<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____)*
U.S. Office Products Company
----------------------------
(Name of Issuer)
Common Stock
------------
(Title of Class of Securities)
912 325 107
----------------------------
(CUSIP Number)
Franci J. Blassberg
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
(212) 909-6000
--------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
June 10, 1998
----------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(3), 240.13d-1(f) or 240.13d-1(g), check the
following box / /.
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d- 7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purposes of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on the following pages)
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- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
CDR-PC Acquisition, L.L.C.
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds
AF
- --------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
Number of Shares 7 Sole Voting Power 0
----------------------------------
Beneficially Owned 8 Shared Voting Power 9,092,106
--------------------------------
by Each Reporting 9 Sole Dispositive Power 0
-----------------------------
Person With 10 Shared Dispositive Power 9,092,106
-----------------------
11 Aggregate Amount Beneficially Owned by
Each Reporting Person 9,092,106
- ----------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares / /
- ----------------------------------------------------------------------------
13 Percent of Class Represented by Amount
in Row (11) 24.9%
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14 Type of Reporting Person
OO
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Clayton, Dubilier & Rice Fund V Limited Partnership
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group (a) / /
(b) / /
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3 SEC Use Only
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4 Source of Funds
OO
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5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) / /
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6 Citizenship or Place of Organization
Cayman Islands
- --------------------------------------------------------------------------------
Number of Shares 7 Sole Voting Power 0
-------------------------------------
Beneficially Owned 8 Shared Voting Power 9,092,106
-----------------------------------
by Each Reporting 9 Sole Dispositive Power 0
--------------------------------
Person With 10 Shared Dispositive Power 9,092,106
-----------------------------
11 Aggregate Amount Beneficially Owned by
Each Reporting Person 9,092,106
- --------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares / /
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount
in Row (11) 24.9%
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14 Type of Reporting Person
PN
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
CD&R Associates V Limited Partnership
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2 Check the Appropriate Box if a Member of a Group (a) / /
(b) / /
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3 SEC Use Only
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4 Source of Funds
OO
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5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Cayman Islands
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Number of Shares 7 Sole Voting Power 0
------------------------------------
Beneficially Owned 8 Shared Voting Power 9,092,106
----------------------------------
by Each Reporting 9 Sole Dispositive Power 0
-------------------------------
Person With 10 Shared Dispositive Power 9,092,106
------------------------------
11 Aggregate Amount Beneficially Owned by
Each Reporting Person 9,092,106
- --------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares / /
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount
in Row (11) 24.9%
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14 Type of Reporting Person
PN
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- --------------------------------------------------------------------------------
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
CD&R Investment Associates II, Inc.
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2 Check the Appropriate Box if a Member of a Group (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC Use Only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Cayman Islands
- --------------------------------------------------------------------------------
Number of Shares 7 Sole Voting Power 0
-----------------------------------
Beneficially Owned 8 Shared Voting Power 9,092,106
---------------------------------
by Each Reporting 9 Sole Dispositive Power 0
------------------------------
Person With 10 Shared Dispositive Power 9,092,106
----------------------------
11 Aggregate Amount Beneficially Owned by
Each Reporting Person 9,092,106
- --------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares / /
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
24.9%
- --------------------------------------------------------------------------------
14 Type of Reporting Person
OO
- --------------------------------------------------------------------------------
<PAGE>
Statement on Schedule 13D
This Statement on Schedule 13D relates to the beneficial ownership of the
common stock, par value $.001 per share (the "Common Stock"), of U.S. Office
Products Company, a Delaware corporation (the "Company"). This Statement is
being filed on behalf of the reporting persons (the "Reporting Persons")
identified on the cover pages of this Statement. Information in respect of each
Reporting Person is given solely by such Reporting Person and no Reporting
Person has responsibility for the accuracy or completeness of information
supplied by any other Reporting Person.
ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this statement relates is the
Common Stock issued by the Company, which has its principal executive office at
1025 Thomas Jefferson Street, N.W., Suite 600 East, Washington, D.C. 20007.
ITEM 2. IDENTITY AND BACKGROUND.
(a) Reference is made to Row 1 of the cover pages for the names of the
Reporting Persons.
The following persons are directors or executive officers of CDR-PC
Acquisition, L.L.C. ("CDR-PC"):
Donald J. Gogel
Brian D. Finn
David A. Novak
The following persons are directors or executive officers of CD&R
Investment Associates II, Inc. ("Associates II, Inc."):
Joseph L. Rice, III
Charles Ames
Donald J. Gogel
William A. Barbe
Brian D. Finn
Charles P. Pieper
Kevin J. Conway
Michael G. Babiarz
Christopher Mackenzie
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The following persons are directors or executive officers of CD&R Cayman
Investment Associates, Inc. ("Associates Cayman Inc."):
Joseph L. Rice, III
Donald J. Gogel
The following persons are directors or executive officers of CD&R
Investment Associates, Inc. ("Associates, Inc."):
Joseph L. Rice, III
Charles Ames
Donald J. Gogel
William A. Barbe
Kevin J. Conway
(b) The business address for each of the following persons listed in Item 2
is c/o Clayton Dubilier and Rice, Inc., 375 Park Avenue, New York, New York
10152:
Messrs. Rice, Ames, Gogel, Barbe, Finn, Pieper, Conway, Babiarz and
Novak.
The business address for Christopher Mackenzie is c/o Clayton, Dubilier &
Rice Limited, 45 Berkeley Street, London, England, W1A1EB.
The business address for each of the following persons listed in Item 2 is
located at 1403 Foulk Road, Suite 106, Wilmington DE 19803:
Clayton, Dubilier & Rice Fund V Limited Partnership ("Fund V"), CD&R
Associates V Limited Partnership ("Associates V"), Associates II, Inc. and
Associates, Inc.
The business address for Associates Cayman Inc. is located at Ugland House,
South Church Street, Grand Cayman, Cayman Islands BWI.
(c) CDR-PC is a newly formed Delaware limited liability company organized
by Fund V for the purpose of making an equity investment in the Company.
Fund V is a private investment fund.
Associates V is the general partner of Fund V.
Associates II, Inc. is the managing general partner of Associates V.
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Associates Cayman Inc. and Associates, Inc. are also general partners
of Associates V.
Messrs. Rice, Ames, Gogel, Barbe, Finn, Pieper, Conway, Novak and
Babiarz are executive employees of Clayton, Dubilier & Rice, Inc., 375 Park
Avenue, 18th Floor, New York, New York 10152.
Christopher Mackenzie is an executive employee of Clayton, Dubilier &
Rice Limited and of Clayton, Dubilier & Rice International, Inc.
(d) and (e) None of the persons or entities with respect to whom
information is required by this Item 2 has been, during the last five years,
either (i) convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
(f) Christopher Mackenzie is a citizen of the United Kingdom. All
other natural persons listed in this Item 2 are citizens of the United
States. Fund V, Associates V, Associates II, Inc. and Associates Cayman Inc.
are organized under the laws of the Cayman Islands. CDR-PC and Associates,
Inc. are organized under the laws of Delaware.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On January 12, 1998, the Board of Directors of the Company approved the
acquisition by CDR-PC (the "Equity Investment") pursuant to the Investment
Agreement, dated as of January 12, 1998, between the Company and CDR-PC (as
amended by Amendment No. 1 thereto dated as of February 3, 1998, the "Investment
Agreement") of the following equity securities:
(a) 9,092,106 shares of Common Stock, representing 24.9% of
the Common Stock outstanding on June 10, 1998, the date the Equity Investment
was consummated (the "Closing Date").
(b) Special warrants (the "Special Warrants") that permit
CDR-PC to buy additional shares of Common Stock to maintain its 24.9% ownership
position in the following circumstances:
(i) Any of the Company's 5 1/2% Convertible Subordinated
Notes Due 2001 (the "2001 Notes") that remained outstanding after the Closing
Date are converted into Common Stock. CDR-PC is entitled to exercise these
Special Warrants pro rata as 2001 Notes are converted. Any Special Warrants not
previously exercised will be exercisable beginning on June 11, 2000, even if all
the 2001 Notes have not been converted.
3
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(ii) The Company issues additional shares of Common Stock
to a former owner of Blue Star Group Limited under the terms of the agreement
by which the Company acquired Blue Star Group Limited. The former owner is
entitled to receive additional shares in an amount that depends on a number
of future events, including the future trading price of the Common Stock and
the consolidated pre-tax earnings of Blue Star and its New Zealand
subsidiaries for the fiscal year ending April 1999.
(iii) The Company issues additional shares of Common Stock to
other people under agreements that existed on January 12, 1998, but were not
identified to CDR-PC in the Investment Agreement.
CDR-PC will pay the Company $0.01 for each share of Common
Stock that CDR-PC purchases using the Special Warrants. The Special Warrants
will expire on June 10, 2010, if they have not previously been used to purchase
Common Stock. The Special Warrants contain anti-dilution provisions that adjust
the number of shares of Common Stock that CDR-PC may purchase if the Company
takes certain actions such as declaring a stock split, an extraordinary dividend
and the like.
(c) Common stock warrants (the "Warrants") that give CDR-PC
the right to buy one share of Common Stock for each share of Common Stock
purchased by CDR-PC in the Equity Investment (9,092,106 shares) and each share
that CDR-PC has the right to buy pursuant to the Special Warrants. The exercise
price of a Warrant is $44.27, subject to adjustment as provided therein. CDR-PC
may use the Warrants to purchase shares of Common Stock at any time after June
10, 2000. The Warrants expire on June 10, 2010. The Warrants contain
anti-dilution provisions that adjust the number of shares of Common Stock that
CDR-PC may purchase and the exercise price if the Company takes certain actions
such as declaring a stock split, an extraordinary dividend and the like.
A copy of the Investment Agreement is attached as Exhibit 1 to this
Schedule 13D and is incorporated herein by reference. All descriptions of the
Investment Agreement contained in this Schedule 13D are qualified in their
entirety by reference to the text of the Investment Agreement.
The aggregate purchase price for the 9,092,106 shares of Common Stock,
the Special Warrants and the Warrants was $270,000,000. CDR-PC obtained such
funds from Fund V, which obtained them from a capital contribution from its
partners.
ITEM 4. PURPOSE OF TRANSACTION.
Fund V is a private investment fund controlled by Associates V and
Associates II, Inc. that invests in equity and equity-related securities. The
Common Stock has been acquired by the Reporting Persons for investment purposes.
Subject to certain restrictions set forth in the Investment Agreement, the
Reporting Persons may sell some or all of the Common Stock, either in the open
market or in private transactions depending on their evaluation of the Company's
business, prospects and financial
4
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condition, the market for the Common Stock, other opportunities available to the
Reporting Persons, prospects for the Reporting Persons' own businesses, general
economic conditions and stock market conditions and further developments.
Pursuant to the Investment Agreement, the Company's current Board of
Directors consists of nine directors, including the Chief Executive Officer of
the Company, three of which are designees of CDR-PC and five of which were
selected by the Board of Directors of the Company that was in place prior to the
Equity Investment (it was a condition to the closing of the Equity Investment
that two of these five be satisfactory to CDR-PC). Until June 10, 2003, for so
long as it maintains certain levels of ownership of Common Stock, CDR-PC will
have the right to nominate three members of the Company's Board of Directors and
to designate the Chairman of the Board.
The Investment Agreement also provides that CDR-PC can approve one
additional nominee to the Board if the Chief Executive Officer of the Company is
not a member of the Board or is not a Board nominee. The Company can increase
the size of the Board of Directors to as many as 12 persons, but the number of
persons CDR-PC can nominate will increase at least proportionally. CDR-PC will
also be entitled to at least proportionate representation on all Board
committees, unless it is precluded from such membership by law or stock exchange
rules.
In addition, the Investment Agreement provides that certain
transactions are subject to approval of three-fourths of the members of the
Board of Directors. The effect of this provision is that for so long as CDR-PC
is able to nominate three directors, at least one of them must vote in favor of
a transaction of any of the following types in order for it to be approved: (i)
the sale by the Company of equity securities, other than (A) a specified amount
made available under employee benefit plans, such as option plans, or (B) a
specified amount issued to acquire companies or issued in public offerings; (ii)
any merger, tender offer involving the Company's equity securities or sale,
lease, or disposition of all or substantially all of the Company's assets, or
other business combination involving the Company, unless the consideration for
such sale is all cash or is freely tradable common stock of a public company
with a specified level of market capitalization; (iii) any major
recapitalization; (iv) certain amendments to shareholder rights plans; (v) any
dissolution or partial liquidation of the Company; and (vi) any modification to
the Company's charter or by-laws that is inconsistent with CDR-PC's rights under
the Investment Agreement or related agreements.
Certain other arrangements with respect to corporate governance are set
forth in the Investment Agreement, which is attached as Exhibit 1 to this
Schedule 13D and is incorporated herein by reference. All of CDR-PC's corporate
governance rights under the Investment Agreement will expire on the earlier of
June 10, 2003 or the date on which CDR-PC acquires more than 50% of the voting
power represented by the Company's then-outstanding voting securities.
Other than as described above or set forth in the Investment Agreement,
the Reporting Persons have no present plans or proposals that relate to or would
result in any of the actions described
5
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in Item 4(a) through (j) of Schedule 13D under Rule 13d-1(a). However, with the
right to nominate three of the members of the Board of Directors, the Reporting
Persons expect to have the ability to influence any future decisions by the
Company with respect to such actions.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a)(i) CDR-PC is the direct beneficial owner of 9,092,106 shares of
Common Stock, representing approximately 24.9% of the outstanding shares of
Common Stock (based on the number of shares of Common Stock outstanding on June
10, 1998).
(ii) By virtue of its position as the sole member of CDR-PC, Fund V may
be deemed to be the beneficial owner of the shares of Common Stock in which
CDR-PC has direct beneficial ownership.
(iii) By virtue of its position as general partner of Fund V,
Associates V may be deemed to be the beneficial owner of the shares of Common
Stock in which CDR-PC has direct beneficial ownership.
(iv) By virtue of its position as managing general partner of
Associates V, Associates II, Inc. may be deemed to be the beneficial owner of
the shares of Common Stock in which CDR-PC has direct beneficial ownership.
(v) Each of Fund V, Associates V and Associates II, Inc. disclaims
beneficial ownership of the shares of Common Stock in which CDR-PC has direct
beneficial ownership.
(vi) Except as described in sections (a)(i)-(iv) of this Item 5, no
person listed in Item 2 of this Schedule 13D is a beneficial owner of the Common
Stock in which CDR-PC has direct beneficial ownership.
(b) The persons listed in sections (a)(i)-(iv) of this Item 5 may be
deemed to share the power to vote or to direct the vote of and to dispose or
direct the disposition of 9,092,106 shares of Common Stock.
(c) Pursuant to the Investment Agreement, upon the closing of the
Equity Investment on the Closing Date, CDR-PC acquired from the Company
9,092,106 shares of Common Stock, the Warrants and the Special Warrants, for an
aggregate consideration of $270 million.
6
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
On the Closing Date, CDR-PC and the Company entered into a registration
rights agreement, dated as of June 10, 1998 (the "Registration Rights
Agreement"), granting CDR-PC certain demand and piggy-back registration rights
with respect to the Common Stock, Warrants and Special Warrants. A copy of the
Registration Rights Agreement is attached as Exhibit 2 to this Schedule 13D and
is incorporated herein by reference.
On the Closing Date, CDR-PC and the Company also entered into a letter
agreement (the "Letter Agreement"), providing that the Company will (i) exchange
for the Special Warrant a new Special Warrant reflecting (x) the increase in the
number of shares of Common Stock into which the 2001 Notes are convertible as a
result of certain adjustments made to their conversion price due to the
Company's self-tender for 37,037,037 shares of Common Stock at a price of $27
per share and to the spin-off of the Company's technology solutions, print
management, educational supplies and corporate travel services businesses, and
(y) any change, from the figure reported by the Company at the closing of the
Equity Investment, in the number of 2001 Notes outstanding as of the Closing
Date; (ii) exchange for the Warrant a new Warrant reflecting any increase in the
number of shares of Common Stock covered by the Special Warrant delivered
pursuant to clause (i), as well as any change, from the figure reported by the
Company at the closing of the Equity Investment, in the number of shares of
Common Stock and/or 2001 Notes outstanding as of the Closing Date; and (iii) if
required, exchange for the certificate evidencing the shares of Common Stock
issued to CDR-PC on the Closing Date a new certificate, reflecting any change
from the figure reported by the Company at the closing of the Equity Investment
in the number of shares of Common Stock and/or 2001 Notes outstanding as of the
Closing Date. A copy of the Letter Agreement is attached as Exhibit 3 to this
Schedule 13D and is incorporated herein by reference.
Fund V is a private investment fund managed by Associates V and
Associates II, Inc. that invests in equity and equity-related securities.
Associates V is entitled to a portion of the net gain realized by Fund V on its
investments. The partners of Associates V -- Associates II, Inc., Messrs. Rice,
Ames, Gogel, Barbe, Finn, Pieper, Conway, Babiarz, MacKenzie and Novak, and
Hubbard C. Howe, Leon J. Hendrix, Thomas E. Ireland and Richard J. Schnall --
are entitled to a portion of the net gain to which Associates V is entitled. The
shareholders of Associates II, Inc. -- Messrs. Rice, Ames, Gogel, Barbe, Finn,
Pieper, Conway, Babiarz, Mackenzie, Howe and Ireland -- are entitled to the net
gain to which Associates II, Inc. is entitled. Except as described in this
Schedule 13D, none of the persons named in Item 2 has any contracts,
arrangements, understandings or relationships (legal or otherwise) with each
other or with any person with respect to any securities of the Company,
including but not limited to the transfer of any shares of Common Stock,
finder's fees, joint ventures, guarantees of profits, division of profits or
loss, or the giving or withholding of proxies.
7
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Investment Agreement, dated as of January 12, 1998, as amended by
Amendment No. 1 thereto dated as of February 3, 1998, between the
Company and CDR-PC.
Exhibit 2 Registration Rights Agreement, dated as of June 10, 1998, between
the Company and CDR-PC.
Exhibit 3 Letter Agreement, dated June 10, 1998, between the Company and
CDR-PC.
Exhibit 4 Joint Filing Agreement, dated June 19, 1998, among CDR-PC, Fund
V, Associates V and Associates II, Inc.
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EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
1. Investment Agreement, dated as of January 12,
1998, as amended by Amendment No. 1 thereto
dated as of February 3, 1998, between the
Company and CDR-PC.
2. Registration Rights Agreement, dated as of
June 10, 1998, between the Company and CDR-PC.
3. Letter Agreement, dated June 10, 1998, between
the Company and CDR-PC.
4. Joint Filing Agreement, dated June 19, 1998,
among CDR-PC, Fund V, Associates V and
Associates II, Inc.
9
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 19, 1998
CDR-PC ACQUISITION, L.L.C.
By: /s/ Brian D. Finn
---------------------------------
Name: Brian D. Finn
Title: Executive Vice President
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Date: June 19, 1998
CLAYTON, DUBILIER & RICE FUND V
LIMITED PARTNERSHIP
By: CD&R Associates V Limited Partnership,
the General Partner
By: CD&R Investment Associates II, Inc.,
its managing general partner.
By: /s/ William A. Barbe
---------------------------------
Name: William A. Barbe
Title: Vice President, Secretary
and Treasurer
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 19, 1998
CD&R ASSOCIATES V LIMITED
PARTNERSHIP
By: CD&R Investment Associates II, Inc.,
its managing general partner.
By: /s/ William A. Barbe
----------------------------------------
Name: William A. Barbe
Title: Vice President, Secretary
and Treasurer
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 19, 1998
CD&R INVESTMENT ASSOCIATES II, INC.
By: /s/ William A. Barbe
----------------------------------------
Name: William A. Barbe
Title: Vice President, Secretary
and Treasurer
<PAGE>
[CONFORMED COMPOSITE COPY]
- --------------------------------------------------------------------------------
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INVESTMENT AGREEMENT
between
U.S. OFFICE PRODUCTS COMPANY
and
CDR-PC ACQUISITION, L.L.C.
This is a conformed composite copy of the Investment
Agreement, dated as of January 12, 1998, between U.S. Office Products Company
and CDR-PC Acquisition, L.L.C., as amended by Amendment No. 1 thereto, dated as
of February 3, 1998.
- --------------------------------------------------------------------------------
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I Purchase and Sale of Shares, Special Warrants and Warrants.......................5
1.01 Purchase and Sale of Shares, Special Warrants and Warrants.......................5
1.02 Time and Place of the Closing....................................................5
1.03 Transactions at the Closing......................................................5
ARTICLE II Covenants........................................................................6
2.01 Covenants of the Company.........................................................6
(a) Financial Statements and Other Reports....................................6
(b) Inspection of Property....................................................8
ARTICLE III Representations and Warranties...................................................9
3.01 Representations and Warranties of the Company....................................9
(a) Corporate Organization....................................................9
(b) Corporate Authority......................................................10
(c) No Violations; Consents and Approvals....................................11
(d) Capital Stock............................................................13
(e) Subsidiaries.............................................................14
(f) SEC Filings..............................................................15
(g) Retained Business Financial Statements...................................16
(h) Undisclosed Liabilities..................................................19
(i) Absence of Certain Events and Changes....................................19
(j) Compliance with Applicable Laws..........................................20
(k) Title to Assets..........................................................20
(l) Litigation...............................................................21
(m) Contracts................................................................22
(n) Taxes....................................................................24
(o) Employee Benefit Plans and Related Matters; ERISA........................26
(p) Environmental Matters....................................................29
(q) Delaware Law.............................................................30
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
(r) Status of Shares.........................................................30
(s) Intellectual Property....................................................30
(t) Guarantees...............................................................32
(u) Brokers or Finders.......................................................32
(v) Acquisitions.............................................................32
(w) Disclosure...............................................................32
(x) Fairness Opinion.........................................................33
3.02 Representations and Warranties of Purchaser.....................................33
(a) Organization.............................................................33
(b) Authority................................................................33
(c) Conflicting Agreements and Other Matters.................................34
(d) Acquisition for Investment...............................................34
(e) Ownership of Securities..................................................35
(f) Brokers or Finders.......................................................35
(g) Future Acquisitions......................................................35
ARTICLE IV Corporate Governance............................................................35
4.01 Composition of the Board of Directors...........................................35
4.02 Supermajority Voting Provisions.................................................37
4.03 Committees......................................................................39
4.04 By-laws.........................................................................39
4.05 Termination of Article IV.......................................................39
ARTICLE V Equity Purchases from the Company...............................................40
5.01 Subscription Rights.............................................................40
5.02 Issuance and Delivery of New Securities and Voting Stock........................41
ARTICLE VI Limitations on Purchases of Additional Equity Securities........................41
6.01 Purchases of Equity Securities..................................................41
6.02 Additional Limitations..........................................................42
ARTICLE VII Transfer of Common Stock........................................................43
7.01 Transfer of Common Stock........................................................43
ii
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE VIII Covenants and Additional Agreements.............................................45
8.01 Covenants of the Company........................................................45
(a) Ordinary Course..........................................................45
(b) No Acquisitions..........................................................45
(c) No Dispositions..........................................................46
(d) Other Transactions.......................................................46
(e) Employee Benefits........................................................49
8.02 Transaction Proposals...........................................................50
8.03 Modification of Transaction Agreements; Abandonment of Distributions............53
8.04 Transaction Agreements and Schedules............................................53
8.05 Company Stockholder Approval; Proxy Statement...................................54
8.06 Retained Companies Financing....................................................56
8.07 Tender Offer....................................................................56
8.08 Information Statements..........................................................58
8.09 [Intentionally omitted.]........................................................59
8.10 Tax Standstill..................................................................59
8.11 Access and Information..........................................................60
8.12 Further Actions.................................................................60
8.13 Further Assurances..............................................................61
ARTICLE IX Conditions Precedent............................................................62
9.01 Conditions to Each Party's Obligations..........................................62
(a) HSR and Other Approvals..................................................62
(b) No Litigation, Injunctions, or Restraints................................62
(c) Stockholders Vote........................................................62
(d) Nasdaq Listing...........................................................62
(e) Consummation of Distributions............................................63
(f) Tax Allocation Agreement.................................................63
9.02 Conditions to the Obligations of the Company....................................65
(a) Representations and Warranties...........................................65
(b) Opinion of Purchaser's Counsel...........................................66
(c) Registration Rights Agreement............................................66
9.03 Conditions to the Obligations of Purchaser......................................66
(a) Representations and Warranties...........................................66
(b) Transaction Agreements...................................................66
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(c) Performance of Obligations of the Company................................67
(d) Opinion of the Company's Counsel.........................................67
(e) Registration Rights Agreement............................................67
(f) Financings...............................................................67
(g) Tender Offer.............................................................67
(h) Consulting Agreement; Transaction Fee....................................67
(i) Other Parties............................................................68
(j) Corporate Proceedings....................................................68
(k) Management Plan..........................................................68
(l) Board of Directors.......................................................69
(m) Material Adverse Effect..................................................69
(n) Debt Amounts.............................................................69
(o) Options..................................................................69
ARTICLE X Termination.....................................................................70
10.01 Termination.....................................................................70
10.02 Effect of Termination...........................................................72
ARTICLE XI Indemnification.................................................................73
11.01 Indemnification of Purchaser....................................................73
11.02 Indemnification Procedures......................................................74
11.03 Survival of Representations and Warranties......................................75
ARTICLE XII Interpretation; Definitions.....................................................76
12.01 Interpretation..................................................................76
12.02 Definitions.....................................................................76
ARTICLE XIII Miscellaneous...................................................................90
13.01 Severability....................................................................90
13.02 Specific Enforcement............................................................91
13.03 Entire Agreement................................................................91
13.04 Counterparts....................................................................91
13.05 Notices.........................................................................91
13.06 Amendments......................................................................93
13.07 Cooperation.....................................................................93
13.08 Successors and Assigns..........................................................93
</TABLE>
iv
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<TABLE>
<CAPTION>
<S> <C> <C>
13.09 Expenses and Remedies...........................................................94
13.10 Transfer of Shares and Warrants.................................................95
13.11 Governing Law...................................................................96
13.12 Publicity.......................................................................96
13.13 No Third Party Beneficiaries....................................................97
13.14 Consent to Jurisdiction.........................................................97
EXHIBITS
Exhibit 1 Terms of Special Warrants
Exhibit 2 Terms of Warrants
Exhibit 3 Terms of Registration Rights Agreement
</TABLE>
v
<PAGE>
THIS INVESTMENT AGREEMENT (this "Agreement"), dated as of
January 12, 1998, is entered into between CDR-PC Acquisition, L.L.C., a Delaware
limited liability company ("Purchaser"), and U.S. Office Products Company, a
Delaware corporation (the "Company").
WHEREAS the Board of Directors of the Company has approved a
series of transactions pursuant to which:
(a) the Company will conduct a tender offer (the "Tender
Offer") to repurchase 37,037,037 shares of common stock, par value
$.001 per share, of the Company (the "Common Stock"), at $27 per share,
(b) the Company will enter into arrangements for new
high-yield and bank financing in connection with the Tender Offer and
the other transactions contemplated hereby (the "Proposed Financings"),
(c) the Company will distribute all of the issued and
outstanding shares of common stock of a corporation that will own,
following the Pre-Distribution Transactions (as defined herein), the
Subsidiaries of the Company comprising the Company's education division
("School"), to the holders of record of the Common Stock after
completion of the Tender Offer on a pro rata basis (the "School
Distribution"),
(d) the Company will distribute all of the issued and
outstanding shares of common stock of a corporation that will own,
following the Pre-Distribution Transactions (as defined herein), the
Subsidiaries of the Company comprising the Company's corporate travel
services division ("Travel"), to the holders of record of the Common
Stock after completion of the Tender Offer on a pro rata basis (the
"Travel Distribution"),
<PAGE>
(e) the Company will distribute all of the issued and
outstanding shares of common stock of a corporation that will own,
following the Pre-Distribution Transactions (as defined herein), the
Subsidiaries of the Company comprising the Company's technology
solutions division ("Technology"), to the holders of record of the
Common Stock after completion of the Tender Offer on a pro rata basis
(the "Technology Distribution"), and
(f) the Company will distribute all of the issued and
outstanding shares of common stock of a corporation that will own,
following the Pre-Distribution Transactions (as defined herein), the
Subsidiaries of the Company comprising the Company's print management
division ("Print"), to the holders of record of the Common Stock after
completion of the Tender Offer on a pro rata basis (the "Print
Distribution", and, together with the School Distribution, the Travel
Distribution and the Technology Distribution, the "Distributions");
WHEREAS, in connection with the Distributions, the Company
expects:
(a) (i) to execute and deliver a distribution agreement to
effect the School Distribution (the "School Distribution Agreement"),
(ii) to cause School to execute and deliver the School Distribution
Agreement, and (iii) after the satisfaction or waiver of all of the
conditions to the Company's obligation to consummate the School
Distribution set forth in the School Distribution Agreement, and
pursuant to the terms of the School Distribution Agreement, to effect
the School Distribution,
(b) (i) to execute and deliver a distribution agreement to
effect the Travel Distribution (the "Travel Distribution Agreement"),
(ii) to cause Travel to execute and deliver the Travel Distribution
Agreement, and (iii) after the satisfaction or waiver
2
<PAGE>
of all of the conditions to the Company's obligation to consummate the
Travel Distribution set forth in the Travel Distribution Agreement, and
pursuant to the terms of the Travel Distribution Agreement, to effect
the Travel Distribution,
(c) (i) to execute and deliver a distribution agreement to
effect the Technology Distribution (the "Technology Distribution
Agreement"), (ii) to cause Technology to execute and deliver the
Technology Distribution Agreement, and (iii) after the satisfaction or
waiver of all of the conditions to the Company's obligation to
consummate the Technology Distribution set forth in the Technology
Distribution Agreement, and pursuant to the terms of the Technology
Distribution Agreement, to effect the Technology Distribution,
(d) (i) to execute and deliver a distribution agreement to
effect the Print Distribution (the "Print Distribution Agreement", and,
together with the School Distribution Agreement, the Travel
Distribution Agree ment and the Technology Distribution Agreement, the
"Distribution Agreements"), (ii) to cause Print to execute and deliver
the Print Distribution Agreement, and (iii) after the satisfaction or
waiver of all of the conditions to the Company's obligation to consum-
mate the Print Distribution set forth in the Print Distribution
Agreement, and pursuant to the terms of the Print Distribution
Agreement, to effect the Print Distribution, and
(e) to execute and deliver, and to cause each of School,
Travel, Technology and Print (together, the "Distributed Companies") to
execute and deliver, a tax allocation agreement (the "Tax Allocation
Agreement") and certain other Transaction Agreements;
WHEREAS, prior to the Distributions and pursuant
to the terms of the Distribution Agreements, the Company
3
<PAGE>
and the Distributed Companies will consummate the Pre-Distribution Transactions
(as herein defined);
WHEREAS, following the Pre-Distribution Transactions and the
record date for the Distributions:
(a) Purchaser wishes to purchase from the Company, and the
Company wishes to sell to Purchaser, shares of Common Stock and
warrants having the terms and conditions set forth in Exhibit 1 (the
"Special Warrants") entitling the holder thereof to purchase shares of
Common Stock together representing 24.9% of the shares of Common Stock
as of the Closing Date (as herein defined) that would be outstanding
after giving effect to the issuance of such shares (and assuming the
conversion into Common Stock of all of the Company's issued and
outstanding 5 1/2% Convertible Subordinated Notes Due 2001 issued
pursuant to an Indenture, dated as of February 7, 1996, between the
Company and State Street Bank and Trust Company (the "2001 Notes") that
are outstanding on the Closing Date, and after giving effect to the
issuance of any Contingent Stock (as defined herein)), and warrants
entitling the holder thereof to purchase one share of Common Stock for
each share and Special Warrant so purchased on the terms and subject to
the conditions set forth in Exhibit 2 (the "Warrants"), and
(b) the Company and Purchaser wish to enter into a
registration rights agreement (the "Registration Rights Agreement"),
the principal terms of which are attached hereto as Exhibit 3;
WHEREAS Purchaser and the Company are entering into this
Agreement to provide for such purchase and sale and to establish various rights
and obligations in connection therewith;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein set forth, the parties agree as follows:
4
<PAGE>
ARTICLE I
Purchase and Sale of Shares, Special Warrants and Warrants
SECTION 1.01 Purchase and Sale of Shares, Special Warrants and
Warrants. Upon the terms and subject to the conditions set forth herein, the
Company agrees to sell to Purchaser and Purchaser agrees to purchase from the
Company for an aggregate purchase price of $270 million (the "Purchase Price")
(a) shares of Common Stock representing 24.9% of the outstanding shares of
Common Stock as of the Closing Date after giving effect to the issuance of such
shares (the "Shares"), (b) Special Warrants representing the right to acquire a
number of shares of Common Stock equal to the difference between (i) 24.9% of
the sum of (A) the outstanding shares of Common Stock as of the Closing Date
after giving effect to the issuance of the Shares and the exercise of the
Special Warrants, and assuming the conversion into Common Stock of all the 2001
Notes outstanding on the Closing Date at the conversion price resulting from
adjustments made as a result of the Tender Offer and the Distributions and (B)
the number of any shares of Contingent Stock that are issued, and (ii) 24.9% of
the outstanding shares of Common Stock as of the Closing Date after giving
effect to the issuance of the Shares and (c) Warrants to purchase one share of
Common Stock for each Share so purchased and for each share into which the
Special Warrants become exercisable.
SECTION 1.02 Time and Place of the Closing. The closing (the
"Closing") shall take place at the offices of Debevoise & Plimpton, 875 Third
Avenue, New York, New York, 10022, at 10:00 A.M., New York time, on the third
Business Day following the first date on which the conditions to Closing set
forth in Article IX have first been satisfied or waived, or at such other place,
time and date as the parties may agree. The Company shall give Purchaser ten
Business Days prior written notice of the date the Closing
5
<PAGE>
is scheduled to occur. The "Closing Date" shall be the date the Closing occurs.
SECTION 1.03 Transactions at the Closing. At the Closing,
subject to the terms and conditions of this Agreement, (a) the Company shall
issue and sell to Purchaser and Purchaser shall purchase the Shares, the
Special Warrants and the Warrants; (b) the Company shall deliver to Purchaser
a certificate representing the Shares and certificates representing the Special
Warrants and the Warrants, in each case registered in the name of Purchaser
against payment of the Purchase Price with respect thereto by wire transfer of
immediately available funds to an account or accounts previously designated by
the Company; and (c) the Company and Purchaser shall enter into the
Registration Rights Agreement.
ARTICLE II
Covenants
SECTION 2.01 Covenants of the Company. (a) Financial
Statements and Other Reports. The Company covenants that it will deliver to
Purchaser so long as Purchaser's Percentage Interest exceeds 10%:
(i) as soon as practicable and in any event within 45 days
after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, a consolidated statement of income and a
consolidated statement of cash flow of the Retained Companies for the
period from the beginning of the then current fiscal year to the end of
such quarterly period, and a consolidated balance sheet of the Retained
Companies as of the end of such quarterly period, setting forth in each
case in comparative form figures for the corresponding period or date
in the preceding fiscal year, all in reasonable detail and certified by
the principal financial officer of the Company as presenting fairly, in
accordance with GAAP
6
<PAGE>
applied (except as specifically set forth therein) on a basis
consistent with such prior fiscal period, the information contained
therein, subject to changes resulting from year-end closing and audit
adjustments; provided, however, that delivery pursuant to clause (iii)
below of a copy of the Quarterly Report on Form 10-Q of the Company for
such quarterly period filed with the SEC shall be deemed to satisfy the
requirements of this clause (i);
(ii) as soon as practicable and in any event within 90 days after
the end of each fiscal year, a consolidated statement of income, a
consolidated statement of cash flow and a consolidated statement of
stockholders equity of the Retained Companies for such year, and a
consolidated balance sheet of the Retained Companies as of the end of
such year, setting forth in each case in comparative form the
corresponding figures from the preceding fiscal year, all in reason-
able detail and examined and reported on by independent public
accountants of recognized national standing selected by the Company,
which report shall state that such consolidated financial statements
present fairly the financial position of the Retained Companies as at
the dates indicated and the results of their operations and changes in
their financial position for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years (except as
otherwise specified in such report) and that the audit by such
accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing standards;
provided, however, that delivery pursuant to clause (iii) below of a
copy of the Annual Report on Form 10-K of the Company for such fiscal
year filed with the SEC shall be deemed to satisfy the requirements of
this clause (ii);
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its stockholders
7
<PAGE>
and copies of all such registration statements (without exhibits), and
all such regular and periodic reports as it shall file with the SEC;
(iv) promptly upon receipt thereof, copies of all reports submitted
to the Retained Companies by independent public accountants in
connection with each annual, interim or special audit of the books of
the Retained Companies made by such accountants, including the comment
letter submitted by such accountants to management in connection with
their annual audit; and
(v) with reasonable promptness, such other financial data of
the Retained Companies as Purchaser may reasonably request.
(b) Inspection of Property. The Company covenants that so
long as Purchaser's Percentage Interest exceeds 10%, it will permit
representatives of Purchaser to visit and inspect, at Purchaser's expense, any
of the properties of the Retained Companies, to examine the corporate books and
make copies or extracts therefrom and to discuss the affairs, finances and
accounts of the Retained Companies with the officers and employees of the
Retained Companies and independent public accountants (and by this provision the
Company authorizes such accountants to discuss with such representatives the
affairs, finances and accounts of the Retained Companies), all at such
reasonable times and as often as Purchaser may reasonably request. Purchaser
agrees not to disclose to any Person any information or data obtained by it
pursuant to this Section 2.01(b) or Section 2.01(a)(iv) or (a)(v) until such
information or data otherwise becomes publicly available or except pursuant to a
valid subpoena, judicial process or its equivalent or in connection with a claim
against the Company; provided that Purchaser shall have used its reasonable best
efforts to give the Company advance notice of such subpoena or judicial process
so that the Company may seek an appropriate protective order. Purchaser
acknowledges that information obtained pursuant to the rights granted hereby may
constitute material non-public
8
<PAGE>
information and agrees that it will comply with all applicable laws relating to
the purchase or sale of securities of the Company while in possession of such
information.
ARTICLE III
Representations and Warranties
SECTION 3.01 Representations and Warranties of the Company.
The Company hereby represents and warrants to Purchaser as follows:
(a) Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Each Retained Subsidiary having assets or annual
revenues of $500,000 or more or which is otherwise material to the
Retained Business (each a "Material Subsidiary") is duly organized and
validly existing and, if applicable, except as set forth in Schedule
3.01(a), is in good standing, under the laws of the jurisdiction of its
incorporation or organization. Each of the Retained Companies is duly
qualified or licensed and, if applicable, is in good standing as a
foreign corporation, in each jurisdiction in which the properties
owned, leased or operated, or the business conducted, by it require
such qualification or licensing, except for any such failure so to
qualify or be in good standing which, individually or in the aggregate,
would not have a Material Adverse Effect on the Retained Companies,
taken as a whole. Each of the Material Subsidiaries has the requisite
power and authority to carry on its businesses as they are now being or
will be (immediately after the Distributions) conducted. The Company
has heretofore made available to Purchaser complete and correct copies
of the Certificate of Incorporation of the Company (the "Company
Charter") and the By-laws of the Company (the "Company By-laws") and
the certificate of incorporation and by-laws, or the comparable
9
<PAGE>
organizational documents, of each of the Material Subsidiaries, each as
amended to date and currently in full force and effect.
(b) Corporate Authority. Each of the Company, School, Travel,
Technology and Print has (or will have at the time of such act) the
requisite corporate power and authority to execute, deliver and perform
each Transaction Agreement to which it is or will be a party and to
consummate the transactions contemplated thereby other than, with
respect to the Distributions, formal declaration of the Distributions
by the Company's Board of Directors (provided that, with respect to the
issuance and sale by the Company of the Shares, the Special Warrants
and the Warrants, the Company shall obtain pursuant to Nasdaq Stock
Market rules the approval of such issuance and sale by the affirmative
vote of the holders of a majority of the shares of Common Stock
represented at the Company Meeting and entitled to vote thereon (the
"Company Stockholder Approval")). The execution, delivery and
performance of each Transaction Agreement by the Company and the
consummation by the Company of the Pre-Distribution Transactions, the
Distributions, the Proposed Financings, the Tender Offer and the
issuance and sale by the Company of the Shares, Special Warrants and
Warrants and of the other transactions contemplated by the Transaction
Agreements have been duly authorized (or will have been duly authorized
at the time of such act) by the Company's Board of Directors, and no
other corporate proceedings on the part of the Company are necessary to
authorize any Transaction Agreement or for the Company to consummate
the Transactions so contemplated (other than, with respect to the
issuance and sale by the Company of the Shares, the Special Warrants
and the Warrants, the Company Stockholder Approval and, with respect to
the Distributions, formal declaration of the Distributions by the
Company's Board of Directors). The execution, delivery and performance
by each of School, Travel, Technology and Print of each Transaction
Agreement to
10
<PAGE>
which it will be party and the consummation by it of the Transactions
contemplated thereby will be duly authorized at the time of such act by
the Board of Directors and the stockholders of each, if required, and
no other corporate proceedings on the part of School, Travel,
Technology or Print will be necessary to authorize the execution,
delivery and performance of any Transaction Agreement to which they
will be a party or for them to consummate the Transactions so
contemplated. Each Transaction Agreement to which the Company, School,
Travel, Technology or Print is or will be a party is, or when executed
and delivered will be, a valid and binding agreement of such party,
enforceable against such party in accordance with the terms thereof,
assuming (in the case of this Agreement and the Registration Rights
Agreement) that each Transaction Agreement to which Purchaser is a
party is a valid and binding agreement of Purchaser.
(c) No Violations; Consents and Approvals. (i) None of the
execution, delivery or performance by the Company, School, Travel,
Technology or Print of each Transaction Agreement to which any of them
is or will be a party or the consummation by the Company or School,
Travel, Technology or Print of the transactions contemplated thereby
(A) will result in a violation or breach of the Company Charter or the
Company By-laws, the articles of incorporation or by-laws of School,
Travel, Technology or Print or the organizational documents of any of
the Retained Subsidiaries or (B) will result in a violation or breach
of (or give rise to any right of termination, revocation, cancellation
or acceleration under or increased payments under), or constitute a
default (with or without due notice or lapse of time or both) under, or
result in the creation of any lien, charge, encumbrance or security
interest of any kind (a "Lien") upon any of the properties or assets of
the Retained Companies under, (1) subject to the govern mental filings
and other matters referred to in clause (ii) below, any of the terms,
conditions or
11
<PAGE>
provisions of any note, bond, mortgage, indenture, contract, agreement,
obligation, instrument, offer, commitment, understanding or other
arrangement (each a "Contract") or of any license, waiver, exemption,
order, franchise, permit or concession (each a "Permit") to which any
of the Retained Companies is a party or by which any of their
properties or assets may be bound (except for the Company's credit
facility with Bankers Trust Company in effect on the date hereof), or
(2) subject to the governmental filings and other matters referred to
in clause (ii) below, any judgment, order, decree, statute, law,
regulation or rule applicable to the Retained Companies, except, in the
case of clause (B), for violations, breaches, defaults, rights of
cancellation, termination, revocation or acceleration or Liens that
would not, individually or in the aggregate, have a Material Adverse
Effect on the Retained Companies, taken as a whole.
(ii) Except for consents, approvals, orders, authorizations,
registrations, declarations or filings as may be required under, and
other applicable requirements of, the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), filings under
state securities or "blue sky" laws and filings or consents referred to
in Schedule 3.01(c)(ii), no consent, approval, order or authorization
of, or registration, declaration or filing with, any government or any
court, administrative agency or commission or other governmental
authority or agency, federal, state or local or foreign (a
"Governmental Entity"), is required with respect to the Company,
School, Travel, Technology or Print or any of their respective
Subsidiaries, in connection with the execution, delivery or performance
by each of the Company, School, Travel, Technology and Print of each
Transaction Agreement to which any of them is or will be a party or the
consummation by the Company and
12
<PAGE>
School, Travel, Technology and Print of the Transactions contemplated
thereby (except where the failure to obtain such consents, approvals,
orders or authorizations, or to make such registrations, declarations,
filings or agreements would not, individually or in the aggregate, have
a Material Adverse Effect on the Retained Companies, taken as a whole).
(d) Capital Stock. As of the date hereof, the authorized
capital stock of the Company consists of (i) 500,000,000 shares of
Common Stock, of which an aggregate of 132,958,606 shares of Common
Stock were issued and outstanding as of the close of business on
January 9, 1998, and (ii) 500,000 shares of preferred stock, $.001 par
value per share, of which none were issued and outstanding as of the
close of business on January 9, 1998. As of the close of business on
January 9, 1998, there were outstanding under the Company's 1994
Long-Term Incentive Plan, the 1994 Amended and Restated Long-Term
Incentive Plan, the 1996 Non-Employee Directors' Stock Plan, the 1997A
Stock Option Plan for Employees of Mail Boxes Etc., the 1997B Stock
Option Plan for Employees of Mail Boxes Etc. and the 1997 Stock Option
Plan for former Non-Employee Directors of Mail Boxes Etc.
(collectively, the "Company Stock Plans") options to acquire an
aggregate of 21,236,778 shares of Common Stock (subject to adjustment
on the terms set forth therein) of which 706,778 are subject to
allocation pursuant to option pools, as set forth on Schedule
3.01(d)(ii). As of the close of business on January 9, 1998,
there were outstanding under the Company Stock Plans no shares of
restricted stock and 3,220 deferred shares had been reserved for
issuance pursuant to the 1996 Non-Employee Directors Stock Plan. As of
the close of business on January 9, 1998, the Company had no shares of
Common Stock reserved for issuance of restricted stock. All of the
outstanding shares of Common Stock have been duly authorized and
validly issued, and are fully paid and nonassessable. As of the date
hereof
13
<PAGE>
the Company has outstanding $230,000,000 in 5 1/2% Convertible
Subordinated Notes Due 2003 issued pursuant to an Indenture, dated as
of May 22, 1996, between the Company and The Chase Manhattan Bank, N.A.
(the "2003 Notes") and $143,750,000 in 2001 Notes, convertible into
shares of Common Stock at any time prior to maturity at a conversion
price of $31.60 and $19.00 per share, respectively. Except as set forth
on Schedule 3.01(d), there are no preemptive or similar rights on the
part of any holders of any class of securities of the Company or of any
of the Retained Subsidiaries. Except for the Common Stock, the 2003
Notes and the 2001 Notes, as set forth above, the Company has
outstanding no bonds, debentures, notes or other obligations or
securities the holders of which have the right to vote (or are
convertible or exchangeable into or exercisable for securities having
the right to vote) with the stockholders of the Company on any matter.
Except as set forth above or on Schedule 3.01(d), as of the date of
this Agreement, there are no securities convertible into or
exchangeable for, or options, warrants, calls, subscriptions, rights,
contracts, commitments, arrangements or understandings of any kind to
which the Company or any of its Subsidiaries is a party or by which any
of them is bound obligating the Company or any of its Subsidiaries
contingently or otherwise to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
voting securities of the Company or of any of the Retained
Subsidiaries. Except (y) with respect to the withholding of exercise
price or withholding taxes under any Company Stock Plan or (z) pursuant
to the Tender Offer, there are no outstanding Contracts of the Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of the Company or of any of the Retained
Subsidiaries.
(e) Subsidiaries. (i) Schedule 3.01(e)
contains a complete and correct description of the
14
<PAGE>
shares of stock or other equity interests that are authorized, or
issued and outstanding, of each of the Retained Companies (other than
the Company). Except for Subsidiaries that will not be Subsidiaries of
the Company after the Distributions, the Company has no equity
interests with a value of $500,000 or more in any Person other than the
Retained Companies, and there are no commitments on the part of the
Company or any Material Subsidiary to contribute additional capital in
respect of any equity interest in any Person. Each of the outstanding
shares of capital stock of each of the Retained Subsidiaries has been
duly authorized and validly issued, and is fully paid and
nonassessable. Except as set forth on Schedule 3.01(e)(i), all of the
outstanding shares of capital stock of each Retained Subsidiary are
owned, either directly or indirectly, by the Company free and clear of
all Liens.
(ii) Schedule 3.01(e)(ii) contains a complete and correct list of
all Material Subsidiaries of the Company.
(iii) Schedule 3.01(e)(iii) contains a complete and correct list
setting forth the respective Material Subsidiaries of each of the
Company, School, Travel, Technology and Print immediately following the
Distributions.
(f) SEC Filings. The Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed
by it with the SEC under the Securities Act and the Exchange Act since
June 30, 1995 (the "Company SEC Documents"). As of its filing date,
each Company SEC Document filed, as amended or supplemented, if
applicable, (i) complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as applicable,
and the rules and regulations thereunder and (ii) did not, at the time
it was filed, contain any untrue statement of a material fact or
15
<PAGE>
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(g) Retained Business Financial Statements. (i) Attached
hereto as Annex A(i) are a consolidated balance sheet as of April 26,
1997 (the "Balance Sheet") and a consolidated balance sheet as of April
30, 1996 and consolidated statements of income, consolidated statements
of cash flow and consolidated statements of stockholders' equity for
the years ended April 30, 1995 and 1996 and April 26, 1997, in each
case for the Company (such financial statements, including the notes
thereto, the "Company Business Financial Statements"), together with
the report of the Company's independent accountants thereon. Each of
the Balance Sheet and the consolidated balance sheet as of April 30,
1996 (including any related notes and schedules) presents fairly in all
material respects the consolidated financial position of the Company as
of their respective dates, and each of the consolidated statements of
income, consolidated statements of cash flow and consolidated
statements of stockholders' equity included in the Company Business
Financial Statements (including any related notes and schedules) fairly
presents in all material respects the income, cash flows and
stockholders equity, as the case may be, of the Company for the periods
set forth therein, in each case in accordance with GAAP applied on a
consistent basis throughout the periods presented therein except as
indicated in the notes thereto, prior to the announcement of the
Transactions. Upon announcement of the Transactions, the Company
Business Financial Statements will require adjustment to reflect (i)
the change in the accounting treatment of certain acquisitions from the
pooling-of-interests method to the purchase method; (ii) the treatment
of certain of the Distributions as discontinued operations, and (iii)
certain footnote disclosure regarding the Transactions.
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(ii) Attached hereto as Annex A(ii) are the unaudited consolidated
balance sheet for the Company as of October 25, 1997 and the unaudited
consolidated statement of income of the Company for the six months then
ended (such financial statements, including the notes thereto, the
"Unaudited Company Business Financial Statements"). The Unaudited
Company Business Financial Statements have been prepared in all
material respects in accordance with GAAP consistently applied and on
that basis fairly present the consolidated financial condition and
results of operations of the Company as of the date thereof and for the
period indicated, except that the Company Business Financial Statements
omit footnote disclosures required by GAAP and are subject to normal,
recurring year-end closing and audit adjustments, prior to the
announcement of the Transactions. Upon announcement of the
Transactions, the Unaudited Company Business Financial Statements will
require adjustment to reflect (i) the change in the accounting
treatment of certain acquisitions from the pooling-of-interests method
to the purchase method; (ii) the treatment of certain of the
Distributions as discontinued operations, and (iii) certain footnote
disclosure regarding the Transactions.
(iii) Attached hereto as Annex A(iii) are the unaudited pro forma
combined balance sheet for the Retained Business as of October 25, 1997
(the "Pro Forma Balance Sheet"), the unaudited pro forma combined
statement of income for the Retained Business for the fiscal year ended
April 26, 1997 and the six month period ended October 25, 1997 (the
"Pro Forma Income Statements"), and the notes to such unaudited pro
forma financial statements (the "Notes to Pro Forma Financial
Statements", and, together with the Pro Forma Balance Sheet and the Pro
Forma Income Statements, the "Pro Forma Retained Business Financial
Statements"). The Pro Forma Retained Business Financial Statements have
been prepared in accordance with Article 11 of Regulation S-X; reflect
the
17
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adjustments necessary to change accounting treatment for certain past
acquisitions from the pooling of interests method to the purchase
method; and give effect to the Proposed Financings, the Tender Offer,
the Distributions and the purchase of the Shares, Special Shares and
Warrants by Purchaser. The Pro Forma Income Statements have been
prepared as if all such Transactions had occurred at the beginning of
fiscal 1997 and the Pro Forma Balance Sheet has been prepared as if all
such transactions had occurred as of October 25, 1997.
(iv) Attached hereto as Annex A(iv) are a consolidated balance
sheet for the Retained Business as of April 26, 1997 (the "Audited
Balance Sheet") and the consolidated statements of income of the
Retained Business for the fiscal year then ended (such financial
statements, including the notes thereto, the "Audited Retained Business
Financial Statements"), together with the report of the Company's
independent accountants thereon. The Audited Retained Business
Financial Statements (including any related notes and schedules) will
fairly present in all material respects the consolidated financial
position of the Retained Business as of the date thereof, and fairly
present in all material respects the income of the Retained Business
for the period set forth therein, in accordance with GAAP applied on a
consistent basis throughout the periods presented therein except as
indicated in the notes thereto.
(v) The balance sheets included in the Pro Forma Retained
Business Financial Statements do not include any material assets or
liabilities not intended to constitute a part of the Retained Business
after giving effect to the Transactions. The statements of income,
statements of stockholders equity and statements of cash flows included
in the Pro Forma Retained Business Financial Statements do not reflect
the operations of any entity or business not intended to constitute a
part of the Retained Business after
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giving effect to all such Transactions. The statements of income
included in the Pro Forma Retained Business Financial Statements
reflect all of the material costs and expenses incurred in connection
with the Retained Business, including those incurred in generating the
revenues reflected in the Pro Forma Retained Business Financial
Statements, in each case, for the periods covered thereby, that would
be required to be so reflected under GAAP in consolidated financial
statements of the Retained Business prepared on a pro forma basis after
giving effect to all such transactions.
(h) Undisclosed Liabilities. Except (i) for the items listed
in Schedule 3.01(h) hereto, (ii) as and to the extent disclosed or
reserved against on the Balance Sheet, the Pro Forma Balance Sheet and
the Audited Balance Sheet or in the footnotes thereto and (iii) as
incurred after the date of the Pro Forma Balance Sheet in the ordinary
course of the Retained Business consistent with prior practice and not
prohibited by this Agreement, the Retained Companies do not have any
liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become
due, that, individually or in the aggregate, are or would be material
to the Retained Companies, taken as a whole.
(i) Absence of Certain Events and Changes. Except as disclosed
in the Company SEC Documents filed with the SEC and publicly available
prior to the date hereof and any amendments filed with respect thereto
prior to the date hereof (the "Filed Company SEC Documents") or as
otherwise contemplated or permitted by this Agreement or the other
Transaction Agreements, and except for any items referred to in
Schedule 3.01(i), since October 25, 1997, the Company and its
Subsidiaries have conducted the Retained Business in the ordinary
course consistent with past practice and there has not been any event,
change or
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<PAGE>
development which, individually or in the aggregate, would have a
Material Adverse Effect on the Retained Companies, taken as a whole.
(j) Compliance with Applicable Laws. Except as disclosed in
the Filed Company SEC Documents, each of the Retained Companies is in
compliance with all statutes, laws, regulations, rules, judgments,
orders and decrees of all Governmental Entities applicable to it that
relate to the Retained Business, and neither the Company nor any of the
Retained Companies has received any notice alleging noncompliance
except, with reference to all the foregoing, where the failure to be in
compliance would not, individually or in the aggregate, have a Material
Adverse Effect on the Retained Companies, taken as a whole. This
Section 3.01(j) does not relate to employee benefits matters (for which
Section 3.01(o) is applicable), environmental matters (for which
Section 3.01(p) is applicable) or tax matters (for which Section
3.01(n) is applicable). Each of the Retained Companies has all Permits
that are required in order to permit it to carry on its business as it
is presently conducted, except where the failure to have such Permits
or rights would not, individually or in the aggregate, have a Material
Adverse Effect on the Retained Companies, taken as a whole. All such
Permits are in full force and effect and the Retained Companies are in
compliance with the terms of such Permits, except where the failure to
be in full force and effect or in compliance would not, individually or
in the aggregate, have a Material Adverse Effect on the Retained
Companies, taken as a whole.
(k) Title to Assets. (i) Except as set forth in Schedule
3.01(k)(i), each of the Retained Companies owns and has good and valid
title to, or a valid leasehold interest in, or otherwise has sufficient
and legally enforceable rights to use, all of the properties and
assets (real, personal or mixed, tangible or intangible), used by the
Retained Business or held for
20
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use by the Retained Business in connection with the conduct of, or
otherwise material to, the Retained Business (the "Assets"), including
Assets reflected on the Balance Sheet or acquired since the date
thereof, except for Assets disposed of in the ordinary course of
business consistent with past practice and in accordance with this
Agreement and except for such defects in title which, individually or
in the aggregate, would not have a Material Adverse Effect on the
Retained Companies, taken as a whole, in each case free and clear of
any Liens except for Permitted Liens. This Section 3.01(k) does not
relate to intellectual property (for which Section 3.01(s) is
applicable). A list of all owned real property and leased real property
having an annual base rental of more than $20,000 or having square
footage in excess of 5,000 square feet relating to the Retained
Business is set forth on Schedule 3.01(k) and such owned and leased
real property constitutes all the fee and leasehold interests meeting
such description held by the Retained Companies, except for any such
fee or leasehold interests acquired or disposed of in the ordinary
course of business consistent with past practice after the date hereof
and in accordance with this Agreement, and constitutes all the fee and
leasehold interests meeting such description used by the Retained
Business or held for use by the Retained Business in connection with
the conduct of the Retained Business.
(ii) Except as referred to in Schedule 3.01(k)(ii), each Retained
Company has (A) good and insurable title to its owned real properties
and (B) valid and subsisting leasehold interests in its leased real
properties, in each case, free and clear of any Liens, except for (1)
Permitted Liens and (2) easements, covenants, rights-of-way, other
matters of record and other matters subject to which the leases of the
Retained Companies' real properties are granted.
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(l) Litigation. Except as disclosed in the Filed Company SEC
Documents or referred to on Schedule 3.01(l), as of the date hereof
there are no civil, criminal or administrative actions, suits or
proceedings pending or, to the knowledge of the Company, threatened,
against any of the Retained Companies that, individually or in the
aggregate, are likely to have a Material Adverse Effect on the Retained
Companies, taken as a whole. Except as disclosed in the Company SEC
Documents, there are no outstanding judgments, orders, decrees, or
injunctions of any Governmental Entity against any of the Retained
Companies that, insofar as can reasonably be foreseen, individually or
in the aggregate, in the future would have a Material Adverse Effect on
the Retained Com panies, taken as a whole.
(m) Contracts. (i) Schedule 3.01(m) contains a complete and
correct list, as of the date hereof, of all Contracts that are of the
types listed in clauses (A) through (G) below to which any of the
Retained Companies is a party (the "Material Contracts"):
(A) employment, consulting, severance, and other
material Contracts relating to or for the benefit of current,
future or former employees, officers or directors (excluding
sales persons) of the Retained Business requiring annual base
payments going forward in excess of $250,000;
(B) Contracts relating to the borrowing of money or
obtaining of or extension of credit (other than in the
ordinary course of business), including letters of credit,
guarantees and material security agreements;
(C) joint venture, partnership and similar Contracts
(excluding joint purchasing arrangements with no minimum
purchase requirements), involving a sharing of profits or
22
<PAGE>
expenses, that are material or involve any obligation on the
part of the Company to commit capital (excluding commitments
not exceeding $100,000 in the aggregate);
(D) Contracts prohibiting or materially restricting
the ability of any Retained Company to conduct its business,
to engage in any business or operate in any geographical area
or to compete with any Person;
(E) Contracts that are material to the business,
operations, results of operations, condition (financial or
otherwise), assets or properties of the Retained Companies
taken as a whole;
(F) any employment agreement (and any other agreement
involving annual payments in excess of $150,000) with change
of control or "event risk" provisions relating to the Company;
and
(G) any employment agreement or other agreement
requiring the Company to compensate any employee for any tax
imposed as a result of any excess parachute payment under
Section 280G of the Code.
(ii) All Material Contracts are legal, valid, binding, in full
force and effect and enforceable against each party thereto, except to
the extent that any failure to be enforceable, individually and in the
aggregate, would not reasonably be expected to have or result in a
Material Adverse Effect on the Retained Companies, taken as a whole,
provided that no representation is made as to the enforceability of any
non-competition provision in any employment agreements. Except as set
forth in Schedule 3.01(n), there does not exist under any Material
Contract any violation, breach or event of default, or event or
condition that, after notice or lapse of time or both,
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would constitute a violation, breach or event of default thereunder, on
the part of any of the Retained Companies or, to the knowledge of the
Company, any other Person, other than such violations, breaches or
events of default as would not, individually or in the aggregate, have
a Material Adverse Effect on the Retained Companies, taken as a whole.
Except as set forth in Schedule 3.01(m), the enforceability of all
Material Contracts will not be adversely affected in any manner by the
execution, delivery or performance of this Agreement or the
consummation of the Transactions, and no Material Contract contains any
change in control or other terms or conditions that will become
applicable or inapplicable as a result of the consummation of the
Transactions.
(n) Taxes. (i) Except as set forth on Schedule 3.01(n), (A)
all Tax Returns required to be filed by or on behalf of each of the
Company and the Retained Subsidiaries have been filed except to the
extent that a failure to file, individually or in the aggregate, would
not have a Material Adverse Effect on the Retained Companies, taken as
a whole; (B) all such Tax Returns filed are complete and accurate in
all respects, other than any incompleteness or any inaccuracy that
would not, individually or in the aggregate, have a Material Adverse
Effect on the Retained Companies taken as a whole, and all Taxes shown
to be due on such Tax Returns have been paid; (C) no written claim
(other than a claim that has been finally settled) has been made by a
taxing authority that any of the Company or the Retained Subsidiaries
is subject to an obligation to file Tax Returns or to pay or collect
Taxes imposed by any jurisdiction in which such Retained Company does
not file Tax Returns or pay or collect Taxes, other than any such claim
that would not have a Material Adverse Effect on such Retained Company
or for which adequate reserves have been provided on the balance sheet
contained in the Unaudited Company Business Financial Statements and
the Pro Forma Balance Sheet; (D) there is no
24
<PAGE>
deficiency with respect to any Taxes which would, individually or in
the aggregate, have a Material Adverse Effect on the Retained
Companies, taken as a whole, other than any such deficiency for which
adequate reserves have been provided on the balance sheet contained in
the Unaudited Company Business Financial Statements and the Pro Forma
Balance Sheet; and (E) all material assessments for Taxes due with
respect to completed and settled examinations or concluded litigation
have been paid which, individually or in the aggregate (with respect to
any Retained Company), exceed $100,000. As used in this Agreement,
"Taxes" shall include all federal, state, local and foreign income,
franchise, property, sales, excise and other taxes, tariffs or
governmental charges of any nature whatsoever, including interest and
penalties, and additions thereto; and "Tax Returns" shall mean all
federal, state, local and foreign tax returns, declarations,
statements, reports, schedules, forms and information returns relating
to Taxes.
(ii) Except as set forth in Schedule 3.01(n), each of the Company
and the Retained Subsidiaries has duly and timely withheld all Taxes
required to be withheld in connection with its business and assets, and
such withheld Taxes have been either duly and timely paid to the proper
governmental authorities or properly set aside in accounts for such
purpose, except to the extent that any failure to do so would not have
a Material Adverse Effect on the Retained Companies, taken as a whole.
(iii) Except as set forth in Schedule 3.01(n), (A) none of the
Company and the Retained Subsidiaries is a party to or bound by or has
any obligation under any Tax allocation, sharing, indemnification or
similar agreement or arrangement (other than any agreement for the
acquisition of one or more of the Retained Subsidiaries) with any
Person other than any of the Retained Companies, which might result in
a
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<PAGE>
Material Adverse Effect to the Retained Company which entered into such
agreement or arrangement; and (B) none of the Company and the Retained
Subsidiaries is or has been at any time a member of any group of
companies filing a consolidated, combined or unitary income tax return
other than any such group (1) the common parent of which is the Company
or any Retained Subsidiary or (2) the common parent of which has not
held any asset other than shares of one or more of the Retained
Subsidiaries.
(iv) Except as set forth in Section 3.01(n) of the Disclosure
Schedule, (A) all taxable periods of each of the Company and the
Retained Subsidiaries ending before December 31, 1993 are closed or no
longer subject to audit; (B) none of the Company and the Retained
Subsidiaries is currently under any audit by any taxing authority as to
which such taxing authority has asserted in writing any claim which, if
adversely determined, could have a Material Adverse Effect on such
Retained Company; and (C) no waiver of the statute of limitations is in
effect with respect to any taxable year of the Company or any of the
Retained Subsidiaries.
(o) Employee Benefit Plans and Related Matters; ERISA. (i)
Employee Benefit Plans. Each Employee Benefit Plan that provides for
equity-based compensation or that has associated costs that are
expected to be material to the Company or the Retained Companies in the
aggregate and that is expected to provide for contributions to be made
by any of the Retained Companies or their Employees after the date
hereof or to permit the accrual of additional benefits by any Employee
of the Retained Companies after the date hereof is either listed on
Schedule 3.01(o) or has been filed with the SEC as a material contract
(collectively, the "Retained Plans"). Except as set forth on Schedule
3.01(o), neither the Company nor any of its Subsidiaries has
communicated to any Employee any intention or commitment to modify any
Retained
26
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Plan or to establish or implement any other employee or retiree benefit
or compensation plan or arrangement which would, if it existed on the
date hereof, be a Retained Plan.
(ii) Qualification. Except to the extent that failure to meet the
requirements of section 401(a) of the Code would not result in any
material liability as to which adequate reserves have not been
established, each Employee Benefit Plan intended to be qualified under
section 401(a) of the Code, and the trust (if any) forming a part
thereof, (A) has received a favorable determination letter from the IRS
as to its qualification under the Code and to the effect that each such
trust is exempt from taxation under section 501(a) of the Code, and
nothing has occurred since the date of such determination letter that
could adversely affect such qualification or tax-exempt status or (B) a
timely application for such a favorable determination letter was filed
and the Company has no reason to believe that such a favorable
determination letter will not be granted.
(iii) Compliance; Liability. (A) No liability has been or is
reasonably expected to be incurred under or pursuant to Title I or IV
of ERISA or the penalty, excise Tax or joint and several liability
provisions of the Code relating to employee benefit plans that is or
would be material to the Company or, following the Closing, to the
Retained Companies in the aggregate.
(B) Each of the Employee Benefit Plans has been operated and
administered in all respects in compliance with its terms, all
applicable laws and all applicable collective bargaining agreements,
except for any failure so to comply that, individually and in the
aggregate, could not reasonably be expected to result in a material
liability or obligation on the part of the Retained Companies in the
aggregate. There are no pending or threatened claims by or on
27
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behalf of any of the Employee Benefit Plans, by any Employee or
otherwise involving any such Employee Benefit Plan or the assets of any
Employee Benefit Plan (other than routine claims for benefits, all of
which have been fully reserved for on the regularly prepared balance
sheets of the Company) which would reasonably be expected to result in
any material liability to the Retained Companies in the aggregate.
(C) Except to the extent that it would not give rise to a
material liability or obligation on the part of the Company or the
Retained Companies, no Employee is or will become entitled to
post-employment benefits of any kind by reason of employment with the
Company or its Subsidiaries, including, without limitation, death or
medical benefits (whether or not insured), other than (x) coverage
mandated by section 4980B of the Code, (y) retirement benefits payable
under any Plan qualified under section 401(a) of the Code or (z)
accrued deferred compensation. The consummation of the Transactions
will not result in an increase in the amount of compensation or
benefits or the acceleration of the vesting or timing of payment of any
compensation or benefits payable to or in respect of any Employee by
any of the Retained Companies.
(iv) Employees, Labor Matters, etc. Except as set forth on Schedule
3.01(o), neither the Company nor any of its Subsidiaries is a party to
or bound by any collective bargaining agreement, and there are no labor
unions or other organizations representing, purporting to represent or
attempting to represent any employees employed by the Company or any of
its Subsidiaries. Since April 26, 1997, there has not occurred or been
threatened any strike, slowdown, picketing, work stoppage, concerted
refusal to work overtime or other similar labor activity with respect
to any employees of the Company or any of its Subsidiaries. Except as
set forth on Schedule 3.01(o), there are no labor disputes currently
subject to any grievance procedure, arbitration or litigation
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and there is no petition pending or threatened with respect to any
employee of any the Company or its Subsidiaries. The Company and its
Subsidiaries has complied with all applicable Laws pertaining to the
employment or termination of employment of their respective employees,
including, without limitation, all such laws relating to labor
relations, equal employment opportunities, fair employment practices,
prohibited discrimination or distinction and other similar employment
activities, except for any failure so to comply that, individually and
in the aggregate, could not result in any material liability to the
Retained Companies in the aggregate.
(p) Environmental Matters. Except as disclosed in the Filed
Company SEC Documents or as set forth on Schedule 3.01(p) and except
for such matters that, individually or in the aggregate, would not have
a Material Adverse Effect on the Retained Companies, taken as a whole,
(i) the Retained Companies are in compliance with all applicable
Environmental Laws (as defined below), (ii) the Retained Companies have
all Permits required under Environmental Laws for the operation of the
Retained Business as presently conducted ("Environmental Permits"),
(iii) none of the Retained Companies has received notice from any
Governmental Entity asserting that any of the Retained Companies may be
in violation of, or liable under, any Environmental Law, and (iv) there
are no actions, proceedings or claims pending (or, to the knowledge of
the Retained Companies, threatened) seeking to impose any liability on
the Retained Companies in respect of any Environmental Laws,
Environmental Permits or Hazardous Substances.
For purposes of this Agreement, "Environmental Law" means any
federal, state, local or foreign law, statute, regulation or decree
relating to (x) the protection of the environment or (y) the use,
storage, treatment, generation, transportation, processing, handling,
release or disposal of Hazardous Substances,
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in each case as in effect on the date hereof. "Hazardous Substance"
means any waste, substance, material, pollutant or contaminant listed,
defined, designated or classified as hazardous, toxic or radioactive,
or otherwise regulated, under any Environmental Law.
(q) Delaware Law. The Company has taken all action necessary
to ensure that the provisions of Section 203 of the Delaware General
Corporation Law (the "DGCL") will not be applicable to Purchaser or its
Affiliates as a result of the transactions
contemplated by this Agreement.
(r) Status of Shares. The Shares being issued at the Closing
have been duly authorized by all necessary corporate action on the part
of the Company, and at Closing such Shares will have been validly
issued and, assuming payment therefor has been made, will be fully paid
and nonassessable, and the issuance of such Shares will not be subject
to preemptive rights of any other stockholder of the Company. The
Warrant Shares and the Special Warrant Shares have been duly authorized
by all necessary corporate action on the part of the Company, and such
shares of Common Stock have been validly reserved for issuance, and,
assuming payment therefor has been made, upon issuance and exercise of
the Warrants or the Special Warrants, as the case may be, will be
validly issued and outstanding, fully paid and nonassessable. Assuming
the Company Stockholder Approval has been obtained, the Shares,
Warrants and Special Warrants will be eligible for listing on the
Nasdaq Stock Market.
(s) Intellectual Property. The Intellectual Property that is
owned by the Retained Companies constitutes all of the Intellectual
Property that is material to the Retained Companies as a whole, except
for Intellectual Property subject to written or oral licenses,
agreements or arrangements pursuant to which the use of Intellectual
Property by any Retained
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Company is permitted by any Person (the "Company Intellectual
Property"). The Company Intellectual Property that is owned by the
Retained Companies is owned free from any Liens (other than Permitted
Liens). Except as set forth in Schedule 3.01(s), all material
Intellectual Property Licenses are in full force and effect in
accordance with their terms, and are free and clear of any Liens
(other than Permitted Liens). Except as set forth in Schedule 3.01(s),
immediately after the Closing, the Retained Companies will own or have
the right to use all the Company Intellectual Property, in each case
free from Liens (except for Permitted Liens incurred in the ordinary
course of business) and on the same terms and conditions as in effect
prior to the Closing. Except as set forth in Schedule 3.01(s), the
conduct of the Retained Business does not infringe or conflict with
the rights of any third party in respect of any Intellectual Property,
except where such conduct would not materially affect the ability of
the Retained Companies to conduct their business as presently
conducted. Except as set forth in Schedule 3.01(s), to the knowledge
of the Company, none of the Company Intellectual Property is being
infringed by any third party except where such infringement would not
have a Material Adverse Effect on the Retained Companies taken as a
whole. Except as set forth in Schedule 3.01(s), there is no claim or
demand of any Person pertaining to, or any proceeding which is pending
or, to the knowledge of the Company, threatened, that challenges the
rights of any of the Retained Companies in respect of any Company
Intellectual Property, or that claims that any default exists under
any Intellectual Property License, except where such claim, demand or
proceeding would not materially affect the ability of the Retained
Companies to conduct their business as presently conducted. Except as
set forth in Schedule 3.01(s), none of the Company Intellectual
Property is subject to any outstanding order, ruling, decree, judgment
or stipulation by or with any court, tribunal, arbitrator, or other
Governmental
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Entity materially adverse to the Company. Except as set forth in
Schedule 3.01(s), the Intellectual Property owned by the Retained
Companies and material to the Retained Companies taken as a whole has
been duly registered with, filed in or issued by, as the case may be,
the appropriate filing offices, domestic or foreign, to the extent
necessary or desirable to ensure usual and customary protection for
the Company Intellectual Property in the relevant jurisdiction under
any applicable law, and the same remain in full force and effect. The
Retained Companies have taken all necessary actions to ensure usual
and customary protection for the Company Intellectual Property in the
relevant jurisdiction of the Company Intellectual Property (including
maintaining the secrecy of all confidential Intellectual Property)
under any applicable law.
(t) Guarantees. Except as set forth on Schedule 3.01(t), none
of the obligations or liabilities of any of the Distributed Companies
will be guaranteed by or subject to a contingent obligation of any of
the Retained Companies following the Distributions (excluding lease
guarantees involving obligations in an aggregate amount not to exceed
$100,000).
(u) Brokers or Finders. Except as set forth on Schedule
3.01(u), no agent, broker, investment banker or other firm is or will
be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by
this Agreement.
(v) Acquisitions. Schedule 3.01(v) sets forth a true and
correct list of the 25 largest acquisitions (in terms of aggregate
consideration) of businesses made by the Company since its inception.
The Company has provided Purchaser with copies of the acquisition
agreements and all schedules thereto for each acquisition listed on
Schedule 3.01(v).
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(w) Disclosure. No representation or warranty by the Company
contained in this Agreement or in any certificate to be furnished by or
on behalf of the Company pursuant hereto contains or will contain any
untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading with respect to the Retained Business as a whole or the
transactions contemplated by this Agreement.
(x) Fairness Opinion. The Board of Directors of the Company
has received a fairness opinion, customary in form and substance, from
Morgan, Stanley & Co., Incorporated.
SECTION 3.02 Representations and Warranties of Purchaser.
Purchaser represents and warrants as of the date hereof as follows:
(a) Organization. Purchaser is a limited liability company
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, with all requisite power and
authority to own, lease and operate its properties and to conduct its
business as now being conducted.
(b) Authority. Purchaser has the requisite limited liability
company power and authority to execute, deliver and perform each
Transaction Agreement to which it is a party and to consummate the
Transactions. All necessary action required to have been taken by or
on behalf of Purchaser by applicable law, its limited liability company
agreement or otherwise to authorize the approval, execution, delivery
and performance by Purchaser of this Agreement and the consummation by
it of the Transactions have been duly authorized, and no other
proceedings on its part are or will be necessary to authorize this
Agreement or for it to consummate the Transactions. This Agreement
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is a valid and binding agreement of Purchaser, enforceable against
Purchaser in accordance with the terms hereof, assuming that this
Agreement is a valid and binding agreement of the Company.
(c) Conflicting Agreements and Other Matters. Neither the
execution and delivery of this Agreement nor the performance by
Purchaser of its obligations hereunder will conflict with, result in a
breach of the terms, conditions or provisions of, constitute a default
under, result in the creation of any mortgage, security interest,
encumbrance, lien or charge of any kind upon any of the properties or
assets of Purchaser pursuant to, or require any consent, approval or
other action by or any notice to or filing with any court or
administrative or governmental body pursuant to, the organizational
documents or agreements of Purchaser or any agreement, instrument,
order, judgment, decree, statute, law, rule or regulation by which
Purchaser is bound (assuming that the Company shall have made or
obtained all consents, approvals, orders, authorizations,
registrations, declarations or filings referred to in Section
3.01(c)(ii)), except for filings after the Closing under Section 13(d)
of the Exchange Act and filings under the HSR Act.
(d) Acquisition for Investment. Purchaser is acquiring the
Shares, Warrants and Special Warrants being purchased by it for its own
account for the purpose of investment and not with a view to or for
sale in connection with any distribution thereof, and Purchaser has no
present intention or plan to effect any distribution of Shares,
Warrants, Special Warrants, Warrant Shares or Special Warrant Shares;
provided that the disposition of such Purchaser's property shall at all
times be and remain within its control and subject to the provisions of
this Agreement and the Registration Rights Agreement. Purchaser has
delivered to the Company a complete and correct copy of a commitment
letter from the Fund for $270 million of common equity financing. The
Fund
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constitutes a "venture capital operating company" within the meaning of
Section 2510.3-101(d) of the regulations promulgated under ERISA and
the transactions contemplated by this Agreement shall not adversely
affect such status.
(e) Ownership of Securities. At the date hereof Purchaser does
not Beneficially Own, directly or, to the knowledge of Purchaser,
indirectly (or have any option or other right to acquire), any
securities of the Company other than the Shares, Warrants and Special
Warrants being purchased by it hereunder.
(f) Brokers or Finders. Except as set forth in Schedule
3.02(f), no agent, broker, investment banker or other firm is or will
be entitled to any broker's or finder's fee or any other commission or
similar fee from Purchaser in connection with any of the transactions
contemplated by this Agreement.
(g) Future Acquisitions. Purchaser has no present plan or
intention to acquire, directly or indirectly, shares of capital stock
comprising 50% or more of the Total Voting Power or 50% or more of the
total fair market value of all shares of outstanding capital stock of
the Company.
ARTICLE IV
Corporate Governance
SECTION 4.01 Composition of the Board of Directors. (a) At
and after the Closing, the Board of Directors of the Company shall consist of
nine directors (subject to the right to increase the Board of Directors pursuant
to Section 4.01(b)(iii)). Three members of the Board of Directors shall
initially be designated by the Purchaser (the "Investor Directors"). Six members
of the Board (the "Non-Investor Directors") shall initially be designated by the
Company, subject to the conditions set
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forth in Section 9.03(l), and shall include the chief executive officer of the
Company. So long as Purchaser shall have the right to nominate at least two
directors pursuant to clause (i) below, Purchaser shall be entitled to designate
the Chairman of the Board of Directors, provided that the Chairman of the Board,
if designated by Purchaser, shall be an Investor Director.
(b) Purchaser shall be entitled to nominate three directors
for election, provided:
(i) if the total number of shares of Common Stock represented
by the Shares, the Special Warrants and the Warrants ("Purchaser's
Total Securities") declines by more than 33 1/3% but less than 66 2/3%
from Purchaser's Total Securities at Closing by reason of sales or
other dispositions of Common Stock, Warrants or Special Warrants by
Purchaser, Purchaser shall have the right to nominate two directors;
(ii) if Purchaser's Total Securities declines by 662/3% or more
from Purchaser's Total Securities at Closing, but Purchaser's
Percentage Interest remains at least 5% of the outstanding Voting
Securities, by reason of sales or other dispositions of Common Stock,
Warrants or Special Warrants by Purchaser, Purchaser shall have the
right to nominate one director;
(iii) in the event that the size of the Board of Directors shall be
increased, Purchaser shall have the right to at least proportionate
representation on the Board following such increase based on the
composition of the Board as between Investor Directors and Non-Investor
Directors immediately prior to such increase; provided that in no event
shall the Board consist of more than 12 directors; and
(iv) if the chief executive officer of the Company is not then a
member of the Board of Directors or a nominee for membership thereon,
the Purchaser
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shall be entitled to approve an additional nominee to
the Board of Directors.
(c) The Company shall not, and shall not permit its Affiliates
to, solicit proxies (as such terms are used in the proxy rules of the SEC) of
the stockholders of the Company to vote against any of the nominees selected by
the Purchaser or for the approval of any stockholder or other proposals that are
inconsistent with the rights afforded the Purchaser pursuant to this Agreement
and the other Transaction Agreements.
SECTION 4.02 Supermajority Voting Provisions. So long as
Purchaser has the right to designate at least two nominees to the Board of
Directors of the Company pursuant to Section 4.01(b):
(a) neither the Company nor the Board of Directors shall cause
or permit to occur any of the following events without the affirmative
vote of not less than three-fourths of the members of the Board of
Directors of the Company:
(i) any issuance of Equity Securities other than (A)
issuances pursuant to employee stock option or incentive
compensation plans of Equity Securities (other than in respect
of options outstanding as of the date hereof) in an aggregate
amount not to exceed 5% of the Common Stock outstanding
immediately following the Closing on a fully diluted basis
("Permitted Options"), or (B) issuances pursuant to
acquisitions or in public offerings, such issuances not to
exceed 5% of the Common Stock outstanding immediately
following the Closing on a fully diluted basis in any one
issuance or 20% in the aggregate, provided, however, that no
such issuance shall be permitted if as a result thereof any
Person would own 10% of the Common Stock outstanding
immediately following such issuance on a fully diluted basis;
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(ii) (A) any merger, consolidation or other business
combination to which the Company is a party or any decision
whether to approve a tender offer involving the Company's
Equity Securities, in any case other than a Cash Transaction
(as defined in Section 4.02(b)(i) below) or a Permitted
Securities Transaction (as defined in Section 4.02(b)(ii))
below, or (B) any amendment of any shareholder rights plan (or
"poison pill") maintained by the Company and any redemption of
the rights issued thereunder, except to permit a Cash
Transaction or a Permitted Securities Transaction;
(iii) any sale, lease, transfer or other disposition in one
transaction or a series of related transactions of all or
substantially all the assets of the Company, in any case other
than a Cash Transaction or Permitted Securities Transaction;
or
(iv) any major recapitalization or similar transaction or
series of transactions involving the Company;
(v) any dissolution or complete or partial
liquidation of the Company; or
(vi) any amendment or modification of the Company Charter
or the Company By-laws that is inconsistent with the
provisions of this Agreement and the rights afforded to
Purchaser hereunder.
(b) For purposes of this Agreement:
(i) "Cash Transaction" means any merger,
consolidation or other business combination or sale of all or
substantially all the assets of the Company to which the
Company is a party or any decision whether to approve a tender
offer
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for all of the Company's Equity Securities, in
any case if the consideration involved in such
transaction is all cash;
(ii) "Permitted Securities Transaction" means any merger,
consolidation or other business combination to which the
Company is a party or any decision whether to approve a tender
or exchange offer for all of the Company's Equity Securities,
in any case if all consideration involved in such transaction
is cash and/or shares of a registered, freely tradeable,
listed common equity security for which there was an aggregate
public market capitalization equal to at least the greater of
$5 billion or the market capitalization of the Company's
Equity Securities, in each case determined immediately prior
to the approval of such transaction by the Board of Directors
of the Company.
SECTION 4.03 Committees. Subject to any law or stock exchange
rule prohibiting committee membership by Affiliates of the Company, Purchaser
shall be entitled to at least proportionate representation by Investor Directors
on any committee of the Board of Directors, based on the composition of the
Board as between Investor Directors and Non-Investor Directors.
SECTION 4.04 By-laws. The Company and Purchaser shall take or
cause to be taken all lawful action necessary to ensure at all times as of and
following the Closing Date that the Company By-laws are not inconsistent with
the provisions of this Agreement or the transactions contemplated hereby.
SECTION 4.05 Termination of Article IV. This Article IV shall
terminate and be of no further force or effect on the earlier to occur of (a)
the fifth anniversary of the Closing and (b) the date on which the percentage of
the Total Voting Power represented by the aggregate voting power of all Voting
Securities then owned by Purchaser
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(other than any Voting Securities acquired in violation of this Agreement) is
greater than 50%.
ARTICLE V
Equity Purchases from the Company
SECTION 5.01 Subscription Rights. So long as Purchaser has the
right to nominate an Investor Director pursuant to Section 4.01, if the
Company's Board of Directors shall authorize the issuance of New Securities for
cash (other than any New Securities issued (i) to officers, employees or
directors of the Company or any of its Subsidiaries pursuant to any employee
stock offering, plan or arrangement (x) in effect on the date hereof, (y) which
constitutes Permitted Options or (z) approved by any Investor Director, (ii) in
connection with any acquisition transaction, (iii) in any public offering
registered under the Securities Act or in any financing transaction in which
sales or resales are effected through Rule 144A or Regulation S under the
Securities Act or any successor or comparable provisions thereto and (iv) to
Purchaser or its Affiliates (other than the Company and its Subsidiaries)),
then, prior to each such issuance of New Securities, the Company shall offer to
Purchaser a Pro Rata Share of such New Securities. Any offer of New Securities
made to Purchaser under this Section 5.01 shall be made by notice in writing
(the "Subscription Notice") at least 10 Business Days prior to the date on which
the meeting of the Company's Board of Directors is held to authorize the
issuance of such New Securities. The Subscription Notice shall set forth (i) the
number of New Securities proposed to be issued to Persons other than Purchaser
and the terms of such New Securities, (ii) the consideration (or manner of
determining the consideration), if any, for which such New Securities are
proposed to be issued and the terms of payment, (iii) the number of New
Securities offered to Purchaser in compliance with the provisions of this
Section 5.01 and (iv) the proposed date of issuance of such New Securities. Not
later than 20 Business Days after its
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receipt of a Subscription Notice, Purchaser shall notify the Company in writing
whether it elects to purchase all or any portion of the New Securities offered
to Purchaser pursuant to the Subscription Notice. If Purchaser shall elect to
purchase any such New Securities, the New Securities which it shall have elected
to purchase shall be issued and sold to Purchaser by the Company at the same
time and on the same terms and conditions as the New Securities are issued and
sold to third parties. If, for any reason, the issuance of New Securities to
third parties is not consummated, Purchaser's right to its Pro Rata Share of
such issuance shall lapse, subject to Purchaser's ongoing subscription right
with respect to issuances of New Securities at later dates or times.
SECTION 5.02 Issuance and Delivery of New Securities and
Voting Stock. The Company represents and covenants to Purchaser that (i) upon
issuance, all the shares of New Securities sold to Purchaser pursuant to this
Article V shall be duly authorized, validly issued, fully paid and nonassessable
and will be approved (if outstanding securities of the Company of the same type
are at the time already approved) for listing on the Nasdaq Stock Market or for
quotation or listing on the principal trading market for the securities of the
Company at the time of issuance, (ii) upon delivery of such shares, they shall
be free and clear of all claims, Liens, encumbrances, security interests and
charges of any nature and shall not be subject to any preemptive right of any
stockholder of the Company and (iii) in connection with any such issuance, the
Company shall take such actions as are specified in Section 3.01(q) with respect
to such shares. Each share issued or delivered by the Company hereunder shall
bear the legend set forth in Section 13.11.
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ARTICLE VI
Limitations on Purchases of Additional Equity Securities
SECTION 6.01 Purchases of Equity Securities. (a) Except as
permitted by Section 6.01(b) or 6.01(c), neither Purchaser nor its Affiliates
will directly or indirectly acquire any securities (including by exercise of the
Warrants or Special Warrants) or take any other action that would cause the
percentage of the Total Voting Power represented by the aggregate voting power
of all Voting Securities then held by Purchaser to equal or exceed 25%.
(b) Nothing herein shall prevent Purchaser from purchasing any
Securities pursuant to the terms of this Agreement (including through exercise
of the Warrants and the Special Warrants in accordance with their respective
terms) and the Purchaser shall not be treated as having breached any covenant in
this Agreement solely as a result of such purchase.
(c) This Section 6.01 shall terminate and be of no further
force or effect on the earlier to occur of (i) the fifth anniversary of the
Closing and (ii) the date on which the percentage of the Total Voting Power
represented by the aggregate voting power of all Voting Securities then owned by
Purchaser (other than any Voting Securities acquired in violation of this
Agreement) is greater than 50%.
SECTION 6.02 Additional Limitations. Other than in connection
with a Buyout Transaction that is not solicited or proposed by Purchaser or its
Affiliates or as specifically approved by a majority of the Non-Investor
Directors, during the five-year period beginning on the date of this Agreement,
Purchaser shall not, and shall not permit its Affiliates to:
(i) contrary to the recommendation of the Company's Board of
Directors, in any "solicitation" of "proxies" (as such terms are used
in the proxy rules
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of the SEC), vote any shares of capital stock of the Company, initiate,
propose or otherwise solicit stockholders of the Company for the
approval of one or more stockholder proposals or induce or attempt to
induce any other individual, firm, corporation, partnership or other
entity to initiate any stockholder proposal, provided, however, that
this clause shall be inapplicable to any solicitation of proxies, or
inducement or attempt to induce any other entity to initiate any
stockholder proposal, in respect of any Cash Transaction or Permitted
Securities Transaction approved by the Board of Directors of the
Company without the approval of at least one Investor Director;
(ii) deposit any Voting Securities into a voting trust or subject
any Voting Securities to any arrangement or agreement with respect to
the voting of such securities or form, join a partnership, limited
partnership, syndicate or other group, or otherwise act in concert with
any other Person, for the purpose of acquiring, holding, voting or
disposing of Voting Securities, or otherwise become a "person" within
the meaning of Section 13(d)(3) of the Exchange Act; or
(iii) make a public request to the Company (or its directors,
officers, stockholders, employees or agents) to amend or waive any
provisions of this Section 6.02.
ARTICLE VII
Transfer of Common Stock
SECTION 7.01 Transfer of Common Stock. (a) Other than as
specifically approved by a majority of the Non-Investor Directors, prior to the
second anniversary of the Closing, Purchaser will not, directly or indirectly,
sell, transfer or otherwise dispose of any Shares, Special
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Warrants or Warrants (except to any Affiliate of Purchaser).
(b) Other than as specifically approved by a majority of the
Non-Investor Directors, prior to the fifth anniversary of the Closing, Purchaser
will not, directly or indirectly, sell, transfer or otherwise dispose of any
Shares except (i) pursuant to a registered underwritten public offering intended
to achieve a broad distribution in accordance with the Registration Rights
Agreement, (ii) in accordance with the volume and manner-of-sale limitations of
Rule 144 promulgated under the Securities Act (regardless of whether such
limitations are applicable), (iii) in a transaction exempt from the registration
requirements of the Securities Act to any Person or group (within the meaning of
Section 13(d)(3) of the Exchange Act) of Persons, if, prior to and after giving
effect to such sale, such Person or group of Persons (A) does not or would not
to Purchaser's knowledge after due inquiry, Beneficially Own (provided that for
purposes of this Section 7.01(a) a Person shall be deemed to Beneficially Own
all shares that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time) 5% or more of the
then outstanding shares of Common Stock or (B) is an investment company
registered under the Investment Company Act of 1940, as amended, or (iv) in
connection with a Buyout Transaction. Purported transfers of shares of Common
Stock that are not in compliance with this Article VII shall be of no force or
effect.
(c) The provisions of clauses (a) and (b) of this Article VII
shall terminate and be of no further force or effect on the earlier to occur of
(i) the fifth anniversary of the Closing and (ii) the date on which the
percentage of the Total Voting Power represented by the aggregate voting power
of all Voting Securities then owned by Purchaser (other than any Voting
Securities acquired in violation of this Agreement) is greater than 50%.
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(d) Prior to the seventh anniversary of the Closing, the
Purchasers will not, directly or otherwise dispose of Shares representing 15% or
more of the then outstanding Common Stock to any Person or group (within the
meaning of Section 13(d)(3) of the Exchange Act) without first offering the
Company the right to make an offer to purchase the Shares proposed to be so
sold, transferred or otherwise disposed of. The provisions of the previous
sentence shall terminate and be of no effect on the date on which the percentage
of the Total Voting Power represented by the aggregate voting power of all
Voting Securities then owned by Purchaser (other than any Voting Securities
acquired in violation of this Agreement) is greater than 50%.
ARTICLE VIII
Covenants and Additional Agreements
SECTION 8.01 Covenants of the Company. During the period from
the date of this Agreement and continuing until the Closing, the Company agrees
as to itself and the Retained Subsidiaries that, except as set forth in the
Distribution Agreements or in Schedule 8.01, or to the extent that Purchaser
otherwise consents in writing:
(a) Ordinary Course. The Retained Business will be conducted
in the ordinary course in substantially the same manner as presently
conducted and the Company will use commercially reasonable efforts to
keep available the services of the current officers and employees
engaged primarily in the Retained Business and to preserve the
relationships with customers, suppliers and others having business
dealings with the Retained Business.
(b) No Acquisitions. The Company will not, nor will it permit
any of the Retained Subsidiaries to, acquire or agree to acquire
(excluding any non-binding letters of intent) by merging or
consolidating with,
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or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets (other than inventory) involving
aggregate consideration having a value in excess of $25 million in any
case or $150 million in the aggregate (in either case whether payable
in cash, stock or a combination thereof); provided that (i) no such
consideration shall be payable in Common Stock or stock of any Retained
Subsidiary and (ii) any such consideration payable in stock of a
Distributed Company shall not be payable prior to completion of the
Distributions; and provided, further, that this paragraph (b) shall not
limit the ability of the Company or the Retained Subsidiaries to make
acquisitions in respect of businesses which will constitute part of a
Distributed Company if all acquisition debt associated therewith is
allocated to such Distributed Company.
(c) No Dispositions. The Company will not, nor will it permit
any of the Retained Subsidiaries to, sell, lease, license, encumber or
otherwise dispose of, or agree to sell, lease, license, encumber or
otherwise dispose of, any of the Assets of the Retained Business other
than at fair market value in the ordinary course of business consistent
with past practice.
(d) Other Transactions. The Company will not, nor will it
permit any of the Retained Subsidiaries to, do any of the following
(except as otherwise expressly provided herein or in any other
Transaction Agreement):
(i) Amend its Certificate of Incorporation (except to
the extent necessary to implement a shareholder rights plan
pursuant to clause (ii) below), By-laws or other
organizational documents (except for immaterial amendments to
the
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Certificate of Incorporation or By-laws of any Subsidiaries,
provided such amendments in no way adversely affect Purchaser
or the rights granted to Purchaser hereunder);
(ii) declare or pay any non-cash dividend or make any
non-cash distribution with respect to the Assets; provided,
however, that the Company shall be permitted to issue rights
under a customary shareholder rights plan or "poison pill"
that (A) expires at Closing and (B) expressly exempts
Purchaser and its Affiliates from its operation;
(iii) redeem or otherwise acquire any shares of its capital
stock or issue any capital stock (except upon exercise of
options issued prior to the date hereof under a Company Stock
Plan), or any option, or warrant or right relating thereto
(other than grants under the Company's 1994 Amended and
Restated Long Term Incentive Plan of options to acquire not
more than 685,778 shares of Common Stock in the aggregate from
the separate "pools" of options that the Company has
heretofore allocated in connection with certain acquisitions
that the Company has made for award to employees of such
acquired companies; provided that each such option shall (A)
have a per share exercise price that is not less than the fair
market value per share of Common Stock at the date of grant,
(B) vest and become exercisable no more rapidly than 25% on
each of the first four anniversaries of the date of grant, and
(C) shall not vest or become earlier exercisable as a result
of the consummation of the Transactions);
(iv) incur any liabilities, obligations or indebtedness
for borrowed money or guarantee any such liabilities,
obligations or indebtedness, other than in the ordinary course
of business consistent with past practice (except as
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otherwise provided herein with respect to the Proposed
Financings or as incurred in connection with acquisitions to
the extent permitted hereby) and in an aggregate amount that
would not be material to the Company;
(v) permit, allow or suffer any assets of the
Retained Business to be subject to any Lien other than
Permitted Liens;
(vi) guarantee or otherwise become
contingently liable for any obligation of any of
the Distributed Companies;
(vii) cancel any material indebtedness (individually or in
the aggregate) relating to the Retained Business or waive any
claims or rights of substantial value relating to the Retained
Business;
(viii) pay, loan or advance any amount to, or sell, transfer
or lease any of its assets relating to the Retained Business,
or enter into any agreement or arrangement relating to the
Retained Business with, any of the Distributed Companies or
any of their respective Affiliates other than in the ordinary
course of business consistent with past practice;
(ix) make any change in any method of accounting or
accounting practice or policy, except as may be required by
GAAP;
(x) modify, amend, terminate or permit the lapse of
any lease of real property used in connection with, and which
is material to, the Retained Business (except modifications or
amendments associated with renewals of such leases in the
ordinary course of business consistent with past practice of
the Retained
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Companies with respect to which Purchaser shall
have the right to participate and to approve);
(xi) enter into, terminate, renew or modify any Contract
to which the Company or any Retained Subsidiary is a party or
by which any of their assets are bound and which is material
to the Company;
(xii) enter into any agreement or take any action in
violation of the terms of this Agreement or any of the other
Transaction Agreements;
(xiii) settle any material tax audit, make or change any tax
election or amend any Tax Returns; or
(xiv) agree, whether in writing or otherwise, to do any of
the foregoing.
(e) Employee Benefits. Except (w) as set forth in Schedule
8.01(e), (x) in connection with acquisitions to the extent permitted by
this Agreement or (y) in the ordinary course of business and as
consistent with past practice (which shall include normal periodic
performance reviews and related benefit increases) or (z) pursuant to
the existing terms of any collective bargaining agreement, the Company
will not, nor will it permit any of the Retained Subsidiaries to (i)
increase in any manner the compensation of any of the officers or other
employees of the Retained Companies; (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit not required by
any existing plan, agreement or arrangement to any such officer or
employee, whether past or present; (iii) enter into, or negotiate, any
collective bargaining agreement with respect to employees of the
Retained Companies except as required by law, in which case the Company
or such Retained Subsidiary shall first notify Purchaser; or
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(iv) commit itself to any additional pension, profit-sharing, bonus,
incentive, deferred compensation, stock purchase, stock option, equity
purchase (or other equity based plan), stock appreciation right, group
insurance, severance pay, retirement or other employee benefit plan,
policy, program, understanding, agreement or arrangement, or to any
employment agreement or consulting agreement (arising out of prior
employment), regardless of the applicable funding arrangements, with or
for the benefit of any officer or employee of the Retained Companies,
or amend, renew or extend any of such plan or any of such agreements in
existence on the date hereof in any manner which would, in the case of
clauses (i), (ii), (iii) and (iv) above, result in liabilities that are
material to the Retained Companies taken as a whole.
SECTION 8.02 Transaction Proposals. (a) Subject to Section
8.02(d), the Company shall not, nor shall it permit any of its Subsidiaries
to, nor shall it authorize or permit any officer, director or employee of, or
any investment banker, attorney, accountant or other advisor, agent or
representative of, the Company or any of its Subsidiaries to, (i) solicit or
initiate, or encourage (including by furnishing non-public information) the
submission of, any Transaction Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Transaction Proposal; provided,
however, that prior to the Company Meeting, in response to an unsolicited
written bona fide Transaction Proposal that in the good faith opinion of the
Board of Directors of the Company could reasonably be expected to result in a
Superior Proposal (as defined below), if the Board of Directors of the
Company determines in good faith, after consultation with outside counsel,
that failure to do so could reasonably be expected to result in a breach of
its fiduciary duties to stockholders under applicable law, the Company may,
subject to
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compliance with Section 8.02(c), (A) furnish information with respect to the
Company to such Person making such proposal pursuant to a customary
confidentiality and standstill agreement with such Person and (B) participate in
negotiations regarding such Transaction Proposal. For purposes of this
Agreement, "Transaction Proposal" means any inquiry, proposal or offer from any
Person relating to (x) any purchase or other acquisition from the Company of
assets representing 25% or more of the net revenues, net income or profits of
the Company and its Subsidiaries, taken as a whole, (y) any purchase or other
acquisition of 10% or more of any class of Equity Securities of the Company, or
(z) any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company (or any
Subsidiary whose business constitutes 25% or more of the net revenues, net
income or assets of the Company and its Subsidiaries, taken as a whole), in each
case other than the transactions contemplated by this Agreement. Immediately
after the execution and delivery of this Agreement, the Company will, and will
cause its Subsidiaries and Affiliates, and their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents to, cease
and terminate any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any possible Transaction Proposal.
(b) Nothing contained in this Section 8.02 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act; provided that except as
set forth in this Section 8.02(b) or as permitted by Section 8.02(d), neither
the Board of Directors of the Company nor any committee thereof shall (A)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Purchaser, the approval or recommendation by such Board of Directors or any such
committee of this Agreement or the Transactions, (B) approve or recommend, or
propose to approve or recommend, any Transaction Proposal (C) cause or permit
the Company or any of its Subsidiaries
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to enter into any agreement with respect to any Transaction Proposal or (D)
terminate this Agreement in response to a Transaction Proposal. Notwithstanding
the foregoing, if prior to the Company Meeting the Company has received a
Transaction Proposal that the Board determines in good faith is a Superior
Proposal, then the Board of Directors of the Company, if it determines in good
faith, after consultation with outside counsel, that failure to do so could
reasonably be expected to result in a breach of its fiduciary duties to
stockholders under applicable law, may (subject to the terms of this sentence
and compliance with the following sentence) (i) withdraw or modify its
recommendation of this Agreement, or the transactions contemplated hereby, (ii)
approve or recommend such Superior Proposal, (iii) cause the Company to enter
into an agreement with respect to a Superior Proposal and (iv) terminate this
Agreement, in each case (as contemplated by this Section 8.02(b)) no earlier
than five Business Days following Purchaser's receipt of a written notice from
the Company advising Purchaser that the Board of Directors of the Company has
received a Superior Proposal, specifying the terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal;
provided, however, that neither the Company nor its Board of Directors shall
take any of the actions specified in such clauses (i), (ii), (iii) or (iv)
unless the Company shall have furnished Purchaser with written notice on a date
prior to the date any such actions are proposed to be taken specifying such
actions to be taken. In addition, if the Company or the Board of Directors of
the Company proposes to take any of the actions permitted by the preceding
sentence with respect to any Transaction Proposal, then the Company shall, prior
to the taking of any such action, pay, or cause to be paid, to Purchaser,
Purchaser's Expenses and the Termination Fee (each as defined in Section 12.09).
The term "Superior Proposal" shall mean any bona fide written Transaction
Proposal that has the following characteristics: (1) it is a proposal to
acquire, directly or indirectly, for consideration consisting of cash and/or
readily marketable securities, (x) shares of Common Stock representing at least
20% of the Total Voting
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Power, or (y) at least 25% of the assets of the Retained Subsidiaries and (2)
the terms of such proposal in the good faith judgment of the Board of Directors
of the Company, based on advice from the Company's financial adviser, provide
consideration to the Company or the Company's stockholders that is superior to
the consideration provided pursuant to this Agreement (after taking into account
any modifications to this Agreement proposed by Purchaser).
(c) The Company shall immediately advise Purchaser orally and
in writing of (i) any request for information which may relate to a Transaction
Proposal, (ii) any Transaction Proposal, (iii) any inquiry with respect to or
that could lead to any Transaction Proposal or (iv) any action taken in
accordance with Section 8.02(a)(A) or (B), and in each case the material terms
and conditions of such request, Transaction Proposal, inquiry or action and the
identity of the Person making any such request, Transaction Proposal or inquiry
with respect to which such action is taken. The Company will keep Purchaser
reasonably informed of material developments concerning the status and details
(including amendments or proposed amendments) of any such request, Transaction
Proposal, inquiry or action.
SECTION 8.03 Modification of Transaction Agreements;
Abandonment of Distributions. Notwithstanding anything to the contrary in this
Agreement, the Company may in its sole discretion modify each of the Transaction
Agreements relating to the Distributions and, if the Board of Directors of the
Company determines in good faith that it is in the best interest of the Company
to do so, abandon the Distributions.
SECTION 8.04 Transaction Agreements and Schedules. The Company
shall use reasonable best efforts to cause (i) each of the Transaction
Agreements to be entered into by the Company, School, Travel, Technology or
Print, as the case may be, in connection with the Distributions, and each of
the Annexes called for in this Agreement that have not been provided to
Purchaser prior to the execution of this Agreement, to be delivered to Purchaser
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and its counsel by 7:00 p.m., New York Time, February 13, 1998 (the "Agreement
Delivery Cut-Off Time"); and (ii) each of the Schedules called for in this
Agreement that have not been provided to Purchaser prior to execution of this
Agreement (and prior to the Schedule Review Cut-Off Time (as defined below) may
supplement Schedules that have previously been supplied or may unilaterally
amend this Agreement to add additional Schedules) to be delivered to Purchaser
and its counsel by 7:00 p.m., New York time, January 20, 1998 (the "Schedule
Delivery Cut-off Time"). Purchaser shall review such Transaction Agreements,
Schedules and Annexes in good faith. Prior to the applicable Review Cut-off Time
(as defined below) the Company shall make available to Purchaser and its counsel
at their request all documentation related to any item set forth on any Schedule
or Annex. Purchaser shall complete its review of the Transaction Agreements, and
the Annexes and notify the Company that such review is complete by 7:00 p.m.,
New York time, on February 27, 1998 (the "Agreement Review Cut-off Time") and
shall complete its review of the Schedules and notify the Company that such
review is complete by 7:00 p.m., New York time, on February 3, 1998 (the
"Schedule Review Cut-Off Time"); provided, however, that if any Transaction
Agreement, Schedule or Annex is delivered after the applicable Delivery Cut-off
Time, the applicable Review Cut-off Time for all Transaction Agreements and
Annexes and for the Schedules, as the case may be shall be extended by the
number of days elapsed (which, in any case, shall not be less than one) between
the date of such Delivery Cut-off Time and the date of receipt by Purchaser and
its counsel of such Transaction Agreement or Annex or such Schedule, as the case
may be; and provided further, however, that if (A) the Transaction Agreements
are not satisfactory to Purchaser in its good faith reasonable judgment, (B) the
Audited Retained Business Financial Statements reflect financial information
materially different from that presented in the Pro Forma Retained Business
Financial Statements, or (C) any new Schedule or change or addition to the
Schedules made after the date hereof is not satisfactory to Purchaser in its
good faith reasonable judgment, Purchaser may terminate
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this Agreement upon written notice to the Company without further liability on
the part of Purchaser or the Company other than pursuant to Sections 10.02 and
13.09.
SECTION 8.05 Company Stockholder Approval; Proxy Statement.
(a) The Company shall call a meeting of its stockholders (the "Company Meeting")
for the purpose, among others, of voting upon the issuance (the "Issuance") of
the Shares, the Special Warrants and the Warrants to Purchaser (the "Company
Meeting Proposal").
(b) The Company will prepare and file with the SEC a proxy
statement relating to the Company Meeting (as amended or supplemented and
including documents incorporated by reference therein, the "Proxy Statement")
and shall use its reasonable best efforts to respond to any comments of the SEC
or its staff and to cause the Proxy Statement to be cleared by the SEC. The
Company shall notify Purchaser of the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and shall
supply Purchaser and its counsel with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement. The Company shall
give Purchaser and its counsel the opportunity to review the Proxy Statement
prior to its being filed with the SEC and shall give Purchaser and its counsel
the opportunity to review all amendments and supplements to the Proxy Statement
and all responses to requests for additional information and replies to comments
prior to their being filed with, or sent to, the SEC. Each of the Company and
Purchaser agrees to use its reasonable best efforts, after consultation with the
other party hereto, to respond promptly to all such comments of and requests by
the SEC. After the Proxy Statement has been cleared by the SEC, the Company
shall mail the Proxy Statement to the stockholders of the Company. If at any
time prior to the Company Meeting there shall occur any event that should be set
forth in an amendment or supplement to the Proxy Statement, the Company
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will prepare and mail to its stockholders such an amendment
or supplement.
(c) The Proxy Statement will not, at the date mailed to the
Company's stockholders and at the date of the Company Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, except
that no representation is made by the Company with respect to statements made
therein based on information concerning Purchaser or its Affiliates supplied in
writing by Purchaser or any of its Affiliates specifically for inclusion in the
Proxy Statement. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
(d) Subject to Section 8.02(b), the Board of Directors of the
Company shall recommend that the Company's stockholders approve the Company
Meeting Proposal and the Company shall use its best efforts to obtain the
necessary approvals by its stockholders of the Company Meeting Proposal.
SECTION 8.06 Retained Companies Financing. In connection with
the Proposed Financings, the Company and Purchaser shall jointly select all
sources of the Proposed Financings, including determining the respective roles
of such sources; provided, however, that Bankers Trust Company shall have the
opportunity to be a lead in the bank financing with economics at least as
favorable as any other lead in the bank financing if Bankers Trust Company's
pricing is competitive. In addition, (i) Purchaser and its - counsel shall have
the right to participate in any discussions or negotiations between the Company
and any of its representatives, on the one hand, and its prospective lenders and
their counsel, on the other, and to comment on draft loan and other
documentation in respect of any such Proposed Financings and (ii) the Company
shall provide -- Purchaser and its counsel copies of all correspondence
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between the Company and its lenders relating thereto. If, prior to the execution
of any definitive documentation with respect to the Proposed Financings, based
on its review of such definitive documentation, Purchaser determines in the good
faith exercise of its reasonable judgment not to proceed with the transactions
contemplated by this Agreement, Purchaser may terminate this Agreement upon
written notice to the Company.
SECTION 8.07 Tender Offer. (a) The Company shall cause the
commencement (as such term is defined in Rule 13e-4(a)(4) under the Exchange
Act) of the Tender Offer to purchase 37,037,037 shares of Common Stock, at a
price per share equal to $27, net to the seller in cash, no later than the date
specified in Schedule 8.07. Unless Purchaser shall otherwise agree, the
Company's obligation to complete the Tender Offer shall be subject only to the
conditions (the "Offer Conditions") set forth in Schedule 8.07. Subject to the
provisions hereof, the Tender Offer shall expire on the date set forth in
Schedule 8.07; provided that the Tender Offer shall be extended from time to
time if the Offer Conditions shall not have been satisfied, so long as this
Agreement shall remain in effect.
(b) On the date of commencement of the Tender Offer, the
Company shall file with the SEC an Issuer Tender Offer Statement on Schedule
13E-4 with respect to the Tender Offer (the "Tender Offer Statement"), which
shall contain an offer to purchase and a related letter of transmittal (such
Tender Offer Statement and the documents therein pursuant to which the Tender
Offer will be made, together with any supplements or amendments thereto, are
referred to hereinafter as the "Offer Documents"). After the Offer Documents are
filed with the SEC, the Company shall disseminate the Offer Documents to the
stockholders of the Company. If at any time prior to the expiration of the
Tender Offer there shall occur any event that should be set forth in an
amendment or supplement to the Offer Documents, the Company will prepare and
file with the SEC
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and disseminate to its stockholders such an amendment or
supplement.
(c) The Company shall give Purchaser and its counsel the
opportunity to review the Offer Documents prior to their being filed with the
SEC and shall give Purchaser and its counsel the opportunity to review all
amendments and supplements to the Offer Documents and all responses to requests
for additional information and replies to comments prior to their being filed
with, or sent to, the SEC. The Company shall notify Purchaser of the receipt of
any comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Offer Documents or for additional
information and shall supply Purchaser and its counsel with copies of all
correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Offer
Documents.
(d) The Offer Documents will not, on the date filed with the
SEC and as of the date first published, sent or given to the Company's
stockholders, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading except that no representation is made by the Company with respect
to statements made therein based on information concerning Purchaser or its
Affiliates supplied in writing by Purchaser or any of its Affiliates
specifically for inclusion in the Offer Documents. The Offer Documents will
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations thereunder.
SECTION 8.08 Information Statements. (a) The Company shall
give Purchaser and its counsel the opportunity to review the information
statements to be disseminated to stockholders of the Company in connection with
the Distributions (the "Information Statements") prior to its being filed with
the SEC and shall give Purchaser
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and its counsel the opportunity to review all amendments and supplements to the
Information Statements and all responses to requests for additional information
and replies to comments prior to their being filed with, or sent to, the SEC.
The Company shall notify Purchaser of the receipt of any comments from the SEC
or its staff and of any request by the SEC or its staff for amendments or
supplements to the Information Statements or for additional information and
shall supply Purchaser and its counsel with copies of all correspondence between
the Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Information Statements. If at any
time prior to completion of the Distributions there shall occur any event that
should be set forth in an amendment or supplement to the Information Statement,
the Company will prepare and file with the SEC and disseminate to its
stockholders such an amendment or supplement.
(b) The Information Statements will not, on the date filed
with the SEC and as of the date first disseminated to the Company's
stockholders, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading except that no representation is made by the Company with respect
to statements made therein based on information concerning Purchaser or its
Affiliates supplied in writing by Purchaser or any of its Affiliates
specifically for inclusion in the Information Statements. The Information
Statements will comply as to form in all material respects with the provisions
of the Exchange Act and the rules and regulations thereunder.
SECTION 8.09 [Intentionally omitted.]
SECTION 8.10 Tax Standstill. Except as permitted by Section
6.01(b) or 6.01(c), during the period ending two years after the date of the
Distributions, (i) Purchaser shall not acquire any Securities or take any
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other action that would cause Purchaser's Percentage Interest to equal or exceed
50%, (ii) none of Purchaser, the Fund or CD&R shall act in concert with any
other Person to acquire any Securities if aggregating such acquisition with the
Purchaser's holdings would cause the Purchaser's Percentage Interest to equal or
exceed 50%, and (iii) none of Purchaser, the Fund or CD&R shall solicit the
acquisition of any Securities, provided that the provision by the Fund to its
limited partners of customary reports and information, and customary
communication with such limited partners on behalf of the Fund, with respect to
the Fund's investment in the Company that, in either case, do not recommend any
such acquisition, shall not be treated as a solicitation by the Purchaser within
the meaning of this clause (iii).
SECTION 8.11 Access and Information. (a) So long as this
Agreement remains in effect, prior to the Closing, the Company will (and will
cause each of the Retained Companies, and each of their respective accountants,
counsel, consultants, officers, directors, employees, agents and representatives
of or to any of the Retained Companies, to) give Purchaser and its
Representatives, full access during reasonable business hours to all of their
respective properties, assets, books, contracts, commitments, reports and
records relating to the Retained Companies, and furnish to them all such
documents, records and information with respect to the properties, assets and
business of the Retained Companies and copies of any work papers relating
thereto as Purchaser shall from time to time reasonably request. The Company
will keep Purchaser generally informed as to the affairs of the Retained
Business.
(b) In addition, the Company shall deliver to Purchaser, not
later than the 35th day following the end of each fiscal month prior to the
Closing, updated Pro Forma Retained Business Financial Statements as of the end
of such fiscal month.
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SECTION 8.12 Further Actions. (a) The Company shall, and
shall cause each of the Retained Companies to, use reasonable best efforts to
take or cause to be taken all actions, and to do or cause to be done all
other things, necessary, proper or advisable in order for each of the
Retained Companies to fulfill and perform its obligations in respect of this
Agreement and the Transaction Agreements to which it is a party, or otherwise
to consummate and make effective the transactions contemplated hereby and
thereby.
(b) The Company shall (and shall cause each of the Retained
Companies to), as promptly as practicable, (i) make, or cause to be made, all
filings and submissions (including but not limited to under the HSR Act and
foreign antitrust filings) required under any law applicable to any of the
Retained Companies, and give such reasonable undertakings as may be required in
connection therewith, and (ii) use all reasonable efforts to obtain or make, or
cause to be obtained or made, all Permits necessary to be obtained or made by
any of the Retained Companies, in each case in connection with this Agreement or
the Transaction Agreements, the sale and transfer of the Shares, the Special
Warrants and the Warrants pursuant hereto, or the consummation of the other
transactions contemplated hereby or thereby.
(c) The Company shall, and shall cause each of the Retained
Companies to, coordinate and cooperate with Purchaser in exchanging such
information and supplying such reasonable assistance as may be reasonably
requested by Purchaser in connection with the filings and other actions
contemplated by this Agreement.
(d) At all times prior to the Closing Date, the Company
shall promptly notify Purchaser in writing of any fact, condition, event or
occurrence that could reasonably be expected to result in the failure of any
of the conditions contained in Article IX to be satisfied, promptly upon
becoming aware of the same.
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SECTION 8.13 Further Assurances. Following the Closing Date,
the Company shall, and shall cause each of the Retained Companies to, from time
to time, execute and deliver such additional instruments, documents, conveyances
or assurances and take such other actions as shall be necessary, or otherwise
reasonably be requested by Purchaser, to confirm and assure the rights and
obligations provided for in this Agreement and the Transaction Agreements and
render effective the consummation of the transactions contemplated hereby and
thereby, or otherwise to carry out the intent and purposes of this Agreement.
ARTICLE IX
Conditions Precedent
SECTION 9.01 Conditions to Each Party's Obligations. The
obligations of the Company and Purchaser to consummate the transactions
contemplated to occur at the Closing shall be subject to the satisfaction prior
to the Closing of each of the following conditions, each of which may be waived
only if it is legally permissible to do so:
(a) HSR and Other Approvals. Any applicable waiting period
under the HSR Act relating to the transactions contemplated hereby
shall have expired or been terminated, and all other material
authorizations, consents, orders or approvals of, or regulations,
declarations or filings with, or expirations of applicable waiting
periods imposed by, any Governmental Entity (including, without
limitation, any foreign antitrust filing) necessary for the
consummation of the transactions contemplated hereby, shall have been
obtained or filed or shall have occurred.
(b) No Litigation, Injunctions, or Restraints. No statute,
rule, regulation, executive order, decree, temporary restraining order,
preliminary or permanent injunction or other order enacted, entered,
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promulgated, enforced or issued by any Governmental Entity or other
legal restraint or prohibition preventing the consummation of the
transactions contemplated by this Agreement or any of the Transaction
Agreements shall be in effect.
(c) Stockholders Vote. The Company Stockholder Approval shall
have been obtained.
(d) Nasdaq Listing. The Shares shall have been approved for
listing on the Nasdaq Stock Market, subject only to official notice of
issuance.
(e) Consummation of Distributions. The distribution of the
businesses of School, Travel, Technology, Print and their respective
Subsidiaries shall have occurred pursuant to the Distribution
Agreements, which shall contain provisions:
(i) effecting the Pre-Distribution
Transactions;
(ii) allocating assets and liabilities among
the Distributed Companies and the Retained
Companies;
(iii) allocating among the Distributed Companies an
aggregate of $130 million of corporate debt, in addition to
acquisition debt incurred in respect of acquisitions effected
after the date hereof;
(iv) allocating among the Distributed Companies and the
Company on a pro rata basis all liabilities of the Distributed
Companies not properly allocable to any specific Distributed
Company or to the Company;
(v) with respect to current and planned
cross-selling opportunities between the
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Distributed Companies and the Retained Companies;
and
(vi) allocating on a pro rata basis the transaction costs
associated with the Transactions.
(f) Tax Allocation Agreement. The Tax Allocation Agreement
shall have been executed and shall contain the following provisions:
(i) a joint and several indemnity from the
Distributed Companies in favor of the Company and the Retained
Subsidiaries from and against any Losses with respect to Taxes
resulting from any Adverse Tax Act of any of the Distributed
Companies or their Subsidiaries;
(ii) an indemnity from each of the Distributed Companies
in favor of the Company from and against any Losses with
respect to Taxes resulting from the Pre-Distribution
Transactions or the Distributions, as a result of the failure
of the Pre-Distribution Transactions or the Distributions to
qualify under sections 355 or 368 of the Code or otherwise,
including, without limitation, by reason of any stock or
securities of any Distributed Company failing to qualify as
"qualified property" within the meaning of section 355(c)(2)
of the Code, except to the extent such Losses result from any
Adverse Tax Act by any of the Company, the Retained
Subsidiaries, the Distributed Companies or any of their
Subsidiaries, provided that each Distributed Company shall be
only liable for the portion of such Losses that bears the same
ratio to the aggregate amount of such Losses as the Market
Capitalization of such Distributed Company bears to the
aggregate Market Capitalization of the Company and the
Distributed Companies and provided, further, that each
Distributed Company
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shall be liable for 100% of any such Losses attributable to
any "deferred intercompany transaction" to the extent such
Loss is attributable to any "intercompany item" that such
Distributed Company or any of its Subsidiaries is required to
take into account immediately prior to the Distributions
pursuant to Treasury Regulations section 1.1502-13;
(iii) customary provisions providing for control and
participation rights with respect to any administrative and
judicial proceedings with respect to Taxes, including the
right of the Person primarily responsible for the relevant
indemnification obligation thereunder to control any such
proceeding. Notwithstanding anything to the contrary in the
preceding sentence, no Distributed Company shall be entitled
to assume control of any portion of any administrative or
judicial proceeding with respect to Taxes unless such
Distributed Company shall have theretofore acknowledged in
writing its liability for such Taxes pursuant to the Tax
Allocation Agreement; and
(iv) Any tax saving or other benefit attributable to any
compensation deduction arising from or in connection with the
exercise by any Employee of the Company or any of its
Subsidiaries of any option granted under any of the Company
Stock Plans shall be apportioned to the entity whose shares
were issued upon the exercise of such option, provided that
any compensation deduction arising from or in connection with
any such exercise on or prior to the Closing Date by any
Employee of any Distributed Company or any of its Subsidiaries
shall be apportioned to such Distributed Company.
SECTION 9.02 Conditions to the Obligations of
the Company. The obligations of the Company to consummate
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the transactions contemplated to occur at the Closing shall be subject to the
satisfaction or waiver thereof prior to the Closing of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser that are qualified as to materiality shall be
true and correct, and those that are not so qualified shall be true and
correct in all material respects, as of the date of this Agreement and
as of the time of the Closing as though made at and as of such time,
except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and
warranties that are qualified as to materiality shall be true and
correct, and those that are not so qualified shall be true and correct
in all material respects, on and as of such earlier date) and the
Company shall have received a certificate signed by an authorized
officer of Purchaser to such effect.
(b) Opinion of Purchaser's Counsel. The Company shall have
received an opinion dated as of the Closing of Debevoise & Plimpton,
counsel to Purchaser, in form and substance reasonably satisfactory to
the Company.
(c) Registration Rights Agreement. Purchaser
shall have executed and delivered the Registration
Rights Agreement.
SECTION 9.03 Conditions to the Obligations of Purchaser. The
obligations of Purchaser to consummate the transactions contemplated to occur at
the Closing shall be subject to the satisfaction or waiver thereof prior to the
Closing of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement that are
qualified as to materiality shall be true and correct, and those that
are not so qualified shall be true and correct in all material
respects, as of the date of this Agreement and as of
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the time of the Closing as though made at and as of such time, except
to the extent such representations and warranties expressly relate to
an earlier date (in which case such representations and warranties that
are qualified as to materiality shall be true and correct, and those
that are not so qualified shall be true and correct in all material
respects, on and as of such earlier date), and Purchaser shall have
received a certificate signed by the chief executive officer and chief
financial officer of the Company to such effect.
(b) Transaction Agreements. Each Transaction Agreement to
which the Company is a party shall have been executed without
modification from the forms as in existence at the Review Cut-off Time
or such earlier date as Purchaser completed its review of such
agreement.
(c) Performance of Obligations of the Company. The Company
shall have performed or complied in all material respects with all
obligations and covenants required to be performed or complied with by
the Company under this Agreement, and Purchaser shall have received a
certificate signed by the chief executive officer and chief financial
officer of the Company to such effect.
(d) Opinion of the Company's Counsel. Purchaser shall have
received opinions dated as of the Closing of the general counsel of the
Company, and Wilmer, Cutler & Pickering, counsel to the Company, in
form and substance reasonably satisfactory to Purchaser.
(e) Registration Rights Agreement. The Company
shall have executed and delivered the Registration
Rights Agreement.
(f) Financings. The Company shall have entered into definitive
documentation for the Proposed
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Financings and such definitive documentation shall be satisfactory in
form and substance to Purchaser.
(g) Tender Offer. The Company shall have consummated the
Tender Offer as provided for herein.
(h) Consulting Agreement; Transaction Fee. The Company shall
have (A) entered into a consulting agreement with CD&R providing for an
annual fee of $500,000 (plus reasonable out-of-pocket expenses) in
connection with consulting and advisory services and a related
indemnification agreement and (B) authorized payment to CD&R of the
Transaction Fee and the Transaction Fee shall have been paid to CD&R.
The consulting agreement shall terminate at the later of (i) the fifth
anniversary of the Closing Date and (ii) such time as Purchaser is
entitled to nominate only one Investor Director.
(i) Other Parties. (A) No Person or "group" (as defined in the
Exchange Act), other than Purchaser, shall have acquired beneficial
ownership of more than 15% of the outstanding shares of Voting
Securities, and (B) no Person (other than Purchaser or one or more of
its Affiliates) shall have entered into an agreement in principle or
definitive agreement with the Company with respect to a tender or
exchange offer for any shares of Common Stock or a merger,
consolidation or other business combination with or involving the
Company.
(j) Corporate Proceedings. All corporate proceedings of the
Company in connection with the transactions contemplated by this
Agreement and the Transaction Agreements, and all documents and
instruments incident thereto, shall be satisfactory in form and
substance to Purchaser and its counsel, and Purchaser and its counsel
shall have received all such documents and instruments, or copies
thereof, certified or requested, as may be reasonably requested.
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(k) Management Plan. Purchaser shall have completed
discussions with management which satisfactorily confirm to Purchaser
that the operating prospects of the Retained Business (exclusive of
acquisitions), are, taken as a whole, not materially inconsistent with
the Company's forecasts (excluding (i) the impact on the Company's
earnings for fiscal quarters ending prior to or including the Closing
caused by the inability of the Company to complete acquisitions
following announcement of the Transactions and/or to account for
acquisitions as poolings of interest and (ii) the effect on the Company
of being required as a result of the Transactions to change accounting
treatment for past acquisitions from poolings of interests to
purchases); provided, however, that this condition shall be deemed
satisfied if Purchaser shall not have given notice to the Company on or
prior to February 3, 1998 that Purchaser has concluded that this
condition has not been satisfied.
(l) Board of Directors. The Board of Directors of the Company
shall consist of 9 persons, including the chief executive officer of
the Company, three designees of Purchaser, three persons selected by
the current Board of Directors and two persons who shall be
satisfactory to both Purchaser and the current Board of Directors of
the Company.
(m) Material Adverse Effect. No event, change or development
shall exist or have occurred since October 25, 1997 which has had or is
reasonably likely to have a Material Adverse Effect on the Retained
Companies, taken as a whole.
(n) Debt Amounts. The outstanding debt of the Retained
Companies shall not exceed $1.4 billion (after giving effect to the
Transactions and assuming conversion of all issued and outstanding 2001
Notes) and the outstanding debt of the Distributed Companies shall be
at least $130 million plus the expenditures
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by the entities comprising such Distributed Companies
for acquisitions after the date hereof.
(o) Options. The Company's arrangements with respect to
Management options shall be satisfactory to Purchaser in its good faith
reasonable judgment.
ARTICLE X
Termination
SECTION 10.01 Termination. This Agreement may be terminated at
any time prior to the Closing, whether before or after the Company Stockholder
Approval has been obtained:
(a) by mutual written consent of Purchaser and
the Company;
(b) by Purchaser or the Company:
(i) if the Closing shall not have occurred prior to
September 30, 1998, provided, that the right to terminate this
Agreement pursuant to this clause (i) shall not be available
to any party whose failure to fulfill any obligation under
this Agreement results in the failure of the Closing to occur;
(ii) if the Company Stockholder Approval shall not have
been obtained by reason of the failure to obtain the required
vote upon a vote held at the Company Meeting, or such meeting
shall not have been held by September 30, 1998;
(iii) if there shall be any statute, law, regulation or
rule that makes consummating the transactions contemplated
hereby illegal or if any court or other Governmental Entity of
competent jurisdiction shall have issued a
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judgment, order, decree or ruling, or shall have taken such
other action restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby and
such judgment, order, decree or ruling shall have become final
and non-appealable;
(c) by Purchaser:
(i) if the Company shall have failed to perform in
any material respect any of its obligations hereunder or shall
have breached in any respect any representation or warranty
contained herein qualified by materiality or shall have
breached in any material respect any representation or
warranty not so qualified, and the Company has failed to
perform such obligation or cure such breach, within 30 days of
its receipt of written notice thereof from Purchaser, and such
failure to perform shall not have been waived in accordance
with the terms of this Agreement;
(ii) if the Board of Directors of the Company or any
committee thereof withdraws or modifies (or publicly announces
its intention to do so, or resolves to do so) in a manner
adverse to Purchaser (as determined by Purchaser in its
reasonable judgment) its approval or recommendation of this
Agreement or the transactions contemplated hereby or approves
or recommends a Transaction Proposal;
(iii) if the Board of Directors of the Company publicly
announces its determination not to effect the Distributions;
(iv) if any of the conditions set forth in Section 9.01 or
9.03 shall become impossible to fulfill (other than as a
result of any breach by Purchaser of the terms of this
Agreement) and
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shall not have been waived in accordance with the
terms of this Agreement;
(v) if permitted pursuant to Section 8.04
or 8.06;
(vi) if the Company shall make any substantive amendment
to any Transaction Agreement after the Review Cut-Off Time
without Purchaser's consent;
(d) by the Company:
(i) if Purchaser shall have failed to perform in any
material respect any of its obligations hereunder or shall
have breached in any respect any representation or warranty
contained herein qualified by materiality or shall have
breached in any material respect any representation or
warranty not so qualified, and Purchaser has failed to perform
such obligation or cure such breach, within 30 days of its
receipt of written notice thereof from the Company, and such
failure to perform shall not have been waived in accordance
with the terms of this Agreement;
(ii) if any of the conditions set forth in Section 9.01 or
9.02 shall become impossible to fulfill (other than as a
result of any breach by the Company of the terms of this
Agreement) and shall not have been waived in accordance with
the terms of this Agreement;
(iii) if permitted pursuant to Section 8.02(b).
SECTION 10.02 Effect of Termination. In the event of
termination of this Agreement by either the Company or Purchaser as provided in
Section 10.01, this Agreement shall forthwith become void and have no effect,
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without any liability or obligation on the part of Purchaser or the Company,
other than the provisions of this Section 10.02, Section 13.09 and Article XI
and except to the extent that such termination results from the wilful and
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
ARTICLE XI
Indemnification
SECTION 11.01 Indemnification of Purchaser. The Company
covenants and agrees to defend, indemnify and hold harmless each of Purchaser,
its Affiliates (other than the Company and any Retained Companies), and their
respective officers, directors, partners, employees, agents, advisers and
representatives including, without limitation, the Fund, CD&R Investment
Associates, Inc., a Delaware corporation, and CD&R Associates V Limited
Partnership, a Cayman Islands exempted limited partnership, and CD&R
(collectively, the "Purchaser Indemnitees") from and against, and pay or
reimburse the Purchaser Indemnitees for, any and all claims, demands,
liabilities, obligations, losses, costs, expenses, fines or damages (whether
absolute, accrued, conditional or otherwise and whether or not resulting from
third party claims), including interest and penalties with respect thereto and
out-of-pocket expenses and reasonable attorneys' and accountants' fees and
expenses incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of their respective rights hereunder
(collectively, "Losses"), resulting from or based on (or allegedly resulting
from or based on):
(i) any actions (including by any shareholders of the Company
in connection with any derivative actions) resulting from or based on
(or allegedly resulting from or based on) any of the Transactions,
provided that the indemnity provided in this clause
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(i) shall not include (A) actions brought by any limited partner of the
Fund against Purchaser or any of its Affiliates relating to the
transactions contemplated by this Agreement, (B) Losses resulting from
or based on the acts or omissions of a Purchaser Indemnitee following
the Closing, (C) claims resulting from or based on (1) a breach by
Purchaser of its obligations under this Agreement, (2) any contract,
agreement, obligation, commitment, understanding or other arrangement
between the claimant and any Purchaser Indemnitee, (3) any intentional
tort by a Purchaser Indemnitee or (4) any fee, compensation or other
payment to be paid to any Purchaser Indemnitee;
(ii) subject to the limitations set forth in Section 11.03, any
breach by the Company of any representation, warranty, covenant or
obligation of the Company hereunder; and
(iii) any failure of any of the Distributed Companies to satisfy its
stated obligations and liabilities under the Distribution Agreements,
the Tax Allocation Agreement or any of the other Transaction Agreements
to which it is a party, whether by virtue of such agreement's
unenforceability, the Distributed Company's bankruptcy or otherwise.
The Losses described in clauses (i), (ii) and (iii) of this Section 11.01(a) are
herein referred to as "Purchaser Indemnifiable Losses". The Company shall
reimburse the Purchaser Indemnitees for any legal or other expenses incurred by
such Purchaser Indemnitees in connection with investigating or defending any
such Purchaser Indemnifiable Losses as such expenses are incurred.
SECTION 11.02 Indemnification Procedures. Promptly after
receipt by a Purchaser Indemnitee of notice of the commencement of any action or
the written assertion of any claim, such Purchaser Indemnitee shall, if a claim
in respect thereof is to be made against the Company, as the case may be (the
"Indemnifying Person"), notify the
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Indemnifying Person in writing of the commencement or the written assertion
thereof. Failure by a Purchaser Indemnitee to so notify the Indemnifying
Person shall relieve the Indemnifying Person from the obligation to indemnify
such Purchaser Indemnitee only to the extent that the Indemnifying Person
suffers actual and material prejudice as a result of such failure but in no
event shall such failure to notify the Indemnifying Person (i) constitute
prejudice suffered by the Indemnifying Person if it has otherwise received
notice of the actions giving rise to such obligation to indemnify or (ii)
relieve it from any liability or obligation that it may otherwise have to
such Purchaser Indemnitee. In case any such action or claim shall be brought
or asserted against any Purchaser Indemnitee and it shall notify the
Indemnifying Person of the commencement or assertion thereof, the
Indemnifying Person shall be entitled to participate therein but the defense
of such action or claim shall be conducted by counsel to the Purchaser
Indemnitee, provided, however, that the Indemnifying Person shall not, in
connection with any one such action or proceeding or separate but
substantially similar actions or proceedings arising out of the same general
allegations, be liable for the fees and expenses of more than one separate
firm of attorneys at any time for all Purchaser Indemnitees, except to the
extent that local counsel, in addition to regular counsel, is required in
order to effectively defend against such action or proceeding and provided
further that a Purchaser Indemnitee shall not enter into any settlement of
any such claim without the prior consent of the Company, such consent not to
be unreasonably withheld or delayed.
SECTION 11.03 Survival of Representations and Warranties. The
representations and warranties of the Company contained in this Agreement shall
expire for all purposes on the first anniversary of the Closing Date, except for
the representations and warranties contained in Sections 3.01(n), 3.01(o) and
3.01(p), which shall expire for all purposes upon expiration of the applicable
statute of limitations.
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ARTICLE XII
Interpretation; Definitions
SECTION 12.01 Interpretation. As used in this
Agreement:
(a) any reference to the Company and its
Subsidiaries means the Company and each of its
Subsidiaries;
(b) any reference to the "Retained Company" and its
Subsidiaries or the "Retained Companies" means the Company and those of
its Subsidiaries included in the Retained Business;
(c) any reference to the "Retained Subsidiaries"
means the Subsidiaries of the Company included in the
Retained Business;
(d) any reference to School, Travel, Technology or Print and
their Subsidiaries means School, Travel, Technology or Print
immediately after completion of the Distributions and those entities
that immediately after the completion of the Distributions will be
Subsidiaries of School, Travel, Technology or Print.
SECTION 12.02 Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
"2001 Notes" is defined in the recitals to this
Agreement.
"2003 Notes" is defined in Section 3.01(d).
"Adverse Tax Act" means, for any Person, any action of such
Person, or any omission by such Person of an action reasonably
available to it, after the date of the Distributions, that materially
contributes to a Final Determination that the Pre-Distribution
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Transactions or any of the Distributions results in the recognition of
gain to the Company by virtue of the Pre-Distribution Transactions or
any of the Distributions failing to qualify under sections 355 or 368
of the Code, including, without limitation, by reason of any stock or
securities of any Distributed Company failing to qualify as "qualified
property" within the meaning of section 355(c)(2) of the Code, or
otherwise.
"Affiliate" shall have the meaning set forth in Rule 12b-2
under the Exchange Act (as in effect on the date of this Agreement).
"Agreement" is defined in the recitals to this
agreement.
"Assets" is defined in Section 3.01(k).
"Audited Balance Sheet" is defined in Section
3.01(g)(iv).
"Audited Retained Business Financial Statements"
is defined in 3.01(g)(iv).
"Balance Sheet" is defined in Section 3.01(g)(i).
"Beneficially Own" with respect to any securities means having
"beneficial ownership" of such securities (as determined pursuant to
Rule 13d-3 under the Exchange Act), including pursuant to any
agreement, arrangement or understanding, whether or not in writing.
"Business Day" means any day on which banking institutions are
open in the City of New York.
"Buyout Transaction" means a tender offer, merger, sale of all
or substantially all the Company's assets or any similar transaction
that offers each holder of Voting Securities (other than, if
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applicable, the Person proposing such transaction) the opportunity to
dispose of Voting Securities Beneficially Owned by each such holder for
the same consideration or otherwise contemplates the acquisition of
Voting Securities Beneficially Owned by each such holder for the same
consideration.
"Cash Transaction" is defined in Section
4.02(b)(i).
"CD&R" means Clayton, Dubilier & Rice, Inc., a
Delaware corporation.
"Closing" is defined in Section 1.02.
"Closing Date" is defined in Section 1.02.
"Code" means the Internal Revenue Code of 1986,
as amended.
"Common Stock" is defined in the recitals to this
Agreement.
"Company" is defined in the recitals to this
Agreement.
"Company Business Financial Statements" is
defined in Section 3.01(g)(i).
"Company By-laws" is defined in Section 3.01(a).
"Company Charter" is defined in Section 3.01(a).
"Company Intellectual Property" is defined in
Section 3.01(s).
"Company Meeting" is defined in Section 8.05(a).
"Company Meeting Proposal" is defined in Section
8.05(a).
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"Company SEC Documents" is defined in Section
3.01(f).
"Company Stock Plans" is defined in Section
3.01(d).
"Company Stockholder Approval" is defined in
Section 3.01(b).
"Contingent Stock" means Common Stock issued after the Closing
Date pursuant to (i) the Amendment to Stock Purchase Agreement, dated
as of June 20, 1996, by and between the Company and Eric Watson or (ii)
any security, option, warrant, call, subscription, right, contract,
commitment, arrangement or understanding required to be disclosed on
Schedule 3.01(d) but not disclosed thereon.
"Contract" is defined in Section 3.01(c)(i).
"Delivery Cut-off Time" is defined in Section
8.04.
"DGCL" is defined in Section 3.01(q).
"Distribution Agreements" is defined in the
recitals to this Agreement.
"Distributions" is defined in the recitals to
this Agreement.
"Distributed Companies" is defined in the
recitals to this Agreement.
"Employee" means any employee or former employee of any member
of the Company or any of its Subsidiaries or any beneficiary or
dependent of any such employee or former employee.
"Employee Benefit Plans" means all defined
contribution, defined benefit, welfare benefit, bonus,
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incentive compensation, stock option, stock purchase, stock
appreciation right, stock bonus, incentive, deferred compensation,
insurance, medical, dental, vision, life, death benefit, fringe benefit
or other employee benefit plans, programs, policies or arrangements,
including without limitation, any employment, consulting, offer,
secondment, severance or other termination agreement, whether or not an
employee benefit plan within the meaning of section 3(3) of ERISA,
maintained by the Company or any of its Subsidiaries.
"Environmental Law" is defined in Section
3.01(p).
"Environmental Permits" is defined in Section
3.01(p).
"Equity Security" means (i) any Common Stock or other Voting
Securities, (ii) any securities of the Company convertible into or
exchangeable for Common Stock or other Voting Securities or (iii) any
options, rights or warrants (or any similar securities) issued by the
Company to acquire Common Stock or other Voting Securities.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"Exchange Act" is defined in Section 3.01(c)(ii).
"Filed Company SEC Documents" is defined in
Section 3.01(i).
"Final Determination" means the final resolution of liability
for any Tax for any taxable period, including any related interest or
penalties, by or as a result of: (i) a final and unappealable decision,
judgment, decree or other order of a court of competent jurisdiction;
(ii) a closing agreement or accepted offer in compromise under Section
7121 or
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7122 of the Code, or comparable agreement under the laws of other
jurisdictions, which resolves the entire tax liability for any tax
period; (iii) any allowance of a refund or credit in respect of an
overpayment of Tax, but only after the expiration of all periods during
which such refund may be recovered (including by way of offset) by the
applicable taxing jurisdiction; or (iv) any other final disposition,
including by reason of the expiration of the applicable statute of
limitations.
"Fund" means Clayton, Dubilier & Rice Fund V
Limited Partnership, a Cayman Islands exempted limited
partnership.
"GAAP" means United States generally accepted
accounting principles.
"Governmental Entity" is defined in Section
3.01(c)(ii).
"Hazardous Substance" is defined in Section
3.01(p).
"HSR Act" is defined in Section 3.01(c)(ii).
"Indemnifying Person" is defined in Section
11.02.
"Information Statement" is defined in Section
8.08(a).
"Intellectual Property" means trademarks, trade names, trade
dress, service marks, copyrights, domain names, and similar rights
(including registrations and applications to register or renew the
registration of any of the foregoing), patents and patent applications,
trade secrets, ideas, inventions, improvements, practices, processes,
formulas, designs, know-how, confidential business or technical
information, computer software, firmware, data and
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documentation, licenses of or agreements relating to any of the
foregoing, rights of privacy and publicity, moral rights, and any other
similar intellectual property rights and tangible embodiments of any of
the foregoing (in any medium including electronic media).
"Investor Directors" is defined in Section 4.01.
"Issuance" is defined in Section 8.05(a).
"knowledge of the Company" or any like expression
means to the knowledge of the persons listed on
Schedule 12.02 after due inquiry.
"Lien" is defined in Section 3.01(c)(i).
"Losses" is defined in Section 11.01(a).
"Market Capitalization" means, for any entity, the market
capitalization of such entity determined on the basis of the average
closing price for the common stock of such entity for the five-day
period ending on the tenth day after the date of the Distributions.
"Material Adverse Effect" on or with respect to an entity (or
group of entities taken as a whole) means any state of facts, event,
change or effect that has had, or would reasonably be expected to have,
a material adverse effect on the business, properties, results of
operations or financial condition of such entity (or, if with respect
thereto, of such group of entities taken as a whole), or on the ability
of such entity (or group of entities) to consummate the transactions
contemplated hereby, including the Pre-Distribution Transactions and
the Distributions, or to perform its obligations under the Transaction
Agreements to which it is or will be a party; provided, however, that a
"Material Adverse Effect" shall exclude (i) the impact on the Company's
earnings for fiscal quarters ending prior to or including the Closing
caused by the inability of the Company to
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complete acquisitions following the announcement of the Transactions
and/or to account for acquisitions as poolings of interest and (ii) the
effect on the Company of being required as a result of the Transactions
to change accounting treatment for past acquisitions from poolings of
interests to purchases.
"Material Contracts" is defined in Section
3.01(m).
"Material Subsidiary" is defined in Section
3.01(a).
"New Security" means any Equity Security issued by the Company
after the Closing; provided that "New Security" shall not include (i)
any securities issuable upon conversion of any convertible Equity
Security, (ii) any securities issuable upon exercise of any option,
warrant or other similar Equity Security or (iii) any securities
issuable in connection with any stock split, stock dividend or
recapitalization of the Company where such securities are issued to all
stockholders of the Company on a pro rata basis.
"Non-Investor Directors" is defined in Section
4.01.
"Notes to Pro Forma Financial Statements" is
defined in Section 3.01(g)(iii).
"Offer Conditions" is defined in Section 8.07(a).
"Offer Documents" is defined in Section 8.07(b).
"Other Holders" means the holders of the Other
Shares.
"Other Shares" means Voting Securities not
Beneficially Owned by Purchaser or its Affiliates.
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"Permit" is defined in Section 3.01(c)(i).
"Permitted Liens" shall mean those Liens (A) securing debt
that is reflected on the Balance Sheet or the notes thereto or securing
debt incurred as part of the Proposed Financings, (B) referred to in
Schedule 3.01(l), (C) for Taxes not yet due or payable or being
contested in good faith and for which adequate reserves have been
established in accordance with GAAP, (D) that constitute mechanics',
carriers', workmens' or like liens, liens arising under original
purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course, (E) Liens incurred
or deposits made in the ordinary course of business consistent with
past practice in connection with workers' compensation, unemployment
insurance and social security, retirement and other legislation and (F)
easements, covenants, declarations, rights of way, encumbrances, or
similar restrictions in connection with real property owned by certain
of the Retained Subsidiaries that do not materially impair the use of
such real property by such Retained Subsidiaries, and in the case of
Liens described in clauses (B), (C), (D), (E) or (F) that, individually
or in the aggregate, would not have a Material Adverse Effect on the
Retained Companies, taken as a whole.
"Permitted Options" is defined in Section
4.02(a)(i).
"Permitted Securities Transaction" is defined in
Section 4.02(b)(ii).
"Person" means any individual, partnership, joint venture,
corporation, limited liability company, trust, unincorporated
organization, government or department or agency of a government.
"Plans" is defined in Section 3.01(o)(ii).
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"Pre-Distribution Transactions" means the contribution of
certain assets, the assumption of certain liabilities and other
transfers contemplated by the respective Distribution Agreements,
pursuant to which the respective businesses of School, Travel,
Technology and Print will be consolidated under such corporations prior
to the Distributions.
"Print" is defined in the recitals to this
Agreement.
"Print Distribution" is defined in the recitals
to this Agreement.
"Print Distribution Agreement" is defined in the
recitals to this Agreement.
"Pro Forma Balance Sheet" is defined in Section
3.01(g)(iii).
"Pro Forma Income Statements" is defined in
Section 3.01(g)(iii).
"Pro Forma Retained Business Financial
Statements" is defined in Section 3.01(g)(iii).
"Pro Rata Share" means the fraction of an entire issuance of
New Securities, the numerator of which shall be the number of shares of
Common Stock owned or receivable upon exercise of the Warrant and the
Special Warrant by Purchaser and its Affiliates (other than the Company
and its Subsidiaries) immediately prior to such issuance of such New
Securities and the denominator of which shall be the aggregate number
of shares of Common Stock outstanding immediately prior to such
issuance of such New Securities and receivable upon exercise of the
Warrant and the Special Warrant.
"Proposed Charter Amendments" is defined in
Section 4.05.
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"Proposed Financings" is defined in the recitals
to this Agreement.
"Proxy Statement" is defined in Section 8.05(b).
"Purchase Price" is defined in Section 1.01.
"Purchaser" is defined in the recitals to this
Agreement.
"Purchaser Indemnifiable Losses" is defined in
Section 11.01(a).
"Purchaser Indemnitees" is defined in Section
11.01(a).
"Purchaser's Expenses" is defined in Section
13.09(b).
"Purchaser's Percentage Interest" means the greater of (i) the
percentage of Total Voting Power, determined on the basis of the number
of Voting Securities actually outstanding, that is controlled directly
or indirectly by Purchaser or any Subsidiary or Affiliate of Purchaser
(other than the Company and its Subsidiaries), including by beneficial
ownership and (ii) the percentage of the total Fair Market Value of all
classes of outstanding capital stock of the Company that is owned
directly or indirectly by Purchaser or any Subsidiary or Affiliate of
Purchaser (other than the Company and its Subsidiaries), including by
beneficial ownership. For purposes of determining Purchaser's
Percentage Interest, (a) any options, rights, warrants (including the
Warrants and the Special Warrants) and similar securities that entitle
the holder thereof to acquire shares of any class of capital stock of
the Company, whether voting or non-voting, shall be treated as
exercised; (b) any debt security that is convertible into shares of any
class of capital stock of the Company, whether voting or non-voting,
shall be treated as converted; and
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(c) any equity security that is convertible into shares of any class of
capital stock of the Company, whether voting or non-voting, shall be
treated as converted, but only to the extent that such conversion would
result in Purchaser's Percentage Interest being greater than such
interest would be if such conversion had not been deemed to occur.
"Purchaser's Total Securities" is defined in
Section 4.01(b)(i).
"Registration Rights Agreement" is defined in the
recitals to this Agreement.
"Retained Business" means the business and
operation of the Retained Companies.
"Retained Companies" is defined in Section
12.01(b).
"Retained Plans" is defined in Section
3.01(O)(i).
"Retained Subsidiaries" is defined in Section
12.01(c).
"Review Cut-off Time" is defined in Section 8.04.
"School" is defined in the recitals to this
Agreement.
"School Distribution" is defined in the recitals
to this Agreement.
"School Distribution Agreements" is defined in
the recitals to this Agreement.
"SEC" means the Securities and Exchange
Commission.
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"Securities Act" is defined in Section
3.01(c)(ii).
"Security" means at any time Equity Securities and any shares
of any class of capital stock of the Company.
"Shares" is defined in Section 1.01.
"Special Warrants" is defined in the recitals to
this Agreement.
"Special Warrant Shares" means shares of Common Stock issuable
upon exercise of the Special Warrants.
"Subscription Notice" is defined in Section 5.01.
"Subsidiary" means, as to any Person, any corporation at least
a majority of the shares of stock of which having general voting power
under ordinary circumstances to elect a majority of the Board of
Directors of such corporation (irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency) is, at the
time as of which the determination is being made, owned by such Person,
or one or more of its Subsidiaries or by such Person and one or more of
its Subsidiaries.
"Superior Proposal" is defined in Section
8.02(b).
"Tax Allocation Agreement" is defined in the
recitals to this Agreement.
"Tax Returns" is defined in Section 3.01(n)(i).
"Taxes" is defined in Section 3.01(n)(i).
"Technology" is defined in the recitals to this
Agreement.
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"Technology Distribution" is defined in the
recitals to this Agreement.
"Technology Distribution Agreement" is defined in
the recitals to this Agreement.
"Tender Offer" is defined in the recitals to this
Agreement.
"Tender Offer Statement" is defined in Section
8.07(b).
"Termination Fee" is defined in Section 13.09(b).
"Total Voting Power" means at any time the total combined
voting power in the general election of directors of all the Voting
Securities then outstanding.
"Transactions" means the execution, delivery and performance
of each Transaction Agreement by the Company and the consummation by
the Company of the Pre-Distribution Transactions, the Distributions,
the Proposed Financings, the Tender Offer, the issuance and sale by the
Company of the Shares, the Special Warrants and the Warrants, and of
the other transactions contemplated by the Transaction Agreements.
"Transaction Agreements" means, collectively, this Agreement,
the Special Warrant, the Warrant, the Registration Rights Agreement,
the Distribution Agreements, the Tax Allocation Agreement, the tax
representation letters to be delivered in connection with the
Distributions and such other agreements as are entered into to effect
the Pre-Distribution Transactions, including, without limitation, any
employee benefits agreement, intellectual property agreement and
transitional services agreement.
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"Transaction Fee" means an amount equal to
$15 million plus out-of-pocket expenses.
"Transaction Proposal" is defined in Section
8.02.
"Travel" is defined in the recitals to this
Agreement.
"Travel Distribution" is defined in the recitals
to this Agreement.
"Travel Distribution Agreement" is defined in the
recitals to this Agreement.
"Unaudited Company Business Financial Statements"
is defined in Section 3.01(g)(ii).
"Voting Securities" means at any time shares of any class of
capital stock of the Company which are then entitled to vote generally
in the election of directors.
"Warrants" is defined in the recitals to this
Agreement.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
ARTICLE XIII
Miscellaneous
SECTION 13.01 Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
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stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable.
SECTION 13.02 Specific Enforcement. Purchaser, on the one
hand, and the Company, on the other, acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state thereof having jurisdiction, this being
in addition to any other remedy to which they may be entitled at law or equity.
SECTION 13.03 Entire Agreement. This Agreement (including the
documents set forth in the Exhibits and Schedules hereto) and the other
Transaction Agreements contain the entire understanding of the parties with
respect to the transactions contemplated hereby.
SECTION 13.04 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more of the counterparts have
been signed by each party and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
SECTION 13.05 Notices. All notices, consents, requests,
instructions, approvals and other communications provided for herein and all
legal process in regard hereto shall be validly given, made or served, if in
writing and delivered personally, by telecopy (except for legal process) or sent
by registered mail, postage prepaid, if to:
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<PAGE>
The Company:
U.S. Office Products Company
1025 Thomas Jefferson Street, N.W.
Suite 600 East
Washington, D.C. 20007
Attention of: Mark D. Director
Telecopy No.: (202) 339-6727
with a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attention of: George P. Stamas
Telecopy No.: (202) 663-6363
Purchaser:
c/o Clayton, Dubilier & Rice Fund V
Limited Partnership
1043 Foulk Road, Suite 106
Wilmington, Delaware
with a copy to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
Attention of: Brian D. Finn
Telecopy No.: (212) 407-5200
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with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention of: Franci J. Blassberg
Telecopy No.: (212) 909-6836
or to such other address or telex number as any party may, from time to time,
designate in a written notice given in a like manner.
SECTION 13.06 Amendments. This Agreement may be amended as to
Purchaser and their successors and assigns (determined as provided in Section
13.08), and the Company may take any action herein prohibited, or omit to
perform any act required to be performed by it, if the Company shall obtain the
written consent of Purchaser. This Agreement may not be waived, changed,
modified, or discharged orally, but only by an agreement in writing signed by
the party or parties against whom enforcement of any waiver, change,
modification or discharge is sought or by parties with the right to consent to
such waiver, change, modification or discharge on behalf of such party.
SECTION 13.07 Cooperation. Purchaser and the Company agree to
take, or cause to be taken, all such further or other actions as shall
reasonably be necessary to make effective and consummate the transactions
contemplated by this Agreement, including, without limitation, making all
required filings under the HSR Act, if any; provided, however, that the
foregoing shall not limit the ability of the Company to abandon the
Distributions pursuant to Section 8.03.
SECTION 13.08 Successors and Assigns. All covenants and
agreements contained herein shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns; provided, however, that
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<PAGE>
neither party may assign any of its rights under this Agreement without the
written consent of the other party.
SECTION 13.09 Expenses and Remedies. (a) Whether or not the
Closing takes place, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by the party
incurring such expense, except as set forth in the next seven paragraphs.
(b) Notwithstanding Section 13.09(a), if Purchaser terminates
this Agreement pursuant to Section 10.01(c)(ii), (c)(iii) or (c)(vi) the Company
shall reimburse Purchaser for the reasonable out-of-pocket expenses (including
reasonable fees and expenses of legal counsel) incurred by Purchaser in
connection with this Agreement or the matters contemplated hereby ("Purchaser's
Expenses") and shall pay CD&R a termination fee of $25 million (the "Termination
Fee").
(c) Notwithstanding Section 13.09(a), if the Company
terminates this Agreement pursuant to Section 10.01(d)(iii), the Company shall
pay Purchaser's Expenses to Purchaser and the Termination Fee to CD&R.
(d) Notwithstanding Section 13.09(a), if Purchaser terminates
this Agreement pursuant to any provision of Section 10.01 other than those
referred to in Sections 13.09(b) or the Company terminates this Agreement
pursuant to any provision of Section 10.01 other than those referred to in
Section 13.09(c) and other than pursuant to Section 10.01(d)(i), the Company
shall pay Purchaser's Expenses to Purchaser; provided that if Purchaser
terminates this Agreement pursuant to Section 10.01(c)(iv) by reason of the
failure to be satisfied of the condition set forth in Section 9.03(k),
Purchaser's Expenses shall be limited to $2,000,000.
(e) Notwithstanding Section 13.09(a), if (i) the Company
terminates this Agreement pursuant to any provision of Section 10.01 other than
those referred to in Sections
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<PAGE>
13.09(c) or Purchaser terminates this Agreement pursuant to Section
10.01(b)(ii), (ii) a Transaction Proposal was made prior to September 30, 1998
and (iii) during the period ending 12 months after termination the Company
enters into an agreement relating to or publicly announces, a transaction
including the sale or other disposition of Equity Securities representing in
excess of 20% of the Total Voting Power or 20% of the assets of the Company and
its Subsidiaries, taken as a whole, then upon consummation of such transaction,
the Company shall pay Purchaser's Expenses (without duplication of any
Purchaser's Expenses paid pursuant to Section 13.09(d)) and the Termination Fee
to CD&R.
(f) Notwithstanding Section 13.09(a), upon the occurrence of
the Closing, the Company shall pay Purchaser's Expenses to Purchaser.
(g) Notwithstanding Section 13.09(a), if Purchaser terminates
this Agreement pursuant to Section 10.01(c)(i) the Company shall reimburse
Purchaser for Purchaser's Expenses and shall pay CD&R a termination fee of $10
million.
SECTION 13.10 Transfer of Shares and Warrants. Purchaser
understands and agrees that neither any shares of Common Stock or any Warrants,
Special Warrants, Warrant Shares or Special Warrant Shares have been registered
under the Securities Act or the securities laws of any state and that they may
be sold or otherwise disposed of only in one or more transactions registered
under the Securities Act and, where applicable, such laws or as to which an
exemption from the registration requirements of the Securities Act and, where
applicable, such laws is available. Purchaser acknowledges that except as
provided in the Registration Rights Agreement, Purchaser has no right to require
the Company to register shares of Common Stock, the Warrants, the Special
Warrants, the Warrant Shares or the Special Warrant Shares. Purchaser
understands and agrees that each certificate representing shares of Common
Stock, Warrants, Special Warrants, Warrant Shares or
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Special Warrant Shares (other than, with respect to the first legend, shares of
Common Stock, Warrants, Special Warrants, Warrant Shares or Special Warrant
Shares that are no longer subject to the provisions of Article VII and other
than, with respect to the second legend, shares of Common Stock, Warrants,
Special Warrants, Warrant Shares or Special Warrant Shares which have been
transferred in a transaction registered under the Securities Act or exempt from
the registration requirements of the Securities Act pursuant to Rule 144
thereunder or any similar rule or regulation) shall bear the following legends:
"THE TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS RESTRICTED BY AN AGREEMENT ON FILE
AT THE OFFICES OF THE CORPORATION."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
and Purchaser agrees to transfer shares of Common Stock, Warrants and Warrant
Shares only in accordance with the provisions of such legends.
SECTION 13.11 Governing Law. This Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the State
of New York, except to the extent that Delaware law mandatorily governs.
SECTION 13.12 Publicity. The Company and Purchaser will
consult and cooperate with each other before issuing, and provide each other the
opportunity to review and comment upon, any press releases or otherwise making
public statements with respect to the transactions contemplated by this
Agreement.
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SECTION 13.13 No Third Party Beneficiaries. (a) Nothing
contained in this Agreement is intended to confer upon any person or entity
other than the parties hereto and their respective successors and permitted
assigns, any benefit, right or remedies under or by reason of this Agreement;
provided, however, that the parties hereto hereby acknowledge and agree that the
Distributed Companies are each third party beneficiaries of Section 6.01 of this
Agreement and that the Purchaser Indemnitees (other than Purchaser) are third
party beneficiaries of Article XI of this Agreement.
(b) Purchaser shall cooperate with the Company in connection
with any tax audits or administrative or judicial proceedings with respect to
the application of Section 355(e) (as ultimately enacted), including in
rebutting any presumption arising under Section 355(e) of the Code.
SECTION 13.14 Consent to Jurisdiction. Each of the Company and
Purchaser irrevocably submits to the personal exclusive jurisdiction of the
United States District Court for the Southern District of New York for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby (and, to the extent permitted under
applicable rules of procedure, agrees not to commence any action, suit or
proceeding relating hereto except in such court). Each of the Company and
Purchaser further agrees that service of any process, summons, notice or
document hand delivered or sent by registered mail to such party's respective
address set forth in Section 13.05 will be effective service of process for any
action, suit or proceeding in New York with respect to any matters to which it
has submitted to jurisdiction as set forth in the immediately preceding
sentence. Each of the Company and Purchaser irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in the
United States District Court for the Southern District of New York, and
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hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in such court that any such action, suit or proceeding brought in such
court has been brought in an inconvenient forum.
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<PAGE>
IN WITNESS WHEREOF, Purchaser and the Company have caused this
Agreement to be duly executed as of the day and year first above written.
U.S. OFFICE PRODUCTS COMPANY
By: /s/ Thomas Morgan
-------------------------
Name: Thomas Morgan
Title: President - CEO
CDR-PC ACQUISITION, L.L.C.
By: /s/ Brian D. Finn
------------------------
Name: Brian D. Finn
Title: Executive Vice
President
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EXHIBIT 1
TO INVESTMENT AGREEMENT
TERMS OF SPECIAL WARRANTS
<TABLE>
<CAPTION>
<S> <C>
Exercise Price: $.01 per share.
Expiration Date: 12 years from date of issuance.
Exercisability: To the extent of 24.9% of the sum of
(A) the number of shares of Common
Stock issued upon conversion of the
2001 Notes, (B) the number of any
shares of Contingent Stock that are
issued, and (C) the number of shares of
Common Stock issuable pursuant to this
Special Warrant in respect of shares
described in clauses (A) and (B) above;
or after the second anniversary of the
issuance of this Special Warrant,
whichever is earlier.
Shares Subject to Equal to the number of shares of
Warrant: Common Stock that is the difference
between (i) 24.9% of the sum of (A) the
outstanding shares of Common Stock as
of the Closing Date after giving effect
to the issuance of the Shares and the
exercise of this Special Warrant, and
assuming the conversion into Common
Stock of all the 2001 Notes outstanding
on the Closing Date at the conversion
price resulting from adjustments made
as a result of the Tender Offer and the
Distributions and (B) the number of any
shares of Contingent Stock that are
issued, and (ii) 24.9% of the
outstanding shares of Common Stock as
of the Closing after giving effect to
the issuance of the Shares.
</TABLE>
<PAGE>
EXHIBIT 1
TO INVESTMENT AGREEMENT
<TABLE>
<CAPTION>
<S> <C>
Transferability: Transferable to the same extent as
Shares.
Cashless Exercise: Permitted.
Antidilution Customary.
Protection:
Registration Rights: Same as for Shares.
Listing of Warrants: Upon request of Purchaser.
Listing of Shares Prior to Closing.
issuable upon
exercise of Warrants:
Listing of Special The Company will not be permitted to
Covenants: repurchase Common Stock if as a
result thereof the exercisability of
the Special Warrant will be limited.
</TABLE>
2
<PAGE>
EXHIBIT 2
TO INVESTMENT AGREEMENT
TERMS OF WARRANTS
<TABLE>
<CAPTION>
<S> <C>
Exercise Price: 1.5 times $270 million divided by the
total number of Shares and shares of
Common Stock subject to Special
Warrants.
Expiration Date: 12 years from date of issuance.
Exercisability: Only after the second anniversary of
issuance.
Shares Subject to Equal to the number of the Shares
Warrant: plus the number of shares subject to
the Special Warrant.
Transferability: Transferable to the same extent as
the Shares under Section 7.01.
Cashless Exercise: Permitted.
Antidilution Customary.
Protection:
Registration Rights: Same as for Shares.
Listing of Warrants: Upon request of Purchaser.
Listing of Shares Prior to Closing.
issuable upon
exercise of Warrants:
Listing of Special The Company will not be permitted to
Covenants: repurchase Common Stock if as a
result thereof the exercisability of
the Warrant will be limited.
</TABLE>
<PAGE>
EXHIBIT 3
TO INVESTMENT AGREEMENT
TERMS OF REGISTRATION RIGHTS AGREEMENT
<TABLE>
<CAPTION>
<S> <C>
Registrable Shares issued under Investment Agreement
Securities: ment, Warrants, Special Warrants and other
Common Stock purchased by Purchaser in
compliance with the Investment Agreement.
Demand Registrations: Four.
Piggyback Unlimited.
Registrations:
Registration Fees Payable by the Company, including
and Expenses: counsel for selling stockholder.
Selection of Purchaser selects underwriters for
Underwriters: Demand Registrations subject to Company's
consent which shall not be unreasonably
withheld. Company selects underwriters
for Piggyback Registrations subject to
Purchaser's consent which shall not be
unreasonably withheld.
Priority in Exercise In the event of cutbacks, securities
of Registration of to be registered for the account of
Rights: the Purchaser shall have priority
over other securities to be registered
in connection with Demand Registrations
and over other securities to be
registered for the account of other
selling stockholders in Piggyback
Registrations.
Indemnification: Customary.
Registration Customary including, without limitation,
Procedures: provision of opinions of counsel and
comfort letter.
</TABLE>
<PAGE>
Exhibit 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. OFFICE PRODUCTS COMPANY
REGISTRATION RIGHTS AGREEMENT
Dated as of June 10, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Background......................................................................................1
2. Definitions.....................................................................................1
3. Registration....................................................................................7
3.1 Demand Registration..................................................................7
(a) Requests....................................................................7
(b) Obligation to Effect Registration...........................................7
(c) Shelf Registration..........................................................7
(d) Effective Registration Statement............................................8
(e) Pro Rata Allocation.........................................................8
(f) Inclusion of Other Securities in Demand Registration........................8
3.2 Piggyback Registration...............................................................9
3.3 Registration Procedures.............................................................11
3.4 Underwritten Offerings..............................................................17
(a) Underwritten Offerings Exclusive...........................................17
(b) Underwriting Agreement.....................................................17
(c) Selection of Underwriters..................................................18
(d) Hold Back Agreements.......................................................18
3.5 Preparation; Reasonable Investigation...............................................19
3.6 Other Registrations.................................................................19
3.7 Indemnification.....................................................................19
(a) Indemnification by the Company.............................................19
(b) Indemnification by the Sellers.............................................20
(c) Notices of Claims, etc.....................................................21
(d) Other Indemnification......................................................22
(e) Other Remedies.............................................................22
(f) Officers and Directors.....................................................23
3.8 Expenses...................................................................................23
4. Miscellaneous..................................................................................23
4.1 Rule 144; Legended Securities; etc..................................................23
4.2 Amendments and Waivers..............................................................23
4.3 Nominees for Beneficial Owners......................................................24
4.4 Successors, Assigns and Transferees.................................................24
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
4.5 Notices.............................................................................24
4.6 No Inconsistent Agreements..........................................................26
4.7 Remedies; Attorneys' Fees...........................................................26
4.8 Severability........................................................................26
4.9. Headings............................................................................26
4.10. Counterparts........................................................................27
4.11. Governing Law.......................................................................27
4.12 No Third Party Beneficiaries........................................................27
4.13 Consent to Jurisdiction.............................................................27
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of June 10,
1998, among U.S. Office Products Company, a Delaware corporation (the
"Company"), and CDR-PC Acquisition, L.L.C., a Delaware limited liability company
(the "Purchaser").
1. Background. (a) The Company is a party to an Investment Agreement,
dated as of January 12, 1998 (as amended, the "Investment Agreement"), with the
Purchaser, pursuant to which the Company agreed to sell to the Purchaser and the
Purchaser agreed to purchase from the Company for an aggregate purchase price of
$270 million (the "Investment"), upon the terms and subject to the conditions
set forth therein, (x) 9,092,106 shares of Common Stock (as such number of
shares may be adjusted as contemplated by the letter agreement, dated the date
hereof, between the Company and the Purchaser, the "Shares"), (y) Special
Warrants representing the right to acquire a number of shares of Common Stock
equal to the difference between (i) 24.9% of the sum of (A) the outstanding
shares of Common Stock as of the Closing Date after giving effect to the
issuance of the Shares and the exercise of the Special Warrants, and assuming
the conversion into Common Stock of all the 2001 Notes outstanding on the
Closing Date at the conversion price resulting from adjustments made as a result
of the Tender Offer and the Distributions and (B) the number of any shares of
Contingent Stock that are issued, and (ii) the number of Shares and (z) Warrants
to purchase one share of Common Stock for each Share so purchased and for each
share into which the Special Warrants become exercisable.
In order to induce the Purchaser to enter into the Investment
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement for the benefit of the Purchaser and its direct and indirect
transferees. The execution and delivery of this Agreement is a condition to the
Purchaser's obligations pursuant to the Investment Agreement.
(b) This Agreement shall become effective with respect to any
Registrable Securities upon the issuance or sale of Registrable Securities
pursuant to the Investment Agreement. This Agreement shall remain in effect upon
the assignment or transfer of Registrable Securities by the Purchaser or a
Holder to an Affiliate, a Distributee or other successors, assigns and
transferees of Purchaser of such Holder pursuant to Section 4.4.
2. Definitions. For purposes of this Agreement, the following terms
have the following respective meanings:
<PAGE>
"2001 Notes" mean all of the Company's issued and outstanding 5 1/2%
Convertible Subordinated Notes due 2001 issued pursuant to an Indenture, dated
as of February 7, 1996, between the Company and State Street Bank and Trust
Company.
"Additional Shares" means shares of Common Stock (other than Warrant
Shares and Special Warrant Shares) acquired by Purchaser after the Closing Date,
to the extent that the acquisition of such shares is not prohibited by the
Investment Agreement.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly Controlling, Controlled by or under common Control with
such first Person. "Control" means the power to direct or cause the direction of
management or policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise. Any director,
member of management or other employee of the Company or any of its Subsidiaries
who would not otherwise be an Affiliate of the Purchaser shall not be deemed to
be an Affiliate of the Purchaser.
"Agreement" is defined in the first paragraph of this Agreement.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required to close.
"Closing Date" means the date the Investment is made under the
Investment Agreement.
"Common Stock" means the Common Stock, par value of $.001 per share, of
the Company.
"Company" is defined in the first paragraph of this Agreement.
"Contingent Stock" means Common Stock issued after the Closing Date
pursuant to (i) the Amendment to Stock Purchase Agreement, dated as of June 20,
1996, by and between the Company and Eric Watson or (ii) any security, option,
warrant, call, subscription, right, contract, commitment, arrangement or
understanding in existence on January 12, 1998 or June 10, 1998 but not
disclosed on the Revised Option Schedule, dated June 10, 1998 and delivered to
the Purchaser on such date, listing options, warrants, convertible securities
and other rights relating to capital stock of the Company.
"DTC" means the Depository Trust Company.
2
<PAGE>
"Distributee" means any person that is a member, stockholder or partner
of Purchaser, or any person that is a member, stockholder or partner of a
Distributee to which Registrable Securities are transferred or distributed by
Purchaser or Distributee.
"Distributions" is defined in the Investment Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations thereunder which
shall be in effect at the time. Any reference to a particular section thereof
shall include a reference to the corresponding section, if any, of any such
successor federal statute, and the rules and regulations thereunder.
"Holder" means any holder of Registrable Securities, including an
Affiliate, a Distributee or other successors, assigns and transferees of
Purchaser or a Holder that has received Registrable Securities pursuant to
Section 4.4.
"Investment" is defined in Section 1(a).
"Investment Agreement" is defined in Section 1(a).
"Legacy Agreement" means the Subscription Agreement, dated as of March
28, 1996, between the Company and Legacy Capital Fund, Inc., as in effect on
January 12, 1998.
"NASD" means the National Association of Securities Dealers, Inc.
"Person" means any natural person, firm, partnership, association,
corporation, company, trust, business trust, governmental entity or other
entity.
"Postponement Period" is defined in Section 3.3(p).
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A), as amended or supplemented
by any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement and
all other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
3
<PAGE>
"Purchaser" is defined in the introduction to this Agreement.
"Registrable Securities" means (a) the Shares, (b) the Additional
Shares, (c) the Warrant Shares, (d) the Warrants, (e) the Special Warrant
Shares, (f) the Special Warrants and (g) any securities issued or issuable with
respect to any Shares, Additional Shares, Warrants or Special Warrants referred
to in the foregoing clauses (a) through (g), (i) upon any conversion or exchange
thereof, (ii) by way of stock dividend or other distribution, stock split or
reverse stock split or (iii) in connection with a combination of shares,
recapitalization, merger, consolidation, exchange offer or other reorganization.
As to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (A) a Registration Statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such Registration Statement, (B) such securities shall have been
distributed to the public in reliance upon Rule 144, (C) subject to the
provisions of Section 4.1(b)(ii), such securities shall have been otherwise
transferred, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require registration or
qualification of such securities under the Securities Act or any similar state
law then in force or (D) such securities shall have been acquired by the
Company. In determining the number of Registrable Securities outstanding at any
time or whether the Holders of the requisite number of Registrable Securities
have taken any action hereunder and in calculating the number of Registrable
Securities for all other purposes under this Agreement, each Warrant and Special
Warrant shall be deemed to have been exercised (to the fullest extent then
determinable) and such calculation shall include the number of Warrant Shares
and Special Warrant Shares then deliverable upon the exercise of such Warrant or
Special Warrant (to the fullest extent then determinable).
"Registration Expenses" All fees and expenses incident to the
performance of or compliance with the provisions of this Agreement, whether or
not any registration statement is filed or becomes effective, including, without
limitation, all (i) registration and filing fees (including, without limitation,
(A) fees with respect to filings required to be made with the NASD in connection
with an underwritten offering, (B) fees and expenses of compliance with state
securities or blue sky laws (including, without limitation, fees and
disbursements of counsel for the underwriter or underwriters in connection with
blue sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as provided in Section 3.3(e)), and (C) fees and other expenses
associated with the listing of the Warrants, Warrant Shares, Special Warrants,
Special Warrant Shares and Additional Shares on the Nasdaq Stock Market and any
other applicable exchange, (ii) printing expenses (including, without
limitation,
4
<PAGE>
expenses of printing certificates for Registrable Securities in a form eligible
for deposit with DTC and of printing prospectuses), (iii) fees and disbursements
of all independent certified public accountants referred to in Section 3.3
(including, without limitation, the reasonable expenses of any special audit and
"cold comfort" letters required by or incident to such performance), (iv) the
fees and expenses of any "qualified independent underwriter" or other
independent appraiser participating in an offering pursuant to Rule 2720 of the
NASD Rules of Conduct, (v) liability insurance under the Securities Act or any
other securities laws, if the Company desires such insurance, (vi) fees and
expenses of all attorneys, advisers, appraisers and other persons retained by
the Company or any Subsidiary of the Company, (vii) internal expenses of the
Company and its Subsidiaries (including, without limitation, all salaries and
expenses of officers and employees of the Company and its Subsidiaries
performing legal or accounting duties), (viii) the expense of any annual audit,
(ix) the expenses relating to printing, word processing and distributing all
registration statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement and (x) the reasonable out-of-pocket expenses of the Holders of the
Registrable Securities being registered in such registration incurred in
connection therewith including, without limitation, the reasonable fees and
disbursements of not more than one counsel (together with appropriate local
counsel) chosen by the Holders of a majority of the Registrable Securities to be
included in such Registration Statement. "Registration Expenses" shall not
include any underwriting discounts or commissions or any transfer taxes payable
in respect of the sale of Registrable Securities by the Holders thereof.
"Registration Statement" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, and all amendments and supplements to any such registration
statement, including post-effective amendments, in each case including the
Prospectus, all exhibits and all material incorporated by reference or deemed to
be incorporated by reference in such registration statement.
"Rule 144" means Rule 144 (or any successor provision) under the
Securities Act.
"Rule 145" means Rule 145 (or any successor provision) under the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations thereunder which shall
be in effect at the time. Any reference to a particular section thereof shall
include a
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reference to the corresponding section, if any, of any such successor federal
statute, and the rules and regulations thereunder.
"SEC" means the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act or the Exchange Act.
"Shares" is defined in Section 1(a).
"Special Registration" means the registration of shares of equity
securities and/or options or other rights in respect thereof to be offered
solely to directors, members of management, employees, consultants or sales
agents, distributors or similar representatives of the Company or its direct or
indirect Subsidiaries, solely on Form S-8 or any successor form.
"Special Warrants" is defined in the Investment Agreement.
"Special Warrant Shares" means shares of Common Stock issuable upon
exercise of the Special Warrants.
"Subsidiary" means, with respect to any Person, any corporation or
Person, a majority of the outstanding voting stock or other equity interests of
which is owned, directly or indirectly, by that Person.
"Tender Offer" is defined in the Investment Agreement.
"underwritten registration" or "underwritten offering" means a
registration in which securities of the Company (including Registrable
Securities) are sold to an underwriter for reoffering to the public.
"Warrants" means warrants entitling the holder thereof to purchase one
share of Common Stock for each Share and Special Warrant purchased by the
Purchaser pursuant to the Investment Agreement, on the terms and subject to the
conditions set forth in Exhibit 2 thereof.
"Warrant Shares" means shares of Common Stock issuable upon exercise of
the Warrants.
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3. Registration.
3.1 Demand Registration.
(a) Requests. Subject to the provisions of Section 3.6, at any time or
from time to time as of the date hereof, Holders of not less than 25% of the
then outstanding Registrable Securities shall have the right to make written
requests that the Company effect up to four registrations under the Securities
Act of all or part of the Registrable Securities of the Holders making such
request, which requests shall specify the intended method of disposition thereof
by such Holders, including whether the registration requested is for an
underwritten offering. For a registration to be underwritten, a majority of the
Holders requesting registration (as measured by ownership of Registrable
Securities) must so request. The Company shall not be required to effect more
than four registrations under this Section 3.1.
(b) Obligation to Effect Registration. Within 10 days after receipt by
the Company of any request for registration pursuant to Section 3.1(a), the
Company shall promptly give written notice of such requested registration to all
Holders, and thereupon will use its best efforts to effect the registration
under the Securities Act of
(i) the Registrable Securities which the Company has been so requested
to register pursuant to Section 3.1(a), and
(ii) all other Registrable Securities which the Company has been
requested to register by the Holders thereof by written request given to
the Company within 10 days after the Company has given such written notice
(which request shall specify the intended method of disposition of such
Registrable Securities),all to the extent required to permit the
disposition (in accordance with the intended methods thereof as aforesaid)
of the Registrable Securities so to be registered.
(c) Shelf Registration. If requested by Holders of a majority of the
Registrable Securities as to which registration has been requested pursuant to
this Section 3.1, and if the Company is eligible to file such Registration
Statement on Form S-3, the Registration Statement covering such Registrable
Securities shall provide for the sale by the Holders thereof of the Registrable
Securities from time to time on a delayed or a continuous basis under Rule 415
under the Securities Act. If more than one underwritten offering is requested
under any particular shelf registration, each such additional underwritten
offering shall constitute a separate "demand" registration for purposes of
Section 3.1(a).
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(d) Effective Registration Statement. A registration requested pursuant
to Section 3.1(a) shall not be deemed to have been effected unless it is
declared effective by the SEC and remains effective for the period specified in
Section 3.3(b). Not withstanding the preceding sentence, a registration
requested pursuant to Section 3.1(a) that does not become effective after the
Company has filed a Registration Statement with respect thereto by reason of the
refusal to proceed of the Holders of Registrable Securities requesting the
registration, or by reason of a request by a majority of the Selling Holders
participating in such registration that such registration be withdrawn, shall be
deemed to have been effected by the Company at the request of such Holders.
(e) Pro Rata Allocation. If the Holders of a majority of the
Registrable Securities for which registration is being requested pursuant to
Section 3.1(a) determine, based on consultation with the managing underwriters
or, in an offering which is not underwritten, with an investment banker, that
the number of securities to be sold in any such offering should be limited due
to market conditions or otherwise, Holders of Regis trable Securities proposing
to sell their securities in such registration shall share pro rata in the number
of securities being offered (as determined by the Holders holding a major ity of
the Registrable Securities for which registration is being requested in
consultation with the managing underwriters or investment banker, as the case
may be) and registered for their account, such sharing to be based on the number
of Registrable Securities as to which registration was requested by such
Holders.
(f) Inclusion of Other Securities in Demand Registration.
(i) The Company may, subject to the remainder of this Section 3.1(f),
elect to include in any Registration Statement made pursuant to Section 3.1(a),
authorized but unissued shares of Common Stock or shares of Common Stock held as
treasury stock.
(ii) Notwithstanding any other provision of this Section 3(f), the
Company shall not register securities (other than Registrable Securities) for
sale for the account of any Person (other than the Company) in any registration
requested pursuant to Section 3.1(a) unless (x) permitted to do so by the
written consent of the Holders holding at least a majority of the Registrable
Securities proposed to be sold in such registration or (y) required pursuant to
Section 10 of the Legacy Agreement.
(iii) If any Registration Statement made pursuant to Section 3.1(a)
involves an underwritten offering and the managing underwriter of such offering
(or, in connection with an offering that is not underwritten, an investment
banker) shall advise the Company that, in its view, the number of securities
requested to be included in such
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Registration exceeds the largest number that can be sold in an orderly manner in
such offering within a price range acceptable to the selling Holders, the
Company shall include in such Registration:
(A) first, all shares of Common Stock requested to be included in
such Registration by the selling Holders as provided in Section 3.1(e); and
(B) second, to the extent that the number of securities to be
registered pursuant to clause (A) is less than the largest number that can be
sold in an orderly manner in such offering within a price range acceptable to
the selling Holders, securities that the Company proposes to register (except to
the extent otherwise required pursuant to Section 10 of the Legacy Agreement);
and
(C) third, to the extent that the number of shares registered
pursuant to clauses (A) and (B) is less than the largest number that can be sold
in an orderly manner in such offering within a price range acceptable to the
selling Holders, the securities requested to be included by any other holders
(if permitted by the Holders pursuant to Section 3.2(f)(ii)).
The securities to be included in any such registration pursuant to clause (C)
shall be allocated on a pro rata basis among all holders requesting that
securities be included in such registration pursuant to such clause on the basis
of the number of securities requested to be included by such holders.
3.2 Piggyback Registration. If the Company at any time proposes to
register any of its common stock under the Securities Act (other than a
Registration relating solely to the sale of securities to participants in a
Company stock plan, on Form S-4 with respect to any merger, consolidation or
acquisition, pursuant to Section 3.1 or pursuant to a Special Registration),
whether or not for sale for its own account, and the registration form to be
used may be used for the registration of Registrable Securities, it shall each
such time give prompt written notice to all Holders of Registrable Securities of
its intention to do so and, upon the written request of any Holder of
Registrable Securities given to the Company within 10 days after the Company has
given any such notice (which request shall specify the Registrable Securities
intended to be disposed of by such holder and the intended method of disposition
thereof), the Company will use its best efforts to effect the registration under
the Securities Act of all Registrable Securities which the Company has been so
requested to register by the Holders thereof, to the extent required to permit
the disposition (in accordance with the intended methods thereof as aforesaid)
of the Registrable Securities so to be registered, provided that:
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(a) if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of
the Registration Statement filed in connection with such registration,
the Company shall determine for any reason not to register such
securities, the Company may, at its election, give written notice of
such determination to each Holder that was previously notified of such
registration and, thereupon, shall not register any Registrable
Securities in connection with such registration (but shall nevertheless
pay the Registration Expenses in connection therewith), without
prejudice, however, to the rights of any Holders to request that a
registration be effected under Section 3.1; and
(b) if the Company shall be advised in writing by the
managing underwriters (or, in connection with an offering which is not
underwritten, by an investment banker) that in their or its opinion the
number of securities requested to be included in such registration
(whether by the Company, pursuant to this Sec tion 3.2 or pursuant to
any other rights granted by the Company to a holder or holders of its
securities to request or demand such registration or inclusion of any
such securities in any such registration) exceeds the number of such
securities which can be sold in such offering in an orderly manner
within a price range that is acceptable to the Company, the Company
shall include in such Registration:
(i) first, all shares of Common Stock that the
Company proposes to register for its own account (except to
the extent otherwise required pursuant to Section 10 of the
Legacy Agreement); and
(ii) second, to the extent that the number of
shares registered pursuant to clause (i) is less than the
largest number that can be sold in an orderly manner in such
offering within a price range acceptable to the Company, (x)
the Registrable Securities requested to be included by the
Holders and (y) in the case of a registration initially
requested or demanded by a holder or holders of securities
other than the Registrable Securities, the securities
requested or demanded to be registered by such other
holders; and
(iii) third, to the extent that the number of
shares registered pursuant to clauses (i) and (ii) is less
than the largest number that can be sold in an orderly
manner in such offering within a price range acceptable to
the Company, the securities requested to be included by any
other holders,
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and the Company shall so provide in any registration agreement
hereinafter entered into with respect to any of its securities.
The securities to be included in any such registration
pursuant to clause (ii) or (iii) shall be allocated on a pro rata basis among
all holders requesting that securities be included in such registration pursuant
to such clause on the basis of the number of securities requested to be included
by such holders.
No registration effected under this Section 3.2 shall
relieve the Company from its obligation to effect registrations upon request
under Section 3.1. The Company shall not be obligated to cause any "piggyback"
registration to be underwritten.
3.3 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 3.1 and 3.2, the
Company shall:
(a) prepare and file with the SEC, as soon as practicable, a
Registration Statement with respect to such securities, make all
required filings with the NASD and use best efforts to cause such
Registration Statement to become effective at the earliest possible
date;
(b) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the Prospectus used in
connection therewith and such other documents as may be necessary to
keep such Registration Statement effective until the earlier of (i) 30
days after the effective date of such Registration Statement (360 days
in the case of a Shelf Registration pursuant to Section 3.1(c)) or (ii)
the consummation of the disposition by the Holders of all the
Registrable Securities covered by such Registration Statement and
otherwise comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration
Statement;
(c) furnish to counsel (if any) selected by the Holders of a
majority of the Registrable Securities covered by such Registration
Statement and to counsel for the underwriters in any underwritten
offering copies of all documents proposed to be filed with the SEC in
connection with such registration a reasonable time prior to the
proposed filing thereof and give reasonable consideration in good faith
to any comments of such Holders, counsel and underwriters. The Company
shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto pursuant to a registration under
Section 3.1(a) if the Holders of a majority of the Registrable
Securities
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covered by such Registration Statement, their counsel, or the
underwriters, if any, shall reasonably object in writing;
(d) furnish to each seller of Registrable Securities,
without charge, such reasonable number of conformed copies of such
Registration Statement and of each such amendment and supplement
thereto (in each case, including all exhibits (including exhibits
incorporated by reference), financial statements, schedules and all
documents incorporated therein, deemed to be incorporated therein by
reference or filed therewith, except that the Company shall not be
obligated to furnish any seller of securities with more than two copies
of such exhibits and documents), such number of copies of the
Prospectus included in such Registration Statement (including each
preliminary prospectus and any summary prospectus) in conformity with
the requirements of the Securities Act, and such other documents, as
such seller may reasonably request in order to facilitate the
disposition of the securities owned by such seller;
(e) use its best efforts to register or qualify and
cooperate with the Holders of Registrable Securities, the underwriters
and their respective counsels in connection with the registration or
qualification (or exemption from such registration or qualification) of
the securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
request; provided, however, that where Registrable Securities are
offered other than through an underwritten offering, the Company agrees
to cause its counsel to perform blue sky investigations and file
registrations and qualifications required to be filed pursuant to this
Section 3.3(e); keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration
Statement is required to be effective hereunder and do any and all
other acts and things which may be necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for
any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified,
subject itself to taxation in any jurisdiction wherein it is not so
subject, or take any action which would subject it to general service
of process in any jurisdiction wherein it is not so subject;
(f) in connection with an underwritten public offering only,
furnish to each seller of Registrable Securities a signed counterpart,
addressed to the sellers, of
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(i) an opinion of counsel for the Company
experienced in securities law matters, dated the effective
date of the Registration Statement, and
(ii) a "cold comfort" letter signed by the
independent public accountants who have issued an audit
report on the Company's financial statements included in the
Registration Statement, subject to such seller having
executed and delivered to the independent public accountants
such certificates and documents as such accountants shall
reasonably request,
covering substantially the same matters with respect to the
Registration Statement (and the Prospectus included therein) and, in
the case of such accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
the underwriters in underwritten public offerings of securities;
(g) (i) notify each Holder of Registrable Securities
subject to such Registration Statement if such Registration
Statement, at the time it or any amendment thereto became effective,
(x) contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading upon discovery by the
Company of such material misstatement or omission or (y) upon
discovery by the Company of the happening of any event as a result
of which the Company believes there would be such a material
misstatement or omission, and, as promptly as practicable, prepare
and file with the SEC a post-effective amendment to such
registration statement and use best efforts to cause such
post-effective amendment to become effective such that such
registration statement, as so amended, shall not contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (ii) notify each Holder of Registrable
Securities subject to such Registration Statement, at any time when
a Prospectus relating thereto is required to be delivered under the
Securities Act, if the Pro spectus included in such Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light
of the circum stances under which they were made, not misleading
upon discovery by the Company of such material misstatement or
omission or upon discovery by the Company of the happening of any
event as a result of which the Company believes there would be a
material misstatement or omission, and,
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as promptly as is practicable, prepare and furnish to such Holder a
reasonable number of copies of a supplement to or an amendment of
such Prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such securities, such Prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading;
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings
statement of the Company complying with the provisions of Section 11(a)
of the Securities Act and Rule 158 under the Securities Act (or any
similar rule promulgated under the Securities Act) no later than 45
days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Registrable Securities are sold
to an underwriter or to underwriters in a firm commitment or best
efforts underwritten offering and (ii) if not sold to an underwriter or
to underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Company after the effective date of the
relevant Registration Statement, which statements shall cover said
12-month periods;
(i) promptly notify each Holder of any Registrable
Securities covered by such Registration Statement, their counsel and
the underwriters (i) when such Registration Statement, or any
post-effective amendment to such Registration Statement, shall have
become effective, or any amendment of or supplement to the Prospectus
used in connection therewith shall have been filed, (ii) of any request
by the SEC to amend such Registration Statement or to amend or
supplement such Prospectus or for additional information, (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of
such Registration Statement or of any order preventing or suspending
the use of any preliminary prospectus or the initiation or threatening
of any proceedings for any of such purposes, (iv) of the suspension of
the qualification of such securities for offering or sale in any
jurisdiction, or of the institution of any proceedings for any of such
purposes and (v) if at any time when a Prospectus is to be required by
the Securities Act to be delivered in connection with the sale of the
Registrable Securities, the representations and warranties of the
Company contained in any agreement (including the underwriting
agreement contemplated in Section 3.4(b) below), to the knowledge of
the Company, cease to be true and correct in any material respect;
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<PAGE>
(j) use its best efforts to prevent the issuance of any
order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any
of the Registrable Securities covered thereby for sale in any
jurisdiction, and, if any such order is issued, to obtain the
withdrawal of any such order at the earliest possible moment;
(k) if requested by the managing underwriter, if any, or the
Holders of a majority of the Registrable Securities being sold in
connection with an underwriting offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as
the managing underwriter, if any, or such Holders reasonably request to
be included therein to comply with applicable law and (ii) make all
required filings of such prospectus supplement or such post-effective
amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(l) cooperate with the Holders and the managing underwriter,
if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends whatsoever and
shall be in a form eligible for deposit with DTC, and enable such
Registrable Securities to be in such denominations and registered in
such names as the underwriters, if any, or Holders may reasonably
request at least two business days prior to any sale of Registrable
Securities in a firm commitment underwritten public offering;
(m) use its best efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with, and to
obtain the consent or approval of, each governmental agency or
authority, whether federal, state, local or foreign, which may be
required to effect such registration or the offering or sale in
connection therewith or to enable the selling Holders to offer, or to
consummate the disposition of, the Registrable Securities subject to
such Registration Statement, except as may be required solely as a
consequence of the nature of such selling Holder's business, in which
case the Company will cooperate in all reasonable respects with the
filing of the Registration Statement and the granting of such
approvals;
(n) prior to the effective date of the Registration
Statement, (i) provide the registrar for the Common Stock or such other
Registrable Securities with printed certificates for such securities in
a form eligible for deposit with DTC and (ii) provide a CUSIP number
for such securities; and
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(o) cause the Warrants, Warrant Shares, Special Warrants and
Special Warrant Shares to be listed on the NASDAQ NMS (or such other
automated trading system or exchange as shall be the primary trading
system or exchange for the Common Stock) in the event that the
Registrable Securities covered by such Registration Statement include
any Warrants, Warrant Shares, Special Warrants or Special Warrant
Shares not already so listed; and
(p) have the right -- if the Board of Directors of the
Company, in its good faith judgment, determines that any Registration
of shares of Common Stock should not be made or continued because it
would materially interfere with any material financing, acquisition,
corporation reorganization, merger, or other transaction involving the
Company or any of its subsidiaries (a "Valid Business Reason") -- (i)
to postpone filing a Registration Statement until such Valid Business
Reason no longer exists, but in no event for more than 90 days, and
(ii) to cause any Registration Statement that has already been filed to
be withdrawn and its effectiveness terminated or to postpone amending
or supplementing such Registration Statement until such Valid Business
Reason no longer exists, but in no event for more than 90 days (the
"Postponement Period"); provided, however, that in no event shall the
Company be permitted to postpone or withdraw a Registration Statement
within 190 days after the expiration of the Postponement Period.
The Company may require each Holder of any Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding such Holder and the distribution of such
securities as the Company may from time to time reasonably request in writing
and as shall be required by law in connection therewith. Each such Holder agrees
to furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading.
The Company agrees not to file or make any amendment to any
Registration Statement with respect to any Registrable Securities, or any
amendment of or supplement to the Prospectus used in connection therewith, which
refers to any seller of any securities covered thereby by name, or otherwise
identifies such seller as the holder of any securities of the Company, without
the consent of such seller, such consent not to be unreasonably withheld, except
that no such consent shall be required for any disclosure that is required by
law.
By the acquisition of Registrable Securities, each Holder
shall be deemed to have agreed that upon receipt of any notice from the Company
pursuant to Section 3.3(g) or (p), such Holder will promptly discontinue such
Holder's disposition of
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Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Holder shall have received, in the case of
clause (i) of Section 3.3(g), notice from the Company that such Registration
Statement has been amended, as contemplated by Section 3.3(g); in the case of
clause (ii) of Section 3.3(g), copies of the supplemented or amended Prospectus
contemplated by Section 3.3(g); or, in the case of Section 3.3(p), the time
period specified has elapsed or such Holder has received notice from the Company
that the Postponement Period has been terminated. If so directed by the Company,
each Holder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, in such Holder's possession of the Prospectus
covering such Registrable Securities at the time of receipt of such notice. In
the event that the Company shall give any such notice, the period mentioned in
Section 3.3(b) shall be extended by the number of days during the period from
and including the date of the giving of such notice to and including the date
when each seller of any Registrable Secu rities covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 3.3(g).
3.4 Underwritten Offerings. The provisions of this Section
3.4 do not establish additional registration rights but instead set forth
procedures applicable, in addi tion to those set forth in Sections 3.1 through
3.3, to any registration that is an underwritten offering.
(a) Underwritten Offerings Exclusive. Whenever a
registration requested pursuant to Section 3.1 is for an underwritten offering,
only securities that are to be distributed by the underwriters may be included
in the registration.
(b) Underwriting Agreement. If requested by the
underwriters for any underwritten offering by Holders pursuant to a
registration requested under Section 3.1, the Company shall enter into an
underwriting agreement with such underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to the Holders
of a majority of the Registrable Securities to be covered by such
registration and to the underwriters and to contain such representations and
warranties by the Company and such other terms and provisions as are
customarily contained in agreements of this type, including, but not limited
to, indemnities to the effect and to the extent provided in Section 3.7,
provisions for the delivery of officers' certificates, opinions of counsel
and accountants' "cold comfort" letters, and hold-back arrangements. The
Holders of Registrable Securities to be distributed by such underwriters
shall be parties to such underwriting agreement and may, at their option,
require that any or all of the represen tations and warranties by, and the
agreements on the part of, the Company to and for the benefit of such
underwriters be made to and for the benefit of such Holders and that any or
all of the conditions precedent to the
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obligations of such underwriters under such underwriting agreement shall also be
conditions precedent to the obligations of such Holders. No such Holder shall be
required by the Company to make any representations or warranties to, or
agreements with, the Company or the underwriters other than as set forth in
Section 3.4(d) and representations, warranties or agreements regarding such
Holder and such Holder's intended method of distribution.
(c) Selection of Underwriters. Whenever a registration
requested pursuant to Section 3.1 is for an underwritten offering, the Holders
of a majority of the Registrable Securities to be registered pursuant to such
offering shall have the right to select one or more underwriters to administer
the offering, subject to the consent of the Company, which shall not be
unreasonably withheld. If the Company at any time proposes to register any of
its securities under the Securities Act for sale for its own account and such
securities are to be distributed by or through one or more underwriters, the
Company shall have the right to select one or more underwriters to administer
the offering, subject to the consent of the Holders of a majority of Registrable
Securities to be registered pursuant to such offering, which shall not be
unreasonably withheld. In all cases in this Section 3.4(c), at least one of the
underwriters chosen by the Holders or the Company shall be an underwriter of
nationally recognized standing.
(d) Hold Back Agreements. If and whenever the Company
proposes to register any of its equity securities under the Securities Act,
whether or not for its own account (other than pursuant to a Special
Registration), or is required to use its best efforts to effect the registration
of any Registrable Securities under the Securities Act pursuant to Section 3.1
or 3.2, each Holder, if required by the managing underwriter in an underwritten
offering, agrees by acquisition of such Registrable Securities not to effect
(other than pursuant to such registration) any public sale or distribution,
including, but not limited to, any sale pursuant to Rule 144, of any Registrable
Securities, any other equity securities of the Company or any securities
convertible into or exchangeable or exercisable for any equity securities of the
Company during the 10 days prior to, and for 90 days after, the effective date
of such registration, to the extent timely notified in writing by the Company or
the managing underwriter, and the Company agrees to cause each holder of any
equity security, or of any security convertible into or exchangeable or
exercisable for any equity security, of the Company purchased from the Company
at any time other than in a public offering to enter into a similar agreement
with the Company. The foregoing provisions shall not apply to any Holder if such
Holder is prevented by applicable statute or regulation from entering into any
such agreement; provided, however, that any such Holder shall undertake, in its
request to participate in any such underwritten offering, not to effect any
public sale or distribution of any applicable class of Registrable Securities
commencing on the date
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of sale of such applicable class of Registrable Securities unless it has
provided 45 days prior written notice of such sale or distribution to the
underwriter or underwriters. The Company further agrees not to effect (other
than pursuant to such registration or pursuant to a Special Registration) any
public sale or distribution, or to file any Registration Statement (other than
such registration or a Special Registration) covering any, of its equity
securities, or any securities convertible into or exchangeable or exercisable
for such securities, during the 10 days prior to, and for 90 days after, the
effective date of such registration if required by the managing underwriter.
3.5 Preparation; Reasonable Investigation. In connection
with the preparation and filing of each Registration Statement registering
Registrable Securities under the Securities Act, the Company shall give the
Holders of such Registrable Securities so to be registered and their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such Registration Statement,
each Prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto, and shall give each of them such access to all
pertinent financial, corporate and other documents and properties of the Company
and its Subsidiaries, and such opportunities to discuss the business of the
Company with its officers, directors, employees and the independent public
accountants who have issued audit reports on its financial statements as shall
be necessary, in the opinion of such Holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
3.6 Other Registrations. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securi ties Act pursuant to Section 3.1 or 3.2, and if such
registration shall not have been with drawn or abandoned, the Company shall not
be obligated to and shall not file any Registration Statement with respect to
any of its securities (including Registrable Securities) under the Securities
Act (other than a Special Registration), whether of its own accord or at the
request or demand of any holder or holders of such securities, until a period of
180 days shall have elapsed from the effective date of such previous registra
tion, provided that the Company shall not be excused from filing a registration
statement by virtue of this Section 3.6 more than once in a 360 day period.
3.7 Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any Registrable Securities under the Securities Act pursuant to
Section 3.1 or 3.2, the Company shall indemnify and hold harmless the seller of
such securities, its directors, officers, and employees, each other person who
participates as an underwriter, broker or dealer in the offering or sale of such
securities and each other person, if any, who
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<PAGE>
controls such seller or any such participating person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act,
against any and all losses, claims, damages or liabilities, joint or several, to
which such seller or any such director, officer, employee, participating person
or controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement under which such securities were registered under the
Securities Act, any Prospectus or preliminary prospectus included therein, or
any amendment or supplement thereto, or (ii) any omission or alleged omission to
state a material fact required to be stated in any such Registration Statement,
Prospectus, preliminary prospectus, amendment or supplement or necessary to make
the statements therein not misleading; and the Company shall reimburse such
seller and each such director, officer, employee, participating person and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding as such expenses are incurred; provided that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or omission made in any such Registration Statement, Prospectus,
preliminary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such seller or
participating person expressly for use in the preparation thereof.
(b) Indemnification by the Sellers. In the event of any
registration of any Registrable Securities under the Securities Act pursuant to
Section 3.1 or 3.2, each of the prospective sellers of such securities, will
indemnify and hold harmless the Company, each director of the Company, each
officer of the Company who shall sign such Registration Statement, and each
other person, if any, who controls the Company or any such participating person
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which the Company or any such director, officer, employee,
partici pating person or controlling person may become subject under the
Securities Act or other wise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement under which such securities were
registered under the Securities Act, any Prospectus or preliminary prospectus
included therein, or any amendment or supplement thereto, or any omission or
alleged omission to state a material fact with respect to such seller required
to be stated in any such Registration Statement, Prospectus, preliminary
prospectus, amendment or supplement or necessary to make the statements therein
not misleading if such statement or omission was made in reliance upon and in
20
<PAGE>
conformity with written information furnished to the Company by such seller
expressly for use in the preparation of any such Registration Statement,
Prospectus, preliminary prospectus, amendment or supplement; provided that the
liability of each such seller shall be in proportion to and limited to the net
amount received by such seller (after deducting any underwriting discount and
expenses) from the sale of Registrable Securities pursuant to such Registration
Statement.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim re ferred to in the preceding paragraphs of this Section 3.7,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party hereunder, give prompt written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided therein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 3.7 unless the failure to provide prompt written notice shall cause
actual prejudice to the indemnifying party. In case any such action is brought
against an indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to retain
counsel reasonably satisfactory to such indemnified party to defend against such
proceeding and shall pay the reasonable fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel and the payment of such fees by the indemnifying party
or (ii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them or (iii) the indemnifying
party has not retained counsel to defend such proceeding, in which case (under
any of such clauses (i), (ii) or (iii)) it is understood that (x) the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties and (y)
such firm shall be designated in writing by the Holders of a majority of the
Registrable Securities included in such Registration Statement in the case of
parties indemnified pursuant to Section 3.7(a) and by the Company in the case of
parties indemnified pursuant to Section 3.7(b). All fees and expenses that an
indemnified party is entitled to receive from an indemnifying party under this
Section 3.7 shall be reimbursed as they are incurred, provided that each such
indemnified party shall promptly repay such fees and expenses if it is finally
judicially determined that such indemnified party is not entitled to
indemnification hereunder. No indemnifying party, in the defense of any such
claim or litigation, shall, except with the consent of such
21
<PAGE>
indemnified party, which consent shall not be unreasonably withheld, consent to
entry of any judgment or enter into any settlement of any pending or threatened
action in respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified party unless
such judgment or settlement includes as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding paragraphs of this Section 3.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
such Registrable Securities under any federal or state law or regulation of
governmental authority other than the Securities Act.
(e) Other Remedies. If for any reason the foregoing
indemnity is unavailable, or is insufficient to hold harmless an indemnified
party, other than by reason of the exceptions provided therein, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Holders of Registrable Securities
covered by the Registration Statement in question and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 3.7 were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in the immediately preceding
paragraph of this Section 3.7 shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
22
<PAGE>
misrepresentation. No party shall be liable for contribution under this Section
3.7(e) except to the extent and under such circumstances as such party would
have been liable to indemnify under this Section 3.7 if such indemnification
were enforceable under applicable law.
(f) Officers and Directors. As used in this Section 3.7, the
terms "officers" and "directors" shall include the partners of Holders which are
partnerships and the members of Holders which are limited liability companies.
3.8 Expenses. The Company shall pay all Registration
Expenses in connection with each registration of Registrable Securities pursuant
to this Section 3.
4. Miscellaneous.
4.1 Rule 144; Legended Securities; etc. (a) The Company
shall file the reports required to be filed by it under the Securities Act and
the Exchange Act and the rules and regulations adopted by the SEC thereunder
(or, if the Company is not required to file such reports, it shall, upon the
request of any Holder, make publicly available such information as necessary to
permit sales pursuant to Rule 144 or Rule 145), and shall take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such holder to sell shares of Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 or Rule 145. Upon the request of any Holder, the
Company shall deliver to such Holder a written statement as to whether it has
complied with such requirements.
(b) The Company shall issue new certificates for Registrable
Securities without a legend restricting further transfer if (i) such securities
have been sold to the public pursuant to an effective Registration Statement
under the Securities Act (other than Form S-8 if the Holder of such Registrable
Securities is an Affiliate) or Rule 144, or (ii) (x) such issuance is otherwise
permitted under the Securities Act, (y) the Holder of such shares has delivered
to the Company an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to the Company, to such effect and (z) the Holder of
such shares expressly requests the issuance of such certificates in writing.
4.2 Amendments and Waivers. This Agreement may be amended,
modified or supplemented, and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the Holder or Holders of at least a majority of the
Registrable Securities. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions
23
<PAGE>
hereof with respect to a matter that relates exclusively to the rights of
Holders whose securities are being sold pursuant to a Registration Statement and
that does not directly or indirectly affect, impair, limit or compromise the
rights of other Holders may be given by Holders of at least a majority of the
Registrable Securities being sold by such Holders pursuant to such Registration
Statement; provided, however, that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence. No amendment, modification or discharge of
this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing. Any such waiver shall constitute a waiver only with respect to
the specific matter described in such writing and shall in no way impair the
rights of the party or parties granting such waiver in any other respect or at
any other time.
4.3 Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election and unless notice is otherwise
given to the Company by the record owner, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any Holder
or Holders pursuant to this Agreement or any determination of any number or
percentage of shares of Registrable Securities held by any Holder or Holders
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership of such Registrable Securities.
4.4 Successors, Assigns and Transferees. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors assign and transferees. Purchaser or a Holder may
assign its rights hereunder to an Affiliate or to a Distributee or to other
successors, assigns and transferees of Purchaser or such Holder. This Agreement
shall survive any transfer of Registrable Securities to and shall inure to the
benefit of an Affiliate, a Distributee or such other successors, assigns and
transferees of Purchaser or such Holder. In addition, and whether or not any
express assignment shall have been made, the provisions of this Agreement which
are for the benefit of the parties hereto other than the Company shall also be
for the benefit of and enforceable by any subsequent Holder of Registrable
Securities, subject to the provisions respecting the minimum numbers or
percentages of shares of Registrable Securities required in order to be entitled
to certain rights, or take certain actions, contained herein.
4.5 Notices. All notices and other communications in
connection with this Agreement shall be in writing. Any notice or other
communication in connection herewith shall be deemed duly given to any party (a)
two Business Days after it is sent by express, registered or certified mail,
return receipt requested, postage prepaid, (b)
24
<PAGE>
one Business Day after it is sent by overnight courier, (c) when delivered by
hand, if personally delivered or (d) when receipt is acknowledged by the
addressee, if telecopied. Notices shall be addressed, if to any Holder not a
party hereto on the date hereof, to the address of such Holder in the stock
record books of the Company, and if to the Company to the following address:
U.S. Office Products Company
1025 Thomas Jefferson Street, N.W.
Suite 600 East
Washington, D.C. 20007
Facsimile: (202) 339-6727
Attention: Mark D. Director
with a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Facsimile: (202) 663-6363
Attention: George P. Stamas
or at such other address or addresses as the Company may have designated in
writing to each holder of Registrable Securities at the time outstanding. Copies
of any notice or other communication given under the Agreement shall also be
given to:
Clayton, Dubilier & Rice Fund V
Limited Partnership
1403 Foulk Road, Suite 106
Wilmington, Delaware 19803
with a copy to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
Facsimile: (212) 407-5200
Attention: Brian D. Finn
25
<PAGE>
and to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Facsimile: (212) 909-6836
Attention: Franci J. Blassberg
Any party may give any notice or other communication in connection herewith
using any other means (including, but not limited to, messenger service, telex
or ordinary mail), but no such notice or other communication shall be deemed to
have been duly given unless and until it is actually received by the individual
for whom it is intended.
4.6 No Inconsistent Agreements. The Company shall not
hereafter enter into any agreement, or amend any existing agreement, with
respect to its securities if such agreement would be inconsistent with the
rights granted to the Holders by this Agreement.
4.7 Remedies; Attorneys' Fees. Each Holder of Registrable
Securities, in addition to being entitled to exercise all rights provided herein
or granted by law, in cluding recovery of damages, shall be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any provision of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate. As between the parties to this Agreement, in any action or proceeding
brought to enforce any provision of this Agreement, or where any provision
hereof is validly asserted as a defense, the successful party shall be entitled
to recover reasonable attorney's fees in addition to its costs and expenses and
any other available remedy.
4.8 Severability. If any clause, provision or section of
this Agreement shall be invalid, illegal or unenforceable, the invalidity,
illegality or unenforceability of such clause, provision or section shall not
affect the enforceability or validity of any of the remaining clauses,
provisions or sections hereof to the extent permitted by applicable law. The
invalidity of any one or more phrases, sentences, clauses, Sections or sub
sections of this Agreement shall not affect the remaining portions of this
Agreement.
4.9. Headings. The headings contained in this Agreement are
for purposes of convenience only and shall not affect the meaning or
interpretation of this Agreement.
26
<PAGE>
4.10. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original and all of which
together constitute one and the same instrument.
4.11. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without giving effect to its principles or rules of conflict of laws that
would require the application of the laws of any other jurisdiction.
4.12 No Third Party Beneficiaries. Except as provided in
Sections 3.7 and 4.4, nothing in this Agreement shall confer any rights upon any
person or entity other than the parties hereto, each such party's respective
successors and permitted assigns.
4.13 Consent to Jurisdiction. Each party irrevocably submits
to the personal exclusive jurisdiction of the United States District Court for
the Southern District of New York for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby
(and, to the extent permitted under applicable rules of procedure, agrees not to
commence any action, suit or proceeding relating hereto except in such court).
Each party further agrees that service of any process, summons, notice or
document hand delivered or sent by registered mail to such party's respective
address set forth in Section 4.5 will be effective service of process for any
action, suit or proceeding in New York with respect to any matters to which it
has submitted to jurisdiction as set forth in the immediately preceding
sentence. Each party irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in the United States District Court for
the Southern District of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in such court that any
such action, suit or proceeding brought in such court has been brought in an
inconvenient forum.
27
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed
this Agreement or caused this Agreement to be executed on its behalf as of the
date first written above.
U.S. OFFICE PRODUCTS COMPANY
By:
-------------------------
Name:
Title:
CDR-PC ACQUISITION, L.L.C.
By:
-------------------------
Name:
Title:
28
<PAGE>
Exhibit 3
[U.S. OFFICE PRODUCTS LETTERHEAD]
June 10, 1998
CDR-PC Acquisition, L.L.C.
c/o Clayton, Dubilier & Rice Fund V Limited Partnership
1403 Foulk Road, Suite 106
Wilmington, Delaware 19803
Gentlemen:
Reference is made to the Investment Agreement, dated as of January 12, 1998
(as amended by Amendment No. 1 thereto dated February 3, 1998, the "Investment
Agreement"), between U.S. Office Products Company (the "Company") and CDR-PC
Acquisition, L.L.C. (the "Investor"). Capitalized terms used herein without
other definition shall have the respective meanings specified in the Investment
Agreement.
This letter will confirm our agreement that the Company shall, as soon as
practicable after the date hereof (and in any event within 30 days), furnish to
Investor (a) certificates of the Company's transfer agents for the Common Stock
and the 2001 Notes (the "Transfer Agent Certificates"), as to the aggregate
number of shares of Common Stock and 2001 Notes outstanding as of the Closing
Date, and (b) a certificate of the Controller of the Company (the "Adjustment
Certificate"), as to the adjustments made to the conversion price of the 2001
Notes as a result of the Tender Offer and the Distributions (the "Adjustments").
Promptly after the delivery of the Transfer Agent Certificates and the
Adjustment Certificate, the Company shall issue to Investor, (i) in exchange for
the Special Warrant issued to Investor at the Closing, a new Special Warrant,
dated the date hereof and of like tenor, covering a number of shares of Common
Stock determined pursuant to Section 1.01 of the Investment Agreement,
reflecting the increase in the number of shares of Common Stock into which the
2001 Notes are convertible as a result of the Adjustments, as well as any change
in the number of 2001 Notes outstanding as of the Closing Date reflected in the
Transfer Agent Certificates (and taking into account, without duplication, any
intervening adjustments required pursuant to the antidilution provisions of the
Special Warrant); (ii) in exchange for the Warrant issued to Investor at the
Closing, a new Warrant, dated the date hereof and of like tenor, covering a
number of shares of Common Stock determined pursuant to Section 1.01 of the
Investment Agreement and with an exercise price determined pursuant to the
Investment Agreement, reflecting the increase in the number of shares of Common
Stock covered by the Special Warrant delivered pursuant to clause (i), as well
as any change in the number of shares of Common Stock and/or 2001 Notes
outstanding as of the Closing Date reflected in the Transfer Agent Certificate
(and taking into account, without duplication, any intervening adjustments
required pursuant to the antidilution provisions of the Warrant); and (iii) if
required, in exchange for the certificate evidencing the Shares issued to
Investor at the Closing, a new Certificate, evidencing a number of Shares
determined pursuant to Section 1.01 of the Investment Agreement, reflecting any
change in the number of shares of Common Stock and/or 2001 Notes outstanding as
of the Closing
<PAGE>
Date reflected in the Transfer Agent Certificate.
Very truly yours,
U.S. OFFICE PRODUCTS COMPANY
By: /s/ Mark D. Director
--------------------------
Mark D. Director
Executive Vice President-
Administration, General
Counsel and Secretary
Agreed:
CDR-PC ACQUISITION, L.L.C.
By: /s/ Brian D. Finn
-------------------------
Brian D. Finn
Executive Vice President
<PAGE>
Exhibit 4
Joint Filing Agreement
In accordance with Rule 13d-1(f) under the Securities Exchange Act of 1934,
as amended, the persons named below agree to the joint filing on behalf of each
of them of a statement on Schedule 13D (including amendments thereto) with
respect to the Common Stock of U.S. Office Products Company and further agree
that this Joint Filing Agreement be included as an Exhibit to such joint
filings.
IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed
this Agreement this 19th day of June, 1998.
CDR-PC ACQUISITION, L.L.C.
By:
---------------------------------------------
Name:
Title:
CLAYTON, DUBILIER & RICE FUND V
LIMITED PARTNERSHIP
By: CD&R Associates V Limited Partnership,
the General Partner
By: CD&R Investment Associates II, Inc.,
its managing general partner.
By:
---------------------------------------------
Name:
Title:
CD&R ASSOCIATES V LIMITED PARTNERSHIP
By: CD&R Investment Associates II, Inc.,
its managing general partner.
By:
---------------------------------------------
Name:
Title:
<PAGE>
CD&R INVESTMENT ASSOCIATES II, INC.
By:
---------------------------------------------
Name:
Title:
