Exhibit 10.21
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INVESTMENT AGREEMENT
between
U.S. OFFICE PRODUCTS COMPANY
and
CDR-PC ACQUISITION, L.L.C.
Dated as of March 30, 1999
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TABLE OF CONTENTS
Page
ARTICLE I Issuance of Preferred Shares and Exchange of Warrants; Amendment of 1998
Investment Agreement and Registration Rights Agreement...................................................2
1.01 Issuance of Preferred Shares and Exchange of Warrants; Amendment of 1998
Investment Agreement and Registration Rights Agreement............................................2
1.02 Time and Place of the Closing......................................................................2
1.03 Transactions at the Closing........................................................................2
ARTICLE II Representations and Warranties..............................................................3
2.01 Representations and Warranties of the Company......................................................3
(a) Corporate Organization....................................................................3
(b) Corporate Authority.......................................................................4
(c) No Violations; Consents and Approvals.....................................................4
(d) Capital Stock.............................................................................5
(e) Subsidiaries..............................................................................6
(f) SEC Filings...............................................................................7
(g) Company Financial Statements..............................................................7
(h) Undisclosed Liabilities...................................................................8
(i) Absence of Certain Events and Changes.....................................................8
(j) Compliance with Applicable Laws...........................................................8
(k) Title to Assets...........................................................................9
(l) Litigation................................................................................9
(m) Contracts................................................................................10
(n) Taxes....................................................................................11
(o) Employee Benefit Plans and Related Matters; ERISA........................................13
(p) Environmental Matters....................................................................15
(q) Status of Preferred Shares and 1999 Warrant Shares.......................................15
(r) Intellectual Property....................................................................16
(s) Brokers or Finders.......................................................................17
(t) Disclosure...............................................................................17
(u) No Solicitation by Purchaser.............................................................17
(v) Fairness Opinion.........................................................................17
2.02 Representations and Warranties of Purchaser.......................................................18
(a) Organization.............................................................................18
ii
(b) Authority................................................................................18
(c) Conflicting Agreements and Other Matters.................................................18
(d) Acquisition for Investment...............................................................18
(e) Brokers or Finders.......................................................................19
(f) Limited Partner Consent..................................................................19
ARTICLE III Transfer of Preferred Shares...............................................................19
3.01 Transfer of Preferred Shares......................................................................19
ARTICLE IV Covenants and Additional Agreements.........................................................21
4.01 Covenants of the Company..........................................................................21
(a) Reasonable Efforts.......................................................................21
(b) No Acquisitions..........................................................................21
(c) No Dispositions..........................................................................21
(d) Other Transactions.......................................................................21
(e) Employee Benefits........................................................................23
(f) Certificate of Designation...............................................................23
4.02 No Solicitation...................................................................................23
4.03 Access and Information............................................................................24
4.04 Further Actions...................................................................................24
4.05 Further Assurances................................................................................25
4.06 Preferred Share Voting Rights.....................................................................25
4.07 Schedule Delivery.................................................................................25
ARTICLE V Conditions Precedent.........................................................................26
5.01 Conditions to Each Party's Obligations............................................................26
(a) Approvals................................................................................26
(b) No Litigation, Injunctions, or Restraints................................................26
(c) Credit Facility Obligations..............................................................26
5.02 Conditions to the Obligations of the Company......................................................26
(a) Representations and Warranties...........................................................26
(b) Opinion of Company's Counsel.............................................................27
5.03 Conditions to the Obligations of Purchaser........................................................27
(a) Representations and Warranties...........................................................27
(b) Performance of Obligations of the Company................................................27
(c) Opinion of Purchaser's Counsel...........................................................27
iii
(d) Purchaser's Expenses.....................................................................28
(e) Other Parties............................................................................28
(f) Corporate Proceedings....................................................................28
(g) Material Adverse Effect..................................................................28
(h) Opinion of the Company's Counsel. ......................................................28
(i) Limited Partner Consent..................................................................28
(j) Schedules................................................................................28
(k) Fairness Opinion.........................................................................29
ARTICLE VI Termination................................................................................29
6.01 Termination.......................................................................................29
6.02 Effect of Termination.............................................................................30
ARTICLE VII Indemnification............................................................................30
7.01 Indemnification of Purchaser......................................................................30
7.02 Indemnification Procedures........................................................................31
7.03 Survival of Representations and Warranties........................................................32
7.04 Other Indemnities.................................................................................32
ARTICLE VIII Interpretation; Definitions................................................................32
8.01 Definitions.......................................................................................32
ARTICLE IX Miscellaneous..............................................................................39
9.01 Severability......................................................................................39
9.02 Specific Enforcement..............................................................................40
9.03 Entire Agreement..................................................................................40
9.04 Counterparts......................................................................................40
9.05 Notices...........................................................................................40
9.06 Amendments; Waivers, etc..........................................................................42
9.07 Cooperation.......................................................................................42
9.08 Successors and Assigns............................................................................43
9.09 Expenses and Remedies.............................................................................43
9.10 Transfer of Preferred Shares, 1999 Warrants and 1999 Special Warrants.............................43
9.11 Governing Law.....................................................................................44
iv
9.12 Publicity.........................................................................................44
9.13 No Third Party Beneficiaries......................................................................44
9.14 Consent to Jurisdiction...........................................................................44
9.15 Replacement of Share Certificates.................................................................45
v
Exhibit I Form of Certificate of Designation
Exhibit II Form of 1999 Warrant
Exhibit III Form of 1999 Special Warrant
Exhibit IV Amendments to the 1998 Investment Agreement
Exhibit V Amendments to the Registration Rights Agreement
vi
THIS INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of March 30,
1999, 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 Company and Purchaser are parties to an investment
agreement, dated as of January 12, 1998 (as amended by an amendment thereto
dated February 3, 1999, the "1998 INVESTMENT AGREEMENT"), pursuant to which the
Company sold to Purchaser, and Purchaser purchased, (I) 9,092,106 shares (the
"SHARES") of common stock of the Company, par value $0.001 per share (the
"COMMON STOCK"), and warrants (the "1998 SPECIAL WARRANTS") representing the
right to acquire a number of shares of Common Stock equal to the difference
between (X) 24.9% of the sum of (A) the outstanding shares of Common Stock as of
June 10, 1998 (the "1998 CLOSING DATE") after giving effect to the issuance of
the Shares and the exercise of the 1998 Special Warrants, and assuming the
conversion into Common Stock of all the 2001 Notes outstanding on the Closing
Date and (B) the number of any shares issued pursuant to certain contingent
obligations of the Company, and (Y) 24.9% of the number of outstanding shares of
Common Stock as of the 1998 Closing Date after giving effect to the issuance of
the Shares, and (II) warrants (the "1998 WARRANTS") entitling the holder thereof
to purchase one share of Common Stock for each Share and Special Warrant so
purchased;
WHEREAS, the Company and Purchaser are parties to a registration
rights agreement, dated as of June 10, 1998 (the "REGISTRATION RIGHTS
AGREEMENT"), entered into pursuant to the 1998 Investment Agreement;
WHEREAS, in light of the Company's operating performance and financing
and capital needs, the Board of Directors of the Company has determined that it
would be in the best interests of the Company and its shareholders for the
Company to raise additional equity capital, and, in connection therewith:
(a) the Company wishes, in exchange for consideration of $51 million
in cash, to (I) issue to Purchaser 73,261.79 newly issued shares of Series
A Non-Voting Participating Convertible Preferred Stock, par value $.001 per
share (the "PREFERRED SHARES"), of the Company having the terms set forth
in the certificate of designation attached hereto as Exhibit I (the
"CERTIFICATE OF DESIGNATION"), (II) amend and restate the 1998 Warrants (as
so amended and restated, the "1999 WARRANTS") to reduce the exercise price
and make certain other conforming changes, as set forth in the form of 1999
Warrant attached hereto as Exhibit II,
and (III) amend and restate the 1998 Special Warrants (as so amended and
restated, the "1999 SPECIAL WARRANTS") to make certain conforming changes,
as set forth in the form of 1999 Special Warrant attached hereto as Exhibit
III; and
(b) the Company and Purchaser wish to amend the 1998 Investment
Agreement and the Registration Rights Agreement as provided herein; and
WHEREAS, the Company and Purchaser intend that the transactions
described in clause (a) of the preceding recital qualify as a "reorganization"
described in section 368(a)(1)(E) of the Code, and that this Agreement qualify
as a "plan of reorganization" within the meaning of section 368 of the Code and
the Treasury Regulations thereunder;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein set forth, the parties agree as follows:
ARTICLE I
ISSUANCE OF PREFERRED SHARES AND AMENDMENT OF
WARRANTS; AMENDMENT OF 1998 INVESTMENT AGREEMENT AND
REGISTRATION RIGHTS AGREEMENT
SECTION I.1 ISSUANCE OF PREFERRED SHARES AND AMENDMENT OF WARRANTS;
AMENDMENT OF 1998 INVESTMENT AGREEMENT AND REGISTRATION RIGHTS AGREEMENT. Upon
the terms and subject to the conditions set forth herein, (A) the Company
agrees, for aggregate consideration of $51 million (the "CASH CONSIDERATION"),
to (I) issue to Purchaser 73,261.79 Preferred Shares, (II) amend and restate the
1998 Warrants as set forth in Exhibit II, and (III) amend and restate the 1998
Special Warrants as set forth in Exhibit III, and (B) the Company and Purchaser
agree to amend the 1998 Investment Agreement and the Registration Rights
Agreement, effective as of the Closing (as hereinafter defined), as provided in
Exhibits IV and V, respectively.
SECTION I.2 TIME AND PLACE OF THE CLOSING. The closing (the
"CLOSING") shall take place at the offices of Debevoise & Xxxxxxxx, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, at 10:00 A.M., New York time, on April 16,
1999, or at such other place, time and date as the parties may agree. The
"CLOSING DATE" shall be the date the Closing occurs.
2
SECTION I.3 TRANSACTIONS AT THE CLOSING. At the Closing, subject to
the terms and conditions of this Agreement:
(a) The Company shall (I) issue to Purchaser the Preferred Shares, and
(II) deliver to Purchaser a certificate representing the Preferred Shares,
a certificate representing the 1999 Warrants and a certificate representing
the 1999 Special Warrants, in each case registered in the name of
Purchaser;
(b) Purchaser shall (I) pay to the Company the Cash Consideration, by
wire transfer of immediately available funds to an account or accounts
designated by the Company at least five business days prior to the Closing
Date, and (II) deliver to the Company the certificates representing the
1998 Warrants and the 1998 Special Warrants; and
(c) The amendments to the 1998 Investment Agreement and the
Registration Rights Agreement provided for in Section 1.01(b) shall become
effective.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION II.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As of the
date hereof and as of the Closing Date, 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 Subsidiary of the Company having assets or annual
revenues of $500,000 or more or which is otherwise material to the business
of the Company and its Subsidiaries, taken as a whole (each a "MATERIAL
SUBSIDIARY"), is duly organized and validly existing and, if applicable, is
in good standing, under the laws of the jurisdiction of its incorporation
or organization. The Company and each of its Subsidiaries 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 qualifica-
3
tion or licensing, except for any such failures so to qualify or be in good
standing which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and its Subsidiaries, 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 following
the Closing) 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
com parable organizational documents, of each of the Material Subsidiaries,
each as amended to date and currently in full force and effect.
(b) CORPORATE AUTHORITY. The Company has the requisite corporate power
and authority to execute, deliver and perform this Agreement, to issue the
Preferred Shares and to consummate the other transactions contemplated
hereby. The execution, delivery and performance by the Company of this
Agreement, the issuance of the Preferred Shares and the consummation of the
other transactions contemplated hereby have been duly authorized by the
Company's Board of Directors, and no other corporate proceedings on the
part of the Company or its shareholders are necessary to authorize this
Agreement or for the Company to issue the Preferred Shares or to consummate
the transactions contemplated hereby. This Agreement is a valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms (assuming that it is a valid and binding obligation of
Purchaser).
(c) NO VIOLATIONS; CONSENTS AND APPROVALS. (i) The execution, delivery
and performance by the Company of this Agreement, the issuance by the
Company of the Preferred Shares, the amendment of the 1998 Warrants and the
1998 Special Warrants and the consummation by the Company of the other
transactions contemplated hereby will not (A) result in a violation or
breach of the Company Charter or the Company By-laws or (B) result in a
violation or breach of (or give rise to any right of termination,
amendment, modification, vesting, revocation, cancellation, acceleration,
increased payments or any adjustments pursuant to any antidilution
provision 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") or any
obligation to create any Lien upon any of the properties or assets of the
Company or any of its Subsidiaries under, (1) subject to the governmental
filings and other
4
matters referred to in clause (ii) below, any of the terms, conditions or
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 the
Company or any of its Subsidiaries is a party or by which any of their
respective properties or assets may be bound, 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 Company or any of its Subsidiaries, except, in the case of clause (B),
for violations, breaches, defaults, rights of cancellation, termination,
revocation vesting, or acceleration or Liens that, individually and in the
aggregate, would not have a Material Adverse Effect on the Company and its
Subsidiaries, 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 Exchange Act, and filings under state
securities or "BLUE SKY" laws and filings or consents referred to in
Schedule 2.01(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, local or foreign (a "GOVERNMENTAL ENTITY"), is
required with respect to the Company or any of its Subsidiaries in
connection with the execution, delivery or performance by the Company of
this Agreement or the consummation by the Company of the transactions
contemplated hereby (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 Company and its
Subsidiaries, 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 36,069,413 shares of Common Stock were issued and
outstanding as of the close of business on March 8, 1999, and (II) 500,000
shares of preferred stock, $0.001 par value per share, of which none were
issued and outstanding as of the date hereof. As of the close of business
on March 30, 1999, there were out standing 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
5
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 4,225,000 shares of Common Stock (subject to adjustment on the terms set
forth therein) of which 25,000 are subject to allocation pursuant to option
pools, as set forth on Schedule 2.01(d)(ii). As of the close of business on
October 24, 1998, there were outstanding under the Company Stock Plans no
shares of restricted stock and 12,821 deferred shares had been reserved for
issuance pursuant to the 1996 Non-Employee Directors Stock Plan. As of the
close of business on March 30, 1999, 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 the Company has
outstanding $4.614 million 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 $12.761
million in 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"), convertible into
shares of Common Stock at any time prior to maturity at a conversion price
of $64.36 and $38.70 per share, respectively. Except as set forth on
Schedule 3.01(d), and except for such rights of Purchaser pursuant to
Section 5.01 of the 1998 Investment Agreement, there are no preemptive or
similar rights on the part of any holders of any class of securities of the
Company or any of its Subsidiaries. Except for the Common Stock, the 1998
Warrants, the 1998 Special Warrants, the 2003 Notes and the 2001 Notes, 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 2.01(d), and except for the 1998 Warrants and
the 1998 Special Warrants, 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 any of its Subsidiaries.
Except with respect to the withholding of exercise price or withholding
taxes under any Company Stock Plan, there are no
6
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 any of its Subsidiaries. Schedule 2.01(d)(iii) lists all shares
of capital stock of the Company and options to acquire such shares that
have been acquired, since June 10, 1998, by any officer of the Company who
is subject to reporting obligations under Section 16 of the Exchange Act or
by any director of the Company.
(e) SUBSIDIARIES. (i) Schedule 2.01(e) contains a complete and correct
description of the shares of stock or other equity interests that are
authorized, or issued and outstanding, of each of the Company's
Subsidiaries. The Company has no equity interests with a value of $100,000
or more in any Person other than the Company's Subsidiaries listed on
Schedule 2.01(e), 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 Company's Subsidiaries has been duly
authorized and validly issued, and is fully paid and nonassessable. Except
as set forth on Schedule 2.01(e)(i), all of the outstanding shares of
capital stock of each of the Company's Subsidiaries are owned, either
directly or indirectly, by the Company free and clear of all Liens, except
for Liens in favor of the banks party to a Credit Agreement, dated June 9,
1998, between the Company, The Chase Manhattan Bank and the other parties
thereto, as amended by the First Amendment thereto dated as of August 21,
1998 (the "CREDIT AGREEMENT").
(ii) Schedule 2.01(e)(ii) contains a complete and correct list of all
Material Subsidiaries of the Company.
(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, 1996 (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 applic able, 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 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.
7
(g) COMPANY FINANCIAL STATEMENTS. (i) The Company has heretofore
furnished to Purchaser complete and correct copies of the consolidated
balance sheets of the Company as of April 25, 1998, April 26, 1997 and
April 30, 1996, and consolidated statements of income, consolidated
statements of cash flow and consolidated statements of stockholders' equity
for the years ended April 25, 1998, April 26, 1997 and April 30, 1996,
(such financial statements, including the notes thereto, the "COMPANY
FINANCIAL STATEMENTS"), together with the report of the Company's
independent accountants thereon. The Company Financial Statements present
fairly in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries 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 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 and its
consolidated Subsidiaries 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.
(ii) Except for matters disclosed on Schedule 2.01(h)(iv) with respect
to balance sheet information only, the financial statements, including the
unaudited consolidated balance sheet (the "BALANCE SHEET") and the
unaudited consolidated statement of income, filed by the Company in its
Quarterly Report on Form 10-Q for the period ended January 23, 1999 (the
"UNAUDITED COMPANY 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 Unaudited Company Financial Statements omit
footnote disclosures required by GAAP and are subject to normal, recurring
year-end closing and audit adjustments.
(h) UNDISCLOSED LIABILITIES. Except (I) for the items listed in
Schedule 2.01(h), (II) as and to the extent disclosed or reserved against
on the Balance Sheet, or in the footnotes thereto, (III) as incurred after
the date of the Balance Sheet in the ordinary course of Business consistent
with prior practice and not prohibited by this Agreement, and (IV) for
matters disclosed on Schedule 2.01(h)(iv) with respect to balance sheet
information only, neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature, whether
8
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 Company and its Subsidiaries, taken as a whole. Except
as disclosed on Schedule 2.01(h), there are no liabilities or obligations
of the Company or any of its Subsidiaries, contingent or otherwise, to any
Person with respect to the value of the Common Stock.
(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, and except for any items
referred to in Schedule 2.01(i) or Schedule 2.01(h)(iv), since January 23,
1999, the Company and its Subsidiaries have conducted their respective
businesses in the ordinary course consistent with past practice and there
has not been any event, change or development which, individually or in
the aggregate, would have or result in a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole.
(j) COMPLIANCE WITH APPLICABLE LAWS. Except as disclosed in the Filed
Company SEC Documents, each of the Company and its Subsidiaries is in
compliance with all statutes, laws, regulations, rules, judgments, orders
and decrees of all Governmental Entities applicable to it, and neither the
Company nor any of its Subsidiaries 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 Company and its Subsidiaries, taken
as a whole. This Section 2.01(j) does not relate to employee benefits
matters (for which Section 2.01(o) is applicable), environmental matters
(for which Section 2.01(p) is applicable) or tax matters (for which Section
2.01(n) is applicable). Each of the Company and its Subsidiaries 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 Company and its Subsidiaries, taken as a whole. All such
Permits are in full force and effect and each of the Company and its
Subsidiaries is 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
Company and its Subsidiaries, taken as a whole.
9
(k) TITLE TO ASSETS. (i) Except as set forth in Schedule 2.01(k)(i),
each of the Company and its Subsidiaries 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 or held for use by it
in connection with the conduct of, or otherwise material to, their
respective businesses (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 would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole, in
each case free and clear of any Liens except for Permitted Liens. This
Section 2.01(k) does not relate to intellectual property (for which Section
2.01(r) is applicable).
(ii) Except as referred to in Schedule 2.01(k)(ii), each of the
Company and its Subsidiaries 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 such
real properties are granted.
(l) LITIGATION. Except as disclosed in the Filed Company SEC Documents
or referred to on Schedule 2.01(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 the Company or any of
its Subsidiaries that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect on the Company and its
Subsidiaries, 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 the Company or any of its
Subsidiaries that, insofar as can reasonably be foreseen, individually or
in the aggregate, in the future would have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole.
(m) CONTRACTS. (i) Schedule 2.01(m) contains a complete and correct
list, as of the date hereof, of all Contracts (other than the 1998
Transaction Agreements) that are of the types listed in clauses (A) through
(H) below to which the Company or any of its Subsidiaries is a party (the
"MATERIAL CONTRACTS"):
10
(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
Company or any of its Subsidiaries 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 expenses, that are material or
involve any obligation on the part of the Company or any of its
Subsidiaries to commit capital (excluding commitments not exceeding
$100,000 in the aggregate);
(D) Contracts prohibiting or materially restricting the ability
of the Company or any of its Subsidiaries 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 Company and it Subsidiaries, 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 or any of its
Subsidiaries;
(G) any employment agreement or other agreement requiring the
Company or any of its Subsidiaries to compensate any employee for any
tax imposed as a result of any excess parachute payment under Section
280G of the Code; and
(H) contracts providing for future payments that are conditioned,
in whole or in part, on the future performance of the Company or any
of its Subsidiaries.
11
(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 would not, individually or in the
aggregate, reasonably be expected to have or result in a Material Adverse
Effect on the Company and its Subsidiaries, 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
2.01(m), 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, would constitute a violation, breach or event of
default thereunder, on the part of the Company or any of its Subsidiaries
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 Company and its
Subsidiaries, taken as a whole. Except as set forth in Schedule 2.01(m),
the enforceability of all Material Contracts will not be adversely affected
in any manner by the execution, delivery or performance of this Agreement,
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 contemplated by this Agreement.
(n) TAXES. (i) Except as set forth on Schedule 2.01(n), (A) all Tax
Returns required to be filed by or on behalf of the Company or any of its
Subsidiaries have been filed except to the extent that a failure to file
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company and its Subsidiaries, taken as a whole; (B) all such Tax
Returns filed are complete and accurate in all respects, other than any
incompletenesses or any inaccuracies that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company and its
Subsidiaries, 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 the Company
or any of its Subsidiaries is subject to an obligation to file Tax Returns
or to pay or collect Taxes imposed by any jurisdiction in which the Company
or such Subsidiary does not file Tax Returns or pay or collect Taxes, other
than any such claim that would not have a Material Adverse Effect on the
Company or such Subsidiary or for which adequate reserves have been
provided on the Balance Sheet; (D) there is no deficiency with respect to
any Taxes which would, individually or in the aggregate, have a Material
Adverse Effect on the Company
12
and its Subsidiaries, taken as a whole, other than any such deficiency for
which adequate reserves have been provided on the 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 the Company or any of its
Subsidiaries), 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 2.01(n), each of the Company and
its 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 Company and its Subsidiaries, taken as a whole.
(iii) Except as set forth in Schedule 2.01(n) and except for the Tax
Allocation Agreement, (A) neither the Company nor any of its 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 Subsidiaries) with
any Person other than the Company or any of its Subsidiaries, which might
result in a Material Adverse Effect to the Company or any of its
Subsidiaries which entered into such agreement or arrangement; and (B)
neither the Company nor any of its 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 of its Subsidiaries or (2) the common parent
of which has not held any asset other than shares of one or more of the
Company's Subsidiaries.
(iv) Except as set forth in Schedule 2.01(n), (A) all taxable periods
of each of the Company and its Subsidiaries ending before December 31, 1993
are closed or no longer subject to audit; (B) neither the Company nor any
of its Subsidiaries is currently under any audit by any taxing authority
as to which such
13
taxing authority has asserted in writing any claim which, if adversely
determined, could have a Material Adverse Effect on the Company or any
of its Subsidiaries; and (C) no waiver of the statute of limitations is
in effect with respect to any taxable year of the Company or any of its
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 and its Subsidiaries, taken as a whole and that is expected
to provide for contributions to be made by the Company or any of its
Subsidiaries or their Employees after the date hereof or to permit the
accrual of additional benefits by any Employee of the Company or any of its
Subsidiaries after the date hereof is either listed on Schedule 2.01(o) or
has been filed with the SEC as a material contract (collectively, the
"PLANS"). Except as set forth on Schedule 2.01(o), neither the Company nor
any of its Subsidiaries has communicated to any Employee any intention or
commitment to modify any 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 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 and its Subsidiaries, taken as a whole.
14
(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
failures 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 Company or any of its Subsidiaries that would be material
to the Company and its Subsidiaries, taken as a whole. There are no pending
or threatened claims by or on 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 bene
fits, 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 liability to the Company or any of its Subsidiaries.
(C) Except to the extent that it would not give rise to a liability or
obligation on the part of the Company or any of its Subsidiaries that would
be material to the Company and its Subsidiaries, taken as a whole, no
Employee is or will become entitled to post-employment benefits of any kind
by reason of employment with the Company or any of its Subsidiaries,
including, without limita tion, 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 contemplated by this Agreement 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 the Company or any of its Subsidiaries.
(iv) EMPLOYEES, LABOR MATTERS, ETC. Except as set forth on Schedule
2.01(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 25, 1998, 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 2.01(o), there are no labor disputes currently subject to
any grievance procedure, arbitration or litigation and there is no petition
pending or threatened with respect to any employee of the Company or any of
its
15
Subsidiaries. Each of the Company and its Subsidiaries has complied with
all applicable Laws pertaining to the employment or termination of
employment of their respective em ployees, 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 failures so to comply
that would not, individually or in the aggregate, reasonably be expected to
result in any material liability to the Company and its Subsidiaries, taken
as a whole.
(p) ENVIRONMENTAL MATTERS. Except as disclosed in the Filed Company
SEC Documents or as set forth on Schedule 2.01(p) and except for such
matters that would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole, (I)
each of the Company and its Subsidiaries is in compliance with all
applicable Environmental Laws (as defined below), (II) each of the Company
and its Subsidiaries has all Permits required under Environmental Laws for
the operation of their respective businesses as presently conducted
("ENVIRONMENTAL PERMITS"), (III) neither the Company nor any of its
Subsidiaries has received notice from any Governmental Entity asserting
that the Company or any of its Subsidiaries 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 Company or any
of its Subsidiaries, threatened) seeking to impose any liability on the
Company or any of its Subsidiaries 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, 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) STATUS OF PREFERRED SHARES AND 1999 WARRANT SHARES. The Preferred
Shares being issued at the Closing have been duly authorized by all
necessary corporate action on the part of the Company (except for the
filing with the Secretary of State of the State of Delaware of the
Certificate of Designation), and
16
at Closing such Preferred Shares will have been validly issued and,
assuming payment therefor has been made, will be fully paid and
nonassessable, and the issuance of such Preferred Shares will not be
subject to preemptive or other subscription rights of any other stockholder
of the Company. The Company has validly reserved for issuance a number of
shares of Common Stock that will be sufficient to permit the conversion in
full of the Preferred Shares into shares of Common Stock, and, upon
conversion of the Preferred Shares, such shares of Common Stock (the
"CONVERSION SHARES") will be validly issued and outstanding, fully paid and
nonassessable. The 1999 Warrant Shares and the 1999 Special Warrant Shares
have been duly authorized by all necessary corporate action on the part of
the Company, and the Company has validly reserved for issuance a number of
shares of Common Stock that will be sufficient to permit the exercise in
full of the 1999 Warrants and the 1999 Special Warrants. Assuming payment
therefor has been made, upon issuance and exercise of the 1999 Warrants or
the 1999 Special Warrants, the 0000 Xxxxxxx Shares or the 1999 Special
Warrant Shares, as the case may be, will be validly issued and outstanding,
fully paid and nonassessable. Assuming that the Common Stock continues to
satisfy the requirements set forth in paragraph (b) of Rule 4450 of the
Nasdaq Marketplace Rules, the Conversion Shares, the 1999 Warrant Shares
and the 1999 Special Warrant Shares will be eligible for listing on the
Nasdaq Stock Market.
(r) INTELLECTUAL PROPERTY. (I) The Intellectual Property that is owned
by the Company and its Subsidiaries constitutes all of the Intellectual
Property that is material to the Company and its Subsidiaries, taken 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 the Company or any of its Subsidiaries is
permitted by any Person (the "COMPANY INTELLECTUAL PROPERTY"). The Company
Intellectual Property that is owned by the Company or any of its
Subsidiaries is owned free from any Liens (other than Permitted Liens).
Except as set forth in Schedule 2.01(r), 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 2.01(r), immediately after the Closing, the Company and
its Subsidiaries 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
Sched ule 2.01(r), the conduct of the respective businesses of the Company
and its Subsidiaries does not infringe upon or conflict with the rights of
any third
17
party in respect of any Intellectual Property, except where such conduct
would not materially affect the ability of the Company and its Subsidiaries
to conduct their respective businesses as presently conducted. Except as
set forth in Schedule 2.01(r), 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
Company and its Subsidiaries, taken as a whole. Except as set forth in
Schedule 2.01(r), 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 the Company or any of its
Subsidiaries 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 Company or any of its Subsidiaries to conduct their
respective businesses as presently conducted. Except as set forth in
Schedule 2.01(r), 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 Entity, which order,
ruling, decree, judgement or stipulation is materially adverse to the
Company. Except as set forth in Schedule 2.01(r), the Intellectual Property
owned by the Company or any of its Subsidiaries and material to the Company
and its Subsidiaries, taken as 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 Company and its Subsidiaries 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.
(II) The disclosure as to Year 2000 Compatibility issues in the
Company's Quarterly Report on Form 10-Q for the period ended January 23,
1999, is true and correct in all material respects and does not omit to
state a material fact necessary to make the statements contained therein
not misleading.
(s) BROKERS OR FINDERS. Except as set forth on Schedule 2.01(s), 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.
18
(t) 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 business of the Company and its Subsidiaries or the transactions
contemplated by this Agreement.
(u) NO SOLICITATION BY PURCHASER. There has been no solicitation of
the acquisition of Securities from the Company (within the meaning of
Section 8.10(iii) of the 1998 Investment Agreement) by Purchaser or an
Affiliate thereof subsequent to June 10, 1998.
(v) FAIRNESS OPINION. The Board of Directors of the Company has
received an oral fairness opinion from Xxxxxx, Xxxxxxx & Co., Incorporated,
which opinion shall have been confirmed in writing, customary in form and
substance, within 7 days of the date hereof.
SECTION II.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants as of the date hereof and as of the Closing Date 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 this Agreement and to
consummate the transactions contemplated hereby. 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 contemplated
hereby 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 contemplated hereby. This Agreement is a valid and binding
agreement of Purchaser, enforceable against Purchaser in accordance with
its terms.
19
(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 Lien 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 2.01(c)(ii)),
except for filings after the Closing under Sections 13(d) and 16 of the
Exchange Act.
(d) ACQUISITION FOR INVESTMENT. Purchaser is acquiring the Preferred
Shares pursuant to this Agreement, and acquired the 1998 Warrants and the
1998 Special Warrants pursuant to the 1998 Investment Agreement, 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 Preferred Shares,
1999 Warrants, 1999 Special Warrants, 1999 Warrant Shares or 1999 Special
Warrant Shares; PROVIDED that the disposition of 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 as amended pursuant
hereto. Purchaser has delivered to the Company a complete and correct copy
of a commitment letter from the Fund for $51 million, which is subject to
the consent of the Fund's limited partners to the waiver described in Sec
tion 2.02(g). The Fund 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) BROKERS OR FINDERS. Except as set forth in Schedule 2.02(e), 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.
20
(f) LIMITED PARTNER CONSENT. A majority in interest of the limited
partners of the Fund will be solicited to consent to a waiver of the
diversification cap of the Fund in connection with the transactions
contemplated hereby.
ARTICLE III
TRANSFER OF PREFERRED SHARES
SECTION III.1 TRANSFER OF PREFERRED SHARES. (a) Other than as
specifically approved by a majority of the Non-Investor Directors, prior to
June 10, 2000, Purchaser will not, directly or indirectly, dispose of any
Preferred Shares, 1999 Warrants or 1999 Special Warrants (except to any
Affiliate of Purchaser).
(b) Other than as specifically approved by a majority of the
Non-Investor Directors, prior to June 10, 2003, Purchaser will not, directly or
indirectly, sell, transfer or otherwise dispose of any Preferred Shares except
(I) pursuant to a registered underwritten public offering intended to achieve a
broad distribution in accordance with the Registration Rights Agreement as
amended pursuant hereto, (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 3.01(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 Preferred Shares
that are not in compliance with this Article III shall be of no force or effect.
(c) The provisions of clauses (a) and (b) of this Article III shall
terminate and be of no further force or effect on the earliest to occur of (I)
the fifth anniversary of the 1998 Closing Date, (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
21
greater than 50%, and (III) the first public disclosure of a Third-Party Bid
(provided, however, that if such Third-Party Bid is thereafter abandoned,
terminated or withdrawn, the provisions of Sections 3.01(a) and (b) hereof shall
be reinstated, although any action taken or agreement or arrangement entered
into by Purchaser after such first public disclosure and prior to such
reinstatement (or the consummation of any such action, agreement or arrangement,
whether before or, unless such action, agreement or arrangement shall be a
tender offer or other public offer with respect to the Company, after such
reinstatement) shall not be deemed to breach the provisions of Sections 3.01(a)
and (b) hereof as a result of such reinstatement).
(d) Prior to the seventh anniversary of the 1998 Closing Date,
Purchaser will not, directly or otherwise dispose of Preferred Shares
convertible into 15% or more of the Common Stock outstanding, after giving
effect to such conversion, 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 Preferred 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 earlier to occur of (I) 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%,
and (II) the first public disclosure of a Third-Party Bid (provided, however,
that if such Third-Party Bid is thereafter abandoned, terminated or withdrawn,
the provisions of this Section 3.01(d) shall be reinstated, although any action
taken or agreement or arrangement entered into by Purchaser after such first
public disclosure and prior to such reinstatement (or the consummation of any
such action, agreement or arrangement, whether before or, unless such action,
agreement or arrangement shall be a tender offer or other public offer with
respect to the Company, after such reinstatement) shall not be deemed to breach
this Section 3.01(d) as a result of such reinstatement).
ARTICLE IV
COVENANTS AND ADDITIONAL AGREEMENTS
SECTION IV.1 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 its Subsidiaries that, except as set forth in Schedule 4.01, or to
the extent that Purchaser otherwise consents in writing:
22
(a) REASONABLE EFFORTS. The Company will use commercially reasonable
efforts to preserve the relationships with customers, suppliers and others
having business dealings with the Company and its Subsidiaries.
(b) NO ACQUISITIONS. The Company will not, nor will it permit any of
its Subsidiaries to, acquire or agree to acquire (excluding any non-binding
letters of intent) by merging or consolidating with, 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 consid eration having a value in
excess of $2.5 million in any case or $15 million in the aggregate (in
either case whether payable in cash, stock or a combination thereof);
PROVIDED that no such consideration shall be payable in Common Stock or
stock of any Subsidiary of the Company.
(c) NO DISPOSITIONS. The Company will not, nor will it permit any of
its 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 Company or any of its Subsidiaries other than at fair
market value in the ordinary course of business consistent with past
practice and except for other dispositions of Assets (other than inventory)
with an aggregate value not in excess of $1 million in any one case or $5
million in the aggregate.
(d) OTHER TRANSACTIONS. The Company will not, nor will it permit any
of its Subsidiaries to, do any of the following (except as otherwise
expressly provided herein):
(i) amend its Certificate of Incorporation (except to the extent
necessary to adopt the Certificate of Designation), By-laws or other
organi zational documents (except for immaterial amendments to the
Certificate of Incorporation or By-laws of any of the Company's
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;
23
(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
(except for options granted to employees to acquire not more than
200,000 shares of Common Stock in the aggregate), or warrant or right
relating thereto;
(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 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 material Assets of the Company or
of any of its Subsidiaries to be subject to any Lien other than
Permitted Liens;
(vi) cancel any material indebtedness (individually or in the
aggregate) or waive any claims or rights of substantial value;
(vii) make any change in any method of accounting or accounting
practice or policy, except (I) as may be required by GAAP, (II) as
disclosed on Schedule 2.01(h)(iv) or (III) pursuant to the approval of
all of the members of the audit committee of the Company's Board of
Directors;
(viii) enter into, terminate, renew or modify any Contract to
which the Company or any of its Subsidiaries is a party or by which
any of their assets are bound and which is material to the Company or
such Subsidiary, except as explicitly contemplated hereby;
(ix) enter into any agreement or take any action in violation of
the terms of this Agreement;
(x) settle any material tax audit, make or change any tax
election or amend any Tax Returns; or
(xi) agree, whether in writing or otherwise, to do any of the
foregoing.
24
(e) EMPLOYEE BENEFITS. Except (X) as set forth in Schedule 4.01(e) 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 its
Subsidiaries to (I) increase in any manner the compensation of any of the
officers or other employees of the Company or any of its Subsidiaries; (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 Company or any of its Subsidiaries except as required by law, in which
case the Company or such Subsidiary shall first notify Purchaser; or (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 Company or any of its Subsidiaries, 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 Company and
its Subsidiaries, taken as a whole.
(f) CERTIFICATE OF DESIGNATION. Prior to the Closing, the Board of
Directors of the Company will adopt the Certificate of Designation and will
cause the same to be filed with the Secretary of State of the State of
Delaware.
SECTION IV.2 NO SOLICITATION. From the date hereof to the Closing
Date, 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 Subsidi aries to, directly or
indirectly, (I) solicit or encourage any proposals for, or enter into or
continue any discussions or negotiations, or review any proposal or offer, with
respect to the acquisition by any Person (other than Purchaser and its
Affiliates) of more than 5% of the capital stock of or other significant
ownership interest in the Company or any significant portion of the Assets, or
(II) furnish or cause to be furnished
25
any non-public information concerning the Company or the assets and properties
of the Company to any person (other than Purchaser and its representatives),
other than in the ordinary course of business or as required by applicable law,
in each case, after prior notice to and consultation with Purchaser. The Company
will promptly notify Purchaser of any inquiry or proposal received by the
Company or its Subsidiaries with respect to the acquisition by any other Person
of any capital stock of or other significant ownership interest in the Company
or any significant portion of the Assets. Notwithstanding the foregoing, if the
Board of Directors of the Company determines in good faith, after consultation
with outside counsel, that failure to take any of the actions otherwise
prohibited by this Section 4.02 would result in a breach of its fiduciary duties
to stockholders under applicable law, the Company may take such otherwise
prohibited actions to the extent necessary to avoid such breach.
SECTION IV.3 ACCESS AND INFORMATION. (a) So long as this Agreement
remains in effect, prior to the Closing, the Company will (and will cause each
of its Subsidiaries and each of their respective accountants, counsel,
consultants, officers, directors, employees, agents and representatives 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 Company and its Subsidiaries, and furnish to
them all such documents, records and information with respect to the properties,
assets and business of the Company and its Subsidiaries 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
business of the Company and its Subsidiaries.
SECTION IV.4 FURTHER ACTIONS. (a) The Company shall, and shall cause
each of its Subsidiaries 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 the Company to fulfill and perform its
obligations in respect of this Agreement, or otherwise to consummate and make
effective the transactions contemplated hereby.
(b) The Company shall (and shall cause each of its Subsidiaries to),
as promptly as practicable, (I) make, or cause to be made, all filings and
submissions required under any law applicable to the Company or any of its
Subsidiaries, 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
the Company or any of its Subsidiaries, in each case in connection with this
Agreement, the issuance to Purchaser of the Preferred Shares, the
26
amendment of the 1998 Warrants and the 1998 Special Warrants pursuant hereto,
and the consummation of the other transactions contemplated hereby.
(c) The Company shall, and shall cause each of its Subsidiaries 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 V to be satisfied, promptly upon becoming aware of the
same.
SECTION IV.5 FURTHER ASSURANCES. Following the Closing Date, the
Company shall, and shall cause each of its Subsidiaries 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 render effective the consummation
of the transactions contemplated hereby, or otherwise to carry out the intent
and purposes of this Agreement.
SECTION IV.6 PREFERRED SHARE VOTING RIGHTS. Following the Closing
Date, the Company shall not take any of the actions described in Section 2(b) of
the Certificate of Designation if a vote of the holders of the Common Stock is
required or sought in connection therewith, unless the holders of the Preferred
Shares shall have been allowed to vote on such action as a single class with the
Common Stock, as described in Section 2(b) of the Certificate of Designation.
SECTION IV.7 SCHEDULE DELIVERY. With respect to (X) matters required
to be disclosed pursuant to (I) the last sentence of Section 2.01(d), (II) the
last sentence of Section 2.01(h), and (III) clause (H) of Section 2.01(m)(i),
and (Y) matters that have occurred since June 10, 1998 or that were not required
to have been disclosed to Purchaser as of such date under the terms of the 1998
Investment Agreement, the Company shall cause each of the Schedules called for
in this Agreement that have not been provided to Purchaser prior to execution of
this Agreement to be delivered to Purchaser and its counsel prior to 5:00 p.m.,
New York time, on the date that is 14 days after the date hereof (the "SCHEDULE
DELIVERY CUT-OFF TIME"), and may, prior to the Schedule Delivery Cut-off Time,
with respect to the matters specified in clauses (x) and
27
(y) of this Section 4.07, supplement Schedules that have previously been
supplied. Any such Schedule so delivered or supplemented and satisfactory to
Purchaser in its good-faith reasonable judgment shall be deemed to have been
delivered as of the date hereof.
ARTICLE V
CONDITIONS PRECEDENT
SECTION V.1 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) APPROVALS. All material authorizations, consents, orders or
approvals of, or regulations, declarations or filings with, or expirations
of applicable waiting periods imposed by, any Governmental Entity 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,
promulgated, enforced or issued by any Governmental Entity or other legal
restraint or prohibition preventing the consummation of the transactions
contemplated by this Agreement shall be in effect.
(c) CREDIT FACILITY OBLIGATIONS. The Company shall have concluded an
amendment, satisfactory to Purchaser and the Company in the good-faith
judgment of each, with the requisite lenders under the Credit Agreement.
SECTION V.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company 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:
28
(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 COMPANY'S COUNSEL. The Company shall have received an
opinion dated as of the Closing of Xxxxxx, Xxxxxx & Xxxxxxxxx, in form and
substance reasonably acceptable to the Company, to the effect that (I) the
issuance of the Preferred Shares and the amendment of the 1998 Warrants and
the 1998 Special Warrants for the Cash Consideration will qualify as a
"reorganization" within the meaning of section 368(a) of the Code and (II)
such transactions should not cause the Distributions (as such term is
defined in the 1998 Investment Agreement) to be treated as distributions to
which section 355(e) of the Code applies.
SECTION V.3 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 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 financial officer and the
chief administrative officer of the Company to such effect.
29
(b) 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 financial officer and the chief administrative officer of the
Company to such effect.
(c) OPINION OF PURCHASER'S COUNSEL. Purchaser shall have received an
opinion dated as of the Closing of Debevoise & Xxxxxxxx, in form and
substance reasonably acceptable to Purchaser, to the effect that (I) the
the issuance of the Preferred Shares and the amendment of the 1998 Warrants
and the 1998 Special Warrants for the Cash Consideration will qualify as a
"reorganization" within the meaning of section 368(a) of the Code and (II)
such transactions should not cause the Distributions (as such term is
defined in the 1998 Investment Agreement) to be treated as distributions to
which section 355(e) of the Code applies.
(d) PURCHASER'S EXPENSES. Purchaser's Expenses shall have been paid to
Purchaser.
(e) 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.
(f) CORPORATE PROCEEDINGS. All corporate proceedings of the Company in
connection with the transactions contemplated by this Agreement 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. The Certificate of
Designation shall have been duly filed with and accepted for filing by the
Secretary of State of Delaware.
(g) MATERIAL ADVERSE EFFECT. No event, change or development shall
exist or have occurred since January 23, 1999 which has had or is
reasonably likely to
30
have a Material Adverse Effect on the Company and its Subsidiaries,
taken as a whole, other than matters disclosed on Schedule 2.01(h)(iv).
(h) OPINION OF THE COMPANY'S COUNSEL. Purchaser shall have received an
opinion of Xxxxxx, Xxxxxx & Xxxxxxxxx, counsel to the Company, dated as of
the Closing Date, in form and substance reasonably satisfactory to
Purchaser.
(i) LIMITED PARTNER CONSENT. A majority in interest of the limited
partners of the Fund shall have consented to a waiver of the
diversification cap of the Fund in connection with the transactions
contemplated hereby.
(j) SCHEDULES. All new Schedules and all changes, supplements and
additions to the Schedules made after the date hereof pursuant to Section
4.07 shall be satisfactory to Purchaser in its good faith reasonable
judgment.
(k) FAIRNESS OPINION. The fairness opinion of Xxxxxx, Xxxxxxx & Co.,
Incorporated referred to in Section 2.01(v) shall not have been withdrawn
or modified.
ARTICLE VI
TERMINATION
SECTION VI.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(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 May 30, 1999,
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; or
31
(ii) 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 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 three
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; or
(ii) if any of the conditions set forth in Section 5.01 or 5.03
shall become impossible to fulfill (other than as a result of any
breach by Purchaser of the terms of this Agreement) and shall not have
been waived in accordance with the terms of this Agreement;
(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 10 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 5.01 or 5.02
shall become impossible to fulfill (other than as a result of any
breach by the
32
Company of the terms of this Agreement) and shall not have been
waived in accordance with the terms of this Agreement.
SECTION VI.2 EFFECT OF TERMINATION. In the event of termination of
this Agreement by either the Company or Purchaser as provided in Section 6.01,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Purchaser or the Company, other than the
provisions of this Sections 6.02, 9.05, 9.09, 9.11, 9.14 and Article VII 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 VII
INDEMNIFICATION
SECTION VII.1 INDEMNIFICATION OF PURCHASER. The Company covenants and
agrees to defend, indemnify and hold harmless each of Purchaser, its Affiliates
(other than the Company and its Subsidiaries), 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 (collec tively, 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 contemplated
hereby, PROVIDED that the indemnity provided in this clause (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
33
Closing, (C) claims resulting from or based on (1) a breach by Purchaser of
its obligations under this Agreement, (2) any pre-existing contract,
agreement, obligation, commitment, understanding or other arrangement
between the claimant and any Purchaser Indemnitee, or (3) any intentional
tort by a Purchaser Indemnitee; and
(ii) subject to the limitations set forth in Section 7.03, any breach
by the Company of any representation, warranty, covenant or obligation of
the Company hereunder.
The Losses described in clauses (i) and (ii) of this Section 7.01(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 VII.2 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 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) consti tute
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
34
into any settlement of any such claim without the prior consent of the Company,
such consent not to be unreasonably withheld or delayed.
SECTION VII.3 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 2.01(n), 2.01(o) and
2.01(p), which shall expire for all purposes upon expiration of the applicable
statute of limitations.
SECTION VII.4 OTHER INDEMNITIES. The rights of each Purchaser
Indemnitee to be indemnified under any other agreement, document, certificate or
instrument or applicable law, including without limitation the 1998 Investment
Agreement, the Registration Rights Agreement as amended pursuant hereto, the
Indemnification Agreement, the Consulting Agreement, and the Loan Out Agreement,
dated as of February 24, 1999, between the Company and CD&R are independent of
and in addition to any rights of such Purchaser Indemnitee to be indemnified
under this Agreement.
ARTICLE VIII
INTERPRETATION; DEFINITIONS
SECTION VIII.1 DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
"1998 CLOSING DATE" is defined in the first recital to this Agreement.
"1998 INVESTMENT AGREEMENT" is defined in the first recital to this
Agreement.
"1998 SPECIAL WARRANTS" is defined in the first recital to this
Agreement.
"1998 TRANSACTION AGREEMENTS" means (I) the 1998 Investment Agreement,
(II) the Registration Rights Agreement, (III) the 1998 Warrant, (IV) the
1998 Special Warrant, (V) the Tax Allocation Agreement, (VI) the
Indemnification Agreement, (VII) the Agreement and Plan of Distribution,
dated as of June 9, 1998, between the Company, Workflow Management, Inc.,
School Specialty,
35
Inc., Aztec Technology Partners, Inc. and Navigant International, Inc.,
(VIII) the Amended Services Agreement, dated as of June 8, 1998, between
the Company and Xxxxxxxx X. Xxxxxxx, (IX) the Consulting Agreement, and (X)
the Employee Benefits Services and Liabilities Agreement, dated as of June
9, 1998, between the Company, Workflow Management, Inc., School Specialty,
Inc., Aztec Technology Partners, Inc. and Navigant International, Inc.
"1998 WARRANTS" is defined in the first recital to this Agreement.
"1999 SPECIAL WARRANTS" is defined in the third recital to this
Agreement.
"1999 WARRANTS" is defined in the third recital to this Agreement.
"1999 SPECIAL WARRANT SHARES" means the shares of Common Stock
issuable upon exercise of the 1999 Special Warrants.
"1999 WARRANT SHARES" means the shares of Common Stock issuable upon
exercise of the 1999 Warrants.
"2001 NOTES" is defined in Section 2.01(d).
"2003 NOTES" is defined in Section 2.01(d).
"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 2.01(k).
"BALANCE SHEET" is defined in Section 2.01(g)(ii).
"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.
36
"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 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 CONSIDERATION" is defined in Section 1.01.
"CD&R" means Xxxxxxx, Dubilier & Rice, Inc., a Delaware corporation.
"CERTIFICATE OF DESIGNATION" is defined in the recitals to this
Agreement.
"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 first recital to this Agreement.
"COMPANY" is defined in the introductory paragraph to this Agreement.
"COMPANY BY-LAWS" is defined in Section 2.01(a).
"COMPANY CHARTER" is defined in Section 2.01(a).
"COMPANY FINANCIAL STATEMENTS" is defined in Section 2.01(g)(i).
"COMPANY INTELLECTUAL PROPERTY" is defined in Section 2.01(r).
"COMPANY SEC DOCUMENTS" is defined in Section 2.01(f).
"COMPANY STOCK PLANS" is defined in Section 2.01(d).
37
"COMPUTER SYSTEM" means, with respect to any Person, any and all
computer software programs, semiconductor chips, microprocessors, embedded
microcontrollers and other hardware containing programming instructions of
any kind, whether owned or licensed or otherwise held by such Person for
use.
"CONSULTING AGREEMENT" means the Consulting Agreement, dated as of
June 10, 1998, by and between the Company and CD&R.
"CONTRACT" is defined in Section 2.01(c)(i).
"CONVERSION SHARES" is defined in Section 2.01(q).
"CREDIT AGREEMENT" is defined in Section 2.01(e).
"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, 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 2.01(p).
"ENVIRONMENTAL PERMITS" is defined in Section 2.01(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.
38
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FILED COMPANY SEC DOCUMENTS" is defined in Section 2.01(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 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 Xxxxxxx, 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 2.01(c)(ii).
"HAZARDOUS SUBSTANCE" is defined in Section 2.01(p).
"INDEMNIFICATION AGREEMENT" means the Indemnification Agreement dated
as of June 10, 1998 by and among the Company, Purchaser, the Fund and CD&R.
"INDEMNIFYING PERSON" is defined in Section 7.02.
"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
39
information, computer software, firmware, data and 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).
"KNOWLEDGE OF THE COMPANY" or any like expression means to the
knowledge of the persons listed on Schedule 8.02 after due inquiry.
"LIEN" is defined in Section 2.01(c)(i).
"LOSSES" is defined in Section 9.01(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 or to
perform its obligations hereunder.
"MATERIAL CONTRACTS" is defined in Section 2.01(m).
"MATERIAL SUBSIDIARY" is defined in Section 2.01(a).
"NON-INVESTOR DIRECTOR" means any director of the Company not
designated or nominated by the Purchaser.
"PERMIT" is defined in Section 2.01(c)(i).
"PERMITTED LIENS" shall mean those Liens (A) securing debt that is
reflected on the Balance Sheet or the notes thereto (B) referred to in
Schedule 2.01(k)(ii), (C) for Taxes not yet due or payable or being
contested in good faith and for which adequate reserves have been
established in accordance
40
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 the Company or its Subsidiaries that do not materially impair the
use of such real property by the Company and its Subsidiaries, and in the
case of Liens described in clauses (B), (C), (D), (E) or (F) that,
individually and in the aggregate, would not have a Material Adverse Effect
on the Company and its Subsidiaries, taken as a whole.
"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 2.01(o)(i).
"PREFERRED SHARES" is defined in the third recital to this agreement.
"PURCHASER" is defined in the recitals to this Agreement.
"PURCHASER INDEMNIFIABLE LOSSES" is defined in Section 7.01(a).
"PURCHASER INDEMNITEES" is defined in Section 7.01(a).
"PURCHASER'S EXPENSES" is defined in Section 9.09(b).
"REGISTRATION RIGHTS AGREEMENT" is defined in the second recital to
this Agreement.
"SCHEDULE DELIVERY CUT-OFF TIME" is defined in Section 4.07.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
41
"SECURITY" means at any time Equity Securities and any shares of any
class of capital stock of the Company.
"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.
"TAX ALLOCATION AGREEMENT" means the Tax Allocation Agreement, dated
as of June 9, 1998, among the Company, Workflow Management, Inc., School
Specialty, Inc., Aztec Technology Partners, Inc. and Navigant
International, Inc.
"TAX RETURNS" is defined in Section 2.01(n)(i).
"TAXES" is defined in Section 2.01(n)(i).
"THIRD-PARTY BID" means an unsolicited bona fide tender offer or other
public offer by a Person other than Purchaser, an Affiliate thereof or the
Company or any of its Subsidiaries (a "THIRD PARTY") to purchase a number
of shares of Common Stock which, together with the shares of Common Stock
Beneficially Owned by such Third Party, would result in the Third Party
being the Beneficial Owner of 25% or more of the shares of Common Stock
outstanding.
"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.
"UNAUDITED COMPANY FINANCIAL STATEMENTS" is defined in Section
2.01(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.
42
"YEAR 2000 COMPATIBLE" (and variations thereof) means, with respect to
any Computer System, that such Computer System (I) records, stores,
processes and provides true and accurate dates and calculations for dates
and spans of dates, (II) is and will be able to operate on a basis
comparable to its current operation during and after calendar year 2000
A.D., including, but not limited to, leap years, and (III) shall not end
abnormally or provide invalid or incorrect results as a result of date data
which represents or references (or fails to represent or reference)
different centuries or more than one century.
ARTICLE IX
MISCELLANEOUS
SECTION IX.1 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
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 IX.2 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 or the Certificate of
Designation 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 or the Certificate of Designation and to enforce specifically the
terms and provisions hereof and thereof 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 IX.3 ENTIRE AGREEMENT. This Agreement (including the documents
set forth in the Exhibits and Schedules hereto), together with the 1998
Investment Agreement, the Registration Rights Agreement as amended pursuant
hereto, and the Indemnification Agreement, contains the entire understanding of
the parties with respect to the transactions contemplated hereby.
43
SECTION IX.4 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 IX.5 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:
The Company:
U.S. Office Products Company
0000 Xxxxxx Xxxxxxxxx Xxxxxx, X.X.
Suite 600 East
Washington, D.C. 20007
Attention of: Xxxx X. Director
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxxx & Xxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention of: Xxxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
Purchaser:
c/o Clayton, Dubilier & Rice Fund V
Limited Partnership
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
44
with a copy to:
Xxxxxxx, Dubilier & Rice, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention of: Xxxxx X. Xxxx
Telecopy No.: (000) 000-0000
with a copy to:
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention of: Xxxxxx X. Xxxxxxxxx
Telecopy No.: (000) 000-0000
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.
45
SECTION IX.6 AMENDMENTS; WAIVERS, ETC. This Agreement may be amended
as to Purchaser and their successors and assigns (determined as provided in
Section 9.08), 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. 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
granting such waiver in any other respect or at any other time. Neither the
waiver by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the parties, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a waiver of any
other breach or default of a similar nature, or as a waiver of any of such
provisions, rights or privileges hereunder. The rights and remedies of any party
based upon, arising out of or otherwise in respect of any inaccuracy or breach
of any representation, warranty, covenant or agreement or failure to fulfill any
condition shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement as to which there is no inaccuracy or breach.
The representations and warranties of the Company shall not be affected or
deemed waived by reason of any knowledge of or investigation made by or on
behalf of Purchaser (including but not limited to knowledge of or investigation
by any of its advisors, consultants, representatives or affiliates).
SECTION IX.7 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.
SECTION IX.8 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 neither party
may assign any of its rights under this Agreement without the written consent of
the other party.
SECTION IX.9 EXPENSES AND REMEDIES. Whether or not the Closing takes
place, all costs and expenses incurred in connection with this Agreement, the
46
transactions contemplated hereby and any amendments to or waivers of this
Agreement, the 1998 Investment Agreement or the Registration Rights Agreement,
including the reasonable out-of-pocket expenses incurred by Purchaser in
connection therewith ("PURCHASER'S EXPENSES"), shall be borne by the Company.
SECTION IX.10 TRANSFER OF PREFERRED SHARES, 1999 WARRANTS AND 1999
SPECIAL WARRANTS. Purchaser understands and agrees that the Preferred Shares,
the Conversion Shares, the 1999 Warrants, the 1999 Warrant Shares, the 1999
Special Warrants and the 1999 Special Warrant Shares have not 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 Preferred Shares, the 1999 Warrants, the 1999 Warrant
Shares, the 1999 Special Warrants or the 1999 Special Warrant Shares. Purchaser
understands and agrees that each certificate representing Preferred Shares, 1999
Warrants, 1999 Warrant Shares, 1999 Special Warrants or 1999 Special Warrant
Shares (other than, with respect to the first legend, Preferred Shares, 1999
Warrants, 1999 Warrant Shares, 1999 Special Warrants or 1999 Special Warrant
Shares that are no longer subject to the provisions of Article III and other
than, with respect to the second legend, Preferred Shares, 1999 Warrants, 1999
Warrant Shares, 1999 Special Warrants or 1999 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."
47
and Purchaser agrees to transfer Preferred Shares, 1999 Warrants, 1999 Warrant
Shares, 1999 Special Warrants and 1999 Special Warrant Shares only in accordance
with the provisions of such legends.
SECTION IX.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 IX.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.
SECTION IX.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 Purchaser
Indemnitees (other than Purchaser) are third party beneficiaries of Article VII
of this Agreement.
SECTION IX.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 9.05 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 hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in such court that
48
any such action, suit or proceeding brought in such court has been brought in
an inconvenient forum.
SECTION IX.15 REPLACEMENT OF SHARE CERTIFICATES. Upon receipt of an
affidavit of loss with respect to any certificate representing Shares or
Preferred Shares or, in the case of any mutilation of such certificate, upon
surrender of such certificate, the Company at its expense shall execute and
deliver, in lieu thereof, a new certificate representing such Shares or
Preferred Shares.
49
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/ Xxxx X. Director
---------------------------------
Name: Xxxx X. Director
Title: Secretary
CDR-PC ACQUISITION, L.L.C.
By: /s/ Xxxxx X. Xxxx
---------------------------------
Name: Xxxxx X. Xxxx
Title: Executive Vice President
50
Exhibit IV
AMENDMENTS TO THE 1998 INVESTMENT AGREEMENT
(i) Paragraph (a) of the penultimate recital to the 1998 Investment
Agreement shall be restated in its entirety as follows as follows:
(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
(as such warrants are amended from time to time, whether pursuant
to the Investment Agreement, dated as of March 30, 1999, between
the Company and Purchaser (the "1999 Investment Agreement") or
otherwise, 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
(as such warrants are amended from time to time, whether pursuant
to the 1999 Investment Agreement or otherwise, the "Warrants"),
and
(ii) Paragraph (b) of Section 4.01 of the 1998 Investment Agreement
shall be restated in its entirety as follows:
(b) Purchaser shall be entitled to nominate three directors for
election, PROVIDED:
51
(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 66-2/3% 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) for the purpose of calculating Purchaser's Total Securities
as of any time after the closing under the 1999 Investment Agreement
(but not for the purpose of calculating Purchaser's Total Securities
at Closing), each Preferred Share owned by Purchaser shall be treated
as if it were 100 Shares.
(iv) 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
(v) 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 shall be entitled to approve an additional nominee to
the Board of Directors.
(iii) Paragraph (a) of Section 6.01 of the 1998 Investment Agreement
shall be restated in its entirety as follows:
(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
52
(including by exercise of the Warrants or Special Warrants) or take
any other action that would cause (i) 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 26.7% or (ii) the
aggregate voting power of all Equity Securities then held by Purchaser
(on an as converted basis) to equal or exceed 50%.
(IV) Paragraph (c) of Section 6.01 of the 1998 Investment Agreement
shall be restated in its entirety as follows:
(c) This Section 6.01 shall terminate and be of no further force
or effect on the earliest to occur of (I) the fifth anniversary of the
Closing, (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%, and
(III) the first public disclosure of a Third-Party Bid (provided,
however, that if such Third-Party Bid is thereafter abandoned,
terminated or withdrawn, the provisions of this Section 6.01 shall be
reinstated, although any action taken or agreement or arrangement
entered into by Purchaser after such first public disclosure and prior
to such reinstatement (or the consummation of any such action,
agreement or arrangement, whether before or, unless such action,
agreement or arrangement shall be a tender offer or other public offer
with respect to the Company, after such reinstatement) shall not be
deemed to breach this Section 6.01 as a result of such reinstatement).
(V) The first paragraph of Section 6.02 of the 1998 Investment
Agreement shall be restated in its entirety as follows:
SECTION 6.02 ADDITIONAL LIMITATIONS. (a) Except as permitted by
Section 6.02(b), during the five-year period beginning on the date of this
Agreement, Purchaser shall not, and shall not permit its Affiliates to:
(VI) Section 6.02 of the 1998 Investment Agreement shall be amended by
adding a section (b) as follows:
53
(b) The limitations set forth in Section 6.02 (a) hereof shall not
apply (X) in connection with a Buyout Transaction that is not solicited or
proposed by Purchaser or its Affiliates, (Y) following the first public
disclosure of a Third-Party Bid (provided, however, that if such
Third-Party Bid is thereafter abandoned, terminated or withdrawn, the
provisions of Section 6.02 (a) hereof shall be reinstated, although any
action taken or agreement or arrangement entered into by Purchaser after
such first public disclosure and prior to such reinstatement (or the
consummation of any such action, agreement or arrangement, whether before
or, unless such action, agreement or arrangement shall be a tender offer or
other public offer with respect to the Company, after such reinstatement)
shall not be deemed to breach the provisions of Section 6.02 (a) hereof as
a result of such reinstatement), or (Z) as specifically approved by a
majority of the Non- Investor Directors
(vii) Paragraphs (c) and (d) of Section 7.01 of the 1998 Investment
Agreement shall be restated in their entirety as follows:
(c) The provisions of clauses (a) and (b) of this Article VII shall
terminate and be of no further force or effect on the earliest to occur of
(I) the fifth anniversary of the Closing, (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%, and (III) the first public disclosure of a Third-Party Bid (provided,
however, that if such Third-Party Bid is thereafter abandoned, terminated
or withdrawn, the provisions of clauses (a) and (b) of this Article VII
shall be reinstated, although any action taken or agreement or arrangement
entered into by Purchaser after such first public disclosure and prior to
such reinstatement (or the consummation of any such action, agreement or
arrangement, whether before or, unless such action, agreement or
arrangement shall be a tender offer or other public offer with respect to
the Company, after such reinstatement) shall not be deemed to breach the
provisions of clauses (a) and (b) of this Article VII as a result of such
reinstatement).
54
(d) Prior to the seventh anniversary of the Closing, the Purchaser
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 earlier to occur of (I)
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%, and (II) the first public disclosure of a Third Party
Bid (provided, however, that if such Third-Party Bid is thereafter
abandoned, terminated or withdrawn, the provisions of this Section 7.01 (d)
shall be reinstated, although any action taken or agreement or arrangement
entered into by Purchaser after such first public disclosure and prior to
such reinstatement (or the consummation of any such action, agreement or
arrangement, whether before or, unless such action, agreement or
arrangement shall be a tender offer or other public offer with respect to
the Company, after such reinstatement) shall not be deemed to breach this
Section 7.01 (d) as a result of such reinstatement).
(VIII) Section 8.10 of the 1998 Investment Agreement shall be restated in
its entirety as follows:
Section 8.10 TAX STANDSTILL. Except as permitted by Section 6.01(b) or
6.01(c) and except for acquisitions of Securities from the Company, during
the period ending two years after the date of the Distributions, (I)
Purchaser shall not acquire any Securities or take any 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
55
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). The limitations contained in this Section 8.10 shall
terminate upon the first public disclosure of a Third-Party Bid (provided,
however, that if such Third-Party Bid is thereafter abandoned, terminated
or withdrawn, the provisions of this Section 8.10 shall be reinstated,
although any action taken or agreement or arrangement entered into by
Purchaser after such first public disclosure and prior to such
reinstatement (or the consummation of any such action, agreement or
arrangement, whether before or, unless such action, agreement or
arrangement shall be a tender offer or other public offer with respect to
the Company, after such reinstatement) shall not be deemed to breach this
Section 8.10 as a result of such reinstatement).
(IX) Section 12.02 of the 1998 Investment Agreement shall be amended
by inserting, immediately following the definition of "Pre-Distribution
Transactions", a new definition as follows:
"PREFERRED SHARES" means the shares of Series A Non-Voting
Participating Convertible Preferred Stock of the Company, par value
$.001 per share, purchased by Purchaser pursuant to an Investment
Agreement, dated as of March 30, 1999, between the Company and
Purchaser.
(X) Section 12.02 of the 1998 Investment Agreement shall be amended by
restating the definition of "Pro Rata Share", as follows:
"PRO RATA SHARE" means the fraction of an entire issuance of New
Securities, the numerator of which shall be the sum of (A) the number
of shares of Common Stock owned or receivable upon exercise of the
Warrants and the Special Warrants by Purchaser and its Affiliates
(other than the Company and its Subsidiaries) immediately prior to
such issuance of such New Securities and (B) the number of shares of
Common Stock into which the Preferred Shares owned by Purchaser and
its Affiliates are convertible, and the denominator of which shall be
the sum of (X) the aggregate number of shares of Common Stock
outstanding immediately
56
prior to such issuance of such New Securities and receivable upon
exercise of the Warrants and the Special Warrants and (Y) the number
of shares of Common Stock into which such Preferred Shares are
convertible.
(XI) Section 12.02 of the 1998 Investment Agreement shall be amended by
inserting, immediately following the definition of "Termination Fee", a new
definition as follows:
"THIRD-PARTY BID" means an unsolicited bona fide tender offer or other
public offer by a Person other than Purchaser, an Affiliate thereof or the
Company or any of its Subsidiaries (a "THIRD PARTY") to purchase a number
of shares of Common Stock which, together with the shares of Common Stock
Beneficially Owned by such Third Party, would result in the Third Party
being the Beneficial Owner of 25% or more of the shares of Common Stock
outstanding.
57
Exhibit V
AMENDMENTS TO THE REGISTRATION RIGHTS AGREEMENT
(I) Section 1(a) of the Registration Rights Agreement shall be amended by
adding a new paragraph, immediately following the first paragraph, as follows:
The Company is also a party to an Investment Agreement, dated as of
March 30, 1999, with the Purchaser (the "1999 INVESTMENT AGREEMENT"),
pursuant to which the Company agreed, in exchange for consideration of
$51 million in cash (I) to issue to Purchaser up to 73,350 newly
issued shares of Series A Non-Voting Participating Convertible
Preferred Stock, par value $.001 per share (the "PREFERRED SHARES"),
of the Company having the terms set forth in Exhibit I of the 1999
Investment Agreement, (II) to amend and restate the Warrants as set
forth in Exhibit II of the 1999 Investment Agreement, and (III) to
amend and restate the Special Warrants as set forth in Exhibit III of
the 1999 Investment Agreement.
(II) Section 1(b) of the Registration Rights Agreement shall be restated in
its entirety as follows:
(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 or the 1999 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.
(III) Section 2 of the Registration Rights Agreement shall be amended by
restating the definition of "Registrable Securities" in its entirety as follows:
"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, (G) the Preferred Shares,
(H) the Conversion Shares and (I) any securities issued or issuable
with respect to any Shares, Additional Shares, Warrants, Special
Warrants, Preferred
Shares or Conversion Shares referred to in the foregoing clauses (a)
through (h), (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 each
Preferred Share shall be deemed to have been converted 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 and the number of Conversion Shares deliverable upon
conversion of the Preferred Shares (to the fullest extent then
determinable).
(iv) Section 2 of the Registration Rights Agreement shall be amended by
inserting, immediately following the definition of "Contingent Stock", a new
definition as follows:
"CONVERSION SHARES" means the shares of Common Stock issuable upon
conversion of the Preferred Shares.
2
(V) Section 2 of the Registration Rights Agreement shall be amended by
inserting, immediately following the definition of "Postponement Period", a new
definition as follows:
"PREFERRED SHARES" is defined in Section 1(a).
(VI) Section 2 of the Registration Rights Agreement shall be amended by
restating the definition of "Special Warrants" as follows:
"SPECIAL WARRANTS" means warrants entitling the holder
thereof to purchase shares of Common Stock on the terms and subject to
the conditions set forth in Exhibit 1 of the Investment Agreement, and
any warrants of the Company received in exchange therefor, pursuant to
the 1999 Investment Agreement or otherwise.
(VII) Section 2 of the Registration Rights Agreement shall be amended by
restating the definition of "Warrants" as follows:
"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, and any warrants of the Company received in exchange
therefor, pursuant to the 1999 Investment Agreement or otherwise.
(VIII) Paragraph (a) of Section 3.1 of the Registration Rights Agreement
shall be restated in its entirety as follows:
(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 six
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
3
measured by ownership of Registrable Securities) must so request. The
Company shall not be required to effect more than [six] registrations
under this Section 3.1.
(IX) Clause C of Section 3.1(f)(iii) of the Registration Rights Agreement
shall be restated in its entirety as follows:
(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 3.1(f)(ii)).
4
