AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT ("Affiliate Agreement") is made and
entered into as of this 30th day of September, 1996, by and
between the undersigned, XXXX XXXXX and XXXX X. XXXXX, not
individually, but as co-Trustees of The Xxxx X. Xxxxx Family
Trust u/a/d May 14, 1996 ("Shareholder"), and HA-LO INDUSTRIES,
INC., an Illinois corporation ("HA-LO").
The background of this Affiliate Agreement is as follows:
As of the date of this Affiliate Agreement, Shareholder is a
shareholder of Market U.S.A., Inc., an Illinois corporation
("Market USA"), an affiliate of Xxxxxx Marketing Inc., a Canadian
federal corporation ("Xxxxxx"). Pursuant to an Agreement and
Plan of Merger and Amalgamation dated as of June 14, 1996 (the
"Plan of Merger"), among Shareholder, the other shareholders of
Market USA and Xxxxxx, XX-LO, Market USA, Xxxxxx, and others, it
was agreed that, upon satisfaction of certain conditions, HA-LO's
wholly-owned Illinois and Canadian subsidiaries would merge into
and amalgamate with Market USA and Xxxxxx, respectively, in a
unitary transaction intended to qualify simultaneously as (i) a
reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended, (ii) an amalgamation
exempt from taxation under the Canada/U.S. Income Tax Convention,
and (iii) a "pooling of interests" under generally accepted
accounting principles ("GAAP"), the published statements of the
Financial Accounting Standards Board ("FASB"), and the rules and
regulations ("Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). The
aforesaid tax and accounting treatments (hereafter collectively
referred to as the "Merger Benefits") were a material inducement
to the parties to enter into the Plan of Merger. Shareholder's
agreements hereunder constituted an inducement to HA-LO to enter
into the Plan of Merger, and HA-LO's obligation to consummate the
transactions contemplated under the Plan of Merger are expressly
conditioned upon Shareholder's execution and delivery of this
Affiliate Agreement prior to the effectiveness of said
transactions (as defined in Section 1.04 of the Plan of Merger,
the "Effective Time"). Unless otherwise provided in this
Affiliate Agreement, the capitalized terms used herein shall have
the same meanings ascribed to them in the Plan of Merger.
Pursuant to the Plan of Merger, Market USA and Xxxxxx (in
their merged and/or amalgamated composition) would become wholly-
owned subsidiaries of HA-LO, and Shareholder would receive shares
of HA-LO's common capital voting stock, no par value (the
"Acquiror Securities"), in exchange for Shareholder's total
shareholdings in Market USA and/or Xxxxxx (the "Target
Securities"). It is the parties' good faith belief and
understanding that Shareholder is an "affiliate" of Market USA
and/or Xxxxxx prior to the Effective Time, and may be an
"affiliate" of HA-LO on and after the Effective Time. As used
herein, "affiliate" shall have the same meaning given to such
term for purposes of paragraphs (c) and (d) of Rule 145 of the
Rules and Regulations of the Commission under the Securities Act,
and/or as used in and for purposes of Accounting Series, Releases
130 and 135, as amended, of the Commission.
By and through this Affiliate Agreement, Shareholder is (i)
acknowledging that certain requirements of the Code, the Canada
Tax Act, GAAP, Financial Accounting Statements of FASB ("FAS")
and the Securities Act (among other laws and rules) may govern or
limit the applicability and/or availability of the Merger
Benefits in the event of a sale, transfer or other disposition by
Shareholder of his Target Securities and Acquiror Securities,
(ii) representing and warranting to and for the benefit of HA-LO
that Shareholder will not take any action which could jeopardize
the treatment of the merger of Market USA and the amalgamation of
Xxxxxx as a pooling of interests for accounting purposes, and
(iii) acknowledging and agreeing that HA-LO shall have no
obligation or responsibility to facilitate the sale, transfer or
other disposition of Acquiror Securities received by Shareholder
under the Plan of Merger except to the extent set forth in the
Registration Rights Agreement attached hereto as Annex "1" (the
"Registration Agreement"), which shall be executed concurrently
herewith by HA-LO, Shareholder and the other shareholders of
Market USA and/or Xxxxxx, or paragraph 7 hereof.
NOW, THEREFORE, in consideration of the premises, the
agreement of the parties to enter into and consummate the
transactions contemplated under the Plan of Merger, and other
good and valuable consideration, the receipt and sufficiency of
which is hereby mutually acknowledged, Shareholder and HA-LO,
intending to be legally bound, covenant to and agree, each with
the other, as follows:
1. In the event Shareholder receives any Acquiror
Securities under, pursuant to or as a result of the Plan of
Merger, Shareholder shall not make any sale, transfer or other
disposition of such Acquiror Securities in violation of the
Securities Act or Rules and Regulations of the Commission.
2. Shareholder acknowledges and represents that
Shareholder has carefully read the Plan of Merger and this
Affiliate Agreement, and to the extent Shareholder deemed it
necessary, Shareholder has discussed the requirements of these
documents, and other applicable limitations on Shareholder's
ability to sell, transfer or otherwise dispose of Acquiror
Securities, with legal counsel of Shareholder s selection.
3. Shareholder understands the transactions contemplated
under the Plan of Merger must be submitted for a vote of the
stockholders of HA-LO pursuant to a Proxy Statement containing,
in part, material information concerning, and provided by or on
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behalf of, Market USA, Xxxxxx and Shareholder. In connection
with such solicitation, and otherwise for the purpose of
consummating the transactions contemplated under the Plan of
Merger, the Proxy Statement and other written materials prepared
by or on behalf of HA-LO may deem Shareholder to be an
"affiliate" of Market USA and Xxxxxx prior to the Effective Time,
and an "affiliate" of HA-LO on and after the Effective Time.
Shareholder hereby agrees that, whether or not such
classification is correct, Shareholder shall not take objection
to, and Shareholder shall not cause or suffer others to take
objection to, such classification, if such objection could result
in, or effect, any modification, alteration, amendment,
restatement or nullification of any term or provision set forth
in this Affiliate Agreement or otherwise intended to be binding
on Shareholder and Shareholder's successors and assigns.
4. Shareholder hereby agrees that, from the Effective
Time, he shall not sell, transfer or otherwise dispose of
Acquiror Securities issued to him under the Plan of Merger unless
(x) such sale, transfer or disposition has been effectively
registered under the Securities Act, including pursuant to the
Registration Agreement, for as long as he shall remain an
"affiliate" of HA-LO, (y) such sale, transfer or disposition is
made in conformity with the volume and other limitations of Rule
145 promulgated by the Commission under the Securities Act, or
(z) in the opinion of counsel reasonably acceptable to HA-LO,
such sale, transfer or disposition is exempt from registration
under the Securities Act.
5. Anything in this Affiliate Agreement to the contrary
notwithstanding, Shareholder covenants and agrees with HA-LO that
Shareholder shall not, directly or indirectly, (i) during the
thirty (30) days prior to the Effective Time, sell, transfer or
otherwise dispose of any shares of Target Securities, or (ii)
sell, transfer or otherwise dispose of any shares of Acquiror
Securities, whether or not received by Shareholder under the Plan
of Merger, during the period from the Effective Time until after
such time as results covering at least thirty (30) days of
combined operations of Market USA, Xxxxxx and HA-LO have been
published by HA-LO in the form of a quarterly earnings report, an
effective registration statement filed with the Commission, a
report to the Commission on Form 10-K, 10-Q or 8-K, or any other
public filing or announcement which includes such combined
results of operations for Market USA, Xxxxxx and HA-LO. For
purposes of this Affiliate Agreement, the separate periods during
which Shareholder shall be prohibited from selling, transferring
or otherwise disposing of Target Securities or Acquiror
Securities pursuant to this Section 5 are hereafter collectively,
the "Pooling Periods".
6. Shareholder understands and agrees it is intended the
transactions under the Plan of Merger will be treated as a
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"pooling of interests" in accordance with GAAP, FAS and Rules and
Regulations promulgated by the Commission under the Securities
Act. Shareholder agrees that Shareholder's forbearance from
selling, transferring or otherwise disposing of Target Securities
and Acquiror Securities during a Pooling Period is required to
preserve the Merger Benefits.
7. Following expiration of the Pooling Periods, for so
long as shall be necessary in order to permit Shareholder to sell
Acquiror Securities issued to him under the Plan of Merger
pursuant to Rule 145 under the Securities Act, and to the extent
applicable, Rule 144 under the Securities Act, HA-LO shall file
those reports required to be filed by it pursuant to Section 13
of the Securities Exchange Act of 1934, as amended, in order to
permit Shareholder to sell Acquiror Securities pursuant to the
terms and conditions of Rule 145 and the applicable provisions of
Rule 144.
Shareholder understands that, except as set forth in the
Registration Agreement or this Agreement, HA-LO shall be under no
obligation to register the sale, transfer or other disposition of
any Acquiror Securities by or on behalf of Shareholder or to take
any other action necessary in order to make compliance with an
exemption from registration available.
8. Nothing set forth in this Affiliate Agreement shall be
deemed to evidence a present intention on the part of Shareholder
to dispose of any Acquiror Securities, and Shareholder expressly
disclaims any such intention. This Agreement merely establishes
parameters for the disposition by Shareholder of Acquiror
Securities should Shareholder elect in the future to do so.
9. Shareholder agrees that stop transfer instructions
shall be given to HA-LO's transfer agent with respect to the
shares of Acquiror Securities issued to Shareholder under the
Plan of Merger (other than those shares which are eligible for
registration and sale from time to time under the Registration
Agreement following the expiration of the Pooling Periods or sale
in accordance with Rule 145) and that there will be placed on the
certificates for such shares, or on any substitutions therefor, a
legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
(1) ARE OWNED BY A PERSON (THE "OWNER") WHO MAY BE
DEEMED TO BE AN "AFFILIATE," AS SUCH TERM IS
DEFINED IN RULE 144(a) PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OF HA-LO INDUSTRIES, INC. (THE
"ISSUER"); (2) WERE RECEIVED BY THE OWNER IN A
TRANSACTION SUBJECT TO RULE 145 PROMULGATED UNDER
THE SECURITIES ACT; (3) ARE SUBJECT TO CERTAIN
RESTRICTIONS ON DISPOSITIONS CONTAINED IN AN
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AFFILIATE AGREEMENT DATED AS OF SEPTEMBER __, 1996
BETWEEN THE ISSUER AND THE OWNER (A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE ISSUER); AND
(4) MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
(AND ANY APPLICABLE STATE LAWS) OR AN OPINION OF
THE ISSUER'S COUNSEL TO THE EFFECT THAT SUCH SALE,
TRANSFER OR OTHER DISPOSITION IS PERMITTED UNDER
THE SECURITIES ACT AND THE REGULATIONS PROMULGATED
THEREUNDER."
The foregoing "stop transfer" instructions shall be
terminated with respect to said Acquiror Securities at the times
at which they become eligible for registration and sale pursuant
to the Registration Agreement or to the extent eligible for sale
in accordance with Rule 145.
10. Shareholder hereby represents and warrants to HA-LO
that he possesses the full power, right and authority to execute
and deliver this Agreement, and to make the representations,
warranties, covenants and agreements herein contained, and to
perform all of his obligations hereunder. This Affiliate
Agreement shall inure to the benefit of HA-LO and its successors
and assigns, and shall be binding upon, and obligate, Shareholder
and Shareholder s successors and assigns. This Affiliate
Agreement shall be specifically enforceable by HA-LO, with or
without proof of monetary damages. This Affiliate Agreement may
be amended only in a writing signed by the parties, and shall be
construed in accordance with, and governed by, the internal laws
of the State of Illinois. In the event of any dispute under this
Affiliate Agreement, the matter shall be settled by resort to the
federal or state courts with venue in the County of Xxxx, State
of Illinois, and in no other location.
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IN WITNESS WHEREOF, the parties have executed this Affiliate
Agreement as of the day and year first above written.
THE XXXX X. XXXXX FAMILY TRUST
U/A/D MAY 14, 1996
By: /s/ Xxxx X. Xxxxx
Co-Trustee
By: /s/ Xxxx Xxxxx
Co-Trustee
HA-LO INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxx
Its: Vice President
182651_01
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