AGREEMENT
AND
PLAN OF REORGANIZATION
BY AND AMONG
US ORDER, INC.,
XXXXX, XXXXXXX & CO.
AND
THE STOCKHOLDERS PARTIES HERETO
DATED AS OF SEPTEMBER 30, 1996
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Accounts.................................. 1
Section 1.2 Affiliate................................. 1
Section 1.3 Agreement................................. 1
Section 1.4 Assets.................................... 1
Section 1.5 Bank Accounts............................. 2
Section 1.6 Cash Payment.............................. 2
Section 1.7 Closing................................... 2
Section 1.8 Closing Date.............................. 2
Section 1.9 Code...................................... 2
Section 1.10 Common Stock.............................. 2
Section 1.11 Company................................... 2
Section 1.12 Company Information....................... 2
Section 1.13 Company's Closing Certificate............. 2
Section 1.14 Contracts................................. 2
Section 1.15 DGCL...................................... 2
Section 1.16 Effective Time............................ 2
Section 1.17 Employee Plans............................ 2
Section 1.18 Employment and Non-Competition Agreement.. 3
Section 1.19 Equipment................................. 3
Section 1.20 ERISA..................................... 3
Section 1.21 Escrow Agent.............................. 3
Section 1.22 Escrow Agreement.......................... 3
Section 1.23 Escrow Fund............................... 3
Section 1.24 Exchange Act.............................. 3
Section 1.25 Financial Statements...................... 3
Section 1.26 GAAP...................................... 3
Section 1.27 Governmental Approval..................... 3
Section 1.28 Governmental Authority.................... 3
Section 1.29 Intellectual Property..................... 4
Section 1.30 Inventory................................. 4
Section 1.31 IRS....................................... 4
Section 1.32 Knowledge................................. 4
Section 1.33 Law....................................... 4
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Section 1.34 Material Adverse Effect................... 4
Section 1.35 Merger.................................... 4
Section 1.36 Nasdaq.................................... 4
Section 1.37 Nondisclosure Agreement................... 5
Section 1.38 OGCL...................................... 5
Section 1.39 Pension Plans............................. 5
Section 1.40 Permits................................... 5
Section 1.41 Permitted Liens........................... 5
Section 1.42 Real Property............................. 5
Section 1.43 Required Consents......................... 5
Section 1.44 SEC....................................... 5
Section 1.45 Securities Act............................ 5
Section 1.46 Shares.................................... 5
Section 1.47 Stockholders.............................. 5
Section 1.48 Surviving Corporation..................... 5
Section 1.49 Total Conversion Price.................... 5
Section 1.50 USO....................................... 6
Section 1.51 USO's Closing Certificate................. 6
Section 1.52 USO Common Stock.......................... 6
ARTICLE II
THE MERGER
Section 2.1 The Merger................................ 6
Section 2.2 Effective Time; Effects of the Merger..... 6
Section 2.3 Conversion of Common Stock................ 6
Section 2.4 Manner of Exchange........................ 7
Section 2.5 No Fractional Shares...................... 7
Section 2.6 Closing; Filing of Certificates of Merger. 7
Section 2.7 Escrow.................................... 7
Section 2.8 Principal Office.......................... 7
Section 2.9 Consent to Service of Process............. 7
Section 2.10 Qualification as a Foreign Corporation.... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
Section 3.1 Organization.............................. 8
Section 3.2 Capitalization............................ 8
Section 3.3 No Subsidiaries........................... 8
Section 3.4 Authority Relative to this Agreement...... 8
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Section 3.5 Consents and Approvals; No Violations..... 9
Section 3.6 No Adverse Change......................... 9
Section 3.7 No Litigation............................. 9
Section 3.8 Title to Assets........................... 9
Section 3.9 Condition of Equipment.................... 10
Section 3.10 Inventory................................. 10
Section 3.11 Books and Records......................... 10
Section 3.12 Contracts................................. 10
Section 3.13 Accounts.................................. 10
Section 3.14 Intellectual Property..................... 11
Section 3.15 Financial Statements...................... 12
Section 3.16 Insurance................................. 12
Section 3.17 Employee Benefit Plans.................... 12
Section 3.18 Compliance with Law; Permits.............. 14
Section 3.19 Transactions With Affiliates.............. 14
Section 3.20 Fees and Expenses of Brokers and Others... 14
Section 3.21 Tax Matters............................... 15
Section 3.22 Environmental Matters..................... 16
Section 3.23 Labor Matters............................. 16
Section 3.24 Accuracy of Information................... 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF STOCKHOLDERS
Section 4.1 Individual Capacity; Enforceability........ 17
Section 4.2 No Violation or Conflict................... 17
Section 4.3 Title to Shares; Approval of Merger........ 17
Section 4.4 Private Placement.......................... 18
Section 4.5 Continuity of Interest..................... 19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF USO
Section 5.1 Organization.............................. 20
Section 5.2 Capitalization............................ 20
Section 5.3 Authority Relative to this Agreement...... 20
Section 5.4 Consents and Approvals; No Violations..... 21
Section 5.5 No Litigation............................. 21
Section 5.6 Financial Statements and Reports.......... 21
Section 5.7 Compliance with Law; Permits.............. 22
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Section 5.8 Fees and Expenses of Brokers and Others... 22
Section 5.9 Principal Offices of the Company.......... 22
Section 5.10 Expansion................................. 22
Section 5.11 Business of the Company................... 22
ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business of the Company........ 23
Section 6.2 No Solicitation........................... 24
Section 6.3 Access to Information..................... 24
Section 6.4 Best Efforts.............................. 24
Section 6.5 Public Announcements...................... 24
Section 6.6 Confidentiality........................... 24
Section 6.7 Tax-Free Reorganization................... 25
Section 6.8 Filing of Public Reports.................. 25
Section 6.9 Compliance with Blue Sky Laws............. 25
Section 6.10 Listing of USO Common Stock............... 25
Section 6.11 Stockholder Guarantees and Loans.......... 25
ARTICLE VII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
Section 7.1 Conditions Precedent to Obligations of USO
USO....................................... 26
Section 7.2 Conditions Precedent to Obligations of
the Company............................... 26
Section 7.3 Stock Options............................. 27
Section 7.4 Registration Rights....................... 27
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1 Termination.............................. 28
Section 8.2 Effect of Termination.................... 28
Section 8.3 Amendment................................ 28
Section 8.4 Extension; Waiver........................ 28
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ARTICLE IX
INDEMNIFICATION
Section 9.1 Indemnification.......................... 29
Section 9.2 Survival of Representations, Warranties
and Covenants............................ 31
ARTICLE X
MISCELLANEOUS
Section 10.1 Entire Agreement; Assignment.............. 31
Section 10.2 Notices................................... 31
Section 10.3 Governing Law............................. 32
Section 10.4 Descriptive Headings...................... 32
Section 10.5 Parties in Interest....................... 32
Section 10.6 Counterparts.............................. 32
Section 10.7 Specific Performance...................... 32
Section 10.8 Fees and Expenses; Set-Off Rights......... 32
Section 10.9 Severability.............................. 33
ARTICLE XI
AGREEMENT AMONG STOCKHOLDERS
Section 11.1 Mutual Release Among Stockholders......... 33
Section 11.2 Contribution.............................. 33
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EXHIBIT INDEX
Exhibit 1.13 Company's Closing Certificate
Exhibit 1.14 Contracts
Exhibit 1.18 Form of Employment and Non-Competition Agreement
Exhibit 1.25 Financial Statements
Exhibit 1.29 Intellectual Property
Exhibit 1.32A Knowledge of the Company
Exhibit 1.32B Knowledge of USO
Exhibit 1.40 Permits
Exhibit 1.41 Permitted Liens
Exhibit 1.42 Real Property
Exhibit 1.51 USO's Closing Certificate
Exhibit 2.7 Escrow Agreement
Exhibit 3.1 Foreign Qualifications of the Company
Exhibit 3.2 Company and Stockholder Agreements
Exhibit 3.5 Required Consents
Exhibit 3.6 Adverse Changes
Exhibit 3.7 Litigation
Exhibit 3.10 Inventory
Exhibit 3.13 Accounts
Exhibit 3.16 Insurance
Exhibit 3.17 Employee Benefit Plans
Exhibit 3.19 Transactions with Affiliates
Exhibit 3.21(a)(ii) Tax Filings
Exhibit 3.21(a)(v) Tax Exceptions
Exhibit 3.21(a)(vii) Tax Exceptions to Financial Statements
Exhibit 3.21(b) Tax Elections, Consents and Agreements
Exhibit 3.23(a)(iii) Labor Matters
Exhibit 4.3(b) Common Stock Ownership
Exhibit 5.1 Foreign Qualifications of USO
Exhibit 5.2 USO Capitalization
Exhibit 7.4 Registration Rights
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AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION, dated as of September 30, 1996, by
and among US ORDER, INC., a Delaware corporation ("USO"), XXXXX, XXXXXXX & CO.,
an Ohio corporation (the "Company"), and the Stockholders (as defined herein).
RECITALS
--------
WHEREAS, USO desires to acquire the business of the Company through the
statutory merger (the "Merger") of the Company with and into USO, and the
parties hereto desire to effect the Merger upon the terms and subject to the
conditions of this Agreement; and
WHEREAS, to effectuate the foregoing, the parties desire to adopt this
agreement as a plan of reorganization in accordance with the provisions of
Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants, agreements and conditions set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
-----------
When used in this Agreement, the following terms shall have the meanings
specified:
Section 1.1 Accounts. "Accounts" shall mean all accounts receivable,
---------
security deposits, notes receivable, prepaids and associated rights owned by the
Company and arising in the ordinary course of the Company's business as of the
Effective Time.
Section 1.2 Affiliate. "Affiliate" shall have the meaning set forth in
----------
Section 3.19.
------------
Section 1.3 Agreement. "Agreement" shall mean this Agreement and Plan of
----------
Reorganization, together with the Exhibits attached hereto, as the same may be
amended from time to time in accordance with the terms hereof.
Section 1.4 Assets. "Assets" shall mean all of the assets of the Company
-------
as of the Effective Time, including, without limitation, the Accounts, Bank
Accounts, Contracts, Equipment, Intellectual Property, Inventory and Real
Property and all books and records relating to the business of the Company.
Section 1.5 Bank Accounts. "Bank Accounts" shall mean the checking
--------------
accounts, savings accounts, custodial accounts, certificates of deposit and
other bank accounts maintained by the Company as of the Effective Time.
Section 1.6 Cash Payment. "Cash Payment" shall have the meaning set forth
-------------
in Section 2.3.
-----------
Section 1.7 Closing. "Closing" shall mean the conference held at 10:00
--------
a.m., Richmond, Virginia time, on the Closing Date, at the offices of Hunton &
Xxxxxxxx, Richmond, Virginia, or such other time and place as the parties may
mutually agree in writing. All transactions occurring at the Closing shall be
deemed to have occurred simultaneously, and no one transaction shall be deemed
to be complete until all transactions are completed.
Section 1.8 Closing Date. "Closing Date" shall mean September 30, 1996,
-------------
or such other date as the parties may mutually agree in writing.
Section 1.9 Code. "Code" shall mean the Internal Revenue Code of 1986, as
-----
amended.
Section 1.10 Common Stock. "Common Stock" shall mean all of the issued
-------------
and outstanding shares of common stock, without par value, of the Company.
Section 1.11 Company. "Company" shall mean Xxxxx, Xxxxxxx & Co., an Ohio
--------
corporation.
Section 1.12 Company Information. "Company Information" shall have the
--------------------
meaning set forth in Section 4.4.
-----------
Section 1.13 Company's Closing Certificate. "Company's Closing Certifi-
------------------------------
cate" shall mean the certificate of the Company in the form of Exhibit 1.13
------------
attached hereto.
Section 1.14 Contracts. "Contracts" shall mean all contracts, agreements,
----------
leases, licenses, relationships and commitments, written or oral, to which the
Company is a party or by which the Company is bound as of the Effective Time,
including the Contracts listed on Exhibit 1.14 attached hereto.
------------
Section 1.15 DGCL. "DGCL" shall mean the Delaware General Corporation Law,
-----
as amended.
Section 1.16 Effective Time. "Effective Time" shall mean the later of the
---------------
time of filing with the Secretary of State of the State of Delaware of a
Certificate of Merger with respect to the Merger, and the time of filing with
the Secretary of State of the State of Ohio of a Certificate of Merger with
respect to the Merger.
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Section 1.17 Employee Plans. "Employee Plans" shall have the meaning set
---------------
forth in Section 3.17(a).
---------------
Section 1.18 Employment and Non-Competition Agreement. "Employment and
-----------------------------------------
Non-Competition Agreement" shall mean the employment and non-competition
agreement, dated the date of the Closing, between USO and Xx. Xxxxxxx X. Xxxxx
in the form of Exhibit 1.18 attached hereto.
-------------
Section 1.19 Equipment. "Equipment" shall mean the equipment, machinery,
----------
furniture, vehicles, furnishings, parts, tools, engineering and other items of
tangible personal property owned or leased by the Company as of the Effective
Time.
Section 1.20 ERISA. "ERISA" shall mean the Employee Retirement Income
------
Security Act of 1974, as amended.
Section 1.21 Escrow Agent. "Escrow Agent" shall mean Crestar Bank.
-------------
Section 1.22 Escrow Agreement. "Escrow Agreement" shall have the meaning
-----------------
set forth in Section 2.7.
-----------
Section 1.23 Escrow Fund. "Escrow Fund" shall mean $200,000 in cash and
------------
30,000 shares of USO Common Stock (as defined below) to be deposited by USO with
the Escrow Agent in accordance with Section 2.7. The Escrow Fund shall be
-----------
comprised of consideration otherwise payable as the Total Conversion Price.
Section 1.24 Exchange Act. "Exchange Act" shall mean the Securities
-------------
Exchange Act of 1934, as amended.
Section 1.25 Financial Statements. "Financial Statements" shall mean the
---------------------
audited balance sheet of the Company as of December 31, 1995, and the related
statements of operations, shareholders' equity and cash flows for the year then
ended, together with the notes thereto, reported on by KPMG Peat Marwick LLP,
independent certified public accountants, and the unaudited balance sheet of the
Company as of June 30, 1996 and the related statement of operations for the six-
month period then ended, copies of which are attached as Exhibit 1.25.
-------------
Section 1.26 GAAP. "GAAP" shall mean generally accepted accounting
-----
principles as in effect in the United States of America at the time of the
preparation of the subject Financial Statement.
Section 1.27 Governmental Approval. "Governmental Approval" shall mean any
----------------------
consent, approval, authorization, waiver, permit, grant, franchise, concession,
agreement, license, exemption or order of, registration, declaration or filing
with, or report or notice to, any Governmental Authority.
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Section 1.28 Governmental Authority. "Governmental Authority" shall mean
-----------------------
any nation or government, any state or other political subdivision thereof, any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation, any
government authority, agency, department, board, bureau, commission or
instrumentality of the United States, any state of the United States or any
political subdivision thereof, and any tribunal or arbitrator(s) of competent
jurisdiction, and any self-regulatory organization.
Section 1.29 Intellectual Property. "Intellectual Property" shall mean
----------------------
(a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith, (d) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals),
(e) all computer software (including data and related documentation), (f) all
other proprietary rights, (g) all rights as a licensee or authorized user of the
intellectual property of any third party and (h) all copies and tangible
embodiments thereof (in whatever form or medium) used in the business of the
Company as of the Effective Time, including, without limitation, the
Intellectual Property, listed on Exhibit 1.29 attached hereto. Exhibit 1.29 sets
------------ ------------
forth separately (x) all Intellectual Property of which the Company is
the exclusive owner, identifying the subject matter, any related registration
and the owner, (y) all Intellectual Property which the Company uses pursuant to
license or other authorization of a third party, listing the subject matter, any
ancillary registration and the source of authorization and (z) all Intellectual
Property that the Company owns jointly with a third party.
Section 1.30 Inventory. "Inventory" shall mean all inventories of goods
----------
and supplies, if any, owned by the Company as of the Effective Time.
Section 1.31 IRS. "IRS" shall mean the Internal Revenue Service.
----
Section 1.32 Knowledge. "Knowledge" of the Company shall mean the actual
----------
knowledge of any person listed on Exhibit 1.32A attached hereto. "Knowledge"
-------------
of USO shall mean the actual knowledge of any person listed on Exhibit 1.32B
-------------
attached hereto.
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Section 1.33 Law. "Law" shall mean any applicable provisions of any
----
federal, state, local or other law or governmental requirement of any kind, and
the rules, regulations and orders promulgated thereunder all as currently in
effect.
Section 1.34 Material Adverse Effect. "Material Adverse Effect" shall mean
------------------------
a material adverse effect on the financial condition, business, assets or
results of operations of the Company taken as a whole, or USO taken as a whole,
as the case may be.
Section 1.35 Merger. "Merger" shall mean the merger of the Company with
-------
and into USO pursuant to this Agreement.
Section 1.36 Nasdaq. "Nasdaq" shall mean the Nasdaq National Market.
-------
Section 1.37 Nondisclosure Agreement. "Nondisclosure Agreement" shall mean
------------------------
the letter agreement, dated as of January 26, 1994, between USO and the Company.
Section 1.38 OGCL. "OGCL" shall mean the Ohio General Corporation Law, as
-----
amended.
Section 1.39 Pension Plans. "Pension Plans" shall have the meaning set
--------------
forth in Section 3.17(b).
---------------
Section 1.40 Permits. "Permits" shall mean all permits, licenses and
--------
authorizations, registrations and approvals used or required in the conduct of
the business of the Company as it is now being conducted, including, without
limitation, those Permits listed on Exhibit 1.40 attached hereto.
------------
Section 1.41 Permitted Liens. "Permitted Liens" shall mean those liens,
----------------
encumbrances, mortgages, charges, claims, restrictions, pledges, security
interests, impositions and other matters affecting the Assets that (i) are
specifically listed on Exhibit 1.41 attached hereto, (ii) are identified or
------------
described in the Financial Statements or the notes thereto, (iii) are for taxes
or other similar charges or assessments not yet due and payable or, to the
extent disclosed in Exhibit 1.41, being contested in good faith or (iv) would
-------------
not have a Material Adverse Effect.
Section 1.42 Real Property. "Real Property" shall mean the real property
--------------
owned or leased by the Company as of the Effective Time, together with the
improvements located thereon, including all appurtenant rights, claims and
interests, all of such Real Property being listed on Exhibit 1.42 attached
------------
hereto.
Section 1.43 Required Consents. "Required Consents" shall have the meaning
------------------
set forth in Section 3.5.
-----------
Section 1.44 SEC. "SEC" shall mean the Securities and Exchange Commission.
----
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Section 1.45 Securities Act. "Securities Act" shall mean the Securities
---------------
Act of 1933, as amended, and the rules and regulations of the SEC promulgated
thereunder.
Section 1.46 Shares. "Shares" shall mean the shares of USO Common Stock
-------
being issued to the Stockholders pursuant to this Agreement.
Section 1.47 Stockholders. "Stockholders" shall mean collectively, Xxxxxxx
-------------
X. Xxxxx, Xxxx Xxxxxxx and Xxxxxx Xxxxxx-Xxxxxxx, the sole stockholders of the
Company.
Section 1.48 Surviving Corporation. "Surviving Corporation" shall mean USO
----------------------
as the surviving corporation in the Merger.
Section 1.49 Total Conversion Price. "Total Conversion Price" shall mean
-----------------------
the total consideration paid by USO to the Stockholders for all of the issued
and outstanding Common Stock as determined pursuant to Section 2.3 hereto.
-----------
Section 1.50 USO. "USO" shall mean US Order, Inc., a Delaware corporation.
----
Section 1.51 USO's Closing Certificate. "USO's Closing Certificate" shall
--------------------------
mean the certificate of USO in the form of Exhibit 1.51.
-------------
Section 1.52 USO Common Stock. "USO Common Stock" shall mean all of the
-----------------
issued and outstanding shares of common stock of USO, $.001 par value (or stock
of any other corporation received in exchange for USO Common Stock in any merger
of USO with another corporation).
ARTICLE II
THE MERGER
----------
Section 2.1 The Merger. Upon the terms and subject to the conditions of
-----------
this Agreement, and in accordance with the DGCL and the OGCL, the Merger shall
be completed at the Effective Time. The Merger shall be completed as soon as
practical following the satisfaction or waiver of the conditions set forth in
Article VII hereof. USO shall continue as the Surviving Corporation in the
Merger and the separate corporate existence of the Company shall cease.
Section 2.2 Effective Time; Effects of the Merger. The Merger shall be
--------------------------------------
consummated by filing with (a) the Secretary of State of Delaware a Certificate
of Merger in such form as is required by, and executed in accordance with, the
relevant provisions of the DGCL, together with such other documents as may be
required by the relevant provisions of the DGCL and (b) the Secretary of State
of Ohio a Certificate of Merger in such form as is required by, and executed in
accordance with, the relevant provisions of the OGCL, together with such other
documents as may be required by the relevant provisions of the OGCL. The Merger
shall become effective at the Effective Time and shall have the effects set
forth in Section 259 of the DGCL and
-6-
Section 1701.82 of the OGCL. At the Effective Time, (i) USO, as the Surviving
Corporation, shall have the same name, Articles of Incorporation, Bylaws,
directors and officers as USO had immediately preceding the Effective Time and
(ii) each of the issued and outstanding shares of Common Stock shall be canceled
and converted, without any action on the part of the holders thereof, into the
consideration set forth in this Agreement.
Section 2.3 Conversion of Common Stock. At the Effective Time, each share
---------------------------
of Common Stock that is issued and outstanding immediately prior to the
Effective Time shall, without any action by the holders thereof, be converted
into the right to receive (a) $20,000 in cash (the "Cash Payment") and (b) 3,750
shares of USO Common Stock (the "Exchange Ratio"), provided that (i) if the
average closing price for the 20 consecutive trading days ending on the fifth
trading day before the Closing as listed on Nasdaq (the "Average Closing Price")
is less than $8.50, each share of Common Stock shall be converted into the Cash
Payment plus the product of (a) $393.38 and (b) $8.50 minus the Average Closing
Price (the "Additional Cash Payment"), and the Exchange Ratio shall equal the
quotient of (x) $31,875 minus the amount of the Additional Cash Payment and
(y) the Average Closing Price, or (ii) if the Average Closing Price is greater
than $12.00, each share of Common Stock shall be converted into the Cash Payment
and the Exchange Ratio shall be equal to the quotient of $45,000 and the Average
Closing Price.
Section 2.4 Manner of Exchange. After the Effective Time, the Stock-
-------------------
holders shall surrender to USO the certificate(s) theretofore evidencing all of
the issued and outstanding shares of Common Stock, and, immediately upon such
surrender, shall be entitled to receive in exchange for each issued and
outstanding share of Common Stock (a) the Cash Payment, (b) the Additional Cash
Payment, if any, and (c) a certificate or certificates representing the number
of full shares of USO Common Stock for which shares of Common Stock theretofore
represented by the certificate or certificates so surrendered shall have been
converted and exchanged as provided in this Article II.
Section 2.5 No Fractional Shares. No certificates or scrip for fractional
---------------------
shares of USO Common Stock shall be issued. In lieu thereof, USO will pay the
value of such fractional shares in cash on the basis of the value of one share
of USO Common Stock at the Effective Time, which value shall be deemed to be the
average closing price for USO Common Stock as listed on the Nasdaq for the 10
consecutive trading days prior to the day of the Effective Time.
Section 2.6 Closing; Filing of Certificates of Merger. Upon the terms and
------------------------------------------
subject to the conditions hereof, as soon as practicable after all of the
conditions to the obligations of the parties hereunder have been satisfied or
waived, the parties shall conduct the Closing for the purpose of confirming the
foregoing. As soon as practicable following the Closing, the Company and USO
shall in the manner required by the DGCL and the OGCL deliver to and file with
(a) the Secretary of State of Delaware a duly executed Certificate of Merger in
accordance with the provisions of the DGCL, and (b) the Secretary of State of
Ohio, a duly executed Certificate of Merger in accordance with the provisions of
the OGCL, and the parties hereto shall take all such other and further action as
may be required by Law to make the Merger effective.
-7-
Section 2.7 Escrow. Subject to the terms and conditions of this Agree-
-------
ment, on the Effective Date USO will deposit the Escrow Fund with the Escrow
Agent in accordance with the terms of this Agreement and the escrow agreement,
substantially in the form attached as Exhibit 2.7 hereto (the "Escrow
-----------
Agreement").
Section 2.8 Principal Office. The principal office of the Surviving
-----------------
Corporation in Delaware, the state in which the Surviving Corporation exists, is
the Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
Section 2.9 Consent to Service of Process. The Surviving Corporation
------------------------------
consents to be sued and served with process in the State of Ohio, and
irrevocably appoints the Secretary of State of the State of Ohio as its agent to
accept service of process in any proceeding in such State to enforce against the
Surviving Corporation any obligation of any constituent corporation in the
Merger or to enforce the rights of a dissenting shareholder of the Company.
Section 2.10 Qualification as a Foreign Corporation. It is desired that
---------------------------------------
the Surviving Corporation transact business in the State of Ohio as a foreign
corporation from and after the Effective Time. The statutory agent of the
Surviving Corporation within the State of Ohio from and after the Effective Time
shall be CT Corporation System, whose address is 000 Xxxx Xxxxxx, Xxxxxxxxxx,
Xxxx 00000, and any process, notice or demand may be served upon such statutory
agent or the Secretary of State of the State of Ohio.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
-----------------------------------
The Company and the Stockholders hereby jointly and severally represent and
warrant to USO as follows:
Section 3.1 Organization. The Company is a corporation duly incorporated,
-------------
validly existing and in good standing under the laws of the State of Ohio and
has all corporate power and authority required to own, lease and operate its
properties and to carry on its business as it is now being conducted. The
Company is duly qualified to do business as a foreign corporation and, with
respect to those jurisdictions which recognize the concept of "good standing",
is in good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except for those jurisdictions where the failure to so
qualify would not have a Material Adverse Effect. Exhibit 3.1 attached hereto
-----------
is a true and complete list of all jurisdictions where the Company is so
qualified.
Section 3.2 Capitalization. The Common Stock consists of 100 shares and
---------------
represents all of the issued and outstanding capital stock of the Company, has
been duly authorized and validly issued and is fully paid and non-assessable,
and was not issued in violation of any
-8-
preemptive or similar right. Exhibit 3.2 attached hereto describes any
-----------
agreements between the Company and any Stockholder, and any agreements between
the Stockholders, relating to the Common Stock, true and correct copies of which
agreements have been delivered to USO. There are no outstanding or authorized
options, warrants, purchase rights, conversion rights, exchange rights, or other
contracts or commitments to subscribe for or purchase any shares of Common Stock
or securities convertible into or exchangeable for, or which otherwise confer on
the holder any right to acquire, any shares of Common Stock, nor is the Company
committed to issue any such option, warrant or other right. There are no
outstanding stock appreciation, phantom stock, profit participation or similar
rights with respect to the Common Stock.
Section 3.3 No Subsidiaries. The Company has no subsidiaries,
----------------
partnerships, joint ventures or other similar business associations.
Section 3.4 Authority Relative to this Agreement. The execution, delivery
-------------------------------------
and performance of this Agreement and of all of the other documents and
instruments required hereby by the Company are within the corporate power of the
Company. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and the Stockholders and no other corporate action on
the part of the Company and no other stockholder approvals on the part of the
Stockholders are necessary to authorize this Agreement or to consummate the
transactions contemplated herein. This Agreement and all of the other documents
and instruments required to be executed and delivered by the Company hereby have
been or will be duly and validly executed and delivered by the Company and
constitute or will constitute valid and binding agreements of the Company,
enforceable against the Company in accordance with their terms.
Section 3.5 Consents and Approvals; No Violations. Except for the filing
--------------------------------------
and recordation of a Certificate of Merger as required by the DGCL and a filing
and recordation of a Certificate of Merger as required by the OGCL, no
Governmental Approval is necessary or required in connection with the execution
and delivery of this Agreement by the Company or for the consummation by the
Company of the transactions contemplated by this Agreement. Assuming that all
Governmental Approvals contemplated by the immediately preceding sentence have
been duly made or obtained, and assuming that the required consents under, and
termination of, certain agreements specified in Exhibit 3.5 attached hereto (the
-----------
"Required Consents") have been obtained, neither the execution, delivery and
performance of this Agreement nor the consummation of the transactions
contemplated hereby by the Company will (a) conflict with or result in any
breach of any provision of the Articles of Incorporation or Code of Regulations
of the Company, (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, Contract or
other instrument or obligation binding upon the Company, or (c) violate any
order, writ, injunction, decree or Law in effect as of the date of this
Agreement and applicable to the Company, or any of its properties or assets.
Section 3.6 No Adverse Change. Except as set forth in Exhibit 3.6
------------------ ----------
attached hereto, since June 30, 1996, there has not been: (a) any event or
occurrence which has had a Material
-9-
Adverse Effect; (b) any loss, damage, condemnation or destruction to any of the
properties of the Company materially and adversely affecting the business or
properties of the Company (whether covered by insurance or not); (c) any
increase, other than in the ordinary course of business, in the rates of pay of
any of the employees of the Company; (d) any labor dispute or disturbance,
litigation or any event or condition of any character that has had a Material
Adverse Effect; (e) any borrowings by the Company other than in the ordinary
course of business; (f) any mortgage, pledge, lien or encumbrance made on any of
the properties or assets of the Company, except for Permitted Liens; or (g) any
sale, transfer or other disposition of assets of the Company other than in the
ordinary course of business or as contemplated by this Agreement.
Section 3.7 No Litigation. Except as set forth on Exhibit 3.7 attached
-------------- -----------
hereto, there is no litigation, arbitration proceeding, governmental
investigation, citation or action of any kind pending or, to the Knowledge of
the Company, proposed or threatened (a) against the Company, (b) relating to the
business, assets, properties or products of the Company, or (c) that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby or
(d) relating to the ownership of the Common Stock against the Stockholders.
Section 3.8 Title to Assets. At the Effective Time, the Company shall own
----------------
good and marketable title to the Assets (excluding, for purposes of this clause,
Assets held under leases, the Intellectual Property, the Contracts and other
similar intangible assets), and holds all Assets free and clear of any and all
mortgages, liens, encumbrances, charges, claims, restrictions, pledges, security
interests or impositions, except the Permitted Liens. At the Effective Time,
the Assets shall include all tangible and intangible assets, contracts and
rights currently used in the operation of the business of the Company.
Section 3.9 Condition of Equipment. The Equipment is in good operating
-----------------------
condition and repair, subject to ordinary wear and tear, and is substantially
fit for use in accordance with the Company's past practices.
Section 3.10 Inventory. Except as set forth on Exhibit 3.10 attached here
---------- ------------
to, the Inventory is useable or saleable in the ordinary course of business of
the Company as heretofore conducted.
Section 3.11 Books and Records. The books and records of the Company are
------------------
complete and correct in all material respects and the Company has made available
to USO for examination the originals or true and correct copies of all documents
material to the businesses of the Company as conducted prior to the Effective
Time and all other documents that USO has requested in connection with the
transactions contemplated by this Agreement.
Section 3.12 Contracts. Exhibit 1.14 attached hereto is a true and
----------- ------------
complete list of all of the Contracts that constitute: (a) a lease of any
interest in any real property; (b) a lease of any personal property with
(i) aggregate annual rental payments in excess of $10,000, or (ii) a remaining
term in excess of one year (unless such lease is cancelable without penalty on
notice of 90 days or less); (c) an agreement to purchase or sell a capital asset
for a price in excess of
-10-
$10,000; (d) an agreement relating to the borrowing or lending of money; (e) a
guaranty, contribution agreement or other agreement that includes any
indemnification, contribution or support obligation; (f) an agreement limiting
in any respect the Company's ability to compete in any line of business or with
any person; and (g) any other agreement involving an amount in excess of
$10,000. The Company has delivered to USO true and complete copies of each
Contract listed on Exhibit 1.14. The Company has performed each material term,
-------------
covenant and condition of each of the Contracts that is to be performed by it at
or before the date hereof, except where the failure to perform by the Company
would not have a Material Adverse Effect. No event has occurred that would,
with the passage of time or compliance with any applicable notice requirements,
constitute a default by the Company or, to the Knowledge of the Company, any
other party under any of the Contracts, except where such default would not have
a Material Adverse Effect and, to the Knowledge of the Company, no party to any
of the Contracts intends to cancel, terminate or exercise any option under any
of the Contracts.
Section 3.13 Accounts. The Accounts all have arisen from bona fide
---------
transactions in the ordinary course of business, and except as set forth on
Exhibit 3.13 attached hereto, there are no offsets or credits that may be
------------
applied against the Accounts. All accounts payable of the Company have arisen
from bona fide transactions in the ordinary course of business and are to be
paid in accordance with normal trade practice. All accounts receivable of the
Company have arisen from bona fide transactions in the ordinary course of
business and were, on the Financial Statements, subject to adequate reserves in
accordance with and based upon the Company's past practice. To the Knowledge of
the Company and except as set forth on Exhibit 3.13 attached hereto, none of
------------
the accounts receivable are in dispute or subject to any reduction or
counterclaim.
Section 3.14 Intellectual Property.
----------------------
(a) Except as set forth on Exhibit 1.29, the Company owns
------------
exclusively or has the exclusive right to use pursuant to license, sublicense,
agreement or permission the Intellectual Property set forth on Exhibit 1.29, and
-------------
set forth on Exhibit 1.29 is all Intellectual Property necessary for the
------------
operation of the businesses of the Company as presently conducted. Each item of
Intellectual Property owned or used by the Company immediately prior to the
Effective Time will be owned or available for use by them on identical terms and
conditions immediately subsequent to the Effective Time. The Company has taken
all necessary and desirable action to maintain and protect each item of
Intellectual Property set forth on Exhibit 1.29. No owned item of Intellectual
-------------
Property set forth on Exhibit 1.29 has been abandoned. To the Knowledge of
------------
the Company, each item of Intellectual Property used by the Company pursuant
to license or other authorization of a third party is used with the
authorization of every other claimant thereto and the execution, delivery and
performance of this Agreement by the Company will not impair such use.
(b) To the Knowledge of the Company, the Company has not
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any intellectual property rights of any third party and the Company has not
received any unresolved charge, complaint, claim, demand or notice alleging any
such interference, infringement, misappropriation or violation (including any
claim that the Company must license or refrain from using any intellectual
-11-
property rights of any third party). To the Knowledge of the Company and except
as set forth on Exhibit 1.29, no third party has interfered with, infringed
-------------
upon, misappropriated or otherwise come into conflict with any Intellectual
Property rights of the Company.
(c) Exhibit 1.29 identifies each patent, trademark, copyright or
------------
other registration that has been issued to the Company with respect to any of
its Intellectual Property, identifies each pending application or application
for registration that the Company has made with respect to any of its
Intellectual Property and identifies each license, agreement or other permission
that the Company has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions thereto). Except as set
forth on Exhibit 1.29, the Company has delivered to USO correct and complete
-------------
copies of all such patents, registrations, applications, licenses, agreements
and permissions (as amended to date) and have made available to USO correct and
complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. Exhibit 1.29 also identifies each
------------
trade name or unregistered trademark used by the Company in connection with its
business. Except as set forth on Exhibit 1.29, with respect to each item of
-------------
Intellectual Property required to be identified therein:
(i) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(ii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or, to the Knowledge of the
Company, is threatened which challenges the legality, validity,
enforceability, use or ownership of the item; and
(iii) the Company has not licensed or permitted any third
party to use any such item.
Section 3.15 Financial Statements. The Financial Statements, including the
--------------------
notes thereto, copies of which are included in Exhibit 1.25 hereto, are, except
------------
for the lack of footnote disclosures and the effect of year end adjustments
(including physical inventories), accruals and reserves in the case of the
Financial Statements at June 30, 1996 and for the six months then ended (the
"Interim Financial Statements"), true and correct in all material respects,
present fairly the financial position and results of operations of the Company
as of their respective dates and the periods then ended, and were prepared in
accordance with GAAP. Except as set forth on Exhibit 3.15 attached hereto, as
------------
of the dates of the Financial Statements, the Company had no material
liabilities, fixed or contingent, required by GAAP to be reflected on a balance
sheet or in the nots thereto not adequately provided for or disclosed or
reflected in such Financial Statements, the notes thereto or the Exhibits
hereto.
Section 3.16 Insurance. Exhibit 3.16 attached hereto is a description
---------- ------------
of each insurance policy (including policies providing property, casualty,
liability and worker's compensation coverage and bond and surety arrangements)
currently in effect or under which the Company has any continuing and material
rights or obligations to which the Company is a party, a named
-12-
insured or otherwise the beneficiary of coverage. With respect to each such
insurance policy, (a) to the Knowledge of the Company, the policy is legal,
valid, binding, enforceable and in full force and effect; (b) to the Knowledge
of the Company, the policy will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (c) neither the Company
nor, to the Knowledge of the Company, any other party to the policy is in breach
or default thereunder (including with respect to the payment of premiums or the
giving of notices), and no event has occurred that, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification or acceleration under the policy; and (d) no party to the policy
has repudiated any provision thereof. To the Knowledge of the Company, the
Company is covered by insurance in scope and amount customary and reasonable for
the business in which it is engaged. Exhibit 3.16 describes any self-insurance
------------
arrangements affecting the Company.
Section 3.17 Employee Benefit Plans.
-----------------------
(a) Exhibit 3.17 includes a correct and complete list of, and USO
------------
has been furnished a true and correct copy of, (i) all qualified pension and
profit-sharing plans, all deferred compensation, consultant, severance, thrift,
option, bonus and group insurance contracts and all other incentive, welfare and
employee benefit plans, trust, annuity or other funding agreements, and all
other agreements that are presently in effect, or have been approved prior to
the date hereof, maintained for the benefit of the employees or former employees
of the Company or the dependents or beneficiaries of any employee or former
employee of the Company, whether or not subject to ERISA (the "Employee Plans");
(ii) the most recent actuarial and financial reports prepared or required to be
prepared with respect to any Employee Plan; and (iii) the most recent annual
reports filed with any governmental agency, the most recent favorable
determination letter issued by the IRS, and any open requests for rulings or
determination letters, that pertain to any such Employee Plan. Exhibit 3.17
------------
identifies each Employee Plan that is intended to be qualified under Section
401(a) of the Code and each such plan is qualified.
(b) Neither the Company nor any employee pension benefit plan (as
defined in Section 3(2) of ERISA (a "Pension Plan")) maintained or previously
maintained by it, has incurred any material liability to the Pension Benefit
Guaranty Corporation ("PBGC") or to the IRS with respect to any Pension Plan.
There is not currently pending with the PBGC any filing with respect to any
reportable event under Section 4043 of ERISA nor has any reportable event
occurred as to which a filing is required and has not been made.
(c) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to
Closing under the terms of each Employee Plan, ERISA, or a collective bargaining
agreement, no accumulated funding deficiency (as defined in Section 302 of ERISA
or Section 412 of the Code) whether or not waived, exists with respect to any
Pension Plan (including any Pension Plan previously maintained by the Company),
and there is not "unfunded current liability" (as defined in Section 412 of the
Code) with respect to any Pension Plan.
-13-
(d) No Employee Plan is a "multiemployer plan" (as defined in
Section 3(37) of ERISA). The Company has not incurred any liability under
Section 4201 of ERISA for a complete or partial withdrawal from a multiemployer
plan (as defined in Section 3(37) of ERISA). The Company has not participated
in or agreed to participate in, a multiemployer plan (as defined in Section
3(37) of ERISA).
(e) All "employee benefit plans," as defined in Section 3(3) of
ERISA, that are maintained by the Company and all "employee benefit plans," as
defined in Section 3(3) of ERISA that were previously maintained by the Company
comply and have been administered in compliance in all material respects with
ERISA and all other applicable legal requirements, including the terms of such
plans, collective bargaining agreements and securities laws. As of the date of
the Financial Statements, the Company has no material liability required by GAAP
to be reflected on a balance sheet or in the notes thereto under any such plan
that is not reflected in the Financial Statements.
(f) No prohibited transaction has occurred with respect to any
Employee Plan that is an "employee benefit plan" (as defined in Section 3(3) of
ERISA) maintained by the Company or any "employee benefit plan" as defined in
Section 3(3) of ERISA that was previously maintained by the Company that would
result, in material liability under ERISA or in the imposition of a material
excise tax under Section 4975 of the Code.
(g) Exhibit 3.17 identifies each employee Plan that is an
------------
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA) and which
is funded. The funding under each such plan does not exceed the limitations
under Section 419A(b) or 419A(c) of the Code. The Company is not subject to
taxation on the income of any such plan or any such plan previously maintained
by the Company.
(h) The Company identifies the method of funding (including any
individual accounting) for all post-retirement medical or life insurance
benefits for the employees of the Company. Exhibit 3.17 also discloses the
------------
funded status of these Employee Plans.
(i) Exhibit 3.17 identifies each corporate owned life insurance
------------
policy insuring the life of any employee or director of the Company, including
any key man insurance policy, and indicates for each such policy, the face
amount of coverage, cash surrender value, if any, and annual premiums.
(j) The Company is the only trade or business which is, or has
ever been, treated as a single employer for employee benefit purposes under
ERISA and the Code.
Section 3.18 Compliance with Law; Permits. The conduct of the business of
-----------------------------
the Company, the use of its Assets and performance under the Contracts does not
violate or conflict, and has not violated or conflicted, with any Law, except
where such violation or conflict have not had, and in the future are not
reasonably likely to have, a Material Adverse Effect. All Permits have been
obtained, are in full force and effect and are being complied with in all
material respects. Exhibit 1.40 is a true and complete list of all such
------------
Permits. The Permits will remain
-14-
in full force and effect immediately following the consummation of the
transactions contemplated herein.
Section 3.19 Transactions With Affiliates. Except as set forth in
----------------------------
Exhibit 3.19 attached hereto, since December 31, 1995, the Company has not, in
------------
the ordinary course of business or otherwise, purchased, leased or otherwise
acquired any material property or assets or obtained any material services from,
or sold, leased or otherwise disposed of any material property or assets or
provided any material services to (except with respect to remuneration for
services rendered as a director, officer or employee of the Company in the
ordinary course), (i) any employee of the Company, (ii) any Stockholder,
(iii) any person, firm or corporation that directly or indirectly controls, is
controlled by or is under common control with the Company, or (iv) any member of
the immediate family of any of the persons described in clauses (ii) and (iii)
hereof (collectively, an "Affiliate"). Except as set forth in Exhibit 3.19
------------
attached hereto, (a) the Contracts do not include any obligation or commitment
between the Company and any Affiliate, (b) the Assets do not include any
receivable or other obligation or commitment from an Affiliate to the Company
and (c) the liabilities reflected on the Financial Statements do not include any
obligation or commitment to any Affiliate.
Section 3.20 Fees and Expenses of Brokers and Others. Neither the Company
----------------------------------------
nor any Stockholder has had any dealings, negotiations or communications with
any investment banking firm, broker or other intermediary (other than legal
counsel) in connection with the transactions contemplated by this Agreement,
none of them is committed to any liability for any brokers' or finders' fees or
any similar fees in connection with the transactions contemplated by this
Agreement, and none of them has retained any investment banking firm, broker or
other intermediary (other than legal counsel) to act on its behalf in connection
with the transactions contemplated by this Agreement. All fees, costs and
expenses of the Company incurred in connection with the transactions
contemplated herein shall be paid in full by the Company prior to the Effective
Time, provided, however, the Stockholders shall be solely liable for the legal
expenses of the Company incurred in connection with the transactions
contemplated herein in excess of $25,000.
Section 3.21 Tax Matters.
------------
(a) (i) The Company is not a member of an affiliated group,
within the meaning of Section 1504(a) of the Code, and the Company has
never filed a consolidated federal income tax return with (or been included
in a consolidated return of) any affiliated group;
(ii) except as set forth on Exhibit 3.21(a)(ii) attached
-------------------
hereto, the Company has filed or caused to be filed or (in the case of
returns or reports not yet due) will file all tax returns and reports
required to have been filed by or for it on or before the Effective Time,
and all material information set forth in such returns or reports is or (in
the case of such returns or reports not yet due) will be accurate and
complete;
-15-
(iii) the Company has paid or made adequate provision or set
up an adequate accrual or reserve for or (with respect to returns or
reports not yet filed) before the Effective Time will pay or make adequate
provision or set up an adequate accrual or reserve for all taxes, additions
to tax, penalties and interest owed by the Company for periods covered by
those returns or reports;
(iv) the Company is in compliance with, and its records
contain all information and documents (including, without limitation,
properly completed IRS Forms W-9) necessary to comply in all material
respects with, all information reporting and tax withholding requirements
under federal, state, local and foreign laws, rules and regulations, and
such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Code;
(v) except as set forth on Exhibit 3.21(a)(v) attached
------------------
hereto, there are and at the Effective Time will be no unpaid taxes,
additions to tax, penalties or interest payable by the Company or by any
other person that are or could become a lien on any asset, or otherwise
adversely affect the business, properties or financial condition, of the
Company;
(vi) the Company has collected or withheld, or will collect
or withhold before the Effective Time, all amounts required to be collected
or withheld by it for any taxes, and all such amounts have been, or before
the Effective Time will have been, paid to the appropriate governmental
agencies or set aside in appropriate accounts for future payment when due;
(vii) except as set forth on Exhibit 3.21(a)(vii) attached
--------------------
hereto, the balance sheets contained in the Financial Statements fully and
properly reflect, as of their respective dates, the liabilities of the Company
for all taxes, additions to tax, penalties and interest;
(viii) for periods ending after June 30, 1996, the books and
records of the Company fully and properly reflect in all material respects
its liability for all accrued taxes, additions to tax, penalties and
interest;
(ix) the Company has not granted (nor is it subject to) any
waiver of the period of limitations for the assessment of tax for any
currently open taxable period, and no unpaid tax deficiency has been
asserted against or with respect to the Company by any taxing authority;
(x) the Company has not made or entered into, and does not
hold any asset subject to, a consent filed pursuant to Section 341(f) of
the Code and the regulations thereunder or a "safe harbor lease" subject to
former Section 168(f)(8) of the Code and the regulations thereunder;
-16-
(xi) the Company is not required to include in income any amount
from an adjustment pursuant to Section 481 of the Code or the regulations
thereunder; and
(xii) no Stockholder is a "foreign person" for purposes of Section
1445 of the Code.
(b) Exhibit 3.21(b) attached hereto describes all tax elections,
---------------
consents and agreements currently in effect made by or affecting the Company,
and lists all types of taxes paid and returns filed by or on behalf of the
Company.
Section 3.22 Environmental Matters. The Company has not used, stored,
----------------------
treated, transported, manufactured, refined, handled, produced or disposed of
any petroleum products or any hazardous or toxic waste, substance or materials
("Hazardous Materials") on, under, at, from or in any way affecting its
properties or assets (including, without limitation, any properties or assets
now or previously owned or operated by the Company), or otherwise, in any manner
which at the time of the action in question violated, or as of the date hereof
violates, any Law or that could result in any cost or liability under any Law.
The Company has no obligations or liabilities, whether absolute or contingent,
accrued or unaccrued, asserted or unasserted, known or unknown, or otherwise,
and no pending claims have been made against the Company and no presently
outstanding citations or notices have been issued against the Company or have
been or are imposed by reason of or based upon any provision of any Laws related
to environmental protection or remediation.
Section 3.23 Labor Matters.
--------------
(a) With respect to employees of the Company:
(i) the Company is and has been in compliance in all
material respects with all applicable Laws governing employment and
employment practices, terms and conditions of employment and wages and
hours, including without limitation any such Laws respecting employment
discrimination and occupational safety and health requirements, and the
Company has not engaged in any unfair labor practice ;
(ii) there is no litigation, arbitration proceeding,
governmental investigation, citation or action of any kind pending or, to
the Knowledge of the Company, proposed or threatened against the Company
relating to employment, employment practices, terms and conditions of
employment or wages and hours; and
(iii) to the Knowledge of the Company and except as set
forth on Exhibit 3.23(a)(iii) attached hereto, no executive, key employee
--------------------
or group of employees has any plans to terminate employment with the
Company.
-17-
(b) The Company has no collective bargaining relationship or duty to
bargain with any labor union or organization, and the Company has not recognized
any labor union or organization as the collective bargaining representative of
any of its employees.
Section 3.24 Accuracy of Information. Neither this Agreement nor any
-----------------------
other document provided by the Company to USO in connection with the
transactions contemplated herein contains an untrue statement of a material fact
or omits to state a material fact necessary to make the statements contained
herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF STOCKHOLDERS
---------------
Each Stockholder hereby represents and warrants to USO as follows:
Section 4.1 Individual Capacity; Enforceability. Such Stockholder has
-----------------------------------
full power, legal right and capacity to enter into this Agreement and to perform
such Stockholder's obligations hereunder. This Agreement is, and the other
documents and instruments required to be executed by such Stockholder hereby
will be, when executed and delivered by the parties hereto, the valid and
binding obligations of such Stockholder, enforceable against such Stockholder in
accordance with their respective terms.
Section 4.2 No Violation or Conflict. The execution, delivery and
------------------------
performance of this Agreement by such Stockholder (a) does not and will not
conflict with or violate any Law, judgment, order or decree binding upon such
Stockholder or any contract or agreement to which such Stockholder is a party or
by which such Stockholder is bound, and (b) will not require the consent or
approval of any other party.
Section 4.3 Title to Shares; Approval of Merger. Such Stockholder owns of
-----------------------------------
record and beneficially good, valid and marketable title to such Stockholder's
shares of Common Stock, free and clear of any and all mortgages, liens,
encumbrances, charges, claims, restrictions, pledges, security interests or
impositions except for those restrictions that are set forth on Exhibit 3.2 that
-----------
will be terminated and canceled as of the Closing. Exhibit 4.3 is a true and
-----------
correct list of the shares of Common Stock owned of record and beneficially by
each of the Stockholders immediately prior to the Effective Time and such shares
constitute all of the Common Stock.
-18-
Section 4.4 Private Placement.
-----------------
(a) Such Stockholder understands that the Shares have not been
registered under the Securities Act, and the Shares are being offered and sold
under an exemption from registration provided by the Securities Act and the
rules and regulations thereunder in reliance, in good faith, upon the
representations and warranties of such Stockholder contained herein.
(b) Such Stockholder has received, read, carefully considered and
fully understands this Agreement and all documents related to USO and its
operations requested by and furnished to such Stockholder (such documents are
herein collectively referred to as the "Company Information"). Such Stockholder
has not been furnished with or solicited by any offering literature, leaflet,
public promotional meeting, circular, newspaper or magazine article, radio or
television advertisement, or any other form of general advertising.
(c) Such Stockholder is able (i) to bear the economic risk of an
investment in the Shares, (ii) to hold the Shares for an indefinite period of
time, and (iii) currently, based on existing conditions, hereafter will be able
to afford a complete loss of such investment.
(d) Such Stockholder understands the business in which USO is
engaged and has such knowledge and experience in financial and business matters
that such Stockholder is capable of evaluating the merits and risks of an
investment in the Shares and of making an informed investment decision with
respect thereto. Such Stockholder has obtained sufficient information to
evaluate the merits and risks of the investment and to make such a decision.
(e) In making the decision to invest in the Shares, such Stockholder
has relied upon independent investigations made by such Stockholder. Such
Stockholder has been given the opportunity to obtain information and to examine
this Agreement and the Company Information and to ask questions of, and to
receive answers from, USO or any person acting on its behalf concerning the
Shares, USO and terms and conditions of this investment, and to obtain any
additional information to verify the accuracy of any information previously
furnished. All such questions have been answered to such Stockholder's full
satisfaction.
(f) Except as otherwise set forth in this Agreement, such
Stockholder confirms that neither USO nor any of its affiliates or agents have
made any representations or warranties (oral or written) concerning such
Stockholder's investment in the Shares, USO, its business, prospects or
anticipated financial results, or other matters.
(g) The Shares are being purchased solely for such Stockholder's own
account, as principal, for investment and not for the interest of any other
entity and not with a view to, or in connection with, any resale, distribution,
subdivision, or fractionalization of such Shares. Such Stockholder has no
agreement or other arrangement with any person to sell, transfer or pledge any
part of the Shares subscribed for or any agreement or arrangement which would
guarantee him any profit or against any loss with respect to such Shares, and
such Stockholder has no plans to enter into any such agreement or arrangement.
-19-
(h) Such Stockholder understands that:
(i) Such Stockholder must bear the economic risk of the
investment for an indefinite period of time because the Shares cannot be
resold unless subsequently registered under the Securities Act or unless an
exemption from such registration is available, as established by an opinion
of counsel satisfactory to USO.
(ii) The certificates evidencing the Shares will bear the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES OR "BLUE SKY" LAWS, AND MAY NOT
BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SUCH
ACT AND BLUE SKY LAWS OR AN EXEMPTION THEREFROM IS AVAILABLE AS
ESTABLISHED BY A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO US
ORDER, INC. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY THE TERMS AND CONDITIONS OF THE
AGREEMENT AND PLAN OF MERGER BY AND BETWEEN US ORDER, INC. AND
XXXXX, XXXXXXX & CO., DATED AS OF SEPTEMBER 30, 1996.
(iii) No federal or state agency has passed on or made any
recommendations or endorsements of the investment in the Shares.
(iv) Such Stockholder's investment in USO involves certain risks
in that, among other factors, (a) successful operation of USO may depend on
factors beyond the control of USO, and (b) the Shares may not be
transferred, sold or encumbered, except in accordance with the terms of
this Agreement and, accordingly, it may not be possible for such
Stockholder to liquidate his investment in case of imminent need of funds
or any other emergency, if at all.
Section 4.5 Continuity of Interest. Such Stockholder acknowledges that,
----------------------
for the Merger to qualify as a tax-free reorganization under Section 368(a) of
the Code, such Stockholder's ownership of USO Common Stock received in the
Merger must satisfy a continuity-of-interest requirement. In accordance with
that requirement and notwithstanding any other provisions hereof, such
Stockholder represents and warrants that such Stockholder did not acquire his
shares of Common Stock in contemplation of the Merger and that such Stockholder
has no plan or intention to sell or otherwise dispose of any Shares such
Stockholder receives in the Merger and covenants that, for at least one year
following the Effective Time, such Stockholder will not
-20-
voluntarily sell or otherwise dispose of more than 29% of such Stockholder's
Shares that such Stockholder receives in the Merger, including any and all such
Shares held in the Escrow Fund. The representation, warranty and covenant
contained in the preceding sentence are in addition to (and do not in any way
limit) the representations, warranties and covenants set forth in the preceding
Section 4.5.
-----------
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF USO
-------------------------------------
USO represents and warrants to the Company as follows:
Section 5.1 Organization. USO is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. USO is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
where the failure to so qualify would not have a material adverse effect on the
business, financial condition or results of operations of USO. Exhibit 5.1
-----------
attached hereto is a true and complete list of all such jurisdictions for USO.
Section 5.2 Capitalization. The authorized capital stock of USO consists
--------------
of: (i) Thirty-Five Million (35,000,000) shares of USO Common Stock, of which,
as of July 31, 1996, 15,887,407 shares of USO Common Stock were issued and
outstanding, and no shares of USO Common Stock were held in treasury, and
(ii) Five Million (5,000,000) shares of Preferred Stock, par value $.001 per
share, no shares of which are outstanding. All of the outstanding shares of USO
Common Stock have been duly authorized and validly issued, and are fully paid,
nonassessable and free of preemptive rights. As of July 31, 1996, approximately
2,519,923 shares of USO Common Stock were reserved for issuance and issuable
upon or otherwise deliverable in connection with the exercise of outstanding USO
stock options. Pursuant to an agreement dated September 14, 1995, certain
parties have the right to require USO to acquire their shares in Home Financial
Network, Inc. in exchange for shares of USO Common Stock pursuant to a formula
contained in such agreement. Except as set forth above, as of the date hereof,
there are no outstanding (i) shares of capital stock or other voting securities
of USO, (ii) securities of USO convertible into or exchangeable for shares of
capital stock or voting securities of USO, (iii) options or other rights to
acquire from USO and, except as described in the SEC Reports, no obligations of
USO to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of USO, and
(iv) equity equivalents, interests in the ownership or earnings of USO or other
similar rights. As of the date hereof, except as set forth on Exhibit 5.2
-----------
attached hereto, there are no outstanding obligations of USO or its subsidiaries
to repurchase, redeem or otherwise acquire any USO capital stock or stockholder
agreements, voting trusts or other agreements or understandings to which USO is
a
-21-
party or by which it is bound relating to the voting or registration of any
shares of capital stock of USO.
Section 5.3 Authority Relative to this Agreement. The execution, delivery
------------------------------------
and performance of this Agreement and of all of the documents and instruments
required hereby by USO are within the corporate power of USO. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of USO, and no other
corporate or stockholder proceedings on the part of USO are necessary to
authorize this Agreement or to consummate the transactions contemplated herein.
This Agreement and all of the other documents and instruments required hereby
have been or will be duly and validly executed and delivered by USO and
constitute or will constitute valid and binding agreements of USO, enforceable
against it in accordance with their terms.
Section 5.4 Consents and Approvals; No Violations. Except for the filing
-------------------------------------
and recordation of a Certificate of Merger as required by the DGCL and the
filing and recordation of a Certificate of Merger as required by the OGCL, no
filing or registration with, and no permit, authorization, consent or approval
of, any public body or authority is necessary or required in connection with the
execution and delivery of this Agreement by USO or for the consummation by USO
of the transactions contemplated by this Agreement. Assuming that all filings,
registrations, permits, authorizations, consents and approvals contemplated by
the immediately preceding sentence have been duly made or obtained, neither the
execution, delivery and performance of this Agreement nor the consummation of
the transactions contemplated hereby by USO will (a) conflict with or result in
any breach of any provision of the Articles of Incorporation or Bylaws of USO,
(b) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation to which USO is a party or by which
it or any of its properties or assets may be bound, or (c) violate any order,
writ, injunction, decree or Law applicable to USO, any of its subsidiaries or
any of their properties or assets.
Section 5.5 No Litigation. There is no litigation, arbitration
-------------
proceeding, governmental investigation, citation or action of any kind pending
or, to the Knowledge of USO, proposed or threatened, (a) against USO,
(b) relating to the business, assets, properties or products of USO, or (c) that
seeks restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
Section 5.6 Financial Statements and Reports. USO has heretofore
--------------------------------
delivered prior to the Effective Date to the Company, in the form filed with the
Securities and Exchange Commission (the "SEC") (including any amendments thereto
but excluding any exhibits), (i) its Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, (ii) its Quarterly Report on Form 10-Q for the six
months ended June 30, 1996, and (iii) all definitive proxy statements relating
to USO's meetings of stockholders (whether annual or special) held since June 1,
1995 (all of the foregoing, collectively, the "SEC Reports"). The SEC Reports
when filed complied in all material respects with the requirements of the
Securities Act and the Exchange
-22-
Act, as the case may be, and the rules and regulations promulgated thereunder.
None of such SEC Reports, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements of USO included in the SEC Reports fairly present, in conformity with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated in the notes thereto), the financial position of USO as of
the dates thereof and its results of operations and changes in financial
position for the periods then ended. As of the date hereof, USO is eligible to
use Securities Act Form S-3 for the filing of a registration statement under the
Securities Act to register the resale of the USO Common Stock to be issued to
the Stockholders in the Merger.
Section 5.7 Compliance with Law; Permits. The conduct of the business of
----------------------------
USO does not violate or conflict, and has not violated or conflicted, with any
Law, except where such violation or conflict have not had, and in the future are
not reasonably likely to have, a Material Adverse Effect. All material
governmental permits, licenses and authorizations, registrations and approvals
necessary or required with respect to the conduct of the business of USO in
accordance with its past practice have been obtained, are in full force and
effect and are being complied with in all material respects.
Section 5.8 Fees and Expenses of Brokers and Others. USO has not had any
---------------------------------------
dealings, negotiations or communications with any investment banking firm,
broker or other intermediary in connection with the transactions contemplated in
this Agreement, and is not committed to any liability for any brokers' or
finders' fees or any similar fees in connection with the Merger and has not
retained any investment banking firm, broker or other intermediary to act on its
behalf in connection with the transactions contemplated in this Agreement except
First Albany Corporation, and USO will pay all fees due to First Albany
Corporation in connection with the transactions contemplated in this Agreement.
Section 5.9 Principal Offices of the Company. The principal office of the
--------------------------------
business of the Company at the Effective Time shall be maintained in its present
location in Toledo, Ohio for a period of at least one year after the Effective
Time.
Section 5.10 Expansion. There is no restriction or agreement binding upon
---------
USO that would adversely affect expansion of the business or product lines of
the Company by USO (including logical extensions of future products and related
services), except as provided in the sales and service subcontract agreement,
dated December 20, 1994, between USO and Visa Interactive, Inc., or the
acquisition agreement, as amended, dated July 15, 1994, among Visa International
Service Association, USO and WorldCorp, Inc.
Section 5.11 Business of the Company. USO has no present plan or
-----------------------
intention to discontinue the business of the Company as it is currently being
conducted or to dispose of any material assets of the Company, except for
dispositions made in the ordinary course of business.
-23-
ARTICLE VI
COVENANTS
---------
Section 6.1 Conduct of Business of the Company. Except as otherwise
-----------------------------------
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, the Company will conduct its operations
according to its ordinary and usual course of business and consistent with past
practice, and the Company will use its reasonable best efforts to preserve
intact its business organizations, to keep available the services of its
officers and employees and to maintain existing relationships with licensors,
licensees, suppliers, contractors, distributors, customers and others having
material business relationships with it. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement, prior
to the Effective Time, the Company will not, without the prior written consent
of USO:
(a) amend its Articles of Incorporation or Bylaws;
(b) authorize for issuance or issue, sell or deliver (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any other securities;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
or redeem or otherwise acquire any of its securities;
(d) except in the ordinary course of business (i) incur or assume any
long-term debt not currently outstanding, (ii) assume, guarantee, endorse or
otherwise become liable or responsible for the obligations of any person,
(iii) make any loans, advances or capital contributions to, or investments in,
any other person (other than customary loans or advances to employees in
accordance with past practice), (iv) enter into any contract or agreement other
than in the ordinary course of business or in connection with the transactions
contemplated by this Agreement or (v) authorize any capital expenditure for the
Company, other than capital expenditures as to which the Company is
contractually committed as of the date hereof;
(e) adopt or amend (except as may be required by Law or as provided
in this Agreement) any compensation, or other employee benefit agreements or
other arrangements for the benefit or welfare of any present or former director,
officer or employee or increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not required by
any existing plan and arrangement;
(f) acquire, sell, lease or dispose of any material assets outside
the ordinary course of business;
-24-
(g) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(h) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of business
of liabilities reflected or reserved against in the Financial Statements or
incurred in the ordinary course of business; or
(i) agree in writing or otherwise to take any of the foregoing
actions.
Section 6.2 No Solicitation. The Company shall not, after the date
---------------
hereof, directly or indirectly, through any Stockholder, director, officer,
employee or affiliate of the Company, or any representative of such person or
entity, institute, pursue, or continue any discussions, negotiations, or
agreements (whether preliminary or definitive) with any person or entity other
than USO contemplating or providing for any public or private offering of
equity, merger, share exchange, acquisition, purchase or sale of a significant
amount of assets or other business combination or change in control of the
Company, or other transaction not in the ordinary course of business. The
Company, except as may be required by law or a court order, and its directors,
officers and advisors shall not furnish any non-public information to any party
other than USO with respect to such a proposed transaction. The Company shall
promptly notify USO to the extent that it receives any inquiry relating to any
such transaction.
Section 6.3 Access to Information. Between the date of this Agreement
---------------------
and the Effective Time, the Company will give USO and its authorized
representatives reasonable access during normal business hours to all its
plants, offices, warehouses and other facilities and to all its books and
records, will permit USO to make such inspections as it may reasonably require
and will cause its officers to furnish USO with such financial and operating
data and other information with respect to the business and properties of the
Company as USO may from time to time reasonably request.
Section 6.4 Best Efforts. Subject to the terms and conditions herein
------------
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper and advisable under applicable Law, and to obtain the consents
of all third parties, necessary to consummate and make effective the
transactions contemplated by this Agreement. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to
this Agreement shall take all such necessary action. The Company and USO will
execute any additional instruments necessary to consummate the transactions
contemplated hereby.
Section 6.5 Public Announcements. USO and the Company will consult with
--------------------
each other before issuing any press release or otherwise making any public
statement with respect to this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation or as to
which the other party reasonably objects, except as may be required
-25-
by Law or by obligations pursuant to any listing agreement with any national
securities exchange or inter-dealer quotation system.
Section 6.6 Confidentiality. Notwithstanding the execution of this
---------------
Agreement, the Nondisclosure Agreement shall remain in full force and effect
through the Effective Time, at which time the Nondisclosure Agreement shall
terminate and be of no further force and effect. In addition to the provisions
of the Nondisclosure Agreement, the parties hereto shall each maintain the
confidentiality of all confidential information furnished to it by any other
party hereto concerning the business, operations, and financial condition of the
party furnishing such information, and shall not use any such information except
in furtherance of the Merger. If this Agreement is terminated, each party hereto
shall promptly return all documents and copies of, and all workpapers
containing, confidential information received from the other party hereto. The
obligations of confidentiality under this Section 6.6, shall survive any such
-----------
termination of this Agreement and shall remain in effect, except to the extent
that (a) one party shall have directly or indirectly acquired the assets and
business of the other party; (b) as to any particular confidential information
with respect to one party, such information (i) shall become generally available
to the public other than as a result of an unauthorized disclosure by the other
party or (ii) was available to the other party on a nonconfidential basis prior
to its disclosure by the first party; or (c) disclosure by any party is required
by subpoena or order of a court of competent jurisdiction or by order of a
regulatory authority of competent jurisdiction.
Section 6.7 Tax-Free Reorganization. USO, the Company, and the
-----------------------
Stockholders each undertakes and agrees (i) to use its best efforts to cause the
Merger to qualify as a tax-free reorganization within the meaning of Section
368(a) of the Code (a "Tax Free Reorganization") and (ii) to not take any action
which would cause, or omit to take any action the omission of which would cause,
the Merger not to qualify as a Tax Free Reorganization.
Section 6.8 Filing of Public Reports. During the three-year period
------------------------
following the Merger, USO agrees that it will use its best efforts to comply
with the current public information requirements of Rule 144(c) promulgated
under the Securities Act so as to permit the resale of the Shares by the
Stockholders pursuant to Rule 145 promulgated under the Securities Act.
Section 6.9 Compliance with Blue Sky Laws. To the extent required by
-----------------------------
applicable state securities or "Blue Sky" laws, USO shall file with applicable
state securities or "Blue Sky" administrators, and cause to become effective,
all registration statements or filings required to be so filed in connection
with the registration of the Shares to be exchanged in connection with the
Merger with such administrators.
Section 6.10 Listing of USO Common Stock. Within 60 business days after
---------------------------
the Merger, USO shall list with Nasdaq as necessary or required, subject to
notice of issuance, the Shares to be issued in connection with the Merger to the
Stockholders so that the Shares, subject to compliance with the Securities Act,
can be sold by the Stockholders on the Nasdaq.
Section 6.11 Stockholder Guarantees and Loans. US Order will use its best
--------------------------------
efforts to have the Stockholders released from any guarantees in connection with
the term loan and
-26-
revolving credit facility between the Company and Key Bank National Association.
USO will pay the outstanding balance of all loans made by Stockholders to the
Company up to a maximum aggregate amount of $31,000 within 15 days of the
Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
--------------------------------------------------
Section 7.1 Conditions Precedent to Obligations of USO. The obligations
------------------------------------------
of USO to consummate the Merger are subject to the satisfaction or waiver at or
prior to the Effective Time of the following conditions precedent:
(a) the representations and warranties of the Company and the
Stockholders contained in Articles III and IV shall be true and correct in all
material respects when made and at and as of the Effective Time with the same
force and effect as if those representations and warranties had been made at and
as of such time (with such exceptions, if any, necessary to give effect to
events or transactions expressly permitted herein);
(b) the Company shall, in all material respects, have performed all
obligations and complied with all covenants necessary to be performed or
complied with by it on or before the Effective Time;
(c) the Company shall have obtained all required Governmental
Approvals and Required Consents;
(d) USO shall have received the Company's Closing Certificate, in
the form of Exhibit 1.13 attached hereto;
------------
(e) all proceedings, corporate or other, to be taken by the Company
in connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to USO and USO's counsel, and the Company and the Stockholders shall
have made available to USO for examination the originals or true and correct
copies of all documents that USO may reasonably request in connection with the
transactions contemplated by this Agreement;
(f) USO shall have received, in form and substance satisfactory to
USO, an opinion of Hunton & Xxxxxxxx to the effect that, for federal income tax
purposes, the Merger should constitute a "reorganization" as defined in Section
368(a)(1)(A) of the Code, and no taxable gain should be recognized by USO or the
Company upon consummation of the Merger;
(g) USO shall have received the Employment and Non-Competition
Agreement and an IRS Form W-9 executed by Xxxxxxx X. Xxxxx; and
-27-
(h) each of the Stockholders shall have delivered the Escrow
Agreement executed by the Escrow Agent.
Section 7.2 Conditions Precedent to Obligations of the Company. The
--------------------------------------------------
obligation of the Company to consummate the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions precedent:
(a) the representations and warranties of USO contained in Article V
shall be true and correct in all material respects when made and at and as of
the Effective Time with the same force and effect as if those representations
and warranties had been made at and as of such time (with such exceptions, if
any, necessary to give effect to events or transactions expressly permitted
herein);
(b) USO shall, in all material respects, have performed all
obligations and complied with all covenants necessary to be performed or
complied with by it on or before the Effective Time;
(c) the Company shall have received USO's Closing Certificate, in the
form of Exhibit 1.51 attached hereto;
------------
(d) all proceedings, corporate or other, to be taken by USO in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to the Company and the Company's counsel, and USO shall have made
available to the Company for examination the originals or true and correct
copies of all documents that the Company may reasonably request in connection
with the transactions contemplated by this Agreement;
(e) Xxxxxxx X. Xxxxx shall have received the Employment Agreement and
Non-Competition Agreement executed by USO; and
(f) USO shall have delivered the Escrow Agreement executed by the
Escrow Agent.
Section 7.3 Stock Options. Xxxxxxx X. Xxxxx and certain other key
-------------
employees of the Company who become employees of USO shall become eligible to
participate in the USO stock option plan. Xxxxxxx X. Xxxxx'x initial option
grant shall be a nonqualified stock option for 25,000 shares of USO Common
Stock, with vesting and termination provisions consistent with those for other
vice presidents of USO participating in the USO incentive plan. The amount of
options granted in the future shall be commensurate with option grants for USO
executives in equivalent or similar positions with similar performance
evaluations as determined by the Compensation Committee of the board of
directors of USO.
-28-
Section 7.4 Registration Rights. With respect to the Shares being issued
--------------------
and sold pursuant to this Agreement, the Company has granted the Stockholders
the registration rights set forth in Exhibit 7.4 attached hereto.
-----------
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
------------------------------
Section 8.1 Termination. This Agreement may be terminated and the
------------
transactions contemplated herein may be abandoned at any time notwithstanding
approval thereof by the Stockholders, but prior to the Effective Time:
(a) by mutual written consent of USO and the Company;
(b) by USO at any time after USO becomes aware that the
Company or any Stockholder has breached any representation, warranty or covenant
contained in this Agreement in any material respect, if USO has notified the
Company and the Stockholders of the breach and the breach has continued without
cure for a period of 30 days after the notice of breach;
(c) by the Company at any time after the Company becomes aware
that USO has breached any representation, warranty or covenant contained in this
Agreement in any material respect, if the Company has notified USO of the breach
and the breach has continued without cure for a period of 30 days after the
notice of breach; or
(d) by USO or the Company, if the Effective Time shall not have
occurred on or before December 31, 1996 (provided that the right to terminate
this Agreement under this Section 8.1(d) shall not be available to any party
--------------
whose failure to fulfill any obligation under this Agreement has been the cause
of or has resulted in the failure of the Effective Time to occur on or before
such date).
Section 8.2 Effect of Termination. If this Agreement is terminated
----------------------
pursuant to Section 8.1 hereof and the Merger is not consummated, this Agreement
-----------
shall forthwith become void and have no effect, without any liability on the
part of any party or its directors, officers or stockholders; provided, however,
that nothing contained in this Section 8.2 shall relieve any party from
-----------
liability for any breach of this Agreement.
Section 8.3 Amendment. This Agreement may be amended by action taken by
----------
USO, the Company and the Stockholders at any time. No amendment to this
Agreement shall be made except by an instrument in writing signed on behalf of
all of the parties.
Section 8.4 Extension; Waiver. At any time prior to the Effective Time,
------------------
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto, or (c) waive
compliance with
-29-
any of the agreements or conditions contained herein. Any agreement on the part
of any party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party.
ARTICLE IX
INDEMNIFICATION
---------------
Section 9.1 Indemnification.
----------------
(a) Each of the Stockholders hereby severally and jointly
indemnifies and holds USO, its successors and assigns, and, from and after the
Effective Time, the Company (collectively, the "USO Indemnified Parties")
harmless from and against, and agrees to defend promptly each of the USO
Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind, including, without limitation,
attorneys' fees and other legal costs and expenses (hereinafter referred to
collectively as "Losses"), that any of the USO Indemnified Parties may at any
time suffer or incur, or become subject to, as a result of or in connection
with: (i) any breach or inaccuracy of any of the representations and warranties
made by the Company and the Stockholders in or pursuant to this Agreement; or
(ii) any failure of the Company or any of the Stockholders to carry out,
perform, satisfy and discharge any of their covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the documents
and instruments delivered by the Company or any of the Stockholders pursuant to
this Agreement, provided, that the Stockholders shall not be required to
indemnify and hold the USO Indemnified Parties harmless pursuant to this Section
-------
9.1 unless such right is asserted in connection with a bona fide claim hereunder
---
(whether or not the Losses have actually been incurred) by written notice to the
Stockholders and the Escrow Agent within 15 months of the Effective Time
describing with specificity the facts giving rise to the asserted right (unless
such right is asserted pursuant to the representations, warranties or covenants
made by the Company or any of the Stockholders in (i) Sections 4.3 or 4.4 , in
------------ ---
which event there shall be no time limitation on when such right is asserted
or (ii) Sections 3.21 or 4.5, in which event such right must be asserted prior
------------- ---
to the expiration of the applicable statute of limitations or periods for the
assessment of taxes (taking into account any extension or waiver of any statute
of limitations); and provided further, that the Stockholders shall not be
required to indemnify the USO Indemnified Parties pursuant to this Section 9.1
-----------
unless and until the amount of all Losses for which indemnification is sought
first exceeds $25,000, after which event the USO Indemnified Parties may seek
indemnification for all such Losses relating back to the first dollar and all
additional Losses up to $500,000 (except for any Losses incurred by the USO
Indemnified Parties as a result of the breach of the representations, warranties
or covenants made by the Company or any of the Stockholders in Sections 3.21,
--------------
4.3, 4.4 or 4.5, which Losses shall be payable without regard to the $500,000
--- --- ---
limitation). Any indemnity amount paid pursuant to this Section 9.1 (including
-----------
amounts payable as a result of the breach of the representations, warranties
or covenants made by the Company or any of the Stockholders in Sections 3.21,
-------------
4.3, 4.4 or 4.5) shall be payable first from the Escrow Fund.
--- --- ---
-30-
(b) USO hereby indemnifies and holds the Stockholders and their
successors, (collectively, the "Xxxxx Xxxxxxx Indemnified Parties" and, together
with the USO Indemnified Parties, the "Indemnified Parties") harmless from and
against, and agrees to defend promptly each of the Xxxxx Xxxxxxx Indemnified
Parties for, any and all Losses, that any of the Xxxxx Xxxxxxx Indemnified
Parties may at any time suffer or incur, or become subject to, as a result of or
in connection with: (i) any breach or inaccuracy of any of the representations
and warranties made by USO in or pursuant to this Agreement; or (ii) any
failure of USO to carry out, perform, satisfy and discharge any of its
covenants, agreements, undertakings, liabilities or obligations under this
Agreement or under any of the documents and instruments delivered by USO
pursuant to this Agreement, provided, that USO shall not be required to
indemnify and hold the Xxxxx Xxxxxxx Indemnified Parties harmless pursuant to
this Section 9.1 unless such right is asserted in connection with a bona fide
-----------
claim hereunder (whether or not the Losses have actually been incurred) by
written notice to USO within 18 months of the Effective Time describing with
specificity the facts giving rise to the asserted right; and provided further,
that USO shall not be required to indemnify the Xxxxx Xxxxxxx Indemnified
Parties pursuant to this Section 9.1 unless and until the amount of all
-----------
Losses for which indemnification is sought first exceeds $25,000, after which
event the Xxxxx Xxxxxxx Indemnified Parties may seek indemnification for all
such Losses relating back to the first dollar and all additional Losses up to
$500,000.
(c) In the event a claim against any of the Indemnified Parties
arises that is covered by the indemnity provisions of Section 9.1(a) or 9.1(b)
-------------- ------
of this Agreement, notice shall be given promptly by such Indemnified Party to
the indemnifying parties. In the event that the indemnifying parties admit in
writing to the party seeking indemnification that such claim is covered by the
indemnity provisions of Section 9.1(a) or 9.1(b) hereof, as the case may be, the
-------------- ------
indemnifying parties shall have the right to contest and defend by all
appropriate legal proceedings such claim and to control all settlements (unless
the party seeking indemnification agrees to assume the cost of settlement and to
forego fully such indemnity) and to select lead counsel to defend any and all
such claims at the sole cost and expense of the indemnifying parties; provided,
however, that the indemnifying parties may not effect any settlement that could
result in any cost, expense or liability to any Indemnified Party unless such
party consents in writing to such settlement and the indemnifying parties agree
to indemnify such party therefore. The party seeking indemnification may select
counsel to participate in any defense, in which event such counsel shall be at
the sole cost and expense of such party. In the event that the indemnifying
parties do not admit in writing to the party seeking indemnification that such
claim is covered by the indemnity provisions of Section 9.1(a) or 9.1(b)
-------------- ------
hereof, as the case may be, then the party seeking indemnification and the
indemnifying parties shall cooperate in good faith jointly to contest, defend
and settle such claim. In connection with all such claims, actions or
proceedings, the parties shall cooperate with each other and provide each other
with access to relevant books and records in their possession.
(d) The amount of any tax indemnification otherwise payable by the
Stockholders under this Agreement shall be reduced or increased (as appropriate)
by the amount or, in the case of a tax benefit or cost to be realized
subsequently, the then-present value of any federal or state income tax benefit
or cost to USO resulting from (i) any adjustment to or change in any tax item
relating to the Company for any taxable period ending before or including the
-31-
Effective Time or (ii) the accrual or receipt of such indemnification payment.
Such present value shall be based on a discount rate of 5% per annum. The
amounts for which any indemnifying party shall be liable to an Indemnified Party
under this Section 9 shall be net of any insurance proceeds and any
---------
reimbursements from third parties received by such Indemnified Party in
connection with the facts giving rise to the right of indemnification.
Section 9.2 Survival of Representations, Warranties and Covenants. The
------------------------------------------------------
representations and warranties made herein by the Company, the Stockholders and
USO shall survive the Closing.
ARTICLE X
MISCELLANEOUS
-------------
Section 10.1 Entire Agreement; Assignment. This Agreement (a)
-----------------------------
constitutes the entire agreement among the parties with respect to the subject
matter hereof, and supersedes all other prior agreements and understandings,
both written and oral, between the parties or any of them with respect to the
subject matter hereof, and (b) shall not be assigned by operation of law or
otherwise without the express written consent of the other parties hereto.
Section 10.2 Notices. All notices, requests, claims, demands and other
--------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex, or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties as follows:
if to USO:
US Order, Inc.
00000 Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Vice President, General Counsel and Secretary
Telecopy No.: (000) 000-0000
with a copy to:
Hunton & Xxxxxxxx
Riverfront Plaza, East Tower
000 X. Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
-32-
if to the Company or the Stockholders:
Xxxxx, Xxxxxxx & Co.
0000 00xx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
President
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxxx, Loop & Xxxxxxxx
North Courthouse Square
1000 Xxxxxxx
Xxxxxx, Xxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Xx.
Telecopy No.: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section10.3 Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of Delaware regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 10.4 Descriptive Headings. The descriptive headings herein are
---------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 10.5 Parties in Interest. This Agreement shall be binding upon
--------------------
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 10.6 Counterparts. This Agreement may be executed in two or more
-------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 10.7 Specific Performance. The parties hereto agree that
---------------------
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
-33-
Section 10.8 Fees and Expenses; Set-Off Rights. Except as otherwise
----------------------------------
provided in this Agreement, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, whether or not the Merger is consummated.
Section 10.9 Severability. If any term or other provision of this
-------------
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effectuate the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
ARTICLE XI
AGREEMENT AMONG STOCKHOLDERS
----------------------------
Section 11.1 Mutual Release Among Stockholders. From and after the
----------------------------------
Effective Time, the Stockholders agree to fully, finally and forever release and
discharge one another of and from each, every, any and all obligations,
liabilities, claims, demands, actions or causes of action, whether at law or in
equity, and whether accrued, contingent, fixed or otherwise, which they, or any
of them, have, or may hereafter attempt to assert, whether presently known to
them, or any of them, or not, of any kind, character or description whatsoever,
arising out of, related to or in any manner connected with, either directly or
indirectly, their purchase and/or ownership of shares of the Common Stock
(including, but not limited to, the termination and cancellation of the Buy-Sell
Agreement, dated as of May 24, 1990, among the Stockholders, Xxxxx Xxxxx and the
Company), their acting as an employee, officer, director, consultant and/or
other representative of the Company, and their negotiation of the terms and
conditions of this Agreement and the execution of this Agreement and any and all
documents executed in connection with this Agreement. Notwithstanding anything
contained in this Section to the contrary, the provisions of this Section shall
in no way be interpreted to release USO, the Company or the Stockholders from
any of their liabilities or obligations arising out of, related to in any manner
connected with this Agreement and the other documents executed in connection
with this Agreement. The provisions of this Section shall be binding upon and
shall inure to the benefit of the respective heirs, executives, administrators,
representatives, fiduciaries, assigns and successors in interest (whether by
operation of law or otherwise) of the Stockholders.
Section 11.2 Contribution. If less than all Stockholders discharge Losses
-------------
to any USO Indemnified Party pursuant to Section 9 hereof, such Stockholders
shall have the right to contribution against each of the other Stockholders in
proportion to the amount of Common Stock owned by each of the other Stockholders
as set forth on Exhibit 3.2 attached hereto. The Stockholders who have
-----------
discharged the Losses, as among themselves, shall bear the loss according to the
proportion of Common Stock held by each.
-34-
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed as of the day and year first above written.
US ORDER, INC.
By:
-------------------------------------
Xxxx X. Xxxxxx, Xx.
President and Chief Operating Officer
XXXXX, XXXXXXX & CO.
By:
--------------------------------------
Xxxxxxx X. Xxxxx
President
THE STOCKHOLDERS
---------------------------------------
Xxxxxxx X. Xxxxx
---------------------------------------
Xxxx Xxxxxxx
---------------------------------------
Xxxxxx Xxxxxx-Xxxxxxx
