Exhibit 99.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
STAPLES, INC.,
MUSKETEER ACQUISITION CORP.,
QUILL CORPORATION
AND
CERTAIN STOCKHOLDERS OF QUILL CORPORATION
April 6, 1998
TABLE OF CONTENTS
Page
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ARTICLE I - THE MERGER....................................................... 1
1.1 The Merger................................................. 1
1.2 The Closing................................................ 1
1.3 Actions at the Closing..................................... 1
1.4 Additional Action.......................................... 2
1.5 Conversion of Shares....................................... 2
1.6 Fractional Shares.......................................... 4
1.7 Escrow..................................................... 4
1.8 Certificate of Incorporation............................... 4
1.9 By-laws.................................................... 4
1.10 No Further Rights.......................................... 4
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE COMPANY STOCKHOLDERS..................... 5
2.1 Organization, Qualification and Corporate Power............ 5
2.2 Capitalization............................................. 5
2.3 Authorization of Transaction............................... 6
2.4 Noncontravention........................................... 7
2.5 Subsidiaries............................................... 7
2.6 Financial Statements....................................... 7
2.7 Absence of Certain Changes................................. 8
2.8 Undisclosed Liabilities.................................... 8
2.9 Tax Matters................................................ 8
2.10 Assets.....................................................10
2.11 Owned Real Property........................................10
2.12 Real Property Leases.......................................10
2.13 Inventory..................................................11
2.14 Intellectual Property......................................11
2.15 Material Contracts.........................................12
2.16 Accounts Receivable........................................14
2.17 Powers of Attorney.........................................14
2.18 Insurance..................................................14
2.19 Litigation.................................................14
2.20 Employees..................................................14
2.21 Employee Benefits..........................................15
2.22 Environmental Matters......................................17
2.23 Legal Compliance...........................................18
2.24 Permits....................................................18
2.25 Certain Business Relationships With Affiliates.............19
2.26 Brokers' Fees..............................................19
2.27 Books and Records..........................................19
2.28 Customers and Suppliers....................................19
2.29 Accounting and Tax Matters.................................19
2.30 Investment Representations.................................20
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2.31 Affiliates.................................................20
2.32 Disclosure.................................................20
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY...........................21
3.1 Organization...............................................21
3.2 Capitalization.............................................21
3.3 Authorization of Transaction...............................22
3.4 Noncontravention...........................................22
3.5 Reports and Financial Statements...........................23
3.6 Litigation.................................................23
3.7 Accounting and Tax Matters.................................23
3.8 Absence of Certain Changes.................................24
3.9 Taxes......................................................24
3.10 Environmental Matters......................................24
3.11 Employee Benefit Plans.....................................24
3.12 Compliance With Laws.......................................25
3.13 Interim Operations of the Transitory Subsidiary............25
3.14 Brokers' Fees..............................................25
3.15 Disclosure.................................................25
ARTICLE IV - COVENANTS.......................................................25
4.1 Reasonable Best Efforts; Notice and Consents;
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act......................................25
4.2 Operation of Business......................................27
4.3 Full Access................................................28
4.4 Exclusivity................................................28
4.5 Monthly Financial Statements...............................29
4.6 Pooling Accounting.........................................29
4.7 Nasdaq Listing.............................................30
4.8 Indemnification............................................30
4.9 Benefit Plans..............................................30
ARTICLE V - CONDITIONS TO CONSUMMATION OF MERGER.............................31
5.1 Conditions to Obligations of the Buyer and the Transitory
Subsidiary.................................................31
5.2 Conditions to Obligations of the Company and the
Company Stockholders.......................................32
ARTICLE VI - INDEMNIFICATION.................................................33
6.1 Indemnification by the Company Stockholders................33
6.2 Indemnification Claims.....................................34
6.3 Survival...................................................37
6.4 Limitations................................................37
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ARTICLE VII - REGISTRATION RIGHTS............................................38
7.1 Demand Registration........................................38
7.2 Piggyback Registration.....................................39
7.3 Limitations on Registration Rights.........................40
7.4 Registration Procedures....................................40
7.5 Requirements of Company Stockholders.......................42
7.6 Indemnification............................................42
7.7 Underwriting Offer.........................................43
7.8 Assignment of Rights.......................................43
7.9 Rule 144...................................................43
7.10 No Inconsistent Agreements.................................43
ARTICLE VIII - TERMINATION...................................................44
8.1 Termination of Agreement...................................44
8.2 Effect of Termination......................................44
ARTICLE IX - OTHER AGREEMENTS................................................44
9.1 Press Releases and Announcements...........................44
9.2 No Third Party Beneficiaries...............................45
9.3 Entire Agreement...........................................45
9.4 Succession and Assignment..................................45
9.5 Counterparts; Facsimile Signature..........................45
9.6 Headings...................................................45
9.7 Notices....................................................45
9.8 Governing Law..............................................47
9.9 Amendments and Waivers.....................................47
9.10 Severability...............................................47
9.11 Expenses...................................................47
9.12 Construction...............................................47
9.13 Incorporation of Exhibits and Schedules....................48
EXHIBITS:
A. Company Stockholders
B. Escrow Agreement
C. Affiliate Agreement
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TABLE OF DEFINED TERMS
Each of the following terms is defined in the Section of this Agreement
indicated below.
Defined Term Section
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ADR Service 6.2(d)
ADR Procedure 6.2(d)
Affiliate 2.15(f)
Agreed Amount 6.2(c)
Agreement Introduction
Antitrust Law 4.1(b)
Antitrust Order 4.1(b)
Balance Sheet Date 2.6
Buyer Introduction
Buyer Certificate 5.2(d)
Buyer Common Stock 1.5
Buyer Disclosure Schedule Article III
Buyer Employee Plans 3.11(a)
Buyer Reports 3.5
Buyer Material Adverse Effect 3.4
CERCLA 2.22(a)
Certificate of Merger 1.1
Claim Notice 6.2(b)
Claimed Amount 6.2(b)
Closing 1.2
Closing Date 1.2
Code 2.9(c)
Company Introduction
Company Certificate 5.1(e)
Company Material Adverse Effect 2.1
Company Shares 1.5
Company Stockholders Introduction
Conversion Ratio 1.5
Costs 4.8(a)
Damages 6.1
Disclosure Schedule Article II
Dispute 6.2(c)
Dissenting Shares 1.5(iv)
Effective Time 1.1
Employee Benefit Plan 2.21(a)
Encumbrance 2.2(b)
Environmental Law 2.22(a)
ERISA 2.21(a)
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ERISA Affiliate 2.21(d)
Escrow Agreement 1.3
Escrow Agent 1.3
Escrow Shares 1.5
Exchange Act 2.15(f)
Executive Life Benefits 2.22(v)
Financial Statements 2.6
GAAP 2.6
Governmental Entity 2.4
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act 2.4
Incremental Amount 1.5(iv)
Indemnified Parties 6.1
Indemnified Persons 4.8(a)
Indemnifying Parties 6.1
Initial Shares 1.5
Initial Stockholder Registration Statement 7.1
Intellectual Property 2.14(a)
Lease 2.12
Materials of Environmental Concern 2.23(b)
Merger 1.1
Merger Shares 1.5
Most Recent Balance Sheet 2.8
Ordinary Course of Business 2.8
Parties Introduction
Pension Benefit Plan 2.21(a)
Permits 2.24
Purchase Price 1.5(a)
Real Estate Agreements 5.1(k)
Reasonable Best Efforts 4.1(a)
Registration Statement 7.4(a)
Related Party Transactions 2.25
Response 6.2(c)
SEC 7.1
Second Stockholder Registration Statement 7.1
Securities Act 2.2(a)
Stockholder Registration Statements 7.1
Stockholder Representatives 1.3
Subsidiary 2.4
Surviving Corporation 1.1
Taxes 2.9(a)
Tax Returns 2.9(a)
Transitory Subsidiary Introduction
Welfare Benefit Plan 2.21(a)
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as of
April 6, 1998 by and among Staples, Inc., a Delaware corporation (the "Buyer"),
Musketeer Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of the Buyer (the "Transitory Subsidiary"), Quill Corporation, a
Delaware corporation (the "Company"), and those stockholders of the Company
listed on Exhibit A hereto, each of which is a signatory hereto (the "Company
Stockholders"). The Buyer, the Transitory Subsidiary, the Company and the
Company Stockholders are referred to collectively herein as the "Parties".
This Agreement contemplates a tax-free merger of the Transitory Subsidiary
into the Company which will be accounted for as a "pooling-of-interests". In
such merger, the Company Stockholders will receive capital stock of the Buyer in
exchange for their capital stock of the Company.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into the Company (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation"). The "Effective Time" shall be the time at which the Company and
the Transitory Subsidiary file a certificate of merger or other appropriate
documents prepared and executed in accordance with the relevant provisions of
the Delaware General Corporation Law (the "Certificate of Merger") with the
Secretary of State of the State of Delaware. The Merger shall have the effects
set forth in Section 259 of the Delaware General Corporation Law.
1.2 The Closing. Subject to Sections 8.1(c) and 8.1(d), the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of ▇▇▇▇ and ▇▇▇▇ LLP in Boston, Massachusetts, commencing at 9:00
a.m. local time, three business days (or such greater or lesser number of days
as may be agreed upon by the Stockholder Representatives and the Buyer) after
the satisfaction or waiver of all conditions (excluding the delivery of any
documents to be delivered at the Closing) set forth in Article V hereof (the
"Closing Date").
1.3 Actions at the Closing. At the Closing:
(i) the Company and the Company Stockholders shall deliver to the
Buyer and the Transitory Subsidiary the various certificates, instruments and
documents referred to in Section 5.1;
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(ii) the Buyer and the Transitory Subsidiary shall deliver to the
Company and the Company Stockholders the various certificates, instruments and
documents referred to in Section 5.2;
(iii) the Surviving Corporation shall file with the Secretary of
State of the State of Delaware the Certificate of Merger;
(iv) each Company Stockholder shall deliver to the Buyer the
certificate(s) representing its Company Shares (as defined below);
(v) the Buyer shall deliver certificates for the Initial Shares (as
defined below) to each Company Stockholder in accordance with Section 1.5; and
(vi) ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ (the
"Stockholder Representatives"), the Buyer and BankBoston, N.A., or such other
nationally recognized bank as may be selected by Buyer (the "Escrow Agent")
shall execute and deliver the Escrow Agreement substantially in the form
attached hereto as Exhibit B (the "Escrow Agreement") and the Buyer shall
deliver to the Escrow Agent a certificate for the Escrow Shares (as defined
below) being placed in escrow on the Closing Date pursuant to Section 1.7.
1.4 Additional Action. The Surviving Corporation may, at any time after the
Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of any Party or the holder of any of the
following securities:
(i) Each share (or fraction thereof) of voting common stock, $.01
par value per share, and each share (or fraction thereof) of non-voting common
stock, $.01 par value per share, of the Company (collectively, the "Company
Shares") issued and outstanding immediately prior to the Effective Time (other
than Company Shares held in the Company's treasury and other than Dissenting
Shares (as defined below)), shall be converted into and represent the right to
receive (subject to the provisions of Sections 1.6 and 1.7) such number of
shares of common stock, $.0006 par value per share, of the Buyer (including the
associated 16/81sts of a right issuable pursuant to the Rights Agreement dated
as of February 3, 1994 between the Buyer and Bank Boston, N.A., as rights agent,
collectively, "Buyer Common Stock") as is equal to the Conversion Ratio (or, in
the case of a fractional share, the Conversion Ratio multiplied by such
fraction). The "Conversion Ratio" shall be the result (rounded down to six
decimal places) obtained by adding $581,000,000 and the Incremental Amount (as
defined below) (such sum being referred to as the "Purchase Price") and then
dividing (1) the sum of (a) 50% of the Purchase Price divided by $24 plus (b)
the number determined by dividing (x) 50% of the Purchase Price by (y) the
average of the last reported sale prices per share of the Buyer Common Stock on
the
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Nasdaq National Market over the 20 consecutive trading days ending on the
trading day that is three trading days prior to the Closing Date, by (2) the
number of outstanding Company Shares immediately prior to the Effective Time;
provided that the Conversion Ratio shall be subject to equitable adjustment in
the event of any reclassification, recapitalization, stock split, stock
dividend, reverse stock split, exchange of shares or other similar events
affecting the Buyer Common Stock between the date hereof and the Closing. Ten
percent (10%) of the shares of Buyer Common Stock into which each Company
Stockholder's Company Shares are converted pursuant to this clause (i) of this
Section 1.5, rounded down to the nearest whole number (the "Escrow Shares")
shall be deposited in escrow pursuant to Section 1.7 and shall be held and
disbursed in accordance with the terms of the Escrow Agreement; and the Company
Stockholders shall be entitled to receive immediately the remaining shares of
Buyer Common Stock into which their Company Shares were converted pursuant to
this clause (i) of this Section 1.5 (the "Initial Shares"). The Initial Shares
and the Escrow Shares shall together be referred to herein as the "Merger
Shares."
(ii) Each Company Share held in the Company's treasury immediately
prior to the Effective Time shall be cancelled and retired without payment of
any consideration therefor.
(iii) Each share of common stock, $.01 par value per share, of the
Transitory Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted into and thereafter evidence one share of common stock,
$.01 par value per share, of the Surviving Corporation.
(iv) "Incremental Amount" shall mean (i) $51,772,749, (ii) plus the
fair value, as of the date three business days prior to the Closing Date (the
"Pre- Closing Date"), of the equity securities included in "Investments" on the
audited balance sheet of the Company as of December 31, 1997 and held by the
Company on the Closing Date, (iii) plus the net income of the Company from
January 1, 1998 to the Pre-Closing Date, determined in the same manner as net
income is determined for purposes of the Financial Statements referred to in
Section 2.6, as agreed upon by the Company and the Buyer, (iv) less $12,500,000,
and (v) less the amount of any cash distributions to stockholders of the Company
made from January 1, 1998 to the Closing Date (as permitted by Section 4.2(b)).
If the Buyer and the Company are unable to agree upon the amount of net income
of the Company from January 1, 1998 to the Pre-Closing Date, such amount shall
be determined by an independent accounting firm selected by Buyer and the
Company.
(v) "Dissenting Shares" shall mean Company Shares held as of the
date of this Agreement by any stockholder of the Company (other than a Company
Stockholder) who has not voted such Company Shares in favor of the adoption of
the Agreement and the Merger and with respect to which appraisal shall have been
duly demanded in accordance with Section 262 of the Delaware General Corporation
Law. The Company shall not, except with the prior written consent of
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the Buyer, settle, or offer to settle, any demand for appraisal by a holder of
Dissenting Shares.
1.6 Fractional Shares. No certificates or script representing fractional
Merger Shares shall be issued to Company Stockholders, and such Company
Stockholders shall not be entitled to any voting rights, rights to receive any
dividends or distributions or other rights as a stockholder of the Buyer with
respect to any fractional Merger Shares that would otherwise be issued to such
Company Stockholders. In lieu of any fractional Merger Shares that would
otherwise be issued, each Company Stockholder that would have been entitled to
receive a fractional Merger Share shall receive such whole number of Merger
Shares as is equal to the number of Merger Shares to which such person would be
entitled, rounded up or down to the nearest whole number (with a fractional
interest equal to .5 rounded to the nearest odd number).
1.7 Escrow.
(a) On the Closing Date, the Buyer shall deliver to the Escrow Agent a
certificate (issued in the name of the Escrow Agent or its nominee) representing
the Escrow Shares, as described in clause (i) of Section 1.5, for the purpose of
securing the indemnification obligations of the Company Stockholders set forth
in this Agreement. The Escrow Shares shall be held by the Escrow Agent under the
Escrow Agreement pursuant to the terms thereof.
(b) Each Company Stockholder hereby irrevocably appoints each of the
Stockholder Representatives as its representative and attorney-in-fact with
respect to any actions and decisions required or permitted to be made by the
Stockholder Representatives pursuant to this Agreement and the Escrow Agreement
and agrees to be bound by any actions or decisions taken by the Stockholder
Representatives or any of them.
1.8 Certificate of Incorporation. The Certificate of Incorporation of the
Surviving Corporation immediately following the Effective Time shall be the same
as the Certificate of Incorporation of the Transitory Subsidiary immediately
prior to the Effective Time, except that the name of the corporation set forth
therein shall be changed to the name of the Company and the reference therein to
the identity of the sole incorporator shall be deleted.
1.9 By-laws. The By-laws of the Surviving Corporation immediately following
the Effective Time shall be the same as the By-laws of the Transitory Subsidiary
immediately prior to the Effective Time, except that the name of the corporation
set forth therein shall be changed to the name of the Company.
1.10 No Further Rights. From and after the Effective Time, no Company
Shares outstanding prior to the Effective Time shall be deemed to be
outstanding, and holders of certificates formerly representing Company Shares
shall cease to have any rights with respect thereto, except as provided herein
or by law.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE COMPANY STOCKHOLDERS
The Company and each of the Company Stockholders jointly and severally
represent and warrant to the Buyer and the Transitory Subsidiary that the
statements contained in this Article II are true and correct, except as set
forth in the disclosure schedule provided by the Company and the Company
Stockholders to the Buyer on the date hereof (the "Disclosure Schedule"). The
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article II, and the
disclosures in any paragraph of the Disclosure Schedule shall qualify other
paragraphs in this Article II only to the extent it is clear from a reading of
the disclosure that such disclosure is applicable to such other paragraphs.
2.1 Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in corporate and franchise tax
good standing under the laws of the State of Delaware. The Company is duly
qualified to conduct business and is in corporate and franchise tax good
standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, except for any such failure to be so qualified and in good
standing that would not, either individually or in the aggregate, have a Company
Material Adverse Effect (as defined below). The Company has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Company has
furnished to the Buyer true and complete copies of its Certificate of
Incorporation and By-laws, each as amended and as in effect on the date hereof.
The Company is not in default under or in violation of any provision of its
Certificate of Incorporation or By-laws. When used in this Article II or
elsewhere in this Agreement in connection with the Company, the term "Company
Material Adverse Effect" means any change, event or effect that is materially
adverse to the business, financial condition or results of operations of the
Company, excluding any changes in general economic conditions in the general
economy as a whole, or that adversely affects the ability of the Company to
consummate the Merger.
2.2 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 70,000
shares of voting common stock, $.01 par value per share, of which 48,306.035
shares are issued and outstanding and no shares are held in the treasury of the
Company and (ii) 100,000 shares of non-voting common stock, $.01 par value per
share, of which 61,663.795 shares are issued and outstanding and no shares are
held in the treasury of the Company. Section 2.2 of the Disclosure Schedule sets
forth a complete and accurate list of all stockholders of the Company,
indicating the number and class of Company Shares held by each stockholder. All
of the issued and
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outstanding Company Shares are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights that have not been, or will not
prior to the Effective Time be, duly waived. Except as set forth in this
Agreement, there are no (i) outstanding or authorized options, warrants, rights,
agreements or commitments to which the Company is a party or which are binding
upon the Company providing for the issuance, disposition or acquisition of any
of its capital stock, or (ii) stock appreciation, phantom stock or similar
rights with respect to the Company, or (iii) agreements, voting trusts, proxies,
or understandings with respect to the voting or registration under the
Securities Act of 1933, as amended (the "Securities Act"), of any Company
Shares. All of the issued and outstanding Company Shares were issued in
compliance with applicable federal and state securities laws.
(b) Each Company Stockholder has good and marketable title to the
Company Shares listed in Section 2.2 of the Disclosure Schedule as being owned
by it, and at the Effective Time all such Company Shares will be free and clear
of any lien, mortgage, pledge, security interest, encumbrance, charge,
contractual restriction or covenant, option or other adverse claim, in each case
whether arising by contract or by operation of law (an "Encumbrance").
2.3 Authorization of Transaction. The Company and each Company Stockholder
has all requisite power and authority to execute and deliver this Agreement and
to perform its or his respective obligations hereunder. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of the Company. Without limiting the
generality of the foregoing: (a) the Board of Directors of the Company, at a
meeting duly called and held, by the unanimous vote of all directors (i)
determined that the Merger is fair and in the best interests of the Company and
its stockholders, (ii) adopted this Agreement in accordance with the provisions
of the Delaware General Corporation Law, and (iii) directed that this Agreement
and the Merger be submitted to the stockholders of the Company for their
adoption and approval and recommended that the stockholders of the Company vote
in favor of the adoption of this Agreement and the approval of the Merger; (b)
the Company provided to each holder of voting common stock of the Company, prior
to the vote by the stockholders of the Company with respect to the Merger and
this Agreement, copies of the Buyer Reports (as defined in Section 3.5) and all
information required under the Delaware General Corporation Law concerning their
appraisal rights; (c) the Company provided to each holder of non-voting common
stock of the Company all information required under the Delaware General
Corporation Law concerning their appraisal rights; (d) the holders of voting
common stock of the Company approved this Agreement and the Merger, in
accordance with the provisions of the Delaware General Corporation Law, by
unanimous written consent and holders of at least 91.08% of the outstanding
shares of non-voting common stock of the Company have waived their appraisal
rights with respect to, and otherwise consented to, this Agreement, the Merger
and each of the other transactions contemplated hereby; and (e) the holders of
common stock of the Company have waived their preemptive
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rights with respect to the Merger and other transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Company
and each Company Stockholder and constitutes a valid and binding obligation of
the Company and each Company Stockholder, enforceable against the Company and
each Company Stockholder in accordance with its terms, subject to (i)
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting or
relating to creditors' rights generally and (ii) the availability of injunctive
relief and other equitable remedies. The agreements set forth in Section 2.2 of
the Disclosure Schedule shall terminate on or prior to the Effective Date.
2.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act") and applicable foreign antitrust laws (if any) and the
filing of the Certificate of Merger as required by the Delaware General
Corporation Law, neither the execution and delivery of this Agreement by the
Company or any of the Company Stockholders, nor the consummation by the Company
or any of the Company Stockholders of the transactions contemplated hereby, will
(i) conflict with or violate any provision of the charter or By-laws of the
Company, (ii) require on the part of the Company or any of the Company
Stockholders any filing with, or any permit, authorization, consent or approval
of, any court, arbitrational tribunal, administrative agency or commission or
other governmental or regulatory authority or agency (a "Governmental Entity"),
(iii) conflict with, result in a breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any Lease or Material Contract (as
such terms are defined herein), except to the extent any such conflict, breach,
default, acceleration, termination, modification or cancellation, or the failure
to give or obtain any such notice, consent or waiver, would not have a Company
Material Adverse Effect, (iv) result in the imposition of any Encumbrance upon
the Company Shares or any material assets or properties of the Company or (v)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any of the Company Stockholders or any of their
respective assets or properties, which violation could reasonably be expected to
have a Company Material Adverse Effect.
2.5 Subsidiaries. The Company owns no equity interest in any corporation,
partnership, limited liability company or other entity.
2.6 Financial Statements. The Company has provided to the Buyer (a) the
audited balance sheets and statements of income, changes in stockholders' equity
and cash flows for each of the last five fiscal years for the Company and (b)
the unaudited balance sheet and statement of income as of and for the two-months
ended as of February 28, 1998 (the "Balance Sheet Date"). Such financial
statements inclusive of the notes thereto (collectively, the "Financial
Statements") have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods covered thereby, fairly present in all material respects the
financial condition, results of operations and cash
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flows of the Company as of the respective dates thereof and for the periods
referred to therein and are materially consistent with the books and records of
the Company; provided, however, that the Financial Statements referred to in
clause (b) above are subject to normal recurring year-end adjustments (which
will not be material) and do not include footnotes.
2.7 Absence of Certain Changes. Since the Balance Sheet Date, (a) there has
occurred no event or development which has had, or could reasonably be expected
to have in the future, a Company Material Adverse Effect, and (b) the Company
has not taken any of the actions set forth in paragraphs (a) through (o) of
Section 4.2.
2.8 Undisclosed Liabilities. The Company has no material liability (whether
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), except for (a) liabilities shown
on the balance sheet referred to in clause (b) of Section 2.6 (the "Most Recent
Balance Sheet"), (b) liabilities which have arisen since the Balance Sheet Date
in the ordinary course of business consistent with past custom and practice
("Ordinary Course of Business") and (c) contractual and other liabilities
incurred in the Ordinary Course of Business which are not required by GAAP to be
reflected on a balance sheet.
2.9 Tax Matters.
(a) The Company has filed on a timely basis all Tax Returns (as
defined below) that it was required to file and all such Tax Returns were
correct and complete in all material respects. The Company has paid, or will
pay, on a timely basis all Taxes (as defined below) due on or before the Closing
Date, whether or not shown to be due on any such Tax Returns. The unpaid Taxes
of the Company for tax periods through the date of the Most Recent Balance Sheet
do not materially exceed the accruals and reserves (excluding reserves for
deferred Taxes) for Taxes set forth on the Most Recent Balance Sheet. All Taxes
attributable to the period from and after the date of the Most Recent Balance
Sheet and continuing through the Closing Date are attributable to the conduct by
the Company of its operations in the Ordinary Course of Business. The Company
has no actual liability for any Tax obligation of any taxpayer (including
without limitation any affiliated group of corporations or other entities that
included the Company during a prior period). All Taxes that the Company is or
was required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Entity.
For purposes of this Agreement, "Taxes" means all taxes, charges, fees, levies
or other similar assessments or liabilities, including without limitation
income, gross receipts, ad valorem, premium, value-added, excise, severance,
stamp, occupation, windfall profits, real property, personal property, sales,
use, transfer, withholding, employment, unemployment insurance, social security,
business license, business organization, environmental, payroll and franchise
taxes imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the United
States or any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest
-8-
or dispute thereof. For purposes of this Agreement, "Tax Returns" means all
reports, returns, declarations, statements, forms or other information required
to be supplied to a taxing authority in connection with Taxes.
(b) The Company has delivered to the Buyer correct and complete copies
of all filed federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by any of the Company since December
31, 1995. The federal income Tax Returns of the Company are currently being
audited by the Internal Revenue Service for 1995. Except as set forth in Section
2.9(b) of the Disclosure Schedule, no examination or audit of any Tax Returns of
the Company by any Governmental Entity is currently in progress or, to the
knowledge of any Company Stockholder, threatened or contemplated. Except as set
forth in Section 2.9(b) of the Disclosure Schedule, the Company has not waived
any statute of limitations with respect to taxes or agreed to an extension of
time with respect to an assessment of or deficiency in Taxes.
(c) The Company is not a "consenting corporation" within the meaning
of Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
and none of the assets of the Company is subject to an election under Section
341(f) of the Code. The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(l)(A)(ii) of the Code.
(d) The Company is not a party to any Tax allocation or sharing
agreement or Tax indemnity agreement. The Company has never filed Tax Returns on
a combined, consolidated or unitary basis with any other business entity in any
jurisdiction or has otherwise been liable, by contract or otherwise, for any
Taxes of any other business entity. The Company has not participated in or
cooperated with, nor will it, prior to the Closing Date, participate in or
cooperate with, an international boycott within the meaning of Section 999 of
the Code. Except as set forth in Section 2.9(d) of the Disclosure Schedule, the
Company is not a party to any agreement, contract, arrangement or plan that has
resulted, or would result, separately or in the aggregate, in the payment of any
excess "parachute payments" within the meaning of Section 280G of the Code.
(e) The Company is not and has never been a member of an "affiliated
group" of corporations (within the meaning of Section 1504 of the Code).
(f) The Company is a not party to any tax litigation nor, to the
knowledge of the Company and any Company Stockholder, the subject of any tax
audit. The Company Stockholders have no reason to suspect any tax litigation
attributable to periods ended before or including the Closing Date.
Classifications, definitions, valuation and principles used in the accounts of
the Company are in accordance with classifications, definitions, valuations and
principles used in the Tax Returns of the Company. To the knowledge of the
Company and any Company Stockholder, the Company is not and has never been a
party to any transaction or
-9-
agreement which is in conflict with the tax rules on transfer pricing in any
relevant jurisdiction.
(g) Since September 1983, the Company has been an S corporation
pursuant to an election validly made under Subchapter S of the Code (which
election has not been revoked or terminated) and the Company has not been
subject to federal income taxes for such periods.
(h) The Company is not required, and will not be required, to include
any adjustment in taxable income for any Tax period prior to the Closing Date
(or portion thereof) as a result of the Merger, a termination of the Company's S
corporation status or accounting methods employed prior to such termination.
(i) The Company is not required, nor will it be required, to make any
adjustments under Section 481(a) of the Code by reason of a change in accounting
method, a termination of its S corporation status or otherwise.
2.10 Assets. The Company owns or leases all tangible assets necessary for
the conduct of its businesses as presently conducted and as presently proposed
by the Company to be conducted. Each such tangible asset is free from material
defects, has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear) and is
suitable for the purposes for which it presently is used. No asset of the
Company (tangible or intangible) is subject to any Encumbrance, except (i) liens
for current taxes not yet due and payable, and (ii) such imperfections of title,
liens and easements as do not and will not materially detract from or interfere
with the use or disposition of the property subject thereto or otherwise
materially impair business operations involving such properties.
2.11 Owned Real Property. The Company owns no real property.
2.12 Real Property Leases. Section 2.12 of the Disclosure Schedule lists,
as of the date hereof, all real property leased or subleased to or by the
Company where (i) the term of such lease or sublease expires (without the
execution of a renewal option) after December 31, 1999, (ii) where such lease or
sublease provides an annual base rental of more than $100,000 or (iii) where
such property is leased or subleased from an Affiliate (as defined below) of the
Company or any Company Stockholder, and lists the term of such lease, any
extension and expansion options, and the rent payable thereunder. The Company
has delivered to the Buyer correct and complete copies of the leases and
subleases (as amended to date) listed in Section 2.12 of the Disclosure
Schedule. With respect to each lease and sublease required to be listed in
Section 2.12 of the Disclosure Schedule ("Leases"):
(a) the lease or sublease is legal, valid, binding, enforceable and in
full force and effect with respect to the Company and, to the knowledge of the
Company and any Company Stockholder, with respect to each other party thereto;
-10-
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect immediately prior to the Closing;
(c) neither the Company nor, to the knowledge of the Company and the
Company Stockholders, any other party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default by the Company or, to the knowledge of the
Company and the Company Stockholders, any other party thereto; and
(d) the Company has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold.
2.13 Inventory. All inventory of the Company, whether or not reflected on
the Most Recent Balance Sheet, consists of a quality and quantity usable and
saleable in the Ordinary Course of Business, except for items of below-standard
quality, and obsolete and other items, all of which have been written-off or
written-down to net realizable value on the Most Recent Balance Sheet. All
inventories not written-off have been priced at the lower of cost or market on a
first-in, first-out basis. The quantities of each type of inventory are not
excessive in the present circumstances of the Company.
2.14 Intellectual Property.
(a) The Company owns or has the right to use all Intellectual Property
(as defined below) used in the operation of its business or necessary for the
operation of its business as presently conducted or as presently proposed by the
Company to be conducted. Each material item of Intellectual Property presently
owned by or used in the operation of the business of the Company will be owned
or available for use by the Surviving Corporation on identical terms and
conditions immediately following the Closing. The Company has taken all
reasonable measures to protect the proprietary nature of each material item of
Intellectual Property, and to maintain in confidence all trade secrets and
confidential information, that it owns or uses. To the knowledge of the Company
and the Company Stockholders, and except as set forth in Section 2.14(a) of the
Disclosure Schedule, no other person or entity has any rights to any of the
material Intellectual Property owned by the Company and no other person or
entity is infringing, violating or misappropriating any of the material
Intellectual Property that the Company owns. For purposes of this Agreement,
"Intellectual Property" means all (i) patents, patent applications, patent
disclosures and all related continuation, continuation-in-part, divisional,
reissue, reexamination, utility, model, certificate of invention and design
patents, patent applications, registrations and applications for registrations,
(ii) trademarks, service marks, trade drafts, logos, trade names and corporate
names and registrations and applications for registration thereof, (iii)
copyrights and registrations and applications for registration thereof, (iv)
computer software, data and documentation, (v) trade secrets and confidential
business information, whether patentable or unpatentable and whether or not
reduced to practice, know-how, manufacturing and production
-11-
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists, (vi) other
proprietary rights relating to any of the foregoing and (vii) copies and
tangible embodiments thereof.
(b) None of the activities or business conducted by the Company, or
conducted by the Company infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any other person or
entity. Since January 1, 1996, the Company has not received any complaint, claim
or notice alleging any such infringement, violation or misappropriation.
(c) Section 2.14 of the Disclosure Schedule lists each issued patent,
registered trademark or service ▇▇▇▇ which has been issued to the Company with
respect to any of its Intellectual Property, identifies each pending patent
application or application for trademark or service ▇▇▇▇ registration which the
Company has made with respect to any of its Intellectual Property, and
identifies each license, except with respect to commercially available or
so-called "off the shelf" software, or other agreement pursuant to which the
Company has granted any rights to, or has received any rights from, any third
party with respect to any of its Intellectual Property.
2.15 Material Contracts. Section 2.15 of the Disclosure Schedule lists, as
of the date of this Agreement, the following agreements to which the Company is
a party ("Material Contracts"):
(a) any agreement (or group of related agreements) for the lease of
personal property from or to third parties providing for payments in excess of
$75,000 per annum;
(b) any agreement (or group of related agreements), for the purchase
or sale of commodities, supplies, products or other personal property or for the
furnishing or receipt of services (other than with respect to utilities and
purchase orders (including, without limitation, blanket purchase orders) or
invoices with respect to commodities, supplies, products or other personal
property purchased or sold by the Company in the Ordinary Course of Business),
which is not cancelable without penalty in excess of $50,000 by the Company upon
less than one month's prior notice and (i) which involved during 1997 (or is
reasonably anticipated to involve during 1998), annual payments in excess of
$250,000; (ii) in which the Company agreed to purchase a minimum quantity of
goods or services (it being agreed that the foregoing shall not include so
called "back-end" or similar programs pursuant to which the Company is entitled
to, or grants, a rebate, reduced purchase price or similar discount based on the
volume of goods or services purchased), (iii) in which the Company has agreed to
purchase goods or services exclusively from a certain party, or (iv) in which
the Company has granted "most favored nation" pricing provisions (it being
agreed that the foregoing shall not include agreements pursuant to which the
Company has granted to certain parties (or their members or
-12-
affiliates) the right to buy the Company's products at "end column" or similarly
discounted prices);
(c) any agreement establishing a partnership or joint venture;
(d) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed (or may create, incur, assume, or
guarantee) indebtedness for borrowed money (including capitalized lease
obligations) involving more than $100,000 or under which it has imposed (or may
impose) an Encumbrance (other than liens for Taxes not yet due) on any of its
assets, tangible or intangible;
(e) any agreement concerning non-solicitation or noncompetition;
(f) any agreement involving any of the Company Stockholders or their
affiliates ("Affiliates"), as defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
(g) any agreement under which the consequences of a default or
termination could reasonably be expected to have a Company Material Adverse
Effect; and
(h) any agreement or group of related agreements (other than purchase
orders (including, without limitation, blanket purchase orders) or invoices with
respect to commodities, supplies, products or other personal property purchased
or sold by the Company in the Ordinary Course of Business), which is not
cancelable by the Company without penalty in excess of $50,000 upon less than
one month's prior notice and (i) which involved during 1997 (or is reasonably
anticipated to involve during 1998), annual payments in excess of $250,000; or
(ii) was not entered into in the Ordinary Course of Business.
The Company has made available to the Buyer a correct and complete copy of each
Material Contract. With respect to each Material Contract listed and except as
set forth in Section 2.15 of the Disclosure Schedule: (i) the Material Contract
is legal, valid, binding and enforceable and in full force and effect with
respect to the Company, and to the knowledge of the Company and the Company
Stockholders, with respect to each other party thereto; (ii) the Material
Contract will continue to be legal, valid, binding and enforceable and in full
force and effect with respect to the Company, and to the knowledge of the
Company and the Company Stockholders, with respect to each other party thereto
prior to the Closing immediately following the Closing in accordance with the
terms thereof as in effect; and (iii) neither the Company nor, to the knowledge
of the Company Stockholders, any other party, is in breach or violation of, or
default under, any such Material Contract, and no event or action has occurred,
is pending or, to the knowledge of the Company and any Company Stockholder, is
threatened, which, after the giving of notice, with lapse of time, or otherwise,
would constitute a breach of default by the Company or, to the knowledge of the
Company and any Company Stockholder, any other party under
-13-
such Material Contract. The Company is not a party to any oral contract,
agreement or other arrangement which, if reduced to written form, would be
required to be listed in Section 2.15 of the Disclosure Schedule under the terms
of this Section 2.15.
2.16 Accounts Receivable. All accounts receivable of the Company reflected
on the Most Recent Balance Sheet are valid receivables subject to no material
setoffs or counterclaims and are current and collectible, net of the applicable
reserves for bad debts, returns (including fiscal year-end credit memos) and
warranties on the Most Recent Balance Sheet. All accounts receivable reflected
in the financial or accounting records of the Company that have arisen since the
Balance Sheet Date are valid receivables subject to no setoffs or counterclaims
and are collectible, net of reserves for bad debts, returns and warranties in an
amount proportionate to the reserve shown on the Most Recent Balance Sheet.
2.17 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
2.18 Insurance. Section 2.18 of the Disclosure Schedule sets forth each
insurance policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which the
Company is a party or otherwise a named insured or the beneficiary. With respect
to each such insurance policy: (i) such policy is enforceable and in full force
and effect; (ii) such policy will continue to be enforceable and in full force
and effect immediately following the Closing in accordance with the terms
thereof as in effect prior to the Closing; (iii) the Company is not in breach or
default (including with respect to the payment of premiums or the giving of
notices) under such policy, and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default or permit termination,
modification or acceleration, under such policy; and the Company has not
received any notice from the insurer disclaiming coverage or reserving rights
with respect to a particular claim or such policy in general. The Company is
covered by insurance in scope and amount customary and reasonable for the
business in which it is engaged.
2.19 Litigation. Except as set forth in Schedule 2.19 of the Disclosure
Schedule, there is no action, suit, proceeding or claim before any Governmental
Entity or arbitrator pending, or, to the knowledge of the Company and the
Company Stockholders, threatened against the Company, or any of its officers or
directors (in their capacities as such) that, individually or in the aggregate,
is reasonably likely to have a Company Material Adverse Effect. There is no
judgement, injunction, decree or order against the Company that is reasonably
likely to have a Company Material Adverse Effect.
2.20 Employees.
(a) Section 2.21 of the Disclosure Schedule contains a list of all
employees of the Company whose annual rate of compensation exceeds $75,000 per
-14-
year, along with the position and the annual rate of compensation of each such
person. To the knowledge of the Company and the Company Stockholders and except
as set forth in Section 2.20 of the Disclosure Schedule, no such employee has
any plans to terminate employment with the Company.
(b) The Company is not a party to or bound by any collective
bargaining agreement. Neither Company nor any Company Stockholder have knowledge
of any material organizational effort made or threatened, either currently or
within the past two years, by or on behalf of any labor union with respect to
employees of the Company.
2.21 Employee Benefits.
(a) Section 2.21(a) of the Disclosure Schedule contains a complete and
accurate list of all Employee Benefit Plans (as defined below) maintained, or
contributed to, by the Company. For purposes of this Agreement, "Employee
Benefit Plan" means any "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (a "Pension Benefit Plan"), any "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) (a "Welfare Benefit Plan"), and any other
written or oral plan, agreement or arrangement involving direct or indirect
compensation, including without limitation insurance coverage, severance
benefits, disability benefits, sick pay, vacation pay (including any policy
concerning accrued vacation, sick days or earned time off), deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation. Complete and accurate copies of (i) all Employee Benefit Plans
which have been reduced to writing, (ii) written summaries of all unwritten
Employee Benefit Plans, (iii) all related trust agreements, insurance contracts
and summary plan descriptions, and (iv) all annual reports filed on IRS Form
5500, 5500C or 5500R for the last five plan years for each Employee Benefit
Plan, have been made available to the Buyer. Each Employee Benefit Plan has been
administered in all material respects in accordance with its terms and the
Company has in all material respects met its obligations with respect to such
Employee Benefit Plan and has made all required contributions thereto. The
Company and all Employee Benefit Plans are in compliance in all material
respects with the currently applicable provisions of ERISA and the Code and the
regulations thereunder.
(b) To the knowledge of the Company and the Company Stockholders,
there are no investigations by any Governmental Entity, termination proceedings
or other claims (except claims for benefits payable in the normal operation of
the Employee Benefit Plans and proceedings with respect to qualified domestic
relations orders), suits or proceedings against or involving any Employee
Benefit Plan or asserting any rights or claims to benefits under any Employee
Benefit Plan that could give rise to any material liability.
(c) All the Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
-▇▇-
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended or operated since
the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its
qualification or materially increase its cost.
(d) Neither the Company, nor any ERISA Affiliate has ever maintained
an Employee Benefit Plan subject to Section 412 of the Code or Title IV of
ERISA. For purposes of this Agreement, "ERISA Affiliate" means any entity which
is or at any applicable time was a member of (i) a controlled group of
corporations (as defined in Section 414(b) of the Code), (ii) a group of trades
or businesses under common control (as defined in Section 414(c) of the Code),
or (iii) an affiliated service group (as defined under Section 414(m) of the
Code), any of which includes the Company.
(e) At no time has the Company or any ERISA Affiliate been obligated
to contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
(f) There are no unfunded obligations under any Employee Benefit Plan
providing benefits after termination of employment to any employee of the
Company (or to any beneficiary of any such employee), including but not limited
to retiree health coverage and deferred compensation, but excluding continuation
of health coverage required to be continued under Section 4980B of the Code or
other applicable law and insurance conversion privileges under state law.
(g) The Company represents and warrants that and, to the knowledge of
the Company Stockholders, the Company Stockholders represent that no act or
omission has occurred and no condition exists with respect to any Employee
Benefit Plan maintained by the Company or any ERISA Affiliate that would subject
the Company or any ERISA Affiliate to (i) any material fine, penalty, tax or
liability of any kind imposed under ERISA or the Code or (ii) any contractual
indemnification or contribution obligation protecting any fiduciary, insurer or
service provider with respect to any Employee Benefit Plan.
(h) No Welfare Benefit Plan is funded by, associated with, or related
to a "voluntary employee's beneficiary association" within the meaning of
Section 501(c)(9) of the Code.
(i) Each Employee Benefit Plan is amendable and terminable in
accordance with its terms.
(j) Except as disclosed on Section 2.21(j) of the Disclosure Schedule,
the execution and performance of this Agreement will not result in (i) payments
(or
-16-
transfers of property) which may constitute "parachute payments" within the
meaning of Section 280G of the Code, (ii) the acceleration of any benefits,
vesting or calculation of benefits under any Employee Benefit Plan or any
agreement or plan providing stock options, restricted stock, stock appreciation
rights or stock purchase plan. In addition, set forth in Section 2.2(j) of the
Disclosure Schedule is each agreement with any stockholder, director, executive
officer or other key employees providing (i) any term of employment or
compensation guarantee or (ii) providing any severance benefits or other
benefits after termination of employment.
(k) All life insurance benefits provided to Seller's employees other
than (i) basic group term life insurance, or (ii) benefits provided to ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇ ("Executive Life Benefits"), are subject
to the terms of the Executive Wealth Accumulation Plan and effective upon the
Closing, the Company will have no further obligation to pay premiums for any
such Executive Life Benefits and any collateral assignment agreements in force
with respect to such Executive Life Benefits will terminate by their terms and
any cash value in which the Company had an interest under such agreements will
be considered a taxable bonus to the insured employee. All life insurance
benefits provided to ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇ are set forth
in Section 2.21 of the Disclosure Schedule.
2.22 Environmental Matters.
(a) To the knowledge of the Company and the Company Stockholders, the
Company has complied in all material respects with all applicable Environmental
Laws (as defined below). There is no pending or, to the knowledge of the Company
and the Company Stockholders, threatened civil or criminal litigation, written
notice of material violation, formal administrative proceeding, or
investigation, inquiry or information request by any Governmental Entity,
relating to any Environmental Law involving the Company. For purposes of this
Agreement, "Environmental Law" means any federal, state or local law, statute,
rule or regulation or the common law relating to the environment or occupational
health and safety, including without limitation any statute, regulation or order
pertaining to (i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous materials or substances or solid or hazardous
waste; (ii) air, water and noise pollution; (iii) groundwater and soil
contamination; (iv) the release or threatened release into the environment of
industrial, toxic or hazardous materials or substances, or solid or hazardous
waste, including without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v) the protection
of wildlife, marine life and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels, abandoned or
discarded barrels, and other closed receptacles; (vii) health and safety of
employees and other persons; and (viii) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or handling of
pollutants, contaminants, toxic or hazardous materials or substances or oil or
petroleum products or solid or hazardous waste. As used above, the terms
"release" and "environment" shall have the meaning set forth in the federal
Comprehensive Environmental Response, Compensation and Liability and Response
Act of 1980 ("CERCLA").
-17-
(b) To the knowledge of the Company and the Company Stockholders,
there have been no releases of any Materials of Environmental Concern (as
defined below) into the environment at any parcel of real property or any
facility formerly or currently owned, operated or controlled by the Company,
except in compliance with Environmental Laws. With respect to any such releases
of Materials of Environmental Concern, the Company has given all required
notices to Governmental Entities (copies of which have been made available to
the Buyer). Neither the Company nor any Company Stockholder is aware of any
releases of Materials of Environmental Concern at parcels of real property or
facilities other than those owned, operated or controlled by the Company that
could reasonably be expected to have an impact on the real property or
facilities owned, operated or controlled by the Company. For purposes of this
Agreement, "Materials of Environmental Concern" means any chemicals, pollutants
or contaminants, hazardous substances (as such term is defined under CERCLA),
solid wastes and hazardous wastes (as such terms are defined under the federal
Resource Conservation and Recovery Act), toxic materials, oil or petroleum and
petroleum products, or any other material subject to regulation under any
Environmental Law.
(c) Set forth in Section 2.22(c) of the Disclosure Schedule is a list
of all environmental reports, investigations and audits known to the Company or
any Company Stockholder relating to premises currently or previously owned or
operated by the Company (whether conducted by or on behalf of the Company or a
third party, and whether done at the initiative of the Company or directed by a
Governmental Entity or other third party) which the Company has possession of or
access to. Complete and accurate copies of each such report, or the results of
each such investigation or audit, have been made available to the Buyer.
(d) Neither the Company nor any Company Stockholder is aware of any
material environmental liability of any solid and hazardous waste transporter or
treatment, storage or disposal facilities that have been utilized by the
Company.
2.23 Legal Compliance. The Company, and the conduct and operations of its
business, are currently in compliance with each law (including rules and
regulations thereunder) of any federal, state, local or foreign government, or
any Governmental Entity, which (i) affects or relates to this Agreement or the
transactions contemplated hereby or (ii) is applicable to the Company or its
business, except for any violation of or default under a law referred to in
clause (ii) above which reasonably may be expected not to have a Company
Material Adverse Effect.
2.24 Permits. Section 2.24 of the Disclosure Schedule sets forth a list of
all material permits, licenses, registrations, certificates, orders or approvals
from any Governmental Entity (including without limitation those issued or
required under Environmental Laws and those relating to the occupancy or use of
owned or leased real property) ("Permits") issued to or held by the Company.
Such listed Permits are the only material Permits that are required for the
Company to conduct its business as presently conducted or as proposed to be
conducted by the Company, except for those the absence of which would not have a
Company Material Adverse Effect.
-18-
Each such Permit is in full force and effect and, to the knowledge of the
Company and the Company Stockholders, no suspension or cancellation of such
Permit is threatened and there is no basis for believing that such Permit will
not be renewable upon expiration. Each such Permit will continue in full force
and effect immediately following the Closing.
2.25 Certain Business Relationships With Affiliates. Except as set forth in
Sections 2.11, 2.15 or 2.25, or disclosed in the Disclosure Schedule, no
Affiliate of the Company (i) owns any property or right, tangible or intangible,
which is used in the business of the Company, (ii) has any claim or cause of
action against the Company, or (iii) owes any money to, or is owed money by, the
Company (the agreements, arrangements and relationships described in this
sentence are hereinafter referred to as "Related Party Transactions"). Section
2.25 of the Disclosure Schedule describes any Related Party Transactions which
are reflected in the Financial Statements.
2.26 Brokers' Fees. The Company has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement, other than the fees and expenses of
▇.▇. ▇▇▇▇▇▇▇ Group, L.L.C., as provided in a letter agreement, a copy of which
has been made available to the Buyer.
2.27 Books and Records. The minute books and other similar records of the
Company contain true and complete records of all material actions taken at any
meetings of the Company's stockholders, Board of Directors or any committee
thereof and of all written consents executed in lieu of the holding of any such
meeting. The books and records of the Company accurately reflect in all material
respects the assets, liabilities, business, financial condition and results of
operations of the Company and have been maintained in accordance with good
business and bookkeeping practices.
2.28 Customers and Suppliers. Section 2.28 of the Disclosure Schedule sets
forth a list of (a) each customer that accounted for more than 1% of the
revenues of the Company during the last full fiscal year or the interim period
through the Balance Sheet Date and the amount of revenues accounted for by such
customer during each such period and (b) each supplier that is the sole supplier
of any significant product to the Company, for which significant product there
does not exist, in the reasonable judgment of the Company Stockholders, an
alternate supplier from which the Company could acquire such significant product
on commercially reasonable terms. No such customer or supplier has indicated
within the past year that it will stop, or decrease the rate of, buying products
or supplying products, as applicable, to the Company.
2.29 Accounting and Tax Matters. To the knowledge of the Company
Stockholders, after consulting with the Company's independent auditors, neither
the Company nor any of its Affiliates has through the date of this Agreement
taken or agreed to take any action that would (i) prevent the Company and the
Buyer from accounting for the business combination to be effected by the Merger
as a "pooling of
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interests" in conformity with GAAP or (ii) prevent the Merger from constituting
a transaction qualifying as a reorganization under Section 368(a) of the Code.
2.30 Investment Representations.
(a) Each Company Stockholder is acquiring the Merger Shares for its
own account for investment only, and not with a view to, or for sale in
connection with, any distribution of the Merger Shares in violation of the
Securities Act or any rule or regulation under the Securities Act.
(b) Each Company Stockholder has had adequate opportunity to obtain
from representatives of the Buyer such information about the Buyer as is
necessary to evaluate the merits and risks of its investment in the Buyer.
(c) Each Company Stockholder has sufficient expertise in business,
financial and investment matters to be able to evaluate the risks involved in
the acquisition of the Merger Shares and to make an informed investment decision
with respect to such acquisition.
(d) Each Company Stockholder understands that the Merger Shares have
not been registered under the Securities Act and are "restricted securities"
within the meaning of Rule 144 under the Securities Act; and the Merger Shares
cannot be sold, transferred or otherwise disposed of unless they are
subsequently registered under the Securities Act or an exemption from
registration is then available.
(e) Each Company Stockholder understands that a legend substantially
in the following form will be placed on each certificate representing the Merger
Shares:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be sold, transferred or otherwise disposed of in the
absence of an effective registration statement under such
Act or an opinion of counsel satisfactory to the corporation
to the effect that such registration is not required."
(f) Each Company Stockholder is an "accredited investor" within the
meaning of Regulation D under the Securities Act.
2.31 Affiliates. Section 2.31 of Disclosure Schedule sets forth those
persons who are, in the Company's reasonable judgment, Affiliates of the
Company.
2.32 Disclosure. No representation or warranty by the Company or any
Company Stockholder contained in this Agreement, and no statement contained in
the Disclosure Schedule or any other document, certificate or other instrument
delivered to or to be delivered by or on behalf of the Company or any Company
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Stockholder pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary, in light of the circumstances under which it was or will be made, in
order to make the statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary jointly and severally
represents and warrants to the Company and the Company Stockholders that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure schedule provided by Buyer to the Company on the date
hereof (the "Buyer Disclosure Schedule"). The Buyer Disclosure Schedule shall be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article III, and the disclosures in any paragraph of the Buyer
Disclosure Schedule shall qualify other paragraphs in this Article III only to
the extent it is clear from a reading of the disclosure that such disclosure is
applicable to such other paragraphs.
3.1 Organization. Each of the Buyer and the Transitory Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation. Each of the Buyer and the Transitory
Subsidiary is duly qualified to conduct business and is in corporate and tax
good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification, except for any such failure to be so qualified and in good
standing that would not, either individually or in the aggregate, have a Buyer
Material Adverse Effect. Each of the Buyer and the Transitory Subsidiary has all
requisite corporate power and authority to carry on the businesses in which it
is engaged and to own and use the properties owned and used by it. Each of the
Buyer and the Transitory Subsidiary has furnished to the Seller true and
complete copies of its Certificate of Incorporation and By-laws, each as amended
and as in effect on the date hereof. Neither the Buyer or the Transitory
Subsidiary is in default under or in violation of any provision of its
Certificate of Incorporation or By-laws.
3.2 Capitalization. The authorized capital stock of the Buyer consists of
(i) 500,000,000 shares of Buyer Common Stock, of which 252,154,564 shares were
issued and outstanding and 59,149 shares were held in the treasury of the Buyer
as of March 1, 1998 and (ii) 5,000,000 shares of preferred stock, $0.01 par
value, none of which are outstanding. All of the issued and outstanding shares
of Buyer Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights and are associated with 16/81sts
of a right issuable pursuant to the Rights Agreement referred to in Section
1.5(i). All of the Merger Shares will be, when issued in accordance with this
Agreement, duly authorized, validly issued, fully paid, nonassessable and free
of all preemptive rights. Except as disclosed in
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Section 3.2 of the Buyer Disclosure Schedule or the Buyer Reports (as defined
below), as of March 1, 1998 there were no (i) outstanding or authorized options,
warrants, rights, agreements or commitments to which the Buyer is a party or
which are binding on the Buyer providing for the issuance, disposition or
acquisition of any of its capital stock, (ii) outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Buyer, and
(iii) agreements, voting trusts, proxies or understandings with respect to the
voting, or registration under the Securities Act of any shares of the capital
stock (or rights related thereto) of the Buyer.
3.3 Authorization of Transaction. Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and (in the case of the Buyer) the Escrow Agreement and to perform its
obligations hereunder and thereunder. Without limiting the generality of the
foregoing: the Board of Directors of the Buyer and the Transitory Subsidiary, at
meetings duly called and held (or by written consent) duly determined (in the
case of the Buyer) that the Merger is fair and in the best interests of the
Buyer and its stockholders and adopted this Agreement in accordance with the
provisions of the Delaware General Corporation Law. The execution and delivery
of this Agreement and (in the case of the Buyer) the Escrow Agreement by the
Buyer and the Transitory Subsidiary and the consummation by the Buyer and the
Transitory Subsidiary of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action on the part
of the Buyer and Transitory Subsidiary. This Agreement has been duly and validly
executed and delivered by the Buyer and the Transitory Subsidiary and
constitutes a valid and binding obligation of the Buyer and the Transitory
Subsidiary, enforceable against them in accordance with its terms, subject to
(i) bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
or relating to creditors' rights generally and (ii) the availability of
injunctive relief and other equitable remedies.
3.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and applicable foreign antitrust laws
(if any), and the filing of the Certificate of Merger as required by the
Delaware General Corporation Law, neither the execution and delivery of this
Agreement or (in the case of the Buyer) the Escrow Agreement by the Buyer or the
Transitory Subsidiary, nor the consummation by the Buyer or the Transitory
Subsidiary of the transactions contemplated hereby or (in the case of the Buyer)
thereby, will (i) conflict with or violate any provision of the charter or
By-laws of the Buyer or the Transitory Subsidiary, (ii) require on the part of
the Buyer or the Transitory Subsidiary any filing with, or any permit,
authorization, consent or approval of, any Governmental Entity, (iii) conflict
with, result in breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of, create in any
party any right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any material contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness or other arrangement to which the
Buyer or Transitory Subsidiary is a party or by which either is bound or to
which any of their assets or properties are
-22-
subject, except to the extent any such conflict, breach, default, acceleration,
termination, modification or cancellation, or the failure to give or obtain any
such notice, consent or waiver, would not have a Buyer Material Adverse Effect
(as defined below), or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Buyer or the Transitory Subsidiary
or any of their assets or properties. The term "Buyer Material Adverse Effect"
means any change, event or effect that is materially adverse to the business,
financial condition or results of operations of the Company, excluding any
changes in general economic conditions in the general economy as a whole, or
that adversely affects the ability of the Buyer to consummate the Merger.
3.5 Reports and Financial Statements. The Buyer has previously furnished to
the Company and the Company Stockholders complete and accurate copies, as
amended or supplemented, of its (a) Annual Report on Form 10-K for the fiscal
year ended February 1, 1997, as filed with the Securities and Exchange
Commission (the "SEC"), and (b) all other reports filed by the Buyer under
Section 13 of the Exchange Act with the SEC since February 1, 1997 (such reports
are collectively referred to herein as the "Buyer Reports"). The Buyer Reports
constitute all of the documents required to be filed by the Buyer under Section
13 of the Exchange Act with the SEC since February 1, 1997. As of their
respective dates, the Buyer Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial statements and
unaudited interim financial statements of the Buyer included in the Buyer
Reports (i) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, (ii) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby (except as may be
indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act and
except for normal recurring year-end adjustments (which will not be material)),
(iii) fairly present the consolidated financial condition, results of operations
and cash flows of the Buyer and its subsidiaries as of the respective dates
thereof and for the periods referred to therein, and (iv) are consistent with
the books and records of the Buyer and its subsidiaries.
3.6 Litigation. There is no action, suit, proceeding, or claim before any
Government Entity or arbitrator pending, or, to the Buyer's knowledge,
threatened against, the Buyer or any of its officers or directors (in their
capacities as such) that, individually or in the aggregate, is reasonably likely
to have a Buyer Material Adverse Effect. There is no judgment, injunction,
decree or order against the Buyer that is reasonably likely to have a Buyer
Material Adverse Effect.
3.7 Accounting and Tax Matters. To the knowledge of the Buyer, after
consulting with its independent auditors, neither the Buyer nor any of its
Affiliates has through the date of this Agreement taken or agreed to take any
action that would (i) prevent the Company and the Buyer from accounting for the
business combination
-23-
to be effected by the Merger as a "pooling of interests" in conformity with GAAP
or (ii) prevent the Merger from constituting a transaction qualifying as a
reorganization under Section 368(a) of the Code.
3.8 Absence of Certain Changes. Since January 31, 1998, there has occurred
no event or development which has had, or could reasonably be expected to have
in the future, a Buyer Material Adverse Effect.
3.9 Taxes. Buyer has (i) filed all federal, state, local and foreign tax
returns and reports required to be filed by it prior to the date of this
Agreement (taking into account extensions), (ii) paid or accrued all Taxes due
and payable, and (iii) paid or accrued all Taxes for which a notice of
assessment or collection has been received (other than amounts being contested
in good faith by appropriate proceedings), except in the case of clause (i),
(ii) or (iii) for any such filings, payments or accruals which are not
reasonably likely, individually or in the aggregate, to have a Buyer Material
Adverse Effect. Neither the Internal Revenue Service nor any other taxing
authority has asserted any claim for taxes, or to the knowledge of Buyer, is
threatening to assert any claim for Taxes, which claims, individually or in the
aggregate, are reasonably likely to have a Buyer Material Adverse Effect. There
are no liens for taxes upon the assets of Buyer (other than liens for Taxes that
are not yet due or that are being contested in good faith by appropriate
proceedings), except for liens which are not reasonably likely, individually or
in the aggregate, to have a Buyer Material Adverse Effect.
3.10 Environmental Matters. The Buyer has complied in all material respects
with all applicable Environmental Laws. Except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Buyer
Material Adverse Effect, (i) there is no pending or, to the knowledge of the
Buyer, threatened civil or criminal litigation, written notice of material
violation, formal administrative proceeding, or investigation, inquiry or
information request by any Governmental Entity, relating to any Environmental
Law involving the Buyer, and (ii) there have been no releases of any Materials
of Environmental Concern into the environment at any parcel of real property or
any facility formerly or currently owned, operated or controlled by the Company,
except in compliance with Environmental Law.
3.11 Employee Benefit Plans
(a) Buyer has listed in Section 3.11 of the Buyer Disclosure Schedule
all employee benefit plans (as defined in Section 3(3) of ERISA) for the benefit
of, or relating to, any employee of Buyer or any ERISA Affiliate of Buyer
(together, the "Buyer Employee Plans").
(b) With respect to the Buyer Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Buyer, there exists no
condition or set of circumstances in connection with which Buyer could be
subject to any liability that is reasonably likely to have a Buyer Material
Adverse Effect under ERISA, the Code or any other applicable law.
-24-
(c) With respect to the Buyer Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with generally accepted accounting principles, on the financial
statements of Buyer, which obligations are reasonably likely to have a Buyer
Material Adverse Effect.
3.12 Compliance With Laws. Buyer has complied with, is not in violation of,
and has not received any notices of violation with respect to, any United States
or foreign federal, state or local statute, law or regulation with respect to
the conduct of its business, or the ownership or operation of its business,
except for failures to comply or violations which, individually or in the
aggregate, have not had and are not reasonably likely to have a Buyer Material
Adverse Effect.
3.13 Interim Operations of the Transitory Subsidiary. The Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities and
has conducted its operations only as contemplated by this Agreement.
3.14 Brokers' Fees. Neither the Buyer nor the Transitory Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement, except
for the fees and expenses of ▇▇▇▇▇▇▇, Sachs & Co.
3.15 Disclosure. The representations and warranties by the Buyer contained
in this Agreement, and any other document, certificate or other instrument
delivered by or on behalf of the Buyer pursuant to this Agreement, including the
Buyer Reports, taken together, do not contain any untrue statement of a material
fact or omit to state any material fact necessary, in light of the circumstances
under which they were made, in order to make the statements herein or therein
not misleading.
ARTICLE IV
COVENANTS
4.1 Reasonable Best Efforts; Notice and Consents; ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
(a) Each of the Company and the Buyer shall use its best efforts, to
the extent commercially reasonable ("Reasonable Best Efforts") (i) to take, or
cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary and proper under applicable law to consummate and make
effective the transactions contemplated hereby as promptly as practicable, (ii)
to obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders required to be
obtained or made by the Parties or any of their Affiliates in connection with
the authorization, execution and delivery of
-25-
this Agreement and the consummation of the transactions contemplated hereby
including, without limitation, the Merger, and (iii) as promptly as practicable,
to make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (A)
any applicable federal or state securities laws, (B) the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act
and any related governmental request thereunder, and (C) any other applicable
law. The Parties shall cooperate with each other in connection with the making
of all such filings, including providing copies of all such documents to the
non-filing Parties and its advisors prior to filing and, if requested, to accept
all reasonable additions, deletions or changes suggested in connection
therewith. Each of the Parties shall use its Reasonable Best Efforts to furnish
to the other Parties all information required for any application or other
filing to be made pursuant to the rules and regulations of any applicable law in
connection with the transactions contemplated by this Agreement.
(b) The Parties agree, and shall cause each of their respective
Affiliates, to cooperate and to use their respective Reasonable Best Efforts to
obtain any governmental clearances or approvals required for Closing under the
▇▇▇▇-▇▇▇▇▇- ▇▇▇▇▇▇ Act, the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇ Act, as
amended, the Federal Trade Commission Act, as amended, and any other Federal,
state or foreign law or, regulation or decree designed to prohibit, restrict or
regulate actions for the purpose or effect of monopolization or restraint of
trade (collectively "Antitrust Laws"), to respond to any government requests for
information under any Antitrust Law, and to contest and resist any action,
including any legislative, administrative or judicial action, and to have
vacated, lifted, reversed or overturned any decree, judgment injunction or other
order (an "Antitrust Order") that restricts, prevents or prohibits the
consummation of the Merger or any other transactions contemplated by this
Agreement under any Antitrust Law. The Parties hereto will consult and cooperate
with one another, in connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted by or on
behalf of any Party hereto in connection with proceedings under or relating to
any Antitrust Law. The Buyer shall be entitled to direct any proceedings or
negotiations with any Governmental Entity relating to any of the foregoing,
provided that it shall afford the Company a reasonable opportunity to
participate therein. Notwithstanding the foregoing, no Party shall be required
to take any action under Section 4.1(a) or Section 4.1(b) if the U.S. Department
of Justice or U.S. Federal Trade Commission authorizes its staff to seek a
preliminary injunction or restraining order to enjoin consummation of the Merger
unless the Buyer agrees to pay all costs and expenses (including, without
limitation attorneys' fees and expenses) necessary to resist and defend against
any such order or injunction.
(c) Each of the Parties shall give (and shall use their Reasonable
Best Efforts to cause their respective Affiliates to give) any notices to third
parties, and use (and cause their respective Affiliates to use) their Reasonable
Best Efforts to obtain any third party consents related to or required in
connection with the Merger that are (A) necessary to consummate the transactions
contemplated hereby, (B) disclosed or required to be disclosed in the Disclosure
Schedule or (C) required to prevent a
-26-
Company Material Adverse Effect or a Buyer Material Adverse Effect from
occurring prior to or after the Effective Time.
(d) No Company Stockholder shall take any action to rescind or modify
the written consent of stockholders of the Company approving the Merger.
4.2 Operation of Business. Except as contemplated by this Agreement
(including the Disclosure Schedule), during the period from the date of this
Agreement to the Effective Time, the Company shall conduct its operations in the
Ordinary Course of Business and in substantial compliance with all applicable
laws and regulations and, to the extent consistent therewith, use its Reasonable
Best Efforts to preserve intact its current business organization, keep its
physical assets in good working condition, normal wear and tear excepted, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in
any material respect. Without limiting the generality of the foregoing, except
as provided herein, prior to the Effective Time, the Company shall not, without
the written consent of the Buyer, which consent, in the cases of clauses (c),
(h), (k) or (n), shall not be unreasonably withheld:
(a) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) or authorize the issuance, sale
or delivery of, or redeem or repurchase, any stock of any class or any other
securities or any rights, warrants or options to acquire any such stock or other
securities;
(b) 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
except for cash dividends that may be paid in the manner set forth in Section
4.2 of the Disclosure Schedule;
(c) create, incur or assume any debt for borrowed money not currently
outstanding (including obligations in respect of capital leases); assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person or entity
(other than product warranties); or make any loans, advances or capital
contributions to, or investments in, any other person or entity;
(d) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement of the type described in
Section 2.21(j) or (except for normal increases in the Ordinary Course of
Business or at the direction of the Buyer) increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms
of, its directors, officers or employees, generally or individually, or pay any
benefit not required by the terms in effect on the date hereof of any existing
Employee Benefit Plan;
-27-
(e) acquire, sell, lease, encumber or dispose of any assets or
property, other than purchases and sales of assets in the Ordinary Course of
Business or as contemplated by the capital expenditure budget of the Company, a
copy of which has been provided to Buyer;
(f) amend its charter or By-laws;
(g) change in any material respect its accounting methods, principles
or practices, except insofar as may be required by a generally applicable change
in GAAP;
(h) discharge or satisfy any Encumbrance or pay any obligation or
liability other than in the Ordinary Course of Business;
(i) mortgage or pledge any of its property or assets or subject any
such assets to any Encumbrance;
(j) enter into, amend, terminate, take or omit to take any action that
would constitute a material violation of or default under, or waive any rights
under, any material contract or agreement;
(k) make or commit to make any capital expenditure in excess of
$1,000,000 in the aggregate;
(l) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of the Company set forth
in this Agreement becoming untrue or (ii) any of the conditions to the Merger
set forth in Article V not being satisfied;
(m) take any action that would jeopardize the treatment of the Merger
as a "pooling of interests" for accounting purposes;
(n) initiate, compromise or settle any material litigation or
arbitration proceeding; or
(o) agree in writing or otherwise to take any of the foregoing
actions.
4.3 Full Access. The Company and Buyer shall each permit (and Buyer shall
cause each of its subsidiaries to) permit representatives of the other Party to
have full access (at all reasonable times, and in a manner so as not to
interfere with normal business operations) to all premises, properties,
financial and accounting records, contracts, other records and documents, and
personnel, of or pertaining to the Company and Buyer and its subsidiaries, as
the case may be.
-28-
4.4 Exclusivity.
(a) Neither the Company nor any of the Company Stockholders shall, and
the Company shall use its Reasonable Best Efforts to cause its Affiliates and
each of its officers, directors, employees, representatives and agents not to,
directly or indirectly, (a) encourage, solicit, initiate, engage or participate
in discussions or negotiations with any person or entity (other than the Buyer)
concerning any merger, consolidation, sale of material assets, sale of Company
Shares, or other business combination involving the Company or any division or
business unit of the Company or (b) provide any non-public information
concerning the business, properties or assets of the Company to any person or
entity (other than the Buyer). The Company shall immediately notify the Buyer
of, and shall disclose to the Buyer all details of, any inquiries, discussions
or negotiations of the nature described in the first sentence of this Section
4.4.
(b) Without the prior written consent of the Company, Buyer shall not,
and shall use its Reasonable Best Efforts to cause each of its Affiliates and
each of its officers, directors, representatives and agents not to, encourage,
solicit, initiate, engage or participate in discussions or negotiations with any
person or entity (other than the Company and the Company Stockholders)
concerning any acquisition (whether by means of a merger, stock or asset
purchase, partnership or affiliation agreement, or otherwise) of any entity that
is engaged primarily in the sale of delivered office products and that has
annual revenues in its most recently completed fiscal year in excess of $200
million from such sales in the United States.
4.5 Monthly Financial Statements. Within 15 days after the end of each
month ending prior to the Closing, beginning with April 1998, the Company shall
furnish to the Buyer an unaudited income statement for such month and a balance
sheet as of the end of such month, prepared on a basis consistent with the
Financial Statements. Within 45 days after the end of each of its fiscal
quarters ending prior to the Closing, Buyer shall furnish to the Company its
Report on Form 10-Q for such quarter.
4.6 Pooling Accounting.
(a) From and after the date hereof and until the Effective Time, none
of the Parties shall knowingly take, and each Party shall use its Reasonable
Best Efforts to prevent its Affiliates from knowingly taking, any action, or
knowingly fail or failing to take any action, that is reasonably likely to
jeopardize the treatment of the Merger as a pooling of interests for accounting
purposes.
(b) Each Company Stockholder agrees that he will not sell, transfer or
otherwise dispose of, or reduce his interest in or risk relating to, any shares
of Buyer Common Stock until after such time as the Buyer has published (within
the meaning of Accounting Series Release No. 130, as amended, of the Securities
and Exchange Commission) financial results covering at least 30 days of combined
operations of the Surviving Corporation and the Buyer. Until the earlier of the
-29-
Effective Time or the termination of this Agreement, each Company Stockholder
agrees that he or she will not sell, transfer or otherwise dispose of, or reduce
his interest in or risk relating to, any Company Shares presently owned by such
Company Stockholder.
4.7 Nasdaq Listing. The Buyer shall use its Reasonable Best Efforts to
cause the Merger Shares to be approved for listing on the Nasdaq National Market
prior to or as of the Effective Time.
4.8 Indemnification.
(a) From and after the Effective Time, Buyer agrees that it will, and
will cause the Surviving Corporation to, indemnify and hold harmless each
present and former director and officer of the Company (the "Indemnified
Persons"), against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that the
Company would have been permitted under Delaware law and its certificate of
incorporation and by-laws in effect on the date hereof to indemnify such
Indemnified Person (and Buyer and the Surviving Corporation shall also advance
expenses as incurred to the fullest extent permitted under applicable law
provided the Indemnified Person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Indemnified Person is not entitled to indemnification).
(b) The provisions of this Section 4.8 are intended to be in addition
to the rights otherwise available to the current and former officers and
directors of the Company by law, charter, by-law or agreement, and shall operate
for the benefit of, and shall be enforceable by, each of the Indemnified
Persons, their heirs and their representatives.
(c) No Indemnified Person shall be indemnified by the Buyer or the
Surviving Corporation for any claim as to which the Buyer is entitled to be
indemnified by such Indemnified Person under Article VI hereof.
4.9 Benefit Plans. The Buyer agrees that, during the period commencing at
the Effective Time and ending on December 31, 1998, it will, and it will cause
the Surviving Corporation to, continue to provide to the employees of the
Surviving Corporation with benefits under employee benefit plans generally
available to all employees which are no less favorable in the aggregate than
those currently provided by the Company to such employees (it being agreed that
Buyer shall be responsible for the payment of all bonuses and other amounts
earned, vested or accrued under such plans prior to December 31, 1998,
regardless when such amounts are required to be paid).
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ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Obligations of the Buyer and the Transitory Subsidiary.
The obligation of each of the Buyer and the Transitory Subsidiary to consummate
the Merger is subject to the satisfaction or waiver by the Buyer of the
following conditions:
(a) Governmental Approvals. The Company shall have obtained from each
Governmental Entity all approvals, issuances, permits, consents and other
authorizations necessary for the consummation of the Merger.
(b) Pending Proceedings and Orders. No action, suit or proceeding
shall be pending by or before any Governmental Entity wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of the Merger, (ii) cause the Merger to be rescinded following
consummation or (iii) affect adversely the right of the Buyer to own, operate or
control any of the assets and operations of the Surviving Corporation following
the Merger, and no such judgment, order, decree, stipulation or injunction shall
be in effect.
(c) Representations and Warranties. The representations and warranties
of the Company and the Company Stockholders set forth in this Agreement that are
qualified as to materiality shall be true and correct, and the representations
and warranties of the Company and the Company Stockholders set forth in this
Agreement that are not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Effective
Time as though made on and as of the Effective Time, except to the extent such
representations and warranties address matters only as of a particular date (in
which case such representations and warranties shall remain true and correct or
true and correct in all material respects, as the case may be, as of such
earlier date).
(d) Covenants. The Company shall have performed or complied in all
material respects with its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Effective Time.
(e) Certificates. The Company and the Company Stockholders shall have
delivered to the Buyer and the Transitory Subsidiary a certificate (the "Company
Certificate") to the effect that each of the conditions specified in clauses (a)
through (d) of this Section 5.1 is satisfied in all respects.
(f) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. All applicable waiting periods (and any
extensions thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or
otherwise been terminated.
(g) Legal Opinion. The Buyer and the Transitory Subsidiary shall have
received from ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel to the Company, an opinion
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substantially in the form of Exhibit A attached to the Disclosure Schedule,
addressed to the Buyer and the Transitory Subsidiary and dated as of the Closing
Date.
(h) Pooling Letter. The Buyer shall have received a letter from Ernst
& Young LLP, addressed to the Buyer, regarding its concurrence with the Buyer's
management's conclusions as to the appropriateness of the pooling of interests
accounting under Accounting Principles Board Opinion No. 16 for the Merger, as
contemplated to be effected as of the date of the letter, it being agreed that
the Company, the Company Stockholders and the Buyer shall each provide
reasonable cooperation to Ernst & Young LLP to enable them to issue such a
letter.
(i) Third Party Consents. The Buyer shall have been furnished with
evidence satisfactory to it of the consent or approval of those third parties
whose consent or approval shall be required in connection with the Merger under
any Material Contract or Lease.
(j) Affiliate Agreement. The Buyer shall have received from each
Affiliate of the Company an executed Affiliate Agreement in the form attached
hereto as Exhibit B.
(k) Real Estate Agreements. The transactions contemplated by the
binding letters of interest of even date herewith relating to the sale, directly
or indirectly, to the Buyer of the properties leased to the Company in Agawam,
Massachusetts; Lebanon, Pennsylvania; Coppell, Texas; Lincolnshire, Illinois and
Canton, Georgia (the "Real Estate Agreements") shall have been consummated prior
to or concurrently with the consummation of the Merger.
5.2 Conditions to Obligations of the Company and the Company Stockholders.
The obligation of each of the Company and the Company Stockholders to consummate
the Merger is subject to the satisfaction or waiver by the Company of the
following conditions:
(a) Governmental Approval. The Buyer and the Transitory Subsidiary
shall have obtained from each Governmental Entity all approvals, issuances,
permits, consents and other authorizations necessary for the consummation of the
merger.
(b) Pending Proceedings and Orders. No action, suit or proceeding
shall be pending by or before any Governmental Entity wherein an unfavorable
judgment, order, decree, stipulation or injunction (i) would prevent
consummation of the Merger, or cause the Merger to be rescinded following
consummation or (ii) is reasonably likely to result in a Buyer Material Adverse
Effect after the Effective Time, and no such judgment, order, decree,
stipulation or injunction shall be in effect.
(c) Representations and Warranties. The representations and warranties
of the Buyer set forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of the Buyer
set
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forth in this Agreement that are not so qualified shall be true and correct in
all material respects, in each case as of the date of this Agreement and as of
the Effective Time as though made on and as of the Effective Time, except to the
extent such representations and warranties address matters only as of a
particular date (in which case such representations and warranties shall remain
true and correct or true and correct in all material respects, as the case may
be, as of such earlier date).
(d) Covenants. Each of the Buyer and the Transitory Subsidiary shall
have performed or complied in all material respects with its agreements and
covenants required to be performed or complied with under this Agreement as of
or prior to the Effective Time.
(e) Certificates. The Buyer shall have delivered to the Company a
certificate (the "Buyer Certificate") to the effect that each of the conditions
specified in clauses (a) through (d) of this Section 5.2 is satisfied in all
respects.
(f) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. All applicable waiting periods (and any
extensions thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or
otherwise been terminated.
(g) Legal Opinion. The Company Stockholders shall have received from
▇▇▇▇ and ▇▇▇▇ LLP, counsel to the Buyer and the Transitory Subsidiary, an
opinion substantially in the form of Exhibit A attached to the Buyer Disclosure
Schedule, addressed to the Company Stockholders and dated as of the Closing
Date.
(h) Nasdaq National Market. The Merger Shares shall have been
authorized for listing on the Nasdaq National Market.
(i) Pooling Letter. The Buyer shall have received a letter from Ernst
& Young LLP, addressed to the Buyer, regarding its concurrence with the Buyer's
management's conclusions as to the appropriateness of the pooling of interests
accounting under Accounting Principles Board Opinion No. 16 for the Merger, as
contemplated to be effected as of the date of the letter, it being agreed that
the Company, the Company Stockholders and the Buyer shall each provide
reasonable cooperation to Ernst & Young LLP to enable them to issue such a
letter.
(j) Real Estate Agreements. The transactions contemplated by the Real
Estate Agreements shall have been consummated prior to or concurrently with the
consummation of the Merger.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Company Stockholders. The Company Stockholders
(the "Indemnifying Parties") shall jointly and severally indemnify the
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Surviving Corporation and the Buyer (the "Indemnified Parties"), without
duplication, in respect of, and hold them harmless against, any and all debts,
obligations and other liabilities, monetary damages, fines, fees, penalties,
interest obligations, deficiencies, losses, and reasonable costs and expenses
(including without limitation amounts paid in settlement, interest, court costs,
costs of investigators, fees and expenses of attorneys, accountants, financial
advisors and other experts, and other expenses of litigation) (collectively,
"Damages") incurred or suffered by the Surviving Corporation or the Buyer
resulting from or relating to any (i) breach by the Company or Company
Stockholders of any representation, warranty, covenant or agreement of the
Company or Company Stockholders contained in Article II or Sections 4.2 or 4.6
of this Agreement (including representations and warranties in the Company
Certificate), other than any breach arising under Section 2.29(i), 4.2(m) or 4.6
as a result of transactions contemplated by this Agreement to occur prior to or
concurrently with the Merger, and (ii) any breach by any party (other than Buyer
or any subsidiary thereof) of any representation, warranty, covenant or
agreement contained in the definitive acquisition agreements to be entered into
pursuant to the Real Estate Agreements.
6.2 Indemnification Claims.
(a) An Indemnified Party seeking to assert rights to indemnification
under this Article VI shall give written notification to the Stockholder
Representatives of the commencement of any action, suit or proceeding relating
to a third party claim for which indemnification pursuant to this Article VI may
be sought. Such notification shall be given within 20 business days after
receipt by the Indemnified Party of notice of such action, suit or proceeding,
and shall describe (to the extent known by the Indemnified Party) the facts
constituting the basis for such action, suit or proceeding and the amount of the
claimed damages; provided, however, that no delay on the part of the Indemnified
Party in notifying the Stockholder Representatives shall relieve the
Indemnifying Parties of any liability or obligation hereunder except to the
extent of any damage or liability caused by or arising out of such failure.
Within 20 days after delivery of such notification, the Stockholder
Representatives may, upon written notice thereof to the Indemnified Party,
assume control of the defense of such action, suit or proceeding with counsel
reasonably satisfactory to the Indemnified Party, provided the Stockholder
Representatives acknowledge in writing to the Indemnified Party that any
damages, fines, costs or other liabilities that may be assessed against the
Indemnified Party in connection with such action, suit or proceeding constitute
Damages for which the Indemnified Party shall, subject to the limitations set
forth in Section 6.4, be indemnified pursuant to this Article VI. If the
Stockholder Representatives do not so assume control of such defense, the
Indemnified Party shall control such defense. The Party not controlling such
defense (the "Non-Controlling Party") may participate therein at their own
expense; provided that if the Stockholder Representatives assume control of such
defense and the Indemnified Party reasonably concludes that the Indemnifying
Parties and the Indemnified Party have conflicting interests or different
defenses available with respect to such action, suit or proceeding, the
reasonable fees and expenses of one counsel to the Indemnified Party shall be
considered "Damages" for
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purposes of this Agreement. The Party controlling such defense (the "Controlling
Party") shall keep the Non-Controlling Party reasonably advised of the status of
such action, suit or proceeding and the defense thereof and shall consider in
good faith recommendations made by the Non-Controlling Party with respect
thereto. The Non-Controlling Party shall furnish the Controlling Party such
information as it may have with respect to such action, suit or proceeding
(including copies of any summons, complaint or other pleadings which may have
been served on such party and any written claim, demand, invoice, billing or
other document evidencing or asserting the same) and shall otherwise cooperate
with and assist the Controlling Party in the defense of such action, suit or
proceeding and provide the Controlling Party and its counsel access to (and the
right to make copies of) the Surviving Corporation's books and records
pertaining to such matter. The Stockholder Representatives shall not agree to
any settlement of, or the entry of any judgment arising from, any such action,
suit or proceeding without the prior written consent of the Indemnified Party,
which shall not be unreasonably withheld, conditioned or delayed. The
Indemnified Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such action, suit or proceeding without the prior
written consent of the Stockholder Representatives, which shall not be
unreasonably withheld, conditioned or delayed; provided that if the Stockholder
Representatives do not assume the defense of such action, suit or proceeding
pursuant to this Section 6.2(a), the Indemnified Party shall be entitled to
agree to a settlement of, or the entry of any judgment arising from, such
action, suit or proceeding, after giving notice of the same to the Stockholder
Representatives, on such terms as the Indemnified Party in good faith may deem
appropriate.
(b) In order to seek indemnification under this Article VI, an
Indemnified Party shall give a written notification (a "Claim Notice") to the
Stockholder Representatives and the Escrow Agent which contains (i) a
description and the amount (the "Claimed Amount") of any Damages incurred as a
result of any final, unappealable judgment, settlement or acknowledgment of the
Stockholder Representatives or reasonably expected to be incurred by the
Indemnified Party as a result of such claim, (ii) a statement that the
Indemnified Party is entitled to indemnification under this Article VI for such
Damages and a reasonable explanation of the basis therefor, and (iii) a demand
for payment in the amount of such Damages.
(c) Within 20 days after delivery of a Claim Notice, the Stockholder
Representatives shall deliver to the Indemnified Party a written response (the
"Response") in which the Stockholder Representatives shall: (i) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount (in which
case the Response shall be accompanied by a copy of instructions to the Escrow
Agent to release to the Indemnified Party Escrow Shares having a Value (as
defined in the Escrow Agreement) equal to the Claimed Amount), (ii) agree that
the Indemnified Party is entitled to receive part, but not all, of the Claimed
Amount (the "Agreed Amount") (in which case the Response shall be accompanied by
a copy of instructions to the Escrow Agent to release to the Indemnified Party
Escrow Shares having a Value (as defined on the Escrow Agreement) equal to the
Agreed Amount or (iii) dispute that the Indemnified Party is entitled to receive
any of the Claimed
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Amount. If the Stockholder Representatives in the Response contest the payment
of all or part of the Claimed Amount, the Stockholder Representatives and the
Indemnified Party shall follow the procedures set forth in Section 6.2(d) for
the resolution of such dispute (a "Dispute").
(d) During the 60-day period following the delivery of a Response that
reflects a Dispute, the Stockholder Representatives and the Indemnified Party
shall use good faith efforts to resolve the Dispute. If the Dispute is not
resolved within such 60-day period, the Stockholder Representatives and the
Indemnified Party shall discuss in good faith the submission of the Dispute to a
mutually acceptable alternative dispute resolution procedure (which may be
non-binding or binding upon the parties, as they agree in advance), including
without limitation one administered by the American Arbitration Association or
the Center for Public Resources (the "ADR Procedure"). In the event the
Stockholder Representatives and the Indemnified Party agree upon an ADR
Procedure, such parties shall, in consultation with the chosen dispute
resolution service (the "ADR Service"), promptly agree upon a format and
timetable for the ADR Procedure, agree upon the rules applicable to the ADR
Procedure, and promptly undertake the ADR Procedure. The provisions of this
Section 6.2(d) shall not obligate the Stockholder Representatives and the
Indemnified Party to pursue an ADR Procedure or prevent either such party from
pursuing the Dispute in a court of competent jurisdiction; provided that, if the
Stockholder Representatives and the Indemnified Party agree to pursue an ADR
Procedure, neither the Stockholder Representatives nor the Indemnified Party may
commence litigation or seek other remedies with respect to the Dispute prior to
the completion of such ADR Procedure. Any ADR Procedure undertaken by the
Stockholder Representatives and the Indemnified Party shall be considered a
compromise negotiation for purposes of federal and state rules of evidence, and
all statements, offers, opinions and disclosures (whether written or oral) made
in the course of the ADR Procedure by or on behalf of the Stockholder
Representatives, the Indemnified Party or the ADR Service shall be treated as
confidential and, where appropriate, as privileged work product. Such
statements, offers, opinions and disclosures shall not be discoverable or
admissible for any purposes in any litigation or other proceeding relating to
the Dispute (provided that this sentence shall not be construed to exclude from
discovery or admission any matter that is otherwise discoverable or admissible).
The fees and expenses of any ADR Service used by the Stockholder Representatives
and the Indemnified Party shall be shared equally by the Indemnifying Parties
and the Indemnified Party.
(e) Each Company Stockholder irrevocably agrees that the Stockholder
Representatives shall have full power and authority on behalf of each Company
Stockholder to take any and all actions on behalf of, execute any and all
instruments on behalf of, and execute or waive any and all rights of, the
Company Stockholders under this Article VI, including, without limitation, the
power and authority to agree to, negotiate, enter into settlements of and demand
arbitration of any claim made under this Article VI. A written decision, act,
consent or instruction of a majority of the Stockholder Representatives shall
constitute a decision of the Stockholder Representatives and all Company
Stockholders and shall be final,
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binding and conclusive upon each such Company Stockholder, and the Escrow Agent
and Buyer may rely upon any written decision, act, consent or instruction of a
majority of the Stockholder Representatives as being the decision, act, consent
or instruction of the Stockholder Representatives and each and every such
Company Stockholder. The Buyer and Escrow Agent are hereby relieved from any
liability to any Company Stockholder for any acts done by them in accordance
with such decision, act, consent or instruction of the Stockholder
Representatives. The Stockholder Representatives shall have no liability to any
Company Stockholder for any action taken or omitted on behalf of the Company
Stockholders pursuant to this Article VI.
6.3 Survival. All representations and warranties contained in this
Agreement, the Company Certificate and the Buyer Certificate shall survive the
execution and delivery hereof and the Closing and continue until the first
anniversary of the Closing Date and shall not be affected by any examination
made for or on behalf of any Party or the knowledge of any of the Party's
officers, directors, stockholders, employees or agents. If an Indemnified Party
delivers to the Stockholder Representatives before expiration of a
representation or warranty, either a Claim Notice based upon a breach of such
representation or warranty, or a notice that, as a result a legal proceeding
instituted by or written claim made by a third party, the Indemnified Party
reasonably expects to incur Damages as a result of a breach of such
representation or warranty (an "Expected Claim Notice"), then such
representation or warranty shall survive until, but only for purposes of, the
resolution of the matter covered by such notice. If the legal proceeding or
written claim with respect to which an Expected Claim Notice has been given is
definitely withdrawn or resolved in favor of the Indemnified Party, the
Indemnified Party shall promptly so notify the Stockholder Representatives; and
if the Indemnified Party has delivered a copy of the Expected Claim Notice to
the Escrow Agent and shares have been retained in escrow after the Termination
Date (as defined in the Escrow Agreement) with respect to such Expected Claim
Notice, the Indemnified Party and the Stockholder Representatives shall promptly
deliver to the Escrow Agent a written notice executed by both parties
instructing the Escrow Agent to distribute such retained shares to the Company
Stockholders in accordance with the terms of Section 4 of the Escrow Agreement.
6.4 Limitations.
(a) Notwithstanding anything to the contrary herein, the Indemnifying
Parties shall be liable under this Article VI for only that portion of the
aggregate Damages which exceeds $2,500,000, and the maximum liability of the
Company Stockholders hereunder shall not exceed the aggregate Value (as defined
in the Escrow Agreement) of the Escrow Shares. For purposes solely of this
Article VI, all representations and warranties in Article II (other than
Sections 2.15 and 2.32) shall be construed as if the terms "material" and
references to "Company Material Adverse Effect" (and variations thereof) were
omitted from such representations and warranties.
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(b) Except with respect to claims based on fraud on behalf of the
Company or the Company Stockholders, after the Closing, the rights of the
Indemnified Parties under this Article VI shall be the exclusive remedy of the
Indemnified Parties with respect to claims resulting from or relating to any
representation or warranty contained in this Agreement.
(c) Except with respect to claims based on fraud on behalf of the
Company or the Company Stockholders, the Parties agree that the sole recourse of
the Indemnified Parties in respect of any claims under this Article VI shall be
the Escrow Shares and, other than the Escrow Shares, no Company Stockholders
shall have any obligation to make any other payment or otherwise be liable to
the Buyer, the Transitory Subsidiary, Surviving Corporation or any of the
Indemnified Parties hereunder.
(d) No Company Stockholder, in its capacity as such, shall have any
right of contribution against the Company or the Surviving Corporation with
respect to any breach by the Company of any of its representations or warranties
contained in this Agreement.
(e) The amount of any Damages of any Indemnified Party shall be
determined net of any United States or foreign federal, state or local income
Tax benefit realized by the Indemnified Party as a result of the incurrence of
such Damages (net of any increased tax liability that results from the receipt
of such indemnity payment) and shall be reduced by any amount received by the
Indemnified Party under any insurance policy with respect to the matter giving
rise to such Damages.
ARTICLE VII
REGISTRATION RIGHTS
7.1 Demand Registration. The Buyer shall use its Reasonable Best Efforts to
file with the Securities and Exchange Commission (the "SEC"), (i) within 60 days
following the Closing, a registration statement on Form S-3 (or its successors)
(or Form S-1, if Form S-3 (or its successor) is then unavailable to the Buyer)
covering the resale to the public by the Company Stockholders of up to 50% of
the Merger Shares (the "Initial Stockholder Registration Statement"), and (ii)
at the request of any of the Stockholder Representatives after the first
anniversary of the Closing, a second registration statement on Form S-3 covering
the resale to the public by the Company Stockholders of the balance of the
Merger Shares or any portion thereof (the "Second Stockholder Registration
Statement" and, with the Initial Stockholder Registration Statement, the
"Stockholder Registration Statements"). The Buyer shall use its Reasonable Best
Efforts to cause each Stockholder Registration Statement to be declared
effective by the SEC as soon as practicable after the filing thereof, provided
that the Initial Stockholder Registration Statement shall not be declared
effective until after financial results covering at least 30 days of combined
operations of the Company and the Buyer after the Effective Time shall have been
publicly released.
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The Buyer shall use its Reasonable Best Efforts to cause the Stockholder
Registration Statements to remain effective until the second anniversary of the
Closing Date or such earlier time as all of the Merger Shares covered by the
Stockholder Registration Statements have been sold pursuant thereto.
7.2 Piggyback Registration. If at any time the Buyer proposes to file a
registration statement with the SEC under the Securities Act for a public
offering of its Common Stock on a form and in a manner that would permit
registration of the Merger Shares for sale to the public under the Securities
Act (other than a registration statement on Form S-8 or S-4, or their respective
successors, and other than an offering of convertible notes or debentures or an
offering of Buyer Common Stock in connection with a standby commitment relating
to a call for redemption of outstanding convertible debentures), then:
(a) The Buyer in each case will notify in writing the Stockholder
Representatives of its intention to effect such a registration at least 15 days
prior to the proposed filing of the registration statement in connection
therewith (unless no Merger Shares may be included therein pursuant to clause
(d) below).
(b) Subject to the provisions of Section 7.2(c), the Buyer shall offer
each Company Stockholder the opportunity to include in such registration all or
such lesser amount of its Merger Shares (other than those covered by a
Stockholder Registration Statement then in effect) as each Company Stockholder
may request. Upon request of one or more such holders given in writing within 10
days after receipt of the notice described under clause (a) above, the Buyer,
subject to the provisions of clause (d), shall cause any such Merger Shares
specified by such Company Stockholder to be included in the registration
statement.
(c) If the registration of which the Buyer gives written notice under
clause (a) above involves an underwriting, the right of any Company Stockholder
to include shares in such registration shall be conditioned upon such Company
Stockholder's execution of an Underwriting Agreement in customary form with the
Underwriter or Underwriters selected for the underwriting by the Buyer except
the indemnities of each of the Company Stockholders shall be several and their
respective liabilities shall be limited to the proceeds received by them in the
offering.
(d) Notwithstanding anything contained in this Section 7.2 to the
contrary, if and to the extent that the managing underwriter(s) of such
registration advise the Buyer that the inclusion of the Merger Shares requested
by the Company Stockholders to be included in the registration statement would
adversely affect the proposed offering, the Buyer may limit the number of Merger
Shares to be included in the registration and underwriting (and such limitation
may be to zero), provided that in the event of any such limitation, the number
of shares to be included in such registration and offering (in addition to any
shares to be sold by the Buyer) shall be allocated among the Company
Stockholders and any other stockholders entitled by contract to include shares
therein, in proportion, as nearly as practicable, to the respective number of
shares of Buyer Common Stock then held by them.
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(e) If at any time after giving notice of its intention to register
any of its securities pursuant to clause (a) above and prior to the effective
date of the applicable registration statement filed in connection with such
registration, the Buyer shall determine for any reason not to register such
securities, the Buyer may, at its election, give written notice of such
determination to each Company Stockholder and thereupon shall be relieved of its
obligation to register any Merger Shares in connection with such registration.
7.3 Limitations on Registration Rights.
(a) The Buyer may, by written notice to the Company Stockholders, (i)
delay the filing or effectiveness of a Stockholder Registration Statement or
(ii) suspend a Stockholder Registration Statement after effectiveness and
require that the Company Stockholders immediately cease sales of shares pursuant
to a Stockholder Registration Statement, in the event that the Buyer is engaged
in any activity or transaction or preparations or negotiations for any activity
or transaction that the Buyer desires to keep confidential for business reasons,
if the Buyer determines in good faith that the public disclosure requirements
imposed on the Buyer under the Securities Act in connection with such
Stockholder Registration Statement would require disclosure of such activity,
transaction, preparations or negotiations, provided that the period of any such
delay or suspension shall not exceed 60 days in any 12-month period.
(b) If the Buyer delays or suspends a Stockholder Registration
Statement or requires the Company Stockholders to cease sales of shares pursuant
to paragraph (a) above, the Buyer shall, as promptly as practicable following
the termination of the circumstance which entitled the Buyer to do so, take such
actions as may be necessary to file or reinstate the effectiveness of the
Stockholder Registration Statement and/or give written notice to all Company
Stockholders authorizing them to resume sales pursuant to the Stockholder
Registration Statement. If as a result thereof the prospectus included in a
Stockholder Registration Statement has been amended to comply with the
requirements of the Securities Act, the Buyer shall enclose such revised
prospectus with the notice to Company Stockholders given pursuant to this
paragraph (b), and the Company Stockholders shall make no offers or sales of
shares pursuant to the Stockholder Registration Statement other than by means of
such revised prospectus.
7.4 Registration Procedures.
(a) In connection with the filing by the Buyer of a Stockholder
Registration Statement or a registration statement under Section 7.2
(collectively, a "Registration Statement"), the Buyer shall furnish to each
Company Stockholder a copy of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act.
(b) The Buyer shall use its Reasonable Best Efforts to register or
qualify the Merger Shares covered by a Registration Statement under the
securities
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laws of such states as the Company Stockholders shall reasonably request;
provided, however, that the Buyer shall not be required in connection with this
paragraph (b) to qualify as a foreign corporation or execute a general consent
to service of process in any jurisdiction.
(c) If the Buyer has delivered preliminary or final prospectuses to
the Company Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Buyer shall promptly
notify the Company Stockholders and, if requested by the Buyer, the Company
Stockholders shall immediately cease making offers or sales of shares under the
Stockholder Registration Statement and return all prospectuses to the Buyer. The
Buyer shall promptly provide the Company Stockholders with revised prospectuses
and, following receipt of the revised prospectuses, the Company Stockholders
shall be free to resume making offers and sales under the Registration
Statement.
(d) The Buyer shall pay the expenses incurred by it in complying with
its obligations under this Article VII, including all registration and filing
fees, Nasdaq listing fees, fees and expenses of counsel for the Buyer, and fees
and expenses of accountants for the Buyer, but excluding (i) any brokerage fees,
selling commissions or underwriting discounts incurred by the Company
Stockholders in connection with sales under a Registration Statement and (ii)
the fees and expenses of any counsel retained by Company Stockholders.
(e) During the period during which Buyer is obligated to use its
Reasonable Best Efforts to keep a Stockholder Registration Statement effective
pursuant to Section 7.1, the Buyer shall prepare and promptly file with the SEC
and promptly notify Company Stockholders named in such Stockholder Registration
Statement of the filing of any amendments or supplements to such Registration
Statement or prospectus as may be necessary to correct any statements or
omissions, if at any time when a prospectus relating to the Merger Shares is
required to be delivered under the Securities Act, any event with respect to the
Buyer shall have occurred as a result of which any such prospectus forming a
part of such Stockholder Registration Statement would include an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading; and, in addition, during such period,
prepare and file with the SEC promptly upon the reasonable written request of
the Stockholder Representatives, any amendments or supplements to the
Registration Statement or prospectus which may be necessary or advisable in
connection with the distribution of the Merger Shares;
(f) The Buyer shall prepare, promptly upon request of the Company
Stockholders or any underwriter(s) for the Company Stockholders made during the
period in which the Buyer is obligated to use its Reasonable Best Efforts to
keep a Stockholder Registration Statement effective, such amendment or
amendments to such Stockholder Registration Statement and such prospectus or
prospectuses as may be reasonably necessary to permit compliance with the
requirements of Section 10(a)(3) of the Securities Act;
-41-
(g) The Buyer shall advise the Company Stockholders promptly after the
Buyer shall receive notice or obtain knowledge of the issuance of any stop order
by the SEC suspending the effectiveness of any Registration Statement or
amendment thereto, or of the initiation or threatening of any proceeding for
that purpose, and promptly use its Reasonable Best Efforts to prevent the issue
of any stop order or obtain its withdrawal promptly as such stop order should be
issued;
(h) The Buyer shall furnish each Company Stockholder with copies of
such opinions of counsel and accountants' comfort letters (if any) as are
delivered (and addressed) to the Buyer in connection with the registration of
Merger Shares;
(i) The Buyer shall in connection with the preparation and filing of
each Registration Statement, give the holders of Merger Shares on whose behalf
such Merger Shares are to be registered, and their underwriter(s), if any, and
their respective counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included therein,
and each amendment thereof and supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss the
business of Buyer with its officers and independent public accountants who have
certified its financial as shall be necessary, in the opinion of such Company
Stockholders and such underwriters, or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act; and
(j) The Buyer shall make senior executives of Buyer available to
assist the underwriters with respect to, and accompanying the underwriters on
so-called "road shows," in connection with marketing efforts for and the
distribution and sale of Merger Shares pursuant to a Stockholder Registration
Statement.
7.5 Requirements of Company Stockholders. The Buyer shall not be required
to include any Merger Shares in a Registration Statement unless the Company
Stockholder owning such shares furnishes to the Buyer in writing such
information regarding such Company Stockholder and the proposed sale of Merger
Shares by such Company Stockholder as the Buyer may reasonably request in
writing in connection with such Registration Statement or as shall be required
in connection therewith by the SEC or any state securities law authorities.
7.6 Indemnification.
(a) The Buyer agrees to indemnify and hold harmless each Company
Stockholder whose shares are included in a Registration Statement, each person
who controls such Company Stockholder within the meaning of Section 15 of the
Securities Act, and each underwriter of the Merger Shares so registered and each
person who controls such underwriter, and their respective officers, directors,
partners, agents, employees and successors, against any losses, claims, damages,
expenses or liabilities to which such Company Stockholder may become subject by
reason of any untrue statement of a material fact contained in such Registration
Statement or any omission to state therein a fact required to be stated therein
or
-42-
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, expenses or liabilities arise out of or are based upon
information furnished to the Buyer by or on behalf of a Company Stockholder for
use in such Registration Statement. The Buyer shall have the right to assume the
defense and settlement of any claim or suit for which the Buyer may be
responsible for indemnification under this Section 7.6(a).
(b) Subject to the provisions of Section 7.2(c), each Company
Stockholder whose shares are included in a Registration Statement agrees to
indemnify and hold harmless the Buyer, each person who controls the Buyer within
the meaning of Section 15 of the Securities Act, each underwriter of any shares
of Buyer Common Stock so registered, each person who controls such underwriter
within the meaning of Section 15 of the Securities Act, and their respective
directors, officers, partners, agents, employees and successors, against any
losses, claims, damages, expenses or liabilities (including reasonable attorneys
fees) to which the Buyer or such directors and officers may become subject by
reason of any statement or omission in such Registration Statement made in
reliance upon, or in conformity with, a written statement by such Company
Stockholder furnished pursuant to Section 7.5.
7.7 Underwriting Offer. If a Stockholder Registration Statement involves an
underwritten public offering, the Buyer agrees to enter into an underwriting
agreement containing customary representations, warranties, covenants,
agreements and indemnities in connection therewith.
7.8 Assignment of Rights. A Company Stockholder may not assign any of its
rights under this Article VII except in connection with the transfer of some or
all of his or her Merger Shares to a child or spouse, or trust for their
benefit, provided each such transferee agrees in a written instrument delivered
to the Buyer to be bound by the provisions of this Article VII.
7.9 Rule 144. To the extent that the Buyer is subject to the filing and
reporting requirements of the Securities Act and the Exchange Act, the Buyer
will file the reports required to be filed by it under those acts and the rules
and regulations adopted by the SEC thereunder, and will take such further action
as the Stockholder Representatives may reasonably request, all to the extent
required from time to time to enable the Company Stockholders to sell Merger
Shares without registration under the Securities Act within the limitations and
exemptions provided by Rule 144 under the Securities Act, as such rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
7.10 No Inconsistent Agreements. Buyer shall not, on or after the date of
this Agreement, enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Company Stockholders in Article VII
of this Agreement or otherwise conflicts with the provisions hereof.
-43-
ARTICLE VIII
TERMINATION
8.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Effective Time as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent; or
(b) the Buyer or the Company may terminate this Agreement if there has
been a breach of any misrepresentation, warranty, covenant or agreement on the
part of the other Party set forth in this Agreement, which breach (i) causes the
condition set forth in Sections 5.1(c) or (d) (in the case of termination by the
Buyer) or Section 5.2(b) or (c) (in the case of termination by the Company) not
to be satisfied and (ii) shall not have been cured within 20 days following
receipt by the breaching party of written notice of such breach from the other
party; or
(c) the Buyer or the Transitory Subsidiary may terminate this
Agreement by giving written notice to the Company if the Closing shall not have
occurred on or before September 30, 1998 by reason of the failure of any
condition precedent under Section 5.1 hereof (unless the failure results
primarily from a breach by the Buyer or the Transitory Subsidiary of any
representation, warranty, covenant or agreement contained in this Agreement); or
(d) the Company may terminate this Agreement by giving written notice
to the Buyer and the Transitory Subsidiary if the Closing shall not have
occurred on or before September 30, 1998 by reason of the failure of any
condition precedent under Section 5.2 hereof (unless the failure results
primarily from a breach by the Company or the Company Stockholders of any
representation, warranty, covenant or agreement contained in this Agreement).
8.2 Effect of Termination. If any Party terminates this Agreement pursuant
to Section 8.1, all obligations of the Parties hereunder shall terminate without
any liability of any Party to any other Party (except for any liability of any
Party for a willful breach of this Agreement).
ARTICLE IX
OTHER AGREEMENTS
9.1 Press Releases and Announcements. No Party shall issue any press
release or other public disclosure relating to the subject matter of this
Agreement without the prior written approval of the other Parties; provided,
however, that the Buyer may make any public disclosure it believes in good faith
is required by law or regulation or stock market rules (in which case the Buyer
shall use its Reasonable
-44-
Best Efforts to advise the Company of the proposed disclosure prior to making
the disclosure).
9.2 No Third Party Beneficiaries. This Agreement (other than Section 4.8)
shall not confer any rights or remedies upon any person other than the Parties
and their respective successors and permitted assigns.
9.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, with respect to the subject matter hereof; provided that the
Agreement dated November 5, 1997 between the Buyer and the Company shall remain
in effect in accordance with its terms.
9.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; provided that the Transitory Subsidiary may assign its
rights, interests and obligations hereunder to an Affiliate of the Buyer.
9.5 Counterparts; Facsimile Signature. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. This Agreement may
be executed by facsimile signature.
9.6 Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
-45-
If to the Company or a
Company Stockholder: Quill Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Secretary
Copy to: ▇▇▇▇, Gerber & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Gerber, Esq.
If to the Stockholder
Representatives: ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o Quill Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Copy to: ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Gerber, Esq.
If to the Buyer: Staples, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Secretary
Copy to: ▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Transitory Subsidiary: Staples, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Secretary
Copy to: ▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
-46-
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdictions other than those of the State of Delaware.
9.9 Amendments and Waivers. This Agreement may be amended at any time prior
to the Effective Time by written agreement of all of the Parties hereto. No
waiver by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
9.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
9.11 Expenses. Except as set forth in Article VI and the Escrow Agreement,
each of the Parties shall bear its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
9.12 Construction. The language used in this Agreement shall be deemed to
be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise.
-47-
9.13 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-48-
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
STAPLES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------
Executive Vice President Finance
Title: and Chief Financial Officer
MUSKETEER ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------
Title: Vice President
-▇▇-
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------
Title: President
▇▇▇▇ ▇▇▇▇▇▇ as trustee of the ▇▇▇▇
▇▇▇▇▇▇ Trust dated January 18, 1984
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as trustee of the
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust dated
January 21, 1983
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇ ▇▇▇▇▇▇ Family
Trust #1 dated May 31, 1983 F/B/O
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇ ▇▇▇▇▇▇ Family
Trust #1 dated May 31, 1983 F/B/O
▇▇▇▇▇▇ ▇. Ring
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
-50-
The Northern Trust Company, as
trustee of the ▇▇▇▇ ▇▇▇▇▇▇ Family
Trust #2 dated May 31, 1983
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust #1 dated May 31, 1983 F/B/O
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust #1 dated May 31, 1983 F/B/O
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust #1 dated May 31, 1983 F/B/O
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust #2 dated May 31, 1983
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
-51-
The Northern Trust Company, as
trustee of the ▇▇▇▇ ▇▇▇▇▇▇ 1991
Term Trust #3 dated July 31, 1991
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
1991 Term Trust #3 dated July 31, 1991
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇ ▇▇▇▇▇▇ Family
Trust #2 dated May 31, 1983 F/B/O
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇ ▇▇▇▇▇▇ Family
Trust #2 dated May 31, 1983 F/B/O
▇▇▇▇▇▇ ▇. Ring
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1991
Family Trust #2 dated May 31, 1983
F/B/O ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
-52-
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust #2 dated May 31, 1983 F/B/O
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust, as trustee of the
▇▇▇▇ ▇▇▇▇▇▇ Family Trust #2 dated
May 31, 1983 F/B/O ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇ ▇▇▇▇▇▇ Family Trust
#2 dated May 31, 1983 F/B/O
▇▇▇▇▇▇ ▇. Ring
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust #2 dated May 31, 1983 F/B/O
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust #2 dated May 31, 1983 F/B/O
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
-53-
▇▇▇▇ ▇▇▇▇▇▇, as Trustee of the ▇▇▇▇
▇▇▇▇▇▇ Trust dated January 18, 1984
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇ ▇▇▇▇▇▇ Family Trust
#4 dated July 31, 1991 F/B/O
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇ ▇▇▇▇▇▇ Family Trust
#4 dated July 31, 1991 F/B/O
▇▇▇▇▇▇ ▇. Ring
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust #4 dated July 31, 1991 F/B/O
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust #4 dated July 31, 1991 F/B/O
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
-54-
The Northern Trust Company, as
trustee of the ▇▇▇▇ ▇▇▇▇▇▇ Family Trust
#4 dated July 31, 1991 F/B/O ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇ ▇▇▇▇▇▇ Family Trust
#4 dated July 31, 1991 F/B/O ▇▇▇▇▇▇
▇. Ring
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust #4 dated July 31, 1991 F/B/O
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust #4 dated July 31, 1991 F/B/O
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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The Northern Trust Company, as
trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust #4 dated July 31, 1991 F/B/O
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By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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The undersigned, being the duly elected Secretary of the Transitory
Subsidiary, hereby certifies that this Agreement has been adopted by a majority
of the votes represented by the outstanding shares of capital stock of the
Transitory Subsidiary entitled to vote on this Agreement.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
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Secretary
The undersigned, being the duly elected Secretary of the Company, hereby
certifies that this Agreement has been adopted by a majority of the votes
represented by the outstanding Company Shares entitled to vote on this
Agreement.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Secretary
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