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EXHIBIT 2.1
U.S. TECHNOLOGIES INC.
0000 XXXXXXXXXXX XXXXXX, X.X.
XXXXX 000
XXXXXXXXXX, X.X. 00000
(000) 000-0000
TELECOPIER (000) 000-0000
July 28, 2000
On-Site Sourcing, Inc.
000 Xxxxx 00xx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Gentlemen:
This "Agreement in Principle" sets forth our agreement concerning the
terms upon which U.S. Technologies Inc., a Delaware corporation ("USXX" or
"Buyer"), either directly or indirectly through a direct or indirect subsidiary
existing or to be formed by USXX will acquire by merger On-Site Sourcing, Inc.,
a Delaware corporation ("Seller" or "ONSS"). Buyer's acquisition of Seller is
hereinafter referred to as the "Merger." The respective boards of directors of
USXX and ONSS have approved this Agreement in Principle, and deem it advisable
and in the best interest of their respective shareholders to pursue the Merger
in accordance with the terms set forth herein.
1. The Merger is expected to be structured so that Buyer will be
the surviving corporation, with Seller becoming a direct or indirect
wholly-owned subsidiary of Buyer. The Merger will be structured as a tax-exempt
transaction for the parties (with respect to their assets) and their
shareholders (with respect to ONSS shares converted to USXX shares).
2. At the date (the "Closing Date") of the closing of the Merger
(the "Closing"), each issued and outstanding share of Common Stock (other than
dissenting shares, which cannot exceed 5%) shall be converted into the right to
receive that number of fully paid, non-assessable shares of USXX common stock
equal to (i) the quotient resulting from (x) $35,000,000 (the "Merger
Consideration") divided by (y) $1.00, divided by (ii) the number of shares of
Common Stock of ONSS outstanding plus the number of shares subject to options
and warrants that are the subject of paragraph 3(a) below. ONSS shareholders
shall have the right to elect cash consideration, subject to proration so that
at least 75% of ONSS shares are converted to USXX shares. The cash consideration
paid for any ONSS $35,000,000 divided by the number of shares
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July 28, 2000
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of Common Stock of ONSS outstanding (including all options and warrants deemed
converted into shares of ONSS Common Stock pursuant to paragraph 3 below). This
valuation assumes no material diminishment to ONSS's net book equity, for
example as a result of increased debt or expenses incurred prior to closing.
3. (a) ONSS shall take all such action as may be permitted
by the instruments governing outstanding options and non-publicly traded
warrants to purchase ONSS Common Stock (the "Options and Warrants") to cause the
Options and Warrants to become fully exercisable and vested prior to the merger.
ONSS and USXX shall in good faith negotiate and reflect in the Merger Agreement
(as hereinafter defined) mutually satisfactory terms and provisions under which
Options and Warrants not exercised before Closing will be converted into options
and warrants to purchase USXX Common Stock after Closing.
(b) Each warrant that is publicly traded (separately or
as part of the units that include shares of common stock) to purchase shares of
ONSS Common Stock at $6.00 per share shall, if not exercised prior to closing,
be exchanged for warrants to purchase shares of common stock of USXX in
accordance with the actual terms of the warrants relevant to an event like the
Merger.
4. At the Closing of the Merger, Xxxxxxxxxxx X. Xxxxxx will be
elected to serve on the Board of Directors of USXX and also will enter into a
three (3) year employment agreement to serve as the Chief Executive Officer of
USXX's ONSS unit. Xx. Xxxxxx'x base salary will be $200,000 per year, reviewed
annually by the Compensation Committee of the Board of Directors of USXX with
appropriate adjustment based on the performance of ONSS and Xx. Xxxxxx'x
contribution to the success of USXX. At the Closing of the Merger, Xx. Xxxxxx
will be granted options to purchase 500,000 shares of USXX common stock under
USXX's 1999 option plan, exercisable at the Conversion Price through the tenth
anniversary of the Closing except that these options would vest over three years
at the rate of 133,334 shares on the first, and 133,333 shares on each of the
second and third, anniversary of the closing of the Merger.
5. USXX will make up to 1,500,000 stock options for USXX shares
available for grant to employees of the ONSS operating unit at an exercise price
consistent with the Conversion Price. These grants will be made by the
Compensation Committee of the Board of Directors of USXX, taking into account
Xx. Xxxxxx'x suggestions.
6. USXX intends to make available to its ONSS operating unit at
least $5 million during the first eighteen months following the Closing. The use
of such funds would be based on requests by Xx. Xxxxxx, subject to the approval
of the USXX Board of Directors as to the application of funds in light of
anticipated returns on investment.
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7. Closing of the Merger is subject, among other things, to the
following conditions:
(a) The negotiation, execution and delivery in good faith
of a mutually satisfactory Agreement and Plan of
Merger (the "Merger Agreement"), which shall include
customary representations and warranties, covenants,
conditions, and other provisions usually included in
agreements governing transactions of similar size and
type, and others which are reasonable and appropriate
in the specific context of the Merger, and each
party's satisfaction that the representations and
warranties of the other party contained in the Merger
Agreement are true and complete.
(b) The receipt of any necessary regulatory and
third-party approvals and the expiration of any
waiting periods required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976 and any other
applicable law, without any action, proceeding or
investigation being commenced or threatened which
seeks to enjoin or delay consummation of the Merger
or to impose any materially burdensome restrictions
or onerous requirements on Buyer or Seller.
(c) All actions, proceedings, instruments and documents
required to carry out the transactions contemplated
hereby or incidental hereto and all other related
legal matters shall be reasonably satisfactory to and
approved by counsel for Buyer and Seller, and each
such counsel shall have been furnished with such
other instruments and documents as it shall have
reasonably requested.
(d) During the period from the date hereof through the
Closing Date, Seller and its direct or indirect
subsidiaries (the "Subsidiaries") shall operate their
respective businesses in the ordinary course
consistent with (i) past practices other than any
recent material events or changes that must be
excepted, and (ii) the description of Seller's
business set forth in Seller's annual report, and
there shall not have occurred since December 31, 1999
any change or development in or affecting the assets,
liabilities, business, operations, condition
(financial or other) or prospects of Seller or any of
Seller's Subsidiaries which, in any case or in the
aggregate, could, in the reasonable judgment of
Buyer, be materially adverse to Seller.
(e) No action, suit, proceeding or investigation shall
have been instituted or threatened which seeks to
restrain, restrict or prohibit or impose substantial
penalties or damages with respect to (or any
materially adverse
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relief or remedy in connection with) and no
injunction, restraining or similar order issued by a
court of competent jurisdiction or by any federal or
state regulatory or administrative agency shall be in
effect that restrains, restricts or prohibits or
imposes substantial penalties or damages with respect
to (or any other materially adverse relief or remedy
in connection with) the consummation of the Merger as
contemplated by this Agreement in Principle or, once
entered into, the Merger Agreement.
(f) There shall not have been any actions taken, or any
statute, rule, regulation, order, judgment or decree
proposed, enacted, promulgated, entered, issued,
enforced or deemed applicable by any foreign or
United States federal, state or local governmental
authority or agency, and there shall be no action,
suit or proceeding pending or threatened, which, in
Buyer's reasonable judgment, (i) makes or is likely
to make any of the transactions contemplated by this
Agreement in Principle illegal or imposes or may
impose material damages or penalties in connection
therewith, (ii) requires or is likely to require the
divestiture of any assets of USXX or Seller, or any
direct or indirect subsidiary of USXX or any material
assets of USXX, (iii) imposes or is likely to result
in the imposition of material limitations on the
ability of Buyer effectively to consummate the Merger
or makes the Merger illegal or subject to any
materially burdensome requirement or condition, or
(iv) otherwise prohibits or restricts consummation of
the Merger contemplated by this Agreement in
Principle or increases or is likely to increase in
any material respect the liabilities or obligations
arising out of any of such transactions.
(g) All consents and approvals of, and notices to and
filings with, any governmental authority or agency as
are required in connection with the consummation of
the transactions contemplated hereby shall have been
obtained, given and made, and all waiting periods, if
any are applicable to the consummation of such
transactions, imposed by any applicable law, need a
space rule or regulations shall have expired. All
consents and approvals of, and notices to and filings
with, any non-governmental persons required in
connection with the consummation of such transactions
shall have been obtained, given or made, except for
any thereof which, if not obtained, given or made
would not, individually or in the aggregate, have a
material adverse effect on the ability of any party
to consummate such transactions or on the assets,
liabilities, business, operation, condition
(financial or other) or prospects of the Seller or
the Subsidiaries, taken as a whole.
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(h) All of Seller's and Buyer's representations and
warranties shall be true and correct, and they shall
have performed their respective covenants, in all
material respects as of the Closing Date. Such
provisions will include Closing being subject to: the
effectiveness prior to Closing of USXX's charter
amendment to increase its authorized shares of common
stock to an amount at least adequate for all USXX
convertible securities, options (outstanding and
available for grant under its 1999 stock option plan)
and warrants to be converted or exercised, and for
the transactions contemplated by this Agreement in
Principle to be consummated; and USXX having obtained
satisfactory financing for the payment of the cash
consideration necessary to complete the Merger.
8. It is understood that, except as otherwise required by law,
all press releases or other public communications of any sort relating to the
subject matter of this Agreement in Principle and, once entered into the Merger
Agreement, and the method of their release or publication thereof, shall be
subject to the prior approval of each of the parties hereto, which approval
shall not be unreasonably withheld or delayed.
9. (a) As soon as practicable after entering into a
definitive Merger Agreement, USXX and ONSS shall take such reasonable steps as
are necessary for the prompt preparation and filing with the Securities and
Exchange Commission (the "SEC") of (i) proxy statements relating to Seller's and
Buyer's stockholder meetings to be held about or necessary for the Merger and
(ii) a registration statement on Form S-4 (and any amendments thereto) to be
filed by USXX with the SEC pursuant to the Securities Act of 1933, as amended,
to register the shares of common stock and the warrants to be issued as a result
of the Merger. ONSS insiders (directors, officers and present 10% or greater
ONSS stockholders) will be subject after Closing to a 90-day restriction on any
sale or transfer of their USXX shares received in the Merger.
(b) Prior to Closing, the parties will cooperate with
each other in good faith to the extent reasonably necessary to prepare the
Merger Agreement and other necessary documentation, in obtaining all necessary
consents from governmental and third parties and in complying with all
applicable regulatory requirements, in each case, as soon as reasonably
possible. Subject to paragraph 12(c) below: (x) either party may terminate this
Agreement in Principle if the Merger Agreement has not been entered into by
September 1, 2000, provided that the terminating party has acted in good faith
in its performance under this Agreement in Principle, and (y) in the event that
this Agreement in Principle is terminated or the Merger Agreement is not entered
into as a result of one party's failure to act in good faith in its performance
under this Agreement in Principle (the "non-performing party"), the other party,
if it has acted in good faith in its performance under this Agreement in
Principle, shall be entitled to
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the payment from the non-performing party of $1,000,000 as liquidated damages
for such non-performance.
(c) The parties' confidentiality and non-disclosure
agreement dated July 18, 2000 shall be deemed applicable to each party and their
exchange of confidential information for a two (2) year period from the date
hereof. Prior to Closing, each party shall supply the other party and its
officers, employees, attorneys, agents, accountants and other representatives
(collectively, "Agents"), free and full access to its management and its
properties, books and records, and will permit such persons to make extracts
from, and copies of, such books and records and will from time to time furnish
such additional financial and operating data and other information about its
financial condition, results of operations, business, properties, assets,
liabilities or prospects from time to time as reasonably requested in order to
complete due diligence and, once a Merger Agreement is entered into, to confirm
the accuracy of its representations and warranties, and the performance of its
covenants. Each party shall cause its independent certified public accountants
to make available to the other party's accountants their work papers relating to
its audited financial statements.
10. This Agreement in Principle, and the Merger Agreement once it
is entered into, may be terminated at any time prior to the Closing by either
USXX or ONSS if any court of competent jurisdiction in the United States or
other United States government body shall have issued an order, decree or ruling
or taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby or by the Merger Agreement and such order,
decree, ruling or other actions shall have become final and non-appealable.
11. Whether or not the transactions contemplated hereby are
consummated, all costs and expenses incurred in connection with this Agreement
in Principle, the Merger Agreement and the Merger will be paid by the party
incurring such costs and expenses.
12. (a) In consideration of USXX's execution and delivery of
this Agreement in Principle and its retention of counsel to assist it in
connection with the preparation of the Merger Agreement, ONSS agrees that, prior
to Closing, it will not, and will cause its Agent not to, solicit, encourage or
initiate (directly or indirectly) any discussions with, or provide any
information to, any corporation, partnership, person or other entity or group,
other than USXX and its Agents, for a merger, a consolidation, a share exchange,
any sale of assets, any issuance of securities including rights to acquire
securities, or any similar or other transaction contemplating or resulting in
the acquisition or change in control of, or a combination involving, ONSS or a
material portion of its assets (any such transaction being referred to herein as
an "Acquisition Proposal"). ONSS will immediately advise USXX if it receives any
Acquisition Proposal from any person. Notwithstanding anything in this paragraph
to the contrary, ONSS shall not be prohibited from responding to any inquiry
from, or providing any information to, any potential
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purchaser of ONSS if ONSS determines in good faith that such potential purchaser
is reasonably likely to be able to consummate its Acquisition Proposal,
including funding therefor, and is advised by King & Spalding that a failure to
so respond or provide information could result in a breach of fiduciary duty by
a member of the Board of Directors of ONSS.
(b) If at any time it determines, as permitted by (a)
above, to enter into a definitive agreement for an Acquisition Proposal, ONSS
will first give USXX five business days written notice, which shall include
copies of all proposed definitive agreements. USXX then shall have the right to
change the terms for its acquisition of ONSS to be at least economically
equivalent to such Acquisition Proposal, and ONSS shall agree to such changes
and not accept the Acquisition Proposal.
(c) If ONSS, upon receipt of an Acquisition Proposal and
its Board's exercise of its fiduciary duty as indicated above, abandons this
transaction (including by failing to seek or obtain ONSS stockholder approval
for the Merger), then ONSS shall pay USXX $1.5 million in connection with the
termination of this Agreement in Principle or the Merger Agreement as liquidated
damages for such termination. This obligation, and related no-shopping, Board
recommendation and stockholder meeting covenants, and termination provisions
including those in (a) and (b) above, shall be included in the Merger Agreement
in a form consistent with those used in public company mergers.
13. The directors and executive officers of ONSS shall, in their
capacity as a stockholder of ONSS, enter into a voting agreement for the benefit
of, and grant an irrevocable proxy to, USXX with respect to supporting the
Merger and not supporting any Acquisition Proposal. Such Agreement and proxy
will be delivered at the time the Merger Agreement is entered into.
14. This Agreement in Principle shall constitute a binding
agreement of USXX and ONSS. In addition to any other applicable remedies, USXX
and ONSS shall be entitled to specific enforcement hereof. This Agreement in
Principle, and once entered into the Merger Agreement, shall terminate on March
31, 2001 (subject to extension if necessary to complete SEC registrations), if
Closing has not occurred by such date.
15. So long as this Agreement in Principle or the Merger Agreement
is in effect, prior to the Closing of the Merger Seller will, and will cause its
Subsidiaries to, in all material respects: (i) operate their respective
businesses in the ordinary course; (ii) not incur any liabilities or purchase
any assets except in the ordinary course of business; (iii) not sell any
material assets; (iv) not transfer any assets to any affiliated entity except in
the ordinary course of business; (v) not make any material change in their
respective accounting policies or procedures; (vi) not declare or pay any
dividend or make any distribution; and (vii) not materially increase the
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compensation paid to its executives.
16. This Agreement in Principle, the Merger Agreement and any
related agreements and instruments shall be governed by and construed in
accordance with the laws of Delaware (without regard to its laws pertaining to
choice of law). Each party consents and agrees to adjudication in the Chancery
Court of Delaware of any dispute arising out of this Agreement in Principle, the
Merger Agreement or any related agreement or instrument.
[Rest of Page Left Blank Intentionally]
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If this Agreement in Principle accurately reflects our understanding,
please so indicate by signing the original and the duplicate of this letter, and
returning the executed duplicate to the undersigned, so that we can promptly
commence work on the Merger Agreement.
Very truly yours,
U.S. Technologies Inc.
By: /s/ C. Xxxxxxx Xxxxx
--------------------------------
C. Xxxxxxx Xxxxx
Co-Chairman of the Board
and Co-Chief Executive officer
ACCEPTED AND AGREED as of
this 28th day of July, 2000 by
ON-SITE SOURCING, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxxxxxx X. Xxxxxx
President and Chief Executive Officer
