Exhibit (d)(1)
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
dated as of
July 9, 2001
among
Full Line Distributors, Inc.,
Broder Bros., Co.
and
FLD Acquisition Corp.
Table of Contents
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Page
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I THE OFFER................................................................ 2
1.01 The Offer.......................................................... 2
1.02 Company Action..................................................... 3
1.03 Directors.......................................................... 5
II THE MERGER............................................................... 6
2.01 The Merger......................................................... 6
2.02 Conversion of Shares............................................... 7
2.03 Exchange of Shares................................................. 7
2.04 Dissenting Shares.................................................. 9
2.05 Stock Options...................................................... 9
2.06 Adjustment of the Offer Price, the Merger Consideration and the
Option Consideration............................................... 10
III THE SURVIVING CORPORATION................................................ 11
3.01 Articles of Incorporation.......................................... 11
3.02 Bylaws............................................................. 11
3.03 Directors and Officers............................................. 11
IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................ 11
4.01 Organization and Qualification; Subsidiaries....................... 11
4.02 Articles of Incorporation and Bylaws............................... 12
4.03 Capitalization..................................................... 12
4.04 Authority Relative to this Agreement............................... 13
4.05 Company Subsidiaries............................................... 13
4.06 No Conflict; Required Filings and Consents......................... 14
4.07 Compliance......................................................... 15
4.08 SEC Filings; Financial Statements.................................. 15
4.09 Disclosure Documents............................................... 16
4.10 Absence of Certain Changes or Events............................... 17
4.11 Change of Control.................................................. 19
4.12 Litigation......................................................... 19
4.13 Benefit Plans...................................................... 19
4.14 Taxes.............................................................. 21
4.15 Intellectual Property.............................................. 23
4.16 Licenses and Permits............................................... 25
4.17 Material Contracts................................................. 25
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4.18 Environmental Matters................................................ 26
4.19 Related Party Transactions........................................... 29
4.20 Properties and Assets................................................ 29
4.21 Labor Matters........................................................ 30
4.22 Insurance............................................................ 31
4.23 Customers and Suppliers.............................................. 31
4.24 Brokers.............................................................. 32
4.25 Applicability of State Takeover Statutes............................. 32
4.26 Voting Requirements.................................................. 32
4.27 Opinion of Financial Advisor......................................... 32
4.28 Transaction Expenses................................................. 32
V REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUBSIDIARY.............. 33
5.01 Organization and Qualification; Subsidiaries......................... 33
5.02 Articles of Incorporation and Bylaws................................. 33
5.03 Authority Relative to this Agreement................................. 34
5.04 No Conflict; Required Filings and Consents........................... 34
5.05 Documents Relating to Offer; Company Proxy Statement................. 35
5.06 Brokers.............................................................. 35
5.07 Financing............................................................ 35
5.08 Litigation........................................................... 36
VI COVENANTS OF THE COMPANY................................................... 36
6.01 Conduct of the Company............................................... 36
6.02 Stockholders' Meeting; Proxy Material................................ 40
6.03 Access to Information................................................ 41
6.04 No Solicitation...................................................... 42
6.05 Notices of Certain Events............................................ 44
6.06 SEC Reports.......................................................... 45
6.07 Financial Statements................................................. 45
6.08 Director Resignations................................................ 46
6.09 Option to Acquire Additional Shares.................................. 46
6.10 Termination of 401(k) Plan........................................... 46
VII COVENANTS OF BUYER......................................................... 47
7.01 Confidentiality...................................................... 47
7.02 Obligations of Merger Subsidiary..................................... 47
7.03 Voting of Shares..................................................... 47
7.04 Director and Officer Liability....................................... 47
7.05 Financing............................................................ 49
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VIII COVENANTS OF BUYER AND THE COMPANY........................................ 50
8.01 Further Actions..................................................... 50
8.02 Certain Filings..................................................... 50
8.03 Public Announcements................................................ 50
8.04 Delisting........................................................... 50
8.05 Stockholder Litigation.............................................. 51
8.06 Conveyance Taxes.................................................... 51
IX CONDITIONS TO THE MERGER.................................................. 51
9.01 Conditions to the Obligations of Each Party......................... 51
X TERMINATION; EXPENSES..................................................... 52
10.01 Termination......................................................... 52
10.02 Effect of Termination............................................... 53
10.03 Transaction Expenses; Termination Fee............................... 53
XI MISCELLANEOUS............................................................. 54
11.01 Notices............................................................. 54
11.02 Survival of Representations, Warranties and Covenants............... 55
11.03 Amendments; No Waivers.............................................. 55
11.04 Successors and Assigns.............................................. 56
11.05 Governing Law....................................................... 56
11.06 Certain Definitions................................................. 56
11.07 Specific Performance................................................ 57
11.08 Company Disclosure Schedule......................................... 57
11.09 Counterparts; Effectiveness......................................... 58
11.10 Headings............................................................ 58
11.11 No Third Party Beneficiaries........................................ 58
11.12 Entire Agreement.................................................... 58
11.13 Severability........................................................ 58
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AGREEMENT AND PLAN OF MERGER
AGREEMENT, dated as of July 9, 2001 (this "Agreement"), among Full
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Line Distributors, Inc., a Georgia corporation (the "Company"), Broder Bros.,
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Co., a Michigan corporation ("Buyer"), and FLD Acquisition Corp., a Georgia
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corporation and a wholly owned subsidiary of Buyer ("Merger Subsidiary").
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RECITALS
WHEREAS, the Boards of Directors of Buyer, the Merger Subsidiary and
the Company have each approved the acquisition of the Company by Buyer upon the
terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of the acquisition of the Company by Buyer,
Buyer proposes to cause Merger Subsidiary to make a tender offer (as it may be
amended from time to time as permitted under this Agreement, the "Offer") to
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purchase all the issued and outstanding shares (the "Shares") of common stock,
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no par value per share, of the Company (the "Common Stock"), at a price per
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Share of $2.95, or such higher price per Share cash consideration paid pursuant
to the Offer (the "Offer Price"), net to the seller in cash, on the terms and
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subject to the conditions set forth herein;
WHEREAS, the Boards of Directors of Buyer, the Merger Subsidiary and
the Company have each approved the merger (the "Merger") of Merger Subsidiary
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with and into the Company, or (at the election of Buyer) the Company with and
into Merger Subsidiary, in accordance with the terms of this Agreement and the
Georgia Business Corporation Code (the "Georgia Code") and with any other
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applicable law, whereby each issued Share not owned directly or indirectly by
Buyer or the Company shall be converted into the right to receive $2.95 per
Share in cash (or such higher price per Share cash consideration paid pursuant
to the Offer) and each then outstanding option to purchase Shares shall be
canceled with the holder thereof being entitled to receive thereof an amount in
cash equal to the Option Consideration (as defined herein);
WHEREAS, the Board of Directors of the Company has: (i) unanimously
determined that (x) the consideration to be paid for each Share in the Offer and
the Merger is fair to the stockholders of the Company and (y) the Offer and the
Merger are otherwise in the best interests of the Company and its stockholders;
(ii) unanimously approved this Agreement and the transactions contemplated
hereby; (iii) unanimously declared that this Agreement is advisable; (iv)
unanimously consented to the Offer; and (v) unanimously recommended that the
holders of Shares accept the Offer, tender their Shares pursuant to the Offer
and approve and adopt this Agreement; and
WHEREAS, simultaneously with the execution and delivery of this
Agreement, (i) Buyer and certain stockholders of the Company are entering into
an agreement (the "Stockholders Agreement" and, together with this Agreement,
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the "Transaction Agreements") pursuant to which such stockholders will agree to
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take specified actions in furtherance of the Offer and the Merger.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and the premises,
representations, warranties, covenants and agreement herein contained, the
parties hereto agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01 The Offer.
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(a) Provided that this Agreement shall not have been terminated in
accordance with Article X hereof and that none of the conditions set forth in
Exhibit A hereto shall have occurred, Buyer and Merger Subsidiary shall, as
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promptly as practicable following the date hereof and in no event later than 15
business days after the public announcement of the execution and delivery of
this Agreement, commence the Offer (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (including the rules and regulations
promulgated thereunder, the "Exchange Act")) to purchase all of the outstanding
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Shares at a price equal to the Offer Price, net to the seller in cash (subject
to reduction only for applicable federal back-up withholding taxes payable by
the seller). The obligation of Merger Subsidiary to accept for payment and to
pay for any Shares tendered in the Offer shall be subject only to the condition
that there shall be validly tendered prior to the expiration date of the Offer
and not withdrawn a number of Shares which, together with the Shares then owned
by Buyer or Merger Subsidiary, represents at least a majority of the
outstanding Shares on a fully diluted basis on the date of purchase (the
"Minimum Condition") and to the other conditions set forth in Exhibit A hereto.
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(b) Buyer and Merger Subsidiary expressly reserve the right to modify
the terms of the Offer, except that, without the prior written consent of the
Company, neither Buyer nor Merger Subsidiary shall (i) decrease the price per
Share or change the form of consideration payable in the Offer, (ii) decrease
the number of Shares sought in the Offer, (iii) amend or waive satisfaction of
the Minimum Condition, (iv) impose additional conditions to the Offer or amend
in any manner materially adverse to the holders of Shares any condition to the
Offer, (v) amend any other term of the Offer in any manner adverse in any
material respect to the holders of Shares, or (vi) except as provided in the
next sentence, extend the expiration date of the Offer beyond August 31, 2001.
Notwithstanding the foregoing, Merger Subsidiary may, without the consent of the
Company, (i)
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extend the Offer, if at the then scheduled expiration date of the Offer any of
the conditions to Merger Subsidiary's obligation to purchase Shares is not
satisfied, until such time as such condition is satisfied or waived, but in no
event later than September 30, 2001, (ii) extend the Offer on one or more
occasions for an aggregate period of not more than ten (10) business days beyond
the then scheduled expiration date of the Offer or provide for a "subsequent
offering period" (as defined in Rule 14d-11 of the Exchange Act) for an
aggregate period of not more than ten (10) business days, if on the date of such
extension less than 90% of the outstanding shares of Common Stock have been
validly tendered and not properly withdrawn pursuant to the Offer, and (iii)
extend the Offer for any period required by any rule, regulation, interpretation
or position of the SEC or the staff thereof applicable to the Offer. Assuming
the prior satisfaction or waiver of the conditions to the Offer, upon the terms
of the Offer, the Merger Subsidiary will accept for payment and purchase, as
soon as practicable after the expiration of the Offer, all Shares validly
tendered and not withdrawn prior to the expiration of the Offer.
(c) The Offer shall be made by means of an offer to purchase (the
"Offer to Purchase") having only the conditions set forth in Exhibit A hereto.
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As soon as practicable on the date the Offer is commenced, Buyer and Merger
Subsidiary shall file with the SEC a Tender Offer Statement on Schedule TO
(together with all amendments and supplements thereto, the "Schedule TO") with
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respect to the Offer that will comply in all material respects with the
provisions of all applicable federal securities laws, and will contain
(including as an exhibit) or incorporate by reference, the Offer to Purchase and
forms of the related letter of transmittal and summary advertisement (which
documents, together with any supplements or amendments thereto, and any other
SEC schedule or form which is filed in connection with the Offer and related
transactions, are referred to collectively herein as the "Offer Documents").
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Each of Buyer and Merger Subsidiary, on the one hand, and the Company, on the
other hand, agree promptly to correct the Schedule TO and the Offer Documents if
and to the extent that such documents shall have become false or misleading in
any material respect and to supplement the information provided by it
specifically for use in the Schedule TO or the Offer Documents to include any
information that shall become necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
agrees to take all steps necessary to cause the Schedule TO as so corrected or
supplemented, to be filed with the SEC and the Offer Documents, as so corrected
or supplemented, to be disseminated to holders of Shares, in each case as and to
the extent required by applicable Federal securities laws. The Company and its
counsel shall be given a reasonable opportunity to review and comment on any
Offer Documents before they are filed with the SEC.
SECTION 1.02 Company Action.
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(a) The Company hereby approves and consents to the Offer, the Merger
and the other transactions contemplated by the Transaction Agreements
(collectively, the "Transactions") and represents that (i) the Company's Board
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of Directors (the "Board") has (w) at a meeting duly called and held or by way
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of unanimous written consent in accordance with the Bylaws of the
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Company unanimously approved and adopted this Agreement and the Transactions,
including the Offer and the Merger (as defined in Section 2.01), (x) resolved to
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recommend acceptance of the Offer and adoption and approval of this Agreement
and the Merger by the Company's stockholders, (y) unanimously determined that
each of this Agreement, the Offer and the Merger are fair to and in the best
interests of the stockholders of the Company and (z) taken all action necessary
to render the limitations on business combinations contained in Parts 2 and 3 of
Article 11 of the Georgia Code and in the Bylaws of the Company inapplicable to
this Agreement and the Stockholders Agreement and the transactions contemplated
hereby and thereby, and (ii) CoView Capital, Inc. ("CoView Capital"), as
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financial advisor to the Company and the Board, delivered to the Board a written
opinion that the per Share consideration to be received by the Company's
stockholders pursuant to the Offer and the Merger is fair to such stockholders
from a financial point of view.
(b) The Company will promptly furnish Buyer with a list of its
stockholders, mailing labels containing the names and addresses of all record
holders of Shares and lists of securities positions of Shares held in stock
depositories, as of the most recent practicable date, and will provide to Buyer
such additional information (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) and such other
assistance as Buyer or its agents may reasonably request in connection with the
Offer. Subject to the requirements of applicable law, and except for such steps
as are necessary to disseminate any documents necessary to consummate the Merger
or the Offer, Buyer shall hold in confidence the information contained in such
labels, listings and files, shall use such information only in connection with
the Merger and the Offer, and if this Agreement is terminated in accordance with
Section 10.01, shall, upon request, deliver to the Company all copies of such
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information then in its possession.
(c) Contemporaneously with the commencement of the Offer as provided
for in Section 1.01, the Company will file with the SEC a Tender Offer
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Solicitation/Recommendation Statement on Schedule 14D-9 (the "14D-9") which
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shall (i) comply in all material respects with the provisions of all applicable
federal securities laws, (ii) contain the opinion letter of CoView Capital
referred to in Section 1.02(a) and (iii) reflect the recommendations and actions
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of the Board referred to above, and shall mail the 14D-9 to the holders of the
Shares. Each of the Company, on the one hand, and Buyer and Merger Subsidiary,
on the other hand, agree promptly to correct any information provided by either
of them for use in the 14D-9 if and to the extent that it shall have become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to cause the 14D-9 as so corrected to be filed with the
SEC and to be disseminated to the stockholders of the Company, in each case as
and to the extent required by applicable laws. Buyer, Merger Subsidiary and
their counsel shall be given an opportunity to review the 14D-9 and any
amendments thereto prior to filing thereof with the SEC.
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SECTION 1.03 Directors.
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(a) Promptly upon the purchase by Buyer or any of its subsidiaries of
Shares pursuant to the Offer, and from time to time thereafter, Buyer shall be
entitled to designate such number of directors, rounded up to the next whole
number (but in no event more than one less than the total number of directors on
the Board) as will give Buyer, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Board equal to the product of (x) the total
number of directors on the Board (giving effect to any increase in the number of
directors pursuant to this Section 1.03) and (y) the percentage that the
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aggregate number of Shares beneficially owned by Buyer or any affiliate of Buyer
(including for purposes of this Section 1.03 such Shares as are accepted for
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payment pursuant to the Offer) bears to the aggregate number of Shares
outstanding (such number being, the "Board Percentage"), and the Company shall
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promptly satisfy the Board Percentage by (i) increasing the size of the Board or
(ii) securing the resignations of such number of directors as is necessary to
enable Buyer's designees to be elected to the Board and shall cause Buyer's
designees promptly to be so elected. At each such time, the Company will also
cause (i) each committee of the Board, (ii) the board of directors of each of
the Company's subsidiaries and (iii) each committee of such board to include
persons designated by Buyer constituting the same percentage of each such
committee or board as the Board Percentage. Notwithstanding the foregoing, the
Company shall not be required to change the composition of its audit committee
in any manner that would not meet the requirements of the AMEX (as defined
herein). At the request of Buyer, the Company shall take, at the Company's
expense, all lawful action necessary to effect any such election, including,
without limitation, mailing to its stockholders the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, unless
such information has previously been provided to the Company's stockholders in
the 14D-9. Buyer and Merger Subsidiary shall be solely responsible for any
information with respect to either of them and their nominees, officers,
directors and affiliates required by Section 14(f) and Rule 14f-1 which either
of them furnishes to the Company specifically for inclusion in the information
so furnished to the Company's stockholders.
(b) Following the election or appointment of Buyer's designees
pursuant to this Section 1.03 and prior to the Effective Time of the Merger, any
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amendment or termination of this Agreement, extension for the performance or
waiver of the obligations or other acts of Buyer or Merger Subsidiary or waiver
of the Company's rights thereunder, shall require the concurrence of a majority
of directors then in office who are directors on the date hereof.
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ARTICLE II
THE MERGER
SECTION 2.01 The Merger.
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(a) Upon the terms and subject to the satisfaction or waiver of the
conditions hereof, and in accordance with the applicable provisions hereof, at
the Effective Time (as defined in Section 2.01(b)), Merger Subsidiary shall be
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merged (the "Merger") with and into the Company in accordance with the Georgia
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Code and the terms and conditions of this Agreement, whereupon the separate
existence of Merger Subsidiary shall cease, and the Company shall be the
surviving corporation (the "Surviving Corporation"). At the election of Buyer,
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any direct or indirect subsidiary of Buyer may be substituted for Merger
Subsidiary as a constituent corporation in the Merger. In such event, the
parties shall execute an appropriate amendment to this Agreement in order to
reflect the foregoing.
(b) As promptly as practicable after the satisfaction or waiver of
the conditions set forth in Article IX, the parties hereto shall cause the
Merger to be consummated by (i) filing Articles of Merger, in accordance with
Section 14-2-1105 of the Georgia Code, with the Secretary of State of the State
of Georgia, in such form as required by, and executed in accordance with the
relevant provisions of, the Georgia Code (the time of such filing being the
"Effective Time") and (ii) complying with the publication requirements of
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Section 14-2-1105.1 of the Georgia Code.
(c) At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the Georgia Code. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and Merger
Subsidiary shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Merger Subsidiary shall become the debts,
liabilities and duties of the Surviving Corporation.
(d) The closing of the Merger (the "Closing") shall take place at
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10:00 a.m., local time, on a date to be specified by the parties, which shall be
no later than the fifth business day after satisfaction or waiver of all of the
conditions set forth in Article IX hereof (the "Closing Date"), at the offices
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of Xxxxxxxx & Xxxxx, 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, XX 00000, unless another
date or place is agreed to in writing by the parties hereto.
(e) If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments or assurances in law or any other acts are necessary or desirable to
(a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of the Company or Merger Subsidiary, or (b) otherwise carry
out the provisions of this Agreement, the
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Company and its officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such deeds, assignments and assurances in law and to take all acts
necessary, proper or desirable to vest, perfect or confirm title to and
possession of such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the provisions of this Agreement, and the officers and
directors of the Surviving Corporation are authorized in the name of the Company
or otherwise to take any and all such action.
SECTION 2.02 Conversion of Shares. At the Effective Time, by virtue
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of the Merger and without any action on the part of Buyer, Merger Subsidiary,
the Company or the holder of any Shares:
(a) Each Share of capital stock of the Company held by the Company as
treasury stock or held by any subsidiary of the Company or owned by Buyer,
Merger Subsidiary or any subsidiary of either of them immediately prior to the
Effective Time shall be cancelled and retired and shall cease to exist, and no
payment shall be made with respect thereto;
(b) Each share of capital stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall automatically and without the
necessity of presenting the same for exchange, be converted into and become one
fully paid and non-assessable share of capital stock of the Surviving
Corporation, no par value per share, with the same rights and privileges as the
shares so converted and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation; and
(c) Each Share outstanding immediately prior to the Effective Time
shall, except as otherwise provided in clause (a) above or as provided in
Section 2.04 with respect to Shares as to which appraisal rights have been
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exercised, be canceled and extinguished and be converted into the right to
receive $2.95, or any higher price per Share paid in the Offer, in cash without
any interest thereon (the "Merger Consideration") upon surrender of the
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certificate representing such Share.
SECTION 2.03 Exchange of Shares.
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(a) Prior to the Effective Time, Buyer shall appoint an agent (the
"Exchange Agent") for the purpose of exchanging certificates representing Shares
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for the Merger Consideration. Buyer will make available to the Exchange Agent,
as needed, the Merger Consideration to be paid in respect of the Shares. For
purposes of determining the Merger Consideration to be made available, Buyer
shall assume that no stockholder of the Company will perfect his right to
appraisal of his, her or its Shares. Promptly after the Effective Time, Buyer
will send, or will cause the Exchange Agent to send, to each holder of Shares
(other than as provided in Section 2.02(c)) at the Effective Time a letter of
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transmittal for use in such exchange.
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(b) After the Effective Time, each holder of Shares that have been
converted into a right to receive the Merger Consideration, upon surrender to
the Exchange Agent of a certificate or certificates representing such Shares,
together with a properly completed letter of transmittal covering such Shares,
will be entitled to receive the Merger Consideration payable in respect of such
Shares. Until so surrendered, each such certificate shall (other than as
provided in Section 2.04), after the Effective Time, represent for all purposes
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only the right to receive such Merger Consideration, and shall automatically be
cancelled and shall cease to exist. No interest shall be paid or accrued on
such Merger Consideration.
(c) If any portion of the Merger Consideration payable in respect of
any Share is to be paid to a person other than the registered holder of the
Shares represented by the certificate or certificates surrendered, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered holder of such shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, the stock transfer books of the Company
shall be closed and there shall be no further registration of transfers of
Shares.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to paragraph (a) of this Section 2.03 that remains
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unclaimed by the holders of Shares entitled thereto twelve months after the
Effective Time shall be returned to Buyer, upon demand, and any stockholder of
the Company who has not exchanged his Shares for the Merger Consideration in
accordance with this Section 2.03 prior to that time shall thereafter look only
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to Buyer for payment of the Merger Consideration in respect of his Shares;
provided, however, that Buyer shall comply with all applicable state escheat
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laws.
(f) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to paragraph (a) of this Section 2.03 to pay for Shares
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for which appraisal rights shall have been perfected shall be returned to Buyer,
upon demand.
(g) None of Buyer, Merger Subsidiary nor the Company shall be liable
to any holder of the Shares for any Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(h) Buyer shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as Buyer is required to deduct and withhold with respect to
the making of such payment under the Internal Revenue Code of 1986, as amended
(the "Code"), or any provision of state, local or foreign tax law, if any. To
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the extent that amounts are so withheld by Buyer, such withheld amounts shall be
treated
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for all purposes of this Agreement as having been paid to the holder of the
Shares in respect of which such deduction and withholding was made by Buyer.
Transfer taxes or fees attributable to the transfer of the Shares shall be paid
by Buyer.
SECTION 2.04 Dissenting Shares.
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(a) Notwithstanding any other provision of this Agreement to the
contrary, Shares outstanding immediately prior to the Effective Time and held by
a holder who has delivered to the Company, prior to the vote of stockholders, if
any, required by Section 6.02 hereof, a written notice in accordance with
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Article 13 of the Georgia Code of such stockholder's intent to demand payment
for such stockholder's Shares if the Merger is effected and who shall have not
voted such Shares in favor of the approval and adoption of this Agreement
(collectively the "Dissenting Shares") shall not be converted into the right to
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receive the Merger Consideration pursuant to Section 2.02(c), but the holders of
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such Dissenting Shares shall be entitled to payment of the fair value of such
Dissenting Shares in accordance with the provisions of Article 13 of the Georgia
Code; provided, however, that if such stockholder shall waive such stockholder's
right to demand and obtain payment under Article 13 of the Georgia Code or a
court of competent jurisdiction shall determine that such stockholder is not
entitled to the relief provided by said Article 13, then the right of such
holder of Dissenting Shares to be paid the fair value of such stockholder's
Dissenting Shares shall cease and such Dissenting Shares shall thereupon be
deemed to have been converted into, as of the Effective Time, the right to
receive the Merger Consideration pursuant to Section 2.02(c) hereof, without any
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interest thereon, upon surrender of the certificate or certificates representing
such Shares.
(b) The Company shall give Buyer (i) prompt notice of any notice or
other instruments received by the Company pursuant to Article 13 of the Georgia
Code and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for payment for Dissenting Shares. The Company shall not
voluntarily offer to make or make any payment with respect to any demands for
payment for Dissenting Shares and shall not, except with the prior written
consent of Buyer, settle or offer to settle any such demands.
(c) Dissenting Shares, if any, shall be canceled after the payment of
fair value in respect thereto has been made to the holder of such shares
pursuant to the Georgia Code.
SECTION 2.05 Stock Options.
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(a) The Company shall take all actions necessary to provide that, at
the Effective Time, each then outstanding option to purchase shares of capital
stock of the Company (the "Plan Options") granted under any of the Company's
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stock option plans referred to in Section 4.03, each as amended (collectively,
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the "Stock Option Plans"), and any and all other outstanding options, stock
------------------
warrants and stock rights, whether or not granted pursuant to such Stock Option
Plans (the "Other Options" and, together with the Plan Options, the "Options"),
------------- -------
whether or not then exercisable or
-9-
vested, shall be canceled and shall be of no further force or effect; provided,
--------
however, that with respect to any Options (whether or not granted pursuant to
-------
the Stock Option Plans and whether or not exercisable or vested) as to which the
Merger Consideration exceeds the applicable per share exercise price, the
Surviving Corporation shall promptly following the Effective Time pay (or cause
to be paid) to the holders of such Options an amount in cash equal to, with
respect to each such Option, the product of (i) the amount by which (x) the
Merger Consideration exceeds (y) the applicable per share exercise price, and
(ii) the number of shares subject to the Option at the time of such cancellation
(the "Option Consideration"). Such amount shall be subject to reduction by
--------------------
applicable tax withholding.
(b) Except as otherwise agreed to by the parties, the Company shall
cause the Stock Option Plans to terminate as of the Effective Time and the
provisions in any other plan, program or arrangement, providing for the issuance
or grant by the Company or any of its subsidiaries of any interest in respect of
the capital stock of the Company or any of its Subsidiaries shall be deleted as
of the Effective Time.
(c) The Company represents and warrants that all the Stock Option
Plans provide that either (i) the Company can take the actions described in
Section 2.05(a) without obtaining the consent of any holders of Options or (ii)
--------------
if such consent is required, the Company will obtain such consents and provide
evidence thereof to Buyer at least 10 days prior to the initial expiration of
the Offer.
SECTION 2.06 Adjustment of the Offer Price, the Merger Consideration
-------------------------------------------------------
and the Option Consideration. The Offer Price, the Merger Consideration and the
----------------------------
Option Consideration, each payable pursuant to this Agreement, have been
calculated based upon the representations and warranties made by the Company in
Section 4.03. In the event that, at expiration date of the Offer, (i) the
------------
actual number of Shares outstanding and/or the actual number of Shares issuable
upon the exercise of Options or similar agreements or upon conversion of
securities (including without limitation, as a result of any stock split,
reclassification, stock dividend (including any dividend or distribution of
securities convertible into Shares) or recapitalization) is greater than as
described in Section 4.03, or (ii) if the weighted average exercise price of the
------------
Options is lower than described in Section 4.03 hereof, the Offer Price, the
------------
Merger Consideration and the Option Consideration (collectively, the "Equity
------
Consideration") shall be appropriately adjusted downward; provided, however,
------------- -------- -------
that no such adjustment shall be required unless and until the aggregate impact
from such differences results in an increase in the aggregate Equity
Consideration payable by Buyer of at least $50,000. The provisions of this
Section 2.06 shall not, in any event, adversely affect, constitute a waiver of
------------
or otherwise impair any of Merger Subsidiary's rights under this Agreement
(including any of Merger Subsidiary's rights arising from any misrepresentation
or breach of the representations and warranties set forth in Section 4.03
------------
hereof).
-10-
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.01 Articles of Incorporation. The Articles of
-------------------------
Incorporation of the Company shall be amended and restated in the Merger to read
in its entirety as set forth as Exhibit B attached hereto and, as so amended,
---------
shall be the Articles of Incorporation of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 3.02 Bylaws. The Bylaws of Merger Subsidiary in effect at
------
the Effective Time shall be the Bylaws of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 3.03 Directors and Officers. Immediately after the
----------------------
Effective Time, until successors are duly elected or appointed in accordance
with the Articles of Incorporation and Bylaws of Merger Subsidiary and with
applicable law, the directors of Merger Subsidiary at the Effective Time shall
be elected to serve as the directors of the Surviving Corporation, and the
officers of the Company at the Effective Time shall be elected to serve as the
officers of the Surviving Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the
Company to Buyer and Merger Subsidiary prior to the execution of this Agreement
(the "Company Disclosure Schedule"), the Company represents and warrants to
---------------------------
Buyer and Merger Subsidiary as of the date hereof and as of the Effective Time
that:
SECTION 4.01 Organization and Qualification; Subsidiaries.
--------------------------------------------
(a) The Company and each of its subsidiaries is a corporation,
partnership or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has the requisite power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, have a Company Material
Adverse Effect (as defined below). The Company and each of its subsidiaries are
duly qualified or licensed as foreign corporations to do business, and are in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by them
-11-
or the nature of their business makes such qualification or licensing necessary,
except for such failures to be so qualified or licensed and in good standing
that would not, individually or in the aggregate, have a Company Material
Adverse Effect. The term "Company Material Adverse Effect" means any effect,
-------------------------------
circumstance, event, fact or change in the business of the Company and its
subsidiaries that (i) is, or is reasonably likely to be, materially adverse to
the business, operations, assets, liabilities (actual or contingent),
properties, financial or other condition, results of operations or prospects of
the Company and its subsidiaries, taken as a whole, or (ii) prevents or
materially delays, or is reasonably likely to prevent or materially delay, the
ability of the Company and its subsidiaries to perform in all material respects
their obligations under this Agreement or to consummate the Transactions.
SECTION 4.02 Articles of Incorporation and Bylaws. The Company has
------------------------------------
heretofore made available to Buyer a complete and correct copy of the Articles
of Incorporation and the Bylaws or equivalent organizational documents, each as
amended to date, of the Company and each of its subsidiaries. Such Articles of
Incorporation, Bylaws and equivalent organizational documents are in full force
and effect. Neither the Company nor any of its subsidiaries is in violation of
any provision of its Articles of Incorporation, Bylaws or equivalent
organizational documents.
SECTION 4.03 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of
25,000,000 shares of Common Stock, no par value per share ("Common Stock"), and
------------
5,000,000 shares of Preferred Stock (the "Preferred Stock"). As of July 5,
---------------
2001, (a) there were 4,222,501 shares of Common Stock outstanding and (b) there
were no shares Preferred Stock outstanding. All outstanding shares of capital
stock of the Company have been duly authorized and validly issued and are fully
paid and nonassessable and have no preemptive rights. As of July 5, 2001, there
were: (i) options to purchase 125,000 shares of Common Stock outstanding and
held by Xxxxxx X. Xxxxxxx, which options were not granted pursuant to any plan,
(ii) 475,000 shares reserved for issuance under the Full Line Distributors, Inc.
1993 Employee Incentive Plan, of which options to purchase 156,950 shares of
Common Stock were outstanding, and (iii) 40,000 shares reserved for issuance
under the Full Line Distributors, Inc. Outside Directors Incentive Plan, of
which options to purchase 26,000 shares of Common Stock were outstanding. The
weighted average exercise price per share for such outstanding Options described
in the preceding sentence is $1.30. Section 4.03(a) of the Company Disclosure
Schedule sets forth the name of each holder of an Option, together with the
grant date, vesting schedule, exercise price and number of shares of Common
Stock subject to each such Option. Except as set forth in Section 4.03(a) of the
Company Disclosure Schedule, there are not now, and at the Effective Time there
will not be, any options, warrants, calls, subscriptions or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company or obligating the Company or any of its
subsidiaries to issue or sell any shares of capital stock of, or other equity
interests in, the Company or any of its subsidiaries. All shares of the Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
-12-
conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and nonassessable. There
are no outstanding contractual obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of the Common
Stock or any capital stock of any subsidiary, or make any material investment
(in the form of a loan, capital contribution or otherwise) in any subsidiary.
Each outstanding share of capital stock of each subsidiary of the Company is
duly authorized, validly issued, fully paid and nonassessable and each such
share is owned by the Company or another subsidiary of the Company free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on the Company's or such other
subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever.
(b) Other than as set forth on Section 4.03(b) of the Company
Disclosure Schedule and in the Stockholders Agreement, to the knowledge of the
Company, there are no stockholders agreements, voting trusts or other agreements
or understandings relating to voting or disposition of any shares of capital
stock of the Company or granting to any person or group of persons the right to
elect, or to designate or nominate for election, a director to the Board.
SECTION 4.04 Authority Relative to this Agreement. The Company has
------------------------------------
all necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. 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
and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated herein
(other than, with respect to the Merger, the approval and adoption of this
Agreement by the holders of a majority of the then outstanding Shares and the
filing of appropriate merger documents as required by the Georgia Code). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Buyer, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting
creditors' rights generally and subject, as to enforceability, to the effect of
general principles of equity (regardless of whether such enforceability is
considered in proceedings in equity or at law). The only action required to be
taken by the stockholders of the Company in order to consummate the Merger is
the adoption of this agreement by the affirmative vote of a majority of the
outstanding shares of Common Stock entitled to vote thereon.
SECTION 4.05 Company Subsidiaries. Section 4.05 of the Company
--------------------
Disclosure Schedule contains a correct and complete list of each subsidiary of
the Company, the name and location of the business owned or operated by each
such subsidiary and the jurisdiction in which each such subsidiary is
incorporated or organized. Section 4.05 of the Company Disclosure Schedule sets
forth for each subsidiary of the Company: (i) its authorized capital stock or
share
-13-
capital; (ii) the number of issued and outstanding shares of capital stock or
share capital; and (iii) the holder or holders of such shares. Except for the
capital stock of its subsidiaries, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any Person. No
subsidiary of the Company owns, directly or indirectly, any capital stock or
other ownership interest in any Person, except for the capital stock and/or
other ownership interest in another wholly-owned subsidiary of the Company.
SECTION 4.06 No Conflict; Required Filings and Consents.
------------------------------------------
(a) Except as set forth in Section 4.06(a) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company do not,
and the performance of the transactions contemplated herein by the Company will
not, (i) conflict with or violate the Articles of Incorporation or Bylaws or
equivalent organizational documents of the Company or any of its subsidiaries,
(ii) conflict with or violate any foreign or domestic (federal, state or local)
law, statute, ordinance, rule, regulation, permit, license, order, judgment or
decree (each, a "Law" and, collectively, "Laws") applicable to the Company or
--- ----
any of its subsidiaries or by which any property or asset of the Company or any
subsidiaries is bound or affected, or (iii) except as set forth in Section 4.06
of the Company Disclosure Schedule, conflict with, result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material benefit under,
or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien, claim, security interest
or other charge, title imperfection or other encumbrance (each, a "Lien" and,
----
collectively, "Liens") on any property or asset of the Company or any of its
-----
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation,
whether oral or written (each, a "Contract" and, collectively, "Contracts"), to
-------- ---------
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or any property or asset of the Company or any of its
subsidiaries is bound or affected, except, in the case of clauses (ii) and (iii)
above, for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate, have a Company
Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and neither the performance of this Agreement by the Company nor the
consummation of the transactions contemplated hereby by the Company will,
require any consent, approval, authorization, order or permit of, or filing with
or notification to, any foreign or domestic (federal, state or local)
governmental, administrative or regulatory authority or agency (each a
"Governmental Entity"), except for (i) applicable requirements, if any, of the
-------------------
Exchange Act, the Securities Act of 1933, as amended (the "Securities Act"), the
--------------
American Stock Exchange, Inc. (the "AMEX") and the Georgia Code, and (ii) such
----
other consents, approvals, authorizations, permits, filings or notifications not
obtained or made prior to consummation of the Offer the failure of which to be
obtained or made would not, individually or in the aggregate, have a Company
Material Adverse Effect.
-14-
SECTION 4.07 Compliance. Except as set forth in Section 4.07 of the
----------
Company Disclosure Schedule, (i) neither the Company nor any of its subsidiaries
is in violation of any Order (as defined in Section 9.01(c)) of any Governmental
---------------
Entity or any Law of any Governmental Entity issued against the Company or any
subsidiary of the Company or, to the Company's knowledge, any of their
respective properties or assets and (ii) the business operations of the Company
and its subsidiaries have been conducted in compliance with all Laws of any
Governmental Entity, except for possible violations and instances of non-
compliance which would not, individually or in the aggregate, have a Company
Material Adverse Effect.
SECTION 4.08 SEC Filings; Financial Statements.
---------------------------------
(a) Since January 1, 1996, the Company has filed all forms, reports,
statements, schedules and other documents (the "SEC Reports") with the SEC
-----------
required to be filed by it pursuant to the federal securities laws and the SEC
rules and regulations thereunder. The Company has delivered or made available
to Buyer copies of all such SEC Reports. The SEC Reports, as well as all forms,
reports, statements, schedules and other documents to be filed by the Company
with the SEC after the date hereof and prior to the Effective Time (the "Future
------
SEC Reports"), (i) were and will be prepared in all material respects in
-----------
accordance with the requirements of the Securities Act, the Exchange Act and the
published rules and regulations of the SEC thereunder, each as applicable to
such SEC Reports and such later filed Future SEC Reports and (ii) did not and
will not as of the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were and will be made, not misleading. No subsidiary of the
Company is subject to the periodic reporting requirements of the Exchange Act.
As of the date hereof, there are no material unresolved comments issued by the
staff of the SEC with respect to any of the SEC Reports.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) of the Company included in the SEC Reports or any
Future SEC Report has been, and in the case of any Future SEC Report will be,
prepared in all material respects in accordance with the published rules and
regulations of the SEC (including Regulation S-X) and in accordance with United
States generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as otherwise stated in such financial
statements, including the related notes) and each fairly presents the
consolidated financial position, results of operations and cash flows of the
Company and its consolidated subsidiaries as at the respective dates thereof and
for the respective periods indicated therein, except as otherwise set forth in
the notes thereto (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments).
(c) Except as disclosed in Section 4.08(c) of the Company Disclosure
Schedule, at the date of the most recent audited financial statements of the
Company included in the SEC Reports, neither the Company nor any of its
subsidiaries had, and since such date neither the
-15-
Company nor any of its subsidiaries has incurred, any liabilities or obligations
of any nature (whether accrued, absolute, contingent, determinable or otherwise)
which, individually or in the aggregate, would be required to be disclosed in a
balance sheet (or the footnotes thereto) of the Company prepared in accordance
with United States generally accepted accounting principles except liabilities
incurred in the ordinary and usual course of business and consistent with past
practice, liabilities expressly incurred in connection with the Transactions and
liabilities that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(d) Except as set forth in Section 4.08(d) of the Company Disclosure
Schedule, none of the Company or any of its subsidiaries is indebted to any
director, officer, partner, affiliate or associate (as such term is defined in
Rule 12b-2 under the Exchange Act) of the Company or any of its subsidiaries
(except for amounts due as normal salaries and bonuses, in reimbursement of
ordinary business expenses and directors' fees) and no such person is indebted
to the Company or any of its subsidiaries, and since December 30, 2000, there
have been no other transactions of the type required to be disclosed pursuant to
Items 402 or 404 of Regulation S-K promulgated by the SEC.
(e) The Company has heretofore furnished or made available to Buyer a
complete and correct copy of any amendments or modifications which have not yet
been filed with the SEC to SEC Reports which previously had been filed by the
Company with the SEC pursuant to the Securities Act and the rules and
regulations promulgated thereunder or the Exchange Act and the rules and
regulations promulgated thereunder.
SECTION 4.09 Disclosure Documents.
--------------------
(a) Each document filed or required to be filed by the Company with
the SEC in connection with the Transaction (the "Company Disclosure Documents"),
----------------------------
including, without limitation, the 14D-9, the proxy or information statement of
the Company (the "Company Proxy Statement"), if any, to be filed with the SEC in
-----------------------
connection with the Merger, and any amendments or supplements to any thereof
will comply as to form in all material respects with the applicable requirements
of the Exchange Act.
(b) At the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company, at the time
such stockholders vote on adoption of this Agreement and at the Effective Time,
the Company Proxy Statement as supplemented or amended, if applicable, will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. At the time of the
filing with the SEC or any other Governmental Entity of any Company Disclosure
Documents (other than the Company Proxy Statement), at the time of any
distribution thereof and throughout the remaining
-16-
pendency of the Offer each such Company Disclosure Document will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The representations and warranties
contained in this subsection (b) will not apply to statements or omissions in
the Company Disclosure Documents based upon information furnished in writing to
the Company by Buyer or Merger Subsidiary specifically for use therein.
(c) The information with respect to the Company or any Subsidiaries
furnished by the Company or its affiliates to Buyer in writing specifically for
use in the Offer and the Offer Documents shall not contain, as of the date the
Offer Documents are filed, any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. If any
such information provided by the Company or its affiliates shall, after the
filing of the Offer Documents, become false or misleading in any material
respect, the Company shall promptly notify Buyer and update such information in
writing.
SECTION 4.10 Absence of Certain Changes or Events. Except as set
------------------------------------
forth in Section 4.10 of the Company Disclosure Schedule or as contemplated by
this Agreement, since December 30, 2000, the Company and its subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and there has not been:
(a) any change in any method of accounting or accounting practice by
the Company or any of its subsidiaries, except for any such change required by
reason of a concurrent change in United States generally accepted accounting
principles;
(b) any revaluation by the Company or any of its subsidiaries of a
material asset (including, without limitation, any writing down of the value of
inventory or writing-off of notes or accounts receivable);
(c) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any of its subsidiaries relating to its assets
or business (including, without limitation, the acquisition, disposition,
leasing or licensing of any tangible or intangible assets) or any relinquishment
by the Company or any of its subsidiaries of any contract or other right, in
either case, material to the Company and its subsidiaries taken as a whole,
other than transactions and commitments in the ordinary course of business
consistent with past practice and those contemplated by this Agreement;
(d) any declaration, setting aside or payment of any dividend
(whether in cash, stock or property) or other distribution in respect of the
Company's capital stock or any redemption, purchase or other acquisition of any
of the Company's securities;
-17-
(e) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock;
(f) any amendment of any material term of any outstanding security of
the Company or any of its subsidiaries;
(g) any issuance by the Company or any of its subsidiaries of any
notes, bonds or other debt securities or any capital stock or other equity
securities or any securities convertible, exchangeable or exercisable into any
capital stock or other equity securities, except for the issuance of any shares
of Common Stock pursuant to the exercise of any Options in existence prior to
the date hereof;
(h) any incurrence, assumption or guarantee by the Company or any of
its subsidiaries of any Indebtedness for Borrowed Money other than in the
ordinary course of business and in amounts and on terms consistent with past
practices;
(i) any creation or assumption by the Company or any of its
subsidiaries of any Lien on any material asset(s) (alone or in the aggregate)
other than in the ordinary course of business consistent with past practice;
(j) any making of any loan, advance or capital contributions to or
investment in any entity or person other than loans, advances or capital
contributions to or investments in wholly-owned subsidiaries made in the
ordinary course of business consistent with past practice;
(k) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or any of
its subsidiaries which, individually or in the aggregate, has had or would
reasonably be expected to have a Company Material Adverse Effect, or any other
event, change or circumstance that has or is reasonably likely to have a Company
Material Adverse Effect;
(l) any material increase in the benefits under, or the
establishment, material amendment or termination of, any Benefit Plan (as
defined in Section 4.13(b)) covering current or former employees, officers or
---------------
directors of the Company or any of its subsidiaries, or any material increase in
the compensation payable or to become payable to or any other material change in
the employment terms for any directors or officers of the Company or any of its
subsidiaries or any other employee earning noncontingent cash compensation in
excess of $75,000 per year;
(m) any entry by the Company or any of its subsidiaries into any
employment, consulting, severance, termination or indemnification agreement with
any director or officer of the
-18-
Company or any of its subsidiaries or entry into any such agreement with any
person for a noncontingent cash amount in excess of $75,000 per year or outside
the ordinary course of business;
(n) any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company or any of its subsidiaries, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees; or
(o) any authorization of, or agreement by the Company or any of its
subsidiaries to take, any of the actions described in this Section 4.10, except
------------
as expressly contemplated by this Agreement.
SECTION 4.11 Change of Control. Except as set forth in Section 4.11
-----------------
of the Company Disclosure Schedule, the Transactions will not constitute a
"change of control" under, require the consent from or the giving of notice to a
-----------------
third party pursuant to, permit a third party to terminate or accelerate vesting
or repurchase rights, or create any other detriment under the terms, conditions
or provisions of any Contract or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any of their properties or
assets may be bound.
SECTION 4.12 Litigation. Except as set forth in Section 4.12 of the
----------
Company Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries, at law or in equity, that, individually
or in the aggregate, would reasonably be expected to have a Company Material
Adverse Effect. Except as set forth in Section 4.12 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is subject to any
outstanding Order that, individually or in the aggregate, would reasonably be
expected to have a Company Material Adverse Effect.
SECTION 4.13 Benefit Plans.
-------------
(a) Except as disclosed in Section 4.13(a) of the Company Disclosure
Schedule or as expressly contemplated by this Agreement, there exist no
employment, consulting, severance or termination agreements, arrangements or
understandings between the Company or any of its subsidiaries and any individual
current or former employee, officer or director of the Company or any of its
subsidiaries with respect to which the annual cash, noncontingent payments
thereunder exceed $75,000 or where the contingent and noncontingent annual
compensation is reasonably likely to exceed $125,000.
(b) Section 4.13(b) of the Company Disclosure Schedule contains a
---------------
complete list of all (i) "employee pension benefit plans" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (collectively, the "Pension Plans"), including any such Pension Plans
----- -------------
that are "multiemployer plans" (as such term is defined in Section 4001(a)(3)
-19-
of ERISA) (collectively, the "Multiemployer Pension Plans"), (ii) "employee
---------------------------
welfare benefit plans" (as defined in Section 3(1) of ERISA) and all other
benefit plans and (iii) other bonus, deferred compensation, severance pay,
pension, profit-sharing, retirement, insurance, stock purchase, stock option, or
other fringe benefit plan, arrangement or practice maintained, or contributed
to, by the Company or any of its subsidiaries for the benefit of any current or
former employees, officers or directors of the Company or any of its
subsidiaries or with respect to which the Company has any liability
(collectively, the "Benefit Plans"). The Company has delivered or made
-------------
available to Buyer correct and complete copies of (i) each Benefit Plan, (ii)
the most recent annual report on Form 5500 filed with the Internal Revenue
Service with respect to each Benefit Plan for which a Form 5500 is required to
be filed, (iii) the most recent summary plan description for each Benefit Plan
for which such summary plan description is required and (iv) each trust
agreement and group annuity contract relating to any Benefit Plan.
(c) Except as disclosed in Section 4.13(c) of the Company Disclosure
Schedule, all Pension Plans intended to be qualified plans have been the subject
of favorable determination letters from the Internal Revenue Service to the
effect that such Pension Plans are qualified and exempt from Federal income
taxes under Section 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked. To the knowledge of the Company, there
is no reasonable basis for the revocation of any such determination letter.
(d) None of the Benefit Plans is, and none of the Company or any of
its subsidiaries has ever maintained or had an obligation to contribute to or
had any other liability with respect to (i) a "single employer plan" (as such
term is defined in Section 4001(a)(15) of ERISA) subject to Section 412 of the
Code or Title IV of ERISA, (ii) a "multiple employer plan" (as such term is
defined in ERISA) or (iii) a funded welfare benefit plan (as such term is
defined in Section 419 of the Code). There are no unpaid contributions due
prior to the date hereof with respect to any Benefit Plan that are required to
have been made under the terms of such Benefit Plan, any related insurance
contract or any applicable law. None of the Company or any of its subsidiaries
has incurred any liability or taken any action, and the Company does not have
any knowledge of, any action or event that could reasonably be expected to cause
any one of them to incur any liability (i) under Section 412 of the Code or
Title IV of ERISA with respect to any "single-employer plan" (as such term is
defined in Section 4001(a)(15) of ERISA), (ii) on account of a partial or
complete withdrawal (as such term is defined in Sections 4203 and 4205 of ERISA,
respectively) with respect to any Multiemployer Pension Plan, or (iii) on
account of unpaid contributions to any Multiemployer Pension Plan.
(e) None of the Company nor any of its subsidiaries has engaged in a
"prohibited transaction" (as such term is defined in Section 406 of ERISA and
Section 4975 of the Code) or any other breach of fiduciary responsibility with
respect to any Benefit Plan subject to ERISA that reasonably could be expected
to subject the Company or any of its subsidiaries to (i) any material tax or
penalty on prohibited transactions imposed by Section 4975 or (ii) any liability
under Section
-20-
502(i) or Section 502(l) of ERISA. As of the date of this Agreement, except as
disclosed in Section 4.13(e) of the Company Disclosure Schedule, with respect to
any Benefit Plan: (i) no filing, application or other matter is pending with the
Internal Revenue Service, the Pension Benefit Guaranty Corporation, the United
States Department of Labor or any other governmental body and (ii) there is no
action, suit or claim pending, other than routine claims for benefits.
(f) Except as disclosed in Section 4.13(f) of the Company Disclosure
Schedule, none of the Company or any of its subsidiaries has any obligation to
provide any health benefits or other non-pension benefits to retired or other
former employees, except as specifically required by Part 6 of Title I of ERISA
("COBRA").
-----
(g) Neither the Company nor any of its subsidiaries has in force any
company-owned life insurance policies.
(h) All Benefit Plans subject to ERISA or the Code have been
maintained and administered, in all material respects, in accordance with their
terms and with all provisions of ERISA and the Code, respectively, and other
applicable federal and state laws and regulations and all employees required to
be included as participants by the terms of such plans have been properly
included. No asset of the Company or any subsidiary is subject to any lien under
ERISA or the Code.
(i) None of the Benefit Plans subjects (or will subject in connection
with the consummation of the transactions contemplated by this Agreement) the
Company or any subsidiary to liability or obligation to make any payment that
will be non-deductible under Section 280G of the Code (or any corresponding
provision of state, local or foreign Tax law).
(j) With respect each Benefit Plan, all required or recommended (in
accordance with historical practices) payments, premiums, contributions or
reimbursements required to be made prior to or as of the Closing shall have been
made and none of the Benefit Plans has or will have any unfunded liabilities.
SECTION 4.14 Taxes.
-----
(a) Except as set forth in Section 4.14(a) of the Company Disclosure
Schedule, or as may result from any election made by Buyer or the Surviving
Corporation under Section 338 of the Code: (i) the Company and each of its
subsidiaries has timely filed (including all permitted extensions) all federal,
state, local and foreign income Tax Returns (as hereinafter defined) required to
be filed by it, and all other material Tax Returns required to be filed by it,
and each such Tax Return has been prepared in substantial compliance with all
applicable laws and regulations and is true and correct in all material
respects; (ii) the Company and each of its subsidiaries has paid (or the Company
has paid on behalf of its subsidiaries) all Taxes (as hereinafter defined)
required to be
-21-
paid in respect of the periods covered by such returns and has made adequate
provision in the Company's financial statements for payment of all Taxes that
have not been paid, whether or not shown as due and payable on any Tax Return,
in respect of all taxable periods or portions thereof ending on or before the
date hereof; and (iii) neither the Company nor any of its subsidiaries has
incurred any liability for Taxes subsequent to the date of the most recent
financial statements contained in the SEC Reports other than in the ordinary
course of Company's or such subsidiary's business.
(b) Except as set forth in Section 4.14(b) of the Company Disclosure
Schedule: (i) no Tax Return of the Company or any of its subsidiaries is under
audit or examination by any taxing authority, and no written notice of such an
audit or examination or any other audit or examination with respect to Taxes has
been received by the Company or any of its subsidiaries; (ii) each deficiency
resulting from any audit or examination relating to Taxes by any taxing
authority has been paid, except for deficiencies currently being contested in
good faith and for which adequate reserves, as applicable, have been established
in the Company's financial statements in accordance with United States generally
accepted accounting principles; (iii) there are no Liens for Taxes upon the
assets of the Company or any of its subsidiaries except liens relating to
current Taxes not yet due and payable; (iv) except for amounts which are not
material, all Taxes which the Company or any of its subsidiaries are required by
law to withhold or to collect for payment have been duly withheld and collected
and paid to the appropriate taxing authority; (v) none of the Company or any of
its subsidiaries has consented to extend the time in which any Tax may be
assessed or collected by any taxing authority; and (vi) to the knowledge of the
Company, no written claim has been made by any taxing authority in a
jurisdiction where the Company and its subsidiaries do not file Tax Returns that
the Company or any of its subsidiaries is or may be subject to taxation in that
jurisdiction, other than such claims which would not reasonably be expected to
have a Company Material Adverse Effect.
(c) Except as set forth in Section 4.14(c) of the Company Disclosure
Schedule, there is no Contract or other arrangement, plan or agreement by or
with the Company or any of its subsidiaries covering any person that,
individually or collectively, could give rise to the payment of any amount by
the Company or any of its subsidiaries that would not be deductible by the
Company or such subsidiary by reason of Section 280G of the Code.
(d) Except as set forth in Section 4.14(d) of the Company Disclosure
Schedule, each of the Company and its subsidiaries has made available to Merger
Subsidiary true, correct and complete copies of all federal income Tax Returns,
and all other Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by any of the Company or any of its subsidiaries
that have been filed by any of the Company or any of its subsidiaries for all
taxable years not barred by the statute of limitations.
(e) Except as set forth in Section 4.14(e) of the Company Disclosure
Schedule, since January 1, 1994, none of the Company or any of its subsidiaries
(i) has been a member of an
-22-
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company), (ii) is a party to or bound
by any Tax allocation or Tax sharing agreement with any persons or entity other
than the Company and its subsidiaries, (iii) has any liability for the Taxes of
any Person (other than any of the Company or any of its subsidiaries) under
Treas. Reg. (S) 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract, or otherwise or (iv) has any
material liability for the Taxes of any Person other than the Company, the
subsidiaries of the Company or in connection with the acquisition, directly or
indirectly, of any Person acquired by the Company or any of its subsidiaries.
(f) Except as set forth in Section 4.14(f) of the Company Disclosure
Schedule, none of the Company or any of its subsidiaries will be required to
include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of any (i) change in method of accounting for a taxable period
ending on or prior to the Closing Date under Code (S) 481(c) (or any
corresponding or similar provision of state, local or foreign income Tax Law);
(ii) "closing statement" as described in Code (S) 7121 (or any corresponding or
similar provision of state, local or foreign income Tax Law); (iii) deferred
intercompany gain or any excess loss account described in Treasury Regulations
under Code (S) 1502 (or any corresponding or similar provision of state, local
or foreign income Tax Law); or (iv) installment sale made prior to the Closing
Date.
(g) As used in this Section 4.14, the terms (i) "Tax" (and, with
------------ ---
correlative meaning, "Taxes") means: (A) any federal, state, local or foreign
-----
net income, gross income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value added, transfer,
stamp or environmental tax, or any other tax of any kind whatsoever, together
with any interest or penalty, addition to tax or additional amount imposed by
any Governmental Entity and (B) any liability of the Company or any of its
subsidiaries for payments of a type described in clause (A) as a result of (I)
any obligation of the Company or any of its subsidiaries under any tax sharing
agreement or tax indemnity agreement or (II) the Company or any of its
subsidiaries being a member of an affiliated group (other than one of which the
Company is the parent); and (ii) "Tax Return" means any report, return or other
----------
information or document required to be supplied to or filed with a taxing
authority in connection with Taxes.
SECTION 4.15 Intellectual Property.
---------------------
(a) Except as set forth in Section 4.15(a) of the Company Disclosure
Schedule, the Company and each of its subsidiaries own and possess, or have a
valid and enforceable license to use, in each case free and clear of any Liens,
all Intellectual Property (as defined below) necessary for the operation of
their respective businesses as currently conducted and as currently proposed to
be conducted in the United States. The Company's revenues in respect of sales of
manufactured product outside of the United States have not exceeded $1,000,000
per annum in any of the last five
-23-
(5) calendar years. As used in this Agreement, the term "Intellectual Property"
---------------------
means: (i) registered and unregistered trademarks, service marks, slogans, trade
names, corporate names, domain names, logos and trade dress (including the good
will associated with each); (ii) patents, patent applications and invention
disclosures; (iii) registered and unregistered copyrights, copyrightable works
and mask works, including, but not limited to, copyrights in software and
databases; (iv) computer software (including, to the extent applicable, source
code, object code, data, databases and related documentation); and (v)
inventions (whether patentable or unpatentable and whether or not reduced to
practice), improvements thereto, methods, devices, technology, trade secrets,
proprietary information, know-how, specifications, flowcharts, blueprints,
schematics, protocols, programmer notes, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals
(collectively, "Proprietary Information").
------------------------
(b) Section 4.15(b) of the Company Disclosure Schedule sets forth a
complete list of all: (i) patented and registered Intellectual Property, and
pending patent applications or applications for registration of Intellectual
Property, owned or filed by the Company or any of its subsidiaries; (ii) all
trade names, domain names and material unregistered trademarks, service marks
and copyrights owned or used by the Company or any of its subsidiaries; and
(iii) all agreements pursuant to which the Company or any of its subsidiaries
has obtained or granted the right to use any Intellectual Property (other than
licenses of mass-marketed software acquired or licensed for a license fee of
less than $75,000 per annum) (the items listed in this clause (iii) being
collectively referred to herein as "License Agreements").
------------------
(c) Except as set forth in Section 4.15(c) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has received any
notice of infringement or misappropriation of or conflict with asserted
Intellectual Property rights of others. No claim by any third party contesting
the validity, enforceability, use or ownership of any of the Intellectual
Property owned or used by the Company or any of its subsidiaries, is currently
outstanding or, to the knowledge of the Company, is threatened. To the knowledge
of the Company, the Intellectual Property owned by the Company or any of its
subsidiaries has not been infringed or misappropriated by other Persons, except
for any such infringement or misappropriation which, individually or in the
aggregate, would not be reasonably be expected to have a Company Material
Adverse Effect. Except as set forth in Section 4.15(c) of the Company Disclosure
Schedule, all of the Intellectual Property owned or used by the Company or any
of its subsidiaries as of the date hereof will be owned or available for use by
the Company or such subsidiary on identical terms and conditions immediately
subsequent to the Closing except for such changes which, individually or in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect. The Company and each of its subsidiaries has taken all reasonable and
necessary actions to maintain and protect its Intellectual Property in the
United States except for those actions, which the failure to take, individually
or in the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect.
-24-
(d) To the knowledge of the Company, neither the Company nor any of
its subsidiaries has done anything to compromise in any material respect the
secrecy, confidentiality or value of any of the Proprietary Information required
to conduct their respective businesses. To the knowledge of the Company, no
prior or current employee, officer or consultant of the Company or any of its
subsidiaries has asserted any ownership interest in any Intellectual Property
used by the Company or its subsidiaries in the operation of their respective
businesses.
SECTION 4.16 Licenses and Permits. The Company and its subsidiaries
--------------------
are in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for the Company and its subsidiaries to
own, lease and operate its properties or to carry on its business as it is now
being conducted (the "Company Permits"), except where the failure to have any of
---------------
the Company Permits, individually or in the aggregate, would not have a Company
Material Adverse Effect. As of the date hereof, all of the Company Permits are
in full force and effect and no violation, suspension or cancellation of any of
the Company Permits is pending or, to the knowledge of the Company threatened,
except where not being in full force and effect or the violation, suspension or
cancellation of such Company Permits, individually or in the aggregate, would
not have a Company Material Adverse Effect. Except as disclosed in Schedule 4.16
of the Company Disclosure Schedule and except where the failure of the following
to be true would not reasonably be expected to have, either individually or in
the aggregate, a Company Material Adverse Effect, none of the Company Permits
will be terminated or impaired or become terminable, in whole or in part, as a
result of the transactions contemplated hereby.
SECTION 4.17 Material Contracts.
------------------
(a) Section 4.17(a) of the Company Disclosure Schedule sets forth a
list (as of the date of this Agreement) of all (i) Contracts for borrowed money
or guarantees thereof in an amount in excess of $60,000, (ii) all joint venture
or other similar agreements to which the Company or any of its subsidiaries is a
party, (iii) all lease agreements to which the Company or any of its
subsidiaries is a party with annual lease payments in excess of $60,000, (iv)
Contracts under which the Company or any of its subsidiaries has advanced or
loaned any other Person or entity an amount in excess of $60,000, (v) Contracts
or groups of related Contracts with the same party or group of parties requiring
the payment or receipt of $60,000 or more per year which are not cancelable by
the Company on 30-days-or-less notice without premium or penalty (other than
purchase orders issued by the Company or its subsidiaries in the ordinary course
of business consistent with past practice which individually do not exceed
$250,000), (vi) warranty agreements with respect to the Company's or its
subsidiaries' services rendered or products sold or leased, other than pursuant
to the Company's standard warranty, a true and complete copy of which has
heretofore been provided or made available to Buyer, (vii) agreements under
which the Company has granted any person or entity registration rights
(including, without limitation, demand and piggy-back registration rights),
(viii) agreements under which the Company or any of its subsidiaries has granted
any right of first refusal
-25-
or similar right in favor of any third party with respect to any material
portion of the Company's or any Company subsidiary's properties or assets, and
(ix) Contracts containing non-compete covenants by the Company or any of its
subsidiaries (the items listed in clauses (i) through (ix) hereof, collectively,
the "Material Contracts"). The Company has made available to Merger Sub a
------------------
correct and complete copy of each Material Contract listed in Section 4.17(a) of
the Company Disclosure Statement.
(b) Except as disclosed in Section 4.17(b) of the Company Disclosure
Schedule, (i) neither the Company nor any of its subsidiaries is, nor, to the
Company's knowledge, is any other party, in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Material Contract or License Agreement (as defined in Section
-------
4.15(b)) to which it is a party and (ii) there has not occurred any event that,
-------
with the lapse of time or giving of notice or both, would constitute such a
default. All Contracts to which the Company or any of its subsidiaries is a
party, or by which any of their respective assets are bound, and which are
otherwise material to the business of the Company and its subsidiaries, taken as
a whole, are valid and binding, in full force and effect and enforceable against
the Company or any such subsidiary, as the case may be, and to the Company's
knowledge, the other parties thereto in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights generally and to the general
principles of equity.
(c) Except as set forth in Section 4.06(a) of the Company Disclosure
Schedule, no Material Contract or License Agreement will, by its terms,
terminate as a result of the Transactions or require any consent from any party
thereto in order to remain in full force and effect immediately after the
Effective Time.
SECTION 4.18 Environmental Matters.
---------------------
(a) Except as set forth in Section 4.18(a) of the Company Disclosure
Schedule, the Company and each of its subsidiaries have been and are in material
compliance with all applicable Environmental Laws (as defined below).
(b) Except as set forth in Section 4.18(b) of the Company Disclosure
Schedule, the Company and its subsidiaries possess all Environmental Permits (as
defined below) required for the operation of the Business (as defined below)
pursuant to Environmental Laws, all such Environmental Permits are in effect,
there are no pending or, to the best knowledge of the Company, threatened
proceedings to revoke such Environmental Permits and the Company and its
subsidiaries are in material compliance with all terms and conditions thereof.
(c) Except as set forth in Section 4.18(c) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has received any
notification or is otherwise aware
-26-
that the Company or any of its subsidiaries as a result of any of the current or
past operations of the Business, or any property currently or formerly owned or
leased in connection with the Business, is or may be the subject of any
proceeding, investigation, claim, lawsuit or order by any Governmental Entity or
other person as to whether (i) any Remedial Action (as defined below) is or may
be needed to respond to a Release (as defined below) or threat of Release into
the environment of Hazardous Substances (as defined below) as defined under
Environmental Laws as in effect on or prior to the date hereof, (ii) any
Environmental Liabilities and Costs (as defined below) imposed by, under or
pursuant to Environmental Laws as in effect on or prior to the date hereof shall
be sought, or proceeding commenced, related to or arising from the current or
past operations of the Business or (iii) the Company or any of its subsidiaries
is or may be a "potentially responsible party" for a Remedial Action, pursuant
to any Environmental Law as in effect on or prior to the date hereof, for the
costs of investigating or remediating Releases or threatened Releases into the
environment of Hazardous Substances, whether or not such Release or threatened
Release has occurred or is occurring at properties currently or formerly owned
or operated by the Company and its subsidiaries.
(d) Except as set forth in Section 4.18(d) of the Company Disclosure
Schedule, and except for Environmental Permits, none of the Company and its
subsidiaries has entered into any written agreement with any Governmental Entity
or other person by which the Company or any of its subsidiaries has assumed
responsibility, either directly or as a guarantor or surety, for the remediation
of any condition arising from or relating to a Release of Hazardous Substances
as defined under Environmental Laws as in effect on or prior to the date hereof
into the environment in connection with the Business, including for cost
recovery with respect to such Releases or threatened Releases.
(e) Except as set forth in Section 4.18(e) of the Company Disclosure
Schedule, there is not now and has not been at any time in the past, a Release
in connection with the current or former conduct of the Business of substances
that would constitute Hazardous Substances as regulated under Environmental Laws
as in effect on or prior to the date hereof for which the Company or any of its
subsidiaries is required or would be required to perform a Remedial Action
pursuant to Environmental Laws as currently in effect, or will incur
Environmental Liabilities and Costs.
(f) The Company has provided to Buyer all environmental reports,
audits and assessments, and all other material environmental documents,
pertaining to the Company, its subsidiaries or any of their current or former
facilities, to the extent the foregoing were issued after January 1, 1997 and
are in the possession, custody or control of the Company or any of its
subsidiaries.
(g) For purposes of this Section:
-27-
(i) "Business" means the current and former businesses of the
--------
Company and its subsidiaries including, but not limited to, businesses or
subsidiaries that have been previously sold by the Company, its
subsidiaries or any predecessors thereto.
(ii) "Environmental Laws" means all Laws relating to pollution,
------------------
the protection of the environment, or to any emission, discharge,
generation, processing, storage, holding, abatement, existence, Release,
threatened Release or transportation of any Hazardous Substances,
including, but not limited to, (A) the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), the Resource
------
Conservation and Recovery Act ("RCRA"), the Clean Water Act, the Clean Air
----
Act, the Toxic Substances Control Act, as amended ("TSCA"), property
----
transfer statutes or requirements and (B) all other requirements pertaining
to reporting, licensing, permitting, investigation or remediation of
emissions, discharges, Releases or threatened Releases of Hazardous
Substances into the air, surface water, groundwater or land, or relating to
the manufacture, processing, distribution, use, sale, treatment, receipt,
storage, disposal, transport or handling of Hazardous Substances.
(iii) "Environmental Liabilities and Costs" means all damages,
-----------------------------------
natural resource damages, claims, losses, expenses, costs, obligations, and
liabilities (collectively, "Losses"), whether direct or indirect, known or
------
unknown, current or potential, past, present or future, imposed by, under
or pursuant to Environmental Laws, including, but not limited to, all
Losses related to Remedial Actions, and all fees, capital costs,
disbursements, penalties, fines and expenses of counsel, experts,
contractors, personnel and consultants based on, arising out of or
otherwise in respect of (A) the Company, any of its subsidiaries (including
predecessors and former subsidiaries) or property owned, used or leased by
the Company or any of its subsidiaries in respect of the Business at any
time; (B) conditions existing on, under, around or above any such property
originating from such property or the Business; and (C) expenditures
necessary to cause any such property or the Company or any of its
subsidiaries to be in compliance with requirements of Environmental Laws in
all material respects.
(iv) "Environmental Permits" means any federal, state,
---------------------
provincial or local permit, license, registration, consent, order,
administrative consent order, certificate, approval or other authorization
necessary for the conduct of the Business as currently conducted under any
Environmental Law.
(v) "Hazardous Substances" means any substance that (A) is
--------------------
defined, listed or identified or otherwise regulated as a "hazardous
waste," "hazardous material" or "hazardous substance" "toxic substance,"
"hazardous air pollution," "polluted," or "contaminated" or words of
similar meaning and regulatory effect under CERCLA, TSCA or RCRA or any
other Environmental Law or analogous state law (including, without
-28-
limitation, radioactive substances, polycholorinated biphenyls, petroleum
and petroleum derivatives and products) or (B) requires investigation,
removal or remediation under applicable Environmental Law.
(vi) "Laws" means all (A) constitutions, treaties, statutes,
----
laws (including, but not limited to, the common law), rules, regulations,
ordinances or codes of any Governmental Entity, (B) Environmental Permits,
and (C) orders, decisions, injunctions, judgments, awards and decrees of
any Governmental Entity.
(vii) "Release" means as defined in CERCLA or RCRA, without
-------
limiting its application to violations or alleged violations of those
statutes, but not including any discharge, spill or emission that is the
subject of, and in compliance with an Environmental Permit.
(viii) "Remedial Action" means all actions required by
---------------
Governmental Entity pursuant to Environmental Law or otherwise taken as
necessary to comply with Environmental Law to (A) clean up, remove, treat
or in any other way remediate any Hazardous Substances, (B) prevent the
release of Hazardous Substances so that they do not migrate or endanger or
threaten to endanger public health or welfare or the environment or (C)
perform studies, investigations or monitoring in respect of any such
matter.
SECTION 4.19 Related Party Transactions. Except as set forth in
--------------------------
Section 4.19 of the Company Disclosure Schedule, no director, officer, partner,
affiliate or associate of the Company or any of its subsidiaries owns any direct
or indirect interest of any kind in (other than less than 1% of the outstanding
common equity of a public company), or is a director, officer, employee,
partner, affiliate or associate of, or consultant or lender to, or borrower
from, or has the right to participate in the management, operations or profits
of, any person or entity which is (i) a competitor, supplier, customer,
distributor, lessor, tenant, creditor or debtor of the Company or any of its
subsidiaries, (ii) engaged in a business related to the business of the Company
or any of its subsidiaries, (iii) participating in any transaction to which the
Company or any of its subsidiaries is a party or (iv) otherwise a party to any
contract, arrangement or understanding with the Company or any of its
subsidiaries.
SECTION 4.20 Properties and Assets. The Company and its subsidiaries
---------------------
have good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of their tangible properties and assets, real
and personal, used or held for use in their businesses located on their premises
or shown on the consolidated balance sheet of the Company and its subsidiaries
as of December 30, 2000 or acquired thereafter, free and clear of any Liens,
except (i) as set forth in Section 4.20 of the Company Disclosure Schedule, (ii)
Liens for taxes not yet due and payable for which adequate reserves, as
applicable, have been established in the Company's financial statements in
accordance with United States generally accepted accounting principles, (iii)
Liens
-29-
which do not, individually or in the aggregate, materially interfere with or
materially impair the conduct of the business of the Company or any of its
subsidiaries and (iv) Liens which would not reasonably be expected to result in
a Company Material Adverse Effect. Neither the Company nor any of its
subsidiaries owns any real property, except as set forth in Section 4.20 of the
Company Disclosure Schedule. The real property listed in Section 4.20 of the
Company Disclosure Schedule constitutes all of the real property owned, used or
occupied by the Company or any of its subsidiaries as of the date hereof. Except
as set forth in Section 4.20 of the Company Disclosure Schedule, the Company's
and each Company subsidiary's buildings, equipment and other tangible assets are
in good operating condition (normal wear and tear excepted) and are fit for use
in the ordinary course of their respective business. To the knowledge of the
Company, all leases pursuant to which the Company or any of its subsidiaries
lease from others material amounts of real property are in full force and effect
as to the Company in accordance with their respective terms, and there is not
under any of such leases, any existing default or event of default (or event
which with notice or lapse of time, or both, would constitute a default) of or
by the Company, except where the lack of being in full force and effect or the
existence of such default or event of default would not reasonably be expected
to have a Company Material Adverse Effect.
SECTION 4.21 Labor Matters. Except as set forth in Section 4.21 of
-------------
the Company Disclosure Schedule, (a) there is no labor strike, dispute,
slowdown, stoppage or lockout actually pending, or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries, and during
the past three years there has not been any such action, (b) no union claims to
represent the employees of the Company or any of its subsidiaries, (c) neither
the Company nor any of its subsidiaries is a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Company or any of its subsidiaries, (d) none of
the employees of the Company or any of its subsidiaries is represented by any
labor organization and the Company does not have any knowledge of any current
union organizing activities among the employees of the Company or any of its
subsidiaries, nor does any question concerning representation exist concerning
such employees, (e) the Company and its subsidiaries are, and have at all times
been, in material compliance with all applicable Laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
law, ordinance or regulation, (f) the Company has not received notice and has no
knowledge of any unfair labor practice charge or complaint against the Company
or any of its subsidiaries pending or threatened before the National Labor
Relations Board or any similar state or foreign agency, (g) the Company has not
received notice and has no knowledge of any grievance arising out of any
collective bargaining agreement or other grievance procedure, (h) the Company
has not received notice and has no knowledge of any charges with respect to or
relating to the Company or any of its subsidiaries that are pending before the
Equal Employment Opportunity Commission or any other agency responsible for the
prevention of unlawful employment practices, (i) neither the Company nor any of
its subsidiaries has received notice of the
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intent of any federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws to conduct an investigation with respect
to or relating to the Company or any of its subsidiaries and, to the Company's
knowledge, no such investigation is in progress and (j) the Company has not
received notice and has no knowledge of any complaints, lawsuits or other
proceedings that are pending or threatened in any forum by or on behalf of any
present or former employee of the Company or any of its subsidiaries alleging
breach of any express or implied contract of employment, any law or regulation
governing employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment relationship.
Except as set forth in Section 4.21 of the Company Disclosure Schedule, to the
knowledge of the Company, as of the date hereof, no executive officer or other
key employee of the Company or any of its subsidiaries is subject to any
noncompete, nonsoliciation, nondisclosure, confidentiality, employment,
consulting or similar agreement relating to, affecting or in conflict with the
present or proposed business activities of the Company and its subsidiaries,
except agreements between the Company or any subsidiary of the Company and its
present and former officers and employees.
SECTION 4.22 Insurance. Except as set forth in Section 4.22 of the
---------
Company Disclosure Schedule, the Company and each of its subsidiaries have
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting businesses or owning assets similar to those of the
Company and its subsidiaries. All premiums due and payable under all such
policies and bonds have been paid (or will be paid prior to delinquency) and the
Company and its subsidiaries are otherwise in compliance in all material
respects with the terms of such policies and bonds. Except as set forth in
Section 4.22 of the Company Disclosure Schedule, as of the date hereof, neither
the Company nor any of its subsidiaries maintains any material self-insurance or
co-insurance programs. As of the date hereof, neither the Company nor any of
its subsidiaries has any disputed claim or claims with any insurance provider
relating to any claim for insurance coverage under any policy or insurance
maintained by the Company or any of its subsidiaries.
SECTION 4.23 Customers and Suppliers. Section 4.23 of the Company
-----------------------
Disclosure Schedule lists, as of the date hereof, the twenty largest customers
of the Company's distribution business, the ten largest customers of the
Company's manufacturing business and the twenty largest suppliers of the Company
and its subsidiaries (on a consolidated basis) for the period January 1, 2000
through December 30, 2000 and sets forth opposite the name of each such customer
and supplier the dollar volume and percentage of consolidated net sales or
purchases attributable to such customer or supplier. To the Company's knowledge
and except as set forth in Section 4.23 of the Company Disclosure Schedule, none
of the customers listed in Section 4.23 of the Company Disclosure Schedule
intends to stop, or materially decrease the rate of, purchasing materials,
products or services from the Company or any of its subsidiaries. To the
Company's knowledge, except as set forth in Section 4.23 of the Company
Disclosure Schedule, none of the suppliers listed in Section 4.23 of the Company
Disclosure Schedule intends to stop, or materially decrease the rate of,
supplying materials, products or services to the Company or any of its
subsidiaries.
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SECTION 4.24 Brokers. Except for CoView Capital, whose fees will be
-------
paid by the Company, there is no investment banker, broker, finder or other
intermediary (other than legal and accounting advisors) which has been retained
by or is authorized to act on behalf of the Company or any of its subsidiaries
(or any director or officer thereof) who might be entitled to any fee or
commission from the Company, any subsidiary of the Company, Merger Subsidiary or
Buyer or any of their affiliates upon consummation of the transactions
contemplated by this Agreement. The fees described in this Section 4.24 for
------------
CoView Capital shall not exceed $550,000 in the aggregate.
SECTION 4.25 Applicability of State Takeover Statutes. The Company
----------------------------------------
has taken all actions necessary under the Georgia Code and the Bylaws of the
Company to render the limitations on business combinations contained in Parts 2
or 3 of Article 11 of the Georgia Code, in the Bylaws of the Company or in any
other "fair price," "moratorium," "control share acquisition," "interested
shareholder," or similar antitakeover statute or regulation enacted under
Georgia law applicable to the Company or any of its subsidiaries inapplicable to
the Offer, the Merger, this Agreement, the Stockholders Agreement or any of the
transactions contemplated by this Agreement or the Stockholders Agreement. No
other state takeover statute or similar statute or regulation applies or
purports to apply to the Offer, the Merger or the other Transactions.
SECTION 4.26 Voting Requirements. In the event that Section
-------------------
14-2-1104 of the Georgia Code is inapplicable and unavailable to effectuate the
Merger, the affirmative vote of the holders of a majority of all the outstanding
Shares entitled to vote approving this Agreement at the Special Meeting is the
only vote of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the Transactions.
SECTION 4.27 Opinion of Financial Advisor. The Company has received
----------------------------
the opinion of CoView Capital, to the effect that, as of the date of this
Agreement, the consideration to be received in the Offer and the Merger by the
Company's stockholders is fair to the Company's stockholders from a financial
point of view, and a complete and correct signed copy of such opinion has been,
or promptly upon receipt thereof will be, delivered to Buyer. The Company has
been authorized by CoView Capital to permit the inclusion of such opinion in its
entirety in the Schedule 14D-9 and the Proxy Statement, so long as such
inclusion is in form and substance reasonably satisfactory to CoView Capital and
its counsel.
SECTION 4.28 Transaction Expenses. Section 4.28 of the Company
--------------------
Disclosure Schedule sets forth the amount of the Transaction Expenses incurred
or which may be incurred by the Company in connection with the Transactions and
the Closing thereof including those incurred or which may be incurred by CoView
Capital and Xxxxx, Xxxxxxxx & Xxxxxxx, LLP (other than (i) expenses incurred in
connection with any litigation with respect to, arising from or related to any
Transactions, (ii) fees and expenses of Xxxxx, Xxxxxxxx & Xxxxxxx, LLP incurred
and paid prior to May 1, 2001, (iii) real estate appraisal fees of $6,500, and
(iv) printing and distribution
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costs associated with any proxy solicitation or other communication with the
Company's shareholders and (v) prepayment fees associated with the refinancing
of the Company's existing revolving credit facility).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
BUYER AND MERGER SUBSIDIARY
Except as set forth in the disclosure schedule delivered by Buyer and
Merger Subsidiary to the Company prior to the execution of this Agreement (the
"Buyer Disclosure Schedule"), Buyer and Merger Subsidiary represent and warrant
-------------------------
to the Company as of the date hereof and as of the Effective Time that:
SECTION 5.01 Organization and Qualification; Subsidiaries. Each of
--------------------------------------------
Buyer and Merger Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a Buyer
Material Adverse Effect (as defined below). Each of Buyer and Merger Subsidiary
is duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Buyer Material Adverse Effect. The term "Buyer Material Adverse Effect" means
-----------------------------
any effect, circumstance, event, fact or change in the business of Buyer that
(i) is or is reasonably likely to be materially adverse to the business,
operations, assets, liabilities (actual or contingent), properties, financial or
other condition, results of operations or prospects of Buyer or (ii) prevents or
materially delays, or is reasonably likely to prevent or materially delay, the
ability of Buyer or Merger Subsidiary to perform in all material respects its
obligations under this Agreement or to consummate the Transactions in accordance
with the terms hereof. Merger Subsidiary has no subsidiaries.
SECTION 5.02 Articles of Incorporation and Bylaws. Buyer has
------------------------------------
heretofore made available to the Company a complete and correct copy of the
Articles of Incorporation and the Bylaws or equivalent organizational documents,
each as amended to date, of Buyer and Merger Subsidiary. Such Articles of
Incorporation, Bylaws and equivalent organizational documents are in full force
and effect. Neither Buyer nor Merger Subsidiary is in violation of any
provision of its
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Articles of Incorporation, Bylaws or equivalent organizational documents, except
for such violations that would not, individually or in the aggregate, have a
Buyer Material Adverse Effect.
SECTION 5.03 Authority Relative to this Agreement.
------------------------------------
(a) Each of Buyer and Merger Subsidiary has all necessary power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated herein. The execution
and delivery of this Agreement by Buyer and Merger Subsidiary and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
herein have been duly and validly authorized by all necessary corporate action
and no other corporate proceedings on the part of Buyer are necessary to
authorize this Agreement or to consummate the transactions contemplated herein
(other than, with respect to the Merger, the filing of the appropriate merger
documents as required by the Georgia Code). This Agreement has been duly and
validly executed and delivered by Buyer and Merger Subsidiary and, assuming the
due authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of Buyer and Merger Subsidiary, enforceable against
Buyer and Merger Subsidiary in accordance with its terms, subject to the effect
of any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to enforceability, to
the effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(b) The Board of Directors and, simultaneously with the execution and
delivery hereof, the sole stockholder of the Merger Subsidiary have approved and
adopted this Agreement in accordance with the Georgia Code and Merger
Subsidiary's Articles of Incorporation and Bylaws.
SECTION 5.04 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by Buyer and Merger
Subsidiary do not, and the performance of the transactions contemplated herein
by Buyer and Merger Subsidiary will not, (i) conflict with or violate the
Articles of Incorporation or Bylaws or equivalent organizational documents of
Buyer or Merger Subsidiary, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Buyer or any Merger
Subsidiary or by which any property or asset of Buyer or any Merger Subsidiary
is bound or affected, or, (iii) except for the consent of Buyer's lenders under
its existing senior credit facility and subordinated loan agreement, result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, result in the loss of a material
benefit under or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any
property or asset of Buyer or any Merger Subsidiary pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Buyer or any Merger Subsidiary is a
party or by which Buyer or any Merger Subsidiary or any property or asset of
Buyer or any Merger Subsidiary is bound or affected, except in the case of
-34-
clauses (ii) and (iii) above, for any such conflicts, violations, breaches,
defaults or other occurrences which would not prevent or delay consummation of
the Merger in any material respect, or otherwise, individually or in the
aggregate, have a Buyer Material Adverse Effect.
(b) The execution and delivery of this Agreement by Buyer and Merger
Subsidiary do not, and neither the performance of this Agreement by Buyer and
Merger Subsidiary nor the consummation of the transactions contemplated hereby
by the Company will, require any consent, approval, authorization, order or
permit of, or filing with or notification to, any Governmental Entity, except
for (i) applicable requirements, if any, of the Exchange Act and the Georgia
Code and (ii) such other consents, approvals, authorizations or permits, filings
or notifications, not obtained or made prior to consummation of the Offer the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Buyer Material Adverse Effect.
SECTION 5.05 Documents Relating to Offer; Company Proxy Statement.
----------------------------------------------------
The Offer Documents and the Offer will comply in all material respects with the
applicable requirements of the Exchange Act, except that no representation is
made by Buyer or Merger Subsidiary with respect to information supplied in
writing by the Company specifically for use in the Offer Documents. None of the
information that may be supplied in writing by Buyer or its affiliates
specifically for use in the Company Proxy Statement, the 14D-9 or any other
document filed or to be filed with the SEC will contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. If any such information provided by Buyer or its
affiliates shall, after the filing of the 14D-9, the Company Proxy Statement or
any other document filed by the Company with the SEC, become false or misleading
in any material respect, the Buyer shall promptly notify the Company and update
such information in writing.
SECTION 5.06 Brokers. Except for Xxxx Capital, Inc., whose fees
-------
will be paid by Buyer, there is no investment banker, broker, finder or other
intermediary (other than legal and accounting advisors) which have been retained
by or is authorized to act on behalf of the Buyer or any of its Subsidiaries (or
any director or officer thereof) who might be entitled to any fee or commission
upon consummation of the transactions contemplated by this Agreement.
SECTION 5.07 Financing. Buyer has provided the Company with a copy
---------
of a commitment letter from the parties named therein to Buyer, dated as of July
6, 2001, relating to the debt financing to be provided to the Surviving
Corporation (the "Commitment Letter"), which is in full force and effect as of
-----------------
the date hereof. The financing contemplated by the Commitment Letter will
provide Buyer, subject to the terms and conditions set forth therein, with
sufficient funds for Buyer to pay the aggregate Equity Consideration, refinance
all of the Company's outstanding indebtedness and to pay the Transaction
Expenses in connection therewith (collectively, the "Acquisition Costs")
-----------------
provided that (i) the representations and warranties made by the Company in
Section 4.03 and Section 4.28 are true and correct in all respects (other than
------------ ------------
any misrepresentations
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that would not exceed, in the aggregate for all such representations and
warranties in Section 4.03 and Section 4.28, $50,000) and (ii) the covenant set
------------ ------------
forth in Section 6.01(h) has not been breached. The commitment fees set forth
---------------
in the Commitment Letter which are due and payable have been paid.
SECTION 5.08 Litigation. There is no suit, claim, action,
----------
proceeding or investigation pending or, to the knowledge of Buyer, threatened
against Buyer or Merger Subsidiary, at law or equity, that, individually or in
the aggregate, would prevent or materially delay, or is reasonably likely to
prevent or materially delay, the ability of Buyer or Merger Subsidiary to
perform in all material respects its obligations under this Agreement or to
consummate the Transactions in accordance with the terms hereof.
ARTICLE VI
COVENANTS OF THE COMPANY
SECTION 6.01 Conduct of the Company. The Company covenants and
----------------------
agrees that, between the date of this Agreement and such time when persons
nominated by Buyer constitute a majority of the Board, unless the Buyer shall
have consented in writing, the businesses of the Company and its subsidiaries
shall be conducted in, and the Company and its subsidiaries shall not take any
material action, except in the ordinary course of business, consistent with past
practice, and the Company shall, and shall cause its subsidiaries to, use their
respective reasonable best efforts to preserve intact their respective business
organizations, to keep available the services of their respective current
officers, employees and consultants and to preserve their respective
relationships with customers, suppliers, licensors, licensees and other persons
with which it or any of its subsidiaries has significant business relations as
well as with officials and employees of government agencies and other entities
which regulate the Company, any of its subsidiaries and their business. In
addition to the foregoing, except (i) as expressly permitted by this Agreement
or (ii) as set forth on Section 6.01 of the Company Disclosure Schedule, neither
the Company nor any of its subsidiaries shall, between the date of this
Agreement and such time when person nominated by Buyer constitute a majority of
the Board, directly or indirectly do, or propose or agree to do, any of the
following without the prior written consent of the Buyer:
(a) amend or otherwise change the Articles of Incorporation or Bylaws
of the Company or any of its subsidiaries;
(b) (i) authorize for issuance, issue, deliver, sell or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, commitments, subscriptions, rights to purchase or otherwise), pledge or
otherwise encumber any shares of its capital stock or the capital stock of any
of its subsidiaries, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities or
-36-
any other securities or equity equivalents (including without limitation stock
appreciation rights or phantom interests), except for issuances of Common Stock
upon the exercise of Options outstanding prior to the date hereof or (ii)
repurchase, redeem or otherwise acquire, or permit any of its subsidiaries to
repurchase, redeem or otherwise acquire, any shares of capital stock or other
equity interests of the Company or any of its subsidiaries (including, without
limitation, securities exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, capital stock or other equity
interests of the Company or any of its subsidiaries);
(c) (i) sell, transfer or pledge, or agree to sell, transfer or
pledge, any equity interest owned by it in any of its subsidiaries or alter
through merger, liquidation, reorganization, restructuring or in any other
fashion the corporate structure or ownership of any of its subsidiaries or (ii)
split, combine or reclassify any shares of its capital stock, and shall not
permit any of its subsidiaries to split, combine or reclassify any shares of its
capital stock;
(d) declare, set aside or pay any dividends on (whether in cash,
stock or property), or make any other distributions in respect of, any of its
capital stock (except for dividends paid by direct or indirect wholly owned
subsidiaries to the Company with respect to capital stock);
(e) (i) grant or agree to any increase in any manner in the
compensation or fringe benefits of, or pay any bonus to, any current or former
director, officer or employee except for increases and bonuses expressly
contemplated by or required under existing employment agreements, bonus plans
and other agreements, arrangements listed in Section 6.01(e) of the Company
Disclosure Schedule and, with respect to non-officer employees, routine
increases in compensation given in the ordinary course of business consistent
with past practices and in an amount not exceeding 5% of such employee's current
compensation, (ii) subject to the covenants set forth in clause (i) of this
Section 6.01(e), enter into any new or materially amend any existing employment,
---------------
severance or termination agreement with any current or former director, officer
or employee of the Company other than in the ordinary course of business
consistent with past practice, (iii) except as may be required to comply with
applicable Law and except as provided in this Agreement, become obligated under
any Benefit Plan that was not in existence on the date hereof or amend, modify
or terminate any Benefit Plan or other employee benefit plan or any agreement,
arrangement, plan or policy for the benefit of any current or former director,
officer or employee in existence on the date hereof or (iv) pay any benefit not
required by any plan or arrangement as in effect as of the date hereof
(including, without limitation, the granting of, acceleration of, exercisability
of or vesting of stock options, stock appreciation rights or restricted stock);
(f) acquire or agree to acquire, including, without limitation, by
merging or consolidating with, or purchasing all or substantially all the assets
or capital stock or other equity interests of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, other than purchases of inventory, supplies or
equipment parts in the ordinary course of business consistent with past
practice;
-37-
(g) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of, or agree to sell, lease, license, mortgage
or otherwise encumber or subject to any Lien or otherwise dispose of, any of its
properties or assets other than (i) immaterial properties or assets (or
immaterial portions of properties or assets) and (ii) inventory in the ordinary
course of business consistent with past practice;
(h) incur, assume or pre-pay any Indebtedness for Borrowed Money or
enter into any agreement to incur, assume or pre-pay any Indebtedness for
Borrowed Money, or guarantee, or agree to guarantee, any such indebtedness or
obligation of another person, or issue or sell, or agree to issue or sell, any
debt securities or options, warrants or calls or rights to acquire any debt
securities of the Company or any of its subsidiaries, guarantee any debt
securities of others, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, other than in
the case of any of the foregoing, that are done in the ordinary course of
business consistent with past practice (provided that the Company and its
--------
subsidiaries' aggregate Indebtedness for Borrowed Money shall not exceed
$14,200,000 as of the Expiration Date);
(i) make or forgive any loans, advances or capital contributions to,
guarantees for the benefit of, or investments in, any person or entity (other
than loans between or among the Company and any of its wholly-owned
subsidiaries);
(j) assume, guarantee or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
Person except for the obligations of the subsidiaries of the Company permitted
under this Agreement;
(k) adopt or put into effect a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company or any of its subsidiaries (other than
any transaction specifically contemplated by this Agreement);
(l) (i) enter into, amend, modify or supplement any Material Contract
or License Agreement outside of the ordinary course of business consistent with
past practice (except as may be necessary for the Company to comply with its
obligations hereunder) or (ii) waive, release, grant, assign or transfer any of
its material rights or claims (whether such rights or claims arise under a
Material Contract or otherwise);
(m) authorize or make any capital expenditures (other than pursuant
to commitments prior to the date hereof disclosed in Section 6.01(m) of the
Company Disclosure Schedule) in excess of $50,000 in the aggregate for the
Company and its subsidiaries taken as a whole;
-38-
(n) fail to comply with their obligations under the Material
Contracts and License Agreements as such obligations become due;
(o) (i) fail to maintain and continue in force with good and
responsible insurance companies adequate insurance covering risks of such types
and in such amounts as are consistent with the Company's past practices or (ii)
permit any insurance policy naming it as beneficiary or loss payable payee to be
canceled or terminated without the prior written approval of Buyer;
(p) enter into, amend, modify or supplement any agreement,
transaction, commitment or arrangement with any current or former officer,
director, employee or other affiliate of the Company or any of its subsidiaries
(or any affiliate of any of the foregoing) other than agreements, transactions,
commitments and arrangements (i) permitted by Section 6.01(e) hereof or (ii) as
---------------
otherwise expressly contemplated by this Agreement;
(q) establish or acquire (i) any subsidiary other than wholly-owned
subsidiaries or (ii) subsidiaries organized outside of the United States and its
territorial possessions;
(r) amend, modify or waive any term of any outstanding security of
the Company and any of its subsidiaries, except as required by this Agreement;
(s) fail to (i) maintain any real property to which the Company and
any of its subsidiaries have ownership or a leasehold interest (including,
without limitation, the furniture, fixtures, equipment and systems therein) in
its current condition, subject to reasonable wear and tear and technical
obsolescence and further subject to any casualty or condemnation, (ii) timely
pay all taxes, water and sewage rents, assessments and insurance premiums
affecting such real property and (iii) timely comply in all material respects
with the terms and provisions of all leases, contracts and agreements relating
to affecting such real property and the use and operation thereof;
(t) enter into any labor or collective bargaining agreement,
memorandum or understanding, grievance settlement or any other agreement or
commitment to or relating to any labor union;
(u) settle or compromise any pending or threatened suit, action,
claim or litigation;
(v) change any of the accounting policies, practices or procedures
(including tax accounting policies, practices and procedures) used by the
Company and its subsidiaries as of December 31, 2000, except as may be required
as a result of a change in applicable law or in United States generally accepted
accounting principles;
-39-
(w) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory in any material manner
or the write-off of notes or accounts receivable in any material manner;
(x) make or change any material tax election, make or change any
method of accounting with respect to Taxes, file any amended Tax Return or
settle or compromise any material disputed tax liability;
(y) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
the financial statements of the Company or incurred in the ordinary course of
business and consistent with past practice;
(z) subject to the exercise of the fiduciary obligations of the Board
as otherwise permitted under the terms of this Agreement, take or agree or
commit to take, any action that would, or is reasonably likely to, make any
representation or warranty of the Company contained in this Agreement inaccurate
at, or as of any time prior to, the Effective Time or result in any of the
conditions to the Offer set forth in Exhibit A hereto or to the Merger set forth
---------
in Article IX not being satisfied, or omit, or agree to omit, to take any action
necessary to prevent any such representation or warranty from being inaccurate
in any material respect at any such time or to prevent any such condition from
not being satisfied; and
(aa) agree or commit to do any of the foregoing.
SECTION 6.02 Stockholders' Meeting; Proxy Material.
-------------------------------------
(a) Unless Buyer or Merger Subsidiary acquires at least 90% of the
outstanding Shares, in which case Buyer shall cause the Merger to take place
without a vote of the Company's stockholders as permitted by Section 14-2-1104
of the Georgia Code, if required by applicable law, the Company shall cause a
special meeting of its stockholders (the "Company Stockholders Meeting") to be
----------------------------
duly called and held as soon as reasonably practicable after the purchase of
Shares pursuant to the Offer for the purpose of acting upon proposals to approve
this Agreement and all actions contemplated hereby that require the approval of
the Company's stockholders. The Board shall (i) recommend to the stockholders
of the Company the approval and adoption of this Agreement and the Merger, (ii)
include in the Company Proxy Statement such favorable recommendation of the
Board that the stockholders of the Company vote in favor of the approval and
adoption of this Agreement and the Merger, (iii) take all lawful action
reasonably required to solicit such approval from the stockholders of the
Company and (iv) not withdraw or modify such favorable recommendation, in each
case, unless the Board, after consultation with independent outside legal
counsel, determines in good faith that failing to take such action is necessary
for the
-40-
Board to comply with its fiduciary duties to the Company's stockholders under
applicable law. The Company agrees that its obligations set forth in the first
sentence of this Section 6.02(a) shall not be affected by the withdrawal or
---------------
modification by the Board, in accordance with the immediately preceding
sentence, of its recommendation to the Company's stockholders that such
stockholders approve and adopt this Agreement and the Merger. In connection with
the Company Stockholders Meeting, the Company shall in accordance with
applicable law and after consultation with the Buyer, prepare and file with the
SEC a preliminary Company Proxy Statement relating to the matters to be
considered at the Company Stockholders Meeting, respond as promptly as
practicable to any comments made by the SEC with respect to the preliminary
Company Proxy Statement and cause a definitive Company Proxy Statement to be
mailed to its stockholders as promptly as practicable thereafter.
(b) In connection with the Company Stockholders Meeting, the Company
shall promptly take all action necessary in accordance with the Georgia Code and
its Articles of Incorporation and Bylaws to convene the Company Stockholders
Meeting, if such meeting is required. The stockholder vote required for approval
of the Merger will be no greater than that set forth in the Georgia Code.
Subject to the terms of 6.02(a), the Company shall use its reasonable best
efforts to solicit from stockholders of the Company proxies in favor of the
Merger and shall take all other reasonable action necessary or, in the
reasonable opinion of Buyer, advisable to secure any vote of stockholders
required by the Georgia Code to effect the Merger. Notwithstanding the
foregoing, if Buyer of Merger Subsidiary or any other subsidiary of Buyer shall
acquire at least 90% of the outstanding Shares, and provided that the conditions
set forth in Article IX shall have been satisfied or waived, the Company shall,
at the request of Buyer, take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after such acquisition,
without the approval of the stockholders of the Company, in accordance with
Section 14-2-1104 of the Georgia Code.
SECTION 6.03 Access to Information. From the date of this Agreement
---------------------
until the earlier of Effective Time and the date this Agreement is properly
terminated in accordance with Article X, the Company will, and will cause each
of its subsidiaries and its and their affiliates, and each of their respective
officers, directors, employees, agents, counsel, accountants, investment
bankers, financial advisors and representatives (collectively, the "Company
-------
Representatives") to, give Buyer, Merger Subsidiary and their respective
---------------
officers, directors, employees, agents, counsel, accountants, investment
bankers, financial advisors, representatives, consultants and financing sources
(collectively, the "Buyer Representatives") access, upon reasonable notice and
---------------------
during normal business hours, to the offices and other facilities and to the
books and records of the Company and each of its subsidiaries and will cause the
Company Representatives and its subsidiaries to furnish Buyer and the Buyer
Representatives with such financial and operating data and such other
information with respect to the business and operations of the Company and any
its subsidiaries as Buyer and the Buyer Representatives may from time to time
reasonably request. Unless otherwise required by law, Buyer will, and will
cause the Buyer Representatives to, hold any such information
-41-
in confidence until such time as such information otherwise becomes publicly
available through no wrongful act of Buyer or the Buyer Representatives. In the
event the Transactions are terminated or are not consummated for any reason, all
such information held by Buyer in tangible form shall be destroyed upon the
request of the Company. No investigation pursuant to this Section 6.03 shall
------------
affect any representations or warranties of the parties herein or the conditions
to the obligations of the parties hereto. Except as otherwise agreed to by the
Company, and notwithstanding termination of this Agreement, the terms and
provisions of the Confidentiality Agreement, dated as of March 21, 2001 (the
"Confidentiality Agreement"), between Buyer and the Company shall apply to all
-------------------------
information furnished to any Buyer Representative by any Company Representative
hereunder or thereunder.
SECTION 6.04 No Solicitation.
---------------
(a) From and after the date hereof until the earlier of the Effective
Time and the termination of this Agreement pursuant to Article X, the Company,
its subsidiaries and their affiliates shall not, and shall cause the Company
Representatives not to, directly or indirectly, (i) solicit, initiate or
encourage (including by way of furnishing nonpublic information or assistance),
or take any other action to facilitate, any inquiry in connection with or the
making of any proposal from any Person that constitutes, or may reasonably be
expected to lead to, an Acquisition Proposal (as defined below), (ii) enter
into, explore, maintain, participate in or continue any discussion or
negotiation with any Person (other than Buyer or any of the Buyer
Representatives, as applicable) regarding an Acquisition Proposal, or furnish to
any Person (other than Buyer or any of the Buyer Representatives, as applicable)
any nonpublic information or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
Person (other than Buyer or any of the Buyer Representatives, as applicable) to
make or effect an Acquisition Proposal, (iii) enter into any agreement,
arrangement or understanding with respect to, or otherwise endorse, any
Acquisition Proposal, or (iv) authorize or permit any Company Representative to
take any such action; provided, however, that nothing contained in this Section
----------------- -------
6.04 shall prohibit the Board, prior to the time of acceptance for payment of
----
Shares pursuant to the Offer, from furnishing information to, or engaging in
discussions or negotiations with, any Person that makes an unsolicited bona fide
written Acquisition Proposal (which did not result from a breach of this Section
-------
6.04) if (A) the Board determines in good faith after consultation with
----
independent outside legal counsel (who may be the Company's regularly employed
outside legal counsel), that such action is necessary for the Board to comply
with its fiduciary duties to the Company's stockholders under applicable law,
(B) the Acquisition Proposal constitutes or would reasonably be expected to lead
to a Superior Proposal (as defined in Section 6.04(g)) and (C) prior to
---------------
furnishing such information to, or engaging in discussions or negotiations with,
such Person, the Company receives from such Person an executed confidentiality
agreement with terms materially no less favorable to the Company than those
contained in the Confidentiality Agreement.
-42-
(b) From and after the date hereof until the earlier of the time of
the acceptance for payment of the Shares pursuant to the Offer and the
termination of this Agreement pursuant to Article X, if the Board is entitled to
furnish information to, or engage in discussions or negotiations with, any
Person on the terms contemplated in Section 6.04(a), the Board may terminate
---------------
this Agreement in respect of any Acquisition Proposal pursuant to the
termination provisions set forth in Article X hereof if (A) such Acquisition
Proposal constitutes a Superior Proposal, (B) the Board shall have determined in
good faith after consultation with independent outside legal counsel (who may be
the Company's regularly employed outside legal counsel), that such action is
necessary for the Board to comply with its fiduciary duties to the Company's
stockholders under applicable law and (C) all amounts due under Section 10.03
-------------
shall have been paid in accordance with the terms thereof.
(c) The Company (i) will promptly (but in any event within three days)
notify Buyer orally and in writing of the receipt of any Acquisition Proposal or
any inquiry regarding the making of an Acquisition Proposal including any
request for information, the terms and conditions of such request, Acquisition
Proposal or inquiry and, if not prohibited by the terms of such proposal, the
identity of the Person making such request, Acquisition Proposal or inquiry and
(ii) will keep Buyer informed of the status and details (including amendments)
of any such request, Acquisition Proposal or inquiry. Prior to taking any of
the actions referred to in Section 6.04(a), the Board shall promptly (but in any
---------------
event within three days) notify Buyer orally and in writing of any action it
proposes to take with respect to such Acquisition Proposal. After taking any
such action, the Board shall promptly advise Buyer orally and in writing of the
status of such action as developments arise or as requested by Buyer. Without
limiting the foregoing, at least three days prior to taking any of the actions
referred to in Section 6.04(b), the Board shall notify Buyer of any such action
---------------
it proposes to take. The Board shall negotiate in good faith with Buyer with
respect to any revised proposal to acquire the Common Stock that Buyer may make
in response to any Acquisition Proposal or inquiry regarding the making of an
Acquisition Proposal.
(d) Nothing contained in this Agreement shall prevent the Board from
taking, and disclosing to the Company's stockholders, a position contemplated by
Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act with regard to any
tender offer; provided, however, that neither Company nor the Board shall,
-----------------
except as permitted by Section 6.04(b) propose to approve or recommend any
---------------
Acquisition Proposal. Without limiting the foregoing, it is understood and
agreed that any violation of the restrictions set forth in the preceding
sentence by any Company Representative shall be deemed to be a breach of this
Section 6.04 by the Company.
------------
(e) The Company and each of its subsidiaries shall immediately cease
and cause its affiliates and the Company Representatives to cease any and all
existing activities, discussions or negotiations with any parties (other than
Buyer or any of the Buyer Representatives, as applicable) conducted heretofore
with respect to any Acquisition Proposal, and shall use its reasonable best
efforts to cause any such parties in possession of confidential information
about the Company that
-43-
was furnished by or on behalf of the Company to return or destroy all such
information in the possession of any such party or in the possession of any
Company Representative.
(f) For purposes of this Agreement, "Acquisition Proposal" shall mean
--------------------
any offer or proposal for, or any indication of interest in, (i) any direct or
indirect acquisition or purchase of 10% or more of the total assets of the
Company or any of its subsidiaries, in a single transaction or series of
transactions, (ii) any direct or indirect acquisition or purchase of 10% or more
of any class of equity securities of the Company or any of its subsidiaries, in
a single transaction or series of transactions, (iii) any tender offer or
exchange offer (including a self-tender offer) that if consummated would result
in any person beneficially owning 10% or more of any class of equity securities
of the Company or any of its subsidiaries, (iv) any merger, consolidation, share
exchange, business combination, recapitalization, reclassification or other
similar transaction involving the Company or any of its subsidiaries or (v) any
public announcement of an agreement, proposal, plan or intention to do any of
the foregoing, other than the transactions contemplated by this Agreement.
(g) For purposes of this Agreement, "Superior Proposal" shall mean any
-----------------
bona fide written Acquisition Proposal by a Person that (i) the Board has
determined in good faith, after consultation with independent outside legal
counsel (who may be the Company's regularly employed outside legal counsel) and
an independent reputable financial advisor (which may be CoView Capital), is
more favorable from a financial point of view to the Company's stockholders than
the Offer (including any adjustment to the terms and conditions thereof proposed
in writing by Buyer in response to any such Acquisition Proposal) and (ii) is
reasonably capable of being consummated in a timely manner (taking into account
all financial, regulatory, legal and other aspects of such proposal (including,
without limitation, any antitrust or competition law approvals or non-
objections) and the terms of the Stockholders Agreement) and for which
financing, to the extent required, is then committed or reasonably capable (in
the good faith judgment of the Board) of being financed by such third party.
SECTION 6.05 Notices of Certain Events. The Company shall promptly
-------------------------
notify Buyer of:
(a) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental Entity in
connection with the transactions contemplated by this Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting the Company or any of its subsidiaries or any
of their assets or properties
-44-
(d) any Company Material Adverse Effect; and
(e) the occurrence, or non-occurrence, of any event which would cause
either (i) any representation or warranty of the Company contained in this
Agreement to be untrue or inaccurate in any material respect at the Effective
Time, (ii) any condition set forth in Exhibit A to be unsatisfied at the time
Buyer or Merger Subsidiary purchases Shares pursuant to the Offer, (iii) any
condition set forth in Article IX hereof to be unsatisfied at the Effective Time
or (iv) any material failure by the Company to comply with or satisfy any
covenant, condition or agreement to be complied with hereunder; provided that
the delivery of any notice pursuant to this Section 6.05 shall not limit or
------------
otherwise affect the remedies available hereunder to Buyer or Merger Subsidiary.
SECTION 6.06 SEC Reports. From the date of this Agreement until the
-----------
earlier of the termination of this Agreement pursuant to Article X or the
Effective Time, the Company shall file on a timely basis all SEC Reports
required to be filed by it with the SEC under the Exchange Act, the Securities
Act and the published rules and regulations of the SEC under either of the
foregoing applicable to such SEC Reports, which SEC Reports shall comply in all
material respects with the requirements of the Exchange Act, the Securities Act
and the published rules and regulations of the SEC thereunder, each as
applicable to such SEC Reports.
SECTION 6.07 Financial Statements. During the period prior to the
--------------------
Effective Time, the Company shall provide to Buyer unaudited consolidated
monthly financial statements no later than the 15/th/ business day following the
end of each calendar month following the date of this Agreement. Further, the
Company shall provide, and shall cause its subsidiaries and the Company
Representatives to provide, upon the entering into a satisfactory
confidentiality agreement, all reasonable cooperation in connection with the
arrangement of any financing to be obtained by Buyer or the Surviving
Corporation in connection with the Transactions (the "Financing") including,
---------
without limitation, (a) promptly providing to Buyer's financing sources all
material financial information in their possession with respect to the Company
and the Transactions as reasonably requested by Buyer or Buyer's financing
sources, including, but not limited to, information and projections that have
previously been prepared by the Company, if any, relating to the Company and the
Transactions, (b) making the Company's senior officers and other Company
Representatives reasonably available to Buyer's financing sources in connection
with such Financing, to reasonably participate in due diligence sessions and to
reasonably participate in presentations related to the Financing, including,
without limitation, presentations to rating agencies and (c) reasonably
assisting in the preparation of one or more appropriate offering documents and
assisting Buyer's financing sources in preparing other appropriate marketing
materials, in each case to be used in connection with the Financing; provided,
--------
however, that nothing herein shall create an obligation on the part of the
-------
Company to prepare any additional projections as to the future performance of
its business. In addition, in conjunction with obtaining any such Financing,
the Company agrees, at the reasonable request of Buyer, to take such reasonable
actions that are necessary to enable all of the Company's
-45-
existing indebtedness to be refinanced as of the date Merger Subsidiary
purchases the Shares in Offer.
SECTION 6.08 Director Resignations. At the Closing, the Company
---------------------
shall deliver to Buyer signed letters of resignations from each director of the
Company (other than those directors who were designated by Buyer pursuant to
Section 1.03 hereof) pursuant to which each such director shall resign from his
------------
or her position as a director of the Company and make such resignation effective
at the Effective Time.
SECTION 6.09 Option to Acquire Additional Shares.
-----------------------------------
(a) The Company hereby grants to Merger Subsidiary an irrevocable
option (the "Buyer Option") to purchase up to that number of newly issued shares
------------
of Common Stock (the "Buyer Option Shares") equal to the number of shares of
-------------------
Common Stock that, when added to the number of shares of Common Stock owned by
Buyer, Merger Subsidiary and their affiliates immediately following consummation
of the Offer, shall constitute one share more than 90% of the shares of Common
Stock then outstanding on a fully diluted basis at a purchase price per Buyer
Option Share equal to the Offer Price.
(b) The Buyer Option shall be exercisable only after the purchase of
and payment for shares of Common Stock pursuant to the Offer by Buyer or Merger
Subsidiary as a result of which Buyer, Merger Subsidiary and their affiliates
own beneficially at least 80% of the outstanding shares of Common Stock. The
Buyer Option shall not be exercisable if the number of shares of Common Stock
subject thereto exceeds the number of authorized shares of Common Stock
available for issuance. The Buyer Option shall terminate automatically upon the
termination of this Agreement in accordance with its terms.
(c) In the event Merger Subsidiary wishes to exercise the Buyer
Option, Buyer shall give the Company one-day prior written notice specifying the
number of shares of Common Stock that are or will be owned by Buyer, Merger
Subsidiary and their affiliates immediately following consummation of the Offer
and specifying a place and a time (which may be concurrent with the consummation
of the Offer) for the closing of such purchase. The Company shall, as soon as
practicable following receipt of such notice, deliver written notice to Buyer
specifying the number of Buyer Option Shares. At the closing of the purchase of
the Buyer Option Shares, the portion of the purchase price owing upon exercise
of such Buyer Option which equals the product of (x) the number of shares of
Common Stock purchased pursuant to such Buyer Option, multiplied by (y) the
Offer Price, shall be paid to the Company in cash by wire transfer or cashier's
check.
SECTION 6.10 Termination of 401(k) Plan. Immediately prior to the
--------------------------
Closing, at Buyer's request, the Company shall terminate the S.P.Z., Inc. d/b/a
Full Line Distributors 401(k) Retirement Plan (f/k/a L.A. T Sportswear, Inc.
401(k) Plan). Upon the closing of the Merger, Buyer
-46-
shall cause the Company to reimburse such Plan for any early termination fees or
penalties incurred as a result of the termination of such Plan pursuant to this
Section 6.10.
ARTICLE VII
COVENANTS OF BUYER
SECTION 7.01 Confidentiality. All information obtained by Buyer in
---------------
connection with the Transactions shall be kept confidential in accordance with
the Confidentiality Agreement; provided that any provisions of the
--------
Confidentiality Agreement that would prohibit Buyer or Merger Subsidiary from
engaging in the transactions contemplated by this Agreement shall be deemed to
be modified to the extent required to permit Buyer and Merger Subsidiary to
engage in all such transactions;
SECTION 7.02 Obligations of Merger Subsidiary. Buyer will take all
--------------------------------
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
SECTION 7.03 Voting of Shares. Buyer agrees to vote all Shares now
----------------
owned or hereinafter acquired by Buyer, Merger Subsidiary or any of their
affiliates in favor of approval and adoption of this Agreement at the Company
Stockholders Meeting.
SECTION 7.04 Director and Officer Liability.
------------------------------
(a) The Articles of Incorporation and Bylaws of the Surviving
Corporation shall contain the identical provisions with respect to
indemnification set forth in the Articles of Incorporation and Bylaws of the
Company on the date of this Agreement, which provisions shall not be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who at any time prior to the Effective Time were directors or
officers of the Company in respect of actions or omissions occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement), unless such modification is required by law.
(b) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers and
directors of the Company (collectively, the "Indemnified Parties") against all
-------------------
losses, expenses, claims, damages, liabilities or amounts that are paid in
settlement of, with the approval of the Surviving Corporation (which approval
shall not unreasonably be withheld), or otherwise incurred in connection with
any claim, action, suit, proceeding or investigation (a "Claim"), based in whole
-----
or in part by reason of the fact that such person is or was a director or
officer of the Company and arising out of actions, events or omissions
-47-
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), in each case to the full extent
permitted under the Georgia Code. In addition, to the extent consistent with
applicable law, the Surviving Corporation shall indemnify, defend and hold
harmless the Indemnified Parties to the same extent and on the same terms
provided for in the Company's Articles Incorporation and Bylaws in effect on the
date hereof, which rights pursuant to such provisions shall survive the Merger
and continue in full force and effect after the Effective Time.
(c) Any Indemnified Party wishing to claim indemnification under this
Section 7.04 after the Effective Time, upon learning of any such Claim, shall
------------
notify the Surviving Corporation thereof (although the failure to so notify the
Surviving Corporation shall not relieve the Surviving Corporation from any
liability that the Surviving Corporation may have under this Section 7.04,
------------
except to the extent such failure prejudices the Surviving Corporation). In the
event of any such claim, the Surviving Corporation shall have the right to
assume the defense thereof and the Surviving Corporation shall not be liable to
such Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof, except that if the Surviving Corporation elects not to assume
such defense or if there is an actual or potential conflict of interest between,
or different defenses exist for the Surviving Corporation and the Indemnified
Party, the Indemnified Party may retain counsel satisfactory to him or her and
the Surviving Corporation shall pay all reasonable fees and expenses of such
counsel for the Indemnified Party promptly as statements therefor are received
by the Surviving Corporation; provided, however, that (i) the Surviving
-----------------
Corporation shall not, in connection with any such action or proceeding or
separate but substantially similar actions or proceedings arising out of the
same general allegations, be liable for the fees and expenses of more than one
separate firm of attorneys at any time for all Indemnified Parties (absent a
conflict of interest which ethically requires that separate counsel be
retained), (ii) the Surviving Corporation and the Indemnified Parties will
cooperate in the defense of any such matter and (iii) the Surviving Corporation
shall not be liable for any settlement effected without its prior written
consent, which consent will not be unreasonably withheld or delayed; and
provided, further, that the Surviving Corporation shall not have any obligation
-----------------
hereunder to any Indemnified Party if and when a court of competent jurisdiction
shall ultimately determine that the indemnification of such Indemnified Party in
the manner contemplated hereby is prohibited by applicable law. The Surviving
Corporation will not effect any settlement which would impose any ongoing
obligation upon an Indemnified Party (including, but not limited to, injunctive
relief) absent the written consent of the affected Indemnified Party.
(d) The Surviving Corporation shall cause to be maintained in effect
for not less than six years from the Effective Time (except to the extent not
generally available in the market) policies of directors' and officers'
liability insurance and fiduciary liability insurance that are substantially
equivalent in coverage to the Company's current insurance policies, with an
amount of coverage of not less than 100% of the amount of coverage maintained by
the Company as of the date
-48-
of this Agreement with respect to matters occurring prior to the Effective Time;
provided, however, that during such period, the Surviving Corporation shall not
-----------------
be required to maintain any coverage in excess of the amount that can be
obtained for the remainder of such period for an annual premium of 200% of the
current annual premium paid by the Company for its existing coverage. The
Company represents to Buyer that the current annual premium paid by the Company
for its existing coverage is $35,000.
(e) The Company and Buyer shall have no obligation under this Section
-------
7.04 to any Indemnified Party when and if a court of competent jurisdiction
----
shall ultimately determine, and such determination shall have become final and
non-appealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. In the event that
subsequent to the Effective Time, the Surviving Corporation challenges an
Indemnified Party's right to indemnification, the Surviving Corporation shall
advance expenses of the Indemnified Party in countering such challenge in the
manner provided in Section 6 of the Company's Bylaws as in effect on the date
hereof. In the further event that it shall be determined in a final judicial
proceeding that a person who has received advance payments of expenses or
indemnification sums pursuant to this Section 7.04 shall not be entitled to
------------
indemnification hereunder such person shall repay to Buyer or the Company, as
the case may be, all such expenses and sums promptly following such
determination.
(f) Each Indemnified Party shall have rights as a third party
beneficiary under this Section 7.04 as separate contractual rights for his or
------------
her benefit and such right shall be enforceable by such Indemnified Party, its
heirs and personal representatives and shall be binding on the Surviving
Corporation and its successors and assigns.
SECTION 7.05 Financing. Buyer agrees to perform all obligations
---------
required to be performed by it in accordance with and pursuant to the Commitment
Letter and not to take any action that will result, or is reasonably likely to
result, in one of the conditions to funding set forth in the Commitment Letter
not being satisfied (including the conditions regarding compliance with certain
debt ratios set forth in the Commitment Letter). Buyer shall use commercially
reasonable efforts to cause the financing to be obtained under, and on the terms
and in the amounts set forth in, the Commitment Letter; provided, however, that
-------- -------
Buyer shall be entitled, in its sole discretion, to enter into new commitments
for equity and/or debt financing with other nationally recognized financial
institutions, which commitments will have at least an equal aggregate funding
commitment and have substantially the same conditions to funding as those set
forth in the Commitment Letter.
-49-
ARTICLE VIII
COVENANTS OF BUYER AND THE COMPANY
SECTION 8.01 Further Actions.
---------------
(a) Subject to the terms and conditions of this Agreement, each party
will use its commercially reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. In case at any time after the Effective Time any
further action is necessary or desirable to consummate more effectively the
actions contemplated by this Agreement, at the request of the other party hereto
and at the expense of the party so requesting, Buyer and Merger Subsidiary, on
the one hand, and the Company, on the other hand, shall execute and deliver to
such requesting party such documents and take such other action as such
requesting party may reasonably request.
(b) In the event any action, suit, claim, investigation or other
proceeding relating to this Agreement, the Merger or the other transactions
hereby shall be commenced prior to the Effective Time, each of the parties
hereto agrees (subject, in the case of the Company, to the fiduciary obligations
of the Board under applicable law as advised by legal counsel) to cooperate with
each other party hereto and to use its commercially reasonable efforts to
respond to and to defend vigorously against such proceeding.
SECTION 8.02 Certain Filings. The Company and Buyer shall cooperate
---------------
with one another (a) in connection with the preparation of the Company
Disclosure Documents and the Offer Documents, and (b) in determining whether any
other action by or in respect of, or filing with, any governmental body, agency
or official, or authority or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts in connection
with the consummation of the transactions contemplated by this Agreement and (c)
in seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith or with the
Company Disclosure Documents or the Offer Documents and seeking timely to obtain
any such actions, consents, approvals or waivers.
SECTION 8.03 Public Announcements. Buyer and the Company will
--------------------
consult with each other before issuing any press release or making any public
statement with respect to this Agreement and the transactions contemplated
hereby and will not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law or any listing agreement with any national securities exchange.
SECTION 8.04 Delisting. Each of the parties hereto agrees to
---------
cooperate with the other party in taking, or causing to be taken, all actions
necessary (i) to delist the Common Stock
-50-
from the AMEX and (ii) to terminate the registration of the Common Stock under
the Exchange Act; provided that such delisting and termination shall not be
--------
effective until or after the Effective Time.
SECTION 8.05 Stockholder Litigation. Each of the Company and Buyer
----------------------
shall give the other the reasonable opportunity to participate in the defense of
any stockholder litigation against the Company or Buyer, as applicable, and
their respective directors relating to the Transactions. The Company agrees
that it will not settle any litigation currently pending, or commenced after the
date hereof, against the Company or any of its directors by any stockholder of
the Company relating to this Agreement, the Offer or the Merger, without the
prior written consent of Merger Subsidiary. The Company will not voluntarily
cooperate with any third party which has sought or may hereafter seek to
restrain or prohibit or otherwise oppose the Merger and will cooperate with
Merger Subsidiary to resist any such effort to restrain or prohibit or otherwise
oppose the Merger.
SECTION 8.06 Conveyance Taxes. Merger Subsidiary and the Company
----------------
shall cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees or any similar taxes
which become payable by the Company or any of its subsidiaries in connection
with the Transactions that are required or permitted to be filed on or before
the Effective Time.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01 Conditions to the Obligations of Each Party. The
-------------------------------------------
obligations of the Company, Buyer and Merger Subsidiary to consummate the Merger
are subject to the satisfaction of the following conditions:
(a) if required by the Georgia Code, this Agreement shall have been
approved and adopted by the stockholders of the Company in accordance with the
Georgia Code (except that this condition shall be deemed satisfied if Buyer
and/or Merger Subsidiary shall have acquired 90% or more of the outstanding
Shares);
(b) no Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, promulgated, issued, enforced or entered any
law, rule, regulation, executive order or decree, judgement, injunction, ruling
or other order, whether temporary, preliminary or permanent (collectively, an
"Order"), that is then in effect and has the effect of preventing or prohibiting
-----
consummation of the Merger or otherwise improving material limitations on the
ability
-51-
of Merger Subsidiary effectively to acquire or hold the business of the Company
and its subsidiaries; and
(c) Merger Subsidiary shall have purchased pursuant to the Offer all
Shares validly tendered prior to the expiration thereof and not withdrawn.
ARTICLE X
TERMINATION; EXPENSES
SECTION 10.01 Termination. This Agreement may be terminated and the
-----------
Transaction may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of the
Company):
(a) by mutual written consent of the Company and Buyer;
(b) by either Buyer or the Company, if any Governmental Entity or any
federal or state court of competent jurisdiction shall have issued an Order
(which has not been vacated, withdrawn or overturned) permanently restraining,
enjoining, or otherwise prohibiting or preventing the consummation of the Merger
shall have become final and nonappealable;
(c) by either Buyer or the Company, if the Shares shall not have been
purchased pursuant to the Offer on or prior to September 30, 2001, unless the
failure to consummate the Offer is the result of a breach of this Agreement by
the party seeking to terminate this Agreement;
(d) by the Company, at any time five business days or more following
termination or expiration of the Offer without Merger Subsidiary accepting for
payment the Shares validly tendered in the Offer;
(e) by Buyer, in the event the Offer expires or is terminated in
accordance with its terms without the purchase of any Shares thereunder;
(f) by the Company, if the Merger shall fail to receive the requisite
vote for approval and adoption by the stockholders of the Company at the Company
Stockholders Meeting;
(g) by the Company, if at any time prior to the acceptance for payment
of the Shares pursuant to the Offer, pursuant to and in accordance with Section
-------
6.02(b) (provided that the Company shall have complied with the provisions of
-------
Section 6.02, including, without limitation, the notice provisions therein) and
------------
that it makes simultaneous payment of the Termination Fee (as defined below);
-52-
(h) by Buyer, in the event of any breach of the representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality or any breach of any representations and warranties of the Company
set forth in this Agreement that are not so qualified in any material respect
and, individually or in the aggregate, such breach or breaches has had or would
reasonably be expected to have a Company Material Adverse Effect; or if the
Company breaches or fails to perform in any material respect any of its
covenants contained in this Agreement, which breach or failure to perform (i)
would give rise to the failure of a condition set forth in Exhibit A and (ii)
---------
has not been cured within 15 days after the giving of written notice to Buyer of
such breach; provided, that Buyer may not terminate this Agreement pursuant to
--------
this Section 10.01(h) if (y) Buyer or Merger Subsidiary is then in material
----------------
breach of any covenant contained in this Agreement or (z) any Shares have been
accepted for payment in the Offer; or
(i) by the Company, in the event of any breach of the representations
and warranties of Buyer or Merger Subsidiary set forth in this Agreement that
are qualified as to materiality or any breach of any representations and
warranties of Buyer or Merger Subsidiary set forth in this Agreement that are
not so qualified in any material respect and, individually or in the aggregate,
such breach or breaches has had or would reasonably be expected to have a Buyer
Material Adverse Effect, or if Buyer or Merger Subsidiary breaches or fails to
perform in any material respect any of its covenants contained in this
Agreement, which breach or failure to perform has not been cured within 15 days
after the giving of written notice to Company of such breach; provided, that the
--------
Company may not terminate this Agreement pursuant to this Section 10.01(i) if
----------------
(y) the Company is then in material breach of any covenant contained in this
Agreement or (z) any Shares have been accepted for payment in the Offer.
The right of any party hereto to terminate this Agreement pursuant to
this Section 10.01 shall remain operative and in full force and effect
-------------
regardless of any investigation made by or on behalf of any party hereto, any
person controlling or controlled by any such party or any of their respective
officers or directors, whether prior to or after the execution of this
Agreement.
SECTION 10.02 Effect of Termination. If this Agreement is terminated
---------------------
pursuant to Section 10.01, this Agreement shall become void and of no effect
-------------
with no liability on the part of any party hereto, except that the agreements
contained in Sections 7.01 and 10.03 shall survive the termination hereof, and
------------- -----
except that no such termination shall relieve any party from liability for
breach of this Agreement or failure by such party to perform its obligations
hereunder.
SECTION 10.03 Transaction Expenses; Termination Fee.
-------------------------------------
(a) All Transaction Expenses incurred directly or indirectly by the
parties hereto shall be borne by the party which has incurred such Transaction
Expenses; provided, however, that if the Merger is consummated all Transaction
-------- -------
Expenses of the Company and its subsidiaries shall be paid by the Surviving
Corporation.
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(b) The Company agrees that if this Agreement shall be terminated: (i)
by the Buyer pursuant to Section 10.01(e) as a result of the condition set forth
----------------
in paragraph (i) of Exhibit A shall have occurred and be continuing, and within
---------
180 days of such termination the Company either (A) enters into a legally
binding agreement with respect to an Acquisition Proposal or (B) consummates a
transaction which satisfies one or more of clauses (i) through (v) of the
definition of Acquisition Proposal, or (ii) by the Company pursuant to Section
-------
10.01(g) as a result of the receipt of a Superior Proposal as contemplated by
--------
Section 6.04(b), then in any such event the Company shall pay to Buyer a fee
---------------
equal to $2,500,000 (the "Termination Fee").
---------------
(c) Any payment required to be made pursuant to Section 10.03(b)(i)
-------------------
shall be made concurrently with the earlier of (i) the Company entering into a
legally binding agreement with respect to an Acquisition Proposal and (ii) the
consummation of a transaction described in clause (B) of such Section
-------
10.03(b)(i), and any payment required to be made pursuant to Section
----------- -------
10.03(b)(ii) shall be made simultaneously with the delivery of such notice of
------------
termination. All payments made hereunder shall be made by wire transfer of
immediately available funds to an account designated by Buyer.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Notices. All notices, requests, claims, demands and
-------
other communications to any party hereunder shall be in writing including
facsimile, telex or similar writing) and shall be given,
If to Buyer or Merger Subsidiary, to:
Broder Bros., Co.
00000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Chief Executive Officer
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Xxxxx X. Breach
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if to the Company, to:
Full Line Distributors, Inc.
0000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxx X
Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
with a copy to:
Xxxxx Xxxxxxxx & Xxxxxxx, LLP
1230 Peachtree Street, N.E.
Suite 3100, Promenade II
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxx Xxxxxxxx
Xxxxxx X. Xxxxx
or such other address, as such party may hereafter specify for the purpose by
notice to the other parties hereto. Each such notice, request or other
communication shall be effective (i) if given by facsimile, upon confirmation of
receipt, or (ii) if given by any other means, when delivered at the address
specified in this Section 11.01.
-------------
SECTION 11.02 Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
The representations and warranties contained herein shall not survive the
Effective Time. The covenants and agreements contained herein shall not survive
the Effective Time or the termination of this Agreement except for the covenants
and agreements set forth in Sections 7.01, 7.04, 7.05 and 10.03.
------------- ---- ---- -----
SECTION 11.03 Amendments; No Waivers.
----------------------
(a) Any provision of this Agreement may be amended or waived prior to
the Effective Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, Buyer and Merger Subsidiary
or in the case of a waiver, by the party against whom the waiver is to be
effective; provided that after the adoption of this Agreement by the
--------
stockholders of the Company, no such amendment or waiver shall, without the
further approval of such stockholders, alter or change (i) the amount or kind of
consideration to be received in exchange for any shares of capital stock of the
Company, (ii) any term of the Articles of Incorporation of the Surviving
Corporation or (iii) any of the terms or conditions of this Agreement if such
alteration or change would adversely affect the holders of any shares of capital
stock of the Company.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights
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and remedies herein provided shall be cumulative and not exclusive of any rights
or remedies provided by law.
SECTION 11.04 Successors and Assigns. The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the Parties hereto
and their respective successor and assigns, provided that no party may assign,
--------
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
SECTION 11.05 Governing Law. This Agreement shall be construed in
-------------
accordance with and governed in all respects, including validity, interpretation
and effect, by the law of the State of Georgia without giving effect to the
principles of conflicts of laws thereof.
SECTION 11.06 Certain Definitions. As used in this Agreement:
-------------------
(a) the term "affiliate," as applied to any person, shall mean any
---------
other person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this definition, "control"
-------
(including, with correlative meanings, the terms "controlling," "controlled by"
----------- -------------
and "under common control with"), as applied to any person, means the
-------------------------
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "Indebtedness for Borrowed Money" shall mean, without
-------------------------------
duplication: (i) all obligations of the Company and its subsidiaries for
borrowed money or in respect of loans or advances; (ii) all obligations of the
Company and its subsidiaries evidenced by bonds, debentures, notes or other
similar instruments (including, without limitation, any seller notes issued in
connection with any acquisition undertaken by the Company or any of its
subsidiaries); (iii) all obligations in respect of letters of credit, whether or
not drawn, and bankers' acceptances issued for the account of the Company or any
of its subsidiaries (other than $250,000 in unfunded letters of credit issued in
connection with the purchase of inventory); (iv) all capitalized lease
liabilities of the Company and its subsidiaries; (v) all interest rate
protection agreements (valued on a market quotation basis); (vi) all obligations
of the Company and its subsidiaries secured by a contractual lien; (vii) all
guarantees of the Company and its subsidiaries in connection with any of the
foregoing; and (viii) any accrued interest, prepayment premiums or penalties or
other expenses or amounts related to any of the foregoing (other than any
prepayment fees associated with the refinancing of the Company's existing credit
agreement);
(c) the term "knowledge," of any person which is not an individual
---------
means the actual knowledge, after due inquiry, of such person's directors and
executive officers and, for such purposes, such persons shall be conclusively
deemed to have knowledge of any fact or matter that would have or should have
come to the attention of such persons in the course of discharging their duties
in accordance with sound business practice;
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(d) the term "on a fully diluted basis" means, as of any date, the
------------------------
number of Shares outstanding, together with Shares the Company is then required
to issue pursuant to obligations outstanding at that date under employee stock
option or other benefit plans or otherwise (assuming all options and other
rights to acquire Shares are fully vested and exercisable and all Shares
issuable at any time have been issued), including, without limitation, pursuant
to the Options, but excluding the Buyer Option;
(e) the term "Person" or "person" shall include individuals,
------ ------
corporations, partnerships, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Exchange
-----
Act);
(f) the term "subsidiary" or "subsidiaries" means, with respect to any
---------- ------------
Person, any corporation, partnership, joint venture or other legal entity of
which such Person (either alone or through or together with any other
subsidiary), owns, directly or indirectly, more than 50% of the stock or other
equity or beneficial interests, the holders of which are generally entitled vote
for the election of the board of directors or other governing body of such
corporation or other legal entity; and
(g) the term "Transaction Expenses" means all out-of-pocket costs and
--------------------
expenses, including, without limitation, fees and disbursements of counsel,
financial advisors, investment bankers, banks, other financial institutions,
accountants, financial printers, appraisers, experts, consultants and other
representatives or agents incurred in connection with or related to the
authorization, preparation, negotiation, execution and performance of the
Agreement and the Transactions, including, without limitation, fees and expenses
of, or incurred in connection with, any litigation or proceedings arising out of
or related to the Agreement or the Transactions.
SECTION 11.07 Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 11.08 Company Disclosure Schedule. Any disclosure made with
---------------------------
reference to one or more sections of the Company Disclosure Schedule shall be
deemed disclosed only with respect to such section unless such disclosure is
made in such a way as to make its relevance to the information called for by
another section of the Company Disclosure Schedule readily apparent in which
case, such disclosure shall be deemed to have been included in such other
section, notwithstanding the omission of a cross reference thereto.
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SECTION 11.09 Counterparts; Effectiveness. This Agreement may be
---------------------------
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
SECTION 11.10 Headings. Section headings used in this Agreement are
--------
for convenience only and shall be ignored in the construction and interpretation
hereof.
SECTION 11.11 No Third Party Beneficiaries. Except for Section 7.04
---------------------------- ------------
(which is intended to and shall confer upon such persons all rights and remedies
by reason of this Agreement as if such person was a party hereto), no provision
of this Agreement is intended to, or shall, confer any third party beneficiary
or other rights or remedies upon any person other than the parties hereto.
SECTION 11.12 Entire Agreement. This Agreement (together with the
----------------
Company Disclosure Schedule, the Buyer Disclosure Schedule and the other
documents delivered pursuant hereto), the Stockholders Agreement and the
Confidentiality Agreement constitute the entire agreements of the parties and
supersede all prior agreements and undertakings, both written and oral, between
the parties, or any of them, with respect to the subject matter hereof.
SECTION 11.13 Severability. If any term or other provisions of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
FULL LINE DISTRIBUTORS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Its: CEO
---------------------
BRODER BROS., CO.
By: /s/ Xxxxxxx X. Xxxx
-------------------
Its: CEO
-------------------
FLD ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxx
-------------------
Its: CEO
-------------------
[Signature Page to Agreement and Plan of Merger]
EXHIBIT A
CONDITIONS TO THE OFFER
The capitalized terms used in this Exhibit A have the meanings set
---------
forth in the attached Agreement, except that the term "Merger Agreement" shall
be deemed to refer to the attached Agreement.
Notwithstanding any other provision of the Offer or this Agreement,
Merger Subsidiary shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Merger Subsidiary's obligation to pay for or return
tendered Shares promptly after the termination or withdrawal of the Offer), to
pay for any Shares tendered pursuant to the Offer, and may terminate or amend
the Offer if (i) as of immediately prior to the expiration of the Offer (as it
may be extended from time to time as permitted under this Agreement, the
"Expiration Date"), (A) the Minimum Condition shall not have been satisfied or
---------------
(B) the Buyer has not received sufficient funds from the financing contemplated
by the Commitment Letter or such other financing permitted by Section 7.05 to
pay the Acquisition Costs or (ii) as of or prior to the Expiration Date and at
any time on or after the date of this Agreement, any of the following conditions
shall have occurred and be continuing (other than with respect to conditions set
forth in paragraphs (a) or (h), which must be continuing as of the Expiration
Date, and the condition set forth in paragraph (j), which must be satisfied as
of the Expiration Date):
(a) There shall be instituted after the date hereof and pending as of
the Expiration Date before any Governmental Entity or any federal or state
court of competent jurisdiction any suit, action or proceeding (i)
challenging the acquisition by Buyer or Merger Subsidiary of any Shares
under the Offer or seeking to prohibit the making or consummation of the
Offer or the Merger or the performance of any of the other transactions
contemplated by this Agreement, or seeking to obtain from the Company,
Buyer or Merger Subsidiary any damages (including damages against the
Company's directors or officers for which they may seek indemnification
from the Company) that, if awarded, would have or is reasonably likely to
have a Company Material Adverse Effect, (ii) prohibiting or materially
limiting the ownership or operation by the Company, Buyer or any of their
respective subsidiaries of a material portion of the business or assets of
the Company and its subsidiaries, or Buyer and its subsidiaries, in each
case taken as a whole, or compelling the Company or Buyer to dispose of or
hold separate any material portion of the business or assets of the Company
and its subsidiaries, or Buyer and its subsidiaries, in each case taken as
a whole, as a result of the Offer or any of the other transactions
contemplated by this Agreement, (iii) seeking to impose material
limitations on the ability of Buyer or Merger Subsidiary to acquire or
hold, or exercise full rights of ownership of, any Shares to be accepted
for payment pursuant to the Offer including, without limitation, the right
to vote such Shares on all matters properly presented to the stockholders
of the Company, or (iv) prohibiting Buyer or any of its
A-1
subsidiaries from effectively controlling in any material respect any
significant portion of the business or operations of the Company and its
subsidiaries taken as a whole;
(b) The Company shall not have performed or complied in any material
respect with any obligation or to comply in any material respect with any
agreement or covenant required by this Agreement to be performed or
complied with by the Company on or prior to the date of consummation of the
Offer, which failure to perform or comply is not substantially cured within
15 days after Buyer provides the Company with notice of such failure;
(c) The representations and warranties of the Company set forth in
this Agreement shall not be true and correct in each case at the date of
this Agreement and the Expiration Date, unless such inaccuracies
individually or in the aggregate with all other such inaccuracies under
such representations and warranties has not had and would not reasonably be
expected to have a Company Material Adverse Effect; provided, that for
--------
purposes of this paragraph (c) each such representation and warranty of the
Company set forth in this Agreement shall be read without giving effect to
any qualification as to materiality or a Company Material Adverse Effect;
(d) This Agreement shall have been terminated in accordance with its
terms;
(e) Buyer and the Company shall have agreed that Buyer shall terminate
the Offer;
(f) There shall be any statute, rule or regulation enacted or
promulgated by any Governmental Entity applicable to the Offer or the
Merger, or any other action shall be taken by any Governmental Entity, that
results, directly or indirectly, in any of the consequences referred to in
clauses (i) through (iv) of paragraph (a) above;
(g) There shall have occurred any event, change or circumstance that
has or is reasonably likely to have a Company Material Adverse Effect;
(h) The Company shall not have obtained consents of the third parties
listed in Section 4.06 of the Company Disclosure Schedule as of the
Expiration Date;
(i) (i) the Board withdraws or modifies in a manner adverse to Buyer
or Merger Subsidiary its approval or recommendation for the Offer, the
Merger or this Agreement, or recommended any Acquisition Proposal, (ii) the
Board shall have resolved to take any of the foregoing actions, or (iii)
upon the reasonable request of Merger Subsidiary, the Board shall fail
within a reasonable period of time to reaffirm its approval or
recommendation of the Offer, the Merger or this Agreement; or
A-2
(j) Xxxxxx X. Xxxxxxx shall have entered into an employment agreement
with the Merger Subsidiary prior to the Expiration Date in the form
attached as Annex 1 and Xx. Xxxxxxx and J. Xxxxx Xxxxxx shall have entered
into Non-Compete Agreements in the forms attached as Annexes 2 and 3,
respectively.
The foregoing conditions in paragraphs (a) through (j) are for the sole
benefit of Merger Subsidiary and Buyer and may be asserted by Merger Subsidiary
or Buyer regardless of the circumstances giving rise to such condition or may be
waived by Merger Subsidiary and Buyer in whole or in part at any time and from
time to time in their sole discretion. The failure by Buyer, Merger Subsidiary
or any other affiliate of Buyer at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, the waiver of any such
right with respect to particular facts and circumstances shall not be deemed a
waiver with respect to any other facts and circumstances and each such right
shall be deemed an ongoing right that may be asserted at any time and from time
to time.
A-3
