1
EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF
JULY 9, 2001
AMONG
FULL LINE DISTRIBUTORS, INC.,
BRODER BROS., CO.
AND
FLD ACQUISITION CORP.
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TABLE OF CONTENTS
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
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4.16 Licenses and Permits...........................................................................25
4.17 Material Contracts.............................................................................25
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
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7.02 Obligations of Merger Subsidiary...............................................................47
7.03 Voting of Shares...............................................................................47
7.04 Director and Officer Liability.................................................................47
7.05 Financing......................................................................................49
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 Line Distributors, Inc., a Georgia corporation (the "Company"), Broder
Bros., Co., a Michigan corporation ("Buyer"), and FLD Acquisition Corp., a
Georgia corporation and a wholly owned subsidiary of Buyer ("Merger
Subsidiary").
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 purchase all the issued and outstanding shares (the "Shares") of common
stock, no par value per share, of the Company (the "Common Stock"), at a price
per 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 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 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 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
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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, the "Transaction Agreements") pursuant to which such stockholders
will agree to 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.
(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 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 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.
(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) extend the Offer, if at the then scheduled
expiration date of
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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. 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 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").
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.
(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 of Directors (the "Board") has (w) at a meeting duly called and
held or by way of unanimous written consent in accordance with the Bylaws of the
Company unanimously approved and adopted this Agreement and the Transactions,
including the Offer and the Merger (as defined
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in Section 2.01), (x) resolved to 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 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 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 Solicitation/Recommendation Statement on Schedule 14D-9 (the "14D-9")
which 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 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.
(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 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 payment pursuant to the Offer) bears to the aggregate number of
Shares outstanding (such number being, the "Board Percentage"), and the Company
shall 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 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.
(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 merged (the "Merger") with and into the Company in
accordance with the Georgia 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, 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
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 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 of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
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 Company and its
officers and directors shall
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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 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 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
certificate representing such Share.
SECTION 2.03 Exchange of Shares.
(a) Prior to the Effective Time, Buyer shall appoint an
agent (the "Exchange Agent") for the purpose of exchanging certificates
representing Shares 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 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 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 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 to Buyer for payment of the Merger Consideration in respect
of his Shares; provided, however, that Buyer shall comply with all applicable
state escheat 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 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
the extent that amounts
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are so withheld by Buyer, such withheld amounts shall be treated 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.
(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 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 receive the Merger Consideration pursuant to Section 2.02(c), but the
holders of 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
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.
(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 stock option plans referred to in Section 4.03, each as amended
(collectively, the "Stock Option Plans"), and any and all other outstanding
options, stock warrants and
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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 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).
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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
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the properties owned, leased or operated by them 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 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, 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
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Stock subject to issuance as aforesaid, upon issuance on the terms and
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
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each subsidiary of the Company: (i) its authorized capital stock or share
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.
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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,
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neither the Company nor any of its subsidiaries had, and since such date neither
the 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 pendency of the
Offer each such Company Disclosure Document will
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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;
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(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 Company
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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
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Pension Plans that are "multiemployer plans" (as such term is defined in Section
4001(a)(3) 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
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prohibited transactions imposed by Section 4975 or (ii) any liability under
Section 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
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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 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.
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(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 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. ss. 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 ss. 481(c) (or
any corresponding or similar provision of state, local or foreign income Tax
Law); (ii) "closing statement" as described in Code ss. 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 ss. 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
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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 (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.
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(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
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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 that the
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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:
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(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 limitation, radioactive substances,
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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 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
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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 intent of any federal, state, local
or foreign agency responsible for the enforcement of labor or employment laws to
conduct an
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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 ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, 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 ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, LLP incurred and paid prior to May 1, 2001, (iii) real estate
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appraisal fees of $6,500, and (iv) printing and distribution 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 Articles of Incorporation, Bylaws
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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,
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except in the case of 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 ▇▇▇▇ 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
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(other than any misrepresentations 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
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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 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
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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;
(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);
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(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;
(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
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31, 2000, except as may be required as a result of a change in applicable law or
in United States generally accepted accounting principles;
(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
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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 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
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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 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
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agreement with terms materially no less favorable to the Company than those
contained in the Confidentiality Agreement.
(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
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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
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 connec tion with the transactions contemplated by this
Agreement;
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(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
(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 15th 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;
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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 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.
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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 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
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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 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
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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 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.
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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.
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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 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
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"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 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
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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);
(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
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Merger is consummated all Transaction Expenses of the Company and its
subsidiaries shall be paid by the Surviving Corporation.
(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.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
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with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. Breach
if to the Company, to:
Full Line Distributors, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
1230 Peachtree Street, N.E.
Suite 3100, Promenade II
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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
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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 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
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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;
(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.
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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.
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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Its: Chairman and Chief Executive Officer
------------------------------------
BRODER BROS., CO.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------------
Its: Chief Executive Officer
-------------------------------------
FLD ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------------
Its: Chief Executive Officer
-------------------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
64
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 subsidiaries from
A-1
65
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
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66
(j) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall have entered into an
employment agreement with the Merger Subsidiary prior to the Expiration
Date in the form attached as Annex 1 and ▇▇. ▇▇▇▇▇▇▇ and J. ▇▇▇▇▇
▇▇▇▇▇▇ 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