Exhibit 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HEILIG-MEYERS COMPANY,
HM MERGER SUBSIDIARY, INC.
AND
RHODES, INC.
DATED AS OF SEPTEMBER 17, 1996
TABLE OF CONTENTS
Article/Section Page
ARTICLE I - THE MERGER............................................................................................2
Section 1.01. Effective Time of the Merger..............................................................2
Section 1.02. Closing...................................................................................2
Section 1.03. Effects of the Merger.....................................................................2
Section 1.04. Directors and Officers of the Surviving Corporation.......................................2
ARTICLE II - CONVERSION AND EXCHANGE OF SECURITIES................................................................3
Section 2.01. Conversion of Shares in the Merger........................................................3
Section 2.02. Exchange of Certificates..................................................................3
(a) Exchange Agent.........................................................................3
(b) Exchange Procedures....................................................................3
(c) Distributions with Respect to Unexchanged Shares; Voting...............................4
(d) No Further Ownership Rights in Company Common Stock....................................5
(e) No Fractional Shares...................................................................5
(f) Termination of Exchange Fund...........................................................6
(g) No Liability...........................................................................6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................7
Section 3.01. Organization..............................................................................7
Section 3.02. Articles of Incorporation and By-laws.....................................................7
Section 3.03. Capitalization............................................................................7
Section 3.04. Company Subsidiaries......................................................................7
Section 3.05. Authority Relative to this Agreement......................................................8
Section 3.06. Consents and Approvals....................................................................8
Section 3.07. Non-Contravention.........................................................................9
Section 3.08. Compliance................................................................................9
Section 3.09. Company SEC Reports......................................................................10
Section 3.10. Absence of Certain Changes...............................................................10
Section 3.11. Litigation...............................................................................10
Section 3.12. Taxes....................................................................................11
Section 3.13. Real Property and Leases.................................................................11
Section 3.14. Information Supplied.....................................................................12
Section 3.15. Brokers..................................................................................13
Section 3.16. Employment and Severance Agreements......................................................13
Section 3.17. Employee Benefit Plans...................................................................13
Section 3.18. Trademarks, Patents and Copyrights.......................................................15
Section 3.19. Environmental Matters....................................................................15
Section 3.20. Undisclosed Liabilities..................................................................16
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TABLE OF CONTENTS
Article/Section Page
Section 3.21. Material Contracts........................................................................16
Section 3.22. Full Disclosure...........................................................................17
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF PURCHASER
AND SUB........................................................................................17
Section 4.01. Organization.............................................................................17
Section 4.02. Capitalization of Purchaser..............................................................17
Section 4.03. Capitalization of Sub; Ownership of Sub Common Stock.....................................18
Section 4.04. Authority Relative to this Agreement.....................................................18
Section 4.05. Consents and Approvals...................................................................18
Section 4.06. Non-Contravention........................................................................18
Section 4.07. Purchaser SEC Reports....................................................................19
Section 4.08. Absence of Certain Changes...............................................................19
Section 4.09. Litigation...............................................................................19
Section 4.10. Information Supplied.....................................................................20
Section 4.11. Brokers..................................................................................20
Section 4.12. Employee Benefit Plans...................................................................20
Section 4.13. Full Disclosure..............................................................20
ARTICLE V - CONDUCT OF BUSINESS PENDING THE MERGER...............................................................21
Section 5.01. Conduct of Business by the Company Pending the Merger....................................21
Section 5.02. Conduct of Business by Purchaser Pending the Merger......................................22
ARTICLE VI - ADDITIONAL AGREEMENTS...............................................................................23
Section 6.01. Preparation of Registration Statement and the Proxy Statement............................23
Section 6.02. Shareholder/Stockholder Meetings.........................................................23
Section 6.03. Legal Conditions to Merger...............................................................23
Section 6.04. Transfer Restrictions; Affiliates........................................................24
Section 6.05. Stock Exchange Listing...................................................................24
Section 6.06. Access and Information...................................................................24
Section 6.07. Other Offers.............................................................................24
Section 6.08. Public Announcements.....................................................................25
Section 6.09. Employee Benefits........................................................................25
Section 6.10. Stock Options............................................................................26
Section 6.11. Company Indemnification Provision........................................................27
Section 6.12. Estoppel Certificates and Consents........................................................27
ARTICLE VII - CONDITIONS TO CONSUMMATION OF MERGER...............................................................28
Section 7.01. Conditions to Each Party's Obligation to Effect the Merger...............................28
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TABLE OF CONTENTS
Article/Section Page
TABLE OF CONTENTS
Section 7.02. Conditions to Purchaser's and Sub's Obligation to Effect Merger..........................28
Section 7.03. Conditions to the Company's Obligation to Effect Merger..................................30
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER.................................................................31
Section 8.01. Termination by Mutual Consent............................................................31
Section 8.02. Termination by Either Purchaser or the Company...........................................31
Section 8.03. Termination by the Company...............................................................31
Section 8.04. Termination by Purchaser.................................................................32
Section 8.05. Effect of Termination and Abandonment....................................................32
ARTICLE IX - GENERAL PROVISIONS..................................................................................33
Section 9.01. Survival of Representations Warranties and Agreements....................................33
Section 9.02. Notices..................................................................................33
Section 9.03. Descriptive Headings.....................................................................34
Section 9.04. Entire Agreement; Assignment.............................................................34
Section 9.05. Governing Law............................................................................34
Section 9.06. Expenses.................................................................................34
Section 9.07. Amendment................................................................................34
Section 9.08. Waiver...................................................................................35
Section 9.09. Counterparts; Effectiveness..............................................................35
Section 9.10. Severability; Validity; Parties in Interest..............................................35
SCHEDULES
Schedule 3.04(a) - Company Subsidiaries
Schedule 3.04(b) - Ownership of Company Subsidiaries
Schedule 3.04(c) - Other Interests
Schedule 3.07 - Non-contravention
Schedule 3.08 - Compliance
Schedule 3.10 - Absence of Certain Changes
Schedule 3.11 - Litigation
Schedule 3.12(a) - Tax Returns
Schedule 3.12(b) - Taxes Payable
Schedule 3.12(c) - Waivers, Extensions and Powers of Attorneys
Schedule 3.13(b) - Liens
Schedule 3.13(c) - Lease Defaults
Schedule 3.16 - Employment and Severance Agreements
Schedule 3.17(a) - Employee Benefit Plans
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TABLE OF CONTENTS
Schedule 3.17(b) - IRS Determination Letters
Schedule 3.17(d) - Certain Claims
Schedule 3.17(f) - Pension Obligations
Schedule 3.17(g) - Reportable Events
Schedule 3.17(j) - Liability for Benefits
Schedule 3.19(b) - Environmental Liabilities
Schedule 3.21 - Material Contracts
Schedule 4.08 - Absence of Certain Changes
Schedule 4.09 - Litigation
Schedule 4.12(a) - Purchaser Plans
Schedule 5.01(d) - Certain Asset Disposals
Schedule 6.04(a) - Persons Delivering Transfer Restriction Letters on the Date of the
Merger Agreement
Schedule 6.12 - Leased Properties
EXHIBITS
Exhibit 6.04(a) - Form of Transfer Restriction Letter to be Delivered on the Date of
the Merger Agreement
Exhibit 6.04(b) - Form of Affiliate Letter to be Delivered on or Prior to the Effective
Time
Exhibit 7.02(l) - Form of Opinion of King & Spalding
Exhibit 7.03(g) - Form of Opinion of McGuire Woods Boothe & Battle L.L.P.
iv
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 17, 1996, by and
among HEILIG-MEYERS COMPANY, a Virginia corporation ("Purchaser"), HM MERGER
SUBSIDIARY, INC., a Georgia corporation and a wholly owned subsidiary of
Purchaser ("Sub"), and RHODES, INC., a Georgia corporation (the "Company").
WHEREAS, the respective Boards of Directors of Purchaser, Sub and the
Company have each determined that it is in the best interests of their
respective stockholders for the merger of Sub with and into the Company upon the
terms and subject to the conditions set forth herein (the "Merger");
WHEREAS, in furtherance of such Merger, the Boards of Directors of
Purchaser, Sub and the Company have each approved the Merger in accordance with
the Georgia Business Corporation Code (the "Georgia Code") and the Virginia
Stock Corporation Act (the "Virginia Act") and upon the terms and subject to the
conditions of this Agreement, with the Company as the corporation surviving the
Merger;
WHEREAS, the Boards of Directors of Purchaser, Sub and the Company have
each determined that the Merger and the other transactions contemplated hereby
are consistent with, and in furtherance of, their respective business strategies
and goals;
WHEREAS, WPS Investors, L.P. ("WPS"), Green Capital Investors, L.P.
("Green Capital") and Purchaser (collectively, the "Shareholders") desire to
enter into a Voting Agreement, dated as of the date hereof (the "Voting
Agreement"), pursuant to which the Shareholders have agreed to vote their
respective shares (each, a "Share") of common stock, no par value, of the
Company ("Company Common Stock") in favor of the Merger;
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, Purchaser, Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01. Effective Time of the Merger. Subject to the provisions
of this Agreement, a certificate of merger (the "Certificate of Merger") shall
be duly prepared, executed and
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acknowledged by Purchaser, on behalf of the Surviving Corporation (as defined in
Section 1.03(b)), and thereafter delivered to the Secretary of State of the
State of Georgia for filing as provided in the Georgia Code on the Closing Date
(as defined in Section 1.02). The Merger shall become effective upon the filing
of the Certificate of Merger with the Secretary of State of the State of Georgia
or at such time thereafter as is provided in the Certificate of Merger (the
"Effective Time").
Section 1.02. Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. on the second business day after satisfaction or waiver
(subject to applicable law) of the conditions (excluding conditions that, by
their terms, cannot be satisfied until the Closing Date) set forth in Article
VII (the "Closing Date"), unless another time or date is agreed to in writing by
the parties hereto. The Closing shall be held at such location as is agreed to
in writing by the parties hereto.
Section 1.03. Effects of the Merger. (a) At the Effective Time (i) the
separate existence of Sub shall cease and Sub shall be merged with and into the
Company (ii) the Articles of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation, until thereafter amended as provided by law and
such Articles of Incorporation and (iii) the By-laws of the Company as in effect
immediately prior to the Effective Time shall be the By-laws of the Surviving
Corporation, until thereafter amended as provided by law, such By-laws and the
Articles of Incorporation of the Surviving Corporation.
(b) As used in this Agreement, "Surviving Corporation" shall mean the
Company at and after the Effective Time, as the surviving corporation in the
Merger.
(c) At and after the Effective Time, the Merger will have the effects
set forth in the Georgia Code.
Section 1.04. Directors and Officers of the Surviving Corporation. The
directors of Sub immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, and the officers of Sub immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation, in each case until their respective successors shall have been duly
elected or appointed and qualified.
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES
Section 2.01. Conversion of Shares in the Merger. At the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any share of Company Common Stock:
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(a) Any Shares owned by Purchaser, Sub or any other direct or indirect
subsidiary of the Company or Purchaser shall be canceled and retired, without
any conversion thereof, and no payment shall be made with respect thereto.
(b) Each share of common stock of Sub, par value $.01 per share ("Sub
Common Stock"), issued and outstanding immediately prior to the Effective Time,
shall continue to be an issued and outstanding share of common stock, par value
$.01 per share, of the Surviving Corporation.
(c) Subject to Section 2.02(e), each remaining Share of Company Common
Stock issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive 0.50 fully paid and nonassessable shares of
$2.00 par value common stock of Purchaser ("Purchaser Common Stock"). All such
shares of Company Common Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
certificate previously representing any such shares shall thereafter represent
the right to receive the shares of Purchaser Common Stock into which such
Company Common Stock has been converted. Certificates previously representing
shares of Company Common Stock shall be exchanged for certificates representing
whole shares of Purchaser Common Stock issued in consideration therefor upon the
surrender of such certificates in accordance with Section 2.02, without
interest.
Section 2.02. Exchange of Certificates. (a) Exchange Agent. Prior to
the Effective Time, Purchaser shall designate a United States bank or trust
company to act as exchange agent (the "Exchange Agent") for the benefit of the
holders of certificates which immediately prior to the Effective Time evidenced
shares of Company Common Stock (the "Company Certificates"), for exchange in
accordance with this Article II through the Exchange Agent, certificates
representing the shares of Purchaser Common Stock (such certificates for shares
of Purchaser Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.01 in exchange for such shares of Company Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of shares
of Company Common Stock immediately prior to the Effective Time whose shares
were converted into the right to receive shares of Purchaser Common Stock
pursuant to Section 2.01, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon delivery of the Company Certificates to the
Exchange Agent), and (ii) instructions for use in effecting the surrender of the
Company Certificates in exchange for certificates representing shares of
Purchaser Common Stock. Upon surrender of a Company Certificate for cancellation
to the Exchange Agent together with such letter of transmittal, duly executed,
the holder of such Company Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares of Purchaser
Common Stock which such holder has the right to receive in respect of the
Company Certificate surrendered pursuant to the provisions of
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this Article II (after taking into account all shares of Company Common Stock
then held by such holder), and the Company Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Purchaser Common Stock
may be issued to a transferee if the Company Certificate representing such
Company Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.02, each Company Certificate shall be deemed at
any time after the Effective Time to represent only the right to receive the
Purchaser Common Stock into which the shares of Company Common Stock represented
by such Company Certificate have been converted as provided in this Article II
and the right to receive upon such surrender cash in lieu of any fractional
shares of Purchaser Common Stock as contemplated by this Section 2.02.
(c) Distributions with Respect to Unexchanged Shares; Voting.
(i) No dividends or other distributions declared or made after
the Effective Time with respect to Purchaser Common Stock with a record
date after the Effective Time shall be paid to the holder of any
unsurrendered Company Certificate with respect to the right to receive
the shares of Purchaser Common Stock represented thereby, and no cash
payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.02(e), until the holder of such Company
Certificate shall surrender such Company Certificate. Subject to the
effect of applicable laws, following surrender of any such Company
Certificate, there shall be paid to the holder of the certificates
representing whole shares of Purchaser Common Stock issued in exchange
therefor, without interest, (A) at the time of such surrender or as
promptly after the sale of the Excess Shares (as defined in Section
2.02(e)) as practicable, the amount of any cash payable with respect to
a fractional share of Purchaser Common Stock to which such holder is
entitled pursuant to Section 2.02(e) and the amount of dividends or
other distributions with a record date after the Effective Time
theretofor paid (but withheld pursuant to the immediately preceding
sentence) with respect to such whole shares of Purchaser Common Stock,
and (B) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable
with respect to such whole shares of Purchaser Common Stock.
(ii) Former holders of record as of the Effective Time of
shares of Company Common Stock shall not be entitled, at and after the
Effective Time, to vote the number of shares of Purchaser Common Stock
which they have the right to receive until the Company Certificates
formerly representing such shares shall have been surrendered in
accordance with this Section 2.02 and certificates evidencing such
Purchaser Common Stock shall have been issued in exchange therefor.
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(d) No Further Ownership Rights in Company Common Stock. All shares of
Purchaser Common Stock issued upon conversion of shares of Company Common Stock
in accordance with the terms hereof (including any cash paid pursuant to Section
2.02(c) or 2.02(e)) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Common Stock subject, however,
to the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by the Company on such shares of Company Common Stock in
accordance with the terms of this Agreement on or prior to the Effective Time
and which remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Company
Certificates are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this Article II.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of
Purchaser Common Stock shall be issued upon the surrender for exchange
of Company Certificates evidencing Company Common Stock, and such
fractional share interests will not entitle the owner thereof to vote
or to any rights of a shareholder of the Surviving Corporation.
(ii) As promptly as practicable following the Effective Time,
the Exchange Agent shall determine the excess of (x) the number of full
shares of Purchaser Common Stock delivered to the Exchange Agent by
Purchaser pursuant to Section 2.02(a) over (y) the aggregate number of
full shares of Purchaser Common Stock to be distributed to holders of
Company Common Stock pursuant to Section 2.02(b) (such excess being
herein called the "Excess Shares"). Following the Effective Time, the
Exchange Agent, as agent for the holders of Company Common Stock, shall
sell the Excess Shares at then prevailing prices on the New York Stock
Exchange, Inc. (the "NYSE"), all in the manner provided in paragraph
(iii) of this Section.
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the
NYSE and shall be executed in round lots to the extent practicable. The
Exchange Agent shall use all reasonable efforts to complete the sale of
the Excess Shares as promptly following the Effective Time as, in the
Exchange Agent's reasonable judgment, is practicable consistent with
obtaining the best execution of such sales in light of prevailing
market conditions. Until the net proceeds of such sale or sales have
been distributed to the holders of Company Common Stock, the Exchange
Agent will hold such proceeds in trust for the holders of Company
Common Stock (the "Common Shares Trust"). Purchaser shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation, of the Exchange Agent incurred
in connection with such sale of the Excess Shares. The Exchange Agent
shall determine the portion of the Common Shares Trust to which each
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holder of Company Common Stock shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the
Common Shares Trust by a fraction the numerator of which is the amount
of the fractional share interest to which such holder of Company Common
Stock is entitled (after taking into account all shares of Company
Common Stock held at the Effective Time by such holder) and the
denominator of which is the aggregate amount of fractional share
interests to which all holders of Company Common Stock are entitled.
(iv) Notwithstanding the provisions of clauses (ii) and (iii),
above, Purchaser may elect at its option, exercised prior to the
Effective Time, in lieu of the issuance and sale of Excess Shares and
the making of the payments contemplated in said clauses, to pay each
holder of Company Common Stock an amount in cash equal to the product
obtained by multiplying (x) the fractional share interest to which such
holder (after taking into account all shares of Company Common Stock
held at the Effective Time by such holder) would otherwise be entitled
by (y) the closing price for a share of Purchaser Common Stock on the
NYSE Composite Transaction Tape on the first business day immediately
preceding the Effective Time, and, in such case, all references herein
to the cash proceeds of the sale of the Excess Shares and similar
references shall be deemed to mean and refer to the payments calculated
as set forth in this clause (iv).
(v) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Company Common Stock
with respect to any fractional share interests, the Exchange Agent
shall make available such amounts to such holders of Company Common
Stock subject to and in accordance with the terms of Section 2.02(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund and
Common Shares Trust which remains undistributed to the shareholders of the
Company for six months after the Effective Time shall be delivered to Purchaser,
upon demand, and any shareholders of the Company who have not theretofor
complied with this Article II shall thereafter look only to Purchaser for
payment of their claim for Purchaser Common Stock, any cash in lieu of
fractional shares of Purchaser Common Stock and any dividends or distributions
with respect to Purchaser Common Stock.
(g) No Liability. Neither Purchaser nor the Company nor the Surviving
Corporation shall be liable to any holder of shares of Company Common Stock or
Purchaser Common Stock for such shares (or dividends or distributions with
respect thereto) or cash from the Common Shares Trust delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Purchaser and Sub
as follows:
Section 3.01. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia and has the corporate 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 or presently proposed to be conducted. The Company
is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not individually or
in the aggregate have a material adverse effect on the business, assets,
liabilities, results of operations or financial condition of the Company and the
Company Subsidiaries (as hereinafter defined), taken as a whole (a "Company
Material Adverse Effect").
Section 3.02. Articles of Incorporation and By-laws. The Company has
heretofore furnished to Purchaser a complete and correct copy of the articles of
incorporation and the by-laws or equivalent organizational documents, each as
amended to date, of the Company and each Company Subsidiary. Such articles of
incorporation, by-laws and equivalent organizational documents are in full force
and effect. Neither the Company nor any Company Subsidiary is in violation of
any provision of its articles of incorporation, by-laws or equivalent
organizational documents.
Section 3.03. Capitalization. The authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock. As of September 13, 1996,
(i) there were 9,168,150 shares of Common Stock issued and outstanding and (ii)
679,000 shares of Common Stock were reserved for issuance upon the exercise of
outstanding Company Stock Options (as defined in Section 6.10). All of the
issued and outstanding shares of Common Stock are validly issued, fully paid and
nonassessable and free of preemptive rights. Except as set forth above, as of
the date of this Agreement there are no shares of capital stock of the Company
issued or outstanding or any options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments obligating the Company
to issue, transfer, sell, redeem, repurchase or otherwise acquire any shares of
its capital stock.
Section 3.04. Company Subsidiaries. (a) Schedule 3.04(a) hereto sets
forth the name of each subsidiary of the Company (collectively, the "Company
Subsidiaries") and the state or jurisdiction of its incorporation. Each Company
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power and authority and all necessary government approvals to own,
lease and operate its properties and to carry on its business as now being
conducted. Each Company Subsidiary is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by
8
it makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not individually or in the aggregate have a Company Material Adverse Effect.
(b) The Company is, directly or indirectly, the record and beneficial
owner of all of the outstanding shares of capital stock of each of the Company
Subsidiaries, there are no proxies with respect to any such shares, and no
equity securities of any Company Subsidiary are or may become required to be
issued by reason of any options, warrants, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable or exercisable for, shares of any capital stock
of any Company Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which the Company or any Company Subsidiary is
or may be bound to issue, redeem, purchase or sell additional shares of capital
stock of any Company Subsidiary or securities convertible into or exchangeable
or exercisable for any such shares. Except as set forth on Schedule 3.04(b)
hereto, all of such shares so owned by the Company are validly issued, fully
paid and nonassessable and are owned by it free and clear of any encumbrances,
restraints on alienation, or any other restrictions with respect to the
transferability or assignability thereof (other than restrictions on transfer
imposed by federal or state securities laws).
(c) Except for the Company Subsidiaries and as set forth in the Company
SEC Reports (as hereinafter defined) or on Schedule 3.04(c) hereto, the Company
does not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity that directly or indirectly conducts any activity
which is material to the Company.
Section 3.05. Authority Relative to this Agreement. The Company has the
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by the Company's Board of
Directors, and no other corporate proceedings on the part of the Company, other
than the approval and adoption of this Agreement and the Merger by a majority of
the outstanding Shares and the filing of the Certificate of Merger, are
necessary to authorize this Agreement or the transactions contemplated hereby.
Subject to the foregoing, this Agreement has been duly and validly executed and
delivered by the Company and (assuming this Agreement constitutes a valid and
binding obligation of Purchaser and Sub) constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms.
Section 3.06. Consents and Approvals. Except (i) for applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) the filing with the SEC of (A) a proxy statement
in definitive form relating to a meeting of the Company's shareholders to be
held in connection with the Merger (the "Proxy Statement"), and (B) such reports
under Sections 13(a), 13(d), 13(g) and 16(a) of the Securities and Exchange Act
9
of 1934, as amended (the "Exchange Act"), as may be required in connection with
this Agreement and the transactions contemplated hereby and the obtaining from
the SEC of such orders as may be required in connection therewith, (iii) the
filing of the Certificate of Merger as required by the Georgia Code, (iv) if
necessary, such other applications, filings, authorizations, orders and
approvals as may be required pursuant to any applicable state takeover laws
("State Takeover Approvals") (the requirements set forth in clauses (i) through
(iv) collectively, the "Governmental Requirements"), or (v) where the failure to
make any filing with, or to obtain any permit, authorization, consent or
approval of, any court or tribunal or administrative, governmental or regulatory
body, agency, commission, division, department, public body or other authority
(a "Government Entity") would not prevent or materially delay the consummation
of the Merger, or otherwise prevent the Company from performing its obligations
under this Agreement, and would not individually or in the aggregate have a
Company Material Adverse Effect, no filing with, and no permit, authorization,
consent or approval of, any Governmental Entity is necessary for the execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions contemplated by this Agreement.
Section 3.07. Non-Contravention. Neither the execution, delivery or
performance of this Agreement by the Company, nor the consummation by the
Company of the transactions contemplated hereby, will (i) conflict with or
result in any breach of any provisions of the articles of incorporation or
by-laws of the Company or the articles of incorporation or by-laws or equivalent
organizational documents of any of the Company Subsidiaries, (ii) except as set
forth on Schedule 3.07 hereto, result in a violation or breach of, or constitute
a default under, or give rise to any right of termination, modification or
acceleration under, any note, bond, mortgage, deed of trust, security interest,
indenture, license, lease, contract, agreement, plan or other instrument or
obligation to which the Company or any of the Company Subsidiaries is a party or
by which any of them or any of their properties or assets may be bound or
affected, or (iii) violate or conflict with any applicable law, except in the
case of clauses (ii) and (iii) of this sentence for violations, breaches,
defaults or conflicts which would not individually or in the aggregate have a
Company Material Adverse Effect.
Section 3.08. Compliance. The Company and the Company Subsidiaries have
operated their respective businesses in compliance with all laws and regulations
applicable to them or their respective businesses including, without limitation,
those related to (i) antitrust and trade matters, (ii) civil rights, (iii)
zoning and building codes, (iv) public health and safety, (v) consumer credit,
including without limitation, the Federal Truth-in-Lending Act, (vi) worker
health and safety and (vii) labor, employment and discrimination in employment,
except for such violations which would not individually or in the aggregate have
a Company Material Adverse Effect. Neither the Company nor any Company
Subsidiary is in conflict with, or in default or violation of, (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any
Company Subsidiary or by which any property or asset of the Company or any
Company Subsidiary is bound or affected, or (ii) except as set forth on Schedule
3.08 hereto, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any Company Subsidiary is a party or by which the Company or any
10
Company Subsidiary or any property or asset of the Company or any Company
Subsidiary is bound or affected, except for any such conflicts, defaults or
violations that would not, individually or in the aggregate, have a Company
Material Adverse Effect.
Section 3.09. Company SEC Reports. The Company has made available to
Purchaser true and complete copies of each registration statement, report and
proxy or information statement (including exhibits and any amendments thereto)
filed by the Company with the SEC since March 1, 1994 (collectively, the
"Company SEC Reports") all of which, as of their respective filing dates,
complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act") and the Exchange Act,
and the rules and regulations promulgated thereunder. None of such Company SEC
Reports, as of the respective dates they were filed, contained any untrue
statement of a material fact or omitted 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 made, not misleading. Each of the
audited consolidated financial statements of the Company (including any related
notes and schedules) included (or incorporated by reference) in its Annual
Report on Form 10-K for the fiscal year ended February 29, 1996 (the "1996 Form
10-K"), fairly present, in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis (except as may be indicated in
the notes thereto), the consolidated financial position of the Company and the
Company Subsidiaries as of the dates thereof and the consolidated results of
their operations and their cash flows for the periods then ended. Each of the
unaudited financial statements of the Company (including any related notes and
schedules) (the "Interim Company Financial Statements") included in its
quarterly report on Form 10-Q for the quarter ended May 31, 1996 (the "May 1996
10-Q"), fairly present, in conformity with GAAP applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of the Company and the Company Subsidiaries as of the dates thereof and
the consolidated results of their operations and their cash flows for the
periods then ended.
Section 3.10. Absence of Certain Changes. Since February 29, 1996,
there has been no event or condition which has had (or is reasonably likely to
result in) a Company Material Adverse Effect, and, except as set forth on
Schedule 3.10 hereto, the Company and the Company Subsidiaries have in all
material respects conducted their businesses in the ordinary course consistent
with past practices and have not taken any action which, if taken after the date
hereof, would violate Section 5.01 hereof.
Section 3.11. Litigation. Except as disclosed in the notes to the
financial statements included in the Company SEC Reports or as set forth on
Schedule 3.11 hereto, there is no suit, action, proceeding or investigation
pending or, to the best knowledge of the Company, threatened against or
affecting the Company or any of the Company Subsidiaries, the outcome of which
is likely individually or in the aggregate (i) to have a Company Material
Adverse Effect or (ii) to limit, in any material manner, the right of Purchaser
to control the Company and the Company Subsidiaries after the Effective Time.
Neither the Company nor any Company Subsidiary is subject to any judgment,
decree, injunction, rule or order which, insofar as can reasonably be
11
foreseen in the future, may (i) have a Company Material Adverse Effect or (ii)
limit, in any material manner, the right of Purchaser to control the Company and
the Company Subsidiaries after the Effective Time.
Section 3.12. Taxes. (a) Except as set forth on Schedule 3.12(a)
hereto, the Company and the Company Subsidiaries have filed all tax returns
required to be filed by any of them, and none of the Company or the Company
Subsidiaries currently is the beneficiary of any extension of time within which
to file any tax return. All such tax returns that have been filed were correct
and complete in all material respects.
(b) Except as set forth on Schedule 3.12(b) hereto, all taxes due and
payable by any of the Company and the Company Subsidiaries (whether or not shown
on any tax return) on or before the date hereof have been paid, and any taxes
accrued but not yet payable as of the date of the most recent balance sheet of
the Company do not exceed by any material amount the reserve for unpaid taxes
shown on the most recent balance sheet of the Company.
(c) Except as set forth on Schedule 3.12(c) hereto, neither the Company
nor any of the Company Subsidiaries (i) has waived any statute of limitations in
respect of any tax or agreed to any extension of time with respect to any tax
assessment or deficiency or (ii) has executed any power of attorney authorizing
any other person to represent it before any tax authority.
(d) Neither the Company nor any Company Subsidiary (i) has filed a
consent under Section 341(f) of the Code concerning collapsible corporations,
(ii) is a party to any tax sharing or tax allocation agreement, (iii) since
January 1, 1988, has been a member of an affiliated group filing a consolidated
federal income tax return (other than a group of which the Company was the
common parent) or (iv) has any liability for the taxes of any person (other than
any of the Company or the Company Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor or otherwise.
For the purpose of this Agreement, the term "tax" (including, with
correlative meaning, the terms "taxes" and "taxable") shall include, except
where the context otherwise requires, (i) all Federal, state, local and foreign
income, profits, environmental, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy and other taxes,
duties or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts and (ii) any
liability of the Company or any Company Subsidiary for the payment of any
amounts of the type described in clause (i) above as a result of being a member
of an affiliated, consolidated, combined or unitary group for any period.
Section 3.13. Real Property and Leases. (a) Except for Permitted Liens
(as defined below), the Company and the Company Subsidiaries have good and
marketable title to all of the real property owned by the Company and the
Company Subsidiaries and good title to all of the personal property, tangible
and intangible, owned by the Company and the Company Subsidiaries.
12
Such title is sufficient for the Company and the Company Subsidiaries to conduct
their respective businesses as currently conducted.
(b) Except as set forth on Schedule 3.13(b) hereto, each parcel of real
property owned or leased by the Company or any Company Subsidiary (i) is owned
or leased free and clear of all mortgages, pledges, liens, security interests,
conditional and installment sale agreements, encumbrances, charges or other
claims of third parties of any kind (collectively, "Liens"), other than (A)
Liens for current taxes and assessments not yet past due, (B) inchoate
mechanics' and materialmen's Liens for construction in progress and inchoate
workmen's, repairmen's, warehousemen's and carriers' Liens arising in the
ordinary course of business of the Company or such Company Subsidiary consistent
with past practice, and (C) all matters of record, Liens and other imperfections
of title and encumbrances which, individually or in the aggregate, would not
materially interfere with the use of such real property by the Company or any
Company Subsidiary (collectively, "Permitted Liens"), and (ii) is neither
subject to any governmental decree or order to be sold nor is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefor, nor, to the best knowledge of the Company, has any
such condemnation, expropriation or taking been proposed.
(c) All leases of real property leased for the use or benefit of the
Company or any Company Subsidiary to which the Company or any Company Subsidiary
is a party, and all amendments and modifications thereto, are in full force and
effect and have not been modified or amended, and, except as set forth on
Schedule 3.13(c) hereto, there exists no default under any such lease by the
Company or any Company Subsidiary and the Company and the Company Subsidiaries
have complied in all material respects with their respective obligations under
such leases.
Section 3.14. Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in (i)
the registration statement on Form S-4 to be filed with the SEC by the Purchaser
in connection with the issuance of shares of the Purchaser Common Stock in the
Merger (the "Registration Statement") will, at the time the Registration
Statement is filed with the SEC and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Proxy Statement will, at the
date of mailing to shareholders and at the times of the meeting of shareholders
to be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any 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 made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to the Purchaser) will comply
as to form in all material respects with the requirements of the Exchange Act
and the rules and regulations of the SEC thereunder.
Section 3.15. Brokers. Except for Salomon Brothers Inc, no person is
entitled to any brokerage, financial advisory, finder's or similar fee or
commission payable by the Company in
13
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Company. The Company has provided
Purchaser with a true and complete copy of the engagement letter between Salomon
Brothers Inc and the Company.
Section 3.16. Employment and Severance Agreements. Except as set forth
on Schedule 3.16 hereto, there are no employment, severance or termination
agreements to which the Company or any Company Subsidiary is a party. Except for
this Agreement and those agreements described in the Company SEC Reports or on
Schedule 3.16 hereto, neither the Company nor any Company Subsidiaries is a
party to, or bound by, any employment agreement or any other arrangement or
understanding with any person that provides for the payment of any consideration
by the Company or any Company Subsidiary (or Purchaser or Sub) to such person as
a result of the consummation of any of the transactions contemplated by this
Agreement. Except as set forth on Schedule 3.16 hereto, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby or thereby has resulted in or will result in payments to
"disqualified individuals" (as defined in Section 280G(c) of the Code) of the
Company or the Company Subsidiaries which, individually or in the aggregate,
will constitute "excess parachute payments" (as defined in Section 280G(b) of
the Code) resulting in the imposition of the excise tax under Section 4999 of
the Code or the disallowance of deductions under Section 280G of the Code.
Section 3.17. Employee Benefit Plans. (a) Schedule 3.17(a) hereto
contains a written list of all employee benefit plans, programs, policies,
practices and other arrangements providing benefits to any employee or former
employee of the Company or the Company Subsidiaries that are maintained by the
Company or the Company Subsidiaries or to which the Company or the Company
Subsidiaries contribute on behalf of such employees or former employees whether
or not subject to the Employee Retirement Income Security Act of 1974 ("ERISA"),
including, without limitation, all plans, agreements or arrangements relating to
deferred compensation, stock option, bonus, profit sharing or other incentive
plan, pensions, retirement income or other benefits, severance arrangements,
health benefits and insurance benefits (collectively the "Company Plans"). The
Company has made available to Purchaser complete and correct copies of (i) all
Company Plans and (ii) the most recent actuarial report for each Company Plan
that is a defined benefit plan (within the meaning of Section 3(35) of ERISA).
None of the Company Plans is a "multiemployer plan" within the meaning of
Section 3(37) or Section 4001(a)(3) of ERISA. Since January 1, 1988, neither the
Company nor any of the Company Subsidiaries has at any time contributed to or
had any obligation to contribute to a "multiemployer plan."
(b) Each Company Plan has been administered and operated in compliance
with its terms and applicable law in all material respects, including, without
limitation, in accordance with the Code and ERISA, except where the failure to
be so administered or operated would not have a Company Material Adverse Effect.
Except as set forth on Schedule 3.17(b) hereto, the Company has received a
favorable determination letter from the IRS with respect to each Company Plan
which is intended to be a "qualified" plan under Section 401(a) of the Code, any
amendment made or event related to such Company Plan subsequent to the date of
such favorable
14
determination letter has not adversely affected the qualified status of such
Company Plan, and, to the best knowledge of the Company, the IRS has taken no
action to revoke any such letter. No material liability under ERISA, the Code,
or other applicable law has been incurred or, to the knowledge of the Company,
is reasonably likely to be incurred by the Company, with respect to any Company
Plan.
(c) Neither the Company nor, to the best of the Company's knowledge,
any of the Company Subsidiaries or, to the best of the Company's knowledge, any
other "disqualified person" (as defined in Section 4975 of the Code) or
"party-in-interest" (as defined in Section 3(14) of ERISA), has engaged in any
transaction in connection with which the Company or any Company Subsidiary,
directly or indirectly, would be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code.
(d) Except as set forth on Schedule 3.17(d) hereto, there are no
actions, suits, claims or proceedings, pending or, to the best of the Company's
knowledge, threatened (other than routine claims for benefits), which would be
reasonably likely to result in any liability to the Company or to any of the
Company Subsidiaries with respect to any Company Plan or any trust related
thereto which would have or would be reasonably likely to have a Company
Material Adverse Effect.
(e) No liability (other than liability for premium payments required by
Section 4007 of ERISA, which premiums have been paid when due) to the Pension
Benefit Guaranty Corporation ("PBGC") exists or has been incurred with respect
to any Company Plan subject to Title IV of ERISA which would or would be
reasonably likely to have a Company Material Adverse Effect.
(f) Except as set forth on Schedule 3.17(f) hereto, the actuarial
present value of all accrued benefits under each Company Plan which is a
"defined benefit plan" (within the meaning of Section 3(35) of ERISA) and which
is subject to Subtitles C and D of Title IV of ERISA (each such plan being
hereinafter referred to as a "Title IV Plan") and maintained or contributed to
by the Company and the Company Subsidiaries, as from time to time in effect, did
not, as of January 1, 1996, exceed the value of the assets of each such Company
Plan as of such date determined on the basis of the actuarial assumptions
required by the PBGC for plans terminating under Section 4041 of ERISA.
(g) Except as set forth on Schedule 3.17(g) hereto, there have not been
any "reportable events," as that term is defined in Section 4043 of ERISA, with
respect to any Title IV Plan required to be reported to the PBGC since January
1, 1992.
(h) None of the Company Plans subject to Part 3 of Subtitle B of Title
I or Title II of ERISA nor any trusts have incurred any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA or Section 412 of
the Code (whether or not waived), since January 1,
15
1992, and full payment has been made of all contributions required to be made
under the terms of each Company Plan.
(i) Neither the Company nor the Company Subsidiaries have any
collective bargaining or similar agreements with any employees. There are no
controversies pending, or to the best knowledge of the Company, threatened
between the Company or any of the Company Subsidiaries and any of their
employees which would reasonably be expected to have a Company Material Adverse
Effect.
(j) Except as set forth in on Schedule 3.17(j) hereto, the Company and
the Company Subsidiaries have no liability for life, health, medical or other
welfare benefits to former employees or beneficiaries or dependents thereof,
except for health continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA.
Section 3.18. Trademarks, Patents and Copyrights. The Company and the
Company Subsidiaries own or have valid rights in all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights,
service marks, trade dress, trade secrets, applications for trademarks and for
service marks, and other proprietary rights and information used or held for use
in connection with the business of the Company and the Company Subsidiaries as
currently conducted or as contemplated to be conducted, and the Company is
unaware of any assertion or claim challenging the validity of any of the
foregoing which, individually or in the aggregate, would have a Company Material
Adverse Effect. The conduct of the business of the Company and the Company
Subsidiaries as currently conducted and as contemplated to be conducted does not
and will not conflict in any way with any copyright, patent, patent right,
license, trade dress, trademark, trademark right, trade name, trade name right,
or service mark of any third party that, individually or in the aggregate, would
have a Company Material Adverse Effect. To the best knowledge of the Company,
there are no infringements of any proprietary rights owned by or licensed by or
to the Company or any Company Subsidiary which, individually or in the
aggregate, would have a Company Material Adverse Effect. Neither the Company nor
any Company Subsidiary has licensed or otherwise permitted the use by any third
party of any proprietary information on terms or in a manner which, individually
or in the aggregate, would have a Company Material Adverse Effect.
Section 3.19. Environmental Matters. (a) For purposes of this
Agreement, the following terms shall have the following meanings: (i) "Hazardous
Substances" means (A) those substances defined in or regulated under the
following federal statutes and their state counterparts, as each may be amended
from time to time, and all regulations thereunder: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (B) petroleum
and petroleum products including crude oil and any fractions thereof; (C)
natural gas, synthetic gas, and any mixtures thereof; (D) radon; (E) any other
contaminant; and (F) any substance with respect to which a federal, state or
local agency
16
requires environmental investigation, monitoring, reporting or remediation; (ii)
"Environmental Laws" means any federal, state or local law relating to (A)
releases or threatened releases of Hazardous Substances or materials containing
Hazardous Substances; (B) the manufacture, handling, transport, use, treatment,
storage or disposal of Hazardous Substances or materials containing Hazardous
Substances; or (C) otherwise relating to pollution or protection of the
environment or the protection of human health.
(b) Except as set forth on Schedule 3.19(b) hereto, or as would not,
individually or in the aggregate, have a Company Material Adverse Effect: (i)
the Company has not violated and is not in violation of any Environmental Law;
(ii) none of the properties currently or, to the best knowledge of the Company,
formerly, owned or leased by the Company (including, without limitation, soils
and surface and ground waters) are contaminated with any Hazardous Substance,
and no release or threat of release of Hazardous Substances except in the
routine operation of the Company consistent with past practices and in
compliance with applicable law in all material respects has occurred in, on,
under, from or at any such properties; (iii) to the best knowledge of the
Company, the Company is not actually, nor to the best knowledge of the Company,
potentially or allegedly liable for any off-site contamination; (iv) to the best
knowledge of the Company, none of the properties adjacent to properties owned or
leased by the Company (including, without limitation, soil and surface and
groundwaters) are contaminated with any Hazardous Substances and no release or
threat of release of Hazardous Substances has occurred in, on, under, from or at
any such adjacent property; (v) the Company is not actually or potentially nor,
to the best knowledge of the Company, allegedly liable under any Environmental
Law (including, without limitation, pending or threatened liens); (vi) the
Company has all permits, licenses and other authorizations required under any
Environmental Law ("Environmental Permits"); (vii) the Company has always been
and is in compliance with its Environmental Permits; and (viii) no above ground
or underground storage tanks are located in, on or under any properties owned or
leased by the Company. For purposes of this Section 3.19(b), all references to
the Company shall include all current and former subsidiaries and any entities
acquired by the Company or any current or former subsidiaries, and all
representations relating to current and former subsidiaries, and properties
formerly owned by the Company, shall be limited in scope to the time periods
before or during the Company's ownership or operation of any such subsidiaries
or properties or before or during the term of the lease.
Section 3.20. Undisclosed Liabilities. Since February 29, 1996 neither
the Company nor the Company Subsidiaries have incurred any liabilities or
obligations which are not reflected in the Interim Company Financial Statements
other than those which were incurred in the ordinary course of business and
consistent with past practices and which do not and cannot reasonably be
expected to have a Company Material Adverse Effect.
Section 3.21. Material Contracts. The Company has filed as an exhibit
(either by inclusion or by incorporation by reference therein) to its 1996 Form
10-K and its May 1996 Form 10-Q all contracts, agreements or commitments of the
Company or the Company Subsidiaries that are required to be filed with such
Company SEC Reports in accordance with the
17
Exchange Act and the rules and regulations promulgated thereunder. Schedule 3.21
hereto sets forth a complete list of each contract, agreement or commitment of
the Company or the Company Subsidiaries:
(i) which provides for the sale, lease or transfer, after the
date hereof and other than in the ordinary course of business, of any of
their respective assets; and
(ii) which contains covenants pursuant to which any person has
agreed not to compete with any business conducted by the Company or the
Company Subsidiaries or not to disclose to others information concerning
the Company or the Company Subsidiaries.
Each of the foregoing is referred to in this Agreement as a "Material Contract".
Except as set forth on Schedule 3.21 hereto, the Company and the Company
Subsidiaries have complied in all material respects with their respective
obligations under all of the Material Contracts and, to the best knowledge of
the Company, no event has occurred or condition exists which constitutes or can
reasonably be expected to constitute a breach of any such contract by any party
thereto.
Section 3.22. Full Disclosure. None of the representations and
warranties in this Article III contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUB
Purchaser and Sub hereby represent and warrant to the Company as
follows:
Section 4.01. Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Virginia
and Sub is a corporation duly organized, validly existing and in good standing
under the laws of the State of Georgia, and each has the corporate 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 or
presently proposed to be conducted. Each of Purchaser and Sub is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities make such qualification necessary, except where the
failure to be so qualified would not individually or in the aggregate have a
material adverse effect on the business, assets, liabilities, results of
operations or financial condition of the Purchaser and its subsidiaries, taken
as a whole (a "Purchaser Material Adverse Effect").
Section 4.02. Capitalization of Purchaser. The authorized capital stock
of the Purchaser consists of 250,000,000 shares of Purchaser Common Stock and
3,000,000 shares of $10.00 par value preferred stock ("Purchaser Preferred
Stock"). As of September 13, 1996 (i) there were
18
48,622,771 shares of Purchaser Common Stock issued and outstanding and no shares
of Purchaser Preferred Stock outstanding and (ii) 5,495,974 shares of Purchaser
Common Stock were reserved for issuance under the Purchaser's stock option
plans. All of the issued and outstanding shares of Purchaser Common Stock are
validly issued, fully paid and nonassessable and free of preemptive rights.
Except as set forth above, as of the date of this Agreement there are no shares
of capital stock of the Purchaser issued or outstanding or any options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating the Purchaser to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital stock.
Section 4.03. Capitalization of Sub; Ownership of Sub Common Stock. The
authorized capital stock of Sub consists of 1,000 shares of Sub Common Stock. As
of the date hereof, Purchaser owns all of the issued and outstanding shares of
Sub Common Stock.
Section 4.04. Authority Relative to this Agreement. Each of Purchaser
and Sub has the corporate power and authority to enter into this Agreement and,
in the case of Purchaser, the Voting Agreement, and to carry out its obligations
hereunder and, in the case of the Purchaser, the Voting Agreement. The
execution, delivery and performance of this Agreement and, in the case of the
Purchaser, the Voting Agreement, and the consummation by Purchaser and Sub of
the transactions contemplated hereby and, in the case of the Purchaser, the
Voting Agreement, have been duly authorized by all necessary corporate action on
the part of Purchaser and Sub, as applicable. This Agreement has been duly and
validly executed and delivered by each of Purchaser and Sub, and the Voting
Agreement has been duly and validly executed and delivered by the Purchaser and
(assuming this Agreement constitutes a valid and binding obligation of the
Company and the Voting Agreement constitutes a valid and binding obligation of
the other Shareholders party thereto) each constitutes a valid and binding
agreement of each of Purchaser and Sub, enforceable against Purchaser and Sub in
accordance with their terms.
Section 4.05. Consents and Approvals. Except (i) for the Governmental
Requirements, or (ii) where the failure to make any filing with, or to obtain
any permit, authorization, consent or approval of, any Governmental Entity would
not prevent or materially delay the consummation of the Merger, or otherwise
prevent Purchaser or Sub from performing their respective obligations under this
Agreement, no filing with, and no permit, authorization, consent or approval of,
any Governmental Entity is necessary for the execution, delivery and performance
of this Agreement by Purchaser and Sub and, in the case of the Purchaser, the
Voting Agreement, and the consummation of the transactions contemplated by this
Agreement and, in the case of the Purchaser, the Voting Agreement.
Section 4.06. Non-Contravention. Neither the execution, delivery or
performance of this Agreement and the Voting Agreement by Purchaser or Sub, as
the case may be, nor the consummation by Purchaser or Sub, as the case may be,
of the transactions contemplated hereby or by the Voting Agreement, will (i)
conflict with or result in any breach of any provisions of the certificate of
incorporation or by-laws or equivalent organizational documents of Purchaser and
Sub, (ii) result in a violation or breach of, or constitute a default under, or
give rise to any
19
right of termination, modification or acceleration under, any note, bond,
mortgage, deed of trust, security interest, indenture, license, lease, contract,
agreement, plan or other instrument or obligation to which Purchaser or Sub is a
party or by which any of them or any of their properties or assets may be bound
or affected, (iii) violate or conflict with any applicable law, except in the
case of clauses (ii) and (iii) for violations, breaches, defaults or conflicts
which would not individually or in the aggregate have a Purchaser Material
Adverse Effect.
Section 4.07. Purchaser SEC Reports. Purchaser has made available to
the Company true and complete copies of each registration statement, report and
proxy or information statement (including exhibits and any amendments thereto)
filed by Purchaser with the SEC since March 1, 1994 (collectively, the
"Purchaser SEC Reports") all of which, as of their respective filing dates,
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, and the rules and regulations promulgated
thereunder. None of such Purchaser SEC Reports, as of the respective dates they
were filed, contained any untrue statement of a material fact or omitted 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
made, not misleading. Each of the audited consolidated financial statements of
Purchaser (including any related notes and schedules) included (or incorporated
by reference) in its Annual Report on Form 10-K for the fiscal year ended
February 29, 1996, fairly present, in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of Purchaser and the Purchaser Subsidiaries as
of the dates thereof and the consolidated results of their operations and their
cash flows for the periods then ended. Each of the unaudited financial
statements of Purchaser (including any related notes and schedules) included in
its quarterly report on Form 10-Q for the quarter ended May 31, 1996, fairly
present, in conformity with GAAP applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of the
Purchaser and its subsidiaries as of the dates thereof and the consolidated
results of their operations and their cash flows for the periods then ended.
Section 4.08. Absence of Certain Changes. Since February 29, 1996,
there has been no event or condition which has had (or is reasonably likely to
result in) a Purchaser Material Adverse Effect, and, except as set forth on
Schedule 4.08 hereto, Purchaser and its subsidiaries have in all material
respects conducted their businesses in the ordinary course consistent with past
practices.
Section 4.09. Litigation. Except as disclosed in the notes to the
financial statements included in the Purchaser SEC Reports or as set forth on
Schedule 4.09 hereto, there is no suit, action, proceeding or investigation
pending or, to the best knowledge of Purchaser, threatened against or affecting
Purchaser or any of the Purchaser Subsidiaries, the outcome of which is likely
individually or in the aggregate to have a Purchaser Material Adverse Effect.
Neither Purchaser nor any Purchaser Subsidiary is subject to any judgment,
decree, injunction, rule or order which, insofar as can reasonably be foreseen
in the future, may have a Purchaser Material Adverse Effect.
20
Section 4.10. Information Supplied. None of the information supplied or
to be supplied by Purchaser or Sub for inclusion or incorporation by reference
in (i) the Registration Statement will, at the time the Registration Statement
is filed with the SEC and at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Proxy Statement will, at the date of
mailing to shareholders and at the times of the meetings of shareholders to be
held in connection with the Merger, contain any untrue statement of a material
fact or omit to state any 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 made, not misleading.
Section 4.11. Brokers. Except for Goldman, Sachs & Co., no person is
entitled to any brokerage, financial advisory, finder's or similar fee or
commission payable by Purchaser in connection with the transactions contemplated
by this Agreement based upon arrangements made by and on behalf of Purchaser.
Section 4.12. Employee Benefit Plans. Schedule 4.12 hereto contains a
written list of all employee benefit plans, programs, policies, practices and
other arrangements providing benefits to any employee or former employee of
Purchaser or its subsidiaries that are maintained by the Company or the Company
Subsidiaries contribute on behalf of such employees or former employees whether
or not subject to the Employee Retirement Income Security Act of 1974 ("ERISA"),
including, without limitation, all plans, agreements or arrangements relating to
deferred compensation, stock option, bonus, profit sharing or other incentive
plan, pensions, retirement income or other benefits, severance arrangements,
health benefits and insurance benefits (collectively the "Purchaser Plans").
Purchaser has made available to the Company complete and correct copies of (i)
all Purchaser Plans and (ii) the most recent actuarial report for each Purchaser
Plan that is a defined benefit plan (within the meaning of Section 3(35) of
ERISA). None of the Purchaser Plans is a "multiemployer plan" within the meaning
of Section 3(37) or Section 4001(a)(3) of ERISA.
Section 4.13. Full Disclosure. None of the representations and
warranties in this Article IV contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.01. Conduct of Business by the Company Pending the Merger.
From the date hereof until the Effective Time, unless Purchaser shall otherwise
agree in writing or as otherwise contemplated by this Agreement, the Company and
the Company Subsidiaries shall conduct their respective businesses in the
ordinary course consistent with past practice and shall use its
21
reasonable best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and key employees, subject to the terms of this Agreement.
Except as set forth in this Agreement, from the date hereof until the Effective
Time, without the prior written consent of Purchaser:
(a) the Company shall not adopt or propose any change in its
articles of incorporation or by-laws;
(b) the Company shall not declare, set aside or pay any
dividend or other distribution with respect to any shares of capital
stock of the Company, or split, combine or reclassify any of the
Company's capital stock, and the Company and the Company Subsidiaries
shall not repurchase, redeem or otherwise acquire any shares of capital
stock or other securities of, or other ownership interests in, the
Company;
(c) the Company shall not, and shall not permit any Company
Subsidiary to, merge or consolidate with any other person or acquire a
material amount of assets of any other person;
(d) except as set forth on Schedule 5.01(d) hereto, the
Company shall not, and shall not permit any Company Subsidiary to,
sell, lease, license or otherwise surrender, relinquish or dispose of
(i) any facility owned or leased by the Company or any Company
Subsidiary or (ii) any assets or property which are material to the
Company and the Company Subsidiaries, taken as a whole, except pursuant
to existing contracts or commitments (the terms of which have been
disclosed to Purchaser prior to the date hereof);
(e) except as set forth on Schedule 5.01(d) hereto, mortgage,
pledge or otherwise encumber any of its assets other than the pledge of
inventory in the ordinary course of business consistent with past
practice;
(f) except pursuant to the Company's employee stock purchase
plan, the Company and the Company Subsidiaries shall not issue any
capital stock or other securities or enter into any amendment of any
material term of any outstanding security of the Company, and the
Company and the Company Subsidiaries shall not incur any indebtedness
except in the ordinary course of business, amend or otherwise increase,
accelerate the payment or vesting of the amounts payable or to become
payable under or fail to make any required contribution to, any Company
Plan, except in the ordinary course of business consistent with past
practice or as otherwise permitted by this Agreement;
(g) except as set forth on Schedule 3.16 hereto, the Company
shall not, and shall not permit any Company Subsidiary to, grant any
increase in the compensation or benefits of directors, officers,
employees, consultants or agents other than increases in
22
compensation of employees who are not executive officers or directors
to the extent that such increases are in the ordinary course of
business consistent with past practice;
(h) the Company shall not, and shall not permit any Company
Subsidiary to, enter into or amend any employment agreement or other
employment arrangement with any employee of the Company or any Company
Subsidiary, except in the ordinary course of business consistent with
past practice;
(i) the Company shall not, and shall not permit any Company
Subsidiary to, take any action that could, directly or indirectly,
cause the Merger to fail to qualify as a tax-free reorganization within
the meaning of Section 368(a) of the Code; and
(j) the Company shall not, and shall not permit any Company
Subsidiary to, agree or commit to do any of the foregoing.
Section 5.02. Conduct of Business by Purchaser Pending the Merger. From
the date hereof until the Effective Time, unless the Company shall otherwise
agree in writing or as otherwise contemplated by this Agreement, Purchaser, Sub
and the other subsidiaries of Purchaser shall conduct their respective
businesses in the ordinary course consistent with past practice and shall use
all reasonable efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and key employees, subject to the terms of this Agreement.
Except as otherwise provided in this Agreement, from the date hereof until the
Effective Time, without the prior written consent of the Company:
(a) Purchaser shall not adopt or propose any change in its
Certificate of Incorporation or By-laws;
(b) Purchaser shall not declare, set aside or pay any dividend
or other distribution with respect to any shares of capital stock of
Purchaser (except for regular quarterly dividends in an amount no
greater than $.07 per share), or split, combine or reclassify any of
the Purchaser's capital stock, and Purchaser and its subsidiaries shall
not repurchase, redeem, or otherwise acquire any shares of capital
stock or other securities of, or other ownership interests in,
Purchaser;
(c) Purchaser and its subsidiaries shall not issue any capital
stock or other securities or enter into any amendment of any material
term of any outstanding security of Purchaser, except that Purchaser
shall be permitted to issue additional shares of Purchaser Common Stock
in an aggregate amount not to exceed 20% of the total number of shares
outstanding at the date of this Agreement;
(d) Purchaser shall not, and shall not permit any subsidiary
to, take any action that could, directly or indirectly, cause the
Merger to fail to qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Code;
23
(e) Purchaser shall not, and shall not permit any subsidiary
to, purchase or otherwise acquire any shares of Company Common Stock;
and
(f) Purchaser shall not, and shall not permit Sub or any
subsidiary to, agree or commit to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Preparation of Registration Statement and the Proxy
Statement. Purchaser and the Company shall cooperate with each other in the
preparation of, and the Company shall promptly prepare and file with the SEC,
the preliminary Proxy Statement. Purchaser and the Company shall cooperate with
each other in the preparation of, and the Purchaser shall prepare and file with
the SEC, the Registration Statement. Each of Purchaser and the Company shall use
all reasonable efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after the filing of the
preliminary Proxy Statement. Purchaser shall also take any action (other than
qualifying to do business in any jurisdiction in which it is now not so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Purchaser Common Stock in the Merger.
Section 6.02. Shareholder/Stockholder Meetings. The Company shall call
a meeting of its shareholders to be held as promptly as practicable for the
purpose of voting upon the approval of this Agreement and the transactions
contemplated by this Agreement. Subject to the second succeeding sentence or as
contemplated by the provisions of Section 8.03 hereof, the Company will, through
its Board of Directors, recommend to its shareholders approval of such matters.
The Company shall use its best efforts to hold such meeting as soon as
practicable after the date on which the Registration Statement becomes
effective. This Section 6.02 shall not prohibit accurate disclosure by a party
that is required in any Purchaser SEC Document or Company SEC Document
(including the Proxy Statement and the Registration Statement) or otherwise
under applicable law of the opinion of the Board of Directors of such party as
of the date of such SEC Document or such other required disclosure as to the
transactions contemplated hereby or as to any Acquisition Proposal (as defined
in Section 6.07).
Section 6.03. Legal Conditions to Merger. Each of Purchaser and the
Company shall use all reasonable efforts (i) to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements which may be
imposed on such party or its subsidiaries with respect to the Merger and to
consummate the transactions contemplated by this Agreement as promptly as
practicable, subject to the appropriate vote of the shareholders of the Company
described in Section 6.02, and (ii) to obtain (and to cooperate with the other
party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other public or private third
party which is required to be obtained or made by such party or any of its
subsidiaries in connection with the Merger and the transactions contemplated by
this Agreement. In connection with the foregoing, the Company will provide
Purchaser, and Purchaser will
24
provide the Company, with copies of correspondence, filings or communications
(or memoranda setting forth the substance thereof) between such party or any of
its representatives, on the one hand, and any governmental agency or authority
or members of their respective staffs, on the other hand, with respect to this
Agreement and the transactions contemplated hereby.
Section 6.04. Transfer Restrictions; Affiliates. The Company shall
cause the persons listed on Schedule 6.04(a) hereto to deliver to Purchaser on
the date of this Agreement a written agreement, substantially in the form
attached as Exhibit 6.04(a). At least thirty days prior to the Closing Date, the
Company shall deliver to Purchaser a letter identifying all persons who are, at
the time this Agreement is submitted for approval to the shareholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use all reasonable efforts to cause each
person named on the letter delivered by it to deliver to Purchaser on or prior
to the Effective Time a written agreement, substantially in the form attached as
Exhibit 6.04(b).
Section 6.05. Stock Exchange Listing. Purchaser shall use all
reasonable efforts to cause the shares of Purchaser Common Stock to be issued in
the Merger to be approved for listing on the NYSE, subject to official notice of
issuance, prior to the Closing Date.
Section 6.06. Access and Information. The Company shall afford to
Purchaser and to Purchaser's financial advisors, legal counsel, accountants,
consultants, financing sources, and other authorized representatives reasonable
access during normal business hours throughout the period prior to the Effective
Time to all of its books, records, properties, plants and personnel and, during
such period, the Company shall furnish as promptly as practicable to Purchaser
(i) a copy of each report, schedule and other document filed or received by it
pursuant to the requirements of federal or state securities laws, and (ii) all
other information as Purchaser reasonably may request, provided that no
investigation pursuant to this Section 6.06 shall affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger. Each party shall continue to abide by the
terms of the confidentiality agreements between Purchaser and the Company, dated
May 13, 1996 and September 16, 1996 (the "Confidentiality Agreements").
Section 6.07. Other Offers. (a) From the date hereof until the
termination hereof, the Company and the Company Subsidiaries will not, and will
use their best efforts to cause their respective officers, directors, employees
or other agents not to, directly or indirectly, (i) take any action to solicit,
initiate or encourage any Acquisition Proposal (as defined below), (ii) subject
to the fiduciary duties of the Board of Directors under applicable law as
advised by counsel, waive any provision of any standstill or similar agreements
entered into by the Company or (iii) subject to the fiduciary duties of the
Board of Directors under applicable law as advised by counsel to the Company,
engage in negotiations with, or disclose any nonpublic information relating to
the Company or any Company Subsidiary or afford access to the properties, books
or records of the Company or any Company Subsidiary to, any person that may be
considering making, or has made, an Acquisition Proposal.
25
(b) The Company will (i) promptly notify Purchaser after receipt of any
Acquisition Proposal or any inquiries indicating that any Person is considering
making or wishes to make an Acquisition Proposal, (ii) promptly notify Purchaser
after receipt of any request for nonpublic information relating to the Company
or any Company Subsidiary or for access to the properties, books or records of
the Company or any Company Subsidiary or any person that may be considering
making, or has made an Acquisition Proposal and (iii) subject to the fiduciary
duties of the Board of Directors under applicable law as advised by counsel to
the Company, keep Purchaser advised of the status and principal financial terms
of any such Acquisition Proposal. The term "Acquisition Proposal" as used herein
means any offer or proposal for, or any indication of interest in, a merger or
other business combination involving the Company or any Company Subsidiary or
the acquisition of any equity interest in, or a substantial portion of the
assets of, the Company or any Company Subsidiary, other than the transactions
contemplated by this Agreement.
Section 6.08. Public Announcements. The Purchaser and the Company will
consult with each other before issuing any press release or making any public
statement or any filing with any governmental body, agency, official or
authority with respect to this Agreement and the transactions contemplated
hereby and, except as may be required by applicable law or any listing agreement
with any national securities exchange, will use reasonable best efforts not to
issue any such press release or make any such public statement or such filing
prior to such consultation.
Section 6.09. Employee Benefits. From and after the Effective Time,
subject to applicable law and except as contemplated hereby, Purchaser and the
Purchaser Subsidiaries will honor, in accordance with their terms, all Company
Plans of the Company and the Company Subsidiaries in effect as of the date
hereof (or as modified in accordance with Section 6.10 hereof); provided,
however, that nothing herein shall preclude any change effected on a prospective
basis in, or termination of, any Company Plan from and after the Effective Time.
Purchaser and the Purchaser Subsidiaries will provide benefits to employees of
the Company and the Company Subsidiaries who become employees of Purchaser and
the Purchaser Subsidiaries or continue after the Effective Time as employees of
the Company or the Company Subsidiaries which will, in the aggregate, be no less
favorable than those provided to other similarly situated employees of Purchaser
and the Purchaser Subsidiaries from time to time. With respect to the Purchaser
Plans in effect as of the date hereof, Purchaser and the Surviving Corporation
shall grant all employees of the Company and the Company Subsidiaries from and
after the Effective Time credit for all service with the Company and the Company
Subsidiaries, their affiliates and predecessors prior to the Effective Time for
purposes of eligibility to participate, eligibility for benefits, form of
benefit, and vesting under Purchaser's and its subsidiaries' employee benefit
plans. To the extent the Purchaser Plans provide medical or dental welfare
benefits after the Effective Time, such plans shall waive any pre-existing
conditions and actively-at-work exclusions and shall provide that any expenses
incurred on or before the Effective Time shall be taken into account under
deductible, coinsurance and maximum out-of-pocket provisions.
26
Section 6.10. Stock Options. (a) At the Effective Time, each
outstanding option to purchase shares of Company Common Stock (a "Company Stock
Option") issued pursuant to any incentive or stock option program of the Company
(the "Company Stock Plan"), whether vested or unvested, shall be assumed by
Purchaser. Each Company Stock Option shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such Company
Stock Option, the same number of shares of Purchaser Common Stock as the holder
of such Company Stock Option would have been entitled to receive pursuant to the
Merger had such holder exercised such option in full immediately prior to the
Effective Time, rounded, if necessary, up or down, to the nearest whole share,
at a price per share equal to (y) the aggregate exercise price for the shares of
Company Common Stock otherwise purchasable pursuant to such Company Stock Option
divided by (z) the number of full shares of Purchaser Common Stock deemed
purchasable pursuant to such Company Stock Option; provided, however, that in
the case of any option to which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code ("incentive stock options"), the
option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order to
comply with Section 424(a) of the Code.
(b) As soon as practicable after the Effective Time, Purchaser shall
deliver to the holders of Company Stock Options appropriate notices setting
forth such holders' rights pursuant to the Company Stock Plan and the agreements
evidencing the grants of such Company Stock Options shall continue in effect on
the same terms and conditions (subject to the adjustments required by this
Section 6.10 after giving effect to the Merger and the assumption by Purchaser
as set forth above). If necessary, Purchaser shall comply with the terms of the
Company Stock Plan and ensure, to the extent required by, and subject to the
provisions of, such Plan, that Company Stock Options which qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options of Purchaser after the Effective Time.
(c) To the extent necessary, Purchaser shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Purchaser
Common Stock for delivery upon exercise of Company Stock Options assumed by it
in accordance with this Section 6.10. With respect to the shares of Purchaser
Common Stock subject to such options, the Purchaser shall, as soon as
practicable after the Effective Time, cause such shares to be covered by a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), or another appropriate form and shall use
its best efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
With respect to those individuals who subsequent to the Merger will be subject
to the reporting requirements under Section 16(a) of the Exchange Act, where
applicable, Purchaser shall administer the Company Stock Plan assumed pursuant
to this Section 6.10 in a manner that complies with Rule 16b-3 promulgated under
the Exchange Act to the extent the Company Stock Plan complied with such rule
prior to the Merger.
27
Section 6.11. Company Indemnification Provision. The articles of
incorporation and by-laws of the Surviving Corporation shall contain provisions
no less favorable with respect to indemnification than are set forth in the
Company's articles of incorporation or by-laws or the articles of incorporation,
by-laws or similar organizational documents of any of the Company Subsidiaries
as in effect as of the date hereof, which provisions shall not be amended,
repealed or otherwise modified for a period of six years from the Effective Time
in any manner that would affect adversely the rights thereunder of individuals
who at the Effective Time were Indemnified Parties (as hereinafter defined) of
the Company or the Company Subsidiaries, unless such modification shall be
required by law. Purchaser shall cause the Surviving Corporation to indemnify
and hold harmless the present and former directors, officers, employees,
fiduciaries and agents of the Company and the Company Subsidiaries
(collectively, the "Indemnified Parties") against all costs and expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and settlement amounts paid in connection with any claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), whether civil, criminal, administrative or investigative, arising out of
or pertaining to any action or omission in their capacity as an officer,
director, employee, fiduciary or agent, whether occurring before or after the
Effective Time, for a period of six years after the date hereof. Purchaser shall
cause the Surviving Corporation to maintain in effect for not less than six
years from the Effective Time the current policies of the directors' and
officers' liability insurance maintained by the Company (provided that Purchaser
may substitute therefor policies of at least equivalent coverage containing
terms and conditions which are no less advantageous) with respect to matters
occurring prior to the Effective Time, provided that in no event shall Purchaser
or the Surviving Corporation be required to expend to maintain or procure
insurance coverage pursuant to this Section 6.11 any amount per annum in excess
of 250% of the aggregate premiums paid in fiscal year 1996 on an annualized
basis for such purpose. In the event the payment of such amount for any year is
insufficient to maintain such insurance or equivalent coverage cannot otherwise
be obtained, the Surviving Corporation shall purchase as much insurance as may
be purchased for the amount indicated. The provisions of this Section 6.11 shall
survive the consummation of the Merger and expressly are intended to benefit
each of the Indemnified Parties.
Section 6.12. Estoppel Certificates and Consents. The Company shall use
commercially reasonable efforts to obtain and deliver to Purchaser executed
estoppel certificates and consents, satisfactory in form and substance to
Purchaser, for the leased properties set forth on Schedule 6.12 hereto.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF MERGER
Section 7.01. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
28
(a) any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated, and no action shall
have been instituted by the Department of Justice or Federal Trade Commission
challenging or seeking to enjoin the consummation of this transaction, which
action shall have not been withdrawn or terminated;
(b) no statute, rule, regulation, executive order, decree, ruling or
preliminary or permanent injunction shall have been enacted, entered,
promulgated or enforced by any federal or state court or governmental authority
which prohibits, restrains, enjoins or restricts the consummation of the Merger,
and there shall not have been threatened in writing, nor shall there be pending,
any action or proceeding in any court or before any governmental agency seeking
to prohibit or delay, or challenging the validity of, the Merger;
(c) the Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for the purpose shall have been initiated by the SEC;
and
(d) the Purchaser Common Stock issuable in the Merger shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
Section 7.02. Conditions to Purchaser's and Sub's Obligation to Effect
Merger. The obligation of Purchaser and Sub to consummate the Merger is further
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Each of the acts and undertakings of the Company to be performed or
complied with by it on or before the Effective Time pursuant to the terms hereof
shall have been duly performed and complied with in all material respects.
(b) The representations and warranties of the Company contained in this
Agreement shall be true and correct on and as of the Effective Time in all
material respects with the same effect as though made on and as of such date,
except to the extent that any such representation or warranty is made as of a
specified date, in which cases such representation or warranty shall have been
true and correct in all material respects as of such date, and Purchaser shall
have received at the Effective Time a certificate to that effect, dated the
Effective Time, and executed on behalf of the Company by an executive officer of
the Company.
(c) This Agreement and the issuance of Purchaser Common Stock in
conjunction with the Merger shall have been approved by the Board of Directors
of the Purchaser.
(d) Purchaser shall have received an opinion of King & Spalding, dated
the date of the Effective Time, reasonably satisfactory in form and substance to
Purchaser, substantially to the effect that, on the basis of certain facts,
representations and assumptions set forth in such opinion, which are consistent
with the state of facts existing at the Effective Time, (i) the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a)
29
of the Code, and (ii) the holders of Company Common Stock will recognize no gain
or loss upon receipt of Purchaser Common Stock in the Merger. In rendering such
opinion, such counsel may require and rely upon representations contained in
certificates of officers of the Company, Purchaser and their respective
subsidiaries.
(e) All corporate action required to be taken by the Company (including
receiving the requisite approval of its shareholders) in connection with the
Merger shall have been taken, all documents incident thereto shall be reasonably
satisfactory in substance and form to Purchaser and Purchaser shall have
received such originals or copies of such documents as it may reasonably
request.
(f) The Company shall have obtained and delivered to Purchaser the
estoppel certificates and consents required by Section 6.12 hereof, except for
estoppel certificates and consents relating to stores which represent in the
aggregate less than $35 million of the Company's gross sales for the fiscal year
ended February 29, 1996.
(g) The Company shall have obtained and delivered to Purchaser a waiver
of Beneficial National Bank USA ("BNB"), satisfactory in form and substance to
Purchaser, pursuant to which BNB will agree to waive certain rights under
Section 23 and 25 of the Merchant Agreement, dated as of May 15, 1993, between
the Company and BNB.
(h) Purchaser shall have received the written resignation, effective as
of the Effective Time, of each officer and director of the Company and the
Company Subsidiaries whom it shall have specified in writing prior to the
Closing.
(i) If, as a result of the consummation of the Merger, a consent would
be required under Section 8.19(b) of that certain Note Purchase Agreement, dated
June 17, 1993 (the "Note Agreement"), among the Company and the note purchasers
(or their successors) party thereto (the "Note Purchasers"), the Company shall
have obtained and delivered to Purchaser a consent, satisfactory in form and
substance to Purchaser, pursuant to which the Note Purchasers waive any such
non-compliance with Section 8.19(b) of the Note Agreement in connection with the
Merger; provided, that notwithstanding any other provision of this Agreement, no
provision contained herein shall prevent the Company from paying a reasonable
fee in connection with obtaining such consent.
(j) There shall not have occurred an acceleration of the Notes (as such
term is defined in the Note Agreement) pursuant to Section 11.1 of the Note
Agreement on or prior to the Effective Time.
(k) Purchaser shall have received letters from the Company's
independent certified public accountants dated (i) the mailing date of the Proxy
Statement and (ii) the Closing Date, with respect to such matters as the
Purchaser may reasonably request relating to the financial
30
information regarding the Company and the Company Subsidiaries contained in the
Registration Statement.
(l) Purchaser shall have received an opinion from King & Spalding,
counsel for the Company, in substantially the form attached hereto as Exhibit
7.02(l).
Section 7.03. Conditions to the Company's Obligation to Effect Merger.
The obligation of the Company to consummate the Merger is further subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Each of the acts or undertakings of Purchaser and Sub to be
performed or complied with by them on or before the Effective Time pursuant to
the terms hereof shall have been duly performed and complied with in all
material respects.
(b) The representations and warranties of Purchaser and Sub contained
in this Agreement shall be true and correct on and as of the Effective Time in
all material respects with the same effect as though made on and as of such
date, except to the extent that any such representation or warranty is made as
of a specified date, in which cases such representation or warranty shall have
been true and correct in all material respects as of such date, and the Company
shall have received at the Effective Time a certificate to that effect, dated
the Effective Time, and executed on behalf of Purchaser and Sub by an executive
officer of Purchaser.
(c) This Agreement shall have been duly adopted and approved by the
shareholders of the Company by the requisite vote in accordance with applicable
law.
(d) The Company shall have received an opinion of King & Spalding,
dated the date of the Effective Time, reasonably satisfactory in form and
substance to the Company, substantially to the effect that, on the basis of
certain facts, representations and assumptions set forth in such opinion, which
are consistent with the state of facts existing at the Effective Time, (i) the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and (ii) the holders of
Company Common Stock will recognize no gain or loss upon receipt of Purchaser
Common Stock in the Merger. In rendering such opinion, such counsel may require
and rely upon representations contained in certificates of officers of the
Company, Purchaser and their respective subsidiaries.
(e) All corporate action required to be taken by the Purchaser in
connection with the Merger shall have been taken, all documents incident thereto
shall be reasonably satisfactory in substance and form to the Company and the
Company shall have received such originals or copies of such documents as it may
reasonably request.
(f) The Company shall have received letters from the Purchaser's
independent certified public accountants dated (i) the mailing date of the Proxy
Statement and (ii) the Closing Date,
31
with respect to such matters as the Company may reasonably request relating to
the financial information regarding the Purchaser and its subsidiaries contained
in the Registration Statement.
(g) The Company shall have received an opinion from McGuire, Woods,
Battle & Boothe, L.L.P., counsel for the Purchaser, in substantially the form
attached hereto as Exhibit 7.03(g).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01. Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Effective Time by mutual written agreement
of Purchaser and the Company.
Section 8.02. Termination by Either Purchaser or the Company. This
Agreement may be terminated and the Merger may be abandoned by action of the
Board of Directors of either Purchaser or the Company if (a) the Merger shall
not have been consummated on or before February 28, 1997, (b) any United States
federal or state court of competent jurisdiction or United States federal or
state governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable or (c) the Closing Date has not occurred and the closing
sales price of the Purchaser Common Stock is less than $13.50 per share for at
least ten (10) consecutive trading days in the twenty (20) consecutive trading
day period immediately preceding the date of such termination.
Section 8.03. Termination by the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval of the Merger and the adoption of this
Agreement by the shareholders of the Company referred to in Section 6.02 by
action of the Board of Directors of the Company, if (a) there has been a breach
by Purchaser or Sub of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to affect adversely
Purchaser's or Sub's ability to complete the Merger; (b) there has been a
material breach of any of the covenants or agreements set forth in this
Agreement on the part of Purchaser, which breach is not curable or, if curable,
is not cured within thirty (30) days after written notice of such breach is
given by the Company to Purchaser; or (c) the Board of Directors of the Company
has (i) withdrawn, or modified or changed in a manner adverse to Purchaser or
Sub its approval or recommendation of this Agreement or the Merger in order to
approve and permit the Company to execute a definitive agreement relating to an
Acquisition Proposal, and (ii) determined, based on an opinion of outside legal
counsel to the Company, that the failure to take such action as set forth in the
preceding clause (i) would result in a breach of the Board of Directors'
fiduciary duties under applicable law; provided, however, that (A) the Board of
Directors shall have been advised in such opinion of outside counsel that
notwithstanding a binding commitment to consummate an agreement of the nature of
this Agreement entered into in the proper exercise of their applicable fiduciary
duties,
32
and notwithstanding all concessions which may be offered by Purchaser in
negotiations entered into pursuant to clause (B) below, such fiduciary duties
would also require the directors to terminate this Agreement as a result of such
Acquisition Proposal, and (B) prior to any such termination, the Company shall,
and shall cause its respective financial and legal advisors to, negotiate with
Purchaser to make such adjustments in the terms and conditions of this Agreement
as would enable the Company to proceed with the transactions contemplated herein
on such adjusted terms.
Section 8.04. Termination by Purchaser. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of Purchaser, if (a) there has been a
breach by the Company of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to have a Company
Material Adverse Effect; (b) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of the Company
or set forth in the Voting Agreement on the part of the Shareholders (other than
Purchaser), which breach is not curable or, if curable, is not cured within
thirty (30) days after written notice of such breach is given by Purchaser to
the Company; or (c) the Board of Directors of the Company shall have withdrawn,
or modified or changed in a manner adverse to Purchaser or Sub its approval or
recommendation of this Agreement or the Merger or shall have recommended an
Acquisition Proposal, or shall have executed an agreement in principle (or
similar agreement) or definitive agreement providing for an Acquisition Proposal
or other business combination with a person or entity other than Purchaser or
its affiliates (or the Board of Directors of the Company resolves to do any of
the foregoing).
Section 8.05. Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, written notice thereof shall as promptly as practicable be given
to the other parties to this Agreement and this Agreement shall terminate and
the transactions contemplated hereby shall be abandoned, without further action
by any of the parties hereto. If this Agreement is terminated as provided
herein: (a) there shall be no liability or obligation on the part of Sub,
Purchaser, the Company or the Company Subsidiaries or their respective officers
and directors, and all obligations of the parties shall terminate, except for
the obligations of the parties pursuant to this Section 8.05, except for the
provisions of Sections 9.04, 9.05, 9.06 and 9.10, except for the obligations of
the parties set forth in the Confidentiality Agreements referred to in Section
6.06 hereof and except that a party who is in material breach of its
representations, warranties, covenants or agreements set forth in this Agreement
shall be liable for damages occasioned by such breach, including without
limitation any expenses incurred by the other party in connection with this
Agreement and the transactions contemplated hereby; provided, however, in the
event that Company terminates this Agreement pursuant to clause (c) of Section
8.03, then the Company shall promptly after such termination pay Purchaser in
cash the sum of $3,000,000 plus an amount equal to reasonable legal fees and
expenses of counsel to the Purchaser and other reasonable out-of-pocket costs
incurred by Purchaser's employees in connection with the transactions
contemplated by this Agreement (such amount representing reasonable compensation
to Purchaser and not constituting a penalty), and
33
(b) all filings, applications and other submissions made pursuant to the
transactions contemplated by this Agreement shall, to the extent practicable, be
withdrawn from the agency or person to which made.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01. Survival of Representations Warranties and Agreements. No
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive beyond the Effective Time. This Section
9.01 shall not limit any covenant or agreement which by its terms contemplates
performance after the Effective Time.
Section 9.02. Notices. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed given upon (a)
confirmation of receipt of a facsimile transmission, (b) confirmed delivery by a
standard overnight courier or when delivered by hand or (c) the expiration of
five business days after the day when mailed by registered or certified mail
(postage prepaid, return receipt requested), addressed to the respective parties
at the following addresses (or such other address for a party as shall be
specified by like notice):
(d) If to Purchaser or Sub, to:
Heilig-Meyers Company
2235 Staples Mill Road
Richmond, Virginia 23230
Telecopy: (804) 254-1493
Attention: Joseph R. Jenkins
with a copy to:
McGuire Woods Battle & Boothe LLP
One James Center
Richmond, Virginia 23219-4030
Telecopy: (804) 775-1061
Attention: David W. Robertson
(e) If to the Company to:
Rhodes, Inc.
4730 Peachtree Road
Atlanta, Georgia 30319
Telecopy: (404) 364-3970
Attention: Joel H. Dugan
34
with a copy to:
King & Spalding
120 West 45th Street
New York, New York 10036
Telecopy: (212) 556-2222
Attention: E. William Bates II, Esq.
Section 9.03. Descriptive Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 9.04. Entire Agreement; Assignment. This Agreement (including
the exhibits, schedules and other documents and instruments referred to herein)
(a) constitutes the entire agreement and supersedes all other prior agreements
and understandings (other than those contained in the Confidentiality
Agreements, which are hereby incorporated by reference herein), both written and
oral, among the parties or any of them, with respect to the subject matter
hereof, including, without limitation, any transaction between or among the
parties hereto and (b) shall not be assigned by operation of law or otherwise.
Section 9.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Virginia without giving
effect to the provisions thereof relating to conflicts of law.
Section 9.06. Expenses. Except as provided in Section 8.05 hereof,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby and
thereby shall be paid by the party incurring such expenses, except that those
expenses incurred in connection with the preparation, clearance and distribution
of the Registration Statement and the Proxy Statement and other documents
relating thereto, will be shared equally by Purchaser and the Company.
Section 9.07. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 9.08. Waiver. At any time prior to the Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
Section 9.09. Counterparts; Effectiveness. This Agreement may be
executed in two or more counterparts, each of which shall be deemed to be an
original but all of which shall
35
constitute one and the same agreement. This Agreement shall become effective
when each party hereto shall have received counterparts thereof signed by all of
the other parties hereto.
Section 9.10. Severability; Validity; Parties in Interest. If any
provision of this Agreement, or the application thereof to any person or
circumstance is held invalid or unenforceable, the remainder of this Agreement,
and the application of such provision to other persons or circumstances, shall
not be affected thereby, and to such end, the provisions of this Agreement are
agreed to be severable. Nothing in this Agreement, express or implied, is
intended to confer upon any person not a party to this Agreement any rights or
remedies of any nature whatsoever under or by reason of this Agreement, except
as contemplated by Section 6.11.
36
IN WITNESS WHEREFORE, each of Purchaser, Sub and the Company has caused
this Agreement to be executed on its behalf by its duly authorized officers
thereunder, all as of the date first above written.
HEILIG-MEYERS COMPANY
By: /s/ Troy A. Peery, Jr.
Name: Troy A. Peery, Jr.
Title: President and Chief Operating Officer
HM MERGER SUBSIDIARY, INC.
By:/s/ Troy A. Peery, Jr.
Name: Troy A. Peery, Jr.
Title: President and Chief Operating Officer
RHODES, INC.
By:/s/ Joel H. Dugan
Name: Joel H. Dugan
Title: Senior Vice President
EXHIBIT 6.04(a)
FORM OF TRANSFER RESTRICTION LETTER
TO BE DELIVERED ON THE DATE OF THE MERGER AGREEMENT
Agreement of Certain Officers
THIS AGREEMENT (the "Agreement") is made as of the 17th day of
September, 1996, by and between the undersigned, ________________, an individual
residing in _______________, _______________, Heilig-Meyers Company, a Virginia
corporation ("Heilig-Meyers") and
Rhodes, Inc., a Georgia corporation ("Rhodes").
Rhodes, Heilig-Meyers and HM Merger Subsidiary, Inc., a Georgia
corporation ("Merger Sub") have entered into an Agreement and Plan of Merger,
dated as of September 17, 1996 (the "Merger Agreement"). The Merger Agreement
provides for the merger of Merger Sub with and into Rhodes (the "Merger") and
the conversion of each of the issued and outstanding shares of the common stock
of Rhodes ("Rhodes Common Stock") into the right to receive shares of the common
stock of Heilig-Meyers ("Heilig-Meyers Common Stock"), all as described in the
Merger Agreement. The transactions contemplated by the Merger Agreement are
subject to the affirmative vote of the shareholders of Rhodes and certain other
conditions.
The undersigned is an officer or an affiliate (as defined in Rule 144
under the Securities Act of 1933) of Rhodes, is the owner of shares of Rhodes
Common Stock, or has rights by option, warrant or otherwise to acquire shares of
Rhodes Common Stock (all of which shares, together with (i) any shares of Rhodes
Common Stock acquired by the undersigned subsequent to the date hereof and (ii)
all shares of Heilig-Meyers Common Stock beneficially owned by the undersigned
from and after the effective date of the Merger, are hereinafter referred to
collectively as the "Shares"). The undersigned, at the specific request of
Heilig-Meyers and Rhodes, and in order to induce Heilig-Meyers and Rhodes to
enter into and perform the Merger Agreement, is entering into this Agreement
with Heilig-Meyers and Rhodes to set forth certain terms and conditions
governing the actions to be taken by the undersigned with respect to the Shares
prior to consummation of the Merger and for a period thereafter.
NOW, THEREFORE, in consideration of the transactions contemplated by
the Merger Agreement and the mutual promises and covenants contained herein, the
parties agree as follows:
1. Without the prior written consent of Heilig-Meyers, the undersigned
shall not transfer, sell, assign or convey, or offer or agree to transfer, sell,
assign or convey, any of the Shares during the term of this Agreement. Without
limiting the generality of the foregoing, the undersigned shall not grant to any
party any option or right to purchase the Shares or any interest therein.
2. The undersigned acknowledges and agrees that neither Heilig-Meyers
nor Rhodes could be made whole by monetary damages in the event of any default
by the undersigned of the terms and conditions set forth in this Agreement. It
is accordingly agreed and understood that Heilig-Meyers and Rhodes, in addition
to any other remedy which either may have at law or in equity, shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and
specifically to enforce the terms and provisions hereof in any action instituted
in any court of the United States or in any state having appropriate
jurisdiction.
3. The undersigned understands that the transfer agents of
Heilig-Meyers and Rhodes shall be given notice that the Shares are subject to
the terms of this Agreement and such Shares shall not be transferred except in
accordance with the terms of this Agreement.
4. The covenants and obligations set forth in paragraphs 1 through 3 of
this Agreement shall expire and be of no further force or effect on the earlier
of (i) the expiration or termination of the Merger Agreement, prior to the
Effective Time (as defined in the Merger Agreement), or (ii) thirty (30) days
after the date on which Heilig-Meyers publishes information as to the financial
results covering at least thirty (30) days of post-Merger combined operations
reflecting combined sales and net income.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the undersigned parties as of the day and year first above written.
Name:
HEILIG-MEYERS COMPANY
By:
Name:
Title:
RHODES, INC.
By:
Name:
Title:
EXHIBIT 6.04(b)
FORM OF AFFILIATE LETTER TO BE DELIVERED
ON OR PRIOR TO THE EFFECTIVE TIME
____________, 1996
Heilig-Meyers Company
2235 Staples Mill Road
Richmond, Virginia 23230
Ladies and Gentlemen:
I have been advised that as of the date of this letter, I may be deemed
to be an "affiliate" of Rhodes, Inc., a Georgia corporation (the "Company"), as
the term "affiliate" is defined for purposes of paragraphs (c) and (d) of Rule
145 of the rules and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"). Pursuant to the terms of the Agreement and Plan of Merger,
dated as of September __, 1996 (the "Agreement"), by and among Heilig-Meyers
Company, a Virginia corporation ("Parent"), HM Merger Sub, Inc., a Georgia
corporation ("Parent Sub"), and the Company, Parent Sub will be merged with and
into the Company (the "Merger").
As a result of the Merger, I may receive shares of common stock, par
value $2.00 per share, of Parent (the "Parent Securities"). I would receive such
shares in exchange for shares (or options for shares) owned by me of common
stock, no par value, of the Company.
I represent, warrant and covenant to Parent that in the event I receive
any Parent Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of
the Parent Securities in violation of the Act or the Rules and
Regulations.
B. I have carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of
Parent Securities to the extent I felt necessary with my counsel or
counsel for the Company.
C. I have been advised that the issuance of Parent Securities
to me pursuant to the Merger will be registered with the Commission
under the Act on a Registration Statement on Form S-4. However, I have
also been advised that, since at the time the Merger is to be submitted
for a vote of the shareholders of the Company, I may be deemed to have
been an affiliate of the Company and the distribution by me of the
Parent Securities has not been registered under the Act, I may not
sell, transfer or otherwise dispose of Parent Securities issued to me
in the Merger unless (iii) such sale, transfer or other disposition is
registered under the Act, (iv) such sale, transfer or other disposition
is made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, or (v) in the opinion of
counsel reasonably acceptable to Parent, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that Parent is under no obligation to register
the sale, transfer or other disposition of the Parent Securities by me
or on my behalf under the Act or to take any other action necessary in
order to make compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions will be
given to Parent's transfer agents with respect to the Parent Securities
and that there will be placed on the certificates for the Parent
Securities issued to me, or any substitutions therefor, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT DATED SEPTEMBER __, 1996 BETWEEN THE
REGISTERED HOLDER HEREOF AND HEILIG-MEYERS COMPANY, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF
HEILIG-MEYERS COMPANY."
It is understood and agreed that the legends set forth in paragraph E
above shall be removed by delivery of substitute certificates without such
legends if the undersigned shall have delivered to Parent a copy of a letter
from the staff of the Commission, or an opinion of counsel reasonably acceptable
to Parent and in form and substance reasonably satisfactory to Parent, to the
effect that such legend is not required for purposes of the Act.
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter, or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
--------------------------------
Name:
Accepted this ___ day of
_________, 1996 by
HEILIG-MEYERS COMPANY
By: ____________________________
Name:
Title:
EXHIBIT 7.02(l)
FORM OF OPINION OF KING & SPALDING
[King & Spalding Letterhead]
[Dated the Closing Date]
Heilig-Meyers Company
2235 Staples Mill Road
Richmond, Virginia 23230
Gentlemen:
We have acted as counsel for Rhodes, Inc. in connection with the Merger
contemplated by an Agreement and Plan of Merger (the "Agreement") dated as of
September 17, 1996 among Rhodes, Inc., a Georgia corporation (the "Company"),
Heilig-Meyers Company, a Virginia corporation ("Purchaser") and HM Merger
Subsidiary, Inc., a Georgia corporation ("Sub"). This opinion is rendered
pursuant to the provisions of Section 7.02(l) of the Agreement. Terms defined in
the Agreement and used in this letter shall have the meanings in this letter
that they have in the Agreement.
In rendering this opinion we have examined originals or copies,
certified or otherwise identified to our satisfaction, of corporate records,
certificates of public officials, certificates of officers of the Company and
such other documents as we have deemed necessary as a basis for this opinion. We
have relied on the representations of the Company made in the Agreement and such
certificates of public officials and of officers of the Company as to various
questions of fact material to our opinion. We note that certain opinions
expressed herein include knowledge limitations. Whenever an opinion in this
letter is stated to be given "to our knowledge" or as "known to us," such
qualification shall signify that no information has come to the attention of the
attorneys in this firm who have been involved in the transactions contemplated
by the Agreement and the Voting Agreement that would give us actual current
knowledge of the existence or absence of the matter in question. We do not
represent the Company on various matters, including certain litigation matters,
that might have brought such information to our attention.
Based on the foregoing we are of the opinion that:
1. The Company is a corporation validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. Based solely on the certificates provided
by agencies of the States of Alabama, Colorado, Florida, Illinois,
Indiana, Kansas, Kentucky, Mississippi, Missouri, North Carolina, Ohio, South
Carolina, Tennessee and Texas (and subject to the meaning ascribed to such
certificates by each applicable state agency), the Company is duly qualified to
do business as a foreign corporation under the laws of each such state.
2. The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock. All of the issued and outstanding shares of Common Stock
are validly issued, fully paid and nonassessable and free of preemptive rights.
To our knowledge, except as set forth in the Agreement, as of the date hereof,
there are no shares of capital stock of the Company issued or outstanding or any
options, warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating the Company to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital stock.
3. The Company is, directly or indirectly, the record owner of all of
the outstanding shares of capital stock of each of the Company Subsidiaries. All
of such shares so owned by the Company are validly issued, fully paid and
nonassessable and are owned by it free and clear of any encumbrances, restraints
on alienation, or any other restrictions with respect to the transferability or
assignability thereof (other than restrictions on transfer imposed by federal or
state securities laws).
4. The Company has the corporate power and authority to enter into the
Agreement and to carry out its obligations thereunder. The execution, delivery
and performance of the Agreement by the Company and the consummation by the
Company of the transactions contemplated thereby have been duly authorized by
the Board and the Shareholders of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize the Agreement
or the transactions contemplated thereby. The Agreement has been duly and
validly executed and delivered by the Company and (assuming the Agreement
constitutes a valid and binding obligation of Purchaser and Sub) constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms.
5. WPS and Green Capital have the power and authority to enter into the
Voting Agreement and to carry out its obligations thereunder. The execution,
delivery and performance of the Voting Agreement by WPS and Green Capital and
the consummation by WPS and Green Capital of the transactions contemplated
thereby have been duly authorized by WPS and Green Capital, and no other
proceedings on the part of the WPS and Green Capital are necessary to authorize
the Voting Agreement or the transactions contemplated thereby. The Voting
Agreement has been duly and validly executed and delivered by WPS and Green
Capital and (assuming the Voting Agreement constitutes a valid and binding
obligation of Purchaser) constitutes a valid and binding agreement of the WPS
and Green Capital, enforceable against the WPS and Green Capital in accordance
with its terms.
6. Except for filing the Certificate of Merger with the Secretary of
the State of Georgia, no consent, approval, authorization, or order of, or
filing with or notice to, any court or state or federal governmental agency is
required to be obtained by the Company for the
consummation of the transactions contemplated by the Agreement which have not
been obtained or made.
7. Neither the execution, delivery or performance of the Agreement by
the Company, nor the consummation by the Company of the transactions
contemplated thereby, will (vi) conflict with or result in any breach of any
provisions of the articles of incorporation or by-laws of the Company or the
articles of incorporation or by-laws or equivalent organizational documents of
any of the Company Subsidiaries, (vii) except as set forth on Schedule 3.07 to
the Agreement, to our knowledge, result in a violation or breach of, or
constitute a default under, or give rise to any right of termination,
modification or acceleration under, any note, bond, mortgage, deed of trust,
security interest, indenture, real property lease or other similar instrument or
obligation known to us to which the Company or any of the Company Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound or affected, or any contract or agreement that was filed by the Company
within the last five years as an exhibit under the Exchange Act, or (viii)
violate or conflict with any federal law or the law of the State of Georgia,
except in the case of clause (ii) or (iii) of this sentence for violations,
breaches, defaults or conflicts which would not individually or in the aggregate
have a Company Material Adverse Effect.
8. The Proxy Statement, at the time it was mailed to shareholders of
the Company, complied as to form in all material respects with the provisions of
the Exchange Act.
9. At the Effective Time, each issued and outstanding share of the
Company Common Stock shall be converted into the right to receive shares of
Purchaser Common Stock, or cash in lieu of fractional shares, all in accordance
with the Agreement.
In our capacity as counsel for the Company, we have participated in
conferences with officers and employees of the Company, with representatives of
the independent accountants for the Company and with your representatives and
counsel, during which the contents of the Registration Statement and the Proxy
Statement and related matters were discussed and reviewed, and, although we are
not passing upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Proxy Statement, on the basis of the information that was
developed in the course of the performance of the services referred to above,
nothing has come to our attention that causes us to believe that the
Registration Statement, insofar as it relates to the Company or to information
that was furnished by the Company to the Purchaser specifically for inclusion in
the Registration Statement (and other than the financial statements and the
notes and Schedules thereto and other financial and statistical information
contained therein or incorporated therein by reference, as to which we express
no belief), at the time it was declared effective, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading or
that the Proxy Statement, insofar as it relates to the Company or to information
that was furnished by the Company, (and other than the financial statements and
the notes and Schedules thereto and other financial and statistical information
contained therein or incorporated therein by reference, as to which we express
no belief), at the time of the meeting of the shareholders of the Company to
approve the Merger, included any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
The opinions expressed in this letter concerning the enforceability or
binding effect of the Agreement and the Voting Agreement are subject to (i) the
effect of applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, arrangement or similar laws relating to or affecting
creditors' rights and remedies generally, and (ii) general principles of equity
including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a court of law or equity).
Furthermore, we express no opinion as to the validity, enforceability or binding
effect of provisions in Section 8.05 of the Agreement under the laws of the
State of Georgia insofar as such Section relates to the payment of certain
amounts by the Company in the event of the termination of the Agreement.
The opinions expressed herein are limited to matters governed by the
federal laws of the United States of America and the laws of the State of
Georgia and, with respect to the opinion in paragraph 4 relating to the
Agreement, the laws of the Commonwealth of Virginia, to the extent set forth in
the following sentence. Insofar as the matters covered by the last sentence of
paragraph 4 of this opinion are governed by the laws of the Commonwealth of
Virginia, we have assumed with your permission and without independent
investigation that the laws of Virginia are in all relevant respects identical
to the laws of the State of Georgia.
Very truly yours,
EXHIBIT 7.03(g)
FORM OF OPINION OF MCGUIRE WOODS BATTLE & BOOTHE L.L.P.
[Letterhead of McGuire Woods Battle & Boothe, L.L.P.]
[Dated the Closing Date]
Rhodes, Inc.
4730 Peachtree Road
Atlanta, Georgia 30319
Gentlemen:
We have acted as counsel for Heilig-Meyers Company and HM Merger
Subsidiary, Inc., in connection with the Merger contemplated by an "Agreement
and Plan of Merger" (the "Agreement") dated as of September 17, 1996 among
Rhodes, Inc., a Georgia corporation (the "Company"), Heilig-Meyers Company, a
Virginia corporation ("Purchaser"), and HM Merger Subsidiary, Inc., a Georgia
corporation ("Sub"). This opinion is rendered pursuant to the provisions of
Section 7.03(g) of the Agreement. Terms defined in the Agreement and used in
this letter have the meanings in this letter that they have in the Agreement.
In rendering this opinion we have examined originals or copies,
certified or otherwise identified to our satisfaction, of corporate records,
certificates of public officials, certificates of officers of Purchaser and Sub
and such other documents as we have deemed necessary as a basis for this
opinion. We have relied on the representations of Purchaser and Sub made in the
Agreement and such certificates of public officers and officers of Purchaser and
Sub as to various questions of fact material to our opinion. We note that
certain opinions expressed herein include knowledge limitations. Whenever an
opinion in this letter is stated to be given "to our knowledge" or as "known to
us," such qualification shall signify that no information has come to the
attention of the attorneys in this firm who have been involved in the
transactions contemplated by the Agreement that would give us actual current
knowledge of the existence or absence of the matter in question. We do not
represent Purchaser on various matters, including certain litigation matters,
that might have brought such information to our attention.
Based on the foregoing we are of the opinion that:
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia and Sub is a
corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia; and each
has the corporate power and authority to own, lease and operate its properties
and to carry on its businesses as it is presently being conducted. Each of
Purchaser and Sub is duly qualified and in good standing to do business in each
jurisdiction where the character of its properties owned or leased by it, or the
nature of its activities makes such qualification necessary, except in those
jurisdictions where the failure to be so qualified would not individually or in
the aggregate have a material adverse effect on the business, assets,
liabilities, financial condition or results of operations of Purchaser and its
subsidiaries, taken as a whole.
(b) The authorized capital stock of Purchaser consists of 250,000,000
shares of Purchaser Common Stock, and 3,000,000 shares of $10.00 par value
preferred stock ("Purchaser Preferred Stock"). All of the issued and outstanding
shares of Purchaser Common Stock are validly issued, fully paid and
nonassessable and free of preemptive rights. To the best of our knowledge,
except as set forth in the Agreement, as of the date hereof, there are no shares
of capital stock of the Purchaser issued or outstanding or, any options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating the Purchaser to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital stock.
Purchaser is record owner of all of the outstanding shares of capital stock of
Sub.
(c) Each of Purchaser and Sub has the corporate power and authority to
enter into the Agreement and to carry out its obligations thereunder. The
execution, delivery and performance by Purchaser and Sub of the Agreement and
the consummation of the transactions contemplated thereby have been duly
authorized by all necessary corporate action of Purchaser and Sub. The Agreement
has been duly and validly executed and delivered by each of Purchaser and Sub
and (assuming the Agreement constitutes a valid and binding obligation of the
Company) constitutes valid and binding obligations of each of Purchaser and Sub
enforceable against each of them in accordance with its terms.
(d) Except for filing the Certificate of Merger with the Secretary of
the State of Georgia, no consent, approval, authorization, or order of, or
filing with or notice to, any court or state or federal governmental agency is
required to be obtained by Purchaser or Sub for the consummation of the
transactions contemplated by the Agreement which have not been obtained or made.
(e) The shares of Purchaser Common Stock to be issued to the
shareholders of the Company in the Merger have been duly authorized, and upon
delivery thereof pursuant to the Agreement will be validly issued, fully paid
and nonassessable.
(f) Neither the execution, delivery or performance of the Agreement by
Purchaser or Sub, as the case may be, nor the consummation by Purchaser or Sub,
as the case may be, of the transactions contemplated thereby, will (i) conflict
with or result in any breach of any provisions of the articles of incorporation
or by-laws documents of Purchaser and Sub, (ii) to our knowledge, result in a
violation or breach of, or constitute a default under, or give rise to any right
of termination, modification or acceleration under, any note, bond, mortgage,
deed of trust, security
interest, indenture, real property lease or other similar instrument or
obligation known to us to which Purchaser or Sub is a party or by which any of
them or any of their properties or assets may be bound or affected, or any
contract or agreement that was filed by Purchaser within the last five years as
an exhibit under the Exchange Act, (iii) violate or conflict with any federal
law or the law of the Commonwealth of Virginia, except in the case of clauses
(ii) and (iii) for violations, breaches, defaults or conflicts which would not
individually or in the aggregate have a Purchaser Material Adverse Effect.
(g) The Registration Statement has become effective under the
Securities Act, and to our knowledge, no stop order suspending its effectiveness
has been issued and no proceedings for that purpose have been initiated or
threatened by the SEC. At the time the Registration Statement became effective,
the Registration Statement, complied as to form in all material respects with
the provisions of the Securities Act.
In our capacity as counsel for Purchaser, we have participated in
conferences with officers and employees of Purchaser, with representatives of
the independent accountants for Purchaser and with your representatives and
counsel, during which the contents of the Registration Statement and the Proxy
Statement and related matters were discussed and reviewed, and, although we are
not passing upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Proxy Statement, on the basis of the information that was
developed in the course of the performance of the services referred to above,
nothing has come to our attention that causes us to believe that the
Registration Statement, insofar as it relates to Purchaser or to information
that was furnished by Purchaser (and other than the financial statements and the
notes and schedules thereto and other financial and statistical information
contained therein or incorporated therein by reference, as to which we express
no belief), at the time it was declared effective, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading or
that the Proxy Statement, insofar as it relates to Purchaser or to information
that was furnished by Purchaser to the Company specifically for inclusion in the
Proxy Statement, (and other than the financial statements and the notes and
schedules thereto and other financial and statistical information contained
therein or incorporated therein by reference, as to which we express no belief),
at the time of the meeting of the shareholders of the Company to approve the
Merger, included any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made not
misleading.
The opinions expressed in this letter concerning the enforceability or
binding effect of the Agreement are subject to (i) the effect of applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium,
arrangement or similar laws relating to or affecting creditors' rights and
remedies generally, and (ii) general principles of equity including principles
of commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a court of law or equity).
The opinions expressed herein are limited to matters governed by the
laws of the United States of America and the laws of the Commonwealth of
Virginia.
Very truly yours,