<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: (Date of earliest event reported): September 17, 1996
Rhodes, Inc.
------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
Georgia 1-9308 58-0536190
- ---------------------------- ----------------------- ---------------------
(State or Other jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
</TABLE>
4370 Peachtree Road, N.E., Atlanta, Georgia 30319
- ------------------------------------------- -----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (404) 264-4600
Not Applicable
-----------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE> 2
Item 1. Changes in Control of Registrant.
On September 17, 1996, the Registrant executed an Agreement and Plan
of Merger, dated as of September 17, 1996 (the "MERGER AGREEMENT"), among the
Registrant, Heilig-Meyers Company ("HM"), and HM Merger Subsidiary, Inc., a
wholly owned subsidiary of HM ("MERGER SUB"), pursuant to which, among other
things, (1) Merger Sub will merge with and into the Registrant, (2) the
Registrant will be the surviving corporation in the merger and become a wholly
owned subsidiary of HM, and (3) each shareholder of the Registrant will be
entitled to receive 0.5 shares of HM common stock in exchange for one share of
the Registrant's common stock. The Board of Directors of the Registrant has
unanimously approved the Merger Agreement. The merger is subject to
Hart-Scott-Rodino clearance, approval by the Registrant's shareholders and
certain other conditions.
In connection with the signing of the Merger Agreement, WPS Investors,
L.P., Green Capital Investors, L.P., and HM, owners of an aggregate of
2,918,404 shares or 31.83% of the outstanding shares of common stock of the
Registrant, entered into a Voting Agreement, dated as of September 17, 1996,
pursuant to which such parties agreed to vote their respective shares of the
Registrant's common stock in favor of adoption of the Merger Agreement and
against any Acquisition Proposal (as defined in the Merger Agreement). The
Voting Agreement will terminate upon termination of the Merger Agreement.
For further information concerning the Merger, the Merger Agreement
and the Voting Agreement, see Exhibits 2, 20 and 99 hereto, which are
incorporated herein by reference.
Item 7. Financial Statement, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
Exhibit 2 - Agreement and Plan of Merger, dated
as of September 17, 1996, among the
Rhodes, Inc., Heilig-Meyers Company
and HM Merger Subsidiary, Inc.
Exhibit 20 - Press Release issued September 17,
1996.
Exhibit 99 - Voting Agreement, dated as of
September 17, 1996, among WPS
Investors, L.P., Green Capital
Investors, L.P. and Heilig-Meyers
Company.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RHODES, INC.
Date: September 23, 1996 By: /s/ Joel H. Dugan
------------------------------------
Name: Joel H. Dugan
Title: Senior Vice President,
Finance and Administration
and Chief Financial Officer
<PAGE> 4
INDEX TO EXHIBITS
Exhibit Number and Description
2 Agreement and Plan of Merger, dated as of September 17, 1996,
among the Rhodes, Inc., Heilig-Meyers Company and HM Merger
Subsidiary, Inc. The Registrant agrees to furnish supplementally
a copy of any omitted schedule to the SEC upon request.
20 Press Release issued September 17, 1996.
99 Voting Agreement, dated as of September 17, 1996, among WPS
Investors, L.P., Green Capital Investors, L.P. and Heilig-Meyers
Company.
<PAGE> 1
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
<PAGE> 2
[CONFORMED COPY]
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HEILIG-MEYERS COMPANY,
HM MERGER SUBSIDIARY, INC.
AND
RHODES, INC.
DATED AS OF SEPTEMBER 17, 1996
================================================================================
<PAGE> 3
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE/SECTION PAGE
- --------------- ----
<S> <C>
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
</TABLE>
i
<PAGE> 4
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE/SECTION PAGE
- --------------- ----
<S> <C>
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
</TABLE>
ii
<PAGE> 5
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE/SECTION PAGE
- --------------- ----
<S> <C>
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
</TABLE>
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
iii
<PAGE> 6
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
<PAGE> 7
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
<PAGE> 8
2
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:
<PAGE> 9
3
(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
<PAGE> 10
4
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.
<PAGE> 11
5
(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
<PAGE> 12
6
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.
<PAGE> 13
7
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
<PAGE> 14
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
<PAGE> 15
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
<PAGE> 16
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
<PAGE> 17
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.
<PAGE> 18
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
<PAGE> 19
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 determination
<PAGE> 20
14
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,
<PAGE> 21
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 requires
<PAGE> 22
16
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
<PAGE> 23
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
<PAGE> 24
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 right
<PAGE> 25
19
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.
<PAGE> 26
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
<PAGE> 27
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
<PAGE> 28
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;
<PAGE> 29
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 provide
<PAGE> 30
24
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.
<PAGE> 31
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.
<PAGE> 32
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.
<PAGE> 33
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:
<PAGE> 34
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)
<PAGE> 35
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
<PAGE> 36
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, with
<PAGE> 37
31
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,
<PAGE> 38
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
<PAGE> 39
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
<PAGE> 40
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 constitute
<PAGE> 41
35
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.
<PAGE> 42
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. Perry, Jr.
---------------------------------------------
Name: Troy A. Perry, Jr.
Title: President and Chief Operating Officer
HM MERGER SUBSIDIARY, INC.
By:/s/ Troy A. Perry, Jr.
----------------------------------------------
Name: Troy A. Perry, Jr.
Title: President and Chief Operating Officer
RHODES, INC.
By:/s/ Joel H. Dugan
----------------------------------------------
Name: Joel H. Dugan
Title: Senior Vice President
<PAGE> 43
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.
<PAGE> 44
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.
<PAGE> 45
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:
<PAGE> 46
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
<PAGE> 47
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.
<PAGE> 48
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:
<PAGE> 49
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),
<PAGE> 50
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.
<PAGE> 51
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.
<PAGE> 52
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,
<PAGE> 53
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:
1. 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
<PAGE> 54
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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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
<PAGE> 55
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.
7. 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,
<PAGE> 1
EXHIBIT 20
PRESS RELEASE ISSUED SEPTEMBER 17, 1996
NEWS RELEASE
RHODES, INC.
4730 PEACHTREE ROAD, N.E.
ATLANTA, GEORGIA 30319
FOR IMMEDIATE RELEASE
ATLANTA, GEORGIA SEPTEMBER 17, 1996
RHODES, INC. ANNOUNCES MERGER AGREEMENT
WITH HEILIG-MEYERS COMPANY
RHODES, INC. [NYSE SYMBOL "RHD"] announced today that agreement has
been reached to merge Rhodes, Inc. with Heilig-Meyers. Following the merger,
Rhodes will be a subsidiary of Heilig-Meyers.
The definitive agreement, which was unanimously approved by the
Rhodes' Board of Directors, entitles Rhodes shareholders to receive one
Heilig-Meyers common share for every two shares of Rhodes common stock, or an
aggregate amount of approximately 4.6 million shares of Heilig-Meyers stock for
all currently outstanding Rhodes shares. The merger is subject to
Hart-Scott-Rodino clearance, approval by Rhodes shareholders and certain other
conditions. The transaction is currently structured as a tax-free exchange of
shares.
The merged companies on a combined basis had sales of approximately
$1.5 billion and 824 stores for fiscal year ended February 29, 1996.
Mr. Lowenstein, Chairman and Chief Executive Officer, stated, "We are
very excited about the merger and the continued growth and profitability
possibilities that it will provide the combined companies. We believe that the
combination will enhance our shareholder value and provide a secure future for
our loyal and hardworking employees."
Rhodes today also reported sales and earnings. The net loss for the
second quarter ended August 31, 1996 was $2,683,000, compared with net income
of $2,669,000, for the same quarter last year, and net loss for the six months
ended August 31, 1996 was $5,343,000 compared with net income of $4,476,000 for
the six months last year. Net loss per share was $.29 for the second quarter
and $.58 for the six months ended August 31, 1996, compared with earnings per
share of $.29 and $.48 for the quarter and six months ended August 31, 1995.
<PAGE> 2
Net sales for the quarter ended August 31, 1996 increased to
$119,038,000 from $95,379,000, up 24.8%, compared with the second quarter last
year, and to $238,764,000 from $184,818,000, up 29.2% for the six months ended
August 31, 1996 compared with last year. Same store sales decreased 10.0% and
8.0%, respectively, for the three months and six months ended August 31, 1996,
compared with the same periods last year.
Heilig-Meyers is the nation's largest publicly held specifically
retailer of home furnishings with 755 stores in 26 states and Puerto Rico.
Rhodes operates 106 retail furniture stores in 15 Southern, Midwestern and
Western states.
CONTACT: Joel H. Dugan
(404) 264-4625
<PAGE> 1
EXHIBIT 99
VOTING AGREEMENT
<PAGE> 2
[CONFORMED COPY]
VOTING AGREEMENT
VOTING AGREEMENT (this "AGREEMENT"), dated as of September 17, 1996,
among WPS Investors, L.P., a Georgia limited partnership ("WPS"), Green Capital
Investors, L.P., a Georgia limited partnership ("GREEN CAPITAL"), and Heilig-
Meyers Company, a Virginia corporation ("PURCHASER"), each a shareholder of
Rhodes, Inc., a Georgia corporation (the "COMPANY"), (WPS, Green Capital and
Purchaser together being referred to herein as the "SHAREHOLDERS").
WHEREAS, concurrently with the execution of this Agreement, the
Company, Purchaser and HM Merger Subsidiary, Inc., a Georgia corporation and a
wholly owned subsidiary of Purchaser ("SUB"), have entered into an Agreement
and Plan of Merger (as the same may be amended from time to time, the "MERGER
AGREEMENT"), providing for the merger (the "MERGER") of Sub with and into the
Company pursuant to the terms and conditions of the Merger Agreement;
WHEREAS, WPS and Green Capital own of record and beneficially
2,912,679 and 5,700 shares, respectively, of common stock, no par value, of the
Company (the "COMMON STOCK"), and Purchaser owns beneficially 25 shares of
Common Stock (together with the shares owed by WPS and Green Capital, the
"SHARES", which term, after the Effective Time, shall refer to the Purchaser
Common Stock (as defined in the Merger Agreement) received in the Merger), and
WPS, Green Capital and Purchaser wish to enter into this Agreement with respect
to the Shares; and
WHEREAS, each of the Shareholders has agreed, upon the terms and
subject to the conditions set forth herein, to vote its Shares at a meeting of
the Company's shareholders in favor of approval of the Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO VOTE SHARES. The Shareholders agree during the
term of this Agreement to vote their respective Shares, in person or by proxy,
(A) in favor of approval of the Merger Agreement at every meeting of the
shareholders of the Company at which such matters are considered and at every
adjournment thereof (each, a "SHAREHOLDERS' MEETING") and (B) against any
Acquisition Proposal (as such term is defined in the Merger Agreement).
2. NO VOTING TRUSTS. Each of the Shareholders agrees that it
will not, nor will such Shareholder permit any entity under such Shareholder's
control to, deposit any of such Shareholder's Shares in a voting trust or
subject any of its Shares to any arrangement with respect to the voting of its
Shares inconsistent with this Agreement.
<PAGE> 3
3. LIMITATION ON DISPOSITIONS.
Without the prior written consent of Purchaser, each of WPS and Green
Capital shall not transfer, sell, assign or convey, or offer or agree to
transfer, sell, assign or convey, any of their Shares during the term of this
Agreement. Without limiting the generality of the foregoing, each of WPS and
Green Capital shall not grant to any party any option or right to purchase
their Shares or any interest therein. Each of WPS and Green Capital
acknowledge and agree that the transfer agent with respect to their Shares
shall be given notice that their 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. Notwithstanding the foregoing, WPS and Green
Capital each may distribute all or a portion of their Shares to their
respective partners, provided such Shares continue to be subject to the
restrictions of this Agreement and are legended to that effect.
4. SPECIFIC PERFORMANCE. Each party hereto acknowledges that it
will be impossible to measure in money the damage to the other party if a party
hereto fails to comply with the obligations imposed by this Agreement, and
that, in the event of any such failure, the other party will not have an
adequate remedy at law or in damages. Accordingly, each party hereto agrees
that injunctive relief or other equitable remedy, in addition to remedies at
law or damages, is the appropriate remedy for any such failure and will not
oppose the granting of such relief on the basis that the other party has an
adequate remedy at law. Each party hereto agrees that it will not seek, and
agrees to waive any requirement for, the securing or posting of a bond in
connection with any other party's seeking or obtaining such equitable relief.
5. TERM OF AGREEMENT; TERMINATION. (a) Except as set forth in
Section 5(b) hereof and subject to Section 8(f) hereof, the term of this
Agreement shall commence on the date hereof, and such term and this Agreement
shall terminate upon the earliest to occur of (i) the Effective Time; (ii) the
date on which the Merger Agreement is terminated in accordance with its terms;
(iii) the date on which the Board of Directors of the Company withdraws or
materially modifies or changes its recommendation for the approval of the
Merger Agreement if the Board of Directors of the Company after consultation
with its counsel determines that the failure to take such action could
reasonably be deemed a breach of its fiduciary duties to the Company's
shareholders under applicable law; and (iv) February 28, 1997. Upon such
termination, no party shall have any further obligations or liabilities
hereunder; provided, however, that such termination shall not relieve any party
from liability for any breach of this Agreement prior to such termination.
(b) The covenants and obligations set forth in Section 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 Purchaser publishes information as to the financial
results covering at least thirty (30) days of post-Merger combined operations
reflecting combined sales and net income.
6. ENTIRE AGREEMENT. This Agreement supersedes all prior
agreements, written or oral, among the parties hereto with respect to the
subject matter hereof and contains the entire agreement among the parties with
respect to the subject matter hereof. This Agreement may not
<PAGE> 4
be amended, supplemented or modified, and no provisions hereof may be modified
or waived, except by an instrument in writing signed by all parties hereto. No
waiver of any provisions hereof by any party shall be deemed a waiver of any
other provisions hereof by any such party, nor shall any such waiver be deemed
a continuing waiver of any provision hereof by such party.
7. NOTICES. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be in writing and
shall be deemed to have been duly given if mailed, by first class or registered
mail, five (5) business days after deposit in the United States Mail, or if
telexed or telecopied, sent by telegram, or delivered by hand or reputable
overnight courier, when confirmation is received, in each case as follows:
If to WPS:
WPS Investors, L.P.
1420 Atlanta Financial Center
3343 Peachtree Road, N.E.
Suite 1420
Atlanta, Georgia 30326
Attention: Holcombe T. Green, Jr.
Telecopy: (404) 266-8677
With a copy to:
King & Spalding
120 West 45th Street
New York, New York 10036
Attention: E. William Bates, II
Telecopy: (212) 556-2222
If to Green Capital:
Green Capital Investors, L.P.
1420 Atlanta Financial Center
3343 Peachtree Road, N.E.
Suite 1420
Atlanta, Georgia 30326
Attention: Holcombe T. Green, Jr.
Telecopy: (404) 266-8677
<PAGE> 5
With a copy to:
King & Spalding
120 West 45th Street
New York, New York 10036
Attention: E. William Bates, II
Telecopy: (212) 556-2222
If to Purchaser:
Heilig-Meyers Company
2235 Staples Mill Road
Richmond, Virginia 23230
Attention: Joseph R. Jenkins
Telecopy: (804) 254-1493
With a copy to:
McGuire Woods Battle & Boothe LLP
One James Center
Richmond, Virginia 23219-4030
Attention: David W. Robertson
Telecopy: (804) 775-1061
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. Nothing in this Section 7 shall be deemed to
constitute consent to the manner and address for service of process in
connection with any legal proceeding (including litigation arising out of or in
connection with this Agreement), which service shall be effected as required by
applicable law.
8. MISCELLANEOUS.
(a) Nothing contained in this Agreement shall be construed as
creating any liability on the part of the Shareholders under the Merger
Agreement.
(b) This Agreement shall be deemed a contract made under, and for
all purposes shall be construed in accordance with, the laws of the State of
Georgia, without reference to its conflicts of law principles.
(c) If any provision of this Agreement or the application of such
provision to any person or circumstances shall be held invalid or unenforceable
by a court of competent jurisdiction, such provision or application shall be
unenforceable only to the extent of such invalidity or unenforceability, and
the remainder of the provision held invalid or unenforceable and the
application of such provision to persons or circumstances, other than the party
as to which it is held invalid, and the remainder of this Agreement, shall not
be affected.
<PAGE> 6
(d) This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
(e) All Section headings herein are for convenience of reference
only and are not part of this Agreement, and no construction or reference shall
be derived therefrom.
(f) The obligations of the Shareholders set forth in this
Agreement shall not be effective or binding upon any Shareholder until after
such time as the Merger Agreement is executed and delivered by the Company,
Purchaser and Sub.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first written above.
HEILIG-MEYERS COMPANY
By: /s/ Roy B. Goodman
-------------------------------
Name: Roy B. Goodman
Title: Senior Vice President
WPS INVESTORS, L.P.
By: HTG Corp.,
Its General Partner
By: /s/ Holcombe T. Green, Jr.
-------------------------------
Name: Holcombe T. Green, Jr.
Title: President
GREEN CAPITAL INVESTORS, L.P.
By: Green and Company, L.P,
Its General Partner
By: HTG Corp.,
Its General Partner
By: /s/ Holcombe T. Green, Jr.
----------------------------
Name: Holcombe T. Green, Jr.
Title: President
