<PAGE>
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
MAY 3, 2000
Date of Report (Date of earliest event reported)
HA-LO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
ILLINOIS 001-13525 36-3573412
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
5980 WEST TOUHY AVENUE, NILES, ILLINOIS 60714
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 647-2300
----------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 3, 2000, HA-LO Industries, Inc., a Delaware corporation and
wholly-owned subsidiary ("Merger Sub") of HA-LO Industries, Inc., an Illinois
corporation (the "Company"), completed a merger (the "Merger") with
Starbelly.com, Inc., a Delaware corporation ("Starbelly"). Starbelly is a
Chicago, Illinois-based e-commerce provider of branded merchandise. In the
Merger, (i) each outstanding share of Starbelly common stock was converted into
the right to receive .753359718 of a share of the Company's common stock and
.079030882 of a share of the Company's Series A convertible participating
preferred stock; (ii) each outstanding share of Starbelly Series A preferred
stock was converted into the right to receive $1.7368 in cash, 1.34952558 shares
of the Company's common stock and .141571409 of a share of the Company's Series
A convertible participating preferred stock; (iii) each outstanding share of
Starbelly Series B preferred stock was converted into the right to receive
$2.458 in cash and .586627475 of a share of the Company's Series A convertible
participating preferred stock; and (iv) all outstanding options to purchase
shares of Starbelly common stock were converted into options to purchase shares
of the Company's common stock and Series A convertible participating preferred
stock. The total merger consideration (including shares issuable upon the
exercise of the assumed stock options) consisted of 17 million shares of the
Company's common stock, 5.1 million shares of the Company's Series A convertible
participating preferred stock and $19 million in cash (less Starbelly's merger
expenses in excess of $500,000). The Merger was effected pursuant to the terms
of the Agreement and Plan of Merger and Plan of Reorganization, dated as of
January 17, 2000, as amended by Amendment No. 1, and certain related agreements
(the "Agreement"), which resulted from arm's length negotiations between
representatives of each of the Company and Starbelly. Upon completion of the
Merger, Merger Sub changed its name to Starbelly.com, Inc. Additional
information regarding the Company, Starbelly and the Merger is set forth in the
proxy statement filed as Exhibit 20.1 to this report on Form 8-K.
Upon consummation of the Merger, the number of directors on the
Company's Board of Directors was increased from seven to nine and Bradley
Keywell, Starbelly's Chief Executive Officer and a director, and Eric Lefkofsky,
Starbelly's President and a director, were appointed to fill the vacancies
created thereby. John Kelley, Jr. remains the Chief Executive Officer of the
Company. Mr. Keywell became President of the Company and Mr. Lefkofsky became
Chief Operating Officer and Vice President of the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of business acquired.
Report of Independent Accountants (1)
Balance Sheet as of December 31, 1999 (1)
Statement of Operations for the Period from March 22, 1999
(Date of Inception), to December 31, 1999 (1)
Statement of Stockholders' Equity for the Period from March
22, 1999 (Date of Inception), to December 31, 1999
(1)
-2-
<PAGE>
Statement of Cash Flows for the Period from March 22, 1999
(Date of Inception), to December 31, 1999 (1)
Notes to Financial Statements (1)
(b) Pro forma financial information
Unaudited Pro Forma Combined Statements of Operations for the
year ended December 31, 1999 (2)
Unaudited Pro Forma Combined Condensed Balance Sheet at
December 31, 1999 (2)
Notes to Pro Forma Combined Condensed Balance Sheet (2)
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
-------------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger and Plan of
Reorganization, dated January 17, 2000,
among the Company, Starbelly.com, Inc. and
HA-LO Industries, Inc. (a subsidiary of the
Company). (3)
2.2 * Amendment No. 1 to Merger Agreement, dated
April 11, 2000, among the Company,
Starbelly.com, Inc. and HA-LO Industries,
Inc. (a subsidiary of the Company).
20.1 Definitive Proxy Statement of the Company. (4)
23.1 * Consent of Arthur Andersen LLP.
99.1 * Press Release dated May 5, 2000.
</TABLE>
- -------------------
(1) Incorporated by reference to the Company's Proxy Statement,
filed as Exhibit 20.1 to this report on Form 8-K.
(2) Set forth on pages F-1 through F-3 to this report on Form 8-K.
(3) Incorporated by reference to exhibit 10.63 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1999.
(4) Incorporated by reference to the Company's Proxy Statement
which was filed on April 12, 2000 pursuant to Rule 14a-6 under
the Securities Exchange Act of 1934, as amended, and is
incorporated by reference herein pursuant to Rule 12b-32 under
such Act.
* Filed herewith.
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
HA-LO INDUSTRIES, INC.
May 12, 2000 By: /s/ Gregory J. Kilrea
----------------------------
Gregory J. Kilrea, Chief Financial Officer
-4-
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
HA-LO AND STARBELLY PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited Pro Forma Combined Condensed Balance Sheet reflects
adjustments computed assuming that the Merger had closed as of December 31,
1999. The unaudited Pro Forma Combined Statements of Operations reflect
adjustments computed assuming that the Merger had closed on March 22, 1999
(the date of inception of Starbelly), and carried forward through December 31,
1999. Accordingly, the effects of pro forma adjustments on income are not
reflected in retained earnings on the Pro Forma Balance Sheet. The pro forma
information gives effect to the Merger under the purchase method of accounting
and to the assumptions and adjustments described in the accompanying notes to
the pro forma combined condensed financial statements.
The pro forma combined condensed financial statements are based on the
historical financial statements of the Company and the related notes thereto
incorporated herein by reference and the historical financial statements of
Starbelly and the related notes thereto included elsewhere herein. These pro
forma statements are presented for informational purposes only and may not
necessarily be indicative of the results that actually would have occurred had
the Merger been consummated at the dates indicated, nor are they necessarily
indicative of future operating results or financial position.
HA-LO AND STARBELLY PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------------
PRO FORMA PRO FORMA
HA-LO STARBELLY.COM ADJUSTMENTS COMBINED
-------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales................................... $650,412 $ 347 $ -- $650,759
Cost of sales--Recurring.................... 424,040 309 -- 424,349
Cost of sales--Non-recurring................ 2,653 -- -- 2,653
-------- ------- -------- --------
Gross Profit.............................. 223,719 38 -- 223,757
Selling expenses............................ 94,280 2,689 -- 96,969
General and administrative expenses......... 125,010 6,051 29,706 (D)(G) 160,767
Non-Recurring Charges....................... 27,347 -- -- 27,347
-------- ------- -------- --------
Loss from operations...................... (22,918) (8,702) (29,706) (61,326)
Other income (expense), net................. 355 129 (1,346)(C) (862)
-------- ------- -------- --------
Loss before taxes......................... (22,563) (8,573) (31,052) (62,188)
Income tax benefit.......................... (9,025) -- (3,968)(F) (12,993)
-------- ------- -------- --------
Net loss for the period..................... $(13,538) (8,573) $(27,084) $(49,195)
======== ======= ======== ========
Net loss per share:
Basic/Diluted............................. $ (0.28) $ (0.51) $ (0.82)
Weighted Average Shares Outstanding:
Basic/Diluted............................. 48,598 16,755 (5,234)(E) 60,119
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements.
F-1
<PAGE>
HA-LO AND STARBELLY PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HA-LO STARBELLY.COM ADJUSTMENTS COMBINED
-------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................... $ 10,729 $ 3,341 -- $ 14,070
Short-term investments....................... -- -- -- --
Receivables.................................. 178,712 205 -- 178,917
Inventories.................................. 37,746 43 -- 37,789
Prepaid expenses and deposits................ 17,406 220 -- 17,626
-------- ------- -------- --------
Total current assets....................... 244,593 3,809 -- 248,402
-------- ------- -------- --------
PROPERTY AND EQUIPMENT, NET.................... 37,003 1,855 -- 38,858
-------- ------- -------- --------
OTHER ASSETS:
Intangible assets, net....................... 77,111 -- 162,744 (A) 239,855
Due from related party....................... -- 338 -- 338
Other........................................ 21,596 -- -- 21,596
-------- ------- -------- --------
Total other assets......................... 98,707 338 162,744 261,789
-------- ------- -------- --------
$380,303 $ 6,002 $162,744 $549,049
======== ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt......... $ 984 $ 244 -- $ 1,228
Book overdraft............................... 3,177 -- -- 3,177
Accounts payable............................. 58,729 1,920 -- 60,649
Accrued expenses:
Other...................................... 38,565 2,168 -- 40,733
Restructuring.............................. 3,771 -- -- 3,771
-------- ------- -------- --------
Total current liabilities.................. 105,226 4,332 -- 109,558
LONG-TERM DEBT,
less maturities shown above.................. 21,230 558 23,000 (C) 44,788
-------- ------- -------- --------
ACCRUED RESTRUCTURING EXPENSES................. 11,863 -- -- 11,863
DEFERRED LIABILITIES........................... 5,438 -- -- 5,438
-------- ------- -------- --------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE CONVERTIBLE PARTICIPATING PREFERRED
STOCK........................................ -- -- 34,671 (A) 34,671
SHAREHOLDERS' EQUITY:
Preferred stock.............................. -- 7 (7)(B) --
Common stock................................. 214,060 18 105,218 (A) 319,296
Note receivable from stockholder............. -- (10) 10 (B) --
Additional paid-in capital................... -- 9,670 (9,670)(B) --
Contingent purchase consideration............ -- -- (16,606) (16,606)
Other........................................ (3,747) -- 17,555 13,808
Retained earnings (deficit).................. 26,233 (8,573) 8,573 (B) 26,233
-------- ------- -------- --------
Total shareholders' equity................. 236,546 1,112 105,073 342,731
-------- ------- -------- --------
$380,303 $ 6,002 $162,744 $549,049
======== ======= ======== ========
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements.
F-2
<PAGE>
NOTES TO HA-LO AND STARBELLY PRO FORMA COMBINED CONDENSED BALANCE SHEET
(A) The following is a summary of the purchase price and its
components assumed for the pro forma financial statements.
<TABLE>
<S> <C>
Purchase Price:
Common Stock.............................................. $ 105,236
Convertible participating preferred stock................. 34,671
Value allocated to option plan............................ 17,555
Cash...................................................... 19,000
Cost and fees of acquisition................................ 4,000
Less: Net tangible assets acquired.......................... (1,112)
Less: Contingent purchase consideration..................... (16,606)
---------
Goodwill.................................................... $ 162,744
=========
</TABLE>
(B) To eliminate the historical equity accounts of
Starbelly.
(C) To record the effects of additional financing incurred
to fund the acquisition and the related interest charges
for the period at an interest rate of 7.5%.
<TABLE>
<CAPTION>
12/31/99
---------
<S> <C>
Assumed additional debt borrowings (cash plus cost and fees
of acquisition)........................................... $ 23,000
Assumed interest rate....................................... 7.5%
---------
Annual interest expense..................................... 1,725
---------
Percentage of period included............................... 78%
---------
Additional interest expense 3/22/99--12/31/99............... $ 1,346
=========
</TABLE>
(D) To record amortization of goodwill over 5 years on a
straight-line basis.
<TABLE>
<CAPTION>
12/31/99
---------
<S> <C>
Goodwill.................................................... $ 162,744
Amortization period......................................... 5
---------
Annual Amortization expense................................. 32,549
---------
Percentage of period included............................... 78%
---------
Amortization expense 3/22/99--12/31/99...................... $ 25,388
=========
</TABLE>
(E) To adjust the weighted average shares for the shares
issued in the acquisition.
<TABLE>
<CAPTION>
12/31/99
---------
<S> <C>
Common stock issued in the transaction...................... 17,000
Percentage of period included............................... 78%
---------
Target adjusted weighted average shares outstanding......... 13,260
Target weighted average shares outstanding from
3/22/99--12/31/99......................................... 16,755
---------
Pro forma share adjustment.................................. (3,495)
=========
</TABLE>
(F) To record income tax benefit on proforma adjustments
affecting income.
<TABLE>
<CAPTION>
12/31/99
---------
<S> <C>
Pro-forma loss before taxes................................. (62,188)
Less: Non-deductible goodwill and deferred compensation
amortization.............................................. 29,706
---------
Taxable loss................................................ (32,482)
Tax rate.................................................... 40.0%
---------
Benefit..................................................... (12,993)
Less: Benefit recorded in HA-LO............................. (9,025)
---------
Pro Forma Adjustment........................................ $ (3,968)
=========
</TABLE>
(G) To record compensation expense related to contingent
purchase consideration.
<TABLE>
<CAPTION>
12/31/99
---------
<S> <C>
Contingent Consideration.................................... $ 16,606
Amortization period......................................... 3
---------
Annual Amortization expense................................. 5,535
---------
Percentage of period included............................... 78%
---------
Amortization expense 3/22/99--12/31/99...................... $ 4,318
=========
</TABLE>
F-3
<PAGE>
Exhibit Index.
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
-------------- ----------------------
<S> <C>
2.1 Agreement and Plan of Merger and Plan of
Reorganization, dated January 17, 2000,
among the Company, Starbelly.com, Inc. and
HA-LO Industries, Inc. (a subsidiary of the
Company). (1)
2.2 * Amendment No. 1 to Merger Agreement, dated
April 11, 2000, among the Company,
Starbelly.com, Inc. and HA-LO Industries,
Inc. (a subsidiary of the Company).
20.1 Definitive Proxy Statement of the Company. (2)
23.1 * Consent of Arthur Andersen LLP.
99.1 * Press Release dated May 5, 2000.
</TABLE>
- -------------------
(1) Incorporated by reference to exhibit 10.63
to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999.
(2) Incorporated by reference to the Company's
Proxy Statement which was filed on April 12,
2000 pursuant to Rule 14a-6 under the
Securities Exchange Act of 1934, as amended,
and is incorporated by reference herein
pursuant to Rule 12b-32 under such Act.
* Filed herewith.
<PAGE>
EXHIBIT 2.2
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AND PLAN OF REORGANIZATION
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AND PLAN OF REORGANIZATION (this "AMENDMENT") is made and entered into as of
April 11, 2000 by and among by and among HA-LO Industries, Inc., an Illinois
corporation ("ACQUIROR"), HA-LO Industries, Inc., a Delaware corporation
("ACQUIROR SUB"), and Starbelly.com, Inc., a Delaware corporation f/k/a
TheZebra.com, Inc. (the "COMPANY").
RECITALS
WHEREAS, Acquiror, Acquiror Sub and the Company are parties to that
certain Agreement and Plan of Merger and Plan of Reorganization dated as of
January 17, 2000 (the "MERGER AGREEMENT") and desire to amend the Merger
Agreement in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the mutual promises and agreements of
the parties hereto, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms in the Merger Agreement.
2. AMENDMENTS TO SECTION 2.01(a)(i). Section 2.01(a)(i) of the
Merger Agreement is deleted in its entirety and the following is hereby
substituted therefor as Section 2.01(a)(i) of the Merger Agreement:
"(a)(i) At the Effective Time, by virtue of the Merger, Acquiror shall
pay to (or for the benefit of) the Stockholders, or reserve for the
benefit of the holders of the Company Options pursuant to Section 6.13,
Two Hundred and Forty Million Dollars ($240,000,000), payable as follows:
(A) Nineteen Million Dollars ($19,000,000) in cash MINUS
Expenses of the Stockholders and the Company in excess of
$500,000 pursuant to section 8.03(a) hereof (the "CASH
CONSIDERATION");
(B) Shares of Acquiror's Series A Convertible Preferred Stock,
without par value ("ACQUIROR SERIES A PREFERRED STOCK"),
valued at its liquidation value, with an aggregate
liquidation value of Fifty-One Million Dollars
($51,000,000) (the "PREFERRED STOCK CONSIDERATION"); and
(C) Shares of Acquiror's common stock, without par value
("ACQUIROR COMMON STOCK"), valued at the Acquiror Share
Price, with an aggregate value of One Hundred Seventy
Million Dollars ($170,000,000) (together
<PAGE>
with the Cash Consideration and the Preferred Stock
Consideration, the "MERGER CONSIDERATION").
Provided, however, that, at the Effective Time, Merger
Consideration valued at $25,000,000 (the "CAP"), shall be withheld from
the Escrowed Stockholders and held pursuant to the Escrow Agreements
referred to in Section 2.04 hereof;"
3. AMENDMENTS TO SECTION 2.01(d). Section 2.01(d) of the Merger
Agreement is deleted in its entirety and the following is hereby substituted
therefor as Section 2.01(d) of the Merger Agreement:
"(d) ACKNOWLEDGEMENT. The parties hereto agree and acknowledge that,
notwithstanding anything to the contrary contained in this Section 2.01,
each of (i) the Series B Portion, the Series A Portion and the Common
Stock Portion, and (ii) the aggregate of the cash paid and the value of
the shares of Acquiror Series A Preferred Stock and Acquiror Common Stock
issued pursuant to Sections 2.01(b)(ii), (iii) and (iv), as such value is
determined pursuant to such Sections, must equal Two Hundred Forty
Million Dollars ($240,000,000) MINUS the sum of (A) the Expenses of the
Stockholders and the Company in excess of $500,000 pursuant to Section
8.03(a) hereof and (B) the aggregate value of Acquiror Common Stock and
Acquiror Series A Preferred Stock which would be issued on exercise of
all Adjusted Options outstanding at the Effective Time, valued in
accordance with this Section 2.01."
4. AMENDMENTS TO SECTION 6.11. Section 6.11 of the Merger Agreement
is deleted in its entirety and the following is hereby substituted therefor as
Section 6.11 of the Merger Agreement:
"Section 6.11. ACQUIROR BOARD REPRESENTATION. At the Effective Time,
the Board of Directors of Acquiror shall be reconstituted so that it is
no more than eleven (11) members and so that it contains as members two
directors designated by Eric and one director designated by Brad. In
order to satisfy its obligations hereunder, Acquiror further agrees prior
to the Effective Time to amend its Bylaws and to take such other action
as reasonably requested by the Company."
5. AMENDMENTS TO SECTION 6.13. Section 6.13 of the Merger Agreement
is deleted in its entirety and the following is hereby substituted therefor as
Section 6.13 of the Merger Agreement:
"Section 6.13 COMPANY OPTIONS UNDER THE PLAN.
(a) As of the Effective Time, Acquiror shall assume the
obligations of the Company under the Plan and each outstanding Company
Option shall be assumed by Acquiror and become and represent an option
(an "ADJUSTED OPTION") to purchase:
(i) the number of shares of Acquiror Common Stock (such
number, before rounding, is the "ADJUSTED OPTION NUMBER"),
decreased to the nearest whole share, determined by multiplying
(A) the number of shares of Company Common Stock subject to such
Company Option immediately prior to the
<PAGE>
Effective Time by (B) the portion (the "COMMON STOCK FRACTION") of
a share of Acquiror Common Stock to be issued upon conversion of
one share of Company Common Stock pursuant to Section 2.01(b)(iv)
of this Agreement; and
(ii) the number of shares of Acquiror Series A Preferred
Stock, or portion thereof, determined by multiplying (A) the
Adjusted Option Number by (B) a fraction, the numerator of which
is the portion of a share of Acquiror Series A Preferred Stock to
be issued upon conversion of one share of Company Common Stock
pursuant to Section 2.01(b)(iv) of this Agreement and the
denominator of which is the Common Stock Fraction.
Each Adjusted Option shall be exercisable at an exercise price per share
of Acquiror Common Stock subject thereto (decreased to the nearest whole
cent) equal to (1) the exercise price per share of Company Common Stock
subject to the corresponding Company Option immediately prior to the
Effective Time, (2) divided by the Common Stock Fraction. All references
to the Company in each Company Option shall be deemed, in the
corresponding Adjusted Option, to refer to Acquiror, where appropriate.
Notwithstanding the foregoing, the adjustments provided in this Section
6.13(a) with respect to any Company Options that are "incentive stock
options" (as defined in Section 422 of the Code) or which are described
in Section 423 of the Code, shall be effected in a manner consistent with
the requirements of Section 424(a) of the Code. The other terms of each
Adjusted Option, and the plans or agreements under which they were
issued, shall continue to apply in accordance with their terms. The date
of grant of each Adjusted Option shall be the date on which the
corresponding Company Option was granted.
(b) The Company and Acquiror agree that the Plan shall
be amended, to the extent necessary, to reflect the transactions
contemplated by this Agreement, including, but not limited to the
conversion of shares of Company Class A Common Stock held or to be
awarded or paid pursuant to the Plan, into shares of Acquiror
Common Stock and Acquiror Series A Preferred on a basis consistent
with the transactions contemplated by this Agreement. The Company
and Acquiror agree to submit the amendments to the Plan and the
new plan under which Acquiror will assume the obligations of the
Company under the Plan to their respective stockholders, if such
submission is determined to be necessary by counsel to the Company
or Acquiror after consultation with one another; provided, however
that such approval shall not be a condition to the consummation of
the Merger.
(c) Acquiror shall (i) reserve for issuance the number
of shares of Acquiror Common Stock and Acquiror Series A Preferred
Stock that will become subject to the Plan and (ii) issue or cause
to be issued the appropriate number of shares of Acquiror Common
Stock and Acquiror Series A Preferred Stock pursuant to the Plan,
upon the exercise or maturation of rights existing thereunder on
the Effective Time or thereafter granted or awarded. No later
than the Effective Time, Acquiror shall prepare and file with the
Commission a registration statement on Form S-8 (or other
appropriate form) registering a number of shares of Acquiror
Common Stock and Acquiror Series A Preferred Stock necessary to
fulfill Acquiror's obligations under this Section 6.13(c). Such
registration statement shall be kept effective and the current
status of the
<PAGE>
prospectus required thereby shall be maintained for at least as
long as Adjusted Options remain outstanding.
(d) As soon as practicable after the Effective Time,
Acquiror shall deliver to the holders of Company Options
appropriate notices setting forth such holders' rights pursuant to
the Plan and the agreements evidencing the grants of such Company
Options and that such Company Options and the related agreements
shall be assumed by Acquiror and shall continue in effect on the
same terms and conditions (subject to the adjustments required by
this Section after giving effect to the Merger); provided that
Acquiror shall make good faith efforts to so deliver such notices
on the same day as the Effective Time.
(e) Prior to the Effective Time, the Company may cause
(i) fifty percent (50%) of all Company Options held by each Key
Employee to become fully vested at the Effective Time (and the
remainder of each such employee's Company Options shall vest on
the date they would have otherwise vested absent such accelerated
vesting), and (ii) thirty-three and one-third percent (33 1/3%) of
all Company Options held by each employee of the Company
identified by the Company (other than the Principal Executives or
Key Employees) to become fully vested at the Effective Time (and
the remainder of each such employee's Company Options shall vest
on the date they would have otherwise vested absent such
accelerated vesting).
(f) Between the date hereof and the Effective Time, the
Company will prohibit (in accordance with the terms of the Plan)
exercises of Company Options to the extent that the issuance
hereunder of the Merger Consideration would not be exempt from the
Securities Act."
6. AMENDMENTS TO SECTION 6.17(b). Section 6.17(b) of the Merger
Agreement is deleted in its entirety and the following is
substituted therefore:
"(b) Intentionally Omitted."
7. AMENDMENTS TO SECTION 8.01 (d), (e) AND (f). The word "or" at the
end of Section 8.01(d) of the Merger Agreement is deleted and
Sections 8.01(e) and (f) of the Merger Agreement are deleted in
their entirety and the following is substituted therefor as
Sections 8.01(e) and (f) of the Merger Agreement:
"(e) by Acquiror or the Company if (i) the Shareholder
Approval shall not have been obtained at the Shareholders Meeting
duly convened therefor or at any adjournment or postponement
thereof, or (ii) the Merger shall not have been consummated on or
prior to May 5, 2000 (the "Outside Date"); or
(f) by the Company if Acquiror takes action pursuant to
its fiduciary duties as contemplated by Section 5.04(m) in
connection with an Acquiror Competing Transaction."
8. INTERPRETATION WITH THE MERGER AGREEMENT. Except as and to the
extent modified by this Amendment, the terms and provisions of the
Merger Agreement are hereby
<PAGE>
ratified and confirmed for all purposes and in all respects.
9. SEVERABILITY. If any term or other provision of this Amendment
is invalid, illegal or incapable of being enforced by a court of
competent jurisdiction, all other conditions and provisions of
this Amendment shall nevertheless remain in full force and effect.
Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Amendment so as to effect
the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby
are fulfilled to the extent possible. In the event the parties
are unable to agree upon any such modification, this Amendment
shall remain in full force and effect without the deleted
provision.
10. MODIFICATION; WAIVER. No modification of or amendment to this
Amendment shall be deemed effective unless it is in writing and
signed by a duly authorized representative of each of the parties
hereto.
11. GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the Laws of the State of Illinois, regardless
of the Laws that might otherwise govern under applicable
principles of conflicts of law.
12. COUNTERPARTS. This Amendment may be executed in or more
counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and
the same agreement.
13. BINDING ON SUCCESSORS. This Amendment is binding upon and inures
to the benefit of the parties hereto and their respective legal
representatives, successors, and permitted assignees.
14. NOTICES. Any notice required to be given pursuant to this
Amendment shall be in writing and shall be given or made in
accordance with the notice provisions of the Merger Agreement.
[Remainder of page intentionally blank]
<PAGE>
IN WITNESS WHEREOF, Acquiror, Acquiror Sub and the Company have caused
this Agreement to be executed as of the date first written above, in the case of
each corporate entity, by their respective officers duly authorized.
HA-LO INDUSTRIES, INC., an Illinois
corporation
By: John R. Kelley, Jr.
-------------------
Its: Chief Executive Officer
HA-LO INDUSTRIES, INC., a Delaware
corporation
By: John R. Kelley, Jr.
-------------------
Its: Chief Executive Officer
STARBELLY.COM, INC., a Delaware corporation
By: Eric Lefkofsky
--------------
Its: President and Secretary
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated March 2, 2000 issued to the Board of
Directors of Starbelly.com, Inc. for the year ended December 31, 1999,
included in HA-LO Industries, Inc.'s Proxy Statement which was filed on April
12, 2000, into this Form 8-K and HA-LO Industries, Inc.'s previously filed
Registration Statements File Nos. 33-64878, 33-89820, 33-99946, 333-03928,
333-66849, 333-28361, 333-48961, 333-66849 and 333-36236 on Form S-8 and
333-00358, 333-49667, 333-19301, 333-43611, 333-36703, 333-32571, 333-28647,
333-27763, 333-26381, 333-49667, 333-58929, 333-65891, 333-69825, 333-72609,
333-75143, 333-85937, 333-91893, 333-94319 and 333-36200 on Form S-3. It
should be noted that we have not audited any financial statements of
Starbelly.com, Inc. subsequent to December 31, 1999 or performed any audit
procedures subsequent to the date of our report.
/s/ ARTHUR ANDERSEN LLP
Chicago, Illinois
May 11, 2000
<PAGE>
EXHIBIT 99.1
HA-LO Industries Completes Acquisition of Starbelly.com
Shareholders Overwhelmingly Approve Purchase of Internet Company
CHICAGO, May 5 /PRNewswire/ -- HA-LO Industries, Inc. (NYSE: HMK - NEWS), a
brand marketing organization, announced today the completion of its previously
announced acquisition of Starbelly.com, the privately-held leading e-commerce
provider of branded merchandise. The acquisition received overwhelming approval
at a special meeting of HA-LO shareholders held yesterday, and positions HA-LO
as the dominant Internet player in the $15 billion promotional products and
custom-decorated merchandise industry.
Effective today, HA-LO's Promotional Products Group and Starbelly.com
will join into one division of HA-LO named Starbelly.com. HA-LO's marketing
services division will continue to operate independently under the name UPSHOT
Marketing Group, but expects to benefit from the e-commerce expertise brought by
Starbelly.com as UPSHOT expands its brand marketing services to online
environments.
"Today is a milestone in HA-LO's e-transformation and a great day for its
customers, employees and shareholders," said John Kelley, HA-LO's chief
executive officer. "The addition of Starbelly's sophisticated Internet business
model, along with HA-LO's market leadership and customer relationships, provides
HA-LO with a strong platform for accelerated growth. Plans are well underway for
a smooth integration."
The acquisition of Starbelly.com demonstrates HA-LO's commitment to its
e-transformation strategy, announced at the end of 1999, which is to evolve the
Company into a cutting-edge, business-to-business brand-marketing leader that
spans both online and offline environments. The Company previously announced
that as a result of this transformation, HA-LO will focus on rapid top-line
growth and expects long-term margin improvements through technology-enabled
operating efficiencies.
HA-LO Industries, a brand marketing organization, is the nation's leading
distributor of promotional products through Starbelly.com and a premier provider
of brand marketing services through UPSHOT Marketing Group. HA-LO's extensive
client roster includes such global leaders as Abbott Labs, Anheuser-Busch, The
Coca-Cola Company, Discover Financial Services, Ford, General Electric, Glaxo
Wellcome, Mirage Resorts, Procter & Gamble, J.E. Seagram & Son and SBC
Communications. The company operates in 11 countries.
Certain statements in this press release regarding HA-LO's long-term
growth, value creation, and the success of the e-transformation of the company
are forward-looking statements that invoke substantial risks and uncertainties.
Actual results may differ materially from those implied by such forward-looking
statements as a result of various factors. Readers are encouraged to review
HA-LO's annual report on Form 10-K for other important factors that may cause
actual results to differ materially from those implied in these forward-looking
statements.
SOURCE: HA-LO INDUSTRIES, INC.
