<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------
SCHEDULE 13D
(Rule 13d-101)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
SHAW INDUSTRIES, INC.
(Name of Issuer)
COMMON STOCK, NO PAR VALUE
(Title of Class of Securities)
820286 10 2
(CUSIP Number)
Julian D. Saul
Julian D. Saul Family Trust
702 Mt. Sinai Road
Dalton, GA 30720
(706) 278-7062
- --------------------------------------------------------------------------------
(Name, address and telephone number of Person Authorized to Receive Notices and
Communications)
October 6, 1998
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box. [ ]
(Continued on following pages)
Page 1 of 9
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1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON - (ENTITIES ONLY)
Julian D. Saul
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS
00
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e): [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
7. SOLE VOTING POWER
11,277,678 (See Item 5)
8. SHARED VOTING POWER
-0-
9. SOLE DISPOSITIVE POWER
11,277,678 (See Item 5)
10. SHARED DISPOSITIVE POWER
-0-
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
11,277,678 (See Item 5)
Page 2 of 9
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [X]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
7.9%
14. TYPE OF REPORTING PERSON
IN
Page 3 of 9
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1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON - (ENTITIES ONLY)
Julian D. Saul Family Trust
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS
00
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e): [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Georgia
7. SOLE VOTING POWER
11,160,724
8. SHARED VOTING POWER
-0-
9. SOLE DISPOSITIVE POWER
11,160,724
10. SHARED DISPOSITIVE POWER
-0-
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
11,160,724
Page 4 of 9
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
7.9%
14. TYPE OF REPORTING PERSON
00
Page 5 of 9
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STATEMENT OF INFORMATION REQUIRED PURSUANT TO SECTION
13(d)(1) OR 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
SECTION 13D
The following statement of information is being filed by Julian D. Saul
individually and as the sole Trustee of the Julian D. Saul Family Trust (the
"Trust") pursuant to Regulation 240.13d-1 of the Rules and Regulations of the
Securities and Exchange Commission.
Item 1. Security and Issuer.
This statement relates to the Common Stock, no par value, of Shaw
Industries, Inc., a Georgia corporation (the "Issuer"), whose principal office
is located at 616 East Walnut Avenue, Dalton, Georgia 30720.
Item 2. Identity and Background.
(a) Name:
(1) Julian D. Saul
(2) Julian D. Saul Family Trust, a trust formed under the
laws of the State of Georgia. The Trust's sole
business is the ownership of Common Stock of the
Issuer and other investments for the benefit of its
beneficiaries.
(b) Business Address:
(1) Mr. Saul: 702 Mt. Sinai Road, Dalton, Georgia 30720
(2) The Trust: 702 Mt. Sinai Road, Dalton, Georgia 30720
(c) Employment:
(1) Executive Vice President of the Issuer and President
of the Issuer's Queen Carpet division.
(2) Not Applicable
(d) Criminal Convictions: None
(e) Civil Proceedings: None
Page 6 of 9
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(f) Citizenship:
(1) Mr. Saul: United States of America
(2) The Trust: State of Georgia (U.S.A.)
Item 3. Source and Amount of Funds or Other Consideration.
Mr. Saul and the Trust acquired their shares of Issuer Common Stock on
October 6, 1998, in connection with the consummation of the transactions
contemplated by an Agreement and Plan of Merger dated as of August 13, 1998, and
as amended by First Amendment to Agreement and Plan of Merger dated as of
October 6, 1998 (the "Merger Agreement"), between the Issuer, Chessman
Acquisition Corp., Queen Carpet Corporation ("Queen"), and the shareholders of
Queen (Mr. Saul, the Trust, Linda Saul Schejola, the Linda Saul Schejola Family
Trust, and the Anita Saul Family Trust (collectively, the "Shareholders")).
Pursuant to the Merger Agreement, Queen merged with and into the Issuer (the
"Merger") with the Issuer as the surviving corporation in the Merger. At the
effective time of the Merger, the Issuer, among other consideration, issued
shares of Issuer Common Stock to the Shareholders in exchange for their shares
of capital stock of Queen. The shares of Issuer Common Stock issued in the
Merger included the shares that are the subject of this Schedule 13D.
A copy of the Merger Agreement is filed as Exhibit 1 hereto, and such
Merger Agreement is incorporated herein by reference. The foregoing is not a
complete description of the terms of the Merger Agreement or the transactions
contemplated thereby and is subject to and qualified in its entirety by
reference to the Merger Agreement.
Item 4. Purpose of Transaction.
As described in Item 3 above, Mr. Saul and the Trust acquired the
shares of Issuer Common Stock pursuant to the Merger. Mr. Saul and the Trust
hold the shares for investment purposes. See Item 3 above.
Item 5. Interest in Securities of the Issuer.
(a) (1) Mr. Saul: As of this date, Mr. Saul is the beneficial
owner of 11,277,678 shares of Common Stock
of the Issuer. (1)
(2) The Trust: As of this date, the Trust is the beneficial
owner of 11,160,724 shares of Common Stock
of the Issuer.
Page 7 of 9
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(b) (1) Mr. Saul: Mr. Saul owns sole power to vote and to
dispose of the shares.
(2) The Trust: Mr. Saul is the sole Trustee of the Trust
and has sole power to vote and dispose of
the shares owned by the Trust.
(c) Not applicable
(d) Not applicable
(e) Not applicable
- ------------------
(1) Includes 11,160,724 shares held of record by the Trust, for which Mr.
Saul is the sole Trustee. As the Trustee, Mr. Saul has sole voting and
disposition power over all of the shares held by the Trust. Excludes
388,989 shares issued in the Merger to the Anita Saul Family Trust.
Anita Saul, Mr. Saul's wife, is the sole Trustee of the Anita Saul
Family Trust. Mr. Saul disclaims beneficial ownership of such shares.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
In addition to the provisions described in Item 4 above, pursuant to
the Merger Agreement, the Issuer has, subject to certain limitations, agreed to
prepare and file with the Securities and Exchange Commission within sixty (60)
days following October 6, 1998, a registration statement for the resale of the
shares of Issuer Common Stock issued to the Shareholders pursuant to the Merger
Agreement. Pursuant to the Merger Agreement, the Issuer appointed Mr. Saul as an
Executive Vice President of the Issuer and President of the Issuer's Queen
Carpet division and will elect Mr. Saul to the Issuer's Board of Directors.
Item 7. Material to be Filed as Exhibits.
Exhibit 1(a) Agreement and Plan of Merger dated as of August 13, 1998,
by and among the Issuer, Chessman Acquisition Corp., a
wholly-owned subsidiary of the Issuer, Queen Carpet Corporation,
Mr. Saul, the Trust, Linda Saul, Anita Saul Family Trust and
Linda Saul Schejola Family Trust.
(b) First Amendment to Agreement and Plan of Merger dated as of
October 6, 1998, by and among the Issuer, Chessman Acquisition
Corp., a wholly-owned subsidiary of the Issuer, Queen Carpet
Corporation, Mr. Saul, the Trust, Linda Saul, Anita Saul Family
Trust and Linda Saul Schejola Family Trust.
Page 8 of 9
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
/s/ Julian D. Saul
Date: October 12, 1998 -------------------------------------
Julian D. Saul
JULIAN D. SAUL FAMILY TRUST
/s/ Julian D. Saul, Trustee
Date: October 12, 1998 -------------------------------------
By: Julian D. Saul, Trustee
Page 9 of 9
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EXHIBIT 1(a)
AGREEMENT AND PLAN OF MERGER
DATED AUGUST 13, 1998
AMONG
SHAW INDUSTRIES, INC. ("PARENT"),
CHESSMAN ACQUISITION CORP. ("SUBSIDIARY"),
QUEEN CARPET CORPORATION ("COMPANY")
AND
JULIAN SAUL,
LINDA SAUL,
ANITA SAUL FAMILY TRUST,
JULIAN SAUL FAMILY TRUST,
AND
LINDA SAUL SCHEJOLA FAMILY TRUST
(COLLECTIVELY, "SHAREHOLDERS")
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
1. DEFINITIONS...........................................................................1
2. MERGER TRANSACTIONS...................................................................9
2.1. Merger.......................................................................9
2.2. Time and Place of Closing....................................................9
2.3. Effective Time...............................................................9
3. TERMS OF MERGER......................................................................10
3.1. Charter.....................................................................10
3.2. Bylaws......................................................................10
3.3. Directors and Officers......................................................10
4. MANNER OF CONVERTING SHARES..........................................................10
4.1. Conversion of Company Common Stock..........................................10
4.2. Closing Obligations.........................................................12
4.3. Supplement to Disclosure Schedule...........................................13
4.4. Antidilution Provisions.....................................................13
4.5. Fractional Company Common Stock.............................................13
4.6. Section 368(a) Adjustments..................................................14
4.7. No Further Ownership Rights in Company Common Stock.........................14
4.8. Closing of Company Transfer Books...........................................14
4.9. Taking of Necessary Action; Further Action..................................14
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND THE SHAREHOLDERS.......................15
5.1. Organization and Good Standing..............................................15
5.2. Authority; No Conflict......................................................15
5.3. Capitalization..............................................................16
5.4. Financial Statements........................................................17
5.5. Books and Records...........................................................17
5.6. Title to Properties; Encumbrances...........................................18
5.7. Condition and Sufficiency of Assets.........................................18
5.8. Accounts Receivable.........................................................19
5.9. Inventory...................................................................19
5.10. No Undisclosed Liabilities..................................................19
5.11. Taxes.......................................................................19
5.12. No Material Adverse Change..................................................20
5.13. Employee Benefits...........................................................20
5.14. Compliance with Legal Requirements; Governmental Authorizations.............23
5.15. Legal Proceedings; Orders...................................................24
5.16. Absence of Certain Changes and Events.......................................25
5.17. Contracts; No Defaults......................................................26
</TABLE>
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<TABLE>
<S> <C> <C>
5.18. Insurance...................................................................28
5.19. Environmental Matters.......................................................28
5.20. Employees...................................................................30
5.21. Labor Relations; Compliance.................................................30
5.22. Intellectual Property.......................................................31
5.23. Certain Payments............................................................33
5.24. Disclosure..................................................................33
5.25. Relationships with Related Persons..........................................33
5.26. Brokers or Finders..........................................................34
5.27. Tax-Free Nature of Transaction..............................................34
5.28. Charter Provisions, Etc.....................................................35
5.29. Board and Shareholder Approval..............................................35
5.30. Year 2000 Compliance........................................................35
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY..............................35
6.1. Organization and Good Standing..............................................36
6.2. Authority; No Conflict......................................................36
6.3. Capitalization of Parent Common Stock.......................................36
6.4. SEC Reports.................................................................37
6.5. Certain Proceedings.........................................................37
6.6. M Corp. Stock...............................................................38
6.7. Brokers or Finders..........................................................38
7. COVENANTS OF COMPANY PRIOR TO CLOSING DATE...........................................38
7.1. Access and Investigation....................................................38
7.2. Operation of the Business of Company........................................38
7.3. Negative Covenant...........................................................39
7.4. Required Approvals..........................................................39
7.5. Notification................................................................39
7.6. Indebtedness of Related Persons.............................................39
7.7. Permitted Distributions.....................................................39
7.8. No Negotiation..............................................................40
7.9. Best Efforts................................................................40
8. COVENANTS OF PARENT AND SUBSIDIARY PRIOR TO CLOSING DATE.............................40
8.1. Access and Investigation....................................................40
8.2. Notification................................................................40
8.3. Approvals of Governmental Bodies............................................41
8.4. Board of Directors of Parent................................................41
8.5. Best Efforts................................................................41
8.6. Operation of Business of Parent.............................................41
9. CONDITIONS PRECEDENT TO PARENT'S AND SUBSIDIARY'S OBLIGATION TO CLOSE................41
9.1. Accuracy of Representations.................................................42
9.2. Company's Performance.......................................................42
9.3. Consents....................................................................42
</TABLE>
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<TABLE>
<S> <C> <C>
9.4. Additional Documents........................................................42
9.5. No Proceedings..............................................................42
9.6. No Claim Regarding Ownership or Sale Proceeds...............................43
9.7. No Prohibition..............................................................43
9.8. Due Diligence...............................................................43
9.9. Tax-Free Reorganization.....................................................43
10. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATION TO CLOSE................................43
10.1. Accuracy of Representations.................................................43
10.2. Parent's and Subsidiary's Performance.......................................44
10.3. Consents....................................................................44
10.4. Additional Documents........................................................44
10.5. No Injunction...............................................................44
10.6. Tax-Free Reorganization.....................................................44
11. TERMINATION..........................................................................44
11.1. Termination Events..........................................................44
11.2. Effect of Termination.......................................................45
11.3. Break-up Fee................................................................45
12. INDEMNIFICATION; REMEDIES............................................................46
12.1. Survival; Right to Indemnification Not Affected by Knowledge................46
12.2. Indemnification and Payment of Damages by Company and Shareholders..........46
12.3. Indemnification and Payment of Damages by Parent and Subsidiary.............47
12.4. Indemnification and Payment of Damages by Parent - Other Matters............48
12.5. Time Limitations............................................................48
12.6. Limitations on Amount - Company and Shareholders............................48
12.7. Limitations on Amount - Parent and Subsidiary...............................49
12.8. Procedure for Indemnification -- Third Party Claims.........................49
12.9. Procedure for Indemnification -- Other Claims...............................50
12.10. Exclusive Remedy............................................................50
13. GENERAL PROVISIONS...................................................................50
13.1. Resale of Parent Common Stock...............................................50
13.2. Registration Rights.........................................................51
13.3. Section 1362(e)(3) Election.................................................58
13.4. Company Employees...........................................................58
13.5. Transfer Taxes..............................................................59
13.6. Expenses....................................................................59
13.7. Public Announcements........................................................59
13.8. Further Assurances..........................................................59
13.9. Confidentiality.............................................................60
13.10. Notices.....................................................................61
13.11. Jurisdiction; Service of Process............................................61
13.12. Further Assurances..........................................................62
13.13. Waiver......................................................................62
13.14. Entire Agreement and Modification...........................................62
</TABLE>
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<TABLE>
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13.15. Disclosure Schedule.........................................................62
13.16. Assignments, Successors, and No Third-Party Rights..........................63
13.17. Severability................................................................63
13.18. Section Headings; Construction..............................................63
13.19. Time of Essence.............................................................63
13.20. Governing Law...............................................................63
13.21. Counterparts................................................................64
13.22. Shareholders' Representative................................................64
</TABLE>
EXHIBITS
Exhibit 4.2(a)(ii) - Employment Agreement
Exhibit 4.2(a)(iii) - Noncompetition Agreements
Exhibit 4.2(a)(iv) - Real Property Agreements
Exhibit 9.4(a) - Opinions of Kinney, Kemp, Sponcler, Joiner & Tharpe,
and Long Aldridge & Norman LLP
Exhibit 10.4(a) - Opinion of Powell, Goldstein, Frazer & Murphy LLP
iv
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is made as of August
13, 1998, by and among Shaw Industries, Inc., a Georgia corporation ("Parent"),
Chessman Acquisition Corp., a wholly-owned subsidiary of Parent ("Subsidiary"),
Queen Carpet Corporation, a Georgia corporation ("Company"), Julian Saul, an
individual resident of Georgia ("Executive"), and Linda Saul, an individual
resident of Italy and Anita Saul Family Trust, Julian Saul Family Trust and
Linda Saul Schejola Family Trust, each a trust created under the laws of Georgia
(together with Executive, collectively "Shareholders").
RECITALS
Company is engaged in the business of manufacturing, distributing and
selling carpet, rugs and related items and accessories. The Shareholders are the
holders of all of the issued and outstanding capital stock of Company. This
Agreement provides for the acquisition of Company by Parent pursuant to the
merger of Company with and into Subsidiary. At the Effective Time of the Merger,
the outstanding shares of Company shall be converted into the right to receive
the merger consideration specified herein. This Agreement also provides for the
employment of Executive as Executive Vice President of the Parent and President
of the Surviving Corporation in the Merger and the appointment of Executive to
the Board of Directors of Parent. It is the intention of the parties to this
Agreement that the Merger shall qualify for federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the IRC. The parties
hereto wish to cause the Merger to be effected on the terms and conditions
hereinafter set forth, subject only to the limitations and exclusions contained
in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACCOUNTANTS" - as defined in Section 4.1(c)(iii).
"ACCOUNTS RECEIVABLE" - as defined in Section 5.8.
"AFFILIATE" - as defined in Section 13.2(a).
"APPLICABLE CONTRACT" -- any Contract (a) under which Company has or
may acquire any rights, (b) under which Company has or may become subject to any
obligation or liability, or (c) by which Company or any of the assets owned or
used by it is or may become bound.
"ASSETS" shall mean all of the assets, properties and rights of
Company, including, without limitation, the following assets, properties and
rights of Company used directly or indirectly in the conduct of, or generated by
or constituting, the Business:
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(a) Real Property. All land, structures, improvements, fixtures,
rights of way, uses, easements, licenses, hereditaments, tenements and
appurtenances belonging or appertaining thereto ("REAL PROPERTY");
(b) Tangible Personal Property. All machinery, operating equipment
and supplies, office equipment and supplies, furniture, computer hardware and
software and other tangible personal property of every kind and nature owned or
used by Company on the Closing Date used in or relating to the Business
("PERSONAL PROPERTY");
(c) Leased Tangible Personal Property. All rights and incidents of
interest of Company in and to (i) the leases relating to tangible personal
property leased by Company from third parties and used in or relating to the
Business (the "PERSONAL PROPERTY LEASES"), and (ii) the tangible personal
property leased pursuant thereto (the "LEASED PERSONAL PROPERTY").
(d) Leased Real Property. All rights and incidents of interest of
Company in and to (i) the leases relating to real property leased by Company
from third parties and used in or relating to the Business (the "REAL PROPERTY
LEASES"), and (ii) the real property leased pursuant thereto (the "LEASED REAL
PROPERTY");
(e) Inventory. All of the finished goods, purchased parts and raw
materials owned by Company on the Closing Date used in or relating to the
Business;
(f) Work in Progress. All work in progress, including, without
limitation, work in progress which has not yet been billed to a customer, owned
by Company on the Closing Date;
(g) Customer Accounts. All of Company's right, title and interest
in and to (i) its customer accounts, and (ii) the outstanding Contracts relating
to the customer accounts;
(h) Intellectual Property. All of Company's right, title and
interest in and to the Intellectual Property Assets;
(i) Governmental Permits. All Permits issued or granted to Company
by any Governmental Authority relating to the Business;
(j) Records and Lists. All books, files, documents, sales
literature, customer lists, customer records, operating records, employee
personnel files, computer programs, instructions, advertising materials, dealer
and distributor lists and other records of Company used in or relating to the
Business or relating to the Assets;
(k) Going Concern Value. The value of the Business as a going
concern;
(l) Deposits and Rights to Recovery. Any deposits, prepayments,
unbilled costs and fees, accounts, notes and other receivables and claims,
causes of action, choses in action, rights of recovery, rights of set-off and
rights of recoupment relating to the Business as of the Closing Date;
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(m) Contractual Rights. All of Company's right, title and interest
in and to the Contracts not previously set forth in this definition;
(n) Accounts Receivable. All accounts receivable of the Company
with respect to the Business as of the Closing Date;
(o) Cash. All cash and all bank accounts and brokerage accounts
and similar accounts and cash equivalents, including deposits in transit, of
Company as of the Closing Date;
(p) Corporate Name. All of Company's right, title and interest in
and to the following name: Queen Carpet Corporation; and
(q) Other. All other properties, assets, rights and interests of
every kind and description, wherever located, of Company used in or relating to
the Business.
"BALANCE SHEET" -- as defined in Section 5.4.
"BASKET" - as defined in Section 12.6(a).
"BEST EFFORTS" -- the reasonable efforts that a prudent Person desirous
of achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as reasonably possible.
"BUSINESS" shall mean the manufacture, sale and distribution of
carpets, rugs and related items and accessories, processed yarn, raw materials
used in the manufacture of carpets and rugs, as conducted by Company on or
before the date of this Agreement. The Company's products are sold to
wholesalers and retailers throughout the United States and in certain
international markets.
"CLOSING" -- as defined in Section 2.2.
"CLOSING DATE" -- the date and time as of which the Closing actually
takes place.
"COMPANY" -- as defined in the first paragraph of this Agreement.
"COMPANY GROUP" as defined in Section 5.13(a).
"COMPANY PLAN" -- as defined in Section 5.13(b).
"COMPANY QUALIFIED PLANS" - as defined in Section 5.13(c).
"COMPANY COMMON STOCK" -- shall mean all of the issued and outstanding
shares of capital stock, of any class or series, of the Company, which consists
of Class A Voting Common Stock and Class B Non-Voting Common Stock.
"CONFIDENTIAL INFORMATION" - as defined in Section 13.9.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
3
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"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including: (a) the Merger; (b) the execution, delivery, and
performance of the Employment Agreement, the Noncompetition Agreements and the
Real Property Agreements; (c) the performance by Parent, Subsidiary, Company and
Shareholders of their respective covenants and obligations under this Agreement;
and (d) Subsidiary's ownership of the Assets and exercise of control over the
Business after the Effective Time.
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"COPYRIGHTS" - as defined in Section 5.22(a).
"DAMAGES" -- as defined in Section 12.2.
"DISCLOSURE SCHEDULE" -- the disclosure schedules delivered by Company
to Subsidiary concurrently with the execution and delivery of this Agreement as
supplemented as provided in Section 4.3 hereof.
"EFFECTIVE TIME" - as defined in Section 2.3 hereof.
"EMPLOYEES" - as defined in Section 5.13(b).
"EMPLOYMENT AGREEMENT" -- as defined in Section 4.2(a)(ii).
"ENCUMBRANCE" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership other than restrictions on transfer under federal or state securities
laws.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law, including fines,
penalties, financial responsibility for cleanup costs, corrective action,
removal, remedial actions and response actions, and any other compliance,
corrective, investigative, or remedial measures required under Environmental Law
or Occupational Safety and Health Law. The terms "removal," "remedial," and
"response action," shall have the meanings defined in the United States
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
ss. 9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or relates
to releases of pollutants or hazardous substances or materials, violations of
discharge limits, or other prohibitions that could have significant impact on
the Environment; preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment; reducing
the quantities, preventing the release, or minimizing the hazardous
4
<PAGE> 10
characteristics of wastes that are generated; reducing to acceptable levels the
risks inherent in the transportation of hazardous substances, pollutants, oil,
or other potentially harmful substances; cleaning up pollutants that have been
released, preventing the threat of release, or paying the costs of such clean up
or prevention; or making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA" - as defined in Section 5.13(b)(i).
"FACILITIES" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by Company and any buildings, plants,
structures, or equipment (including motor vehicles and trucks) currently or
formerly owned or operated by Company.
"FORM S-3" - as defined in Section 13.2(a).
"GAAP" -- generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 5.4(b) were prepared.
"GBCC" - Georgia Business Corporation Code.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" -- any federal, state, local, municipal, foreign,
or other government; or governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal).
"HAZARDOUS MATERIALS" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"HOLDER" - as defined in Section 13.2.
"HSR ACT" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, or any successor law, and regulations and rules issued pursuant to
that Act or any successor law.
"INDEMNIFIED PERSON" - as defined in Section 12.2.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 5.22.
"IRC" -- the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
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"IRS" -- the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter or has received notice of such fact or other matter within
a reasonable period of time prior to the date hereof. "Knowledge" with respect
to the Company shall mean the Knowledge of the Executive, and each vice
president and director responsible for the following functional areas: finance,
taxes, operations, human resources, sales and marketing, purchasing and
international. "Knowledge" with respect to Parent and Subsidiary shall mean the
Knowledge of the executive officers of Parent. "Knowledge" with respect to a
trust shall mean Knowledge of the trustee or trustees thereof.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"MARKS" - as defined in Section 5.22(a).
"M CORP. STOCK" - as defined in Section 4.1(c)(i)(A).
"MATERIAL ADVERSE EFFECT" - a material adverse effect on the business,
operations, assets or financial condition of a Person, taken as a whole.
"MATERIAL CONTRACT" as defined in Section 5.17(a).
"MERGER" as defined in Section 2.1.
"MERGER CONSIDERATION" -- as defined in Section 2.3.
"NONCOMPETITION AGREEMENTS" -- as defined in Section 4.2(a)(iii).
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal operations of such Person.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited
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<PAGE> 12
partnership of a limited partnership; (d) any trust agreement adopted in
connection with any trust; and (e) any amendment to any of the foregoing.
"PARENT COMMON STOCK" -- shall mean the common capital stock of Parent,
no par value per share.
"PATENTS" - as defined in Section 5.22(a).
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"REAL PROPERTY AGREEMENTS" - the Real Property Option Agreement and
Real Property Purchase Agreement as described in Section 4.2(a)(iv).
"REGISTRABLE SECURITIES" - as defined in Section 13.2(a).
"REGISTRATION STATEMENT" - as defined in Section 13.2(b).
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled
by such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or
one or more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
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<PAGE> 13
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in
clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SEC" - as defined in Section 13.2(a).
"SECURITIES ACT" -- the Securities Act of 1933, as amended, and
regulations and rules issued pursuant to that Act.
"SUBSIDIARY" -- as defined in the first paragraph of this Agreement.
"SUBSIDIARY CLOSING DOCUMENTS" - as defined in Section 6.2(a).
"SUBSIDIARY COMMON STOCK" - shall mean the common stock, par value
$.01, of the Subsidiary.
"SUBSIDIARY'S ADVISORS" - as defined in Section 7.1.
"SUPPLEMENT" -- as defined in Section 4.3.
"SURVIVING CORPORATION" -- as defined in Section 2.1.
"TAX" -- shall mean all tax (including income tax, capital gains tax,
value added tax, sales tax, property tax, gift tax or estate tax), levy
assessment, tariff, duty (including customs duty), deficiency or other fee and
any related charge or amount (including fine, penalty and interest) imposed,
assessed or collected by or under the authority of any Governmental Body.
"TAX RETURN" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration,
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<PAGE> 14
implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"THREATENED" -- a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made in writing or any notice has been given in writing that would lead a
prudent Person to conclude that such a claim, Proceeding, dispute, action, or
other matter will be asserted, commenced, taken, or otherwise pursued in the
future.
"TRADE SECRETS" - as defined in Section 5.22(a).
2. MERGER TRANSACTIONS.
2.1. Merger.
Subject to the terms and conditions of this Agreement, at the Effective
Time, Company shall be merged with and into Subsidiary in accordance with the
provisions of Sections 14-2-1101 et seq. of the GBCC and with the effect
provided in Section 14-2-1106 of the GBCC (the "Merger"). Subsidiary shall be
the Surviving Corporation resulting from the Merger (the "Surviving
Corporation") and shall remain a wholly-owned subsidiary of Parent and shall
continue to be governed by the laws of the State of Georgia. The Merger shall be
consummated pursuant to the terms of this Agreement, which has been approved and
adopted by the respective boards of directors of Company, Parent and Subsidiary,
and has been approved by Parent as the sole shareholder of Subsidiary and the
Shareholders as all of the shareholders of Company, as required by applicable
law.
2.2. Time and Place of Closing.
The closing of the transactions contemplated hereby (the "Closing")
will take place at the offices of Powell, Goldstein, Frazer & Murphy LLP, at
10:00 a.m. (local time) on the later of (i) October 23, 1998, or (ii) the date
that is five business days following the termination of the applicable waiting
period under the HSR Act, or at such other time and place as the parties may
agree. Subject to the provisions of Section 11, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 2.2 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement.
2.3. Effective Time.
The Merger and the other transactions contemplated by this Agreement
shall become effective on the date and at the time the certificate of merger
reflecting the Merger shall become effective with the Secretary of State of the
State of Georgia (the "Effective Time").
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<PAGE> 15
3. TERMS OF MERGER
3.1. Charter.
The Articles of Incorporation of Subsidiary in effect immediately prior
to the Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until duly amended or repealed; provided that such Articles of
Incorporation shall be amended to reflect that the name of the Surviving
Corporation shall be "Queen Carpet Corporation".
3.2. Bylaws.
The Bylaws of Subsidiary in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until duly amended or
repealed.
3.3. Directors and Officers.
The directors of Subsidiary in office immediately prior to the
Effective Time, together with Executive and such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation. The officers of the Company at the Effective Time shall be the
officers of the Surviving Corporation and such additional or different officers
as the Board of Directors of the Surviving Corporation may elect as of the
Effective Time.
4. MANNER OF CONVERTING SHARES
4.1. Conversion of Company Common Stock.
Subject to the provisions of this Section 4, at the Effective Time, by
virtue of the Merger and without any action on the part of the parties hereto,
the shares of the constituent corporation shall be converted as follows:
(a) Each share of capital stock of Parent issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(b) Each share of Subsidiary Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(c) Each share of Company Common Stock issued and
outstanding at the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for the right to receive consideration determined
by multiplying Merger Consideration (as hereafter defined) by a fraction, the
numerator of which is one (1) and the denominator of which is the aggregate
number of issued and outstanding shares of Company Common Stock. As used herein,
"Merger Consideration" shall mean:
(i) The aggregate of $600,000,000, subject to
adjustment as provided in subparagraph (ii) below, which shall
consist of the following:
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<PAGE> 16
(A) The sum of $70 million delivered by
means of a Non-negotiable Promissory Note (the
"Note") of Parent, payable to Shareholders on a pro
rata basis, with interest at 6.5% per annum, on the
later of November 30, 1998, or the Closing Date, and
otherwise in form reasonably satisfactory to Parent
and Company. Parent, at its option, shall be entitled
to pay the Note in cash, by wire transfer or other
immediately available funds, or by means of delivery
of 3.15 million shares of the common capital stock of
The Maxim Group, Inc. ("M Corp."), if such stock is
delivered to Shareholders freely transferable,
including under applicable federal and state
securities laws, subject to applicable
prospectus-delivery requirements under Form S-3 and
free of Encumbrances ("M Corp. Stock"), plus cash for
(i) accrued but unpaid interest on the original $70
million principal balance and (ii) dividends paid on
the M Corp. Stock after the Effective Time; provided
that in the event the aggregate value of M Corp.
Stock valued as of the date hereof is less than $70
million, based on the closing price of M Corp. Stock,
as reported by the Wall Street Journal on the date
hereof, the amount by which $70 million exceeds such
aggregate value of M Corp. Stock shall be paid on the
Note payment date in cash, by wire transfer or other
immediately available funds; plus
(B) By delivery on the Closing Date of
19,444,444 shares of Parent Common Stock which solely
for the purposes of determining the amount of cash
deliverable under subparagraph (i)(C) shall be valued
at an aggregate of $350 million, without regard to
the market price as of the date hereof or the Closing
Date; plus
(C) By delivery on the Closing Date of
the balance of the Merger Consideration in cash, by
wire transfer or other immediately available funds.
The Merger Consideration shall be paid to Shareholders pro rata in
accordance with their ownership of Company Common Stock.
(ii) The Merger Consideration shall be reduced on
a dollar-for-dollar basis as follows:
(A) By the amount of all dividends or
other distributions on the Company Common Stock made
by the Company to the Shareholders from the period
from May 31, 1998, to the Closing Date; provided that
there shall not be a reduction for distributions made
by the Company to pay estimated income Taxes
attributable to the income of the Company for the
taxable year ending May 31, 1998 (to the extent not
previously paid), and with respect to any estimated
Tax payments required for income Tax periods of the
Company from May 31, 1998, to the Closing Date (which
estimated income Taxes shall be determined in good
faith and consistent with the past practice of the
Company); plus
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(B) By the amount of special bonuses to
be paid by Company prior to or immediately following
the Effective Time to certain key employees of the
Company designated by the Board of Directors of the
Company; provided that there shall not be a reduction
in Merger Consideration for bonuses paid or accrued
for payment in the Ordinary Course of Business and
consistent with past practices. At the Company's
written election delivered to Parent at least five
(5) days prior to the Closing Date, such special
bonuses may be paid all or in part in Parent Common
Stock otherwise deliverable under Section
4.1(c)(i)(B).
(iii) Prior to the Closing, Company and Subsidiary
shall jointly determine the amount, if any, of adjustment to
the Merger Consideration as contemplated by Section
4.1(c)(ii).
4.2. Closing Obligations.
At the Closing:
(a) Company and the Shareholders will deliver to Parent
and Subsidiary duly executed by Company, the Shareholders or the owners of any
real property, as appropriate:
(i) the Certificate of Merger;
(ii) an Employment Agreement among Parent,
Subsidiary and Executive in the form of Exhibit 4.2(a)(ii)
(the "Employment Agreement");]
(iii) a Noncompetition Agreement in the form of
Exhibit 4.2(a)(iii), executed by each Shareholder
(collectively, the "Noncompetition Agreements"); and
(iv) the Real Property Agreements substantially
in the form of Exhibit 4.2(a)(iv) (each a "Real Property
Agreement") with respect to each parcel or interest of real
property leased to the Company by certain Related Persons,
duly executed by the owners of the property;
(v) a certificate executed by Shareholders to
the effect set forth in Section 9.1 hereof; and
(b) Parent and Subsidiary will deliver
(i) to Shareholders, the Merger Consideration;
(ii) the Employment Agreement, executed by the
Subsidiary and Parent;
(iii) each Real Property Agreement, executed by
the Parent or its designee; and
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(iv) a certificate executed by Parent and
Subsidiary to the effect set forth in Section 10.1 hereof.
4.3. Supplement to Disclosure Schedule.
The parties acknowledge that this Agreement has been executed prior to
(i) Company having a full opportunity to prepare the final and complete
Disclosure Schedule and (ii) Subsidiary conducting appropriate due diligence
with respect to Company. Accordingly, Company shall, no later than twenty (20)
days from the date of this Agreement, deliver to Subsidiary final and complete
Disclosure Schedule containing all information required to be provided pursuant
to Section 5 of this Agreement (the "Supplement"). Subsidiary shall have ten
(10) days from receipt of the Supplement to review and audit the Supplement
(including all information contained in the Disclosure Schedule delivered with
this Agreement). During this period of review and audit, Subsidiary shall have
the right to terminate this Agreement, without further liability on the part of
Parent or Subsidiary, as contemplated by Section 11.1 hereof, provided that the
Board of Directors of Parent shall have reasonably and in good faith determined,
following consultation with Company, that any item or combination of items set
forth on the Disclosure Schedule, as amended by the Supplement, are so material
that it is reasonably likely to result in liability to or adverse financial
performance of the Company, taken as a whole, which is materially adverse from
the liabilities or financial performance known by Parent prior to the date
hereof. In the event Subsidiary does not exercise this right of termination, the
Supplement to the Disclosure Schedule so delivered, together with any
modifications and amendments to which the parties shall agree in writing, shall
constitute the Disclosure Schedule for purposes of this Agreement and shall be
deemed to be effective as of the date hereof.
4.4. Antidilution Provisions.
In the event (i) Parent changes the number of shares of Parent Common
Stock issued and outstanding or the record date for such change is fixed prior
to the Effective Time or (ii) the number of shares of M Corp. Stock issued and
outstanding are changed or the record date for such change is fixed prior to the
payment date under the Note as a result of a stock split, stock dividend or
similar recapitalization and the record date therefor (in the case of a stock
dividend or other such recapitalization for which a record date is established)
or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time or the payment date under the Note, as the case may be, the
number of shares of Parent Common Stock or M Corp. Stock, respectively, to be
delivered shall be adjusted appropriately. In addition, if M Corp. Stock is
delivered, dividends paid from and after the Effective Time shall be paid.
4.5. Fractional Company Common Stock.
Each record holder of shares of Company Common Stock exchanged pursuant
to the Merger who would otherwise have been entitled to receive, upon a delivery
of Parent Common Stock, a fraction of a share of Parent Common Stock (after
taking into account all certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of Parent Common Stock multiplied by the market value of one
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<PAGE> 19
share of Parent Common Stock at the Effective Time. The market value of one
share of Parent Common Stock at the Effective Time shall be the closing price of
such common stock, as reported by the Wall Street Journal, on the trading day
immediately prior to such date. No such holder will be entitled to dividends,
voting rights or any other rights as a shareholder in respect of any fractional
shares.
4.6. Section 368(a) Adjustments.
It is the mutual intention of the parties, and it is a condition to the
Merger, that the Merger qualify as a tax-free reorganization under Section 368
of the IRC. If, as a result of a decline in the value of Parent Common Stock,
the Company's and Parent's tax advisors shall be of the opinion that the Merger
shall no longer qualify as a tax-free reorganization, the parties shall use
reasonable efforts to reallocate consideration so that the Merger so qualifies;
provided that no party hereto shall be obligated to reallocate consideration if,
in its reasonable judgment, such a reallocation is or could reasonably have a
Material Adverse Effect on such party.
4.7. No Further Ownership Rights in Company Common Stock.
The Merger Consideration delivered upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such shares, and there shall be no further registration of transfers of Company
Common Stock on the records of Company which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, certificates are presented
to the Surviving Corporation for any reason, they shall be cancelled and
exchanged as provided in this Section 4. Until surrendered and exchanged in
accordance with this Section, each certificate of Company Common Stock shall,
after the Effective Time, represent solely the right to receive the Merger
Consideration in respect of the shares of Company Common Stock evidenced by such
certificate and shall have no other rights. No interest shall accrue or be
payable on any Merger Consideration except as set forth in Section 4.1(c)(i)(A)
under the Note.
4.8. Closing of Company Transfer Books.
At the Effective Time, the stock transfer books of Company shall be
closed, and no transfer of Company Common Stock shall thereafter be made. In
addition, Company and the Shareholders will take no action to transfer any
shares of Company Common Stock from and after the date hereof without first
obtaining the prior written consent of Parent.
4.9. Taking of Necessary Action; Further Action.
Each of the parties hereto will take all such reasonable and lawful
action as may be necessary or appropriate in order to effectuate the Merger in
accordance with this Agreement as promptly as practicable. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Company and Subsidiary, the officers and directors of
Company and Subsidiary immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary reasonable action.
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<PAGE> 20
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND THE SHAREHOLDERS
Company and the Shareholders, jointly and severally, represent and
warrant to Parent and Subsidiary as follows:
5.1. Organization and Good Standing.
(a) Schedule 5.1 contains a complete and accurate list of
Company's jurisdiction of incorporation and other jurisdictions in which it is
authorized to do business. Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under Applicable
Contracts. Company is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification, except where the
failure to so qualify would not have a Material Adverse Effect on the Company.
(b) Company has delivered to Subsidiary true and correct
copies of its Organizational Documents, minute books and stock records, each as
currently in effect.
(c) The Shareholders which are trusts have been duly
organized and are validly existing under the laws of the State of Georgia and
the trustee of such trusts have all power and authority to conduct the business
of the trust, including, without limitation, all power and authority to cause
the trust to enter into and perform the obligations of the trust under this
Agreement.
5.2. Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and
binding obligation of Company and each Shareholder, enforceable against Company
and each Shareholder in accordance with its terms. Upon the execution and
delivery by Company and each Shareholder, as appropriate, of the Certificate of
Merger, the Employment Agreement, the Noncompetition Agreements and the Real
Property Agreements (collectively, the "Company's Closing Documents"), the
Company's Closing Documents will constitute the legal, valid, and binding
obligations of Company and the Shareholders, enforceable against Company and the
Shareholders in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership or similar Applicable Laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought). Company
has the absolute and unrestricted corporate power and authority to execute and
deliver this Agreement and the Company's Closing Documents and to perform its
obligations under this Agreement and the Company's Closing Documents. Each
Shareholder which is a trust has the power and authority to execute and deliver
this Agreement and the Company's Closing Documents to be executed by it and to
perform its obligations under this Agreement and the Company's Closing Documents
to be
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<PAGE> 21
executed by it. Each Shareholder who is an individual has the capacity to
execute and deliver this Agreement and the Company's Closing Documents to be
executed by him or her and to perform his or her obligations under this
Agreement and the Company's Closing Documents to which he or she is a party.
(b) Except as set forth in Schedule 5.2(b), neither the
execution and delivery of this Agreement nor the consummation or performance by
the Company and the Shareholders of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents
of the Company, or (B) any resolution adopted by the board of
directors or the stockholders of Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person
the right to challenge any of the Contemplated Transactions;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by Company, except for any Governmental
Authorizations which would not have a Material Adverse Effect
on the Company;
(iv) cause Company to become subject to, or to
become liable for the payment of, any material Tax;
(v) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Material Contract, except for any of
the foregoing which would not have a Material Adverse Effect
on the Company; or
(vi) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by Company.
(c) Company is acquiring the Parent Common Stock and the
M Corp. Stock for its own account and not with a view to their distribution
within the meaning of Section 2(11) of the Securities Act. Company and each
Shareholder is an "accredited investor" as such term is defined in Rule 501(a)
under the Securities Act.
5.3. Capitalization.
The authorized equity securities of Company consist of 1,000,000 shares
of voting common stock and 100,000,000 shares of non-voting common stock, each
par value $1.00 per share, of which 341,250 shares of voting common stock and
33,700,000 shares of non-voting common stock are issued and outstanding and
constitute the Company Common Stock and are held as set forth in Schedule 5.3.
The Shareholders are and will be on the Closing Date the
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<PAGE> 22
record and beneficial owners and holders of the Company Common Stock, free and
clear of all Encumbrances. No legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of
Company. There are no Contracts relating to the issuance, sale, or transfer of
any equity securities or other securities of Company. None of the outstanding
equity securities or other securities of Company was issued in violation of the
Securities Act or any other Legal Requirement. Except as set forth in Schedule
5.3, Company does not own, or has any Contract to acquire, any equity securities
or other securities of any Person or any direct or indirect equity or ownership
interest in any other business.
5.4. Financial Statements.
Company has delivered to Subsidiary (a) the audited balance sheets of
Company as at May 31, 1997, and June 1, 1996, and the related audited statements
of income, changes in stockholders' equity, and cash flow for each of the fiscal
years then ended, together with the report thereon of Robertson & Company,
independent auditors, and (b) the unaudited balance sheet of the Company as of
May 30, 1998, and the related statement of income for the fiscal year then
ended. Such financial statements and notes fairly present the financial
condition and the results of operations, changes in stockholders' equity, and
cash flow of Company as at the respective dates of and for the periods referred
to in such financial statements, all in accordance with GAAP, subject, in the
case of interim financial statements, to normal recurring year-end adjustments
(the effect of which will not, individually or in the aggregate, be materially
adverse) and the absence of notes (that, if presented, would not differ
materially from those included in the last audited statement); the financial
statements referred to in this Section 5.4 reflect the consistent application of
such accounting principles throughout the periods involved. Except as set forth
on Schedule 5.4, Company has not been advised in writing by any attorney
representing it that there are any "loss contingencies" (as defined in Statement
of Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board of March, 1975), which would be required to be disclosed or
accrued in financial statements of the Company were such statements prepared as
of the date hereof. No financial statements of any Person other than Company are
required by GAAP to be included in the financial statements of Company. The May
30, 1998, audited financial statements of the Company shall be delivered no
later than August 31, 1998, including the audited balance sheet of the Company
as of May 30, 1998 (the "Balance Sheet"), and, when delivered, shall be deemed
to constitute a portion of the Supplement entitling the Parent to such rights
and obligations applicable with respect to the Supplement, except that the ten
(10) day period referenced in Section 4.3 shall commence on the date of delivery
of such financial statements.
5.5. Books and Records.
The books of account stock record books, and other records of Company
are complete and correct in all material respects and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. With respect to the minute books of
Company, Company has taken no action not reflected in the minutes which would
have a Material Adverse Effect on the Company.
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5.6. Title to Properties; Encumbrances.
Schedule 5.6 contains a list of all Real Property, Leased Real
Property, or other interests in Real Property owned by Company. Except as set
forth in Schedule 5.6, Company owns (with good and marketable title in the case
of real property, subject only to the matters permitted by the following
sentence) all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) that it purports to own or reflected as owned in
the books and records of Company, including all of the properties and assets
reflected in the Balance Sheet and the Balance Sheet (except for assets held
under capitalized leases disclosed in Schedule 5.6 and personal property sold
since the date of the Balance Sheet and the Balance Sheet, as the case may be,
in the Ordinary Course of Business), and all of the properties and assets
purchased or otherwise acquired by Company since the date of the Balance Sheet
(except for property, inventory and other assets acquired, sold, consumed or
disposed of since the date of the Balance Sheet in the Ordinary Course of
Business and consistent with past practice). All properties and assets reflected
in the Balance Sheet and the Balance Sheet are free and clear of all
Encumbrances and are not, in the case of real property, subject to any rights of
way, building use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Balance Sheet as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the Balance Sheet (such
mortgages and security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists, (c) liens for current Taxes
not yet due or which are contested in good faith by appropriate proceedings, and
(d) with respect to real property, (i) minor imperfections of title, if any,
none of which is substantial in amount, materially detracts from the value or
materially impairs the use of the property subject thereto, or materially
impairs the operations of Company, and (ii) zoning laws and other land use
restrictions that do not materially impair the present or anticipated use of the
property subject thereto. All buildings, plants, and structures owned by Company
lie wholly within the boundaries of the real property owned by Company and do
not encroach upon the property of, or otherwise conflict with the property
rights of, any other Person.
5.7. Condition and Sufficiency of Assets.
Except as set forth on Schedule 5.7, to the Knowledge of the Company,
the buildings, facilities, structures, and equipment of Company are in operating
condition and repair, and are adequate for the uses to which they are being put,
and such buildings, facilities, structures, or equipment have been maintained in
all material respects in accordance with industry standards, except for failures
to maintain which could not have a Material Adverse Effect. The building,
facilities, structures, and equipment of Company are sufficient in all material
respects for the continued conduct of the Business after the Closing in
substantially the same manner as conducted prior to the Closing.
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5.8. Accounts Receivable.
All accounts receivable of Company that are reflected on the Balance
Sheet or on the accounting records of Company as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. To Company's Knowledge, unless paid prior to
the Closing Date, the Accounts Receivable are or will be as of the Closing Date
current and collectible net of the respective reserves shown on the Balance
Sheet or on the accounting records of Company as of the Closing Date (which
reserves, to Company's Knowledge, are adequate and calculated consistent with
past practice and, in the case of the reserve as of the Closing Date, will not
represent a greater percentage of the Accounts Receivable as of the Closing Date
than the reserve reflected in the Balance Sheet represented of the Accounts
Receivable reflected therein and will not represent a material adverse change in
the composition of such Accounts Receivable in terms of aging).
5.9. Inventory.
All inventory of Company reflected in the Balance Sheet consists in all
material respects of a quality and quantity usable and salable in the Ordinary
Course of Business, except for obsolete items, normal defects and deficiencies,
returns and allowances, and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Balance Sheet or
on the accounting records of Company as of the Closing Date, as the case may be.
All inventories not written off have been priced at the lower of cost or market.
The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of Company.
5.10. No Undisclosed Liabilities.
Except as set forth in Schedule 5.10, to the Knowledge of the Company,
Company has no material liabilities or obligations of any nature (whether known
or unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
5.11. Taxes.
(a) Company has elected to be taxed in accordance with
the provisions of Subchapter S of the IRC, which election shall remain in effect
up to the Effective Time. Since the effective date of its election to be taxed
in accordance with this provision of Subchapter S of the IRC, none of the
Company or the Shareholders has taken any action or failed to take any action
which would result in the Company failing to be so qualified.
(b) Company has filed or caused to be filed all Tax
Returns that are or were required to be filed by or with respect to it pursuant
to applicable Legal Requirements. Company has made available to Subsidiary
copies of, and Schedule 5.11(b) contains a complete and accurate list of, all
filings prepared by the Company with respect to income for federal income tax
purposes since May, 1994. Company has paid, or made provision for the payment
of, all Taxes that have or may have become due pursuant to Tax Returns or
otherwise, or pursuant to
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any assessment received by Company, except such Taxes, if any, as are listed in
Schedule 5.11(b) and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided in the Balance
Sheet and the Balance Sheet.
(c) The United States federal and state income Tax
Returns of Company subject to such Taxes have been audited by the IRS or
relevant state tax authorities or are closed by the applicable statute of
limitations for all taxable years through May, 1994. Schedule 5.11(c) contains a
complete and accurate list of all audits of all Tax Returns from May, 1994,
through such period, including a description of the nature and outcome of each
audit. All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in Schedule 5.11(c), are being
contested in good faith by appropriate proceedings. Schedule 5.11(c) describes
all adjustments to the United States federal income Tax Returns filed by Company
for all taxable years since May, 1994, and the resulting deficiencies proposed
by the IRS. Except as described in Schedule 5.11(c), Company has not given or
been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other Person) of any statute of limitations
relating to the payment of Taxes of Company or for which Company may be liable.
(d) To Company's Knowledge, the charges, accruals, and
reserves with respect to Taxes on the books of Company are adequate (determined
in accordance with GAAP). To Company's Knowledge, there exists no proposed tax
assessment against Company except as disclosed in the Balance Sheet or in
Schedule 5.11(d). No consent to the application of Section 341(f)(2) of the IRC
has been filed with respect to any property or assets held, acquired, or to be
acquired by Company. Except as set forth in Schedule 5.11(d), all Taxes that
Company is or was required by Legal Requirements to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid to
the proper Governmental Body or other Person.
(e) All Tax Returns filed by Company since May, 1994 are
true, correct, and complete in all material respects. There is no tax sharing
agreement that will require any payment by Company after the date of this
Agreement.
5.12. No Material Adverse Change.
Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects, assets,
working capital or condition of Company taken as a whole, and no event has
occurred or circumstance exists that may result in such a material adverse
change, except such changes as may result from general economic conditions in
each of the markets served by Company, matters affecting the industry as a
whole, and possible adverse changes resulting, directly or indirectly, from the
existence of this Agreement and the transactions contemplated hereby.
5.13. Employee Benefits.
(a) Except as disclosed on Schedule 5.13(a), no other
corporation, trade, business, or other entity, other than Company, would now or
in the past constitute a single employer within the meaning of Section 414 of
the IRC. Company and any other entities which
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now or in the past constitute a single employer within the meaning of IRC
Section 414 are hereinafter collectively referred to as the "Company Group."
(b) Schedule 5.13(b) contains a true and complete list of
all the following agreements or plans which are presently in effect or which
have previously been in effect and which cover employees of any member of the
Company Group ("Employees"), and indicating, with respect to each, the plans for
which Company currently maintains or contributes to on behalf of its employees:
(i) Any employee benefit plan as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and any trust or other funding
agency created thereunder, or under which any member of the
Company Group, with respect to Employees, has any outstanding,
present, or future obligation or liability, or under which any
Employee or former Employee has any present or future right to
benefits which are covered by ERISA; or
(ii) Any other pension, profit sharing,
retirement, deferred compensation, stock purchase, stock
option, incentive, bonus, vacation, severance, disability,
hospitalization, medical, life insurance, split dollar or
other employee benefit plan, program, policy, or arrangement,
whether written or unwritten, formal or informal, which any
member of the Company Group maintains or to which any member
of the Company Group has any outstanding, present or future
obligations to contribute or make payments under, whether
voluntary, contingent or otherwise.
The plans, programs, policies, or arrangements described in
subparagraph (i) or (ii) above are hereinafter collectively referred to as the
"Company Plans." Company has delivered to Subsidiary true and complete copies of
all written plan documents and contracts evidencing the Company Plans, as they
may have been amended to the date hereof, together with (A) all documents,
including without limitation, Forms 5500, relating to any Company Plans required
to have been filed prior to the date hereof with governmental authorities for
each of the three most recently completed plan years; (B) attorney's response to
an auditor's request for information for each of the three most recently
completed plan years; and (C) financial statements and actuarial reports, if
any, for each Company Plan for the three most recently completed plan years.
(c) Except as to those plans identified on Schedule
5.13(c) as tax-qualified Company Plans (the "Company Qualified Plans"), no
member of the Company Group maintains or previously maintained a Company Plan
which meets or was intended to meet the requirements of IRC Section 401(a). The
Internal Revenue Service has issued favorable determination letters to the
effect that each Company Qualified Plan qualifies under IRC Section 401(a) and
that any related trust is exempt from taxation under IRC Section 501(a), and
such determination letters remain in effect and have not been revoked. Copies of
the most recent determination letters and any outstanding requests for a
determination letter with respect to each Company Qualified Plan have been
delivered to Purchaser. Except as disclosed on Schedule 5.13(c), no Company
Qualified Plan has been amended since the issuance of each respective
determination letter. The
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Company Qualified Plans currently comply in form with the requirements under IRC
Section 401(a), other than changes required by statutes, regulations and rulings
for which amendments are not yet required. No issue concerning qualification of
the Company Qualified Plans is pending before or, to Company's Knowledge, is
threatened by the IRS. The Company Qualified Plans have been administered in all
material respects according to their terms (except for those terms which are
inconsistent with the changes required by statutes, regulations, and rulings for
which changes are not yet required to be made, in which case the Company
Qualified Plans have been administered in all material respects in accordance
with the provisions of those statutes, regulations and rulings) and in
accordance with the requirements of IRC Section 401(a). To Company's Knowledge,
no member of the Company Group or any fiduciary of any Company Qualified Plan
has done anything that would adversely affect the qualified status of the
Company Qualified Plans or the related trusts. Any Company Qualified Plan which
is required to satisfy IRC Section 401(k)(3) and 401(m)(2) has been tested for
compliance with, and has satisfied the requirements of, IRC Section 401(k)(3)
and 401(m)(2) for each plan year ending prior to the Closing Date.
(d) Each member of the Company Group is in material
compliance with the requirements prescribed by any and all statutes, orders,
governmental rules and regulations applicable to the Company Plans and all
reports and disclosures relating to the Company Plans required to be filed with
or furnished to any governmental entity, participants or beneficiaries prior to
the Closing Date have been or will be filed or furnished in a timely manner and
in accordance with applicable law.
(e) Except as expressly identified on Schedule 5.13(e),
no termination or partial termination of any Company Qualified Plan has occurred
nor has a notice of intent to terminate any Company Qualified Plan been issued
by a member of the Company Group.
(f) No member of the Company Group maintains or has
maintained an "employee benefit pension plan" within the meaning of ERISA
Section 3(2) that is or was subject to Title IV of ERISA.
(g) Each member of the Company Group has made full and
timely payment of, or has accrued pending full and timely payment, all amounts
which are required under the terms of each of the Company Plans and in
accordance with applicable laws and contracts to be paid as a contribution to
each Company Plan. In conformity with GAAP, the Balance Sheet accurately
reflects all obligations for accrued benefits under any non-qualified deferred
compensation or supplemental retirement plans.
(h) No member of the Company Group has any past, present
or future obligation or liability to contribute or has contributed to any
multiemployer plan as defined in ERISA Section 3(37).
(i) No member of the Company Group nor, to the Company's
Knowledge, any other "disqualified person" or "party in interest" (as defined in
IRC Section 4975 and ERISA Section 3(14), respectively) with respect to the
Company Plans, has engaged in any "prohibited transaction" (as defined in IRC
Section 4975 or ERISA Section 406). All members of the Company Group and, to the
Company's Knowledge, all "fiduciaries" (as defined in ERISA
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Section 3(21)) with respect to the Company Plans, including any members of the
Company Group which are fiduciaries as to a Company Plan, have complied in all
respects with the requirements of ERISA Section 404. No member of the Company
Group and no party in interest or, to the Company's Knowledge, disqualified
person with respect to the Company Plans has taken or omitted any action which
could lead to the imposition of an excise tax under the IRC or a fine under
ERISA.
(j) Each member of the Company Group has complied in all
material respects with the continuation coverage requirements of Section 4980B
of the IRC, Section K, Chapter 100 of the IRC and ERISA Sections 601 through 608
("COBRA"), and with the portability, access and renewability provisions of ERISA
Sections 701 through 712.
(k) Except as disclosed on Schedule 5.13(k), no member of
the Company Group will be obligated after the Effective Time to make any
nondeductible contributions to any Company Plan.
(l) Other than routine claims for benefits, there are no
actions, audits, investigations, suits or claims pending, or, to the Company's
Knowledge, threatened against any Company Plan, any trust or other funding
agency created thereunder, or against any fiduciary of any Company Plan or
against the assets of any Company Plan.
(m) Other than health continuation coverage required by
COBRA, no member of the Company Group has any obligation to any retired or
former employee or any current employee of the Company to provide any benefits
upon retirement or termination of employment under any Company Plan.
(n) Since May 31, 1997, no member of the Company Group
has (i) increased the rate of compensation payable or to become payable to any
of the employees of the Company and its Subsidiaries, other than in the normal
course of business and consistent with past practice; (ii) made any commitment
and has not incurred any liability to any labor union; (iii) paid or agreed to
pay any bonuses or severance pay not reflected in the unaudited financial
statements as of May 30, 1998, described in Section 5.4 or as described in
Schedule 5.13(n); (iv) increased any benefits or rights under any Company Plan;
and (v) adopted any new plan, program, policy or arrangement, which if it
existed as of the Closing Date, would constitute a Company Plan.
5.14. Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Schedule 5.14(a):
(i) Company is in compliance in all material
respects with each material Legal Requirement that is
applicable to it or to the conduct or operation of its
business or the ownership or use of any of its assets;
(ii) To Company's Knowledge, no event has
occurred or circumstance exists that (with or without notice
or lapse of time) may constitute or result in a violation by
Company of, or a failure on the part of Company to comply
with, any material Legal Requirement; and
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(iii) Company has not received, at any time since
January 1, 1995, any written notice from any Governmental Body
or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any
material Legal Requirement.
(b) Except as set forth in Schedule 5.14(b):
(i) Company is in material compliance with all
of the terms and requirements of each material Governmental
Authorization;
(ii) To Company's Knowledge, no event has
occurred or circumstance exists that may (with or without
notice or lapse of time) constitute or result directly or
indirectly in a material violation of or a failure to comply
with any term or requirement of any material Governmental
Authorization; and
(iii) Company has not received, at any time since
January 1, 1995, any written notice from any Governmental Body
regarding any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement
of any material Governmental Authorization.
5.15. Legal Proceedings; Orders.
(a) Except as set forth in Schedule 5.15, there is no
pending Proceeding to which Company is a party:
(i) except for individual claims of less than
$5,000, that has been commenced by or against Company or that
could impair the Company's use of any of its material assets;
or
(ii) that challenges, or that to Company's
Knowledge may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the
Contemplated Transactions. To the Knowledge of Company, (1) no
such Proceeding has been Threatened, and (2) no event has
occurred or circumstance exists that may give rise to or serve
as a basis for the commencement of any such Proceeding. The
Proceedings listed in Schedule 5.15 will not have a material
adverse effect on the business, operations, assets, condition,
or prospects of the Business taken as a whole.
(b) Except as set forth in Schedule 5.15 :
(i) there is no material Order to which Company,
or any of the assets owned or used by Company, is subject; and
(ii) to the Knowledge of Company, no executive
officer, director or key employee of Company is subject to any
Order that prohibits such officer, director or key employee
from engaging in or continuing any conduct, activity, or
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practice relating to the Business, except Orders that would
not have a Material Adverse Effect on Company.
5.16. Absence of Certain Changes and Events.
Except as set forth in Schedule 5.16, since the date of the Balance
Sheet, Company has conducted its business only in the Ordinary Course of
Business in all material respects and there has not been any:
(a) change in Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
Company; issuance of any security convertible into such capital stock; grant of
any registration rights; purchase, redemption, retirement, or other acquisition
by Company of any shares of any such capital stock; or declaration or payment of
any dividend or other distribution or payment in respect of shares of capital
stock;
(b) amendment to the Organizational Documents of Company;
(c) payment or increase by Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer, or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee, except for year-end bonuses to any such individual to the extent
accrued in the financial statements referenced in Section 5.4 hereof;
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of Company;
(e) damage to or destruction or loss of any asset or
property of Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of Company taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of any material license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement;
(g) sale (other than sales in the Ordinary Course of
Business), lease, or other disposition of any material asset or property of
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of Company;
(h) cancellation or waiver of any material claims or
rights;
(i) change in the accounting methods used by Company; or
(j) agreement, whether oral or written, by Company to do
any of the foregoing.
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5.17. Contracts; No Defaults.
(a) Schedule 5.17(a) contains a complete and accurate
list, and Company has delivered or will deliver to Subsidiary true and complete
copies, of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by
Company of an amount or value in excess of $1,000,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to
Company of an amount or value in excess of $1,000,000;
(iii) each Applicable Contract that was not
entered into in the Ordinary Course of Business and that
involves expenditures or receipts of Company in excess of
$100,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any
real or personal property (except personal property leases and
installment and conditional sales agreements having a value
per item or aggregate payments of less than $100,000 and with
terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with former
employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property Assets which are used by the Company but excluding
standard nondisclosure agreements and licenses of commercially
available software;
(vi) each collective bargaining agreement and
other Applicable Contract to which the Company is a party or
with any labor union or other employee representative of a
group of employees;
(vii) each joint venture or partnership to which
the Company is a party, and other Applicable Contract to which
the Company is a party (however named) involving a sharing of
profits, losses, costs, or liabilities by Company with any
other Person;
(viii) each Applicable Contract containing
covenants that in any way purport to materially restrict the
business activity of Company or Executive or limit the freedom
of Company or Executive to engage in any line of business or
to compete with any Person;
(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods
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and other than commission arrangements with sales employees of
the Company entered into in the Ordinary Course of Business;
(x) each power of attorney granted by the
Company that is currently effective and outstanding;
(xi) each outstanding Applicable Contract for
capital expenditures in excess of $100,000;
(xii) each outstanding written warranty, guaranty,
and or other similar undertaking with respect to contractual
performance extended by Company other than in the Ordinary
Course of Business; and
(xiii) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing
(the Contracts, identified or required to be identified in
this Section 5.17(a)(i) - (xiii) collectively, the "Material
Contracts").
(b) Except as set forth in Schedule 5.17(b), no
Shareholder (and no Related Person of any Shareholder) has or may acquire any
rights under, or has or may become subject to any obligation or liability under,
any Applicable Contract that relates to the business of, or any of the assets
owned or used by, Company.
(c) Except as set forth in Schedule 5.17(c), each
Material Contract is in full force and effect and is valid and enforceable in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership or similar
Applicable Laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(d) Except as set forth in Schedule 5.17(d):
(i) Company is in compliance in all material
respects with all applicable terms and requirements of each
Material Contract under which Company has or had any
obligation or liability;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene,
conflict with, or result in a violation or breach of, or give
Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Material Contract; and
(iii) Company has not given to or received from
any other Person, at any time since May 31, 1997, any written
notice regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Material
Contract.
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(e) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to Company under current or completed Material Contracts with any Person
and to the Knowledge of Company no such Person has made written demand for such
renegotiation.
5.18. Insurance.
(a) Company has delivered to Subsidiary or will deliver
prior to finalization of the Supplement true and complete copies of all policies
of insurance to which Company is a party or the payor and under which Company,
or any director of Company, is or has been covered at any time since May, 1997.
(b) Schedule 5.18(b) describes:
(i) any self-insurance arrangement by or
affecting Company, including any reserves established
thereunder; and
(ii) any material contract or arrangement, other
than a policy of insurance, for the transfer or sharing of any
risk by Company.
(c) Except as set forth on Schedule 5.18(c):
(i) All policies to which Company is a party or
that provide coverage to Company or any director or officer of
Company
(A) are valid and outstanding; and
(B) do not provide for any
retrospective premium adjustment or other
experienced-based liability on the part of Company.
(ii) Company has not received (A) any written
refusal of coverage or any written notice that a defense will
be afforded with reservation of rights, or (B) any written
notice or, to Company's Knowledge, oral notice of cancellation
or any other indication that any insurance policy is no longer
in full force or effect or will not be renewed or that the
issuer of any policy is not willing or able to perform its
obligations thereunder.
(iii) Company has paid all premiums due, and have
otherwise performed all of its material obligations, under
each insurance policy to which Company is a party or the payor
and that provides coverage to Company or any director thereof.
(iv) To Company's Knowledge, Company has given
notice to the insurer of all claims that may be insured
thereby.
5.19. Environmental Matters.
Except as set forth in Schedule 5.19:
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(a) Company is, and at all times has been, in material
compliance with, and has not been and is not in material violation of or
materially liable under, any Environmental Law. Company has no basis to expect,
nor has Company or any other Person for whose conduct it is or may be held to be
responsible received, any written order, notice, or other written communication
from (i) any Governmental Body or private citizen acting in the public interest,
or (ii) the current or prior owner or operator of any Facilities, of any alleged
material violation or failure to comply with any Environmental Law, or of any
alleged material obligation to undertake or bear the cost of any Environmental,
Health, and Safety Liabilities with respect to any of the Facilities or any
other properties or assets (whether real, personal, or mixed) in which Company
has had an interest, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by Company or any other Person for whose conduct it
is or may be held responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(b) There are no material pending or to the Knowledge of
Company, Threatened claims or Encumbrances of any nature, resulting from any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any alleged violation of or noncompliance with Environmental Law, with respect
to any of the Facilities or any other properties and assets in which Company has
or had an interest.
(c) Company has not received any written citation, Order,
summons, warning, or notice of violation that relates to the Release of
Hazardous Materials, or any alleged or actual violation or failure to comply
with any Environmental Law, or of any alleged or actual obligation to undertake
or bear the cost of any Environmental, Health, and Safety Liabilities with
respect to any of the Facilities or any other properties or assets in which
Company had an interest, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred, imported,
used, or processed by Company or any other Person for whose conduct it is or may
be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) Company, or any other Person for whose conduct it is
or may be held responsible, has no material Environmental, Health, and Safety
Liabilities with respect to the Facilities or with respect to any other
properties and assets in which Company (or any predecessor) had an interest.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities except in material compliance with all applicable
Environmental Laws.
(f) There has been no material Release of any Hazardous
Materials at or from the Facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the Facilities, or from or by
any other properties and assets in which Company had an interest.
(g) Company has delivered to Subsidiary true and complete
copies and results of any material reports, studies, analyses, tests, or
monitoring possessed or initiated by Company pertaining to Hazardous Materials
in, on, or under the Facilities, or concerning compliance by
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Company or any other Person for whose conduct it is or may be held responsible,
with Environmental Laws.
5.20. Employees.
(a) Schedule 5.20(a) contains a list of the following
information for each full-time, part-time or temporary salaried employee or
director of Company whose annual compensation exceeds or will exceed $50,000,
including each such employee on leave of absence or layoff status: name; job
title; current employment status and current compensation. Schedule 5.20(a) also
contains a list of all written contracts of employment to which Company is a
party with such employees, except for contracts which can be terminated without
liability upon not more than thirty (30) days notice.
(b) To Company's Knowledge, except as set forth on
Schedule 5.20(b), no employee or director of Company listed on Schedule 5.20(a)
is a party to, or is otherwise bound by, any agreement or arrangement, including
any confidentiality, noncompetition, or proprietary rights agreement, between
such employee or director and any other Person that, to the Knowledge of the
Company, in any way adversely affects or will affect (i) the performance of his
duties as an employee or director, or (ii) the ability of the Company to conduct
the Business.
(c) Schedule 5.20(c) also contains a complete and
accurate list of the following information for each retired employee or director
of Company, or their dependents, receiving benefits or scheduled to receive
benefits from the Company in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance coverage,
and other benefits.
5.21. Labor Relations; Compliance.
Company is not a party to any collective bargaining or other labor
Contract. Except as set forth on Schedule 5.21, there has not been, there is not
presently existing, and to Company's Knowledge there is not threatened (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
any pending proceeding against or affecting Company relating to the alleged
violation of any legal requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting Company, or (c) any application for
certification of a collective bargaining agent. There is no lockout of any
employees by Company, and no such action is contemplated by the Company. Company
has complied in all material respects with all legal requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar Taxes, occupational safety and health, and plant closing.
Schedule 5.21 contains a complete list of employment-related lawsuits
and/or governmental administrative proceedings in each case for which the
liability of the Company exceeds $5,000 to which Company is currently a party.
This list includes any employment-related disputes brought under any applicable
federal, state or local laws, as well as all
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administrative actions including, but not limited to, those proceedings before
the Equal Employment Opportunity Commission, the National Labor Relations Board,
the Occupational Safety and Health Agency and the Department of Labor, and any
state counterparts to such agencies.
5.22. Intellectual Property.
(a) Intellectual Property Assets--The term "Intellectual
Property Assets" includes:
(i) Company's name, all fictional business
names, trade names, styles, registered and unregistered
trademarks, service marks, and applications owned by the
Company and used in its Business (collectively, "Marks");
(ii) all patents, patent applications, and
inventions and discoveries that may be patentable owned by the
Company and used in its Business (collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works owned by the Company and used in its
Business (collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential
information, customer lists, software, technical information,
data, process technology, plans, drawings, and blue prints to
the extent the same are trade secrets under the laws of
Georgia owned or licensed by or to Company as licensee or
licensor (collectively, "Trade Secrets").
(b) Agreements.
Schedule 5.22(b) describes any royalties paid or received by
Company, under all Contracts relating to the Intellectual Property Assets for
which payments exceed $20,000 per year, , except for licenses for commonly
available software programs under which Company is the licensee. There are no
outstanding and, to Company's Knowledge, no Threatened disputes or disagreements
between Company and any third party with respect to any such agreement.
(c) Know-How Necessary for the Business
The Intellectual Property Assets are all those necessary for
the operation of the Business as currently conducted. Except as set forth on
Schedule 5.22(c), Company is the owner of all right, title, and interest in and
to each of such Intellectual Property Assets that it purports to own, free and
clear of all liens, security interests, charges, encumbrances, equities, and
other adverse claims, and has the right to use without payment to a third party
all of the Intellectual Property Assets.
(d) Patents
(i) Schedule 5.22(d) contains a complete and
accurate list of all Patents. Company is the owner of all
right, title and interest in and to each of the
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Patents, free and clear of all liens, security interest,
charges, encumbrances, equities and other adverse claims.
(ii) All of the issued Patents are currently in
compliance in all material respects with formal legal
requirements, are valid and enforceable and are not subject to
any maintenance fees or taxes falling due within ninety (90)
days after the Closing Date.
(iii) No Patent has been or is now involved in any
interference, reissue, re-examination or opposition
proceedings. To Company's Knowledge, there is no potentially
interfering patent or patent application of any third party.
(iv) No Patent is infringed or, to Company's
Knowledge, has been challenged or threatened in any way. None
of the products manufactured or sold, nor any process or
know-how used by the Company, materially infringes any patent
or proprietary right of any other Person.
(e) Trademarks
(i) Schedule 5.22(e) contains a complete and
accurate list and summary description of all Marks registered
with the U.S. Patent and Trademark Office. Except as set forth
in Schedule 5.22(e), Company is the owner of all right, title,
and interest in and to each of the Marks, free and clear of
all liens, security interests, charges, encumbrances,
equities, and other adverse claims.
(ii) To Company's Knowledge, there is no
potentially interfering trademark or trademark application of
any third party.
(iii) To Company's Knowledge, no Mark is infringed
or has been challenged or threatened in any way. To Company's
Knowledge, none of the Marks used by Company infringes or is
alleged to infringe any trade name, trademark, or service mark
of any third party.
(f) Copyrights
(i) Schedule 5.22(f) contains a complete and
accurate list and summary description of all Copyrights
material to the conduct of the Business. Company is the owner
of all right, title, and interest in and to each of such
Copyrights, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims.
(ii) To Company's Knowledge, no Copyright is
infringed or has been challenged or threatened in any way. To
Company's Knowledge, none of the subject matter of any of the
Copyrights infringes or is alleged to infringe any copyright
of any third party or is a derivative work based on the work
of a third party.
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(g) Trade Secrets
(i) Company has taken commercially reasonable
precautions to protect the secrecy, confidentiality, and value
of its Trade Secrets material to the conduct of the Business.
(ii) Company has good title and an absolute right
to use the Trade Secrets. To Company's Knowledge, the Trade
Secrets are not part of the public knowledge or literature and
have not been used, divulged, or appropriated either for the
benefit of any Person (other than Company) or to the detriment
of Company. To Company's Knowledge, no Trade Secret is subject
to any adverse claim or has been challenged or threatened in
any way.
5.23. Certain Payments.
Neither Company nor any director, officer, agent, or employee of
Company acting for or on behalf of Company, has (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any
Person, private or public, regardless of form, whether in money, property, or
services in violation of the rights of third parties (i) to improperly obtain
favorable treatment in securing business, (ii) to improperly pay for favorable
treatment for business secured, (iii) to improperly obtain special concessions
or for special concessions already obtained, for or in respect of Company, or
(iv) in violation of any Legal Requirement, (b) established or maintained any
fund or asset that has not been recorded in the books and records of Company.
5.24. Disclosure.
(a) No representation or warranty of Company or
Shareholders in this Agreement and no statement in the Disclosure Schedule omits
to state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
(b) There is no fact known to Company or any Shareholder
that has specific application to the Business (other than general economic or
industry conditions and possible adverse changes resulting directly or
indirectly from the existence of this Agreement or the Contemplated
Transactions) which the Company or such Shareholder reasonably expects would
materially adversely affect the assets, business, prospects, financial
condition, or results of operations of Company that has not been set forth in
this Agreement or the Disclosure Schedule.
5.25. Relationships with Related Persons.
Except as set forth in Schedule 5.25, and except for property subject
to the Real Property Agreements, no Related Person of Company has, or since 1996
has had, any interest in any property (whether real, personal, or mixed and
whether tangible or intangible), owned or licensed by Company and used in or
pertaining to the Business. No Related Person of Company is, or since 1996 has
owned (of record or as a beneficial owner) an equity interest or any other
financial or profit interest in, a Person that has had business dealings or a
material financial interest in any transaction with Company.
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5.26. Brokers or Finders.
Company has not incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
5.27. Tax-Free Nature of Transaction.
(a) As of the Effective Time, the fair market value of
the Parent Common Stock and other property received by each Shareholder
in the Merger will be approximately equal to the fair market value of
the Company Common Stock surrendered in the Merger.
(b) The Company has not made and will not make any
distributions to its Shareholders with respect to its capital stock,
prior to or in connection with the Merger, other than distributions
contemplated by Section 4.1(c)(ii) and Section 7.7 hereof.
(c) The Company has not and will not sell, transfer,
assign, or otherwise dispose of any of its assets (other than for
distributions contemplated by Section 4.1(c)(ii) and Section 7.7
hereof) in contemplation of the Merger other than in the ordinary
course of business and payments for expenses incurred in connection
with the Merger.
(d) Company has not and will not redeem, purchase or
acquire any of the outstanding shares of Company Common Stock prior to
or in connection with the Merger.
(e) No person who is related to Company, as determined
under the rules of Treasury Regulations Section 1.368-1(e)(3), has or
will purchase, acquire, exchange or transfer shares of Company Common
Stock prior to the Effective Time.
(f) Other than distributions, payments and bonuses
contemplated by Section 4.1(c)(ii) and Section 7.7 hereof, cash or
other property paid to employees of Company prior to the Effective
Time, but during the period the Merger was contemplated, has been or
will be paid in the ordinary course of business.
(g) Company will continue to operate its historic
business through the Effective Time.
(h) Company will pay its expenses and not more than
$250,000 of Shareholder expenses incurred in connection with the
Merger.
(i) There is no indebtedness existing between Parent and
Company or between Subsidiary and Company that was issued, acquired, or
will be settled at a discount.
(j) Company is not and will not be at the Effective Time
an investment company as defined in section 368(a)(2)(f)(iii) and (iv)
of the Code.
(k) At the Effective Time, the fair market value of the
assets of Company will exceed the aggregate liabilities of Company,
plus the amount of liabilities, if any, to which the assets are
subject.
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(l) Company is not and will not be at the Effective Time
under the jurisdiction of a court in a title 11 or similar case within
the meaning of IRC Section 368(a)(3)(a).
(m) Other than distributions, payments and bonuses
contemplated by Section 4.1(c)(ii) and Section 7.7 hereof, no
compensation received by any Shareholder of Company will be separate
consideration for, or allocable to, any of their shares of Company
Common Stock; none of the shares of Parent stock received by any
Shareholder of Company will be separate consideration for, or allocable
to, any employment agreement; and the employment-based compensation
paid to any Shareholder will be for services actually rendered and will
be commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
5.28. Charter Provisions, Etc.
Company has taken all action so that the entering into of this
Agreement and the consummation of the Merger and the Contemplated Transactions
do not and will not result in the grant of any rights to any Person (other than
the Shareholders) under the Organizational Documents of Company or restrict the
ability of Parent to otherwise exercise the rights of the Shareholder with
respect to shares of the Company, and the transactions contemplated by this
Agreement are exempt from any applicable "moratorium," "fair price," "business
combination," "control share" or other anti-takeover laws under the GBCC.
5.29. Board and Shareholder Approval.
The board of directors of the Company and all of the shareholders of
the Company have, in strict compliance with the provisions of the GBCC, approved
and authorized this Agreement, the Merger and the Contemplated Transactions, in
each case without condition, limitation or restriction.
5.30. Year 2000 Compliance.
The Company has (i) initiated a review and assessment of all areas
within its business and operations that could be adversely affected by the "Year
2000 Problem" (that is, the risk that computer applications used by the Company
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999), (ii)
developed a plan and timeline for addressing the Year 2000 Problem on a timely
basis, and (iii) to date, implemented that plan in all material respects in
accordance with that timetable. Based on the foregoing, and assuming the plan is
implemented after the Effective Time, all computer applications that are
material to the Company's business and operations are reasonably expected on a
timely basis to be able to perform properly date-sensitive functions for all
dates before and after January 1, 2000 (that is, be "Year 2000 compliant"),
except to the extent that a failure to do so could not reasonably be expected to
have a material adverse effect on the Business.
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY
Parent and Subsidiary, jointly and severally, represent and warrant to
Company as follows:
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6.1. Organization and Good Standing.
Each of Parent and Subsidiary is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Georgia, with full
corporate power and authority to conduct its business as it is now being
conducted and to own or use the properties and assets that it purports to own or
use. Subsidiary is a newly formed, wholly-owned subsidiary of Parent formed for
the sole purpose of consummating the Contemplated Transactions and has not
conducted any business other than as expressly set forth in or contemplated by
this Agreement.
6.2. Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and
binding obligation of Parent and Subsidiary, enforceable against Parent and
Subsidiary in accordance with its terms. Upon the execution and delivery by
Parent and Subsidiary of the Certificate of Merger, the Employment Agreement and
the Real Property Agreements (collectively, the "Subsidiary's Closing
Documents"), the Subsidiary's Closing Documents will constitute the legal,
valid, and binding obligations of Parent and Subsidiary, enforceable against
Parent and Subsidiary in accordance with their respective terms. Parent and
Subsidiary have the absolute and unrestricted right, power, and authority to
execute and deliver this Agreement and the Subsidiary's Closing Documents and to
perform its obligations under this Agreement and the Subsidiary's Closing
Documents.
(b) Neither the execution and delivery of this Agreement
by Parent and Subsidiary nor the consummation or performance of any of the
Contemplated Transactions by Parent and Subsidiary will directly or indirectly
give any Person the right to prevent, delay, or otherwise interfere with any of
the Contemplated Transactions pursuant to:
(i) any provision of Parent's or Subsidiary's
Organizational Documents;
(ii) any resolution adopted by the board of
directors or the stockholders of Parent or Subsidiary;
(iii) any Legal Requirement or Order to which
Parent or Subsidiary may be subject, other than pursuant to
the HSR Act; or
(iv) any material Contract to which Parent or
Subsidiary is a party or by which Parent or Subsidiary may be
bound.
Except pursuant to the HSR Act or as described above, neither Parent
nor Subsidiary is required to obtain any Consent from any Person in connection
with the execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
6.3. Capitalization of Parent Common Stock.
The authorized and issued equity securities of Parent are as set forth
in the 10-K of Parent with respect to the period ended December 31, 1997, a copy
of which, together with the annual report of the Parent, has been delivered to
Company. The shares of Parent Common Stock to be
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issued to Company under this Agreement have been duly authorized and, when
issued, will be validly issued and fully paid and non-assessable. None of the
shares of Parent Common Stock or M Corp. Stock, when and if delivered pursuant
to this Agreement, will (a) be in breach or violation of any applicable
statutory or contractual preemptive right or other contractual rights of any
kind (including any rights of first offer or refusal) of any Person or any
federal or state securities laws or the rules and regulations thereunder, or (b)
be subject to any shareholders, voting, transfer or other agreement with any
Person, except that certain Shareholders Agreement between M Corp. and Parent
dated August 7, 1998, which will terminate as to the M Corp. Stock held by the
Shareholders as of the date of transfer of the M Corp. Stock to the
Shareholders.
6.4. SEC Reports.
All reports, statements and other documents that Parent is responsible
for filing with the Securities Exchange Commission in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Legal Requirements. Since January 1, 1995, all
reports, statements and other documents filed by Parent with the Securities
Exchange Commission complied in all material respects with applicable Legal
Requirements and did not as of the date made contain an untrue statement of
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (all such documents collectively, the "SEC Reports"). Since the date
of the last SEC Report consisting of a 10-Q, there has not been any material
adverse change in the business, operations, properties, prospects, assets,
working capital or condition of Parent, taken as a whole, and no event has
occurred or circumstance exists that may result in such a material adverse
change. To Parent's Knowledge, there is no material event or condition with
respect to M Corp. not disclosed in M Corp.'s reports filed with the Securities
Exchange Commission which Parent believes is reasonably likely to have a
Material Adverse Effect on M Corp. Each of the Parent financial statements
(including, in each case, any related notes) included in the Parent SEC Reports
(i) have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements), and (ii) fairly present in all material respects the
consolidated financial position of Parent and its subsidiaries as at the
respective dates and the consolidated results of operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not
or are not expected to be material in amount or effect.
6.5. Certain Proceedings.
There is no pending Proceeding that has been commenced against Parent
or Subsidiary and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions. To Parent's and Subsidiary's Knowledge, no such Proceeding has
been Threatened. The SEC Reports disclose all Proceedings pending against Parent
or Subsidiary which are required under Applicable Law to be disclosed therein.
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6.6. M Corp. Stock.
If Parent shall deliver M Corp. Stock in payment of the Note: (i) the
transfer of such M Corp. Stock to the Shareholders shall comply, in all material
respects, with all Legal Requirements in connection with such transfer, and (ii)
the Shareholders will receive the M Corp. Stock free and clear of all
Encumbrances and freely tradable without restriction (other than
prospectus-delivery obligations under Form S-3 registrations).
6.7. Brokers or Finders.
Parent and Subsidiary and their officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
7. COVENANTS OF COMPANY PRIOR TO CLOSING DATE
7.1. Access and Investigation.
For the sole purpose of the Contemplated Transactions, between the date
of this Agreement and the Closing Date, Company will, and will cause its
Representatives to, (a) afford Subsidiary and its Representatives (collectively,
"Subsidiary's Advisors") reasonable access to Company's personnel, properties
(including for purposes of subsurface and other environmental testing),
contracts, books and records, and other documents and data, (b) furnish
Subsidiary and Subsidiary's Advisors with copies of all such contracts, books
and records, and other existing documents and data as Subsidiary may reasonably
request, and (c) furnish Subsidiary and Subsidiary's Advisors with such
additional financial, operating, and other data and information as Subsidiary
may reasonably request.
7.2. Operation of the Business of Company.
Between the date of this Agreement and the Closing Date, except as set
forth in Section 7.7, Company will:
(a) conduct the business of Company only in the Ordinary
Course of Business;
(b) use its Best Efforts to preserve intact the current
business organization, keep available the services of the current officers,
employees, and agents, and maintain the relations and good will with suppliers,
customers, landlords, creditors, employees, agents, and others having business
relationships with Company;
(c) confer with Subsidiary concerning operational matters
of a material nature, in compliance with Legal Requirements; and
(d) otherwise report periodically to Subsidiary
concerning the status of the business, operations, and finances of Company, in
compliance with Legal Requirements.
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7.3. Negative Covenant.
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Company will not, without the prior
consent of Subsidiary which will not be unreasonably withheld, take any
affirmative action, or fail to take any reasonable action within its control, as
a result of which, to the Company's Knowledge, any of the changes or events
listed in Section 5.16 is likely to occur.
7.4. Required Approvals.
As promptly as practicable after the date of this Agreement, Company
will make all filings required by Legal Requirements to be made by it in order
to consummate the Contemplated Transactions (including all filings under the HSR
Act). Between the date of this Agreement and the Closing Date, Company will (a)
reasonably cooperate with Subsidiary with respect to all filings that Subsidiary
elects to make or is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (b) reasonably cooperate with Subsidiary in
obtaining all material consents (including taking all actions reasonably
requested by Subsidiary to cause early termination of any applicable waiting
period under the HSR Act); provided that this Agreement will not require Company
to dispose of or make any change in any portion of its Business or to incur any
other burden to obtain a Governmental Authorization.
7.5. Notification.
Between the date of this Agreement and the Closing Date, Company will
promptly notify Subsidiary in writing if Company becomes aware of any fact or
condition that causes or constitutes a material breach of Company's
representations and warranties as of the date of this Agreement, or if Company
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a material breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. During the same period, Company will promptly notify
Subsidiary if Company becomes aware of the occurrence of any material breach of
any covenant of Company in this Section 7 or of the occurrence of any event that
may make the satisfaction of the conditions in Section 9 impossible or unlikely.
7.6. Indebtedness of Related Persons.
Except as expressly provided in this Agreement, Company will cause all
indebtedness owed to Company by any Related Person to be paid in full prior to
or simultaneous with Closing. All indebtedness of Company to any Shareholder
existing on the date hereof will be resolved without an adverse effect on the
tax-free nature of the Merger under Section 368(a) of the IRC.
7.7. Permitted Distributions.
Notwithstanding the provisions of Section 7.2 and 7.3 hereof:
(a) Subject to the provisions of the GBCC, Company shall
be entitled to make one or more distributions on the Company Common Stock to its
Shareholders of cash or a
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promissory note in an aggregate amount not to exceed $130 million, bearing
interest at nine percent (9%) per annum and otherwise having terms and
conditions reasonably satisfactory to Parent and Company. All such distributions
shall result in a reduction of Merger Consideration as provided in Section
4.1(c) of this Agreement. Additionally, the Company, in its discretion, shall be
entitled to obtain commercially reasonable third party financing to fund the
payment of all or any portion of such distribution prior to the Effective Time.
(b) Company shall be entitled to accrue on its financial
statements special bonuses to be paid to certain key employees of the Company in
an aggregate amount to not exceed $25 million, as provided in Section
4.1(c)(ii)(B), which shall be paid by the Surviving Corporation immediately
following the Effective Time. As provided in Section 4.1(c)(ii)(B), such bonuses
may be paid in cash or Parent Common Stock or a combination thereof. All such
bonuses shall constitute a reduction in the Merger Consideration as provided in
Section 4.1(c).
7.8. No Negotiation.
Until such time, if any, as this Agreement is terminated pursuant to
Section 11, neither Company nor any Shareholder will directly or indirectly
solicit, initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Parent and
Subsidiary) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of Company, or any of the
capital stock of Company, or any merger, consolidation, business combination, or
similar transaction involving Company.
7.9. Best Efforts.
Except as set forth in the proviso of Section 7.4, between the date of
this Agreement and the Closing Date, Company will use its Best Efforts to cause
the conditions in Sections 9 and 10 to be satisfied by the Company.
8. COVENANTS OF PARENT AND SUBSIDIARY PRIOR TO CLOSING DATE
8.1. Access and Investigation.
Between the date of this Agreement and the Closing Date, Parent will,
and will cause its Representatives to, afford Shareholders and their
Representatives access to such financial information with respect to Parent and
access to ask questions of the officers of Parent as such parties may reasonably
request, subject to obtaining appropriate confidentiality agreements from such
Persons.
8.2. Notification.
Between the date of this Agreement and the Closing Date, Parent will
promptly notify Company in writing if Parent becomes aware of any fact or
condition that causes or constitutes a material breach of Parent's
representations and warranties as of the date of this Agreement, or if Parent
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a material breach of any such representation or warranty had such
representation or warranty been made as
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of the time of occurrence or discovery of such fact or condition. During the
same period, Parent will promptly notify Company if Parent becomes aware of the
occurrence of any material breach of any covenant of Parent in this Section 8 or
of the occurrence of any event that may make the satisfaction of the conditions
in Section 10 impossible or unlikely.
8.3. Approvals of Governmental Bodies.
As promptly as practicable after the date of this Agreement, Parent and
Subsidiary will make all filings required by Legal Requirements to be made by
them to consummate the Contemplated Transactions (including all filings under
the HSR Act). Between the date of this Agreement and the Closing Date, Parent
and Subsidiary (i) will cooperate with Company with respect to all filings that
Company is required by Legal Requirements to make in connection with the
Contemplated Transactions, and (ii) cooperate with Company in obtaining all
consents required under this Agreement; provided that this Agreement will not
require Parent or Subsidiary to dispose of or make any change in any portion of
its business or to incur any other burden to obtain a Governmental
Authorization.
8.4. Board of Directors of Parent.
Parent shall cause its Board of Directors to nominate and appoint
Executive to fill a vacancy on its Board of directors effective as of the day
immediately following the Closing Date, and Executive agrees to serve for the
unexpired term of such vacancy.
8.5. Best Efforts.
Except as set forth in the proviso to Section 8.1, between the date of
this Agreement and the Closing Date, Parent and Subsidiary will use its Best
Efforts to cause the conditions in Sections 9 and 10 to be satisfied by Parent
and Subsidiary.
8.6. Operation of Business of Parent.
Between the date of this Agreement and the Closing Date, Parent will
not:
(a) enter in to any agreement to dissolve, consolidate or
sell a substantial portion of its assets; or
(b) take any action which would cause the Merger to fail
to qualify as a reorganization under the provisions of Section 368(a) of the
IRC.
9. CONDITIONS PRECEDENT TO PARENT'S AND SUBSIDIARY'S OBLIGATION TO CLOSE
Parent's and Subsidiary's obligation to effect the Merger and to take
the other actions required to be taken by Parent and Subsidiary at the Closing
is subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Parent and Subsidiary, in
whole or in part):
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9.1. Accuracy of Representations.
Company's representations and warranties in this Agreement must have
been accurate as of the date of this Agreement, and must be accurate as of the
Closing Date as if made on the Closing Date, except in each case, for
inaccuracies that will not have a Material Adverse Effect on Company or the
Business of the Company, taken as a whole.
9.2. Company's Performance.
(a) The covenants and obligations that Company is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been duly performed and complied with in all material
respects, except in each case for failures to perform or comply that would not
have a Material Adverse Effect on the Company or the Business, taken as a whole.
(b) Company must have delivered each of the documents
required to be delivered by Company pursuant to Section 4.2.
9.3. Consents.
Each of the Consents identified in Schedule 9.3 must have been obtained
and must be in full force and effect.
9.4. Additional Documents.
Each of the following documents shall have been delivered to
Subsidiary:
(a) opinions of Kinney, Kemp, Sponcler, Joiner & Tharpe
and Long Aldridge & Norman LLP, dated the Closing Date, substantially in the
forms of Exhibit 9.4(a);
(b) estoppel certificates executed on behalf of landlords
of all Leased Real Property, dated as of a date not more than twenty (20) days
prior to the Closing Date, each in a commercially reasonable form; and
(c) such other documents as Parent or Subsidiary may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 10.4(a), (ii) evidencing the accuracy of
Company's representations and warranties, (iii) evidencing the performance by
Company of, or the compliance by Company with, any covenant or obligation
required to be performed or complied with by Company, (iv) evidencing the
satisfaction of any condition referred to in this Section 9, or (v) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
9.5. No Proceedings.
Since the date of this Agreement, there must not have been commenced
any Proceeding (a) involving any material challenge to, or seeking material
damages or other relief in connection with, any of the Contemplated
Transactions, (b) that reasonably would be expected to have the effect of
preventing, delaying, making illegal, or otherwise interfering with any of the
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Contemplated Transactions, or (c) that involves a claim against Company which
could be reasonably expected to have a Material Adverse Effect.
9.6. No Claim Regarding Ownership or Sale Proceeds.
There must not have been made or Threatened by any Person any claim
asserting that such Person (other than a Shareholder) (a) is the holder or the
beneficial owner of, or has the right to acquire or to obtain beneficial
ownership of, any stock of, or any other voting, equity, or ownership interest
in, Company, or (b) is entitled to all or any portion of the Merger
Consideration.
9.7. No Prohibition.
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Parent or Subsidiary or any Person affiliated with Parent
or Subsidiary to suffer any material adverse consequence under, (a) any
applicable Legal Requirement or Order, or (b) any Legal Requirement or Order
that has been published, introduced, or otherwise formally proposed by or before
any Governmental Body.
9.8. Due Diligence.
Parent and Subsidiary's due diligence investigation and its review and
audit of the Supplement to Disclosure Schedule shall not reveal any fact or
circumstance which, following consultation with Company, are so material that it
is reasonably likely to result in liability to or adverse financial performance
of the Company, taken as a whole, which is materially adverse from the
liabilities or financial performance known by Parent prior to the date hereof,
which determination, in each case, shall be made by the Board of Directors of
Parent in good faith and shall be determined, if at all, within ten (10) days
following receipt of the Supplement referenced in Section 4.3.
9.9. Tax-Free Reorganization.
The Merger shall qualify as a tax-free reorganization under Section
368(a) of the IRC.
10. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATION TO CLOSE
Company's obligation to enter into the Merger and to take the other
actions required to be taken by Company at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Company, in whole or in part):
10.1. Accuracy of Representations.
Parent's and Subsidiary's representations and warranties in this
Agreement must have been accurate as of the date of this Agreement and must be
accurate as of the Closing Date as if made on the Closing Date, except in each
case inaccuracies that will not have a Material Adverse Effect on Parent, taken
as a whole.
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10.2. Parent's and Subsidiary's Performance.
(a) The covenants and obligations that Parent and
Subsidiary is required to perform or to comply with pursuant to this Agreement
at or prior to the Closing must have been performed and complied with in all
material respects, except in each case for failures to perform or comply that
would not have a Material Adverse Effect on the Company or the Business, taken
as a whole.
(b) Parent and Subsidiary must have delivered each of the
documents required to be delivered by Parent or Subsidiary pursuant to Section
4.2 and must have made the payments required to be made by Parent or Subsidiary
pursuant to Sections 4.2(b).
10.3. Consents.
Each of the Consents identified in Schedule 10.3 must have been
obtained and must be in full force and effect.
10.4. Additional Documents.
Subsidiary must have caused the following documents to be delivered to
Company:
(a) an opinion of Powell, Goldstein, Frazer & Murphy LLP,
dated the Closing Date, substantially in the form of Exhibit 10.4(a); and
(b) such other documents as Company may reasonably
request for the purpose of (i) enabling their counsel to provide the opinion
referred to in Section 9.4(a), (ii) evidencing the accuracy of any
representation or warranty of Subsidiary, (iii) evidencing the performance by
Subsidiary of, or the compliance by Subsidiary with, any covenant or obligation
required to be performed or complied with by Subsidiary, (iv) evidencing the
satisfaction of any condition referred to in this Section 10, or (v) otherwise
facilitating the consummation of any of the Contemplated Transactions.
10.5. No Injunction.
There must not be in effect any Legal Requirement or any injunction or
other Order that prohibits the Contemplated Transactions.
10.6. Tax-Free Reorganization.
The Merger shall qualify as a tax-free reorganization under Section
368(a) of the IRC.
11. TERMINATION
11.1. Termination Events.
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Parent or Subsidiary on the one hand, or
Company and Shareholders, on the other hand, if a material breach of any
provision of this Agreement has been
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committed by the other parties and such breach has not been waived or cured
within ten (10) days after the non-breaching party or parties has notified the
breaching party of such breach and its intention to terminate pursuant to this
Section 11;
(b) (i) by Subsidiary if any of the conditions in
Section 9 has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Parent or Subsidiary to comply with its obligations under this Agreement) and
Subsidiary has not waived such condition on or before the Closing Date; or (ii)
by Company, if any of the conditions in Section 10 has not been satisfied as of
the Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Company to comply with its obligations under
this Agreement) and Company has not waived such condition on or before the
Closing Date;
(c) by Subsidiary in accordance with Section 4.3 hereof.
(d) by mutual consent of Subsidiary and Company; or
(e) by either Subsidiary or Company if the Closing has
not occurred (other than through the failure of any party seeking to terminate
this Agreement pursuant to this subparagraph (e) to comply fully with its
obligations under this Agreement) on or before January 31, 1999, or such later
date as the parties may agree upon.
11.2. Effect of Termination.
Each party's right of termination under Section 11.1 is in addition to
any other rights it may have under this Agreement or otherwise, and subject to
Section 11.3, the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 11.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in Sections 13.6, 13.8 and 11.3 will survive; provided, however,
that if this Agreement is terminated by a party other than pursuant to Section
11.1(a) or 11.1(b), the terminating party's right to pursue all legal remedies
will survive such termination unimpaired.
11.3. Break-up Fee.
Each party acknowledges that in the event the Merger does not occur,
both parties will experience significant damage and incur significant expenses
in connection with the Contemplated Transactions. In recognition of that fact
and because the amount of Damages which might otherwise accrue would be
impossible or difficult to ascertain, the parties hereto hereby agree as
follows:
(a) In the event either Parent or Subsidiary shall
terminate this Agreement pursuant to Section 11.1(a) or 11.1(b) for any reason
other than a breach of a representation, warranty or covenant of Company or
Shareholders resulting from inaccuracies or failures to perform or comply that
will have a Material Adverse Effect on the Company or the Business, taken as a
whole, or the failure of the parties to obtain any required approvals under the
HSR Act, then Parent shall promptly on demand therefor, pay to Company the sum
of $20 million, as liquidated damages and not as a penalty; and
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(b) In the event either Company or the Shareholders shall
terminate this Agreement pursuant to Section 11.1(a) or 11.1(b) for any reason
other than a breach of a representation, warranty or covenant of Parent or
Subsidiary resulting from inaccuracies or failures to perform or comply that
will have a Material Adverse Effect on Parent or Subsidiary, taken as a whole,
or the failure of the parties to obtain any required approvals under the HSR
Act, , then Company shall promptly on demand therefor, pay to Parent the sum of
$20 million, as liquidated damages and not as a penalty.
12. INDEMNIFICATION; REMEDIES
12.1. Survival; Right to Indemnification Not Affected by Knowledge.
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Schedule, the Supplement to the Disclosure Schedule,
the certificate delivered pursuant to Section 4.2(a)(v) and Section 4.2(b)(iv),
and any other certificate or document delivered pursuant to this Agreement will
survive the Closing. The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any
Knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
12.2. Indemnification and Payment of Damages by Company and
Shareholders.
Company (prior to the Closing) and Shareholders, jointly and severally,
will indemnify and hold harmless Parent and Subsidiary and their respective
directors, officers, employees, agents and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, in each case net of insurance
recoveries, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by
Company or Shareholders in this Agreement, the Disclosure Schedule, the
supplements to the Disclosure Schedule, or any other certificate or document
delivered at Closing by Company or Shareholders pursuant to this Agreement;
provided that to the extent that any such representation and warranty is
qualified by whether there is or could result a "Material Adverse Effect," such
qualification shall be ignored for purposes of indemnification under this
Section 12.2(a);
(b) any breach by Company or Shareholders of any covenant
or obligation of Company or Shareholders in this Agreement;
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(c) any liability or obligation of the Company to a third
party not adequately reserved on the Balance Sheet to the extent they arise out
of the operation of the Business or Assets of the Company prior to Closing,
whether disclosed or undisclosed under this Agreement; provided the Shareholders
shall not be liable hereunder unless (i) such liability or obligation results in
litigation against the Company, the Surviving Corporation or Parent; and (ii)
Parent or Surviving Corporation shall have suffered or incurred Damages with
respect to such liability or obligation of not less than $1.0 million (in excess
of amounts reserved for such litigation on the Balance Sheet). In no event shall
any Indemnified Person be entitled to recover the initial $1.0 million of
Damages suffered or incurred with respect to such liability or obligation, but
Indemnified Persons shall be entitled to recover all Damages in excess of such
$1.0 million without limitation. Damages for purposes of this paragraph (c)
shall also include any liability or obligation to any officer, director or
employee of the Company for indemnification of such Person in connection with
any claim, suit, investigation or other matter arising from the operation of the
Business or Assets of the Company prior to Closing. The Surviving Corporation,
or Parent on behalf of Surviving Corporation, shall maintain insurance on the
Business and Assets which affords, in all material respects, the coverages
available to the Company as of the date hereof, and in the event of a claim
under this Section 12.2(c), in the event such insurance is not available, the
indemnification hereunder shall be reduced by the insurance that otherwise would
have been available to pay such claim had it been maintained by the Surviving
Corporation or Parent. In the event any such litigation also arises out of the
business and operation of Parent prior to the Effective Time, or out of the
business and operation of Parent or the Surviving Corporation after the
Effective Time, any amount of Damages payable in connection with such litigation
which is not clearly attributable to the activities of a particular party shall
be allocated among Parent, the Surviving Corporation and Shareholders as may be
determined in such litigation or, absent such determination, in such proportion
as is appropriate to reflect the relative fault of Parent, the Surviving
Corporation and Company (in the case of Shareholders) in connection with such
Damages.
12.3. Indemnification and Payment of Damages by Parent and
Subsidiary.
Parent and Subsidiary, jointly and severally, will indemnify and hold
harmless Company (prior to the Closing) and Shareholders and their respective
Representatives, trustees and affiliates (collectively, the "Indemnified
Persons") for, and will pay to the Indemnified Persons the amount of any Damages
arising, directly or indirectly, from or in connection with:
(a) any breach of any representation made by Parent or
Subsidiary in this Agreement, any schedule hereto or any other certificate or
document delivered or Closing by Parent or Subsidiary pursuant to this
Agreement, provided that to the extent any such representation and warranty is
qualified by whether there is or could result a Material Adverse Effect, such
qualification shall be ignored for purposes of indemnification under this
Section 12.3(a);
(b) any breach by Parent or Subsidiary of any covenant or
obligation of Parent or Subsidiary in this Agreement; or
(c) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such
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Person with Parent or Subsidiary (or any Person acting on its behalf) in
connection with any of the Contemplated Transactions.
12.4. Indemnification and Payment of Damages by Parent - Other
Matters.
Parent will indemnify and hold harmless the Shareholders, and will pay
to Shareholders an amount equal to the Shareholder's "Additional Tax Liability"
(as defined below), in the event that it is determined that the Merger of
Company with and into Subsidiary does not qualify as a "reorganization" within
the meaning of IRC Section 368(a); provided, however, that Parent shall not be
obligated to indemnify the Shareholders under this Section 12.4 in the event
that the reason that the Merger fails to qualify as a "reorganization" (as
defined above) is the direct result of a breach of a representation set forth in
Section 5.27 or as a direct result of a distribution by the Company other than a
distribution permitted under the provisions of Section 7.7. Additional Tax
Liability shall mean the aggregate federal and state income tax liability for
which the Shareholders are liable regardless of when due or assessed that is a
direct result of the failure of the Merger to qualify as a "reorganization" (as
defined above), but not in excess of the product of (i) the aggregate fair
market value of all of the shares of Parent Common Stock, based upon the closing
price of Parent Common Stock on the Closing Date, as reported in the Wall Street
Journal, issued to the Shareholders in the Merger, multiplied by (ii)
twenty-four percent (24%).
12.5. Time Limitations.
If the Closing occurs, no Indemnified Person will have any liability
for indemnification under this Article 12 or otherwise unless on or before the
date specified below, an Indemnified Person shall notify in writing the parties
against whom indemnification is sought of a claim specifying the factual basis
of the claim in reasonable detail to the extent then known:
(a) a claim for breach of any representation and
warranty, or covenant or obligation to be performed and complied with prior to
the Closing Date, other than representations and warranties set forth in
Sections 5.2(a), 5.3 (other than the last sentence of Section 5.3), 5.11(a), 6.2
and 6.3 must be given by written notification of such claim on or before March
31, 2000;
(b) a claim for breach of the representations and
warranties contained in Sections 5.11(a) must be given by written notification
no later than three (3) years following the date the final Subchapter S return
with respect to the Company is filed; and
(c) a claim for breach of the representations and
warranties set forth in Sections 5.2(a), 5.3 (other than the last sentence of
Section 5.3), 6.2 and 6.3 or any covenant or obligation which is not to be
performed and complied with prior to the Closing Date (including, without
limitation, any indemnification under Section 12.2(c) and 12.4) may be made at
any time.
12.6. Limitations on Amount - Company and Shareholders.
(a) Company and Shareholders will have no liability (for
indemnification or otherwise) with respect to the matters described in Section
12.2 until the total of all Damages with respect to such matters exceeds $6.0
million (the "Basket"), and then only for the amount
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by which such Damages exceed $6.0 million; provided that this Section 12.6(a)
shall not be applicable to indemnification for Damages under Section 12.2(c) and
any amounts paid pursuant to Section 12.2(c) will not be applied or otherwise
reduce the Basket.
(b) Company's and Shareholders' maximum liability for
Damages with respect to a claim for indemnification or reimbursement under this
Agreement shall be limited to and shall not exceed $34.0 million in the
aggregate; provided that this Section 12.6(b) shall not be applicable to
indemnification for Damages under Section 12.2(c).
12.7. Limitations on Amount - Parent and Subsidiary.
(a) Parent and Subsidiary will have no liability (for
indemnification or otherwise) with respect to the matters described in Section
12.3 until the total of all Damages with respect to such matters exceeds $6.0
million, and then only for the amount by which such Damages exceed $6.0 million;
provided that this Section 12.7(a) shall not be applicable to indemnification
for Damages under Section 12.4.
(b) Parent's and Subsidiary's maximum liability for
Damages with respect to a claim for indemnification or reimbursement under this
Article 12 shall be limited to and shall not exceed $34.0 million in the
aggregate; provided that this Section 12.7(b) shall not be applicable to
indemnification for Additional Tax Liability under Section 12.4.
12.8. Procedure for Indemnification -- Third Party Claims.
(a) Promptly after receipt by an indemnified party under
Section 12.2, 12.3 or 12.4, of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section 12.8(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 12 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding. If the indemnifying party
assumes the defense of a Proceeding, (i) it will not in and of itself be
conclusively
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established for purposes of this Agreement that the claims made in that
Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
with the consent of the indemnifying party, which will not be unreasonably
withheld, any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
(d) Company, Shareholders, Parent and Subsidiary hereby
consent to the non-exclusive jurisdiction of any court in which a Proceeding is
brought against any Indemnified Person for purposes of any claim that an
Indemnified Person may have under this Agreement with respect to such Proceeding
or the matters alleged therein, and agree that process may be served on such
Persons with respect to such a claim anywhere in the world.
12.9. Procedure for Indemnification -- Other Claims.
A claim for indemnification for any matter not involving a third-party
claim may be asserted by written notice to the party from whom indemnification
is sought.
12.10. Exclusive Remedy.
The indemnification rights and obligations set forth in this Section
12, absent fraud, shall be the exclusive remedy available to the parties for a
breach of a representation, warranty, covenant or agreement under this
Agreement.
13. GENERAL PROVISIONS
13.1. Resale of Parent Common Stock.
(a) Each of the Shareholders acknowledges that he may be
deemed an "affiliate" of the Company within the meaning of Rule 144 promulgated
under the Securities Act (although nothing contained herein should be construed
as an admission of such fact) and that, if in fact such Shareholder were an
affiliate of the Company under the Securities Act, his, her or its
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ability to sell, assign or transfer the Parent Common Stock received pursuant to
the Merger may be restricted unless the transaction is registered under the
Securities Act or an exemption from such registration is available.
(b) Each of the Shareholders hereby covenants that he
will not sell, assign or transfer any of the Parent Common Stock except (i)
pursuant to an effective registration statement under the Securities Act, or
(ii) in a transaction, which in the opinion of independent counsel reasonably
satisfactory to Parent, is not required to be registered under the Securities
Act.
(c) Each of the Shareholders understands that Parent may
instruct its transfer agent to withhold the transfer of any Parent Common Stock
pending the receipt of any such opinion. Each of the Shareholders acknowledges
that appropriate legends will be placed on certificates representing Parent
Common Stock received pursuant to the Merger, which legends will be removed by
delivery of substitute certificates upon receipt of an opinion in form and
substance reasonably satisfactory to parent from independent counsel reasonably
satisfactory to Parent the effect that such legends are no longer required for
purposes of the Securities Act.
(d) Notwithstanding anything herein to the contrary, the
Shareholders agree that they shall not sell, assign or transfer at any time the
Parent Common Stock in any manner so that such disposition causes the
transactions contemplated by this Agreement to fail to qualify as a
reorganization under Section 368(a) of the IRC.
13.2. Registration Rights.
(a) The following terms shall have the following
meanings:
(i) The terms "register," "registered" and
"registration" refer to a registration effected by preparing
and filing with the SEC and applicable state securities laws a
registration statement or similar document in compliance with
the Securities Act and applicable state securities laws, and
the automatic effectiveness or the declaration or ordering of
effectiveness of such registration statement or document.
(ii) The term "Registrable Securities" means
shares of Parent Common Stock issued or to be issued to any
Holder pursuant this Agreement (including any shares issued in
connection with any stock split, stock dividend or other
recapitalization), but shall not include any Parent Common
Stock (i) which has been effectively registered under the
Securities Act and disposed of by a Holder in accordance with
a registration statement covering such security or (ii) which
has been distributed to the public pursuant to Rule 144 under
the Securities Act.
(iii) The term "Holder" means (i) a Shareholder
and (ii) a transferee of Registrable Securities from a Holder
provided such transfer complies with Section 13.2(a)(i) of
this Agreement.
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(iv) The term "Form S-3" means Form S-3 under the
Securities Act as in effect on the date hereof or any
successor registration form to Form S-3 under the Securities
Act subsequently adopted by the SEC.
(v) The term "SEC" shall mean the Securities
Exchange Commission.
(vi) The term "affiliate" means a person or
entity directly or indirectly controlled by, controlling or
under common control with another person or entity.
(b) Holders shall have registration rights as follows:
(i) Parent shall prepare and file with the SEC
within sixty (60) days following the Closing Date a
registration statement (the "Registration Statement") on Form
S-3 or other appropriate form for the resale of the
Registrable Securities by the Holders from time to time,
covering all the Registrable Securities, and shall use its
best efforts to have such registration become effective as
soon as practicable after the filing thereof.
(ii) A reasonable time before filing the
Registration Statement and the related prospectus or any
amendment or supplement thereto, Parent will furnish to the
counsel selected by the Holders of a majority of the
Registrable Securities covered by the Registration Statement
copies of all such documents proposed to be filed.
(iii) Parent shall prepare and file with the SEC
such amendments and supplements to the Registration Statement
filed hereunder and the prospectus used in connection
therewith as may be necessary to keep the Registration
Statement effective until the earlier of (i) the time when all
the Registrable Securities covered by the Registration
Statement have been sold by the Holders and (ii) the date as
of which each Holder is entitled to sell all remaining
Registrable Securities covered by the Registration Statement
held by such Holder, without limitation as to volume, pursuant
to Rule 144 under the Securities Act.
(iv) Subject to the limitations set forth in
Section 13.2(h) hereof and subject to compliance with the
obligations imposed by federal and state securities laws, each
Holder shall be entitled to make sales of Registrable
Securities pursuant the Registration Statement without any
volume limitation.
(c) Parent shall:
(i) Prepare and file with the SEC and applicable
state securities commissions such amendments and supplements
to the Registration Statement and the prospectus used in
connection with the Registration Statement, and use its best
efforts to cause each such amendment to become effective as
soon as practicable, as may be necessary to comply with the
provisions of the Securities Act and applicable state
securities laws with respect to the disposition of all
securities covered by the Registration Statement;
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(ii) Furnish to the Holders such reasonable
number of copies of the Registration Statement, each amendment
and supplement thereto, the prospectus included in the
Registration Statement (including each preliminary
prospectus), any documents incorporated by reference into the
Registration Statement and such other documents as they may
reasonably request in order to facilitate the disposition of
Registrable Securities owned by them;
(iii) Use its best efforts to register or qualify
the securities covered by the Registration Statement under the
securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders, and do any and all other
acts and things which may be necessary or desirable to
consummate the disposition of the securities in such
jurisdictions, except that Parent shall not for any such
purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not
but for the requirements of this paragraph (c) be obligated to
be so qualified or to consent to general service of process in
any such jurisdiction;
(iv) Promptly notify each Holder of Registrable
Securities covered by the Registration Statement, at any time
when a prospectus relating thereto covered by the Registration
Statement is required to be delivered under the Securities
Act, of the happening of any event as a result of which the
prospectus included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in
the light of the circumstances then existing and promptly file
such amendments and supplements which may be required on
account of such event and use its best efforts to cause each
such amendment and supplement to become effective;
(v) Use its best efforts to cause the
Registrable Securities to be listed on a national securities
exchange; and
(vi) Otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at
least twelve months beginning with the first day of the
Company's first full calendar quarter after the effective date
of the Registration Statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder.
(d) It shall be a condition precedent to the obligations
of Parent to take any action pursuant to Section 13.2 of this Agreement that the
selling Holders shall furnish to Parent such information regarding themselves or
the Registrable Securities held by them, and the intended method of disposition
of such securities, as shall be reasonably requested by Parent in order to
effect the registration of their Registrable Securities.
(e) All expenses incurred in connection with each of the
registrations, filings or qualifications pursuant to Section 13.2 (including all
amendments thereto), including (without
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limitation) all registration, printing and accounting fees, fees and
disbursements of counsel for Parent, shall be borne by Parent.
(f) With respect to Registrable Securities included in
the Registration Statement under this Agreement:
(i) To the fullest extent permitted by law,
Parent will and hereby does indemnify and hold harmless each
selling Holder and each person, if any, who controls such
Holder within the meaning of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any losses, claims, damages or liabilities
(joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law
or common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or
violations (each a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained or
incorporated by reference in the Registration Statement, or
the omission or alleged omission to state or incorporate by
reference therein a material fact required to be stated or
incorporated by reference therein or necessary to make the
statements therein or incorporated by reference not misleading
(including in any prospectus or preliminary prospectus
included therein), unless such untrue statement or alleged
untrue statement or omission or alleged omission was contained
in or omitted from a preliminary prospectus and corrected in a
final or amended prospectus and the selling Holder failed to
deliver a copy of the final or amended prospectus at or prior
to the confirmation of the same of the registered securities
to the persons asserting any such loss, claim, damage or
liability in the case where such delivery is required by the
Securities Act, or (ii) any other violation by Parent of the
Securities Act or any other securities law or any rule or
regulation promulgated thereunder. Parent will reimburse each
such selling Holder, officer, director, shareholder, partner
or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or
action. The indemnity agreement contained in this Section
13.2(f) shall not apply to amounts paid in settlement of any
loss, claim, damage, liability or action if such settlement is
effected without the consent of Parent (which consent shall
not be unreasonably withheld), nor shall Parent be liable to a
Holder in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for
inclusion in such registration statement by or on behalf of
such Holder or controlling person.
(ii) To the fullest extent permitted by law, each
selling Holder will and hereby does indemnify and hold
harmless Parent, each of its directors, each of its officers
who sign the Registration Statement, each person, if any, who
controls Parent within the meaning of the Securities Act, each
agent and any other selling Holder selling securities in such
registration statement and any of its directors, officers or
partners or any person who controls such selling Holder,
against any losses, claims, damages or liabilities (joint or
several) to which they may become
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subject under the Securities Act, the Exchange Act or other
federal or state or common law, to the extent that such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with
written information furnished by or on behalf of such Holder
expressly for inclusion in such registration statement; and
each such selling Holder will reimburse any legal or other
expenses reasonably incurred by (x) Parent or any such
director, officer, agent, controlling person of Parent, or (y)
other selling Holder, officer, director, partner or
controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action;
provided, however, that the liability of each selling Holder
hereunder shall be limited to the proportion of any such loss,
claim, damage, liability or expense which is equal to the
proportion that the total price to the public at which the
registered securities sold by such selling Holder under the
Registration Statement bears to the total public offering
price of all securities, but not in any event to exceed the
proceeds received by such selling Holder from the sale of
Registrable Securities covered by the Registration Statement.
The indemnity agreement contained in this Section 13.2(f)
shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is
effected without the consent of the selling Holder (which
consent shall not be unreasonably withheld) nor, shall the
selling Holder be liable to Parent in any case in which such
untrue statement or alleged untrue statement or omission or
alleged omission was contained in a preliminary prospectus and
corrected in a final or amended prospectus, and Parent failed
to deliver a copy of the final or amended prospectus at or
prior to the confirmation of the sale of the securities to the
person asserting any such loss, claim, damage or liability in
any case where such delivery is required by the Securities
Act.
(iii) Each indemnified party or parties shall give
reasonably prompt notice to each indemnifying party or parties
of any action or proceeding commenced against it in respect of
which indemnity may be sought hereunder, but failure so to
notify an indemnifying party or parties shall not relieve it
or them from any liability which it or they may have under
these indemnity provisions, except to the extent that the
indemnifying party is materially prejudiced by such failure to
give notice. If the indemnifying party or parties so elects
within a reasonable time after receipt of such notice, the
indemnifying party or parties may assume the defense of such
action or proceeding at such indemnifying party's or parties'
expense with counsel chosen by the indemnifying party or
parties and approved by the indemnified party defendant in
such action or proceeding, which approval shall not be
unreasonably withheld; provided, however, that if such
indemnified party or parties determine in good faith that a
conflict of interest exists and that therefore it is advisable
for such indemnified party or parties to be represented by
separate counsel or that, upon advice of counsel, there may be
legal defenses available to it or them which are different
from or in addition to those available to the indemnifying
party, then the indemnifying party or parties shall not be
entitled to assume such defense and the indemnified party or
parties shall be entitled to separate counsel at the
indemnifying party's or parties'
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expense. If an indemnifying party or parties is not so
entitled to assume the defense of such action or does not
assume such defense, after having received the notice referred
to in the first sentence of this paragraph, the indemnifying
party or parties will pay the reasonable fees and expenses of
counsel for the indemnified party or parties. Notwithstanding
the foregoing, the indemnifying party shall not be obligated
to pay the reasonable fees and expenses of more than one
counsel for the indemnified parties with respect to any claim,
unless in the reasonable judgment of counsel to any
indemnified party, expressed in a writing delivered to the
indemnifying party, a conflict of interest may exist between
such indemnified party and any other indemnified party with
respect to such claim, in which event the indemnifying party
shall be obligated to pay the reasonable fees and expenses of
such additional counsel or counsels (which shall be limited to
one counsel per indemnified party). No indemnifying party or
parties will be liable for any settlement effected without the
written consent of such indemnifying party or parties, which
consent shall not be unreasonably withheld. If an indemnifying
party is entitled to assume, and assumes, the defense of such
action or proceeding in accordance with this paragraph, such
indemnifying party or parties shall not, except as otherwise
provided in this subsection (iii), be liable for any fees and
expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
(iv) If the indemnification provided for in this
Section 13.2(f) is unavailable to a party that would have been
an indemnified party under this Section 13.2(f) in respect of
any claims referred to herein, then each party that would have
been an indemnifying party hereunder shall, in lieu of
indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such
claims in such proportion as is appropriate to reflect the
relative fault of the indemnifying party or parties on the one
hand and such indemnified party on the other in connection
with the action, statement or omission which resulted in such
claims, as well as any other relevant equitable
considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or
alleged omission to state a material fact relates to
information supplied by the indemnifying party or such
indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the foregoing
provisions of this Section 13.2(f), a selling Holder of
registered securities shall not as an indemnifying party be
required to contribute any amount in excess of (x) the amount
by which the total price at which the registered securities
sold by such indemnifying party were offered to the public
exceeds (y) the amount of any damages which such indemnifying
party has otherwise been required to pay by reason of such
action, untrue or alleged untrue statement or omission or
alleged omission. Parent and each selling Holder of registered
securities agrees that it would not be just and equitable if
contribution pursuant to this Section 13.2(f) were determined
by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations
referred to above in this Section 13.2(f). The amount paid or
payable by an indemnified party as a result of the claims
referred to above in this Section 13.2(f) shall include any
legal
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or other expenses reasonably incurred by such indemnified
party in connection with investigation or defending any such
action or claim.
(v) Without the prior written consent of the
indemnified party, no indemnifying party shall consent to
entry of judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release
of all liability in respect of such claim.
(vi) No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any
person who was not guilty of fraudulent misrepresentation
within the meaning of such Section 11(f).
(g) With a view to making available to the Holders the
benefits of Rule 144 promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
Parent to the public without registration, Parent agrees to use its best
efforts:
(i) make and keep public information available,
as those terms are understood and defined in Rule 144;
(ii) to file with the SEC in a timely manner all
reports and other documents required of Parent under the
Exchange Act; and
(iii) to furnish to any Holder so long as the
Holder owns any Registrable Securities forthwith upon request
(i) a written statement by Parent as to its compliance with
the reporting requirements of Rule 144 and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of
Parent and such other reports and documents so filed by
Parent, and (iii) such other information as may be reasonably
requested in availing the Holder of any rule or regulation of
the SEC which permits the selling of any such securities
without registration.
(h) Upon the request of the underwriters managing a
public offering for sale by Parent of its securities, each Holder shall not sell
or otherwise transfer or dispose of any Registrable Securities for such period
as the directors and officers of Parent are required to hold their shares
following the effective date of a registration statement filed by Parent under
the Securities Act covering the offer and sale of Parent Common Stock or such
other securities by Parent in an underwritten offering without the prior written
consent of the underwriters for such offering. Parent may impose stop transfer
restrictions with respect to Registrable Securities subject to the foregoing
restriction until the end of the period described in the preceding sentence.
(i) The registration rights of a Holder may be
transferred to any transferee who acquires all of the shares of Parent Common
Stock originally acquired by such Holder, provided, however, that Parent is
given written notice by the transferor at the time of such transfer stating the
name and address of the transferee and identifying the securities with respect
to which the rights under this Agreement are being assigned and provided further
that the
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transferee agrees in writing to acquire and hold such securities subject to the
provisions of this Agreement.
(j) Each Shareholder hereby covenants with Parent that it
will promptly advise Parent of any changes in the information concerning each
Shareholder contained in the Registration Statement filed hereunder and that
such Shareholder will not make any sale of Registrable Securities pursuant to
the Registration Statement without complying with the prospectus delivery
requirements of the Securities Act. Each Shareholder acknowledges that
occasionally there may be times when Parent must temporarily suspend the use of
the prospectus forming a part of the Registration Statement until such time as
an amendment to the Registration Statement has been filed by Parent and declared
effective by the SEC, the relevant prospectus supplemented by Parent or until
such time as Parent has filed an appropriate report with the SEC pursuant to the
Exchange Act. Parent agrees to use its best efforts to have the suspension
period lifted as soon as practicable. During any period in which sales are
suspended and upon notice of such suspension from Parent, each Shareholder
agrees not to sell any such Registrable Securities pursuant to any such
prospectus. Each Shareholder covenants that he will not sell any Registrable
Securities pursuant to any such prospectus during the period commencing at the
time at which Parent gives such Shareholder notice of the suspension of the use
of said prospectus and ending at the time Parent gives notice that such
Shareholder may thereafter effect sales pursuant to said prospectus.
(k) The registration rights granted pursuant to this
Section 13.2 shall terminate on the date as of which each Holder is entitled to
sell all remaining Registrable Securities held by such Holder, without
limitation as to volume, pursuant to Rule 144 under the Securities Act.
13.3. Section 1362(e)(3) Election.
Unless the Shareholders have a lower tax liability pursuant to IRC
Section 1362(e)(2), Subsidiary and Company agree to elect to have all items
necessary in the determination of any income, expense, deduction, credit or
other amount utilized in preparation of the federal (and, if applicable, state)
tax returns of the Company for the "S Termination Year" (as that term is defined
in IRC Section 1362(e)(4)) to be assigned to each such short taxable year in the
"S Termination Year" under normal tax accounting rules in accordance with the
provisions of IRC Section 1362(e)(3) and any applicable regulations thereunder.
Subsidiary and Company shall execute and timely file any forms, statements, or
other documentation required to effect the election in the appropriate manner.
Subsidiary and Company shall provide each of the other parties hereto with
evidence that such form, statement, or other documentation has been timely filed
in the appropriate manner.
13.4. Company Employees.
After the Effective Time, employees of Company shall be offered
participation in the employee benefit plans and programs available to employees
of Parent or its subsidiaries upon terms and conditions which when taken as a
whole are substantially similar to those afforded similarly situated employees
of Parent or its subsidiaries; provided that, to the extent that any present
plan or program of Company is temporarily continued solely for Company
employees, the foregoing shall not apply with respect to such temporarily
continued plan or program until
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such time as such plan or program of Company is discontinued. Employees of
Company shall receive credit for their service with Company for purposes of
determining their participation and vesting under the employee benefit plans and
programs of the Parent or its subsidiaries which are made available to employees
of the Company. For purposes of computing deductible amounts (or like
adjustments or limitations on coverage) under any employee benefit plan or
program of the Parent or its subsidiaries which are made available to employees
of the Company, expenses and claims previously recognized for similar purposes
under the applicable similar plan or program of Company shall be credited or
recognized under the comparable plan or program of Parent or its subsidiaries to
the fullest extent permitted under such plan or program, and any preexisting
condition requirements under any such plan or program of Parent or its
subsidiaries that would otherwise be applicable to employees of Company shall,
to the fullest extent permitted under such plan or program, be waived.
13.5. Transfer Taxes.
Parent shall pay any Tax statutorily imposed (including, without
limitation, a sales Tax, use Tax, real property transfer or gains Tax or
documentary stamp Tax (but not including any income or capital gains Tax)
directly attributable to the Contemplated Transactions.
13.6. Expenses.
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants, except that the Company, prior to or at the Closing
shall pay or accrue on its books all reasonable expenses of the Company and the
Shareholders with respect to the Contemplated Transactions, including, without
limitation, all reasonable fees and expenses of attorneys and accountants.
Parent or Subsidiary will pay the HSR Act filing fee for each party. In the
event of termination of this Agreement, the obligation of each party to pay its
own expenses will be subject to any rights of such party arising from a breach
of this Agreement by another party.
13.7. Public Announcements.
Any press release with respect to this Agreement or the Contemplated
Transactions will be issued, if at all, at such time and in such manner as
Parent determines, after consultation by Company. Unless consented to by Parent
in advance or required by Legal Requirements, prior to the Closing, Company and
each Shareholder shall keep this Agreement strictly confidential and may not
make any disclosure of this Agreement to any Person. Company and Subsidiary will
consult with each other concerning the means by which Company's employees,
customers, and suppliers and others having dealings with Company will be
informed of the Contemplated Transactions, and Parent will have the right to be
present for any such communication.
13.8. Further Assurances.
Following the Closing Date, neither Parent nor the Shareholders will
take any action which would cause the Merger to fail to qualify as a
reorganization under the provisions of Section 368(a) of the IRC.
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13.9. Confidentiality.
In connection with this Agreement, the parties may have access to
information which is nonpublic, confidential or proprietary in nature. All of
such information, in whole or in part, together with any analyses, compilations,
studies or other documents prepared by any party, which contain or otherwise
reflect any such information is hereinafter referred to as the "Confidential
Information." The term "Confidential Information" does not include information
which (a) was known to any party about another party prior to its disclosure,
provided that such information was lawfully obtained or developed, (b) becomes
generally available to the public other than as a result of a disclosure by a
party in violation of this Agreement, (c) becomes available from a source other
than a party to this Agreement, if the source is not bound by a confidentiality
agreement and such source lawfully obtained such information, or (d) is
independently developed by a party without access to any information from the
other party hereto.
Each party hereby agrees as follows:
(a) Except to the extent required in order to perform its
respective obligations hereunder and to perform its due diligence investigation,
each party shall keep the Confidential Information confidential and shall not,
without the prior mutual written consent of the parties hereto, disclose and
shall not use such Confidential Information after this Agreement is terminated
pursuant to Article 11 hereof. Each party agrees to transmit the Confidential
Information only to its respective employees and representatives who need to
know the Confidential Information;
(b) If the transactions contemplated hereunder are not
consummated, the Confidential Information, except for that portion of the
Confidential Information which consists of analyses, compilations, studies or
other documents prepared by each party's respective employees and
representatives, will be returned to the other promptly upon request and no
party shall retain any copies. That portion of the Confidential Information, and
all copies thereof, which consists of analyses, compilations, studies or other
documents prepared by each party's respective employees and representatives will
be kept confidential and subject to the terms of this Agreement or destroyed;
and
(c) In the event any party becomes legally compelled to
disclose any of the Confidential Information, such party will provide to the
other parties prompt notice so that each other party may seek a protective order
or other appropriate remedy and/or waive compliance with the provisions of this
Agreement. In the event that such protective order or other remedy is not
obtained, or compliance with the provisions of this Agreement is waived, a party
will furnish only that portion of the Confidential Information which is legally
required, and to the extent requested by the other party, will exercise its
reasonable efforts to obtain a protective order or other reliable assurance that
confidential treatment will be accorded the Confidential Information.
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13.10. Notices.
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested or nationally recognized overnight
delivery service, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the other
parties):
Company and Shareholders:
Julian Saul
702 Mt. Sinai Road
Dalton, GA 30720
with a copy to:
Kinney, Kemp, Sponcler, Joiner & Tharpe
225 West King Street
Dalton, Georgia 30720
Attention: H. Greely Joiner, Esq.
Facsimile No.: 706/275-6566
If to Parent, to:
Shaw Industries, Inc.
P.O. Drawer 2128
Dalton, Georgia 30722-2128
Attention: Bennie M. Laughter, Esq.
Telephone: (706) 278-3812
Telecopier: (706) 275-1442
with a copy to:
Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Thomas R. McNeill, Esq.
Telephone: (404) 572-6600
Telecopier: (404) 572-6999
13.11. Jurisdiction; Service of Process.
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State
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of Georgia, County of Whitfield, or, if it has or can acquire jurisdiction, in
the United States District Court for the Northern District of Georgia, and each
of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on any party anywhere in the world.
13.12. Further Assurances.
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
13.13. Waiver.
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
13.14. Entire Agreement and Modification.
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the documents executed
in connection with this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended except by a written agreement executed by the
party to be charged with the amendment.
13.15. Disclosure Schedule.
(a) The disclosures in the Disclosure Schedule, and those
in the Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Schedule
(other than an exception expressly set forth as such in the Disclosure Schedule
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
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(c) No due diligence conducted by Parent or Subsidiary
shall limit or be used as a defense by Company with respect to any claim of
breach of a representation, warranty or covenant by Company under this
Agreement.
(d) The disclosure of any information in the Disclosure
Schedule shall not be deemed to constitute an acknowledgement that such
information is required to be disclosed in connection with the representations
and warranties made by the Company in this Agreement or that it is material, nor
shall such information be deemed to establish a standard of materiality.
13.16. Assignments, Successors, and No Third-Party Rights.
Neither party may assign any of its rights under this Agreement without
the prior consent of the other parties except that Parent or Subsidiary may
assign any of its rights under this Agreement to any subsidiary of Parent.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this Agreement will
be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
13.17. Severability.
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
13.18. Section Headings; Construction.
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
13.19. Time of Essence.
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
13.20. Governing Law.
This Agreement will be governed by the laws of the State of Georgia
without regard to conflicts of laws principles.
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13.21. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
13.22. Shareholders' Representative.
(a) By executing this Agreement, each of the Shareholders
hereby irrevocably constitutes and appoints Executive, acting as hereinafter
provided, as his or her attorney-in-fact and agent in his or her name, place and
stead in connection with the transactions contemplated by this Agreement and
matters arising therefrom subsequent to the date hereof, and acknowledges that
such appointment is coupled with an interest. By executing and delivering this
Agreement, Executive hereby (i) accepts his appointment and authorization as
Shareholders' Representative to act as attorney-in-fact and agent in the name,
place and stead of each of the Shareholders in accordance with the terms of this
Agreement, and (ii) agrees to perform his duties and obligations hereunder.
(b) Each Shareholder authorizes the Shareholders'
Representative in the name and on behalf of such Shareholder:
(i) to give and receive any notice required or
permitted under this Agreement;
(ii) to exercise any rights and to take any
action required or permitted to be taken under this Agreement;
(iii) to negotiate, execute and deliver any
amendment to or modification of this Agreement or any of the
provisions hereof and any waiver or consent hereunder;
(iv) to dispute or to refrain from disputing any
claim made by Parent or Subsidiary under this Agreement and
any other agreements, instruments and documents to be
delivered by or on behalf of such Shareholder pursuant to this
Agreement;
(v) to negotiate and compromise any dispute
which may arise, and to exercise or refrain from exercising
remedies available under this Agreement and the other
agreements, instruments and documents delivered or to be
delivered by or on behalf of such Shareholder pursuant to this
Agreement and to sign any releases or other documents with
respect to any such dispute or remedy; and
(vi) to give such instructions and to do such
other things and refrain from doing such other things as the
Shareholders' Representative shall deem necessary or
appropriate to carry out the provisions of this Agreement and
any other agreements, instruments and documents delivered or
to be delivered by or on behalf of such Shareholder pursuant
to this Agreement.
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Each of the Shareholders agrees to be bound by all agreements and
determinations made, and agreements, documents and instruments negotiated,
executed and delivered by the Shareholders' Representative under this Agreement.
(c) Each of the Shareholders hereby expressly
acknowledges and agrees that the Shareholders' Representative is authorized to
act in his or her name and on his or her behalf. Notwithstanding any dispute or
disagreement among the Shareholders and/or the Shareholders' Representative,
Parent shall be entitled in good faith to rely on any and all action taken by
the Shareholders' Representative under this Agreement and the other agreements,
instruments and documents to be delivered by or on behalf of the Shareholders
pursuant to this Agreement without any liability to, or obligation to inquire
of, any of the Shareholders. Parent is hereby expressly authorized in good faith
to rely on the genuineness of the signatures of the Shareholders'
Representative, and upon receipt of any writing which reasonably appears to have
been signed by the Shareholders' Representative, Parent may act upon the same in
good faith without any further duty of inquiry as to the genuineness of the
writing.
(d) If the Shareholders' Representative ceases to
function in such capacity for any reason whatsoever, then Shareholders who prior
to the Contemplated Transactions held (or their successors in interest) a
majority of the Company Common Stock may appoint a successor; provided, however,
that if for any reason no successor has been appointed pursuant to the foregoing
within thirty (30) days, then Parent shall have the right but not the obligation
to petition a court of competent jurisdiction for appointment of a successor.
(e) The authorization of the Shareholders' Representative
shall be effective until such rights and obligations under this Agreement
terminate by virtue of the termination of any and all obligations of the
Shareholders hereunder.
(f) The Shareholders' Representative shall not be liable
for any acts or omissions under this Section 13.22 except for its own gross
negligence or willful misconduct.
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IN WITNESS WHEREOF, the parties have executed, sealed and delivered
this Agreement as of the date first written above.
Parent:
SHAW INDUSTRIES, INC.
By: /s/ W. Norris Little
----------------------------------------
Title: President and Chief Operating Officer
Subsidiary:
CHESSMAN ACQUISITION CORP.
By: /s/ Kenneth G. Jackson
----------------------------------------
Title: President
Company:
QUEEN CARPET CORPORATION
By: /s/ Julian Saul
----------------------------------------
Title: President
Shareholders:
/s/ Julian Saul
--------------------------------------------
JULIAN SAUL
/s/ Linda Saul
--------------------------------------------
LINDA SAUL
ANITA SAUL FAMILY TRUST
By: /s/ Anita Saul
----------------------------------------
Anita Saul, Trustee
JULIAN SAUL FAMILY TRUST
By: /s/ Julian Saul
----------------------------------------
Julian Saul, Trustee
LINDA SAUL SCHEJOLA FAMILY TRUST
By: /s/ Linda Saul Schejola
----------------------------------------
Linda Saul Schejola, Trustee
<PAGE> 1
EXHIBIT 1(b)
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
THIS FIRST AMENDMENT (the "First Amendment") to that certain Agreement
and Plan of Merger, dated as of August 13, 1998 (the "Agreement") among Shaw
Industries, Inc. ("Parent"), Chessman Acquisition Corp. ("Subsidiary"), Queen
Carpet Corporation ("Company") and Julian Saul, Linda Saul, Anita Saul Family
Trust, Julian Saul Family Trust and Linda Saul Schejola Family Trust
(collectively, "Shareholders") is entered into as of the 6th day of October,
1998, by and among PARENT, SUBSIDIARY, COMPANY and the SHAREHOLDERS in
accordance with the provisions of the Agreement. Capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Agreement.
WHEREAS, the Agreement contemplated that the Company would be merged
with and into the Subsidiary, with the Subsidiary being the Surviving
Corporation;
WHEREAS, the parties hereto wish to amend the Agreement to provide that
(i) the Company will be merged with and into Parent (instead of Subsidiary),
with Parent being the Surviving Corporation, (ii) the Note to be delivered at
Closing be substituted with shares of common capital stock of M Corp., and under
certain circumstances, a cash payment, and (iii) certain other provisions be
revised to reflect the current agreement of the Parties.
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties agree as follows:
1. The Agreement is hereby amended as follows:
A. Section 2.1 shall be deleted in its entirety and the
following shall be inserted in lieu thereof:
2.1 Merger.
Subject to the terms and conditions of this
Agreement, at the Effective Time, Company shall be merged with
and into Parent in accordance with the provisions of Section
14-2-1101 et seq. of the GBCC and with the effect provided in
Section 14-2-1106 of the GBCC (the "Merger"). Parent shall be
the Surviving Corporation resulting from the Merger (the
"Surviving Corporation") and shall continue to be governed by
the laws of the State of Georgia. The Merger shall be
consummated pursuant to the terms of this Agreement, which has
been approved and adopted by the respective boards of
directors of Company, Parent and Subsidiary, and has been
approved by the Shareholders as all of the shareholders of
Company, as required by applicable law.
B. Section 3.1 shall be deleted in its entirety and the
following shall be inserted in lieu thereof:
<PAGE> 2
3.1 Charter.
The Articles of Incorporation of Parent in effect
immediately prior to the Effective Time shall be the Articles
of Incorporation of the Surviving Corporation until duly
amended or repealed.
C. The word "Subsidiary" shall be deleted and the word
"Parent" inserted in lieu thereof in each of the following:
1. RECITALS - third sentence
2. SECTION 1 (DEFINITIONS)
"Contemplated Transactions" - subparagraph (d)
3. SECTION 3.2 (Bylaws)
4. SECTION 3.3 (Directors and Officers)
5. SECTION 4.1 (Conversion of Company Common Stock)
Paragraph (c) (iii)
6. SECTION 4.9 (Taking of Necessary Action; Further
Actions)
7. SECTION 6.2(a) (Authority; No Conflict)
8. SECTION 12.4 (Indemnification and Payment of Damages
by Parent - Other Matters)
9. SECTION 13.3 (Section 1362(e)(3) Election)
D. The fifth sentence of the recitals shall be deleted
in its entirety and the following shall be inserted in lieu thereof:
This Agreement also provides for the employment of Executive
as Executive Vice President of the Parent and President of the
Queen Carpet Division of the Parent and the appointment of
Executive to the Board of Directors of Parent.
E. The last sentence of Section 3.3 shall be deleted in
its entirety and the following shall be inserted in lieu thereof:
The officers of the Company at the Effective Time shall become
divisional officers of the Queen Carpet Division of Parent
with the same titles (together with such additional or
different officers as Parent shall appoint from time to time),
provided that Executive shall be elected Executive Vice
President of Parent and President of the Queen Carpet Division
of Parent.
2
<PAGE> 3
F. Section 4.1(c)(i)(A) shall be deleted in its entirety
and the following shall be inserted in lieu thereof:
(A) The sum of $70,000,000 which shall be deemed
delivered by means of the delivery by Parent of 3.15 million
shares of the common capital stock ("M Corp. Stock") of The
Maxim Group, Inc. ("M Corp."), freely transferable under
applicable federal and state securities laws, and free of all
Encumbrances, except restrictions on transfer of the M Corp.
Stock at any time prior to December 31, 1998 under that
certain Stock Purchase Option from the Parent in favor of M
Corp., a copy of which is attached to this First Amendment as
EXHIBIT A (the "M Corp. Option); provided that in the event
the aggregate value of M Corp. Stock valued as of the Closing
Date is less than $70,000,000, based on the closing price of M
Corp. Stock on the Closing Date as reported by the Wall Street
Journal published on the next business day, then in addition
to the delivery of 3.15 million shares of M Corp. Stock, fifty
percent (50%) of the amount by which $70,000,000 exceeds such
aggregate value of M Corp. Stock shall be paid by Parent
within two (2) business days following such determination in
cash, by wire transfer or other immediately available funds;
plus
G. The last sentence of Section 4.1(c)(ii)(B) shall be
deleted.
H. Section 4.2(a)(ii) shall be amended to delete the
reference to "Subsidiary".
I. Section 4.2(b)(ii) shall be amended to delete the
words "Subsidiary and".
J. Section 5.13(l) is hereby amended by adding at the
beginning of the subsection "Except as disclosed in Schedule 5.13(l), . . ."
K. Section 5.13(m) is hereby amended by adding at the
beginning of the subsection "Except as disclosed in Schedule 5.13(m),"
L. Section 6.2(a) shall be deleted in its entirety and
the following shall be inserted in lieu thereof:
(a) This Agreement constitutes the legal, valid and
binding obligation of Parent and Subsidiary, enforceable
against Parent and Subsidiary in accordance with its terms.
Upon execution and delivery by Parent of the Certificate of
Merger, the Employment Agreement and the Real Property
Agreements (collectively, the "Parent's Closing Documents"),
the Parent's Closing Documents will constitute the legal,
valid and binding obligations of Parent, enforceable against
Parent in accordance with their respective terms. Parent and
Subsidiary have the absolute and unrestricted right, power and
authority to execute and deliver this Agreement and the
Parent's Closing Documents and to perform their obligations
under this Agreement and the Parent's Closing Documents.
3
<PAGE> 4
M. Section 7.7(a) shall be deleted in its entirety and
the following shall be inserted in lieu thereof:
(a) Subject to the provisions of the GBCC, Company shall
be entitled to make one or more distributions on Company
Common Stock to its Shareholders in an aggregate amount of
$131 million. Such distribution shall result in a reduction of
Merger Consideration as provided in Section 4.1(c) of this
Agreement. In addition, Company shall be entitled to make tax
distributions as contemplated by Section 4.1(c)(ii)(A) in the
amount of $18.625 million, which tax distribution shall not
result in a reduction of Merger Consideration as provided in
Section 4.1(c) of this Agreement.
2. With respect of the provisions of Section 4.1(c)(ii) of the
Agreement, the Parties acknowledge and agree as follows:
(A) With respect to the provisions of subparagraph
(ii)(A), the reduction in the Merger Consideration as of the
Closing Date for dividends and other distributions as
contemplated by such subparagraph is in the aggregate amount
of $131 million and the amount of dividends and distributions
for estimated Tax payments which do not reduce Merger
Consideration as contemplated by such paragraph is $18.625
million.
(B) With respect to special bonuses contemplated by
subparagraph (i)(B), the amount of special bonuses shall be
$24,200,000 which shall be paid by Parent following the
Effective Time, fifty percent (50%) in cash and fifty percent
(50%) in shares of Parent Common Stock valued as determined
pursuant to the Executive Incentive Agreements between the
Company and the individual recipients of the bonuses, the form
of which is set forth as Exhibit B attached to this First
Amendment (the "Executive Incentive Agreements"). Special
bonus payments shall be made net of any tax withholdings. It
is acknowledged that the Board of Directors of the Company
have designated the bonus pool of participants and has advised
Parent of such designations and delivered originals of such
Executive Incentive Agreements to Parent.
3. Pursuant to Section 9.4(c) of the Agreement, Shareholders
shall deliver to Parent and M Corp. their written agreement as set forth in and
as part of the M Corp. Option, pursuant to which the Shareholders agree to
accept and be bound by all the terms and conditions of the M Corp. Option and
agree that all such terms and conditions shall be binding upon the Shareholders
and their successors, personal representatives and heirs to the same extent as
if the Shareholders had originally been a party to the M Corp. Option.
4. Except as modified by Paragraphs 1 and 2 of this First
Amendment, the Agreement shall remain in full force and effect.
5. This First Amendment shall be governed by the laws of the
State of Georgia without regard to conflicts of laws principles.
6. This First Amendment may be executed in counterparts and shall
be binding upon each party executing this or any counterpart.
4
<PAGE> 5
IN WITNESS WHEREOF, this First Amendment has been executed as of the
date and year first above written.
SHAW INDUSTRIES, INC.
By: /s/ Bennie M. Laughter
----------------------------------------
Name: Bennie M. Laughter
--------------------------------------
Title: Vice President
-------------------------------------
CHESSMAN ACQUISITION CORPORATION
By: /s/ Bennie M. Laughter
----------------------------------------
Name: Bennie M. Laughter
--------------------------------------
Title: Vice President
-------------------------------------
QUEEN CARPET CORPORATION
By: /s/ Gerald R. Embry
----------------------------------------
Name: Gerald R. Embry
--------------------------------------
Title: Vice President Finance
-------------------------------------
/s/ Julian Saul
--------------------------------------------
JULIAN SAUL
/s/ Linda Saul Schejola
--------------------------------------------
LINDA SAUL SCHEJOLA
ANITA SAUL FAMILY TRUST
By: /s/ Anita Saul
----------------------------------------
Anita Saul, Trustee
JULIAN SAUL FAMILY TRUST
By: /s/ Julian Saul
----------------------------------------
Julian Saul, Trustee
LINDA SAUL SCHEJOLA FAMILY TRUST
By: /s/ Linda Saul Schejola
----------------------------------------
Linda Saul Schejola, Trustee
