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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
COACH USA, INC.
(Name of Subject Company)
COACH USA, INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
18975L106
(CUSIP Number of Class of Securities)
DOUGLAS M. CERNY
SENIOR VICE PRESIDENT -- CORPORATE DEVELOPMENT,
GENERAL COUNSEL AND SECRETARY
COACH USA, INC.
ONE RIVERWAY, SUITE 500
HOUSTON TEXAS 77056
(713) 888-0104
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person filing statement)
Copies to:
GENE G. LEWIS
LOCKE LIDDELL & SAPP LLP
3400 CHASE TOWER
600 TRAVIS
HOUSTON, TEXAS 77002
(713) 226-1200
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Coach USA, Inc., a Delaware corporation
(the "Company"). The address of the principal executive offices of the Company
is One Riverway, Suite 500, Houston, Texas 77056. The title of the class of
equity securities to which this Solicitation/Recommendation on Schedule 14D-9
(this "Statement" or this "Schedule 14D-9") relates is the common stock, par
value $0.01 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to a tender offer (the "Offer") described in the
Tender Offer Statement on Schedule 14D-1, dated June 18, 1999 (as amended or
supplemented, the "Schedule 14D-1"), filed by Stagecoach Holdings plc, a public
limited company organized under the laws of Scotland ("Parent"), and its wholly
owned subsidiary SCH Holdings Corp., a Delaware corporation ("Purchaser"), with
the Securities and Exchange Commission (the "Commission"), relating to an offer
by Purchaser to purchase all the issued and outstanding Shares at a price of
$42.00 per Share, net to the seller in cash, without interest thereon (the
"Offer Price"), upon the terms and subject to the conditions set forth in
Purchaser's Offer to Purchase, dated June 18, 1999, and the related Letter of
Transmittal (together, with any amendments or supplements thereto, the "Offer
Documents").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 12, 1999 (as it may be amended or supplemented from time to time, the
"Merger Agreement"), among Parent, Purchaser SCH Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Purchaser ("Merger Sub"), and the
Company, a copy of which is filed as Exhibit 3 to this Schedule 14D-9 and is
incorporated herein by reference in its entirety. The Merger Agreement provides,
among other things, for the making of the Offer by Purchaser, and further
provides that, following the completion of the Offer, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Merger Sub will be merged with and into
the Company (the "Merger"). Following the effective time of the Merger (the
"Effective Time"), the Company will continue as the surviving corporation (the
"Surviving Corporation") and become a wholly owned subsidiary of Purchaser and,
indirectly, Parent, and the separate corporate existence of Merger Sub will
cease. Following the Merger, Parent may, at its option, cause the Surviving
Corporation to be merged with and into Purchaser (the "Subsequent Merger"). The
Subsequent Merger would be effected in order to cause the Company's outstanding
convertible subordinated notes, which presently are convertible into Shares, to
instead become convertible pursuant to their terms into the same consideration
as would be received by holders of Shares in the Merger. Alternatively, Parent
may elect to structure the Merger so that the Company is merged with and into
Purchaser, Merger Sub, or another direct or indirect wholly owned subsidiary of
Parent, or another direct or indirect wholly owned subsidiary of Parent is
merged with and into the Company; provided, however, that no such change shall
(i) alter or change the amount or kind of the consideration to be issued to the
Company's stockholders in the Merger or the treatment of the holders of the
Company Stock Options (as hereinafter defined), (ii) materially impede or delay
consummation of the Merger, or (iii) release Parent from any of its obligations
under the Merger Agreement. If more than 80% of the Shares are purchased by
Purchaser in the Offer, Parent currently intends to restructure the Merger as a
merger of the Company with and into Purchaser, which would obviate the need for
the Subsequent Merger.
At the Effective Time, each Share issued and outstanding immediately prior
to the Effective Time (other than Shares held by the Company or owned by Parent,
Purchaser or any other subsidiary of Parent or the Company, which shall be
canceled, and other than Shares, if any (collectively, "Dissenting Shares"),
held by stockholders who have properly exercised appraisal rights under Section
262 of the DGCL) will, by virtue of the Merger and without any action on the
part of the holders of the Shares be converted into the right to receive in cash
the per Share price paid in the Offer (the "Per Share Price"), payable to the
holder thereof, without interest, upon surrender of the certificate formerly
representing such Share, less any required withholding taxes. The Merger
Agreement is more fully described in Item 3 of this Schedule 14D-9.
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The Schedule 14D-1 indicates that the principal executive offices of
Purchaser are located at c/o Stagecoach Holdings plc, Charlotte House, 20
Charlotte Street, Perth PH1 5LL, Scotland, and the principal executive offices
of Parent are located at Charlotte House, 20 Charlotte Street, Perth PH1 5LL,
Scotland.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above and incorporated herein by
reference. Unless the context otherwise requires, references to the Company in
this Schedule 14D-9 are to the Company and its subsidiaries, viewed as a single
entity.
(b) Except as described or referred to in the attached Annex I (Information
Statement), or set forth in this Item 3(b), to the knowledge of the Company, as
of the date hereof, there are no material contracts, agreements, arrangements,
understandings or any actual or potential conflicts of interest between the
Company or its affiliates and (i) the Company, its officers, directors or
affiliates, or (ii) Parent, Purchaser, or their executive officers, directors or
affiliates.
The following summaries of the Merger Agreement, the Tender Agreement, the
Undertakings to Vote, the Employee Term Sheet and the Confidentiality Letters,
as well as the other agreements described or referred to in Annex I, are
qualified in their entirety by reference to the copies thereof filed as exhibits
to this Schedule 14D-9.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement. For the purposes of
this Item 3(b), capitalized terms used and not otherwise defined herein have the
meanings given to such terms in the Merger Agreement.
The Offer. The Merger Agreement provides that no later than five business
days after the announcement of the Merger Agreement, Parent will cause Purchaser
to, and Purchaser will, commence the Offer. The parties to the Merger Agreement
have agreed in the Merger Agreement that the obligation of Purchaser to
consummate the Offer, and to accept for payment and pay for the Shares tendered
pursuant to the Offer, is subject to the conditions of the Offer described under
"Certain Conditions of the Offer" below (the "Offer Conditions"). Pursuant to
the Merger Agreement, the Offer will be made by means of an offer to purchase
which will contain as conditions only the Minimum Condition and the other Offer
Conditions described below, and, subject to the succeeding sentence, will
otherwise contain, and be entirely consistent with, the terms and conditions of
the Offer as described in the Merger Agreement. Under the Merger Agreement, each
of Purchaser and Parent expressly reserved the right, in its sole discretion, to
waive any such condition and to make any other changes to the terms of the
Offer, provided, that, without the consent of the Company, neither Parent nor
Purchaser will (i) amend or waive the Minimum Condition, the HSR Condition, the
STB Condition (each as defined in "Certain Conditions of the Offer" below) or
the condition described in paragraph (c) of "Certain Conditions of the Offer"
below, (ii) amend any other Offer Condition, (iii) reduce the price per Share
payable in the Offer, (iv) change the form of consideration to be paid in the
Offer (other than by adding cash consideration), (v) reduce the maximum number
of Shares to be purchased in the Offer or (vi) amend any other term of the Offer
in a manner which is adverse to the holders of Shares. The Merger Agreement
provides that the price per Share will be net to the sellers in cash, without
interest, subject to reduction only for any applicable federal back-up
withholding taxes.
Under the Merger Agreement, Purchaser may, without the consent of the
Company, subject to the Company's right to terminate the Merger Agreement, (i)
extend the Offer on one or more occasions for up to ten business days for each
such extension beyond the then-scheduled expiration date, if at the
then-scheduled expiration date of the Offer any of the conditions to Purchaser's
obligation to accept for payment and pay for the Shares will not be satisfied or
waived, until such time as such conditions are satisfied or waived, and, at the
request of the Company, Purchaser will, subject to Parent's right to terminate
the Merger Agreement, extend the Offer for additional periods up to but not
later than January 31, 2000, but will not be required to so extend if any of the
conditions not satisfied or earlier waived on the then-scheduled expiration date
are one or more of the Minimum Condition or the conditions described in
paragraphs (a), (c) or (d) of "Certain Conditions of the Offer" below, provided
that (x) if the only condition not satisfied is the Minimum Condition, the
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satisfaction or waiver of all other conditions will have been publicly disclosed
at least five business days before termination of the Offer and (y) if the
condition described in paragraph (a) or (d) of "Certain Conditions of the Offer"
below has not been satisfied and the failure to so satisfy can be remedied, the
Offer will not be terminated unless the failure is not remedied within 10
business days after Parent has furnished the Company with written notice of such
failure, (ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable to
the Offer, and (iii) extend the Offer for an aggregate period of not more than
five business days beyond the latest expiration date that would otherwise be
permitted under clause (i) or (ii) of this sentence if there will not have been
tendered sufficient Shares so that the Merger could be effected without a
meeting of the Company's stockholders in accordance with Section 253 of the
DGCL. The Merger Agreement provides that, subject to the terms of the Offer,
including the Offer Conditions, Purchaser will accept for payment and pay for
all Shares duly tendered at the earliest time at which it is permitted to do so
under applicable provisions of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"); provided, that, as set forth above, Purchaser will have
the right, in its sole discretion, to extend the Offer for up to five business
days notwithstanding the prior satisfaction of the Offer Conditions, in order to
attempt to satisfy the requirements of Section 253 of the DGCL. The Merger
Agreement further provides that the Offer Conditions other than the Minimum
Condition, the HSR Condition, the STB Condition and the condition described in
paragraph (c) of "Certain Conditions of the Offer" below are solely for the
benefit of Purchaser and that all Offer Conditions may be asserted by Purchaser
regardless of the circumstances resulting in a condition not being satisfied
(except for any action or inaction by Purchaser, Merger Sub or Parent
constituting a breach of the Merger Agreement) and, except with respect to the
Minimum Condition, the HSR Condition, the STB Condition and the condition
described in paragraph (c) of "Certain Conditions of the Offer" below, may be
waived by Purchaser, in whole or in part at any time and from time to time, in
its sole discretion.
Certain Conditions of the Offer. Notwithstanding any other provisions of
the Offer, and in addition to the conditions that (i) at the expiration of the
Offer there will have been validly tendered and not properly withdrawn prior to
the expiration of the Offer a number of Shares which constitutes more than 50%
of the voting power (determined on a fully-diluted basis) on the date of
purchase of all the securities of the Company entitled to vote generally in the
election of directors or in a merger (the "Minimum Condition") (for purposes of
determining at any time whether the Minimum Condition has been met, each
outstanding Share legally or beneficially owned by Parent or Purchaser or any of
its affiliates at the commencement of the Offer will be deemed validly tendered
under the Offer and not withdrawn), (ii) any and all applicable waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") shall have expired or been terminated (the "HSR Condition") and (iii)
the staff of the United States Surface Transportation Board (the "STB") shall
have given Parent a favorable informal advisory opinion to the effect that the
proposed use of the Voting Trust (as defined under "Voting Trust" below) will
effectively insulate Parent from acquiring unlawful control of the Company and
such advisory opinion shall not have been withdrawn or the STB shall have
approved Parent's and Purchaser's acquisition of the federally regulated
carriers controlled by the Company (the "STB Condition"), Purchaser will not be
required to accept for payment, or subject to applicable rules and regulations
of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), purchase or pay for any Shares tendered
pursuant to the Offer, may postpone the acceptance for payment of Shares
tendered, and subject to the terms and conditions of the Merger Agreement may
terminate the Offer, if at any time on or after June 12, 1999 and at or before
the time of payment for any such Shares any of the following conditions occurs
or has occurred:
(a) (i) the representations and warranties of the Company set forth in
the Merger Agreement shall not have been true and correct as of the date of
the Merger Agreement, or shall not be true and correct (in all material
respects, in the case of representations and warranties not already
qualified as to materiality or Material Adverse Effect (as defined below)
by their terms) as of the expiration of the Offer as though made on and as
of the expiration of the Offer (except to the extent that such
representations and warranties speak as of a specific date, which
representations and warranties shall have been true and correct as of such
date), or (ii) the Company shall have breached in any material respect any
covenants contained in the Merger Agreement;
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(b) there shall have been any Law (as defined under "Merger
Conditions" below) promulgated, enacted, entered, enforced or issued by any
governmental entity which would have the effect of (i) making the purchase
of, or payment for, some or all of the Shares by Parent or Purchaser or
their affiliates pursuant to the Offer or the Merger illegal, or making the
Voting Trust illegal; (ii) otherwise preventing consummation of the Offer
or Merger; (iii) except for the Voting Trust, prohibiting the ownership or
operation by the Company or any of its subsidiaries, or Parent or any of
its subsidiaries, of all or any material portion of the business or assets
of the Company or any of its subsidiaries, taken as a whole, or Parent or
its subsidiaries, taken as a whole; (iv) except for the Voting Trust,
materially limiting the ownership or operation by the Company or any of its
subsidiaries, or Parent or any of its subsidiaries, of all or any material
portion of the business or assets of the Company or any of its
subsidiaries, taken as a whole, or Parent or its subsidiaries, taken as a
whole, as a result of the transactions contemplated by the Offer or the
Merger; (v) except for the Voting Trust, imposing limitations on the
ability of Parent, Purchaser or any of Parent's affiliates effectively to
acquire or hold or to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired or
owned by Parent or Purchaser or any of its affiliates on all matters
properly presented to the stockholders of the Company, including, without
limitation, the adoption of the Merger Agreement or the right to vote any
shares of capital stock of any significant subsidiary (as defined in
Regulation S-X), directly or indirectly owned by the Company; or (vi)
requiring divestiture by Parent or Purchaser or any of their affiliates of
any Shares; and, in each case, no action or proceeding seeking to do any of
the foregoing which has been instituted by any governmental entity or other
person shall be pending;
(c) the Merger Agreement shall have been terminated by the Company or
Parent in accordance with its terms;
(d) there shall have occurred or exist any condition, event or
occurrence which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect;
(e) any approval or filing required to be obtained from or made with
Governmental Entities or third parties in connection with the Offer or the
Merger shall not have been obtained or made or shall not be in full force
and effect, other than any failure of which to obtain or make, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect or to materially reduce the benefits to Parent of ownership
of the Company and its subsidiaries; or
(f) the due adoption by a majority of the ordinary shares of Parent
present and voting at an extraordinary meeting of shareholders of
resolutions approving the acquisition by Parent of the Company pursuant to
the Offer and the Merger and certain related matters at an extraordinary
general meeting of shareholders ("Parent Shareholder Approval") shall not
have been obtained.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to such
condition. The foregoing conditions (other than the Minimum Condition, the HSR
Condition, the STB Condition and the condition set forth in clause (c) above)
may be waived by Purchaser in whole or in part at any time and from time to time
in its sole discretion. The failure by Purchaser at any time to exercise any of
the foregoing rights will not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and other circumstances will
not be deemed a waiver with respect to any other facts and circumstances, and
each such right will be deemed an ongoing right that may be asserted at any time
and from time to time.
Pursuant to the Merger Agreement, a "Material Adverse Effect" means an
effect or change that either individually or in the aggregate with all other
such effects or changes is or would be materially adverse to the business,
assets, operations, properties, financial condition or results of operations of
the Company and its subsidiaries taken as a whole, or would prevent, hinder or
materially delay the consummation of the transactions contemplated by the Merger
Agreement; provided that (i) any adverse effect or change after the date of the
Merger Agreement resulting from or relating to general business or economic
conditions shall be
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disregarded, (ii) any adverse effect or change after the date of the Merger
Agreement resulting from or relating to conditions generally affecting the
industry in which the Company competes shall be disregarded, (iii) any adverse
effect or change resulting from or relating to the announcement or pendency of
the Offer, the Merger or any other transaction contemplated by the Merger
Agreement (other than any default of the Company under its primary credit
agreement or any related agreement, its senior subordinated notes, or the terms
of any other indebtedness of the Company or its subsidiaries resulting from such
announcement or pendency or from the negotiation, execution or announcement of
the Merger Agreement) shall be disregarded, and (iv) any adverse effect or
change resulting from compliance with any limitation on the Company's and its
subsidiaries' operations imposed by the Merger Agreement shall be disregarded.
Directors Following the Offer. The Merger Agreement provides that,
effective upon the payment by Purchaser for the Shares tendered pursuant to the
Offer in accordance with the terms of the Merger Agreement, and subject to the
provisions of the Interstate Commerce Act, as amended by the ICC Termination Act
(the "ICA"), and the rules, regulations and practices of the STB, the Company
will be required to use its reasonable best efforts to cause to be appointed to
the Board of Directors of the Company an individual designated by Parent, who
will be identified as a suitable candidate by Parent prior to the consummation
of the Offer and who will not be a director, officer or employee of Parent and
will be reasonably satisfactory to the Board of Directors of the Company. The
Merger Agreement further provides that the Company's obligations to appoint such
individual to the Board of Directors of the Company will be subject to the
provisions of the ICA and the rules, regulations and practices of the STB.
The Merger Agreement provides that promptly upon the later of (x) payment
by Purchaser for the Shares tendered pursuant to the Offer in accordance with
the terms of the Merger Agreement and (y) the date on which Parent is lawfully
permitted to assume control over the Company's common carrier motor coach
subsidiaries pursuant to STB approval or exemption (the later of (x) and (y),
the "Control Date"), Parent will be entitled to designate a number of directors
on the Board of Directors of the Company (including any designated pursuant to
the provision described in the paragraph immediately above) equal to the product
of the total number of the directors on such Board (after giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that
such number of Shares owned by Purchaser and its affiliates bears to the number
of Shares outstanding, rounded to the nearest whole number, but in no event less
than a majority.
At the time specified in the preceding two paragraphs, as the case may be,
the Company will, upon request of Parent, use its reasonable best efforts
promptly either to increase the size of the Board of Directors of the Company
or, at the Company's election or at Parent's request, secure the resignations of
such number of its incumbent directors as is necessary to enable Parent's
designees pursuant to the provisions described in the preceding two paragraphs,
as the case may be, to be so elected or appointed to the Company's Board, and
will cause Parent's designees to be so elected or appointed. The Merger
Agreement further provides that the Company will use its reasonable best efforts
to cause directors designated by Parent pursuant to the provisions described in
the preceding paragraph to constitute the same percentage as is on the Board
(but in any event at least one Parent designee) (i) of each committee of the
Board of Directors, (ii) of each board of directors of each subsidiary of the
Company and (iii) of each committee of each such board, in each case only to the
extent permitted by law and the rules of the New York Stock Exchange ("NYSE") to
the extent applicable. The Merger Agreement provides that notwithstanding the
foregoing, until the Effective Time, the Company and Parent will use all
reasonable best efforts to retain as members of the Company's Board of Directors
at least two directors who are directors of the Company on the date of the
Merger Agreement and who are not designated by Parent or employees of the
Company or its subsidiaries (the "Independent Directors"). The Merger Agreement
further provides that the Company's obligations to appoint designees to the
Board of Directors will be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder.
The Merger Agreement provides that, following the election or appointment
of Parent's designees, after the payment for the Shares pursuant to the Offer
and prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors (who will act as an independent committee of the Board of
Directors for this purpose) will be required, and alone will be sufficient, to
take action by the Company to (i) amend or terminate the Merger Agreement, (ii)
exercise or waive any of the Company's rights or remedies under the
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Merger Agreement, (iii) extend the time for performance of Parent's and Merger
Sub's respective obligations under the Merger Agreement, or (iv) approve any
other action by the Company that could adversely affect the interests of the
stockholders of the Company (other than Parent, Purchaser and their affiliates)
with respect to the transactions contemplated thereby.
Voting Trust. Pursuant to the Merger Agreement, the parties agreed that,
(i) immediately upon the purchase by Parent, Purchaser or their affiliates of
Shares pursuant to the Offer or otherwise, such Shares will be deposited in one
or more separate, independent, irrevocable voting trusts (collectively, the
"Voting Trust") in accordance with the terms and conditions of one or more
voting trust agreements and (ii) upon consummation of the Merger, all
outstanding shares of the Surviving Corporation will be deposited in such Voting
Trust. The Merger Agreement provides that, subject to applicable law and to the
rules, regulations and practices of the STB, the voting trust agreements may be
modified or amended at any time by Parent in its sole discretion; provided, that
(i) prior to the Effective Time, the voting trust agreements may not be modified
or amended without the prior written approval of the Company unless such
modification or amendment is not inconsistent with the Merger Agreement and is
not adverse to the Company or its stockholders and would not reasonably be
expected to have an adverse effect on receipt of a favorable informal advisory
opinion from the STB and (ii) the voting trust agreements may not be modified or
amended without the prior written approval of the Company if such modification
or amendment would reasonably be expected to increase the liability exposure of
the Board of Directors of the Surviving Corporation under applicable law. The
Merger Agreement further provides that no power of Parent or Purchaser provided
for in the voting trust agreements may be exercised in a manner which violates
the Merger Agreement. Pursuant to the Merger Agreement, Parent, in consultation
with the Company, will use its reasonable best efforts to take, or cause to be
taken, all actions necessary, proper or advisable to obtain a favorable informal
advisory opinion from the STB staff to the effect that the Voting Trust
effectively insulates Parent from any violation of the ICA and STB rules or
policies against unauthorized acquisition of control of regulated carriers. The
Merger Agreement provides that in furtherance and not in limitation of the
foregoing: (i) Parent will make any filings required by the STB with respect to
the Voting Trust and the Company will make any filings reasonably required by
Parent with respect thereto; (ii) Parent will consult with the Company in
connection with any discussions or proceedings initiated by Parent with the STB
with respect to the Voting Trust; provided, that the Company will not initiate
any such discussions or proceedings without Parent's prior written consent; and
(iii) Parent, with the Company's consent, will change or modify the terms of the
voting trust agreements to the extent required by the STB as a condition to the
issuance of such advisory opinion, so long as the required changes or
modifications do not, in the aggregate, materially affect Parent's rights
thereunder. The Merger Agreement further provides that any voting trustee of the
Voting Trust appointed by Parent and Purchaser pursuant to the voting trust
agreements will be reasonably satisfactory to the Board of Directors of the
Company.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the DGCL, at
the Effective Time, Merger Sub will be merged with and into the Company. The
Merger Agreement provides that as a result of the Merger, the separate corporate
existence of Merger Sub will cease and the Company will continue as the
Surviving Corporation.
The Merger Agreement provides that at the Effective Time, the Certificate
of Incorporation of the Surviving Corporation will be amended to be identical to
the Certificate of Incorporation of Merger Sub as in effect immediately prior to
the Effective Time; provided, that (i) the name of the Surviving Corporation
will be the name of the Company; (ii) the number of shares of authorized common
stock will be equal to the number of shares of authorized Company Common Stock
set forth in the Certificate of Incorporation of the Company as in effect
immediately prior to the Effective Time; and (iii) the Certificate of
Incorporation of the Surviving Corporation will include the provisions of
Articles Seven and Eight of the Certificate of Incorporation of the Company as
in effect on the date of the Merger Agreement. The Merger Agreement further
provides that at the Effective Time and without any further action on the part
of the Company or Merger Sub, the By-laws of Merger Sub will be the By-laws of
the Surviving Corporation and thereafter may be amended or repealed in
accordance with their terms or the Certificate of Incorporation of the Surviving
Corporation and as provided by law.
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The Merger Agreement provides that the directors of Merger Sub (if the
Effective Time follows the Control Date) or the Company (if the Effective Time
precedes the Control Date), in either case immediately prior to the Effective
Time, will be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and By-laws of the
Surviving Corporation, and the officers of the Company immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation, in
each case until their resignation or removal or until their respective
successors are duly elected or appointed (as the case may be) and qualified.
The Merger Agreement provides that, following the Effective Time, at
Parent's election, the Surviving Corporation will be merged with and into
Purchaser. The Subsequent Merger will be effected on terms and have effects
substantially similar to the Merger. The Merger Agreement further provides that
at Parent's election the Merger may alternatively be structured so that the
Company is merged with and into Merger Sub, Purchaser or another direct or
indirect wholly owned subsidiary of Parent, or another direct or indirect wholly
owned subsidiary of Parent is merged with and into the Company; provided,
however, that no such change will (i) alter or change the amount or kind of the
consideration to be issued to the Company's stockholders in the Merger or the
treatment of the holders of the Company Stock Options (defined below), (ii)
materially impede or delay consummation of the Merger, or (iii) release Parent
from any of its obligations under the Merger Agreement; provided, however, that
the Company will be deemed not to have breached any of its representations and
warranties and covenants therein if and to the extent such breach would have
been attributable to such election. In the event of such an election, the
Company agreed to execute any appropriate documentation as may be reasonably
requested by Parent to reflect such election.
The Merger Agreement provides that at the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities: (i) each Share (other than any
Shares to be canceled pursuant to clause (ii) below and any Dissenting Shares)
will be canceled, extinguished and converted automatically into the right to
receive an amount per share in cash equal to the Per Share Price payable to the
holder thereof, without interest, upon surrender of the certificate that prior
to the Merger represented such Share, less any required withholding taxes; (ii)
each Share held in the treasury of the Company and each Share owned by Parent,
Purchaser or any other direct or indirect subsidiary of Parent or of the Company
(including the Shares held in the Voting Trust), in each case immediately prior
to the Effective Time, will be canceled and retired without any conversion
thereof and no payment or distribution will be made with respect thereto; (iii)
the shares of common stock of Merger Sub issued and outstanding immediately
prior to the Effective Time will be converted into and become equal to a number
of identical validly issued, fully paid and nonassessable shares of common stock
of the Surviving Corporation as is equal to the number of Shares immediately
prior to the Effective Time; (iv) each share of preferred or other capital stock
of Merger Sub issued and outstanding immediately prior to the Effective Time
will be converted into and become one validly issued, fully paid and
nonassessable share of identical preferred or other capital stock of the
Surviving Corporation and, in the case of each of (iii) and (iv), if the
Effective Time precedes the Control Date, each such share will be deposited in
the Voting Trust; and (v) each share of Series A Voting Preferred Stock, par
value $.01 per share, of the Company (the "Voting Preferred Stock") outstanding
immediately prior to the Effective Time will be canceled and retired without any
conversion thereof and no payment or distribution will be made with respect
thereto.
The Merger Agreement provides that, upon the consummation of the Offer,
except as otherwise agreed between the Company and any holder thereof, each then
outstanding employee stock option and any other stock or stock-based right and
each then outstanding director stock option and any other stock or stock-based
right (a "Company Stock Option"), whether or not then vested or exercisable,
will be (or, if not previously vested and exercisable, will become), consistent
with the plans and agreements applicable to such Company Stock Options, vested
and exercisable and such Company Stock Options immediately thereafter will be
canceled by the Company, and each holder of a canceled Company Stock Option with
an exercise price that is less than the Per Share Price will be entitled to
receive at the consummation of the Offer or as soon as practicable thereafter
(or if the grant of the Company Stock Option does not qualify as an exempt
acquisition pursuant to Rule 16b-3 under the Exchange Act, the date six months
and one day following the grant of such Company Stock Option, if later) from the
Company (and, if necessary, Parent will provide funds to the
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Company sufficient for such payments) in consideration for the cancellation of
such Company Stock Option an amount in cash equal to the product of (i) the
number of shares of Company Common Stock previously subject to such Company
Stock Option and (ii) the excess, if any, of the Per Share Price over the
exercise price per share of Company Common Stock previously subject to such
Company Stock Option.
The Merger Agreement provides that the Company will use its reasonable best
efforts to take all such actions as are reasonably necessary to provide that (i)
no further issuance, transfer or grant of any capital stock of the Surviving
Corporation or any interest in respect of any capital stock of the Surviving
Corporation will be made on or after the consummation of the Offer under any
Company Plan and (ii) following the consummation of the Offer, no holder of a
Company Stock Option or any participant in any Company Plan will have the right
thereunder to acquire any capital stock of the Surviving Corporation.
The Merger Agreement provides that Shares that are issued and outstanding
immediately prior to the Effective Time and which are held by stockholders who
have not voted in favor of or consented to the Merger and who have delivered a
written demand for appraisal of such shares of Company Common Stock in the time
and manner provided in Section 262 of the DGCL and have not failed to perfect or
have not effectively withdrawn or lost their rights to appraisal and payment
under the DGCL will not be converted into the right to receive the Merger
Consideration, but will be entitled to receive the consideration as will be
determined pursuant to Section 262 of the DGCL; provided, however, that if such
holder failed to perfect or has effectively withdrawn or lost his, her or its
right to appraisal and payment under the DGCL, such holder's shares of Company
Common Stock will thereupon be deemed to have been converted, at the Effective
Time, into the right to receive the Merger Consideration, without any interest
thereon, less any required withholding taxes.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations and warranties by the Company as to the
Company's organization, standing and corporate power, subsidiaries, capital
structure, authorization, recommendation and required stockholder vote for the
Merger Agreement, noncontravention of any governing instruments, laws or other
agreements, filings with the Commission, financial statements, and undisclosed
liabilities, information provided in the Offer documents and this Schedule
14D-9, absence of certain changes or events, litigation, labor matters and
compliance with laws, employee benefit plans, taxes, environmental matters,
contracts, absence of rights plan, intellectual property, year 2000 matters,
ownership of assets, insurance, brokers, and the opinion of the Company's
financial advisor.
In addition, the Merger Agreement contains representations and warranties
of Parent, Purchaser and Merger Sub concerning their organization and standing,
authorization, recommendation and required stockholder vote for the agreement,
noncontravention of any governing instruments, laws or other agreements,
information provided in the Offer documents and this Schedule 14D-9, financing,
and brokers.
Interim Operations of the Company. Pursuant to the Merger Agreement, the
Company has covenanted and agreed that, except (i) as expressly provided in the
Merger Agreement, (ii) with the prior written consent of Parent or (iii) as set
forth on a disclosure schedule to the Merger Agreement delivered by the Company,
after the date of the Merger Agreement and prior to the Control Date, the
business of the Company and its subsidiaries will be conducted only in the
ordinary course of business consistent with past practice and each of the
Company and its subsidiaries will use all reasonable efforts to preserve its
business organization intact and preserve and maintain its rights and franchises
and its relationships with its customers, suppliers, employees, independent
contractors, creditors, business partners and others with whom it deals; the
Company, in conducting its business and operations, will have due regard for the
interests of the holders of the trust certificates (as defined in the voting
trust agreements) as investors in the Company; and neither the Company nor any
of its subsidiaries will:
(a) (i) amend its certificate of incorporation or by-laws or similar
organizational documents; (ii) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property with respect to any
of its capital stock other than dividends or distributions by the Company's
wholly owned subsidiaries; (iii) split, combine or reclassify any of its
capital stock; or (iii) issue, sell, transfer, pledge, dispose of or
encumber, or redeem, purchase or otherwise acquire directly or indirectly,
any shares of, or
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<PAGE> 10
securities convertible into or exchangeable or redeemable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares
of capital stock of any class of, or any other ownership or equity interest
(including, without limitation, any phantom interest or stock appreciation
rights) in, the Company or its subsidiaries other than pursuant to
exercises of Company Stock Options, conversions of the convertible
subordinated notes, redemptions of Dividend Access Shares (as defined in
"Dividend Access Shares" below) and exercises of warrants;
(b) transfer, lease, license, sell, mortgage, pledge, dispose of, or
create or suffer to exist any lien on any assets that are material to the
Company and its subsidiaries, taken as a whole, other than liens pursuant
to the Company's primary credit agreement, purchase money security
interests under certain other indebtedness and related documents and other
than sales of assets in the ordinary course of business consistent with
past practice;
(c) acquire (by merger, consolidation, acquisition of stock or assets
or otherwise) any corporation, partnership or other business organization
or division thereof, or any substantial portion of any assets thereof,
other than acquisitions for total value not in excess of $50 million in the
aggregate;
(d) (i) grant any increase in the compensation payable or to become
payable by the Company or any of its subsidiaries to any employee other
than increases in the ordinary course of business consistent as to timing
and amount with past practice; (ii) except to the extent currently required
under applicable law or the terms of the applicable agreement or
arrangement, adopt any new, or amend or otherwise increase, or accelerate
the payment or vesting of the amounts payable or to become payable under
any existing, bonus, incentive compensation, deferred compensation,
severance, profit sharing, stock option, stock purchase, insurance,
pension, retirement or other employee benefit plan agreement or
arrangement; (iii) enter into any, or amend any existing, employment,
consulting or severance agreement with, or grant any severance or
termination pay to, any officer, director or employee of the Company or any
of its subsidiaries, other than pursuant to existing plans or agreements;
(iv) except with respect to the Company's foreign operations, as required
by law or existing arrangements, make any additional contributions to any
grantor trust created by the Company to provide funding for
non-tax-qualified employee benefits or compensation; or (v) provide any
severance program to any subsidiary which does not have a severance program
as of the date of the Merger Agreement;
(e) enter into or materially modify any collective bargaining
agreement, including any successor collective bargaining agreement;
(f) enter into, modify or terminate any material contract except in
the ordinary course of business consistent with past practice;
(g) permit any material insurance policy naming it as a beneficiary or
a loss payable payee to be canceled or terminated, except in the ordinary
course of business consistent with past practice;
(h) (i) incur or assume any debt except for borrowings under existing
credit facilities, debt incurred in connection with permitted acquisitions
in an aggregate outstanding amount not to exceed $65 million at any one
time (including no more than $15 million in assumed debt) and additional
borrowings in an aggregate outstanding amount not to exceed $20 million at
any time (any newly incurred debt to be on terms no less favorable to the
Company and its subsidiaries in any material respect than its existing
credit facilities); (ii) assume, guarantee, endorse, enter into any "keep
well" or other similar agreement, or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations or
financial condition of any person other than the Company or its wholly
owned subsidiaries, except in the ordinary course of business consistent
with past practice and where the amount involved, individually or in the
aggregate, is not material; (iii) make any loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned subsidiaries of the Company or customary loans or advances to
employees in accordance with past practice); or (iv) make any capital
expenditure in excess of $1 million with respect to any individual or
series of related capital expenditures or $15 million in the aggregate for
all capital expenditures;
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(i) change any of its material accounting principles, except as
required by generally accepted accounting principles;
(j) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other material
reorganization of the Company or any of its subsidiaries or any agreement
(other than a confidentiality agreement pursuant to the provisions
described under "No Solicitation" below) relating to an Acquisition
Proposal (as defined below);
(k) engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any of the
Company's affiliates, other than the Company or its wholly owned
subsidiaries, including, without limitation, any transactions, agreements,
arrangements or understandings with any affiliate or other person covered
under Item 404 of Regulation S-K under the Securities Act of 1933, as
amended (the "Securities Act") that would be required to be disclosed under
such Item 404;
(l) make any material tax election;
(m) (i) pay, discharge or satisfy any claim, liability or obligation
(including contingent claims, liabilities and obligations), other than in
the ordinary course of business consistent with past practice; or (ii)
settle or compromise any litigation (whether or not commenced prior to the
date of the Merger Agreement) other than settlements or compromises of
litigation not relating to the transactions contemplated hereby and which
could not reasonably be expected to prejudice materially the Company or its
subsidiaries in any other pending or future litigation, where the amount
paid (after giving effect to insurance proceeds actually received) in
settlement or compromise does not exceed $1 million, provided that the
aggregate amount paid in connection with the settlement or compromise of
all such litigation matters will not exceed $5 million;
(n) take any action which would make any of the Company's
representations and warranties in the Merger Agreement untrue or incorrect
in a manner that would, or any other action that would, result in any of
the Offer Conditions not being satisfied; or
(o) enter into an agreement, contract, commitment or arrangement to do
any of the foregoing, or authorize, recommend, propose or announce an
intention to do, or to agree to do, any of the foregoing.
Access to Information. The Merger Agreement provides that Company will
(and will cause each of its subsidiaries to) afford to the officers, employees,
accountants, counsel, financing sources and other representatives of Parent,
reasonable access, during normal business hours, during the period prior to the
Effective Time, to all of its and its subsidiaries' personnel, properties,
books, contracts, commitments and records (including any tax returns or other
tax related information pertaining to the Company and its subsidiaries) and,
during such period, the Company will (and will cause each of its subsidiaries
to) furnish promptly to Parent (i) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of the federal securities laws or which is otherwise
material to the Company and its subsidiaries and (ii) all other information
concerning its business, properties and personnel as Parent may reasonably
request (including any tax returns or other tax related information pertaining
to the Company and its subsidiaries). The Merger Agreement further provides that
Parent will hold any such information in confidence to the extent required by
and in accordance with the provisions of the existing confidentiality agreement
between the Company and Parent.
Consents and Approvals. The Merger Agreement provides that each of the
Company, Parent, Purchaser and Merger Sub will use all reasonable best efforts
to comply promptly with all legal requirements which may be imposed on it with
respect to the Merger Agreement and the transactions contemplated thereby which
actions will include, without limitation, furnishing all information in
connection with approvals of or filings with any governmental entity, including,
without limitation, any schedule, or reports required to be filed with the
Commission, and will promptly cooperate with and furnish information to each
other in connection with any such requirements imposed upon any of them or any
of their subsidiaries in connection with the Merger Agreement and the
transactions contemplated thereby. The Merger Agreement further provides that
each of the Company, Parent, Purchaser and Merger Sub will, and will cause its
subsidiaries to, use all reasonable best efforts to obtain any consent,
authorization, order or approval of, or any exemption by, any
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governmental entity or other public or private third party, required to be
obtained or made by Parent, Purchaser, Merger Sub, the Company or any of their
subsidiaries in connection with the Offer, the Merger or the taking of any other
action contemplated by the Merger Agreement.
The Merger Agreement provides that Parent, on the one hand, and the Company
on the other will, and each will cause its subsidiaries to, subject to the
following sentences, (i) cooperate with one another to prepare and present to
the STB, as soon as practicable, all filings and other presentations in
connection with seeking any STB approval, exemption or other authorization
necessary to consummate the transactions contemplated by the Merger Agreement,
(ii) prosecute such filings and other presentations with diligence, (iii)
diligently oppose any objections to, appeals from or petitions to reconsider or
reopen any such STB approval by persons not party to the Merger Agreement, and
(iv) take all such further action as in the reasonable judgment of Parent and
the Company may facilitate obtaining a final order or orders of the STB
approving such transactions consistent with the Merger Agreement and the
transactions contemplated therein. The Merger Agreement further provides that
without in any way limiting Parent's obligations under Section 1.4 of the Merger
Agreement relating to the Voting Trust and subject to consultations with the
Company and, after giving good faith consideration to the views of the Company,
Parent will have final authority over the development, presentation and conduct
of the STB case, including over decisions as to whether to agree to or acquiesce
in conditions.
Employee Matters. The Merger Agreement provides that for a period of one
year following the Effective Time, Parent will or will cause the Surviving
Corporation to either continue the existing Company employee benefit plans or
provide benefits to employees of the Company and its subsidiaries under
substitute plans or arrangements ("Parent Benefit Plans") that are no less
favorable, in the aggregate, to such employees than those provided under such
existing Company plans.
The Merger Agreement further provides that with respect to any Parent
Benefit Plan in which the Company's or its subsidiaries' employees participate
effective as of the Merger, Parent will, or will cause the Surviving Corporation
to: (A) waive all limitations as to pre-existing conditions, exclusions and
waiting periods with respect to participation and coverage requirements
applicable to the employees under any Parent Benefit Plan in which such
employees may be eligible to participate after the Effective Time, (B) provide
each employee with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any applicable deductible or out-of-pocket
requirements under any Parent Benefit Plan in which such employees may be
eligible to participate after the Effective Time, and (C) recognize all service
of the employees with the Company or any subsidiary for all purposes (excluding
for benefit accrual) in any Parent Benefit Plan in which such employees may be
eligible to participate after the Effective Time, to the same extent taken into
account under a comparable Company plan immediately prior to the Closing Date;
provided, however, that such service will not be recognized to the extent that
such recognition would result in a duplication of benefits.
No Solicitation. The Merger Agreement provides that the Company will not,
and it will cause its subsidiaries, directors, officers, employees, financial
and other advisors, agents, representatives, affiliates and others working on
its behalf or at its direction (collectively, "Company Representatives") not to,
initiate, solicit, encourage or facilitate offers, inquiries or proposals with
respect to, or furnish any information relating to or participate in any
negotiations or discussions concerning, any merger, reorganization, share
exchange, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
subsidiaries, or any purchase or sale of more than 10% of the assets (including
stock of subsidiaries) of the Company and its subsidiaries taken as a whole, or
any purchase or sale of, or tender or exchange offer for, 10% or more of the
equity securities of the Company or any of its subsidiaries (an "Acquisition
Proposal"), other than as contemplated by the Merger Agreement.
The Merger Agreement further provides that notwithstanding the above
paragraph, if the Company is not otherwise in breach or violation of the
provisions described in this subsection, until the Offer has been consummated,
the Board of Directors of the Company may, directly or indirectly through
Company Representatives: (x) furnish information concerning the Company and its
subsidiaries to any person with respect to an Acquisition Proposal pursuant to
appropriate confidentiality agreements with terms substantially
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similar to those contained in the confidentiality agreement with Parent
(including with respect to "standstill" provisions), and (y) negotiate and
participate in discussions and negotiations with such person concerning an
Acquisition Proposal, if in either case (x) or (y), (i) such person has
submitted a bona fide written Acquisition Proposal to the Company after the date
hereof which constitutes a Superior Proposal (as defined below) and (ii) in the
good faith judgment of the Board of Directors of the Company, only after receipt
of and based upon advice from outside legal counsel to the Company, the failure
to provide such information or access or to engage in such discussions or
negotiations would cause the Board of Directors to violate its fiduciary duties
to the Company's stockholders under applicable law. In addition, the Merger
Agreement will not restrict the Company Board of Directors from, to the extent
required, complying with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal, subject to any rights of
Parent to terminate the Merger Agreement and receive payment of any fee due as a
result thereof under the provisions of the Merger Agreement -- described under
"Termination" and "Effect of Termination" below.
Pursuant to the Merger Agreement, the Company will notify Parent
immediately of any inquiries, proposals or offers received by, information
requested from, or discussions or negotiations sought to be initiated or
continued with, it or any Company Representatives with respect to, or which
could reasonably be expected to lead to, an Acquisition Proposal indicating, in
connection with each such notice, the name of such person (unless the proposed
consideration consists solely of cash) and the material terms, conditions and
other aspects of any such inquiries, proposals, offers, requests, discussions or
negotiations, including promptly forwarding copies of any written Acquisition
Proposals (with redactions of the proposing party's identity, if the proposed
consideration consists solely of cash), and promptly keep Parent informed of the
status and terms of any such proposals or offers and the status and terms of any
such discussions or negotiations. The Merger Agreement provides that the Company
immediately cease and to cause to be terminated any activities, discussions or
negotiations conducted on or prior to the date of the Merger Agreement with any
parties other than Parent with respect to any of the foregoing. The Merger
Agreement further provides that neither the Company nor any subsidiary of the
Company will waive or fail to enforce any provision of any confidentiality or
standstill or similar agreement to which it is a party without the prior written
consent of Parent unless the Company's Board of Directors determines in good
faith, only after receipt of and based upon advice from outside legal counsel to
the Company, that it is required by fiduciary duties under applicable law to
take such action in response to a Superior Proposal.
A "Superior Proposal" means, for purposes of the Merger Agreement, a bona
fide written Acquisition Proposal made by a third party after the date of the
Merger Agreement:
(i) as a result of which (A) the Company's stockholders prior to such
transaction would in the aggregate cease to own at least 50% of the voting
securities of the ultimate parent entity resulting from such transaction or
(B) at least 50% of the assets of the Company and its subsidiaries taken as
a whole would be transferred to an unaffiliated third party; and
(ii) which the Board of Directors of the Company in its good faith
judgment, taking into account the various legal, financial and regulatory
aspects of the proposal and the person making such proposal and after
consultation with and based on the advice of outside counsel and a
nationally recognized financial advisor, determines (A) if accepted, is
reasonably likely to be consummated, and (B) if consummated, is reasonably
likely to result in a transaction that is financially superior and more
favorable to the holders of Company Common Stock than the Offer and the
Merger (taken together).
Certain Financing Matters. The Merger Agreement provides that the Company
will provide, and will cause its subsidiaries and its and their respective
officers, employees and advisors to provide, all necessary cooperation in
connection with the arrangement of any financing to be consummated
contemporaneous with or at or after the consummation of the Offer, including
without limitation any financing to be provided to the Company or any of its
subsidiaries by Parent. The Merger Agreement further provides that in
conjunction with the obtaining of any such financing, the Company agrees, at the
request of Parent, to call for prepayment or redemption, conduct a tender offer
for, or prepay, redeem and/or renegotiate, as the case may be, any then existing
indebtedness of the Company and its subsidiaries, including, without limitation,
indebtedness under the primary credit agreement, the senior subordinated notes
and the convertible subordinated notes; provided
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that no such prepayment or redemption or purchase under any tender offer will
themselves actually be required to be made or consummated until
contemporaneously with or after the consummation of the Offer.
Reasonable Best Efforts. The Merger Agreement provides that, subject to
the terms and conditions therein provided, each of the parties thereto agreed to
use all reasonable best efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable, whether
under applicable laws and regulations or otherwise, and to remove any
injunctions or other impediments or delays, legal or otherwise, to consummate
the Offer and make effective the Merger and the other transactions contemplated
by the Merger Agreement as expeditiously as practicable. Pursuant to the Merger
Agreement, in case at any time after the Effective Time any further action
becomes necessary or desirable to carry out the purposes of the Merger
Agreement, the proper officers and directors of the Company, Parent, Purchaser
and Merger Sub will use all reasonable efforts to take, or cause to be taken,
all such necessary actions.
Publicity. The Merger Agreement provides that so long as the Merger
Agreement is in effect, neither the Company nor Parent nor their affiliates will
issue or cause the publication of any press release or other public statement or
announcement with respect to the Merger Agreement or the transactions
contemplated thereby without prior consultation with and approval (not to be
unreasonably withheld or delayed) of the other party, except as may be required
by law or by obligations pursuant to any listing agreement with, or the listing
rules of, a national securities exchange, and in such case will use all
reasonable efforts to consult with and obtain approval of the other party prior
to such release or announcement being issued.
Notification of Certain Matters. The Merger Agreement provides that the
Company will give prompt notice to Parent, and Parent will give prompt notice to
the Company, of (i) the occurrence or non-occurrence of any event which would be
likely to cause any representation or warranty of the Company or Parent,
Purchaser and Merger Sub, as the case may be, contained in the Merger Agreement
to be untrue or inaccurate in any material respect at or prior to the Effective
Time and (ii) any material failure or inability of the Company or Parent, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this provision will not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
Directors' and Officers' Insurance and Indemnification. The Merger
Agreement provides that at all times after the Effective Time, Parent and the
Surviving Corporation will jointly and severally indemnify each person who was
at the date of the Merger Agreement, or at any time prior to the date thereof, a
director or officer of the Company or of any of the Company's subsidiaries or
person entitled to indemnification (individually an "Indemnified Party" and
collectively the "Indemnified Parties"), subject to applicable law, to the same
extent and in the same manner as was being provided in the respective
certificates of incorporation or by-laws or similar organizational documents of
the Company and such subsidiaries or otherwise in effect on the date thereof.
The Merger Agreement further provides that the Surviving Corporation will
maintain in effect for not less than six years after consummation of the Merger
the policies of directors' and officers' liability insurance maintained by the
Company and its subsidiaries on the date of the Merger Agreement or policies
having comparable coverage, terms and conditions, with respect to matters
existing or occurring at or prior to the Effective Time, to the extent
available; provided, that in no event will the Surviving Corporation be required
to expend in any one year an amount in excess of 200% of the annual premiums
paid by the Company for such insurance (as disclosed to Parent in writing prior
to the date of the Merger Agreement), although it will be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount.
The Merger Agreement provides that, without limitation of the foregoing, in
the event any such Indemnified Party is or becomes involved in any capacity in
any action, proceeding or investigation in connection with any matter,
including, without limitation, the transactions contemplated by the Merger
Agreement, Parent will pay as incurred such Indemnified Party's legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, subject to the provision by such Indemnified Party of an
undertaking to reimburse such payments in the event of a final determination by
a court of competent jurisdiction that such Indemnified Party is not entitled
thereto. The Merger Agreement further provides that Parent will pay all
expenses, including attorneys' fees, that may be incurred by any
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Indemnified Party in enforcing the indemnity and other obligations provided for
in the above-described provisions or any action involving an Indemnified Party
resulting from the transactions contemplated by the Merger Agreement.
The Merger Agreement provides that any determination to be made as to
whether any Indemnified Party has met any standard of conduct imposed by law
will be made by legal counsel reasonably acceptable to such Indemnified Party,
Parent and the Surviving Corporation, retained at Parent's and the Surviving
Corporation's expense.
The Merger Agreement provides that the provisions described above are
intended to benefit and will be enforceable by the Indemnified Parties and their
respective heirs, executors and personal representatives and will be binding on
and enforceable against Parent, Purchaser, Merger Sub and the Surviving
Corporation and their successors and assigns in accordance with Delaware law.
Proxy Statement; Company Stockholders Meeting. The Merger Agreement
provides that as soon as practicable following the date thereof at the request
of Parent, the Company will prepare and file with the Commission a proxy or
information statement with respect to the required Company stockholder approval
of the Merger Agreement (the "Proxy Statement") and will use all reasonable
efforts to resolve any comments of the Commission with respect to the Proxy
Statement as promptly as practicable. The Merger Agreement further provides that
Parent will cooperate with the Company in the preparation of the Proxy
Statement. The Merger Agreement also provides that Company will give Parent and
its counsel a reasonable opportunity to review the Proxy Statement prior to its
being filed with the Commission and will give Parent and its counsel a
reasonable opportunity to review all amendments and supplements to the Proxy
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the Commission, all of
which filings and responses will be subject to Parent's prior consent, not to be
unreasonably withheld. The Company will provide to Parent promptly copies of all
correspondence between it or any of its representatives and the Commission.
Pursuant to the Merger Agreement, Parent will furnish all information concerning
it required to be included in the Proxy Statement, and as promptly as
practicable, the Proxy Statement will be mailed to the stockholders of the
Company. The Merger Agreement provides that the Company will advise Parent
promptly after it receives notice thereof of any request or demand by the
Commission or the NYSE for amendment of the Proxy Statement.
The Merger Agreement provides that if Company stockholder approval is
required under the DGCL to consummate the Merger and is required to be given at
a duly held meeting of stockholders, the Company will, as promptly as reasonably
practicable following the execution of the Merger Agreement, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Company
Stockholders Meeting") for the purpose of obtaining the Company stockholder
approval and will take all lawful action to solicit the Company stockholder
approval. The Merger Agreement further provides that unless otherwise required
by their fiduciary duties under applicable law, the Board of Directors of the
Company will (i) recommend adoption of the Merger Agreement by the stockholders
of the Company, and (ii) not withdraw, modify or qualify in any manner adverse
to Parent such recommendation (or its recommendation that holders of Shares
tender their Shares in the Offer) or take any action or make any statement in
connection with the Company Stockholders Meeting (or the Offer) inconsistent
with such recommendation (collectively, an "Adverse Change in the Company
Recommendation"). Pursuant to the Merger Agreement, the Company will use all
reasonable efforts to obtain any necessary approvals to permit the Company
stockholder approval to be effected by written consent. The Merger Agreement
provides that, subject to its right to terminate the Merger Agreement in
accordance with its terms, the Company will be required to take the actions
specified in the provisions described above, and satisfy all its other
obligations under the Merger Agreement, whether or not the Company Board of
Directors makes an Adverse Change in the Company Recommendation after the date
thereof.
The Merger Agreement provides that Parent will vote at the Company
Stockholders Meeting or give consents with respect to, or cause to be voted or
to have consents given with respect of (including, prior to the Control Date, by
causing the voting trustees to vote pursuant to the voting trust agreements),
all Shares then owned by it or Purchaser or any of Parent's other subsidiaries
and affiliates (including any shares held in the Voting Trust) in favor of the
adoption of the Merger Agreement.
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<PAGE> 16
The Merger Agreement provides that, notwithstanding the foregoing, in the
event that Purchaser has acquired at least 90% of the then-outstanding Shares,
the parties will, at the request of Purchaser, subject to the conditions to the
Merger, the DGCL, the ICA and the rules and regulations of the STB, to take (and
prior to the Control Date to cause the voting trustees to take) all necessary
and appropriate action to cause the Merger to become effective, in accordance
with Section 253 of the DGCL, as soon as reasonably practicable after such
acquisition, without a meeting of the stockholders of the Company.
Parent Circular; Parent Shareholders Meeting. The Merger Agreement
provides that as soon as practicable following the date of the Merger Agreement,
Parent will prepare and obtain the approval of the London Stock Exchange ("LSE")
of a circular (the "Parent Circular") to be sent to Parent's shareholders in
connection with the Parent Shareholder Meeting (as defined below). The Company
will cooperate with Parent in the preparation of the Parent Circular. The Merger
Agreement further provides that Parent will give the Company and its counsel a
reasonable opportunity to review the Parent Circular prior to its being lodged
with the LSE for approval and will give the Company and its counsel a reasonable
opportunity to review all amendments and supplements to the Parent Circular and
all responses to requests for additional information and replies to comments
prior to their being filed with, or sent to, the LSE. The Merger Agreement also
provides that Parent will provide to the Company promptly copies of all
correspondence between it or any of its representatives and the LSE. Pursuant to
the Merger Agreement, the Company will furnish all information concerning it
required to be included in the Parent Circular, and as promptly as practicable,
the Parent Circular will be mailed to the shareholders of Parent. The Merger
Agreement provides that Parent will advise the Company promptly after it
receives notice thereof of any request or demand by the LSE for amendment of the
Parent Circular. The Merger Agreement further provides that the Parent Circular
and any supplements thereto and any other circulars or documents issued to
shareholders or employees of Parent will contain all particulars relating to
Parent and the Company required to comply in all material respects with all
United Kingdom statutory and other legal provisions (including, without
limitation, the Companies Act of 1985 of the United Kingdom, as amended, the
Financial Services Act 1986 and the rules and regulations made thereunder, and
the rules and requirements of the LSE and the City Code) and, at the date filed
with the LSE or distributed to Parent's shareholders or at the time of the
Parent Shareholders Meeting, all such information contained in such documents
will be substantially in accordance with the facts and will not omit anything
material likely to affect the import of such information.
The Merger Agreement provides that Parent will, as promptly as reasonably
practicable following the execution of the Merger Agreement, duly call, give
notice of, convene and hold a meeting of its shareholders (the "Parent
Shareholders Meeting") for the purpose of obtaining the Parent Shareholder
Approval and will take all lawful action to solicit such Parent Shareholder
Approval. The Merger Agreement further provides that Parent will use its
reasonable best efforts to hold the Parent Shareholders Meeting on or before
July 26, 1999. Pursuant to the Merger Agreement, unless otherwise required by
their fiduciary duties under applicable law, the Board of Directors of Parent
will (i) recommend that the shareholders of Parent vote in favor of the
resolution to be proposed at Parent Shareholders Meeting and required for the
implementation of the Offer and the Merger, and (ii) not withdraw, modify or
qualify in any manner adverse to the Company such recommendation or take any
action or make any statement in connection with the Parent Shareholders Meeting
inconsistent with such recommendation (collectively, an "Adverse Change in the
Parent Recommendation"). The Merger Agreement provides that, subject to its
right to terminate the Merger Agreement in accordance with its terms, Parent
will be required to take the actions specified in the provisions described
above, and satisfy all its other obligations under the Merger Agreement, whether
or not Parent's Board of Directors makes an Adverse Change in the Parent
Recommendation after the date of the Merger Agreement.
Registration Rights for Shares Deposited in Voting Trust. The Merger
Agreement provides that the Company will, if requested by any Voting Trustee at
any time and from time to time within three years after the termination of the
Merger Agreement while any securities of the Company or any of its subsidiaries
remain in the Voting Trust, as expeditiously as possible prepare and file up to
three registration statements under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all
securities that have been deposited in the Voting Trust, in accordance with the
intended method of sale or other disposition stated by the Voting Trustee,
including a "shelf" registration statement under Rule 415
15
<PAGE> 17
under the Securities Act or any successor provision; and the Company will use
its reasonable best efforts to qualify such securities under any applicable
state securities laws. The Merger Agreement further provides that the Voting
Trustee and Parent will use reasonable efforts to cause, and to cause any
underwriters of any sale or other disposition to cause, any sale or other
disposition pursuant to such registration statement to be effected on a widely
distributed basis. The Merger Agreement also provides that the Company will use
reasonable efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties which are required
therefor, and to keep such registration statement effective for such period not
in excess of 180 calendar days from the day such registration statement first
becomes effective as may be reasonably necessary to effect such sale or other
disposition. Pursuant to the Merger Agreement, the obligations of the Company
thereunder to file a registration statement and to maintain its effectiveness
may be suspended for one or more periods of time not exceeding 60 calendar days
in the aggregate with respect to any registration statement if the Board of
Directors of the Company determines that the filing of such registration
statement or the maintenance of its effectiveness would require disclosure of
nonpublic information that would materially and adversely affect the Company.
Pursuant to the Merger Agreement, the costs of any registration statement
prepared and filed under the provisions described in this paragraph, and any
sale covered thereby, will be shared equally by the Company and Parent except
for underwriting discounts or commission, brokers' fees and the fees and
disbursements of the Voting Trustee's and Parents' counsel related thereto
(which will be paid by Parent). The Merger Agreement provides that the Voting
Trustee and Parent will provide all information reasonably requested by the
Company for inclusion in any registration statement to be filed hereunder. The
Merger Agreement further provides that if, during the time periods referred to
in the first sentence of this paragraph, the Company effects a registration
under the Securities Act of the Company's securities for its own account or for
any other of its stockholders (other than on Form S-4, Form S-8, or any
successor form), it will allow the Voting Trustee the right to participate in
such registration, and such participation will not affect the obligation of the
Company to effect demand registration statements for the Voting Trustee under
the Section described hereby; provided, that, if the managing underwriters of
such offering advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include the securities
requested to be included therein by the Voting Trustee only after including all
securities intended to be included therein by the Company. The Merger Agreement
also provides that in connection with any registration pursuant to the Section
described hereby, the Company and Parent will provide each other and any
underwriter of the offering with customary representations, warranties,
covenants, indemnification, and contribution in connection with such
registration.
Dividend Access Shares. The Merger Agreement provides that prior to the
commencement of the Offer, the Company will enter into an agreement (the
"Dividend Access Share Purchase Agreements") with each holder of Dividend Access
Shares, par value $.01 per share (the "Dividend Access Shares"), of 3376249
Canada, Inc., a subsidiary of the Company (the "Canadian Subsidiary") which will
be substantially in the form previously furnished to Parent, and take any other
necessary action to ensure that none of the Company, the Canadian Subsidiary,
the Surviving Corporation, Parent or any other affiliate of Parent will be
required under the terms of the Dividend Access Shares, the Support Agreement
with respect to the Dividend Access Shares (the "Support Agreement") or
otherwise, to, and none of them will bear any liability or other obligation for
failing to: (i) permit the holders of Dividend Access Shares to retract their
Dividend Access Shares as against the Canadian Subsidiary and receive Shares in
exchange therefor for the sole purpose of tendering such Shares in the Offer,
effective and conditional only upon the consummation of the Offer, all as
contemplated by the Support Agreement (it being understood that Purchaser will
not be required to accept tenders of, nor will Parent or Purchaser otherwise be
required to acquire, Dividend Access Shares in the Offer or otherwise); or (ii)
following the Effective Time, issue or otherwise deliver any shares in the
capital stock of the Company, the Surviving Corporation, the Canadian
Subsidiary, Parent or any other affiliate of Parent or any other securities or
property other than a sum in United States Dollars equal to the Per Share Price,
without any interest thereon, in respect of or in exchange for, whether pursuant
to a retraction or otherwise, any Dividend Access Share. Pursuant to the Merger
Agreement, true and complete copies of all executed Dividend Access Share
Purchase Agreements will be provided to Parent upon execution thereof.
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<PAGE> 18
Merger Conditions. The Merger Agreement provides that the obligations of
the Company, on the one hand, and Parent and Merger Sub, on the other hand, to
consummate the Merger are subject to the satisfaction (or, if permissible,
waiver by the party for whose benefit such conditions exist) of the following
conditions: (1) Purchaser shall have purchased the Shares pursuant to the Offer
(provided that the purchase of Shares pursuant to the Offer will not be a
condition to the obligations of Parent and Merger Sub hereunder if Purchaser
fails to accept for payment and pay for Shares pursuant to the Offer in
violation of the terms hereof or of the Merger Agreement); (2) if required under
the DGCL, Company stockholder approval for the Merger shall have been obtained;
and (3) no court, arbitrator or other governmental entity shall have issued any
order, injunction, decree or ruling, and there will not be any other judgment,
order, decree, arbitration award, statute, law, ordinance, rule, or regulation
("Law") restraining, enjoining or prohibiting the consummation of the Merger.
Termination. The Merger Agreement provides that notwithstanding anything
to the contrary in the Merger Agreement, it may be terminated and the
transactions contemplated therein may be abandoned at any time prior to the
Effective Time, whether before or after stockholder approval thereof:
(a) by the mutual written consent of Parent and the Company;
(b) by either of the Company or Parent:
(i) if (A) the Offer expires or terminates in accordance with the
terms thereof without the purchase of any Shares thereunder or (B)
Purchaser has not purchased Shares under the Offer prior to January 31,
2000; provided, however, that the right to terminate the Merger
Agreement under this clause will not be available to any party to the
extent that the delay in consummating the Offer is due to such party's
material breach of the Merger Agreement;
(ii) if any governmental entity has issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other
action the parties thereto will use their reasonable best efforts to
lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement and
such order, decree, ruling or other action will have become final and
non-appealable;
(iii) prior to the consummation of the Offer, if the other party
has breached any of its representations, warranties, covenants or
agreements set forth herein such that any of the Offer Conditions would
not be satisfied, which breach, to the extent curable, is not cured
within ten business days of receipt of written notice of breach by the
breaching party; or
(iv) the Parent Shareholder Approval has not been obtained at the
Parent Shareholders Meeting;
(c) by the Company, prior to consummation of the Offer, upon three
business days' prior written notice to Parent (which notice will entitle
Parent to terminate the Merger Agreement pursuant to clause (d) below), in
order to accept a proposal which its Board of Directors will have
determined as of the date of such notice is a Superior Proposal and such
Board of Directors will have concluded in good faith, only after receipt of
and based on advice of its outside legal counsel, that its fiduciary duties
would require it to accept such Superior Proposal; provided, however, that
(i) any financing with respect thereto is committed for the full amount
required, (ii) the Company will have fully complied with its obligations
described under "No Solicitation" above, (iii) such notice will include a
copy of any proposed or definitive documentation relating to such Superior
Proposal, and will otherwise indicate all material terms and conditions
with respect thereto, (iv) prior to any such termination, the Company will,
if requested by Parent in connection with any revised proposal Parent might
make, negotiate in good faith for such three business day period with
Parent, (v) the Board of Directors of the Company will have concluded in
good faith, only after receipt of and based on advice of its outside legal
counsel and a nationally recognized financial advisor, as of the effective
date of such termination, after taking into account any revised proposal by
Parent during such three business day period, that such third party
proposal remains a Superior Proposal (and such financing remains so
committed) which the Board of Directors of the Company is obligated to
accept under its fiduciary duties and (vi) immediately following such
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<PAGE> 19
termination, the Company enters into definitive and binding documentation
with respect to such Superior Proposal; and provided, further, that it will
be a condition to termination pursuant to this clause (c) that the Company
will have made the payment of the fee to Parent described under "Effect of
Termination" below;
(d) by Parent if prior to the consummation of the Offer: (i) the
Company delivers the notice described in clause (c) above, (ii) the Board
of Directors of the Company effects an Adverse Change in the Company
Recommendation or approves or recommends another Acquisition Proposal or
fails to reconfirm its recommendation, if so requested by Parent, within
fifteen days following such request, or (iii) the Company engages in
negotiations with a third party after the date of the Merger Agreement with
respect to any Acquisition Proposal and has not fully and unconditionally
rejected such proposal (including, if such Acquisition Proposal was
publicly announced or known, by publicly announcing such rejection) within
three business days of first engaging in any negotiations with respect to
such Acquisition Proposal; or
(e) by Parent if prior to the consummation of the Offer any person or
group (within the meaning of Section 13(d)(3) of the Exchange Act) acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of more than 20% of the combined voting power of the Company Common
Stock and the Voting Preferred Stock.
Effect of Termination. The Merger Agreement provides that in the event of
the termination of the Merger Agreement as described above, written notice
thereof will forthwith be given to the other party or parties specifying the
provision thereof pursuant to which such termination is made, and the Merger
Agreement will forthwith become null and void, and there will be no liability on
the part of Parent, Purchaser, Merger Sub or the Company except (i) for fraud or
for breach of the Merger Agreement or the confidentiality agreement and (ii) the
provisions described under "Registration Rights for Shares Deposited in Voting
Trust" above, "Effect of Termination" herein, and "Costs and Expenses" below and
in the last sentence of under "Access to Information" above.
The Merger Agreement provides that the Company will pay Parent the sum of
$35 million if the Merger Agreement is terminated solely as follows:
(i) by Parent pursuant to clause (b)(iii) under "Termination"
described above if the breach giving rise to such termination right
occurred at a time after the Company will have received or become aware of
an Acquisition Proposal (other than any such proposal submitted prior to
the date of the Merger Agreement) and within twelve months of such
termination, the Company enters into a definitive agreement with respect to
an Acquisition Proposal or an Acquisition Proposal is consummated (which
fee will be payable immediately upon the earlier of execution of such
agreement or consummation of an Acquisition Proposal); or
(ii) by the Company pursuant to clause (c) under "Termination" above
(which fee will be payable as a condition to such termination) or by Parent
pursuant to clause (d)(i) under "Termination" above (which fee will be
payable immediately upon such termination); or
(iii) (A) by Parent or the Company pursuant to clause (b)(i)(A) under
"Termination" above (provided that (1) prior to such termination an
Acquisition Proposal with respect to the Company will have been publicly
announced or otherwise become public, (2) on the date of expiration or
termination of the Offer the Minimum Condition has not been satisfied, and
(3) on such date there is no other condition to the Offer which has failed
to be satisfied as a result of a material breach of the Merger Agreement by
Parent, Purchaser or Merger Sub), or (B) by Parent pursuant to clause
(d)(ii) or (iii) or clause (e) under "Termination" above, if, in the case
of either clause (A) or (B), within twelve months of any such termination,
the Company enters into a definitive agreement with respect to an
Acquisition Proposal or an Acquisition Proposal is consummated (which fee
will be payable immediately upon the earlier of execution of such agreement
or consummation of an Acquisition Proposal); or
(iv) by Parent pursuant to clause (e) under "Termination" above, if
prior to or within twelve months after any such termination, any person or
group acquired or acquires beneficial ownership of more
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<PAGE> 20
than 40% of the combined voting power of the Company Common Stock, the
Voting Preferred Stock and any other voting capital stock of the Company
(which fee will be payable immediately upon the later of such acquisition
or such termination).
The Merger Agreement provides that Parent will pay the Company the sum of
$25 million if the Merger Agreement is terminated by either party pursuant to
clause (b)(iv) under "Termination" above and prior to the Parent Shareholders
Meeting there has been an Adverse Change in the Parent Recommendation.
The Merger Agreement further provides that if the Merger Agreement is
terminated by either party pursuant to clause (b)(i)(A) under "Termination"
above (provided that (1) on the date of expiration or termination of the Offer
the Minimum Condition has not been satisfied and (2) on such date all other
conditions to the Offer have been satisfied or waived), then upon and following
such termination the Company will be required to reimburse Parent and its
affiliates for all reasonable out-of-pocket fees and expenses actually incurred
by any of them or on their behalf in connection with the Offer and the Merger,
any financing thereof or in respect therewith, and the negotiation, preparation,
execution and diligence in respect of the Merger Agreement (including, without
limitation, fees and disbursements payable to banks, investment banking firms,
dealer managers and other financial institutions, and their respective agents
and counsel, and all fees of counsel, accountants, financial printers,
depositaries, information agents, experts and consultants) ("Expenses") up to an
aggregate maximum reimbursement of $5 million. The Merger Agreement also
provides that the Company will pay the amounts requested within three business
days of such requests (accompanied by a submission of statements therefor).
Pursuant to the Merger Agreement, the maximum aggregate amount that the Company
will be required to pay pursuant to the provisions described in this paragraph
and the second preceding paragraph will be $35 million.
The Merger Agreement provides that if the Merger Agreement is terminated by
either party pursuant to clause (b)(iv) under "Termination" above and prior to
the Parent Shareholders Meeting there has not been an Adverse Change in the
Parent Recommendation, then upon and following such termination Parent will be
required to reimburse the Company and its affiliates for all Expenses actually
incurred by any of them or on their behalf up to an aggregate maximum
reimbursement of $5 million. The Merger Agreement further provides that Parent
will pay the amounts requested within three business days of such requests
(accompanied by a submission of statements therefor). Pursuant to the Merger
Agreement, the maximum aggregate amount that Parent will be required to pay
pursuant to the provisions described in this paragraph and the second preceding
paragraph will be $25 million.
The Merger Agreement provides that in addition to the above described
provisions, in the event a fee or Expenses is or becomes payable pursuant to the
above-described provisions, the party required to pay such fee or Expenses will
promptly, but in no event later than three business days following written
notice thereof, together with related bills or receipts, to reimburse the other
party for all reasonable out-of-pocket costs, fees and expenses, including,
without limitation, the reasonable fees and disbursements of counsel and the
expenses of litigation, incurred in connection with collecting such fee or
Expenses as a result of any breach by the party required to pay such fee or
Expenses of its obligations under the Merger Agreement described hereby.
Costs and Expenses. The Merger Agreement provides that except as expressly
otherwise provided in the Merger Agreement, all costs and expenses incurred in
connection with the Merger Agreement and the consummation of the transactions
contemplated thereby will be paid by the party incurring such expenses.
Amendment and Modification. The Merger Agreement provides that, subject to
applicable law, the Merger Agreement may be amended, modified and supplemented
in any and all respects, whether before or after any vote of the stockholders of
the Company or the shareholders of Parent contemplated thereby, only by written
agreement of the parties thereto, pursuant to action taken by their respective
Boards of Directors, at any time prior to the Effective Time with respect to any
of the terms contained therein; provided, however, that after the approval of
the Merger Agreement by the stockholders of the Company or the shareholders of
Parent, no such amendment, modification or supplement which by law requires
prior approval of the stockholders of the Company or shareholders of Parent will
be made unless such approval has been obtained.
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Waiver; Remedies Cumulative. The Merger Agreement provides that at any
time prior to the Effective Time, any party to the Merger Agreement may with
respect to any other party thereto: (i) extend the time for the performance of
any of the obligations or other acts; (ii) waive any inaccuracies in the
representations and warranties contained therein or in any document delivered
pursuant thereto; or (iii) waive compliance with any of the agreements or
conditions contained therein. Pursuant to the Merger Agreement, any such
extension or waiver will be valid only if set forth in an instrument in writing
signed by the party or parties to be bound. The Merger Agreement provides that
no failure or delay on the part of any party to the Merger Agreement in the
exercise of any right thereunder shall impair such right or be construed to be a
waiver of, or acquiescence in, any breach of any representation, warranty or
agreement therein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. Pursuant to
the Merger Agreement, all rights and remedies existing under the Merger
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
TENDER AGREEMENT
Concurrently with the execution and delivery of the Merger Agreement,
Parent and Purchaser entered into a Tender Agreement (the "Tender Agreement")
with each of the directors of the Company (each, a "Stockholder" and, together,
the "Stockholders") who together beneficially own 1,499,921 shares of Company
Common Stock (the "Existing Shares" and, together with any shares of Company
Common Stock acquired after the date of the Tender Agreement and prior to the
termination thereof, whether upon the exercise of options, conversion of
convertible securities or otherwise, the "Subject Shares"). Pursuant to the
Tender Agreement, each of the Stockholders agreed, among other things, to
validly tender (and not withdraw) his Subject Shares to Purchaser pursuant to
the Offer.
Additionally, pursuant to the Tender Agreement, each of the Stockholders
agreed that, during the time that the Tender Agreement is in effect, at any
meeting of the stockholders of the Company, however called, or in any written
consent in lieu thereof, such Stockholder will (i) vote the Subject Shares owned
by him in favor of the Merger; and (ii) vote the Subject Shares owned by him
against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that could reasonably be expected to impede,
interfere with, delay, postpone or attempt to discourage the Merger or the
Offer, including, but not limited to: (A) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company and its subsidiaries; (B) a sale or transfer of a material
amount of assets of the Company and its subsidiaries or a reorganization,
recapitalization or liquidation of the Company and its subsidiaries; (C) any
change in the management or board of directors of the Company, except as
otherwise agreed to in writing by Purchaser; (D) any material change in the
present capitalization or dividend policy of the Company; or (E) any other
material change in the Company's corporate structure or business.
The Tender Agreement provides that, from and after the date of the Tender
Agreement, each of the Stockholders will not, and will cause his financial and
other advisors, agents, representatives, affiliates and others working on its
behalf or at its direction not to, initiate, solicit, encourage or facilitate
offers, inquiries or proposals with respect to, or furnish any information
relating to or participate in any negotiations or discussions concerning, any
merger, reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its subsidiaries, or any purchase or sale of more than 10% of
the assets (including stock of subsidiaries) of the Company and its subsidiaries
taken as a whole, or any purchase or sale of, or tender or exchange offer for,
10% or more of the equity securities of the Company or any of its subsidiaries
other than as contemplated or permitted by the Merger Agreement.
Pursuant to the Tender Agreement, each of the Stockholders hereby agreed,
while the Tender Agreement is in effect, and except as contemplated thereby, not
to (i) sell, transfer, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, pledge, encumbrance, assignment or other
disposition of, any of the Subject Shares or (ii) grant any proxies, deposit any
Subject Shares into a voting trust or enter into a voting agreement with respect
to any Subject Shares or (iii) take any action that would make any
representation or warranty of such Stockholder
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<PAGE> 22
contained herein untrue or incorrect or have the effect of preventing or
disabling such Stockholder from performing his obligations under the Tender
Agreement.
The Tender Agreement provides that each of the Stockholders will, while the
Tender Agreement is in effect, promptly notify Parent of the number of any new
shares of Company Common Stock acquired by such Stockholder, if any, after the
date thereof.
The Tender Agreement terminates upon any termination of the Merger
Agreement.
IRREVOCABLE UNDERTAKINGS
Each of Brian Souter and Ann Gloag has signed an irrevocable Undertaking to
Vote dated June 12, 1999, pursuant to which each of them has agreed to vote his
or her shares of voting stock of Parent in favor of the Merger. Mr. Souter and
Ms. Gloag together beneficially own approximately 24% of the shares of Parent.
EMPLOYEE TERM SHEET
Pursuant to an Employee Term Sheet dated June 12, 1999 and delivered to the
Parent, and subject to the good faith negotiation and execution of definitive
service agreements, (i) each of Lawrence K. King, Frank Gallagher and Gerald
Mercadante agreed to enter into new service agreements with the Company or one
of its subsidiaries for a fixed term of three years from the closing of the
Merger, (ii) Lawrence K. King will be appointed as a director of Parent (subject
to Parent's articles of association and the rules of the LSE) and (iii) Lawrence
K. King, Frank Gallagher, Gerald Mercadante and John Mercadante, Jr.
(collectively, the "Investors") agreed to invest an aggregate of $9 million in
the purchase of Parent ordinary shares, as soon as reasonably practicable, and,
subject to certain customary exceptions, not dispose of the shares acquired by
them for a period of one year from the purchase. Subject to the Investors
continuing to be employed by the Company (except where prior termination by the
employer was without cause), certain performance criteria being achieved and the
approval of Parent's shareholders being obtained, three years after the
Effective Time each Investor will be entitled to receive one Parent ordinary
share for every ten Parent ordinary shares purchased under (iii) above. The
Company has indicated to Parent that certain additional executives would be
prepared to invest an additional $1 million in the purchase of Parent's ordinary
shares on the terms described above.
CONFIDENTIALITY LETTERS
Pursuant to letter agreements dated as of June 2, 1999 (the
"Confidentiality Letters") between the Parent and the Company, each party has
supplied the other party with certain confidential non-public information. The
parties have agreed in the Confidentiality Letters that, together with their
respective directors, executives, officers, employees, legal, financial,
accounting or other advisors, affiliates and representatives, they will keep
confidential all such information supplied by the other party and that, among
other things, without the prior written consent of the Company, they will not
enter into or propose to enter into any business combination, acquisition or
other transaction relating to the other party or acquire any securities of the
other party or seek to control or influence the management, board of directors
or policies of the other party (collectively, the "Standstill Provisions")
within one year after the date of the Confidentiality Letters.
Notwithstanding the foregoing, the Company has agreed that the Standstill
Provisions will not be applicable to Parent if the Board of Directors of the
Company approves a transaction with any person that would result in such person
owning (i) more than 20% of the outstanding voting securities of the Company,
(ii) any securities convertible into securities of the Company representing more
than 20% of the outstanding voting securities of the Company or (iii)
substantially all of the assets of the Company, or if any person or group
commences or announces its intention to commence a tender or exchange offer for
the percentages of Company securities referred to in clauses (i) and (ii) above.
The Parent has similarly agreed that the Standstill Provisions will not be
applicable to the Company if the Parent's board of directors approves a
transaction with any person that would result in such person owning (x) more
than 50% of the outstanding voting securities of Parent, (y) any securities
convertible into securities of Parent representing more than 50% of the
outstanding voting securities of Parent or (z) substantially all of the assets
of Parent, or if any person or group commences or announces its intention to
commence a tender or exchange offer for the percentages of Parent securities
referred to in clauses (x) and (y) above.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION
(A) RECOMMENDATION OF THE BOARD
The Company's Board of Directors has unanimously approved the Merger
Agreement and the transactions contemplated thereby and determined unanimously
that the Offer and the Merger are advisable and fair to and in the best
interests of the stockholders of the Company and recommends that all
stockholders of the Company tender all their Shares pursuant to the Offer. This
recommendation is based in part upon an opinion (the "Fairness Opinion")
received by the Company from Morgan Stanley & Co. Incorporated ("Morgan
Stanley") that the consideration to be received by the Company's stockholders in
the Offer and the Merger is fair to the stockholders from a financial point of
view. No limitations were imposed by the Board or management of the Company on
Morgan Stanley with respect to the investigation made, or the procedures
followed by it, in rendering the Fairness Opinion. For purposes of its opinion,
Morgan Stanley relied, without independent verification, on the accuracy,
completeness and fairness of all financial and other information reviewed by it.
The Fairness Opinion contains a description of the factors considered, the
assumptions made and the scope of review undertaken by Morgan Stanley in
rendering its opinion. THE FULL TEXT OF THE FAIRNESS OPINION RECEIVED BY THE
COMPANY FROM MORGAN STANLEY IS ATTACHED AS ANNEX II TO THIS SCHEDULE 14D-9 AND
IS INCORPORATED HEREIN BY REFERENCE IN ITS ENTIRETY. SHAREHOLDERS ARE URGED TO
READ SUCH OPINION IN ITS ENTIRETY.
(B) BACKGROUND; REASONS FOR RECOMMENDATION
In August 1998, Lawrence K. King, Chairman of the Board and Chief Executive
Officer of the Company, met with a third party who expressed an interest in
acquiring or merging with the Company.
In November 1998, Mr. King contacted Mr. Brian Souter, Executive Chairman
of the Parent, concerning the possibility of certain strategic opportunities the
two companies might be able to pursue jointly.
In November and December 1998, representatives of the Company met with
several parties regarding their possible interest in investing in the Company.
In March 1999, the Company had further discussions with those and other
potential investors regarding potential equity investments in the Company.
In March 1999, Mr. King contacted Mr. Souter to request a meeting to
discuss Parent's acquisition strategy in North America and ways in which the two
companies might be able to work together to pursue this strategy.
In March 1999, Mr. King contacted a United States investment banking firm
and requested such firm to assist the Company to identify and arrange meetings
with companies other than Parent regarding the Company's strategic alternatives.
On April 26, 1999, Mr. King, Mr. John Mercadante, Jr., President of the
Company, and Mr. Frank P. Gallagher, Executive Vice President and Chief
Operating Officer of the Company, met with Mr. Souter and Mr. Keith Cochrane,
Group Finance Director of the Parent, in Perth, Scotland to discuss Parent's
acquisition strategy in North America, ways in which Parent and the Company
might work together as part of that strategy, the motor coach operating market
in North America and other strategic matters.
Later in April 1999, Mr. King and Mr. Gallagher met with three other motor
coach operating companies regarding the Company's growth strategies, its needs
for additional financial resources to be able to continue to pursue acquisitions
effectively and their possible interest in working with the Company to execute
the Company's strategic plan.
In May 1999, Mr. King met with representatives of the company with whom he
had discussions in August 1998. On the basis of this meeting, Mr. King believed
that the other company no longer had any interest in acquiring or merging with
the Company.
In May 1999 the Company received an indication of value from a private
investment group.
22
<PAGE> 24
On May 17, 1999, Mr. Souter met with Mr. King and certain other Company
management team members in Houston, Texas and expressed an interest in acquiring
the Company or merging the Company into Parent.
Following the meeting with Mr. Souter, on May 18, 1999, the Company
requested Morgan Stanley to perform a preliminary analysis of the value of the
Company to assist Company management in its consideration of the interest of
Parent or other parties in acquiring or merging with the Company.
On May 18, 1999, Mr. King was contacted by a representative of another
motor coach operating company expressing its interest in an acquisition of the
Company, and Mr. King encouraged such party to come visit the Company.
On May 24, 1999, Mr. King and Mr. Souter and other representatives of their
respective companies discussed a possible structure for a business combination
transaction between Parent and the Company, involving consideration consisting
of cash and Parent equity securities to be paid to the Company's stockholders in
a merger. Mr. Souter indicated, however, that Parent did not want to be involved
in an auction of the Company, and therefore needed a period of four weeks during
which it could conduct due diligence and, assuming satisfaction with the results
thereof, negotiate and enter into a definitive transaction agreement with the
Company.
On May 25, 1999, Mr. King had discussions with another company regarding
its interest in a possible business combination with the Company. The other
company requested an opportunity to conduct exclusive due diligence and,
assuming satisfaction with the results thereof, to negotiate and enter into a
definitive transaction agreement with the Company. Mr. King informed the other
company that the Company had already received an indication of interest and
requested the other company to provide the Company with an indication of the
price it would be prepared to offer the Company or its stockholders. The other
company indicated that it would be prepared to make an offer in a range in
excess of that initially indicated by Parent, such consideration to consist of
approximately 50% in cash and 50% in stock of the other company.
Later on May 25, 1999, Mr. Cochrane and representatives of Parent's legal
and financial advisors met in Houston, Texas, with Mr. King, Mr. Mercadante and
certain other executives of the Company, and the Company's legal advisors, to
discuss the terms of Parent's transaction proposal and the terms of a
confidentiality and standstill agreement and exclusivity agreement proposed by
Parent. Mr. King informed Mr. Cochrane that the Company had received a proposal
for a transaction from another company, and that the Company could not enter
into an exclusivity agreement until the Company's Board of Directors and its
financial advisor had considered Parent's and the other company's proposals. A
Company Board of Directors meeting was scheduled for the next morning. Mr. King
also asked for clarification of the terms of Parent's proposal.
On May 26, 1999 before the Company's Board of Directors meeting, Parent
submitted a written proposal for a business combination transaction involving
equity securities of Parent and the opportunity for the Company shareholders to
receive up to 50% of their consideration in cash, at an increased valuation for
the Company from the valuation that was indicated on May 24. Parent's ongoing
interest in the Company was subject to the condition that Parent would have an
exclusive period to conduct a due diligence investigation of the Company. The
Board of Directors met and, after presentations by management regarding the
expressions of interest which the Company had received, the Board determined to
evaluate the Company's strategic alternatives, including the further
investigation and analysis of the two business combination proposals. The Board
also authorized the engagement of Morgan Stanley as financial advisor to the
Company.
After the Board meeting, Mr. King informed Mr. Cochrane that the Company
was interested in pursuing a transaction with Parent, but that the Board and its
financial advisor would need time to consider valuation and other matters before
the Company would be willing to consider an exclusivity arrangement with Parent.
The Company advised Parent it would be willing to enter into a confidentiality
and standstill agreement with Parent so as to permit Parent to commence promptly
its due diligence investigation of the Company, but Parent indicated it was
unwilling to conduct due diligence without an exclusivity agreement.
23
<PAGE> 25
On May 31, 1999, the Executive Committee of the Board together with certain
members of management met with representatives of Morgan Stanley. Morgan Stanley
presented an evaluation of the offers and the strategic alternatives available
to the Company. The Executive Committee requested that Morgan Stanley make a
similar presentation to the full Board.
On June 1, 1999, the Board met again and received a presentation by Morgan
Stanley regarding the indications of interest being made to the Company and its
evaluation of those offers as well as other strategic alternatives available to
the Company. Based on the presentations by Morgan Stanley and the Company's
management, the Board preliminarily directed management of the Company to pursue
a transaction with Parent.
On June 1, 1999, Mr. King advised representatives of the other company that
the Company had determined to pursue discussions with another party. On June 2,
1999, Mr. King received from the other company a proposal for an all cash
transaction at a price in excess of the price then proposed by Parent.
During June 2 and June 3, 1999, Parent and the Company engaged in
negotiations of the terms of a confidentiality and standstill agreement and an
exclusivity agreement.
While these negotiations were continuing, on June 3, 1999 the Board of
Directors met again and received further presentations and updates from Morgan
Stanley and Company management regarding the proposals and other strategic
alternatives available to the Company. The Board directed management to pursue
an all cash transaction with Parent at a price per Share in excess of the price
indicated by the other company.
After the Board meeting on June 3, 1999, Mr. King informed Mr. Cochrane
that the other company had proposed an all cash transaction, but Mr. King did
not specify the price of such other proposal. Parent continued to insist on an
exclusivity period until June 21, 1999 to conduct due diligence, but indicated a
willingness to accelerate its work to the extent practicable in an effort to
meet a June 14, 1999 transaction announcement date. Parent also indicated that
it was prepared to value the Company at up to $42.00 per Share in cash, subject
to reaching agreement regarding exclusivity, the Company's agreement to the cost
reimbursement provision described below, Parent's satisfaction with its due
diligence investigation and the parties' negotiation of a mutually satisfactory
definitive merger agreement.
On June 3, 1999, the Company and Parent entered into the confidentiality
and standstill agreement and the exclusivity agreement. The exclusivity
agreement provided that Parent would have the exclusive right until June 18,
1999 to conduct due diligence and negotiate in good faith a definitive
transaction agreement. The agreement further provided that the Company would pay
Parent's reasonable costs, fees and expenses in connection with its review of
the Company and other matters relating to the proposed transaction, up to a
maximum of $5 million, if the parties failed to enter into a definitive
agreement providing for the transaction and the Company executed and delivered a
definitive agreement providing for a competing transaction with any third party
on or prior to the 45th day after the end of the exclusivity period.
On June 4, 1999, in response to an inquiry from the other company with
which the Company was having discussions, the Company informed the other company
that it was not then in a position to continue discussions with the other
company.
From June 3, 1999 until June 12, 1999 Parent conducted and completed its
due diligence review of the Company, and Parent and the Company negotiated the
terms of the Merger Agreement. During the course of this review, the Company
made available to Parent certain information and discussed the Company's
business and operations.
On June 9, 1999, in response to unusual market activity in the Shares, the
Company issued a press release to the effect that it was in discussions with a
third party regarding a possible acquisition of the Company for consideration of
$42.00 per Share in cash.
On June 11, 1999, the Company received letters from the other company as
well as an additional party, expressing their respective desires to pursue
business combination discussions with the Company that might result in a value
in excess of that described in the Company's press release, subject in each case
to an opportunity to conduct due diligence.
24
<PAGE> 26
On June 11, 1999, the Board met and after presentations by Company
management and the Company's legal and financial advisors, approved the Merger
Agreement and the transactions contemplated thereby. The Merger Agreement and
related agreements were finalized and executed and delivered on June 12, 1999,
and the transaction was announced before the New York Stock Exchange opened for
trading on June 14, 1999.
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that all holders tender their Shares pursuant to the Offer, the
Board of Directors considered a number of factors, including the following:
(i) the Board's familiarity with, and information provided by the
Company's management as to, the business, financial condition, results of
operations, current business strategy and future prospects of the Company,
the nature of the markets in which the Company operates, the Company's
position in such markets, the historical and current market prices for the
Shares, and the information provided by Morgan Stanley as to the Company's
strategic and other alternatives;
(ii) the terms of the Merger Agreement, including (x) the proposed
structure of the Offer and the Merger involving an immediate cash tender
offer followed by a merger for the same consideration, (y) the fact that
financing is not a condition to the Offer and the Merger and the Board's
view, based on Morgan Stanley's advice, that Parent would be able to
finance the transaction, and (z) the willingness of Parent to use a voting
trust structure to permit it to consummate the Offer prior to obtaining
Surface Transportation Board approval, thereby enabling tendering
stockholders to obtain cash for their Shares quickly;
(iii) that the per Share price contemplated by the Merger Agreement,
at $42.00, represented a significant premium to the trading prices of the
Shares prior to the announcement of the discussions regarding a possible
acquisition of the Company, and, later, prior to the announcement of the
execution of the Merger Agreement;
(iv) the presentation of Morgan Stanley at the June 11, 1999 Board
meeting regarding the advisability of the Offer and the Merger as compared
to other strategic alternatives available to the Company and the oral
opinion of Morgan Stanley (confirmed in writing on June 12, 1999) to the
effect that, as of the date of such opinion, and based on the assumptions
made, matters considered and limits of review described therein, the
consideration to be received by the holders of the Shares in the Offer and
the Merger is fair from a financial point of view to such holders (A COPY
OF THE MORGAN STANLEY OPINION IS ATTACHED AS ANNEX II TO THIS
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 AND IS INCORPORATED
HEREIN BY REFERENCE. STOCKHOLDERS ARE URGED TO READ SUCH OPINION CAREFULLY
IN ITS ENTIRETY);
(v) the two expressions of interest received by the Company on June
11, 1999, and the relative risks and benefits of entering into the Merger
Agreement with Parent as compared to pursuing business combination
discussions with those or other parties without a binding commitment from
Parent or any other party;
(vi) possible adverse effects on the business and operations of the
Company resulting from a prolonged sale process;
(vii) that the Merger Agreement permits the Company to furnish
nonpublic information to, and to participate in negotiations with, any
third party that has submitted a Superior Proposal as defined in the Merger
Agreement, if the Board determines in its good faith judgment, only after
receipt of and based on advice from outside legal counsel to the Company,
that failure to take such actions would cause the Board to violate its
fiduciary duties to its stockholders under applicable law, and the Merger
Agreement permits the Company's Board to terminate the Merger Agreement
upon three business days' prior written notice to Parent, in order to
accept a proposal which the Board of Directors has determined is a Superior
Proposal and the Board has concluded in good faith, only after receipt of
and based on advice of its outside legal counsel, that its fiduciary duties
would require it to accept such Superior Proposal; provided, however, that,
among other things, (i) any financing with respect to such Superior
Proposal is committed
25
<PAGE> 27
for the full amount required, (ii) before any such termination, the Company
is required, if requested by Parent in connection with any revised proposal
Parent might make, to negotiate in good faith for such three business day
period with Parent, (iii) the Board must conclude in good faith, only after
receipt of and based on advice of its outside legal counsel and a
nationally recognized financial advisor, as of the effective date of such
termination, after taking into account any revised proposal by Parent
during such three business day period, that such third party proposal
remains a Superior Proposal (and such financing remains so committed) which
the Board is obligated to accept under its fiduciary duties and (iv) such
termination is not effective until the applicable termination fee described
below has been paid;
(viii) the termination provisions of the Merger Agreement, which under
certain circumstances could obligate the Company to pay a $35 million
termination fee to Parent or to reimburse Parent for its actual expenses
(not to exceed $5 million) incurred in connection with the transaction, and
the Board's belief that such fees and expense reimbursement provisions are
reasonable in the circumstances and would not deter a higher offer;
(ix) the likelihood of obtaining the required approval of Parent's
shareholders, and the irrevocable undertakings of Brian Souter and Ann
Gloag, the beneficial owners of approximately 24% of the shares of Parent,
to vote their shares of Parent voting stock in favor of the acquisition of
the Company pursuant to the Merger Agreement;
(x) strategic considerations, such as the Company's competitive
position, the changes currently occurring in the motorcoach, airport
shuttle and taxi service businesses, and the need for additional capital to
support further growth by the Company; and
(xi) alternatives to the proposed sale of the Company, including
seeking additional proposals from other parties and accepting the
uncertainties associated therewith (including with respect to timing,
valuation and the likelihood of completion of any such proposals that might
be received) and continuing to maintain the Company as an independent
public corporation and not engaging in any extraordinary transaction.
The foregoing discussion addresses the material information and factors
considered by the Board in its deliberations regarding and approval of the Offer
and the Merger. In view of the variety of factors and the amount of information
considered, the Board did not find it practicable to provide specific
assessments of, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination or determine that any factor
was of particular importance. The determination to recommend that stockholders
tender their shares in the Offer was made after consideration of all of the
factors taken as a whole. In addition, individual members of the Board may have
given different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Morgan Stanley was retained by the Company to act as its financial advisor
with respect to the Offer, the Merger and matters arising in connection
therewith. Pursuant to the engagement letter between Morgan Stanley and the
Company dated May 28, 1999 (the "Engagement Letter"), the Company agreed to pay
Morgan Stanley as follows: (i) an advisory fee estimated at $50,000 payable in
the event the transaction is not completed and (ii) if the transaction is
completed, a fee based upon the value of the transaction. The value of the
transaction is defined in the Engagement Letter as the value of the
consideration paid for the Company's common equity, plus the value of any
borrowed money, debt, capital lease, and preferred stock obligations of the
Company assumed, retired, or defeased in connection with the transaction. The
full transaction fee will become payable by the Company when control of 50% or
more of the Shares changes hands. If the transactions contemplated by the Merger
Agreement are consummated, Morgan Stanley will receive a fee estimated at $8.4
million.
The Company also agreed to reimburse Morgan Stanley for its reasonable out
of pocket expenses (including, without limitation, professional and legal fees
and disbursements) incurred in connection with its engagement with respect to
the services to be rendered by it, and to indemnify Morgan Stanley against
certain liabilities in connection with its engagement, including certain
liabilities under the federal securities laws.
26
<PAGE> 28
In the ordinary course of its business, Morgan Stanley may effect
transactions for its own account or the account of its customers and therefore,
at any time may hold long or short positions in debt or equity securities of the
companies which may be the subject of the transactions contemplated by the
Merger Agreement.
Except as described above, neither the Company, nor any person acting on
its behalf, currently intends to employ, retain or compensate any other person
to make solicitations or recommendations to stockholders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, no transactions in the Shares have been
effected by the Company or, to the best of the Company's knowledge, by any
executive officer, directors, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director, affiliate and subsidiary of the Company currently intends to tender
all Shares to Purchaser which are held of record or beneficially by such person
or over which any of them has sole dispositive power pursuant to the Offer. The
directors of the Company have entered into a Tender Agreement with Parent and
Purchaser pursuant to which each Company director has agreed, among other
things, to validly tender (and not withdraw) his Shares pursuant to the Offer.
See Item 3(b).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth herein, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that relates
to, or would result in, one or more of the events referred to in Item 7(a)
above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement required by Section 14(f) and Rule 14f-1 of the
Exchange Act, and referenced in Item 3(b), is attached hereto as Annex I.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1 -- Offer to Purchase, dated June 18, 1999 (incorporated by
reference to Exhibit 11(a)(1) of Schedule 14D-1)
2 -- Letter of Transmittal (incorporated by reference to
Exhibit 11(a)(2) of Schedule 14D-1)
3 -- Agreement of Plan and Merger, dated as of June 12, 1999,
among the Parent, the Purchaser, Merger Sub and the
Company incorporated by reference to Exhibit 11(c)(1) of
Schedule 14D-1)
4 -- Fairness Opinion of Morgan Stanley & Co. Incorporated
dated June 12, 1999 (attached hereto as Annex II)
5 -- Press release issued by the Company on June 14, 1999
6 -- Press release issued by the Parent dated on June 14, 1999
(incorporated by reference to Exhibit 11(a)(8) of
Schedule 14D-1)
7 -- Letter to Company stockholders dated June 18, 1999
</TABLE>
27
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
8 -- Tender Agreement, dated as of June 12, 1999, by and among
the Parent, the Purchaser and each of the other parties
that are signatory thereto (incorporated by reference to
Exhibit 11(c)(3) of Schedule 14D-1)
9 -- Confidentiality Letter by and between the Parent and the
Company, dated June 2, 1999, in favor of the Company
10 -- Confidentiality Letter by and between the Parent and the
Company, dated June 2, 1999, in favor of the Parent
11 -- Employee Term Sheet executed by Larry King, Frank
Gallagher, Gerald Mercadante and John Mercadante
12 -- Undertaking to Vote, dated June 12, 1999, by Ann Gloag in
favor of Parent and the Company
13 -- Undertaking to Vote, dated June 12, 1999, by Brian Souter
in favor of Parent and the Company
14 -- Employment Agreement between the Company and Lawrence K.
King (Incorporated by reference to Exhibit 10.4 to the
Registration Statement on Form S-1 (File No. 333-6525) of
the Company)
15 -- Employment Agreement between the Company and Douglas M.
Cerny (Incorporated by reference to Exhibit 10.5 to the
Registration Statement on Form S-1 (File No. 333-6525) of
the Company)
16 -- Employment Agreement between the Company, Cape Transit
Corp. and John Mercadante, Jr. (Incorporated by reference
to Exhibit 10.6 to the Registration Statement on Form S-1
(File No. 333-6525) of the Company)
17 -- Employment Agreement among the Company, Community Coach,
Inc. and affiliated entities and Frank P. Gallagher
(Incorporated by reference to Exhibit 10.7 to our
Registration Statement on Form S-1 (File No. 333-6525))
18 -- Employment Agreement among the Company, Leisure Time
Tours and Gerald Mercadante (Incorporated by reference to
Exhibit 10.9 to our Registration Statement on Form S-1
(File No. 333-6525))
19 -- Employment Agreement between the Company and Barnett
Rukin (Incorporated by reference to Exhibit 10.9 to our
Annual Report on Form 10-K for the period ended December
31, 1998 (File No. 001-12939))
20 -- Employment Agreement between the Company and Richard H.
Kristinik (Incorporated by reference to Exhibit 10.3 to
the Registration Statement on Form S-1 (File No.
333-6525) of the Company))
21 -- Coach USA 1996 Long-Term Incentive Plan (Incorporated by
reference to Exhibit 10.1 to Amendment No. 2 to our
Registration Statement on Form S-1 (File No. 333-2704))
22 -- Coach USA 1998 Long-Term Incentive Plan (Incorporated by
reference to Exhibit 10.2 to Annex I to our Proxy
Statement on Form DEF 14A filed April 30, 1998)
23 -- Coach USA 1996 Non-Employee Directors' Stock Option Plan
(Incorporated by reference from Exhibit 10.2 to Amendment
No. 2 to our Registration Statement on Form S-1 (File No.
333-2704))
24 -- Amendment dated June 24, 1997 to Agreement between the
Company and Exel Motorcoach Partners, LLC (Incorporated
by reference to Exhibit 10.1 to our Registration
Statement on Form S-4 (File No. 333-33215))
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
25 -- Warrants to Purchase 100,000 shares of Common Stock of
the Company, held by American Business Partners, LLC,
formerly known as Exel Motorcoach Partners, LLC
(Incorporated by reference to Exhibit 10.12 to our Annual
Report on Form 10-K for the period ended December 31,
1997 (File No. 001-12939))
26 -- Leases by and between Gerdaneu, Inc. and Leisure Time
Tours related to property located in Mahwah and
Pleasantville, New Jersey and Philadelphia, Pennsylvania
(Incorporated by reference to Exhibit 10.15 to the
Registration Statement on Form S-1 (File No. 333-6525) of
the Company)
27 -- Lease by and between Liberty Street Corporation and
Community Coach, Inc. and its affiliated entities related
to property located in Passaic, New Jersey (Incorporated
by reference to Exhibit 10.16 to the Registration
Statement on Form S-1 (File No. 333-6525) of the Company)
</TABLE>
29
<PAGE> 31
SIGNATURE
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.
COACH USA, INC.
/s/ DOUGLAS M. CERNY
------------------------------------
Douglas M. Cerny
Senior Vice President -- Corporate
Development, General Counsel
and Secretary
June 18, 1999
30
<PAGE> 32
ANNEX I
COACH USA, INC.
ONE RIVERWAY, SUITE 500, HOUSTON, TEXAS 77056
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about June 18, 1999 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to holders of the Common Stock, par value $0.01 per share
("Shares"), of Coach USA, Inc. (the "Company"). Capitalized terms used and not
otherwise defined herein shall have the respective meanings set forth in the
Schedule 14D-9. You are receiving this Information Statement in connection with
the possible election of persons designated by SCH Holdings Corp. ("Purchaser"),
a wholly-owned subsidiary of Stagecoach Holdings plc ("Parent"), to a majority
of the seats on the Board of Directors of the Company by means other than
through a meeting of the Company's stockholders.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
promulgated thereunder. You are urged to read this Information Statement
carefully. You are not, however, required to take any action. The information
contained in this Information Statement concerning Parent and Purchaser has been
furnished to the Company by Parent, and the Company assumes no responsibility
for the accuracy, completeness or fairness of any such information.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
At the close of business on June 14, 1999, there were 25,420,777 Shares
issued and outstanding, each of which entitles its record holder to one vote,
and one share of Voting Preferred Stock issued and outstanding, with the voting
power of 63,643 Shares, which are the only classes of securities outstanding
having the right to vote for the election of the Company's directors.
PARENT DESIGNEES
On June 12, 1999, the Company, Parent, Purchaser and Merger Sub entered
into an Agreement and Plan of Merger (the "Merger Agreement") and, in accordance
with the terms and subject to the conditions therein, (i) Purchaser commenced a
tender offer (the "Offer") for any and all outstanding Shares at a price of
$42.00 per Share, net to the seller in cash, without interest thereon (the
"Purchase Price") and (ii) at the Effective Time (as defined in the Merger
Agreement) Merger Sub will be merged with and into the Company (the "Merger").
The Merger Agreement provides that promptly upon the later of (x) payment
by Purchaser for the Shares tendered pursuant to the Offer in accordance with
the Merger Agreement and (y) the date on which Parent is lawfully permitted to
assume control over the Company's common carrier motor coach subsidiaries
pursuant to United States Surface Transportation Board's approval or exemption
(the later of (x) and (y), the "Control Date"), Parent shall be entitled to
designate a number of directors to the Company's Board of Directors equal to the
product of the total number of directors on the Board multiplied by the
percentage that the number of Shares owned by Purchaser and its affiliates bears
to the number of Shares outstanding, rounded to the nearest whole number.
However, in no event shall the number of directors designated by Parent be less
than a majority of the directors. At Parent's request, the Company must use its
reasonable best efforts either to increase the size of the Board or to secure
the resignations of the number of incumbent directors necessary to enable
Parent's designees to be elected. The Company must use its reasonable best
efforts to cause directors designated by Parent to constitute the same
percentage as is on the Board (but in any
I-1
<PAGE> 33
event at least one Parent designee) (i) of each committee of the Board of
Directors, (ii) of each board of directors of each subsidiary of the Company,
and (iii) of each committee of each such board, in each case only to the extent
permitted by law and the rules of the New York Stock Exchange (the "NYSE") to
the extent applicable. Notwithstanding the foregoing, until the Effective Time
(as defined in the Merger Agreement), the Company and Parent shall use
reasonable best efforts to retain as members of the Board of Directors at least
two directors who were directors of the Company on the date of the Merger
Agreement and who are not designated by Parent or employees of the Company or
its subsidiaries (the "Independent Directors"). Pursuant to the Merger
Agreement, in the event Parent's designees are elected or appointed directors,
after the payment for the Shares and prior to the Effective Time the affirmative
vote of a majority of the Independent Directors shall be required, and alone
shall be sufficient, to take action by the Company to (i) amend or terminate the
Merger Agreement, (ii) exercise or waive any of the Company's rights or remedies
under the Merger Agreement, (iii) extend the time for performance of Parent's
and Merger Sub's respective obligations under the Merger Agreement, or (iv)
approve any other action by the Company that could adversely affect the
interests of the stockholders of the Company (other than Parent, Purchaser and
their affiliates) with respect to the transactions contemplated thereby.
Parent has informed the Company that it currently intends to designate one
or more of the persons listed in Schedule I to the Purchaser's Offer to Purchase
included as part of the Offer Documents (which Schedule I is incorporated herein
by reference) as directors of the Company following the Control Date.
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The Company's Second Amended and Restated Certificate of Incorporation
provides for three classes of directors as nearly equal in number as possible.
The term of office of the Class I directors expires at the 2000 Annual Meeting,
the term of office of the Class II directors expires at the 2001 Annual Meeting,
and the term of office of the Class III directors expires at the 2002 Annual
Meeting.
The persons named below are current members of the Company's Board of
Directors listed by class. The following sets forth as to each director, his age
and principal occupation and business experience, and the period during which he
has served as a director of the Company.
Directors of Class I -- Term Expires at the 2000 Annual Meeting
FRANK P. GALLAGHER, age 55, became a director of the Company in May 1996.
Mr. Gallagher has served as Executive Vice President and Chief Operating Officer
of the Company since December 1997 and formerly served as Senior Vice
President-Corporate Development of the Company from May 1996 to December 1997.
LAWRENCE K. KING, age 42, became a director of the Company in May 1996. Mr.
King has served as Chairman of the Board of Directors and Chief Executive
Officer since December 1998. Mr. King served as Senior Vice President and Chief
Financial Officer of the Company from December 1995 to December 1998. Mr. King
is also currently a director of Transportation Components, Inc. From 1992 until
September 1995, Mr. King was Executive Vice President, Secretary, Treasurer and
Chief Financial Officer of SI Diamond Technology, Inc., a publicly traded
technology development company. From 1988 to 1991, he served as Assistant
Secretary and Treasurer of The Permian Corporation, the general partner of
Permian Partners L.P., a publicly traded crude oil, trucking, transportation and
distribution master limited partnership. From 1979 to 1988, Mr. King served in a
number of positions as a certified public accountant with Arthur Andersen LLP.
WILLIAM J. LYNCH, age 57, became a director in May 1996. Mr. Lynch is a
Managing Director of Capstone Partners, LLC, a special situation venture capital
firm. Mr. Lynch is also currently a director of Capstone Partners, LLC and
Laisen Electronics. From October 1989 to March 1996, Mr. Lynch was a partner of
the law firm of Morgan, Lewis & Bockius LLP.
Directors of Class II -- Term Expires at the 2001 Annual Meeting
I-2
<PAGE> 34
PAUL M. VERROCHI, age 50, became a director in May 1996. Mr. Verrochi is
Chairman of the Board of Directors and Chief Executive Officer of PROVANT, Inc.,
a publicly traded provider of corporate training and education, and Chairman of
the Board of Directors of BridgeStreet Accommodations, a publicly traded
provider of temporary corporate housing. Mr. Verrochi served as Chairman of the
Board of American Medical Response, Inc., a publicly traded provider of
ambulance services, from its inception in February 1992 through March 1997, when
it was purchased by Laidlaw, Inc. Since February 1992, he has also been a
Principal of Exel Holdings, Ltd., and since March 1996, he has been a Principal
of American Business Partners, LLC, a privately-held investment firm he
co-founded. From April 1989 to December 1990, Mr. Verrochi was President of
Allwaste Asbestos Abatement, Inc., a subsidiary of Allwaste, Inc. Mr. Verrochi
was a founder of American Environmental Group, a regional asbestos abatement
company, and served as Chairman of its Board of Directors from July 1987 until
April 1989, when it was acquired by Allwaste, Inc.
BARNETT RUKIN, age 58, became a director in, and has served as Senior Vice
President -- Northeast Region since, October 1998. Mr. Rukin has also served as
President and Chief Executive Officer of Short Line Terminal Agency, Inc. and
its related companies, all wholly-owned subsidiaries of the Company, since 1987.
Mr. Rukin is currently a director of Valley National Bank.
FRANK V. ATLEE III, age 59, has been a director of the Company since June
1998. From 1993 to 1995, Mr. AtLee served as President of American Cyanamid
Company ("Cyanamid"), a research-based life sciences company which develops,
manufactures and markets medical and agricultural products, and chairman of
Cyanamid International. From 1966 to 1993, Mr. AtLee served in various
management positions within divisions of Cyanamid, including executive vice
president with authority over Cyanamid's worldwide medical business. Mr. AtLee
is currently a director of Fingold and Takeda Italia, both in Rome, Italy.
Directors of Class III -- Term Expires at the 2002 Annual Meeting
STEVEN S. HARTER, age 36, has been a director of the Company since
September 1995. Mr. Harter is President of Notre Capital Ventures II, L.L.C.
("Notre"), a venture capital firm which specializes in consolidating fragmented
businesses and which was the principal founder of the Company. Mr. Harter is
also currently a director of Comfort Systems USA, Inc. and Metals USA, Inc. Mr.
Harter served as Senior Vice President of Notre Capital Ventures, Ltd. from June
1993 through July 1995. Mr. Harter and Notre were primarily responsible for the
initial public offerings of US Delivery Systems, Inc., Physicians Resource
Group, Inc., Comfort Systems USA, Inc., Home USA, Inc., Metals USA, Inc.,
Landcare USA, Inc. and Transportation Components, Inc. From April 1989 to June
1993, Mr. Harter was Director of Mergers and Acquisitions for Allwaste, Inc., a
publicly traded environmental services company.
GERALD MERCADANTE, age 52, became a director in, and has served as Senior
Vice President-Northeast Region since, May 1996. Mr. Mercadante was a co-founder
of Leisure Time Tours, Inc., a subsidiary of the Company ("Leisure"), and has
served as President and Chief Executive Officer of Leisure since 1980.
JOHN MERCADANTE, JR., age 54, has been a director of the Company since May
1996. Mr. Mercadante has served as President of the Company since May 1996 and
previously served as President and Chief Operating Officer of the Company from
May 1996 to December 1997. Mr. Mercadante co-founded Leisure with his brother,
Gerald Mercadante, in 1970 and acquired Cape Transit Corp., a subsidiary of the
Company doing business as Adventure Trails ("Adventure Trails"), in 1988. Mr.
Mercadante is currently a director of the Atlantic City Bus Operators
Association and a director of the New Jersey Motor Bus Association, both
motorcoach trade associations.
EXECUTIVE OFFICERS
The Board elects executive officers annually at its first meeting following
the annual meeting of stockholders. Information concerning the following
executive officers is set forth above under "Election of Directors": President,
John Mercadante, Jr.; Chief Executive Officer, Lawrence K. King; Executive Vice
President and Chief Operating Officer, Frank P. Gallagher; and Senior Vice
Presidents -- Northeast Region, Gerald Mercadante and Barnett Rukin. Information
concerning Senior Vice President -- Corporate Develop-
I-3
<PAGE> 35
ment, General Counsel and Secretary, Douglas M. Cerny, and Senior Vice President
and Chief Financial Officer, Robert D. Womack, is set forth below.
DOUGLAS M. CERNY, age 40, has served as Senior Vice President -- Corporate
Development, General Counsel and Secretary of the Company since December 1997.
Mr. Cerny served as Senior Vice President, General Counsel and Secretary of the
Company from January 1996 to December 1997. From February 1994 through January
1996, he was Vice President and General Counsel of Medical Review Systems, Inc.,
a privately held health care cost-containment services company which was
acquired by Equifax, Inc. in March 1995. Between March 1995 and January 1996,
Mr. Cerny provided operational support in the transition of operations to
Equifax, Inc. From July 1988 through February 1994, Mr. Cerny was Vice President
and Corporate Counsel and then Vice President and General Counsel of Allwaste,
Inc.
ROBERT D. WOMACK has served as Senior Vice President and Chief Financial
Officer of the Company since April 1999. Mr. Womack previously served as Chief
Operating and Financial Officer of Pacific Consumer Funding, LLC, a subprime
automotive finance company, from 1996 to 1998. From 1990 to 1995, he served in
various executive positions for American General Financial Group ("AGFG"),
including as President and Office of the Chairman for American General Finance,
Inc., one of AGFG's operating subsidiaries. Mr. Womack is a Certified Public
Accountant.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 14, 1999, with
respect to beneficial ownership of the Company's Common Stock by (i) each
director, (ii) each executive officer, (iii) the executive officers and
directors as a group, and (iv) each person known to the Company to beneficially
own 5% or more of the outstanding shares of its Common Stock. The address of all
such persons is c/o Coach USA, Inc., One Riverway, Suite 500, Houston, Texas
77056. Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
OWNER SHARES PERCENTAGE
----- ---------- ----------
<S> <C> <C>
Lawrence K. King(1)......................................... 149,500 *
John Mercadante, Jr.(2)..................................... 299,707 1.2%
Douglas M. Cerny(3)......................................... 118,600 *
Frank P. Gallagher(4)....................................... 167,260 *
Gerald Mercadante(5)........................................ 628,800 2.5
Steven S. Harter(6)......................................... 354,381 1.4
William J. Lynch(7)......................................... 50,468 *
Paul M. Verrochi(8)......................................... 65,000 *
Frank V. AtLee III(9)....................................... 15,342 *
Barnett Rukin(10)........................................... 17,359 *
Robert D. Womack............................................ 0 *
T. Rowe Price Associates, Inc.(11).......................... 3,119,700 12.3
Warburg Pincus Asset Management, Inc.(12)................... 1,993,100 7.9
All officers and directors as a group(11 persons)........... 1,866,417 7.3
</TABLE>
- ---------------
* Less than one percent.
(1) Includes 65,000 shares of Common Stock underlying options which are
exercisable within 60 days.
(2) Includes 137,774 shares of Common Stock held by Mr. John Mercadante, Jr.'s
spouse, as to which shares Mr. John Mercadante, Jr. disclaims beneficial
ownership. Includes 25,000 shares of Common Stock underlying options which
are exercisable within 60 days.
(3) Includes 65,000 shares of Common Stock underlying options which are
exercisable within 60 days.
I-4
<PAGE> 36
(4) Includes 55,370 shares of Common Stock held by Mr. Gallagher's spouse and
6,520 shares held in a trust for the benefit of Mr. Gallagher's daughter,
for which Mr. Gallagher is a trustee. Includes 50,000 shares of Common
Stock underlying options which are exercisable within 60 days.
(5) Includes 103,210 shares held by Mr. Gerald Mercadante's spouse, as to which
shares Mr. Gerald Mercadante disclaims beneficial ownership. Includes
10,000 shares of Common Stock underlying options which are exercisable
within 60 days.
(6) These shares of Common Stock are held by Harter Investment Partners, Ltd.,
of which Mr. Harter is a general partner. Includes 25,000 shares of Common
Stock underlying options granted under the Directors' Plan which are
currently exercisable. Excludes 20,000 shares of Common Stock held by the
Victoria Harter and Phyllis Spisak Educational Trust, of which Mr. Harter's
minor children are beneficiaries, as to which shares Mr. Harter disclaims
beneficial ownership.
(7) Includes 25,000 shares of Common Stock underlying options granted under the
Directors' Plan which are currently exercisable.
(8) Includes 25,000 shares of Common Stock underlying options granted under the
Directors' Plan which are currently exercisable and 40,000 shares of Common
Stock underlying warrants.
(9) Includes 15,000 shares of Common Stock underlying options granted under the
Directors' Plan which are currently exercisable.
(10) Includes 150 shares of Common Stock held by Mr. Rukin's spouse and 1,034
shares held in three separate trusts for the benefit of Mr. Rukin's
children, for which Mr. Rukin is a trustee.
(11) These securities are owned by various individual and institutional
investors for which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment adviser with power to direct investments and/or sole
power to vote the securities. For purposes of the reporting requirements of
the Securities Exchange Act of 1934, Price Associates expressly disclaims
that it is, in fact, the beneficial owner of such securities.
(12) These securities are owned by or on behalf of various individual and
institutional investors for which Warburg Pincus Asset Management, Inc.
("Warburg") serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Warburg expressly
disclaims that it is, in fact, the beneficial owner of such securities.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
LEASES OF FACILITIES
The Company leases a number of properties from former owners of acquired
businesses who are, or are affiliates of, certain of the Company's executive
officers and directors. In 1998, the Company paid affiliates of Frank P.
Gallagher, Gerald Mercadante and Barnett Rukin approximately $195,000, $77,000
and $270,000, respectively, in annual rentals for such properties. The Company
believes that these amounts do not exceed the fair market rental value for such
properties.
OTHER TRANSACTIONS
On July 7, 1998, the Company purchased the following companies: Orange,
Newark, Elizabeth Bus, Inc., Twenty-Four Corp., Wohlgemuth Bus Company, Clinton
Avenue Bus Company, Trans Maintenance Inc. and Transit Video Security Systems,
Inc. (collectively referred to as "ONE Bus"). Frank P. Gallagher and his
immediate family members, and trusts controlled by his immediate family members,
received a total of $13,044,205 as consideration for their ownership in ONE Bus.
Paul Verrochi, a director of the Company, holds Warrants to purchase 40,000
Shares at an exercise price of $26.00 per Share. The right to exercise these
Warrants expires on July 26, 1999. Mr. Verrochi may exercise the Warrants by
delivering written notice to the Company setting forth the number of Shares with
respect to which he intends to exercise the Warrants, together with cash,
certified check, bank draft, wire transfer, or
I-5
<PAGE> 37
postal or express money order payable to the order of the Company for an amount
equal to the exercise price for the Shares being purchased.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers and persons holding more than 10% of a registered class of
the Company's equity securities to file with the Securities and Exchange
Commission and any stock exchange or automated quotation system on which the
Common Stock may then be listed or quoted (i) initial reports of ownership, (ii)
reports of changes in ownership and (iii) annual reports of ownership of Shares
and other equity securities of the Company. Such directors, officers and 10%
stockholders are also required to furnish the Company with copies of all such
filed reports.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required during
1998, the Company believes that all Section 16(a) reporting requirements related
to the Company's directors and executive officers were timely filed during 1998
except Form 3 -- Initial Statement of Beneficial Ownership of Securities for
Messrs. Rukin and AtLee.
GENERAL INFORMATION WITH RESPECT
TO THE BOARD OF DIRECTORS
During the year ended December 31, 1998, the Board of Directors held five
meetings and acted two times by unanimous consent. During 1998, each member of
the Board of Directors attended at least 75% of all meetings of the Board of
Directors and committees of the Board of Directors of which such director was a
member. There are five standing committees of the Board of Directors.
COMMITTEES OF THE BOARD
Audit Committee. The Audit Committee consists of William J. Lynch
(Chairman), Steven S. Harter, Paul M. Verrochi and Frank V. AtLee III. The Audit
Committee: (i) makes recommendations to the Board of Directors with respect to
the independent auditors who conduct the annual examination of the Company's
accounts; (ii) reviews the scope of the annual audit and meets periodically with
the Company's independent auditors to review their findings and recommendations;
(iii) reviews quarterly financial information and earnings releases prior to
dissemination to the public; (iv) approves major accounting policies or changes
thereto; and (v) periodically reviews principal internal controls to assure that
the Company is maintaining a sound and modern system of financial controls.
During 1998, the Audit Committee held eight meetings.
Acquisition Committee. The Acquisition Committee consists of Steven S.
Harter (Chairman) and Lawrence K. King. The Acquisition Committee reviews and
monitors the strategic direction of the Company's acquisition program and,
within guidelines established by the full Board of Directors, has authority to
approve offers and the form of consideration to be offered for the acquisition
of other businesses. In August 1997, the Board of Directors gave the Acquisition
Committee authority to approve, without further full Board review, any
acquisition the consideration for which is equal to or less than $10 million.
During 1998, the Acquisition Committee did not meet.
Compensation Committee. The Compensation Committee consists of Paul M.
Verrochi (Chairman), Steven S. Harter, William J. Lynch and Frank V. AtLee III.
The Compensation Committee periodically determines the amount and form of
compensation and benefits payable to all principal officers and certain other
management personnel. See "Report of Compensation Committee on Executive
Compensation." During 1998, the Compensation Committee held four meetings.
Executive Committee. The Executive Committee consists of Lawrence K. King
(Chairman), Frank P. Gallagher and John Mercadante, Jr. The Executive Committee
has such authority as is delegated to it from time to time by the full Board of
Directors. During 1998, the Executive Committee did not meet.
I-6
<PAGE> 38
Nominating Committee. The Nominating Committee consists of Frank P.
Gallagher and Lawrence K. King. The Nominating Committee reviews the size and
composition of the Board of Directors, designates new directors by classes,
interviews new director candidates and makes recommendations with respect to
nominations for the election of directors. The Nominating Committee will
consider suggestions from stockholders for nominees to serve as directors, if
such proposals are submitted in writing to the Secretary at the Company's
corporate offices. During 1998, the Nominating Committee did not meet.
DIRECTORS' COMPENSATION
FEES
During 1998, each non-employee director was paid a fee of $2,000 for each
meeting of the full Board attended. Non-employee directors of the Company also
receive $1,000 for each committee meeting attended, unless held the same day as
a meeting of the full Board, and are reimbursed for all expenses relating to
attendance at meetings. The Company paid aggregate fees of $42,000 to
non-employee directors of the Company in connection with the Board of Directors
and committee meetings in 1998. The Company does not pay director fees to
directors who also are employees of the Company. No member of the Board of
Directors was paid compensation during 1998 for his service as a director of the
Company other than pursuant to the standard compensation arrangement described
above. Non-employee directors also receive annual stock option awards pursuant
to the Company's 1996 Non-Employee Directors' Stock Plan (the "Directors'
Plan").
STOCK OPTION GRANTS
The Directors' Plan provides for the automatic grant to each non-employee
director of an option to purchase 10,000 shares of Common Stock upon such
person's initial election as a director. In addition, upon the effectiveness of
the Company's registration statement relating to its initial public offering
(the "Initial Public Offering"), the Company granted options to purchase 10,000
shares of Common Stock to each of the Company's directors at such time, pursuant
to the Directors' Plan. The Directors' Plan also provides for an automatic
annual grant to each non-employee director of an option to purchase 5,000 shares
of Common Stock at each annual meeting of stockholders; provided, however, that
if the first annual meeting of stockholders following a person's initial
election as a non-employee director is within three months of the date of such
election, such person will not be granted an option to purchase 5,000 shares of
Common Stock at such annual meeting. At the annual meeting of stockholders held
on June 3, 1999, Messrs. Harter, Lynch, Verrochi and AtLee received 5,000 shares
of Common Stock underlying options granted under the Directors' Plan.
The options granted under the Directors' Plan will have an exercise price
per share equal to the fair market value of a share at the date of grant. The
options granted to Messrs. Harter, Lynch and Verrochi at the annual meeting in
1998 have an exercise price equal to $44.438 per share. The options granted to
Mr. AtLee on June 4, 1998 have an exercise price equal to $44.438 per share.
Options granted under the Directors' Plan will expire at the earlier of 10
years from the date of grant or one year after termination of service as a
director. Once issued, the options are immediately exercisable. In addition, the
Directors' Plan permits non-employee directors to elect to receive, in lieu of
cash, directors' fees, shares or credits representing "deferred shares" that may
be settled at future dates, as elected by the director. The number of shares or
deferred shares received will be equal to the number of shares which, at the
date the fees would otherwise be payable, will have an aggregate fair market
value equal to the amount of such fees.
I-7
<PAGE> 39
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table. The following table provides certain summary
information concerning compensation earned by the Company's Chief Executive
Officer and each of the four other most highly compensated executive officers
(collectively, the "Named Executive Officers") during the years ended December
31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES
OTHER ANNUAL UNDERLYING
PRINCIPAL POSITION YEAR SALARY COMPENSATION COMPENSATION(#)
- ------------------ ---- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Lawrence K. King.............................. 1998 $200,000 -- 225,000
Chief Executive Officer 1997 $150,000 -- --
1996 $ 94,355(1) -- 100,000
John Mercadante, Jr. ......................... 1998 $200,000 -- 25,000
President 1997 $150,000 -- --
1996 $ 94,355(2) $32,617 100,000
Frank P. Gallagher............................ 1998 $200,000 -- 50,000
Executive Vice President and Chief 1997 $150,000 -- --
Operating Officer 1996 $ 94,355(2) -- 100,000
Douglas M. Cerny.............................. 1998 $200,000 -- 25,000
Senior Vice President -- Corporate 1997 $150,000 -- --
Development, General Counsel and Secretary 1996 $ 94,355(1) $38,286 100,000
Richard H. Kristinik.......................... 1998 $200,000 -- 25,000
Former Chief Executive Officer 1997 $150,000 -- --
1996 $ 94,355(1) -- 200,000
</TABLE>
- ---------------
(1) Represents less than one full year's compensation. Pursuant to an employment
agreement between the officer and the Company, no compensation was paid to
such officer until May 14, 1996, the date on which the registration
statement with respect to the Company's initial public offering became
effective.
(2) Represents less than one full year's compensation. Pursuant to an employment
agreement between the officer and the Company, such officer did not begin to
earn compensation until May 17, 1996, the date of the closing of the
Company's initial public offering. Does not include amounts paid to such
officer by subsidiaries of the Company prior to May 17, 1996.
I-8
<PAGE> 40
Stock Option Grants Table. The following table provides certain summary
information concerning grant of stock options to the Named Executive Officers
pursuant to the 1998 Long-Term Incentive Plan during the year ended December 31,
1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------------
NAME GRANTED(#) IN 1998 ($/SHARE) DATE 5% 10%
- ---- ---------- ---------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence K. King........ 25,000 2.28% 30.6875 1/21/08 $ 482,480 $1,122,699
200,000 18.22 23.3125 11/12/08 $2,932,220 $7,430,823
John Mercadante, Jr. ... 25,000 2.28 30.6875 1/21/08 $ 482,480 $1,222,699
Frank P. Gallagher...... 50,000 4.56 30.6875 1/21/08 $ 964,960 $2,445,398
Douglas M. Cerny........ 25,000 2.28 30.6875 1/21/08 $ 482,480 $1,222,699
Richard H. Kristinik.... 25,000 2.28 30.6875 1/21/08 $ 482,480 $1,222,699
</TABLE>
Stock Option Exercises and Year-End Values Table. The following table
provides, as to the Named Executive Officers, information with respect to stock
options exercised during the year ended December 31, 1998, and the unexercised
options to purchase Common Stock granted under the 1998 Long-Term Incentive
Plan, or its predecessor, and held as of December 31, 1998.
OPTION EXERCISES IN 1998 AND YEAR END 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, "IN-THE-MONEY" OPTIONS
SHARES 1998 AT DECEMBER 31, 1998
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED/($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence K. King............ 0 0 40,000 285,000 $827,500 $3,616,250
John Mercadante, Jr. ....... 20,000 425,000 20,000 85,000 $218,750 $ 756,250
Frank P. Gallagher.......... 0 0 40,000 110,000 $437,500 $ 856,250
Douglas M. Cerny............ 0 0 40,000 85,000 $827,500 $1,341,250
Richard H. Kristinik........ 40,000 1,240,000 40,000 145,000 $827,500 $2,582,500
</TABLE>
- ---------------
(1) Based on the difference between $34.6875 per share, which was the closing
price of the Company's Common Stock as listed on the New York Stock Exchange
on December 31, 1998, and the exercise price of each option.
I-9
<PAGE> 41
STOCK PERFORMANCE GRAPH
The following performance graph compares the Company's cumulative total
stockholder return on its Common Stock with the cumulative total return of the
Russell 2000(R) Index, a generally accepted index for small-cap stocks (the
"Russell 2000"), and a peer group stock index (the "Peer Group Index") which
consists of 16 publicly-traded companies. The Peer Group Index is comprised of
companies formed to consolidate fragmented businesses within a particular
industry. The cumulative total return computations set forth in the Performance
Graph assume the investment of $100 in the Company's Common Stock, the Russell
2000 Index and the Peer Group Index on May 17, 1996 (dividends reinvested).
The companies that comprise the Peer Group Index are: American Residential
Services, Inc., Coinmach Laundry Corp., Comfort Systems USA, Inc., Cotelligent
Group Inc., FYI, Inc., Keystone Automotive Industries, Inc., Medical Manager
Corp., Metals USA, Inc., PalEx, Inc., Service Experts, Inc., Sunterra
Corporation, Staffmark, Inc., Telespectrum Worldwide Inc., Travel Services
International, Inc., U.S. Office Products Co. and United Auto Group, Inc.
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURNS
STOCKHOLDER GRAPH
<TABLE>
<CAPTION>
MEASUREMENT PERIOD COACH USA, PEER GROUP RUSSELL 2000
(FISCAL YEAR COVERED) INC. INDEX INDEX
<S> <C> <C> <C>
5/14/96 100.00 100.00 100.00
12/31/96 164.54 134.28 105.21
12/31/97 190.07 135.63 128.72
12/31/98 196.81 111.40 125.11
</TABLE>
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee, subject to the approval of the Board of
Directors, determines the amount and form of compensation and benefits payable
to all principal officers, including the Named Executive Officers, and certain
other management personnel. The Compensation Committee currently consists of
four members, none of whom is a current or former employee or officer of the
Company. See "General Information with Respect to the Board of Directors
-- Committees of the Board."
The Compensation Committee has instituted an executive compensation
structure designed to attract and retain highly qualified executives and
motivate them to maximize stockholder returns. In order to reach this goal, the
Named Executive Officers compensation has been weighted toward equity options,
with base compensation as set forth in the employment agreements described
below. See "Employment Agreements".
I-10
<PAGE> 42
In addition to the compensation plans described below, the Compensation
Committee has recommended, and the Board of Directors has approved, (i) a 401(k)
retirement savings plan which enables Company employees to make pre-tax
contributions to a retirement investment account, which are matched by the
Company up to 50% of the first 2% of salary contributed by the employee, and
(ii) an Employee Stock Purchase Plan which enables employees to purchase shares
of the Company's Common Stock at a price which is 15% less than the price
available in the public market, with the Company paying all applicable brokerage
fees.
BASE SALARY
In connection with the initial public offering, the Company entered into
employment agreements with each of the Named Executive Officers, including the
Chief Executive Officer, which provided for an annual base salary in the amount
of $150,000 and bonuses as determined from time to time. In 1996, 1997 and 1998
there were no bonuses paid to the executive officers of the Company. Because the
Compensation Committee believes that the cash compensation paid to executive
officers has been lower than compensation paid by other comparably sized
publicly traded companies, the Compensation Committee determined in January 1998
to increase the base salary amounts for each of the Named Executive Officers to
$200,000 annually.
ANNUAL BONUS PLAN/1998 PERFORMANCE BASED INCENTIVE BONUS PROGRAM
In March 1998 the Compensation Committee recommended, and the Board of
Directors approved, an annual 1998 performance-based incentive bonus program
(the "Annual Bonus Plan"). The purpose of the Annual Bonus Plan is to provide
senior management as well as other key employees with additional performance
incentives in the form of an annual bonus to be paid in recognition of meeting
certain financial or operational goals to be set on an annual basis. Bonus
levels vary in accordance with levels of responsibility within the Company, with
senior executives eligible to receive a bonus of up to 100% of annual salary and
key employees eligible to receive bonuses ranging from 15% to 75% of annual
salary.
1998 LONG-TERM INCENTIVE PLAN
In March 1996, the Board of Directors and the Company's stockholders
approved the Company's 1996 Long-Term Incentive Plan. In June 1998, the 1996
Long-Term Incentive Plan ("Plan") was amended and restated and named the 1998
Long-Term Incentive Plan. On January 6, 1998, the Compensation Committee
recommended, and the Board of Directors approved, the grant, under the Plan, of
options to purchase 25,000 shares of Common Stock to each of Messrs. Kristinik,
John Mercadante, Jr., King and Cerny and of options to purchase 50,000 shares of
Common Stock to Mr. Gallagher, all at an exercise price of $30 11/16. The
Compensation Committee believed that such grants were appropriate given the
financial and operational performance of the Company in 1997. In November 1998
the Compensation Committee recommended, and the Board of Directors approved, the
grant of options to purchase 200,000 shares of Common Stock to Mr. King, all at
an exercise price of $23.3125. The Compensation Committee believed that such
grant was appropriate to provide incentive to Mr. King in his new position as
Chief Executive Officer.
This report is furnished by the Compensation Committee of the Board of
Directors.
Paul M. Verrochi, CHAIRMAN
Steven S. Harter
William J. Lynch
Frank V. AtLee III
EMPLOYMENT AGREEMENTS
Messrs. John Mercadante, Jr., Gerald Mercadante and Gallagher each entered
into an employment agreement, effective as of May 17, 1996, with the Company and
one of the companies that merged with and into and became a wholly-owned
subsidiary of the Company in connection with the Initial Public Offering,
providing for an annual base salary of $150,000 and a bonus to be determined
annually. The Company increased the annual salary payable pursuant to each of
these agreements to $200,000 for 1998. Each
I-11
<PAGE> 43
employment agreement has a term of five years. Unless terminated or not renewed
by the Company or not renewed by the employee, the term will continue thereafter
on a year-to-year basis on the same terms and conditions existing at the time of
renewal. Each of these agreements provides that, in the event of a termination
of employment by the Company without cause during the first three years of the
employment term (the "Initial Term"), the employee will be entitled to receive
from the Company an amount equal to his then current salary for the remainder of
the Initial Term or for one year, whichever is greater. In the event of a
termination of employment without cause during the final two years of the
initial five-year term of the employment agreement, the employee will be
entitled to receive an amount equal to his then current salary for one year. In
either case, payment is due in one lump sum on the effective date of
termination. In the event of a change in control of the Company (as defined in
the agreement) during the Initial Term, if the employee is not given at least
five days' notice of such change in control, the employee may elect to terminate
his employment and receive in one lump sum three times the amount he would
receive pursuant to a termination without cause during the Initial Term. In
addition, if the employee is not given at least five days' notice of such change
in control, the non-competition provisions of the employment agreement would not
apply. In the event the employee is given at least five days' notice of such
change in control, the employee may elect to terminate his employment agreement
and receive in one lump sum two times the amount he would receive pursuant to a
termination without cause during the Initial Term. In such an event, the
non-competition provisions of the employment agreement would apply for two years
from the effective date of termination.
Messrs. Cerny and King each entered into an employment agreement with the
Company, effective as of May 14, 1996, providing for an annual base salary of
$150,000 and a bonus to be determined annually. The Company increased the annual
salary payable pursuant to each of these agreements to $200,000 for 1998. Each
employment agreement is for a term of three years. Unless terminated or not
renewed by the Company or not renewed by the employee, the term will continue
thereafter on a year-to-year basis on the same terms and conditions existing at
the time of renewal. Each of these agreements provides that, in the event of
termination of employment by the Company without cause, the employee will be
entitled to receive from the Company an amount equal to one year's salary,
payable in one lump sum on the effective date of termination. In the event of a
change in control of the Company (as defined in the agreement) during the term,
if the employee is not given at least five days' notice of such change in
control, the employee may elect to terminate his employment and receive in one
lump sum three times the amount he would receive pursuant to a termination
without cause during such initial term. In addition, if the employee is not
given at least five days' notice of such change in control, the non-competition
provisions of the employment agreement would not apply. In the event the
employee is given at least five days' notice of such change in control, the
employee may elect to terminate his employment and receive in one lump sum three
times the amount he would receive pursuant to a termination without cause during
such initial term. In such an event, the non-competition provisions of the
employment agreement would apply for two years from the effective date of
termination. Mr. Kristinik resigned from his position of Chairman of the Board
of Directors and Chief Executive Officer of the Company effective December 31,
1998.
Barnett Rukin entered into an employment agreement with the Company,
effective as of July 31, 1998, providing for an annual base salary of $260,000
and a bonus to be determined annually. On each anniversary date of the term of
the employment agreement, Mr. Rukin's base salary shall increase by not less
than the average percentage increases in the salaries of the senior management
of the Company. The employment agreement is for a term of three years, unless
terminated sooner as provided in the employment agreement. The employment
agreement provides that the Company or the employer may terminate the agreement
and employee's employment, without cause, effective thirty (30) days after
written notice is provided to or from the Company. Should employee be terminated
by the Company without cause during the three year term or should employee
resign by reason of the Company's material violation of the employment
agreement, the employee will be entitled to receive from the Company a lump sum
payment, due within ten (10) days of the effective date of the termination, in
an amount equal to the employees compensation specified in the agreement for the
remainder of the term. In such an event, the non-competition provisions of the
employment agreement would apply for one year from the effective date of the
termination.
I-12
<PAGE> 44
Each employment agreement contains a covenant not to compete with the
Company for a period equivalent to the longer of two years immediately following
termination of employment, or in the case of termination by the Company without
cause in the absence of a change in control, for a period of one year following
termination of employment.
I-13
<PAGE> 45
Annex II
MORGAN STANLEY DEAN WITTER
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
June 12, 1999
Board of Directors
Coach USA, Inc.
One Riverway
Suite 500
Houston, Texas 77056-1921
Members of the Board:
We understand that Coach USA, Inc. (the "Company"), Stagecoach Holdings plc
("Parent"), SCH Holdings Corp. ("Buyer") and SCH Acquisition Corp., a wholly
owned subsidiary of Buyer ("Acquisition Sub") propose to enter into an Agreement
and Plan of Merger (the "Merger Agreement"), which provides, among other things,
for (i) the commencement by Buyer of a tender offer (the "Tender Offer") for all
outstanding shares of common stock, par value $0.01 per share (the "Common
Stock") of the Company for $42.00 per share net to the seller in cash and (ii)
the subsequent merger (the "Merger") of Acquisition Sub with and into the
Company. Pursuant to the Merger, the Company will become a wholly owned
subsidiary of Buyer and each outstanding share of Common Stock, other than
shares held in treasury or held by Buyer or any affiliate of Buyer or as to
which dissenters' rights have been perfected, will be converted into the right
to receive $42.00 per share in cash. The terms and conditions of the Tender
Offer and the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration to be received by
the holders of shares of Common Stock pursuant to the Merger Agreement is fair
from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have, among other things:
<TABLE>
<C> <S>
(i) reviewed certain publicly available financial statements and
other information of the Company;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company prepared by the
management of the Company;
(iii) reviewed certain financial forecasts prepared by the
management of the Company;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company with senior executives of the
Company;
(v) reviewed the reported prices and trading activity for the
Common Stock;
</TABLE>
II-1
<PAGE> 46
<TABLE>
<C> <S>
MORGAN STANLEY DEAN WITTER
(vi) compared the financial performance of the Company and the prices
and trading activity of the Common Stock with that of certain
other comparable publicly- traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among representatives
of the Company and Parent and certain other parties and their
financial and legal advisors;
(ix) reviewed a draft of the Merger Agreement and certain related
documents and
(x) considered such other analyses as we have deemed appropriate.
</TABLE>
We have assumed and relied upon without independent verification the accuracy
and completeness of the information supplied or otherwise made available to us
for the purposes of this opinion. With respect to the financial forecasts, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the future financial
performance of the Company. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals. Our opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services.
It is understood that this letter is for the information of the Board of
Directors of the Company. In addition, Morgan Stanley expresses no opinion or
recommendation as to whether the holders of shares of Common Stock should accept
the Tender Offer.
Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Common Stock pursuant
to the Merger Agreement is fair from a financial point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
/s/ MARK D. EICHORN
By: ---------------------------------------
Mark D. Eichorn
Principal
II-2
<PAGE> 1
FOR: COACH USA, INC.
APPROVED BY: Larry King, Chairman and CEO
Robert Womack, Senior VP and CFO
One Riverway, Suite 500
Houston, TX 77056-1921
1(888) COACH-US
CONTACT: David Stutts, VP - Financial Administration
1(888) COACH-US
Betsy Brod/Jonathan Schaffer
Investor Relations
Media: Eileen King
Morgen-Walke Associates, Inc.
FOR IMMEDIATE RELEASE (212) 850-5600
- ---------------------
STAGECOACH HOLDINGS PLC ENTERS INTO DEFINITIVE
MERGER AGREEMENT WITH COACH USA, INC.
~ STAGECOACH TO ACQUIRE COACH USA FOR $42 PER SHARE IN CASH ~
HOUSTON, TX - JUNE 14, 1999 - COACH USA, INC. ("COACH") (NYSE: CUI) AND
STAGECOACH HOLDINGS PLC ("STAGECOACH") (LSE: SGC) today jointly announced that
the two companies have signed a definitive merger agreement pursuant to which
Stagecoach will acquire all of the outstanding common stock of Coach at a price
of $42.00 per share in cash in a transaction valued at approximately $1.8
billion, including assumption of debt. The transaction has been approved
unanimously by the Boards of Directors of both companies.
Under the terms of the merger agreement, a subsidiary of Stagecoach
will promptly commence a tender offer for all outstanding shares of Coach stock
at a net price of $42.00 per share in cash. The tender offer is expected to
commence on June 18, 1999. Any shares not purchased pursuant to the tender offer
will be acquired in a subsequent merger at a price of $42.00 per share in cash
as soon as practicable after completion of the tender offer. The merger
agreement contains certain limited provisions that restrict the ability of the
Coach Board of Directors to have discussions or negotiate with other interested
parties.
In connection with the execution of the merger agreement, Stagecoach
entered into tender agreements with the Directors of Coach who collectively own
approximately 8% of the outstanding Coach shares, pursuant to which such
Directors agreed, among other things, to tender their shares in the offer and
not to withdraw such shares during the term of the merger agreement.
- MORE -
<PAGE> 2
STAGECOACH HOLDINGS ENTERS INTO DEFINITIVE MERGER AGREEMENT WITH COACH USA
PAGE 2
Completion of the tender offer is subject to customary conditions,
including the acquisition by Stagecoach of a majority of Coach's common shares
on a fully diluted basis, receipt of necessary governmental approvals, including
approval from the US Surface Transportation Board (as explained below), the
expiration of applicable waiting periods under the Hart-Scott-Rodino Act, and
the approval of Stagecoach's shareholders. The holders of approximately 24% of
Stagecoach's outstanding shares have already agreed to vote in favor of the
transaction. The merger agreement is not subject to a financing contingency.
The tender offer will be subject to receipt of informal approval by the
staff of the US Surface Transportation Board ("US STB") of a required voting
trust agreement. Coach shares acquired by Stagecoach in the tender offer and the
merger will be placed in the voting trust pending full approval by the US STB.
However, other than the informal approval of the voting trust agreement, US STB
approval will not be a condition to the transaction.
The merger agreement provides for the payment to Stagecoach of a fee of
$35 million if the merger agreement is terminated in certain circumstances. The
merger agreement also provides for a termination fee of $25 million to be paid
to Coach following, in certain circumstances, a change in the recommendation of
the Stagecoach Board to Stagecoach shareholders to vote in favor of the
acquisition.
J.P. Morgan, which is also acting as dealer manager in connection with
the tender offer, and Noble Grossart Limited advised Stagecoach. Morgan Stanley
Dean Witter acted as Coach's financial adviser in connection with the
transaction. Morgan Stanley has delivered to the Coach Board of Directors a
written opinion to the effect that, as of the date of such opinion and based
upon and subject to certain matters stated therein, the $42.00 per share cash
consideration to be received in the tender offer and the merger by holders of
Coach common stock was fair, from a financial point of view, to such holders.
Brian Souter, Chairman of Stagecoach, said, "I am delighted that we are
entering the North American market at a relatively early stage in its
consolidation with the prospect of exciting growth opportunities. In Coach USA
we are acquiring an excellent company which has already built a strong position
and brand in North America. Our two companies have a shared background of
successful growth by acquisition and we have found a high degree of
compatibility between the two management teams."
Larry King, Chairman and Chief Executive Officer of Coach, said, "I
believe that in Stagecoach we have identified the ideal partner who can provide
the financial flexibility and resources to support our next growth phase. The
Coach USA management team will be remaining in place going forward. We are
excited about working alongside the management of Stagecoach to meet our
collective objectives in North America."
- MORE -
<PAGE> 3
STAGECOACH HOLDINGS ENTERS INTO DEFINITIVE MERGER AGREEMENT WITH COACH USA
PAGE 3
Stagecoach is an international passenger transportation company
headquartered in Perth, Scotland. Stagecoach operates bus, train and airport
businesses in the United Kingdom, buses and ferries in New Zealand, buses in
Sweden, Finland, Portugal, Australia, Hong Kong and China together with
associated undertakings in railways in the United Kingdom and toll roads in
China. The Stagecoach group employs approximately 37,000 people worldwide, with
annual revenues of approximately $2.5 billion.
Coach USA is the leading provider of motorcoach, airport shuttle and
taxi services in North America. Through over 120 cities in 33 states, provinces
and territories, Coach USA's services include motorcoach charters, sightseeing
and tours, contract services for municipalities and corporations, commuter
transportation, airport shuttles and taxis. Coach USA employs approximately
12,500 people, with reported revenues of approximately $804 million in 1998.
Note: This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on the current plans and expectations of Coach USA, Inc.
and involve risks and uncertainties that could cause actual future results to be
materially different from those set forth in the forward-looking statements.
Important factors that could cause actual results to differ include, among
others, risks that no transaction will occur and other risks associated with
possible business combination transactions.
# # #
<PAGE> 1
COACH USA LOGO
June 18, 1999
Dear Stockholder:
I am very pleased to announce that on June 12, 1999, Coach USA, Inc.
("Coach"), Stagecoach Holdings plc ("Stagecoach") and Stagecoach's subsidiaries
SCH Holdings Corp. and SCH Acquisition Corp. entered into a merger agreement
providing for the acquisition of all outstanding shares of the Common Stock, par
value $0.01 per share, of Coach at $42.00 cash per share.
SCH Holdings Corp. has today commenced a cash tender offer for all
outstanding shares of Common Stock at a price of $42.00 net per share. The
merger agreement provides that promptly following the tender offer all Coach
shares which are not acquired through the tender offer will be acquired through
a merger at the same $42.00 per share cash price.
Your Board of Directors has unanimously approved the tender offer and the
merger and unanimously recommends that stockholders tender their shares in the
Offer. All directors have agreed to tender their shares and, if a stockholder
vote is required, to vote in favor of the merger.
Your Board of Directors believes that the proposed acquisition of Coach by
Stagecoach is advisable and fair to, and in the best interests of, our
stockholders. Enclosed for your consideration are copies of the tender offer
materials and Coach's Schedule 14D-9 being filed today with the Securities and
Exchange Commission. These documents should be read carefully. In particular, I
call your attention to Item 4 of the Schedule 14D-9 which describes both the
reasons for the Board's recommendation and certain additional factors that
stockholders may wish to consider before taking action with respect to the
offer.
Sincerely,
/s/ LAWRENCE K. KING
LAWRENCE K. KING
Chairman of the Board and
Chief Executive Officer
One Riverway, Suite 500 - Houston, Texas 77056-1921 - (713) 888-0104
Toll-free (888) COACH-USA - Fax (713) 888-0257
<PAGE> 1
CONFIDENTIALITY LETTER
June 2, 1999
Coach USA, Inc.
One Riverway
Suite 500
Houston, Texas 77056
Attention: Lawrence King, Chairman of the Board and Chief Executive Officer
Ladies and Gentlemen:
In connection with our consideration of a possible Transaction
(as defined below) with Coach USA, Inc. and its subsidiaries (together, the
"Company"), we have requested the Company to provide us with information
concerning the Company. As a condition to our being furnished such information,
we agree to treat any information concerning the Company (whether prepared by
the Company, its advisors or otherwise) which is furnished to us by or on behalf
of the Company, regardless of the form in which it is communicated or maintained
(herein collectively referred to as the "Evaluation Material") in accordance
with the provisions of this letter agreement and to take or abstain from taking
certain other actions herein set forth. "Transaction" shall mean a joint
venture, merger, consolidation, share exchange, purchase of substantially all of
the stock or assets, or other business combination of any nature whatsoever
between the Company and us or one or more than one of our affiliates.
The term "Evaluation Material" does not include information
which (i) is in our possession as of the date hereof, provided that such
information was not provided by or on behalf of the Company and is not known by
us to be subject to another confidentiality agreement with or other obligation
of secrecy to the Company or another party, (ii) is or becomes generally
available to the public other than as a result of a disclosure by us or our
Representatives (as defined below), (iii) is or becomes available to us on a
non-confidential basis from a source other than the Company or its advisors or
other representatives, provided that such source is not known by us to be bound
by a confidentiality agreement with or other obligation of secrecy to the
Company or another party or (iv) is independently developed by us or our
Representatives without violating our obligations hereunder. Evaluation Material
shall include all notes, analyses, compilations, studies or other documents,
whether prepared by us or others, which contain or otherwise reflect the
information furnished to us concerning the Company. The term "Representatives"
as used in this letter agreement shall include our directors, executives,
officers,
<PAGE> 2
2
employees, legal, financial, accounting or other advisors, affiliates and
representatives of any thereof.
1. We hereby agree that the Evaluation Material will be used
solely for the purpose of evaluating a possible Transaction involving the
Company and us, and that, except as required by law or regulation or by legal or
judicial process or by the rules of any applicable securities exchange, such
information will be kept confidential by us in accordance with the terms hereof;
provided, however, that (i) any such information may be disclosed to our
Representatives who need to know such information for the purpose of evaluating
any such possible Transaction by us (it being understood that such
Representatives shall be informed by us of the confidential nature of such
information) and (ii) any disclosure of such information may be made to which
the Company consents in writing. We will be responsible for any breach of this
letter agreement by our Representatives.
2. We shall promptly, upon the request of the Company,
destroy, and instruct our Representatives to destroy, all written Evaluation
Material in our possession prepared by the Company or its representatives and
will not retain in any form any copies, extracts or other reproductions in whole
or in part of such written material. Upon the Company's request, any such
destruction shall be certified in writing by one of our responsible officers
supervising such destruction. Notwithstanding the destruction of any Evaluation
Material, we will continue to be bound by our obligation of confidentiality and
other obligations hereunder.
3. Without the prior consent of the other party hereto, except
as required by law or regulation, by legal or judicial process or by the rules
of any applicable securities exchange, each party hereto will not disclose to
any person the fact that an evaluation of a possible Transaction with us is
occurring or has occurred, that Evaluation Material is being or has been made
available to us or that discussions or negotiations are occurring or have
occurred concerning the possible Transaction with us, or any of the terms,
conditions or other facts with respect to any such possible Transaction,
including the status thereof. The term "person" as used in this letter agreement
shall be broadly interpreted to include without limitation any corporation,
company, group, partnership or individual.
4. In the event that either party hereto receives a request to
disclose any information referred to in paragraph 3 hereof or that we receive a
request to disclose any Evaluation Material, in any such case under any
applicable law or regulation, legal or judicial process or the rules of any
applicable securities exchange, the party receiving such request agrees (i)
promptly to notify the other party hereto in writing thereof, (ii) to consult
with the other party hereto on the advisability of taking steps to resist or
narrow such request, and (iii) if disclosure is required or deemed advisable, to
cooperate reasonably with the other party hereto in, and not to oppose, any
attempt that it may make to obtain an order or other reliable assurance that
confidential treatment will be accorded to designated portions of such
information. If disclosure is required or deemed advisable in the circumstances
described above, disclosure may be made without liability hereunder, subject to
compliance with this paragraph.
<PAGE> 3
3
5. We agree that, for a period of one year from the date of
this letter agreement, we will not, without your prior written consent, unless
we have been specifically invited in writing by the board of directors of the
Company, in any manner, directly or indirectly, (a) effect, offer or propose
(whether publicly or otherwise) to effect or cause or participate in, or in any
way assist any other person to effect, offer or propose (whether publicly or
otherwise) to effect or cause or participate in, (i) any acquisition of any
securities (or beneficial ownership thereof) or material assets of the Company
or any of its subsidiaries, (ii) any tender or exchange offer for securities of
the Company or, any merger or business combination involving the Company
(including, without limitation, any recapitalization, restructuring,
liquidation, dissolution or other extraordinary transaction with respect to the
Company) or (iii) any "solicitation" of "proxies" (as such terms are used in the
proxy rules of the Securities and Exchange Commission) or consents to vote, or
seek to advise or influence any person with respect to the voting of any voting
securities of the Company, (b) form, join or in any way participate in a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934 and
the rules and regulations thereunder) with respect to any voting securities of
the Company, (c) otherwise act, alone or in concert with others, to seek to
control or influence the management, board of directors or policies of the
Company, (d) take any action which would reasonably be expected to force the
Company to make a public announcement regarding any of the types of matters set
forth in clause (a) above, (e) enter into any discussions or arrangements with
any third party with respect to any of the foregoing or (f) publicly disclose
any intention, plan or arrangement with respect to the foregoing. We also agree
during such period not to request the Company (or its directors, officers,
employees or agents), directly or indirectly, to amend or waive any provision of
this paragraph (including this sentence). Notwithstanding the foregoing
provisions of this paragraph, if the board of directors of the Company approves
a transaction with any person that would result in such person beneficially
owning (i) more than 20% of the outstanding voting securities of the Company or
(ii) any securities convertible into securities of the Company, or any options,
warrants or other rights to acquire securities of the Company, in each case in
this clause (ii) representing more than 20% of the outstanding voting securities
of the Company determined on a fully diluted basis (or a successor to the
Company in a merger or consolidation Transaction) or all or substantially all of
its assets, or any person or "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations thereunder) has
commenced or publicly announced its intention to commence a tender or exchange
offer for (i) more than 20% of the outstanding voting securities of the Company
or (ii) any securities convertible into securities of the Company, or any
options, warrants or other rights to acquire securities of the Company, in each
case in this clause (ii) representing more than 20% of the outstanding voting
securities of the Company determined on a fully diluted basis, then we shall not
be prohibited thereafter from taking any of the actions described in the
foregoing provisions of this paragraph.
6. Each party hereto agrees that unless and until a definitive
agreement between the Company and us with respect to a possible Transaction
involving the Company has been executed and delivered, neither the Company nor
we will be under any legal obligation of any kind whatsoever with respect to
such a Transaction by virtue of this letter agreement or any written or oral
expression with respect to such a Transaction by any of its representatives
except,
<PAGE> 4
4
in the case of this letter agreement or any other written agreement which
purports to be binding, for the matters specifically agreed to herein or
therein. The agreement set forth in this paragraph may be modified or waived
only by a separate writing executed by the Company and us expressly so modifying
or waiving such agreement. We understand that the Company does not make any
representation or warranty as to the accuracy or completeness of the Evaluation
Material, and we agree that neither the Company nor any of its representatives
will have any liability to us or any of our Representatives resulting from the
use of the Evaluation Material supplied by the Company or its representatives.
7. We hereby acknowledge that we are aware (and our
Representatives have been or will be advised by us) that United States federal
securities laws restrict persons with material non-public information concerning
a company obtained directly or indirectly from that company from purchasing or
selling securities of such company, or from communicating such information to
any other person under circumstances in which it is reasonably foreseeable that
such person is likely to purchase or sell such securities. We further agree
that, from the date we receive Evaluation Material, we will not purchase or
sell, or permit any Representative to purchase or sell on our behalf, any of the
Company's securities in violation of United States federal securities laws.
8. We hereby agree that the Company reserves the right in it
its sole and absolute discretion, to reject any or all proposals, to decline to
furnish further Evaluation Material and to terminate discussions and
negotiations at any time. The exercise by the Company of these rights shall not
affect the enforceability of any provision of this letter agreement.
9. Each party hereto acknowledges and agrees that money
damages would not be a sufficient remedy for any breach of any provision of this
letter agreement, and that in addition to all other remedies which the
non-breaching party, its agents or its representatives may have, each of the
non-breaching party, its agents and representatives will be entitled to specific
performance and injunction or other equitable relief as a remedy for any such
breach, and each party hereto further agrees to waive any requirement for the
securing or posting of any bond in connection with such remedy.
10. It is understood and agreed that no failure or delay by a
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
11. The invalidity or unenforceability of any provision of
this letter agreement shall not affect the validity or enforceability of any
other provisions of this letter agreement, which shall remain in full force and
effect.
12. Except as provided in paragraph 5 above, this letter
agreement shall terminate two years from the date hereof.
<PAGE> 5
5
13. This letter agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware. This letter agreement may
be executed in separate counterparts, all of which taken together shall
constitute one and the same instrument.
Very truly yours,
STAGECOACH HOLDINGS PLC
By: /s/ KEITH COCHRANE
-----------------------------------
Name: Keith Cochrane
Title: Group Finance Director
Confirmed and agreed to as of
the date first written above:
COACH USA, INC.
By: /s/ LAWRENCE K. KING
----------------------------------
Name: Lawrence K. King
Title: Chief Executive Officer
<PAGE> 1
CONFIDENTIALITY LETTER
June 2, 1999
Stagecoach Holdings plc
Charlotte House
Charlotte Street
Perth, Scotland PH1 5LL
Attention: Brian Souter, Chairman of the Board
Ladies and Gentlemen:
In connection with our consideration of a possible Transaction
(as defined below) with Stagecoach Holdings plc and its subsidiaries (together,
the "Company"), we have requested the Company to provide us with information
concerning the Company. As a condition to our being furnished such information,
we agree to treat any information concerning the Company (whether prepared by
the Company, its advisors or otherwise) which is furnished to us by or on behalf
of the Company, regardless of the form in which it is communicated or maintained
(herein collectively referred to as the "Evaluation Material") in accordance
with the provisions of this letter agreement and to take or abstain from taking
certain other actions herein set forth. "Transaction" shall mean a joint
venture, merger, consolidation, share exchange, purchase of substantially all of
our stock or assets, or other business combination of any nature whatsoever
between the Company and us or one or more than one of our affiliates.
The term "Evaluation Material" does not include information
which (i) is in our possession as of the date hereof, provided that such
information was not provided by or on behalf of the Company and is not known by
us to be subject to another confidentiality agreement with or other obligation
of secrecy to the Company or another party, (ii) is or becomes generally
available to the public other than as a result of a disclosure by us or our
Representatives (as defined below), (iii) is or becomes available to us on a
non-confidential basis from a source other than the Company or its advisors or
other representatives, provided that such source is not known by us to be bound
by a confidentiality agreement with or other obligation of secrecy to the
Company or another party or (iv) is independently developed by us or our
Representatives without violating our obligations hereunder. Evaluation Material
shall include all notes, analyses, compilations, studies or other documents,
whether prepared by us or others, which
<PAGE> 2
2
contain or otherwise reflect the information furnished to us concerning the
Company. The term "Representatives" as used in this letter agreement shall
include our directors, executives, officers, employees, legal, financial,
accounting or other advisors, affiliates and representatives of any thereof.
1. We hereby agree that the Evaluation Material will be used
solely for the purpose of evaluating a possible Transaction involving the
Company and us, and that, except as required by law or regulation or by legal or
judicial process or by the rules of any applicable securities exchange, such
information will be kept confidential by us in accordance with the terms hereof;
provided, however, that (i) any such information may be disclosed to our
Representatives who need to know such information for the purpose of evaluating
any such possible Transaction by us (it being understood that such
Representatives shall be informed by us of the confidential nature of such
information) and (ii) any disclosure of such information may be made to which
the Company consents in writing. We will be responsible for any breach of this
letter agreement by our Representatives.
2. We shall promptly, upon the request of the Company,
destroy, and instruct our Representatives to destroy, all written Evaluation
Material in our possession prepared by the Company or its representatives and
will not retain in any form any copies, extracts or other reproductions in whole
or in part of such written material. Upon the Company's request, any such
destruction shall be certified in writing by one of our responsible officers
supervising such destruction. Notwithstanding the destruction of any Evaluation
Material, we will continue to be bound by our obligation of confidentiality and
other obligations hereunder.
3. Without the prior consent of the other party hereto, except
as required by law or regulation, by legal or judicial process or by the rules
of any applicable securities exchange, each party hereto will not disclose to
any person the fact that an evaluation of a possible Transaction with us is
occurring or has occurred, that Evaluation Material is being or has been made
available to us or that discussions or negotiations are occurring or have
occurred concerning the possible Transaction with us, or any of the terms,
conditions or other facts with respect to any such possible Transaction,
including the status thereof. The term "person" as used in this letter agreement
shall be broadly interpreted to include without limitation any corporation,
company, group, partnership or individual.
4. In the event that either party hereto receives a request to
disclose any information referred to in paragraph 3 hereof or that we receive a
request to disclose any Evaluation Material, in any such case under any
applicable law or regulation, legal or judicial process or the rules of any
applicable securities exchange, the party receiving such request agrees (i)
promptly to notify the other party hereto in writing thereof, (ii) to consult
with the other party hereto on the advisability of taking steps to resist or
narrow such request, and (iii) if disclosure is required or deemed advisable, to
cooperate reasonably with the other party hereto in, and not to oppose, any
attempt that it may make to obtain an order or other reliable assurance that
confidential treatment will be accorded to designated portions of such
information. If disclosure
<PAGE> 3
3
is required or deemed advisable in the circumstances described above, disclosure
may be made without liability hereunder, subject to compliance with this
paragraph.
5. We agree that, for a period of one year from the date of
this letter agreement, we will not, without your prior written consent, unless
we have been specifically invited in writing by the board of directors of the
Company, in any manner, directly or indirectly, (a) effect, offer or propose
(whether publicly or otherwise) to effect or cause or participate in, or in any
way assist any other person to effect, offer or propose (whether publicly or
otherwise) to effect or cause or participate in, (i) any acquisition of any
securities (or beneficial ownership thereof) or material assets of the Company
or any of its subsidiaries, (ii) any tender or exchange offer for securities of
the Company or, any merger or business combination involving the Company
(including, without limitation, any recapitalization, restructuring,
liquidation, dissolution or other extraordinary transaction with respect to the
Company) or (iii) any "solicitation" of "proxies" (as such terms are used in the
proxy rules of the Securities and Exchange Commission) or consents to vote, or
seek to advise or influence any person with respect to the voting of any voting
securities of the Company, (b) form, join or in any way participate in a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934 and
the rules and regulations thereunder) with respect to any voting securities of
the Company, (c) otherwise act, alone or in concert with others, to seek to
control or influence the management, board of directors or policies of the
Company, (d) take any action which would reasonably be expected to force the
Company to make a public announcement regarding any of the types of matters set
forth in clause (a) above, (e) enter into any discussions or arrangements with
any third party with respect to any of the foregoing or (f) publicly disclose
any intention, plan or arrangement with respect to the foregoing. We also agree
during such period not to request the Company (or its directors, officers,
employees or agents), directly or indirectly, to amend or waive any provision of
this paragraph (including this sentence). Notwithstanding the foregoing
provisions of this paragraph, if the board of directors of the Company approves
a transaction with any person that would result in such person beneficially
owning (i) more than 50% of the outstanding voting securities of the Company or
(ii) any securities convertible into securities of the Company, or any options,
warrants or other rights to acquire securities of the Company, in each case in
this clause (ii) representing more than 50% of the outstanding voting securities
of the Company determined on a fully diluted basis (or a successor to the
Company in a merger or consolidation Transaction) or all or substantially all of
its assets, or any person or "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations thereunder) has
commenced or publicly announced its intention to commence a tender or exchange
offer for (i) more than 50% of the outstanding voting securities of the Company
or (ii) any securities convertible into securities of the Company, or any
options, warrants or other rights to acquire securities of the Company, in each
case in this clause (ii) representing more than 50% of the outstanding voting
securities of the Company determined on a fully diluted basis, then we shall not
be prohibited thereafter from taking any of the actions described in the
foregoing provisions of this paragraph.
<PAGE> 4
4
6. Each party hereto agrees that unless and until a definitive
agreement between the Company and us with respect to a possible Transaction
involving the Company has been executed and delivered, neither the Company nor
we will be under any legal obligation of any kind whatsoever with respect to
such a Transaction by virtue of this letter agreement or any written or oral
expression with respect to such a Transaction by any of its representatives
except, in the case of this letter agreement or any other written agreement
which purports to be binding, for the matters specifically agreed to herein or
therein. The agreement set forth in this paragraph may be modified or waived
only by a separate writing executed by the Company and us expressly so modifying
or waiving such agreement. We understand that the Company does not make any
representation or warranty as to the accuracy or completeness of the Evaluation
Material, and we agree that neither the Company nor any of its representatives
will have any liability to us or any of our Representatives resulting from the
use of the Evaluation Material supplied by the Company or its representatives.
7. We hereby acknowledge that we are aware (and our
Representatives have been or will be advised by us) that certain United Kingdom
securities laws restrict persons with price sensitive non-public information
concerning a company obtained directly or indirectly from that company from
purchasing or selling securities of such company, or from communicating such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities. We
further agree that, from the date we receive Evaluation Material, we will not
purchase or sell, or permit any Representative to purchase or sell on our
behalf, any of the Company's securities in violation of United Kingdom
securities laws.
8. We hereby agree that the Company reserves the right in it
its sole and absolute discretion, to reject any or all proposals, to decline to
furnish further Evaluation Material and to terminate discussions and
negotiations at any time. The exercise by the Company of these rights shall not
affect the enforceability of any provision of this letter agreement.
9. Each party hereto acknowledges and agrees that money
damages would not be a sufficient remedy for any breach of any provision of this
letter agreement, and that in addition to all other remedies which the
non-breaching party, its agents or its representatives may have, each of the
non-breaching party, its agents and representatives will be entitled to specific
performance and injunction or other equitable relief as a remedy for any such
breach, and each party hereto further agrees to waive any requirement for the
securing or posting of any bond in connection with such remedy.
10. It is understood and agreed that no failure or delay by a
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
<PAGE> 5
5
11. The invalidity or unenforceability of any provision of
this letter agreement shall not affect the validity or enforceability of any
other provisions of this letter agreement, which shall remain in full force and
effect.
12. Except as provided in paragraph 5 above, this letter
agreement shall terminate two years from the date hereof.
<PAGE> 6
6
13. This letter agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware. This letter agreement may
be executed in separate counterparts, all of which taken together shall
constitute one and the same instrument.
Very truly yours,
COACH USA, INC.
By: /s/ LAWRENCE K. KING
---------------------------------------
Name: Lawrence K. King
Title: Chief Executive Officer
Confirmed and agreed to as of
the date first written above:
STAGECOACH HOLDINGS PLC
By: /s/ KEITH COCHRANE
-----------------------------
Name: Keith Cochrane
Title: Group Finance Director
<PAGE> 1
EMPLOYEE TERM SHEET
1. Each of Larry King, Frank Gallagher and Gerald Mercadante agrees to enter
into a new service agreement with Coach USA, Inc. ("Coach") or one of its
subsidiaries for a fixed term of 3 years from closing; thereafter the
notice periods in the existing contracts will apply subject to a maximum of
one year.
2. Larry King will, following closing, be appointed as a director of
Stagecoach Holdings plc ("Stagecoach") subject to the articles of
association of Stagecoach and the rules of London Stock Exchange.
3. The terms of the new service agreements will be on the same overall terms
as the existing service contracts of those individuals except where changes
are reasonably required to conform with the principles of corporate
governance to which Stagecoach is subject and to remove any provisions
which are, in the reasonable opinion of Stagecoach, inappropriate for a
London listed company of the size and nature of Stagecoach.
4. Larry King, Frank Gallagher, Gerald Mercadante and John Mercadante (the
"Investors") agree that as soon as reasonably practicable taking into
account the London Stock Exchange Code on directors dealings and insider
dealing legislation in the UK, they will invest between them in aggregate
US$9 million in the purchase of Stagecoach ordinary shares.
5. For a period of one year from purchase, the Investors will not be permitted
to dispose of the shares acquired by them. This will be subject to
customary exceptions to be negotiated. At the end of three years from
closing, each Investor will be entitled to receive one new ordinary
Stagecoach share for each 10 ordinary shares purchased under paragraph 4
above then held. This entitlement will be subject to the relevant Investor
continuing to be employed by Coach, except where prior termination by the
employer was without cause and subject to appropriate performance criteria
being achieved. These arrangements will be subject to the required approval
of Stagecoach shareholders being obtained.
6. Stagecoach intends that senior executives of Coach will be entitled to
participate in the existing Stagecoach executive share option scheme or an
appropriate equivalent phantom option scheme arrangement.
7. Existing underwater options will be cancelled.
8. For an executive who is entitled to terminate his contract on a change of
control and to receive a lump sum payment:
(i) if the executive terminates his employment within a period of three
years from the date of the change of control, he will be entitled to
receive the termination payment which would have been due had the
contract been terminated upon
<PAGE> 2
the change of control together with interest on that sum for the
period from the date of the change of control to the date of
termination at a rate equivalent to the retail bank rate.
(ii) if the executive terminates his employment at any time following the
3 year period above, the executive will be entitled to an amount
calculated on the basis of (i) above or to receive a cash payment
equal to the number of Stagecoach shares which, at the market price
prevailing on the date of the change of control, could have been
purchased with the relevant termination payment had the contract
been terminated upon the change of control, multiplied by the market
price of Stagecoach shares prevailing on the date of termination of
the employment, whichever of the two (2) amounts described above is
the greater amount.
Each of the signatories hereto and Stagecoach agree that this term sheet is a
statement of mutual intent for the purpose of aiding negotiation, and remains
subject to the negotiation of other material terms and the negotiation and
execution of definitive service agreements. The signatories hereto agree to
negotiate definitive service agreements on the basis of the terms herein in good
faith.
/s/ LARRY KING
- --------------------------
Larry King
/s/ FRANK GALLAGHER
- --------------------------
Frank Gallagher
/s/ GERALD MERCADANTE
- --------------------------
Gerald Mercadante
/s/ JOHN MERCADANTE
- --------------------------
John Mercadante
<PAGE> 1
UNDERTAKING TO VOTE
The Directors
Stagecoach Holdings PLC
Charlotte House
20 Charlotte Street
Perth PH1 5LL
Scotland
and
The Directors
Coach USA, Inc.
One Riverway, Suite 500
Houston, Texas 77056
June 12, 1999
Dear Sirs:
Stagecoach PLC (the "Company")
Proposed acquisition of Coach USA, Inc. ("Coach")
You have informed us in confidence of the Company's proposals to acquire the
whole of the issued share capital of Coach (the "Transaction").
In consideration of the payment to us of $1 (receipt of which we hereby
acknowledge), we confirm and undertake as follows:
1. We confirm that we are the beneficial and/or registered holder of
shares in the capital of the Company as shown in the schedule below
(the "Shares") and that we have all necessary authority to vote or
procure the voting of the Shares in accordance with this undertaking:
2. We irrevocably undertake that we shall vote or procure the voting of
the Shares in favor of the resolution[s] to implement the Transaction
to be proposed at the Parent Shareholders Meeting (as defined in the
Agreement and Plan of Merger, dated as of June 12, 1999, among the
Company, Coach, SCH Holdings Corp. and SCH Acquisition Corp. (the
"Merger Agreement"));
3. We authorize you to include a statement in the circular letter to be
sent to shareholders of the Company in connection with the
Extraordinary General Meeting that we have undertaken so to vote;
4. We irrevocably undertake and confirm that we shall not sell or
otherwise dispose of or permit the sale or other disposition of all or
any of the Shares or any interest in any of the Shares prior to the
close of the Extraordinary General meeting or any adjournment thereof;
and
5. We irrevocably undertake and confirm that we have not agreed,
conditionally or otherwise, to dispose of all or any of the Shares or
any interest in any of the Shares.
We acknowledge that you have informed us that the information you have provided
to us concerning the Transaction constitutes inside information for the purposes
of the "insider dealing" provisions of the Criminal Justice Act 1993 and confirm
that we are aware of our obligations as insiders for the purpose of that Act.
<PAGE> 2
We further acknowledge that it is the intention of the parties to this
undertaking that in the event of a breach by us of any of its terms then,
without prejudice to any other of your rights or remedies, the terms of this
undertaking be specifically performed.
This Undertaking shall terminate upon the termination of the Merger Agreement,
in accordance with its terms.
This Undertaking shall be governed by and construed in accordance with English
law.
<TABLE>
<CAPTION>
No and class of shares in the capital of
the Company Registered Holder Beneficial Owner
- ------------------------------------------ ----------------- ----------------
<S> <C> <C>
131,640,815 ordinary shares 1/2 pence each 131,640,815 131,640,815
</TABLE>
<PAGE> 3
IN WITNESS whereof this document has been executed and delivered as a deed on
the date first before written.
/s/ ANN GLOAG
------------------------------------
signature
Ann Gloag
------------------------------------
print name
<PAGE> 1
UNDERTAKING TO VOTE
The Directors
Stagecoach Holdings PLC
Charlotte House
20 Charlotte Street
Perth PH1 5LL
Scotland
and
The Directors
Coach USA, Inc.
One Riverway, Suite 500
Houston, Texas 77056
June 12, 1999
Dear Sirs:
Stagecoach PLC (the "Company")
Proposed acquisition of Coach USA, Inc. ("Coach")
You have informed us in confidence of the Company's proposals to acquire the
whole of the issued share capital of Coach (the "Transaction").
In consideration of the payment to us of $1 (receipt of which we hereby
acknowledge), we confirm and undertake as follows:
1. We confirm that we are the beneficial and/or registered holder of
shares in the capital of the Company as shown in the schedule below
(the "Shares") and that we have all necessary authority to vote or
procure the voting of the Shares in accordance with this undertaking:
2. We irrevocably undertake that we shall vote or procure the voting of
the Shares in favor of the resolution[s] to implement the Transaction
to be proposed at the Parent Shareholders Meeting (as defined in the
Agreement and Plan of Merger, dated as of June 12, 1999, among the
Company, Coach, SCH Holdings Corp. and SCH Acquisition Corp. (the
"Merger Agreement"));
3. We authorize you to include a statement in the circular letter to be
sent to shareholders of the Company in connection with the
Extraordinary General Meeting that we have undertaken so to vote;
4. We irrevocably undertake and confirm that we shall not sell or
otherwise dispose of or permit the sale or other disposition of all or
any of the Shares or any interest in any of the Shares prior to the
close of the Extraordinary General meeting or any adjournment thereof;
and
5. We irrevocably undertake and confirm that we have not agreed,
conditionally or otherwise, to dispose of all or any of the Shares or
any interest in any of the Shares.
We acknowledge that you have informed us that the information you have provided
to us concerning the Transaction constitutes inside information for the purposes
of the "insider dealing" provisions of the Criminal Justice Act 1993 and confirm
that we are aware of our obligations as insiders for the purpose of that Act.
<PAGE> 2
We further acknowledge that it is the intention of the parties to this
undertaking that in the event of a breach by us of any of its terms then,
without prejudice to any other of your rights or remedies, the terms of this
undertaking be specifically performed.
This Undertaking shall terminate upon the termination of the Merger Agreement,
in accordance with its terms.
This Undertaking shall be governed by and construed in accordance with English
law.
<TABLE>
<CAPTION>
No and class of shares in the capital of
the Company Registered Holder Beneficial Owner
- ---------------------------------------- ----------------- ----------------
<S> <C> <C>
163,341,225 ordinary shares 1/2 pence each 163,341,225 163,341,225
</TABLE>
<PAGE> 3
IN WITNESS whereof this document has been executed and delivered as a deed on
the date first before written.
/s/ BRIAN SOUTER
-----------------------------------
signature
Brian Souter
-----------------------------------
print name
