<PAGE>
As Filed with the Securities and Exchange Commission on December 24, 1996
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934
SLH CORPORATION
(name of registrant as specified in its charter)
Kansas 43-1764632
(State of incorporation or organization) (IRS Employer Identification No.)
2600 Grand Boulevard
Suite 500
Kansas City, Missouri 64108
(Address, including zip code, of principal executive offices)
816-842-7000
(Registrant's telephone number, including area code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)
Preferred Share Purchase Rights
(Title of Class)
===============================================================================
<PAGE>
SLH CORPORATION
INFORMATION REQUIRED IN REGISTRATION STATEMENT
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
Item Item
No. Caption Location in Information Statement
- ---- ------- ---------------------------------
1. Business "SUMMARY;" "INTRODUCTION;" "THE DISTRIBUTION --
Background and Reasons for the Distribution;"
"BUSINESS AND PROPERTIES;" and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS."
2. Financial Information "SUMMARY;" "THE DISTRIBUTION -- Risk Factors;"
"SLH OPERATIONS SELECTED HISTORICAL COMBINED
FINANCIAL INFORMATION;" "SLH OPERATIONS
UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION;" "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS;" and "FINANCIAL STATEMENTS."
3. Properties "BUSINESS AND PROPERTIES."
4. Security Ownership of
Certain Owners and
Management. "THE DISTRIBUTION -- No Market for Company
Common Stock;""MANAGEMENT OF THE COMPANY;"
"EXECUTIVE COMPENSATION" and "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF
COMPANY COMMON STOCK."
5. Directors and Executive
Officers "SUMMARY;" "ARRANGEMENTS BETWEEN SEAFIELD AND
THE COMPANY RELATING TO THE DISTRIBUTION;"
"MANAGEMENT OF THE COMPANY;" and "LIABILITY AND
INDEMNIFICATION OF DIRECTORS AND OFFICERS."
6. Executive Compensation. "ARRANGEMENTS BETWEEN SEAFIELD AND THE COMPANY
RELATING TO THE DISTRIBUTION;" "MANAGEMENT OF
THE COMPANY;" and "EXECUTIVE COMPENSATION."
7. Certain Relationships and
Related Transactions "SUMMARY;" "INTRODUCTION;" "THE DISTRIBUTION --
Background and Reasons for the
Distribution" and "-- Risk Factors;"
"ARRANGEMENTS BETWEEN SEAFIELD AND THE COMPANY
RELATING TO THE DISTRIBUTION;" "MANAGEMENT OF
THE COMPANY;" and "FINANCIAL STATEMENTS."
8. Legal Proceedings "BUSINESS AND PROPERTIES -- Legal Matters."
2
<PAGE>
Item Item
No. Caption Location in Information Statement
- ---- ------- ---------------------------------
9. Market Price of and
Dividends on the
Registrant's Common
Equity and Related
Stockholder Matters "SUMMARY;" "THE DISTRIBUTION -- No Market for
Company Common Stock" and "-- Risk Factors."
10. Recent Sales of
Unregistered Securities. None
11. Description of
Registrant's Securities
to be Registered "DESCRIPTION OF COMPANY CAPITAL STOCK;"
"CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN
PROVISIONS OF THE ARTICLES OF INCORPORATION,
THE BYLAWS, THE RIGHTS, AND KANSAS LAW."
12. Indemnification of
Directors and Officers "LIABILITY AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS."
13. Financial Statements and
Supplementary Data "SUMMARY;" "SLH OPERATIONS SELECTED COMBINED
HISTORICAL FINANCIAL INFORMATION;" "SLH
OPERATIONS UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION;" "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS;" and "FINANCIAL
STATEMENTS."
14. Disagreements with
Accountants on
Accounting and Financial
Disclosure. None
15. Financial Statements and
Exhibits.
(a) Financial Statements
and Schedules
(1) Financial Statements: "FINANCIAL STATEMENTS" and "INDEX TO
FINANCIAL STATEMENTS."
(2) Financial Statement Schedules:
Auditors' Report on Financial Statement Schedules
III. SLH Operations Schedule III Real Estate and Accumulated
Depreciation as of December 31, 1995.
SLH Operations Schedule III Real Estate and
Accumulated - Reconciliation between years.
All other schedules are omitted because they are not
applicable or the information is contained in the
Combined Financial Statements or notes thereto.
3
<PAGE>
(b) Exhibits:
Exhibit
Number Description
------- -----------
2(a) Form of Distribution Agreement.
2(b) Form of Blanket Assignment, Bill of Sale, Deed and
Assumption Agreement [incorporated by reference to
Exhibit D to Exhibit 2 (a)].
3(a) Articles of Incorporation of SLH Corporation.
3(b) Bylaws of SLH Corporation.
4 Form of Rights Agreement
8 Form of Opinion of Lathrop & Gage L.C. with regard to
certain tax matters.
10(a ) Form of Facilities Management and Interim Services
Agreement [incorporated by reference to Exhibit A to
Exhibit 2(a)].
10(b ) Form of Tax Sharing Agreement [incorporated by
reference to Exhibit C to Exhibit 2 (a)].
10(c) Form of SLH Corporation 1997 Stock Incentive Plan
[incorporated by reference to Exhibit E to Exhibit
2(a)].
10(d) Form of Employment Agreements with certain executive
officers of SLH [(incorporated by reference to
Exhibit B to Exhibit 2(a)].
21 Subsidiaries of SLH Corporation
Scout Development Corporation (Missouri)
Scout Development Corporation of New Mexico (Missouri)
BMA Resources, Inc. (Missouri)
27 Financial Data Schedule
4
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
SLH CORPORATION
By /s/ James R. Seward
----------------------------
James R. Seward, President
December 21, 1996
5
<PAGE>
[LOGO]
SEAFIELD CAPITAL CORPORATION
2600 Grand Boulevard, Suite 500
P.O. Box 410949
Kansas City, Missouri 64141
January __, 1997
Dear Shareholder:
I am pleased to inform you that the Board of Directors of Seafield
Capital Corporation has approved a distribution to our shareholders of all the
outstanding shares of common stock of SLH Corporation. The stock distribution
will be made to holders of record of Seafield Capital Corporation common stock
on February 28, 1997. You will receive one share of SLH Corporation common stock
for every four shares of Seafield Capital Corporation common stock you hold on
the record date.
As a result of the distribution you will own shares in two separate and
very different companies. Seafield Capital Corporation will be focused on its
core businesses -- operating its current laboratory testing business and
healthcare businesses consisting of LabOne, Inc., and its subsidiaries and
Response Oncology, Inc. SLH Corporation will concentrate on managing, developing
and disposing of its Real Estate and Energy Businesses and Miscellaneous Assets.
The Seafield Board believes that the separation of the Real Estate and
Energy Businesses and Miscellaneous Assets from Seafield's other core businesses
will provide investors a sharper focus as to the particular merits of each of
those investments and thereby provide Seafield shareholders with a better
recognition of the value of each of those investments. In addition, the
Distribution will permit SLH to pursue strategies for the management and
development of its relatively illiquid and developmental assets without
conflicting with Seafield's strategies for its laboratory testing and healthcare
businesses.
Following the Distribution, your Board of Directors expects that it
will maintain the quarterly cash dividend on Seafield Capital Corporation common
stock at current levels. SLH does not intend to pay regular annual or quarterly
cash dividends. We have received an opinion from our counsel that the
Distribution will be a taxable transaction. After the Distribution we will
report to you our determination of the fair market value of the amount of the
Distribution received by you for tax purposes on IRS Form 1099-DIV.
The enclosed Information Statement explains the proposed distribution
in detail and provides financial and other important information regarding SLH
Corporation. We urge you to read it carefully. Holders of Seafield Capital
Corporation common stock are not required to take any action to participate in
the distribution. A shareholder vote is not required in connection with this
matter and, accordingly, your proxy is not being sought.
Sincerely,
W. Thomas Grant II
Chairman of the Board
<PAGE>
SLH CORPORATION
2600 Grand Boulevard, Suite 500
Kansas City, Missouri 64108
January __, 1997
Dear Stockholder:
We would like to take this opportunity to welcome you as a stockholder
and introduce you to your company.
SLH Corporation is engaged in the business of managing, developing and
disposing of Real Estate and Energy Businesses and Miscellaneous Assets to be
received by SLH from Seafield in the Distribution described in Mr. Grant's
letter. The real estate assets consist of the remaining inventory from three
high end resort condominium developments in Santa Fe New Mexico and Juno Beach
Florida, a seven story parking garage in Reno, Nevada, a 49.9% interest in a
small shopping center in Gillette, Wyoming (the "Shopping Center Interest"); and
an aggregate of 1,147 acres of undeveloped land in Houston and Fort Worth, Texas
and Olathe, Kansas. Energy assets consist of a significant ownership interest
in Syntroleum Corporation, which is the developer and owner of a patented
process and several related proprietary technologies for the conversion of
natural gas into synthetic liquid fuels and four oil and gas general
partnerships which have working interests in producing wells in the Gulf of
Mexico. Miscellaneous Assets consist primarily of three venture capital
investments. The Company will also be assuming certain Transfer Liabilities
which are described in the Information Statement.
There is no current public market for the common stock of the Company.
Although it is anticipated that the SLH Common Stock will initially trade in the
over-the-counter market after the Distribution with quotations being published
in the OTC Bulletin Board and the NQB Pink Sheets, there is no assurance that an
active market will develop following the Distribution.
The Company is engaged in the sale of all of its assets in the ordinary
course other than Syntroleum. Following the liquidation of non Syntroleum
assets, the Company plans to continue to promote the management, growth and
development of Syntroleum or it may engage in a merger or some other transaction
that would effectively dispose of all of its assets. Management's objective is
to realize the highest value for its various assets and businesses in the most
cost effective manner possible.
Sincerely,
P. Anthony Jacobs James R. Seward
Chairman of the Board President and Chief
Executive Officer
<PAGE>
INFORMATION STATEMENT
SLH CORPORATION
Common Stock
(Par Value $0.01 Per Share)
Preferred Share Purchase Rights
This Information Statement is being furnished to shareholders of
Seafield Capital Corporation ("Seafield") in connection with the distribution
(the "Distribution") by Seafield to its shareholders of all of the outstanding
shares of common stock of its wholly owned subsidiary, SLH Corporation (the
"Company"), along with the associated preferred share purchase rights (the
"Rights").
The Distribution will be effected on February 28, 1997 (the
"Distribution Date"), and shares of Company common stock ("Company Commons
Stock") will be distributed to the holders of record of Seafield common stock as
of February 13, 1997 (the "Record Date"), on the basis of one share of common
stock of the Company for each four (4) shares of Seafield common stock held. No
consideration will be paid by shareholders of Seafield for the shares of common
stock of the Company to be received by them in the Distribution, nor will they
be required to surrender or exchange shares of Seafield in order to receive
common stock of the Company. Seafield has received an opinion from its counsel
to the effect that the Distribution will be a taxable distribution for Federal
income tax purposes.
There is no current public market for the common stock of the Company.
Although it is anticipated that the SLH Common Stock will initially trade in the
over-the-counter market after the Distribution with quotations being published
in the OTC Bulletin Board and the NQB Pink Sheets, there is no assurance that an
active market will develop following the Distribution.
In reviewing this Information Statement, you should carefully consider
the matters described under the caption "RISK FACTORS."
_____________________________________
NO VOTE OF STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS DISTRIBUTION.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
______________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
INFORMATION STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
______________________________________
THIS INFORMATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. ANY SUCH OFFERING MAY
ONLY BE MADE BY MEANS OF A SEPARATE PROSPECTUS PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT
AND OTHERWISE IN COMPLIANCE
WITH APPLICABLE LAW.
_______________________________________
The date of this Information Statement is , 1997.
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION..................................................... 3
SUMMARY................................................................... 4
The Company............................................................. 4
The Distribution........................................................ 5
SLH Operations Summary Financial Information............................10
INTRODUCTION..............................................................12
THE DISTRIBUTION..........................................................13
Background and Reasons for the Distribution.............................13
The Appraisal...........................................................14
Risk Factors............................................................14
Manner of Effecting the Distribution....................................17
Material Federal Income Tax Consequences of the Distribution............18
No Market for Company Common Stock......................................21
Company Common Stock Dividend Policy....................................21
Conditions and Termination..............................................22
ARRANGEMENTS BETWEEN SEAFIELD AND THE COMPANY
RELATING TO THE DISTRIBUTION............................................22
Distribution Agreement..................................................22
Interim Services Agreement..............................................24
Tax Sharing Agreement...................................................24
BUSINESS AND PROPERTIES...................................................25
Overview ............................................................26
Management and Disposition of Real Estate Assets........................26
Business and Management of Syntroleum...................................27
Oil and Gas Properties..................................................30
Miscellaneous Assets and Liabilities....................................30
Company Employees.......................................................31
Company Properties......................................................31
Regulation - Possible Application of the Investment Company Act of 1940.31
Legal Matters...........................................................32
CAPITALIZATION............................................................35
SLH OPERATIONS UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION ..................................................35
SLH OPERATIONS SELECTED HISTORICAL COMBINED
FINANCIAL DATA..........................................................38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...............................................39
Results of Operations...................................................39
Liquidity and Capital Resources.........................................42
MANAGEMENT OF THE COMPANY ................................................42
EXECUTIVE COMPENSATION....................................................44
Compensation of Directors...............................................44
2
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Compensation of Executive Officers.....................................44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF
COMPANY COMMON STOCK....................................................47
By Management...........................................................47
By Others ............................................................48
DESCRIPTION OF COMPANY CAPITAL STOCK......................................49
CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION, THE BYLAWS, THE RIGHTS, AND KANSAS LAW...................49
Classified Board of Directors...........................................49
Number of Directors, Filling Vacancies and Removal......................50
Stockholder Action......................................................50
Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals............................................................50
Company Preferred Stock.................................................52
Business Combinations...................................................52
Amendment of Certain Provisions of the Articles of Incorporation and
Bylaws...............................................................53
Rights ............................................................53
Antitakeover Legislation................................................55
Comparison with Rights of Holders of Seafield Common Stock..............56
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS...................56
Limitation of Liability of Directors....................................56
Indemnification of Directors and Officers...............................57
INDEPENDENT AUDITORS......................................................58
SLH OPERATIONS AND SLH CORPORATION INDEX TO FINANCIAL STATEMENTS.........F-1
Annex A Opinion of George K. Baum & Company, dated December 20, 1996.
AVAILABLE INFORMATION
SLH Corporation (the "Company") has filed a Registration Statement on Form
10 (the "Registration Statement") with the Securities and Exchange Commission
(the "Commission") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to the Company Common Stock (as defined and
described herein) and the Rights (as defined and described herein). This
Information Statement does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information, reference is made hereby to the Registration Statement and such
exhibits and schedules. Statements contained herein concerning any documents are
not necessarily complete and, in each instance, reference is made to the copies
of such documents filed as exhibits to the Registration Statement. Each such
statement is qualified in its entirety by such reference. Copies of these
documents may be inspected without charge at the principal office of the
Commission at 450 5th Street, N.W., Washington, D.C. 20549, and at the Regional
Offices of the Commission at 7 World Trade Center, Suite 1300, New York, New
York 10048 and at Northwestern Atrium Center, Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661 and copies of all or any part thereof may be
obtained from the Commission upon payment of the charges prescribed by the
Commission. Copies of this material should also be available through the
internet at the SEC EDGAR Archive, the address of which is
http://www.sec.gov/cgi-bin/srch-edgar.
<PAGE>
Following the Distribution, the Company will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the Commission. The Company will also be subject to the proxy
solicitation requirements of the Exchange Act and, accordingly, will furnish
audited financial statements to its stockholders in connection with its annual
meetings of stockholders.
NO PERSON IS AUTHORIZED BY SEAFIELD OR THE COMPANY TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS INFORMATION
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED.
3
SUMMARY
This summary is qualified by the more detailed information set forth
elsewhere in this Information Statement, which should be read in its entirety.
THE COMPANY
The Company is primarily engaged in the business of managing, developing
and disposing of Real Estate and Energy Businesses and Miscellaneous assets to
be acquired from Seafield immediately prior to the Distribution (the "Transfer
Assets").
Real Estate assets, as of September 30, 1996, consist of (a) the remaining
inventory from three high end condominium developments located in Santa Fe, New
Mexico (comprising 31 completed homes that have been priced for sale between
$225,000 and $750,000; "Quail Run") and Juno Beach, Florida (primarily
comprising three homes that have been priced for sale between $800,000 and $3.0
million, the "Juno Beach Homes"); (b) a seven story parking garage in Reno,
Nevada (the "Reno Parking Garage"); (c) a 49.9% interest in a community shopping
center in Gillette, Wyoming (the "Shopping Center Interest"); and (d)
approximately 1,147 acres of undeveloped land, with 370 acres in Houston, Texas,
approximately 547 acres in the vicinity of the Alliance Airport, in Ft. Worth,
Texas, 205 acres in West Ft. Worth, Texas, 9 other acres in Corinth, Texas and
16 acres at the intersection of 119th Street and Interstate 35 in the southern
portion of the Kansas City metropolitan area (the "Undeveloped Land"). The
total Real Estate Inventory had an aggregate book value as of September 30,1996,
of approximately $29.4 million.
Energy assets consist of a 32.5% interest in Syntroleum Corporation
("Syntroleum") and minority interests in four oil and gas general partnerships
which have working interests in producing wells in the Gulf of Mexico (the "Oil
& Gas Properties").
Syntroleum is the developer and owner of a patented process and several
related proprietary technologies ("Syntroleum(R) Process") for the conversion of
natural gas into synthetic liquid hydrocarbons which can be further processed
into fuels such as diesel, kerosene (used by jet aircraft) and naphtha and
related non fuel chemical feedstocks and lubricants. Syntroleum is currently
engaged in negotiations for the licensing of the Syntroleum(R) Process with
major oil companies. Because Syntroleum continues to be in the developmental
phase of its operations, no assurances can be given that it will be able to
successfully conclude any license or agreement on a favorable basis or that a
commercially viable Syntroleum(R) Process plant will be constructed and
successfully operated.
<PAGE>
The Company also owns other assets consisting primarily of (a) three
investments in privately held venture capital limited partnerships having an
aggregate book value at September 30, 1996, of $1,364,538, (b) a common stock
interest in Oclassen Pharmaceuticals, Inc. a privately owned pharmaceutical
manufacturer, which is proposed to be converted into approximately 183,673
shares of the common stock of Watson Pharmaceuticals, a publicly traded company,
the shares of which were last traded on December 18, 1996, at $41.37 per share,
and (c) a preferred stock interest in Norian Corporation, a privately owned
developer of proprietary bone substitute technology which had a book value of
approximately $1.0 million at September 30, 1996, ("Miscellaneous Assets").
The Company has agreed to assume liabilities relating to the Transfer
Assets as well as certain contingent Seafield liabilities (the "Transfer
Liabilities"), including Seafield's liability for disputed income taxes which
the Internal Revenue Service claims to be owed by Seafield for its 1986, 1987,
1988, 1989 and 1990 tax years and which the State of California claims to be
owed for the 1987, 1988 and 1989 years (the "Tax Claims"). The Tax Claims amount
to approximately $14.6 million, plus interest. Although the Company believes
that a combination of defenses against the claims and contested offsetting tax
losses generated by a real estate project sold at a loss in 1990, could result
in a positive outcome, the Company can not provide any assurance that its
defense of such claims will be successful. See "BUSINESS - Legal Matters."
4
The Company is engaged in the sale of all of its assets in the ordinary
course other than Syntroleum. Following the liquidation of non Syntroleum
assets, the Company plans to continue to promote the management, growth and
development of Syntroleum or it may engage in a merger or some other transaction
that would effectively dispose of all of its assets.
The Company's historical operating results during the past four years
reflect the sale or other disposition of a number of real estate assets and
other significant Seafield investments, all of which have culminated in net
capital loss carryforwards at Seafield in the approximate amount of $ 13.0
million. It is the intent of Seafield to utilize such losses in connection with
the Distribution to offset as much as possible any gains that Seafield is
required to recognize for Federal income tax purposes as a result of making the
distribution. However, none of such losses may be applied against any ordinary
income that Seafield shareholders will realize as the result of their receipt of
shares of Company Common Stock in the Distribution.
As a result of the Distribution, Seafield will own no shares of Company
Common Stock and the Company will operate as an independent publicly traded
company. The Company's principal executive offices are located at 2600 Grand
Boulevard, Suite 500, P.O. Box 410949, Kansas City, Missouri 64141, and its
telephone number is (816) 842-7000.
<PAGE>
THE DISTRIBUTION
Distributing Company............ Seafield Capital Corporation, a Missouri
corporation ("Seafield"). Immediately after
the Distribution, Seafield will own no
shares of Common Stock of the Company and
the Company will operate as an independent,
publicly owned corporation.
Shares to be Distributed........ Approximately 1,620,862 shares of common
stock, par value $0.01 per share ("Company
Common Stock"), of SLH CORPORATION, a Kansas
corporation (the "Company"), based on
approximately 6,483,448 shares of common
stock, par value $1.00 per share, of
Seafield ("Seafield Common Stock") currently
outstanding.
Distribution Ratio.............. One share of Company Common Stock for each
four (4) shares of Seafield Common Stock. No
consideration will be paid by Seafield's
shareholders for the shares of Company
Common Stock to be received in the
Distribution. See "THE DISTRIBUTION --
Manner of Effecting the Distribution."
No Fractional Shares............ No fractional shares of Common Stock will be
distributed. All fractional share interests
will be aggregated and sold by the
Distribution Agent and the cash proceeds
distributed to those shareholders otherwise
entitled to a fractional interest. See "THE
DISTRIBUTION -- Manner of Effecting the
Distribution."
Appraisal of Company
Common Stock ................ In connection with the decision of the
Seafield Board to effect the Distribution,
George K. Baum & Company ("GKB") has
appraised the fair market value of the
Company Common Stock on a pro forma basis in
the hands of Seafield Shareholders as if the
distribution had occurred on September 30,
1996, at a price of $26.00 per share. The
appraisal of the Company Common Stock is not
based on any actual transactions in the
Company Common Stock, is based on a number
of estimates and judgments and is
5
<PAGE>
subject to a number of assumptions, all of
which are generally described under "THE
DISTRIBUTION - The Appraisal." In addition
the appraisal does not take into account
changes occurring subsequent to September
30, 1996, which may affect the actual value
of the Company Stock on the Distribution
Date. Accordingly, no assurance can be given
that the appraised value will reflect the
actual prices at which the Company Common
Stock will trade on the date of the
distribution or following the development of
a market for the Company Common Stock. See
"THE DISTRIBUTION -- Listing and Trading of
Company Common Stock;" "THE DISTRIBUTION
-- The Appraisal," and "-- Risk Factors."
Federal Income Tax Consequences
To Seafield Shareholders..... Seafield has received an opinion from its
counsel to the effect that the Distribution
will be a taxable event to Seafield's
shareholders for Federal income tax
purposes. The amount of the Distribution
received by each Seafield shareholder will
be treated as a dividend (i.e., as ordinary
income) to such shareholder to the extent of
such shareholder's pro rata share of
Seafield's current and accumulated earnings
and profits. The amount of the Distribution
received by each Seafield shareholder that
is not treated as a dividend will first be
treated as a nontaxable return of capital to
the extent of such shareholder's basis in
its Seafield Common Stock, and then
generally as capital gain. The amount of the
Distribution received by each Seafield
shareholder for Federal income tax purposes
will be the fair market value of the SLH
Common Stock received by such shareholder as
of the Distribution Date. Seafield will make
a determination of the fair market value of
the SLH Common Stock as of the Distribution
Date after such date based on a number of
factors that will include, without
limitation, the trading price of SLH Common
Stock at or near the Distribution Date and
information and advice to be received by
Seafield from GKB. Prior to January 31,
1998, Seafield will report the amount of the
Distribution received by each shareholder to
such shareholder and to the IRS on IRS Form
1099-DIV. There is no assurance that the
IRS or the courts will agree with the amount
determined by Seafield. Seafield
<PAGE>
shareholders are urged to consult their own
tax advisors as to the specific tax
consequences to them of the Distribution.
See "THE DISTRIBUTION -- Material Federal
Income Tax Consequences of the
Distribution."
Federal Income Tax Consequences
To Seafield.................. Seafield has received an opinion from its
counsel to the effect that the Distribution
may be a taxable event to Seafield for
Federal income tax purposes. Seafield will
recognize gain upon the Distribution equal
to the excess, if any, of the fair market
value of the SLH Common Stock on the
Distribution Date over Seafield's tax basis
in such stock. Seafield will not recognize
any loss upon the Distribution, even if its
tax basis in the SLH Common Stock that is
distributed to its shareholders exceeds the
fair market value of such stock on the
Distribution Date. See "THE
6
DISTRIBUTION -- Material Federal Income Tax
Consequences of the Distribution."
Purpose of the Distribution..... The Distribution is a part of a
restructuring strategy to improve
shareholder values by separating the
Company's assets from Seafield's other core
businesses with the view to providing
investors a sharper focus as to the
particular merits of each of those
investments and provide greater recognition
of the value of the Company's assets. It was
also concluded that the Distribution would
permit the Company to pursue strategies for
the management and development and
disposition of its relatively illiquid and
developmental assets without conflicting
with Seafield's strategies for its
laboratory testing and healthcare
businesses. See "THE DISTRIBUTION --
Background and Reasons for the
Distribution."
Relationship with Seafield after
the Distribution............. As a result of the Distribution, the Company
will cease to be a subsidiary of or
otherwise affiliated with Seafield and will
thereafter operate as an independent,
publicly held company. However, as indicated
under "Management" certain executive
officers and directors of Seafield will be
the executive officers and directors of the
<PAGE>
Company, and will continue in such dual
capacities for an indefinite period of time.
The Company and Seafield have also entered
into certain agreements providing for (a)
the sharing of certain facilities and
services, (b) the orderly separation of
Seafield and the Company and the making of
the Distribution, and (c) the allocation of
certain tax and other liabilities. See
"TRANSACTIONS BETWEEN THE COMPANY AND
SEAFIELD" and "MANAGEMENT."
Risk Factors.................... Stockholders should consider the factors
discussed under "THE DISTRIBUTION -- Risk
Factors."
No Market For Company Common
Stock........................ There is no current public market for the
common stock of the Company. Although it is
anticipated that the SLH Common Stock will
initially trade in the over-the-counter
market after the Distribution with
quotations being published in the OTC
Bulletin Board and the NQB Pink Sheets,
there is no assurance that an active market
will develop following the Distribution.
Although GKB has appraised the Company
Common Stock as of September 30, 1996 at
$26.00 per share on a pro forma basis, there
can be no assurance that the Common Stock
will trade at or near that price on and
after the Distribution Date. See "THE
DISTRIBUTION -- No Market For Company Common
Stock" and "-- Risk Factors."
Trading Market Seafield Common
Stock........................ Seafield Common Stock will continue to be
listed and traded on the NASDAQ National
Market System of the National Association of
Securities Dealers, Inc. ("NMS") after the
Distribution.
Record Date..................... February 13, 1997 (the "Record Date").
7
Distribution Date............... February 28, 1997 (the "Distribution Date").
On, or as soon as practicable after, the
Distribution Date, American Stock Transfer
& Trust Company, as distribution agent, will
commence mailing certificates representing
shares of Company Common Stock to holders of
record as of the Record Date of Seafield
Common Stock. Seafield shareholders will not
be required to make any payment or to take
any other action to receive their Company
Common Stock. See "THE DISTRIBUTION --
Manner of Effecting the Distribution."
<PAGE>
Distribution Agent.............. American Stock Transfer & Trust Company, 40
Wall Street, 46th Floor, New York, N.Y.
10005. Telephone (718) 921-8200.
Conditions to the Distribution.. The Distribution is conditioned upon, among
other things, completion of the transfer of
the Transfer Assets and assumption by the
Company of the Transfer Liabilities, and the
receipt of certain consents. Any of the
conditions to the Distribution may be
waived, at any time prior to the
Distribution Date, for any reason, in the
sole discretion of the Board of Directors of
Seafield (the "Seafield Board"). Even if all
conditions are satisfied, the Seafield
Board has reserved the right to abandon,
defer or modify the Distribution and the
related transactions described herein at any
time prior to the Distribution Date for any
reason. See "THE DISTRIBUTION -- Conditions
and Termination."
Principal Businesses to Be
Retained by Seafield......... Following the Distribution, Seafield will
continue to operate its current laboratory
testing business and healthcare business
consisting of LabOne, Inc. and its
subsidiaries ("LabOne") and Response
Oncology, Inc. ("Response"). See
"INTRODUCTION" and "ARRANGEMENTS BETWEEN
Seafield AND THE COMPANY RELATING TO THE
DISTRIBUTION -- Distribution Agreement."
Interests of Certain Persons
in the Distribution.......... P. Anthony Jacobs, CFA, James R. Seward,
CFA, and Steven K. Fitzwater, who are the
President and Chief Operating Officer,
Executive Vice President and Chief Financial
Officer, and Vice President and Chief
Accounting Officer of Seafield,
respectively, will also be the Chairman,
President and Chief Executive Officer,
and Vice President and Chief Financial and
Accounting Officer of the Company,
respectively. In their capacities as
officers of the Company they have entered
into certain employment agreements that will
provide them effective as of the
Distribution Date with certain options to
purchase shares of the Company's Common
Stock and certain other benefits described
under "EXECUTIVE COMPENSATION -- Employment
and Change in Control Arrangements."
<PAGE>
Management of the Company....... Effective as of the Distribution, the Board
of Directors of the Company (the "Company
Board") will consist of W. Thomas Grant II
who is currently Chairman and Chief
Executive Officer of Seafield, P. Anthony
Jacobs, CFA who is presently a director
and the Chief Operating Officer of Seafield
and who will serve as
8
the Chairman of the Board of the Company,
James R. Seward, CFA who is presently a
director and the Chief Financial Officer
of Seafield and who will serve as the
President and chief executive officer of
the Company, Steven K. Fitzwater who is
presently the Chief Accounting Officer of
Seafield and who will be the Chief Financial
Officer, Treasurer and Chief Accounting
Officer of the Company and other individuals
who are currently directors of Seafield.
See "MANAGEMENT OF THE COMPANY"
Preferred Share Purchase Rights
of the Company............... The Company has adopted a preferred share
purchase rights plan, effective as of the
Distribution Date. Certificates issued in
the Distribution representing shares of
Company Common Stock will also represent an
equivalent number of associated Rights. See
"CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN
PROVISIONS OF THE ARTICLES OF INCORPORATION,
THE BYLAWS, THE RIGHTS, AND KANSAS LAW."
Certain Antitakeover Effects of
Certain Provisions of the
Articles of Incorporation
and Bylaws................... Certain provisions of the Company's Articles
of Incorporation (the "Articles of
Incorporation") and Bylaws, as amended, as
each will be in effect as of the
Distribution, may have the effect of making
more difficult an acquisition of control of
the Company in a transaction not approved by
the Company Board. See "CERTAIN ANTITAKEOVER
EFFECTS OF CERTAIN PROVISIONS OF THE
ARTICLES OF INCORPORATION, THE BYLAWS, THE
RIGHTS, AND KANSAS LAW." The Articles of
Incorporation would, in some circumstances,
eliminate certain liabilities of the Company
directors in connection with the performance
of their duties. See "LIABILITY AND
INDEMNIFICATION OF DIRECTORS AND OFFICERS."
<PAGE>
Post-Distribution Dividend Policy.. Under the Distribution Agreement the Company
will be restricted from paying dividends
until the second anniversary of the
Distribution Date. However, Seafield expects
to continue its current dividend of $0.30
per quarter.
Transfer Agent and Registrar.... American Stock Transfer & Trust Company, 40
Wall Street, 46th Floor, New York, N.Y.
10005. Telephone (718) 921-8200.
9
<PAGE>
SLH OPERATIONS
SUMMARY FINANCIAL INFORMATION
The following table sets forth a summary of selected historical combined
financial data for the Company. The historical financial information presented
reflects periods during which the Company did not exist but rather reflects the
financial information of Seafield's businesses and assets that will be
transferred to the Company in connection with the Distribution as well as
related liabilities to be assumed by the Company. References to the "Company"
herein for time periods prior to the Distribution mean the Transfer Assets,
Transfer Liabilities and related businesses as managed and conducted by Seafield
prior to the Distribution ("SLH Operations") and, for time periods following the
Distribution, mean the Company as capitalized by Seafield with the Transfer
Assets and Transfer Liabilities pursuant to the Distribution Agreement (the
"Distribution Agreement") between Seafield and the Company. The historical
financial information presented may not necessarily be indicative of the results
of operations or financial condition that would have been obtained if the
Company had been a separate, independent company during the periods shown.
Neither should the information be deemed to be indicative of the Company's
future performances as an independent company. The financial information should
be read in conjunction with the Company's Combined Financial Statements and the
notes thereto found elsewhere in this Information Statement. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
Earnings per share data are presented elsewhere in this Information Statement
and on a pro forma basis only. See "PRO FORMA FINANCIAL DATA."
<TABLE>
(unaudited)
<CAPTION>
Nine months ended
September 30, Years ended December 31,
------------- ------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data
Real estate sales................ $12,801 7,815 10,910 10,932 17,147 33,067 17,689
Real estate rentals and other.... 801 723 1,001 1,059 1,173 1,701 1,404
-------- ----- ------ ------ ------ ------ ------
Total Revenues.............. 13,602 8,538 11,911 11,991 18,320 34,768 19,093
------ ----- ------ ------ ------ ------ ------
Net loss......................... (1,661) (2,912) (11,602) (6,598) (4,307) (6,046) (3,057)
Balance Sheet Data
Current assets................... $3,657 N/A 4,432 3,707 6,006 1,538 1,200
Real estate held for sale........ 26,985 N/A 35,073 40,998 39,047 50,703 75,832
Investment securities............ 4,879 N/A 5,136 6,161 6,624 6,990 6,279
Investment in oil and gas
partnerships and interests... 4,102 N/A 5,255 6,703 8,543 11,427 11,668
Total assets..................... 40,790 N/A 51,638 64,627 70,155 84,471 111,313
Current liabilities.............. 458 N/A 365 239 2,150 1,186 1,977
Stockholders' equity............. 39,063 N/A 49,869 61,330 66,621 81,454 105,032
</TABLE>
10
<PAGE>
SLH OPERATIONS
SUMMARY OF PRO FORMA FINANCIAL DATA
(Unaudited)
The following unaudited summary pro forma financial data make adjustments
to the historical balance sheet as if the Distribution had occurred on September
30, 1996. See "PRO FORMA FINANCIAL DATA" for a discussion of the principal
adjustments involved in the preparation of the pro forma financial information.
The pro forma financial statements of the Company may not reflect the future
results of operations or financial condition of the Company or what the results
of operations would have been if the Company had been a separate independent
company during such period.
See "PRO FORMA FINANCIAL DATA."
(unaudited)
Nine months ended
September 30, 1996
(in thousands)
Statement of Operations Data
Real estate sales.................................. 12,801
Real estate rental and other....................... 801
------
Total Revenues................................ 13,602
------
Net loss............................................ (1,305)
Balance Sheet Data
Current assets...................................... $ 14,457
Real estate held for sale........................... 26,985
Investment securities............................... 4,879
Investment in oil and gas partnerships and interests 4,102
Total assets........................................ 51,590
Current liabilities................................. 2,208
Stockholders' equity................................ 46,930
Stockholders' equity per share (1,620,862 shares
outstanding) ................................. 28.95
11
<PAGE>
INTRODUCTION
On December 24, 1996, Seafield announced that its Board of Directors (the
"Seafield Board") had approved a proposal for a strategic restructuring to
separate Seafield into two publicly-traded companies by means of a taxable
dividend distribution to Seafield's shareholders (the "Distribution"). The
Distribution will be effected by contributing Seafield's Real Estate and Energy
businesses and Miscellaneous Assets (the "Transfer Assets") together with
certain associated liabilities (the "Transfer Liabilities"), to SLH CORPORATION,
a newly formed Kansas corporation (the "Company") and a wholly owned subsidiary
of Seafield and by thereafter distributing the Company Common Stock and
associated Rights pro rata to Seafield shareholders. The date of the
Distribution is expected to be February 28, 1997 (the "Distribution Date").
References to the "Company" herein for time periods prior to the Distribution
mean the Transfer Assets, Transfer Liabilities and related businesses as managed
and conducted by Seafield prior to the Distribution ("SLH Operations") and, for
time periods following the Distribution, mean the Company as capitalized by
Seafield with the Transfer Assets and Transfer Liabilities pursuant to the
Distribution Agreement (the "Distribution Agreement") between Seafield and the
Company.
Seafield has received an opinion from its counsel to the effect that the
Distribution will be a taxable event for Federal income tax purposes (the "Tax
Opinion"). The amount of the Distribution for Federal income tax purposes will
be the fair market value of the SLH Common Stock distributed as of the
Distribution Date. The amount of the distribution will be treated as a dividend
of ordinary income to the extent of each Seafield shareholder's pro rata share
of Seafield's current and accumulated earnings and profits, then as a non
taxable return of capital to the extent of the Seafield shareholder's basis in
the Seafield Common Stock, with any remaining amount generally being taxed as a
capital gain. Special rules may apply to certain shareholders, including
corporate shareholders, shareholders who are dealers, shareholders subject to
back-up withholding and foreign shareholders. The fair market of the Company
Common Stock will be determined by Seafield after the Distribution as of the
Distribution Date based on a number of factors that will include, without
limitation, the trading price of Company Common Stock at or near the
Distribution Date and information and advice received by Seafield from GKB. GKB
has been engaged by the Seafield Board to advise it in connection with the
Distribution and to appraise the value of the Company Common Stock. After this
determination is made Seafield will report the amount of the Distribution
received by each shareholder to such shareholder and to the IRS on IRS Form
1099-DIV. Seafield shareholders are urged to consult their own tax advisors as
to the specific tax consequences to them of the Distribution. See "THE
DISTRIBUTION -- Material Federal Income Tax Consequences of the Distribution."
The Distribution is conditioned upon, among other things, completion of the
transfer of the Transfer Assets and assumption by the Company of the Transfer
Liabilities, and the receipt of certain consents. Any of the conditions to the
Distribution may be waived, at any time prior to the Distribution Date, for any
reason, in the sole discretion of the Seafield Board. See "THE DISTRIBUTION --
Conditions and Termination."
The Distribution will be effected by distributing to holders of the common
stock, par value $1 per share, of Seafield ("Seafield Common Stock"), all of the
outstanding common stock, par value $0.01 per share, of the Company ("Company
<PAGE>
Common Stock"), including the associated preferred share purchase rights (the
"Rights") at the rate of one share of Company Common Stock for each four shares
of Seafield Common Stock. Prior to the Distribution Date, the Company will
deliver certificates for the shares of Company Common Stock to American Stock
Transfer & Trust Company as the distribution agent (the "Distribution Agent")
for transfer and distribution to the holders of Seafield Common Stock as of the
Record Date (as defined herein) for the Distribution. The Distribution will
occur on February 28, 1997, unless sooner terminated by the Seafield Board.
The Company's principal executive offices are located at 2600 Grand
Boulevard, Suite 500, P.O. Box 410949, Kansas City, Missouri 64141, and its
telephone number is (816) 842-7000. Shareholders of Seafield with inquiries
relating to the Distribution should contact Ms. Kimberly Schaefer at that
address and phone number.
NO ACTION IS REQUIRED BY SEAFIELD SHAREHOLDERS IN ORDER TO RECEIVE THE
COMPANY COMMON STOCK TO WHICH THEY WILL BE ENTITLED IN THE DISTRIBUTION UPON
PAYMENT OF THE DIVIDEND.
12
THE DISTRIBUTION
Background and Reasons for the Distribution
In late 1990 Seafield began a transformation process from an insurance
company to a holding company with a new focus. Seafield's principal assets after
the sale of its insurance subsidiary consisted of a majority ownership of a
laboratory testing business (LabOne), a significant interest in a cancer
management business ("Response"), the Real Estate business, Energy assets,
including Syntroleum, several venture capital investments and a significant
amount of cash. The strategy of Seafield was deployment of resources into
developing businesses that provide services to the healthcare and insurance
industries. The sources of cash for these investments were the proceeds from the
sale of the insurance company, gains on securities transactions, real estate
sales from real estate operations and the sale of other assets that did not
support the strategic focus on the healthcare and insurance industries. By 1995
Seafield had made considerable progress consistent with that focus by increasing
its ownership in LabOne to over 80% and its interest in Response to
approximately 60% and had sold and disposed of several majority owned
investments. In 1996, the Seafield Board decided to further pursue that focus by
spinning off Seafield's remaining Real Estate and Energy Businesses and
Miscellaneous Assets to shareholders in the Distribution.
The Seafield Board concluded that the Distribution was in the best
interests of Seafield Shareholders since it would separate the Company's assets
from Seafield's other core businesses and thereby provide investors a sharper
focus as to the particular merits of each of those investments and provide
greater recognition of the value of the Company's assets. It was also concluded
that the Distribution would permit the Company to pursue strategies for the
management and development of its relatively illiquid and developmental assets
without conflicting with Seafield's strategies for its laboratory testing and
healthcare businesses.
<PAGE>
It is believed that the distribution will enable Seafield shareholders to
have the market value of their interests in Seafield more closely reflect the
true value of the underlying assets. The Seafield Board believes that the market
has not fully recognized the value of the Seafield Common Stock due to the fact
that the Company's Real Estate and Energy Businesses and Miscellaneous Assets
have been combined with Seafield's core healthcare and laboratory testing
businesses. Analysis conducted by Seafield management indicate that investors
have ignored or attributed little value to the Real Estate and Energy Businesses
and Miscellaneous Assets in pricing Seafield Common Stock. By separating the
Company's assets from Seafield's publicly traded core businesses into Seafield
Common Stock and Company Common Stock, it is believed that investors may be
better able to ascertain the value of each of those assets. After the
Distribution, Seafield will consist of two publicly traded core businesses that
already have common stock values that are readily ascertainable. This should
enable investors to gain a more accurate perception of the value of the Seafield
Common Stock. For a similar reason, the transfer of the Real Estate and Energy
Businesses and Miscellaneous Assets into a publicly traded entity that contains
no other assets should facilitate the public recognition of the value of those
assets. However, there is no assurance that the combined prices of the Company
Common Stock and the Seafield Common Stock following the Distribution will be
equal to or greater than the trading price of Seafield Common Stock prior to the
Distribution.
The Distribution would also permit the Company to pursue strategies for the
management and development of a variety of illiquid and developmental assets
that would not conflict with Seafield's strategies for the insurance and
healthcare businesses. Seafield's business plan for its Real Estate and Energy
businesses and Miscellaneous assets has been to realize the value of the real
estate assets in an orderly manner and to grow the other businesses and assets
to maturity and to then dispose of them in an orderly manner over an indefinite
period of time. Although it is contemplated that many of the Real Estate and
Miscellaneous assets may be successfully disposed of over the next two to three
years, a longer period will likely be required for Syntroleum. Syntroleum is
beginning to emerge from 12 years of developing its Syntroleum(R) Process.
However, a commercially viable processing plant using the Syntroleum(R) Process
has not been constructed or placed in operation and a considerable amount of
time and additional capital funding may be necessary to move Syntroleum from a
start-up venture to a second stage operating enterprise. At the same time, the
Seafield Board has considered other strategic alternatives for its remaining
core businesses, including the possibility of a merger into LabOne or the sale
of Seafield as a whole. Although no such transactions have been agreed upon or
are under negotiation, it is believed that the transfer of the assets to the
Company could better position Seafield for any such alternative while at the
same time permitting a continuation of the Company's concentration on its
businesses and assets.
13
<PAGE>
The Seafield Board recognized in its planning that the Distribution would
result in a transaction taxable both to Seafield and Seafield shareholders.
However, due to the nature of the Company's businesses and the amount and
duration of Seafield's holdings thereof, Seafield and the Company are not
positioned to effect the Distribution on a tax free basis. The Board has
considered that Seafield's net capital losses and its tax basis in Company
Common Stock (and prior to their transfer to the Company, in the Transfer
Assets) will significantly reduce the amount of taxable gains to Seafield that
would otherwise be recognized. Accordingly, it concluded that the benefits of
the restructuring would more than offset any negative tax consequences of the
restructuring. See "THE DISTRIBUTION - Material Federal Income Tax Consequences
of the Distribution."
For the reasons stated above, the Seafield Board believes that the
Distribution is in the best interests of Seafield and its shareholders.
The Appraisal
In connection with its deliberations relating to the Distribution the
Seafield Board engaged GKB to appraise the fair market value of the Company
Common Stock to be distributed in the Distribution as if the Distribution Date
had occurred at the close of business on September 30, 1996 (the "Appraisal").
The GKB opinion is appended to this Information Statement as Annex A. The
Appraisal concludes that if the Distribution had occurred as of the close of
business on September 30, 1996, each share of the 1,620,862 shares to be
distributed in the Distribution would have had a fair market value of $26.00 per
share. As described in the Appraisal, GKB's opinion is based upon the financial
statements of the Company included in this Information Statement, GKB's
inspection of the Transfer Assets and Transfer Liabilities, interviews of
management of the Company and of Syntroleum, and an examination of documents,
books and records relating to the Transfer Assets and Liabilities.
The Appraisal does not take into account changes occurring since September
30, 1996. The Appraisal is also based on a number of judgements and assumptions
and therefore no assurance can be given that the Appraisal reflects the amounts
the Company may realize upon a disposition of the assets or the prices at which
the Company Common Stock will be traded on or following the Distribution Date.
Risk Factors
Readers should be aware of the following risk factors to which the Company
has been subject in the past, is currently and may in the future be subject, and
which could materially adversely affect the performance of the Company. The
Company also cautions readers that, in addition to the historical information
included herein, this Information Statement includes certain forward-looking
statements and information that are based on management's beliefs as well as on
assumptions made by and information currently available to management. When used
in this Information Statement, the words "anticipate," "intend," "plan,"
"believe," "estimate" and similar expressions are intended to identify
forward-looking statements. Such statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions, including,
but not limited to, the following factors which could cause the Company's future
results and stockholder values to differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company.
No Prior Market for Company Common Stock and Volatility of Company's Stock
Price. There is no current public market for the common stock of the Company.
<PAGE>
Although it is anticipated that the SLH Common Stock will initially trade in the
over-the-counter market after the Distribution with quotations being published
in the OTC Bulletin Board and the NQB Pink Sheets, following the Distribution
the Company Common Stock will not be listed on a stock exchange and transactions
and quotations in the Company Common Stock will not be reported by the National
Association of Securities Dealers, Inc. through NASDAQ. Accordingly, there can
be no assurance that an active trading market for the Common Stock will develop
or be sustained following the Distribution nor can their be any assurance as to
the prices at which the Company Common Stock will trade following the
Distribution. Until the Company Common Stock is fully distributed and an orderly
market develops, the prices at which the Company Common Stock trades may
fluctuate significantly.
14
Although GKB has provided the Seafield Board with its opinion as to the market
value of Company Common Stock as of September 30, 1996, on a pro forma basis,
there can be no assurance that the appraised value will have any relationship to
the prices at which Company Common Stock will trade following the Distribution.
Prices for the Company Common Stock will be determined in the trading markets,
to the extent that one exists, and may be influenced by many factors, including
the depth and liquidity of the market for Company Common Stock, investor
perceptions of the Company and its plan to liquidate the bulk of its non
Syntroleum assets and thereafter possibly engage in a merger or some other
transaction that would effectively dispose of all of its assets. In addition,
there is no assurance that the combined prices of the Company Common Stock and
the Seafield Common Stock following the Distribution will be equal to or greater
than the trading price of Seafield Common Stock prior to the Distribution.
Because Seafield shareholders generally will be obligated to pay Federal
income taxes on the distribution it is possible that there may be a larger
number of sellers of Company Common Stock than buyers following the Distribution
due to the needs of shareholders to generate the cash necessary to make tax
payments. This circumstance could also tend to depress the market price of the
Company Common Stock.
A substantial amount of the total value of the Company's assets will also
consist of shares of the Common Stock of Syntroleum. Although these securities
are not publicly traded, members of the oil and gas industry have shown interest
in the development of plants and technology for the conversion of natural gas
into liquid fuels and specialty products. Such interest could contribute
significantly to the volatility of prices for Company Common Stock following the
Distribution.
No Assurance that GKB Appraised Value of Company Common Stock at September
30, 1996, will reflect Market Prices Following the Distribution. The GKB
Appraisal of the Company Common Stock that was provided to the Seafield Board
in connection with its consideration of the Distribution only reflects GKB's
estimate of the fair market value of the Company Common Stock as of September
30, 1996. Except as specified in the Appraisal, the Appraisal does not take into
account changes occurring since September 30, 1996. The Appraisal is also
based on a number of judgments and assumptions and therefore no assurance can
be given that the Appraisal reflects the amounts the Company may realize upon a
disposition of the assets or the prices at which the Company Common Stock will
be traded on or following the Distribution Date.
<PAGE>
No Representations or Warranties as to the Transfer Assets or Liabilities.
The Distribution Agreement and Assignment generally provides that Seafield is
transferring the Transfer Assets and Transfer Liabilities to the Company without
representation or warranty "as is, where is."
Potential Losses on Real Estate Assets. Seafield has incurred substantial
losses in connection with its real estate development activities. Although, the
Company does not plan to engage in any further real estate development
activities other than those necessary to maximize the value of the existing real
estate assets, there can be no assurance that the Company will be able to
realize the book values of the real estate assets as reflected in the Financial
Statements.
Minority Ownership of Syntroleum. Although the Company owns approximately
32.5% of Syntroleum, is the largest stockholder of Syntroleum, has substantial
representation on the Syntroleum board of directors and key committees of that
board of directors and participate actively in the financing, management and
development of that business, Syntroleum is not majority owned by the Company
and therefore the Company does not have the absolute right to manage, control or
veto the taking of certain actions including, without limitation a merger, sale
of all or substantial all of the assets of such entity, the declaration of
dividends or the issuance of additional capital stock.. In addition a
stockholder's agreement among the Syntroleum Stockholder's restricts the
transfer of the Company's holdings of Syntroleum Common Stock.
Regulation - Possible Application of the Investment Company Act of 1940
Although the Company believes that immediately following the Distribution
it will not be an investment company under the Investment Company Act of 1940
(the "1940 Act"), certain circumstances could occur that would subject the
Company to investment company regulation. For example, if more than 40% of the
Company's assets consist of investment securities and the Company's percentage
ownership interest in Syntroleum should drop below 25% or if the amount of the
Company's Miscellaneous assets and other securities held by the Company should
become greater than 45%
15
of the Company's total assets or if the income derived from such securities
exceeds 45% of the Company's net income after taxes, and if such ratio is not
corrected within a year, then the Company could become subject to regulation by
the SEC under the 1940 Act. Such regulation could significantly and adversely
affect the Company's activities. In order to minimize the likelihood of such
event, the Company intends to take such action as may be appropriate to maintain
its primary control over Syntroleum and to reinvest the proceeds of sales of its
Real Estate and Miscellaneous assets to the extent necessary in Government
securities and other operating assets pending any merger or other disposition of
the Company's assets and businesses.
Possible Conflicts with Seafield after the Distribution. Following the
Distribution certain executive officers and directors of Seafield will be the
executive officers and directors of the Company, and will continue in such dual
capacities for an indefinite period of time. The Company and Seafield have also
entered into certain agreements providing for (a) the sharing of certain
facilities and services for an indefinite period, (b) the orderly separation of
Seafield and the Company and the making of the Distribution, and (c) the
allocation of certain tax and other liabilities. Because the management of both
<PAGE>
Seafield and the Company will be essentially identical following the
Distribution for some period of time conflicts may arise with respect to the
operation and effect of these agreements and relationships which could have an
adverse affect on the Company and its stockholders if not properly resolved. See
"TRANSACTIONS BETWEEN THE COMPANY AND SEAFIELD" and "MANAGEMENT; and "BUSINESS
AND PROPERTIES -- Legal Matters."
Impact of Possible Contingent Liabilities and Tax Claims. Under the
Distribution and Assignment Agreements the Company will assume all of Seafield's
liability for the Tax Claims discussed elsewhere (which have a possible exposure
of up to $14.6 million plus interest) and any other claims made against Seafield
or liabilities of Seafield arising out of Seafield's operation and ownership of
the Transfer Assets. Although the Company and Seafield believe that the
financial statements of the Company reflect proper accruals for such contingent
liabilities and Tax Claims, no assurance can be given that the accruals will be
adequate or that claims for which no accruals have been established will be
asserted that could have a material adverse affect on the financial condition
and results of operation of the Company following the Distribution. See
"BUSINESS AND PROPERTIES -- Legal Matters."
Company Policy to Not Pay Dividends. It is anticipated that the Company
will not pay regular annual or quarterly cash dividends following the
Distribution. The Company plans to reinvest amounts derived from the sale of
Real Estate and Miscellaneous assets and oil and gas properties in Government
securities, and in corporate debt and equity securities and money market
instruments to the extent that such investments will not subject the Company to
regulation as an Investment Company under the 1940 Act. The Company may also
make additional investments in Syntroleum or in existing real estate assets. As
further assurance for the Company's obligations in connection with the
Distribution, the Company has agreed that it will not pay any dividends in cash
or property or redeem any of its capital stock for a period of two years
following the Distribution Date, without the consent of the Seafield Board.
Unavailability of Seafield's Financial and Other Resources. Prior to the
distribution Seafield provided substantial financial support to Syntroleum.
However, following the Distribution the Company will no longer be a wholly owned
subsidiary of Seafield and will no longer be able to rely on Seafield for
financial support. Nor will the Company be able to benefit from its relationship
with Seafield to obtain credit for the purpose of supporting its operations.
Although the Company expects to generate excess cash flows from the liquidation
of its real estate and Miscellaneous assets, its assumption of the Tax Claims
and its assumption of other contingent liabilities may preclude the use of any
such resources to promote its Energy business.
Dependence upon Key Personnel. The Company is dependent upon the ability
and experience of its executive officers. The Company currently has employment
contracts with three of the Company's executive officers. The loss of the
services of any or all of its executive officers or the Company's inability in
the future to attract and retain management and other key personnel could have a
material adverse effect on the Company.
Certain Antitakeover Effects of Certain Provisions of the Articles of
Incorporation and Bylaws. Certain provisions of the Company's Articles of
Incorporation and Bylaws as will be in effect as of the Distribution, may have
the effect of making more difficult an acquisition of control of the Company in
a transaction not approved by the Company
16
<PAGE>
Board. See "CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE ARTICLES
OF INCORPORATION, THE BYLAWS, THE RIGHTS, AND KANSAS LAW." The Articles of
Incorporation would, in some circumstances, eliminate certain liabilities of the
Company directors in connection with the performance of their duties. See
"LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS."
Risks Associated with Syntroleum. Syntroleum is a small developmental
venture having September 30, 1996, unaudited accumulated deficit of $3.3 million
and net shareholders' equity of $1.4 million. Unaudited losses from operations
for the nine months ended September 30, 1996, were $766,000. The Syntroleum(R)
Process developed by Syntroleum is in direct competition with processes
developed by a number of major oil companies which have substantially greater
financial and technical resources relative to those available to Syntroleum.
Furthermore, the Syntroleum(R) Process has not been tested in a plant designed
to produce commercially viable quantities and such testing can not occur until a
plant has been developed and constructed, which could take up to two years from
the commencement of construction. Although, Syntroleum has entered into joint
development and license agreements with Texaco, these agreements do not assure
that the development process will be completed or that Texaco will use its
license rights to build a plant using the Syntroleum(R) Process. Until a plant
using the Syntroleum(R) Process is constructed and placed in profitable
operation, Syntroleum will not have assurance of the commercial feasibility of
its process or whether it will be able to successfully compete with processes
developed by companies having much greater financial resources. Accordingly,
there can be no assurance that the Company or its stockholders will realize the
amount of the appraised value of the Company's interest in Syntroleum.
Manner of Effecting the Distribution
It is expected that the Distribution will be consummated on February 28,
1997, the Distribution Date. At the time of the Distribution, share certificates
for Company Common Stock will be delivered to American Stock Transfer & Trust
Company, as Distribution Agent, for mailing. On or as soon as practicable after
the Distribution Date, the Distribution Agent will commence mailing the share
certificates to holders of Seafield Common Stock as of the close of business on
February 13, 1997 (the "Record Date") on the basis of one share of Company
Common Stock and associated Right for each four (4) shares of Seafield Common
Stock held on the Record Date. All such shares of Company Common Stock will be
validly issued, fully paid, nonassessable and free of preemptive rights. See
"DESCRIPTION OF COMPANY CAPITAL STOCK."
No certificates or scrip representing fractional shares of Company Common
Stock will be issued to Seafield shareholders as part of the Distribution. The
Distribution Agent will aggregate fractional shares into whole shares and sell
them in the open market at then prevailing prices on behalf of holders who
otherwise would be entitled to receive fractional share interests, and such
persons will receive instead a cash payment in the amount of their pro rata
share of the total sale proceeds. Proceeds from sales of fractional shares will
be paid by the Distribution Agent based upon the average gross selling price per
share of Common Stock of all such sales. Seafield will bear the cost of
commissions incurred in connection with such sales. Such sales are expected to
be made as soon as practicable after the Record Date. None of Seafield, the
Company or the Distribution Agent will guarantee any minimum sale price for the
shares of Company Common Stock, and no interest will be paid on the proceeds.
<PAGE>
NO HOLDER OF SEAFIELD COMMON STOCK WILL BE REQUIRED TO PAY ANY CASH OR
OTHER CONSIDERATION FOR THE SHARES OF COMPANY COMMON STOCK TO BE RECEIVED IN THE
DISTRIBUTION OR TO SURRENDER OR EXCHANGE SHARES OF SEAFIELD COMMON STOCK OR TO
TAKE ANY OTHER ACTION IN ORDER TO RECEIVE COMPANY COMMON STOCK. THE DISTRIBUTION
WILL NOT AFFECT THE NUMBER OF, OR THE RIGHTS ATTACHING TO, OUTSTANDING SHARES OF
SEAFIELD COMMON STOCK.
17
Material Federal Income Tax Consequences of the Distribution
Introduction. The discussion set forth below is a summary of the material
tax consequences respecting the Distribution. The discussion does not purport to
be a complete analysis of all of the potential tax effects of the Distribution
or of ownership of Company Common Stock (including the Rights) following the
Distribution. The discussion is limited to United States Federal income tax
matters. The discussion is based upon the Internal Revenue Code of 1986,
Treasury regulations, Internal Revenue Service ("IRS") rulings, and judicial
decisions now in effect, all of which are subject to change at any time,
possibly with retroactive effect, by legislative, judicial, or administrative
action.
The discussion does not address the tax consequences of receipt of the
Distribution to taxpayers which are subject to special rules that do not apply
to taxpayers generally, such as life insurance companies, tax-exempt
organizations, regulated investment companies, S corporations, financial
institutions, broker-dealers in securities, foreign entities, and nonresident
alien individuals.
The discussion insofar as it relates to legal matters is a summary of the
Tax Opinion provided by Lathrop & Gage L.C., to the Seafield Board, a copy of
which is appended as an exhibit to the Registration Statement. The Tax Opinion
is based on certain factual representations and assumptions concerning Seafield
and the Company. Seafield is not aware of any present facts or circumstances
which would cause such representations and assumptions to be untrue. Seafield
has not sought, and it does not intend to seek, a ruling from the IRS as to any
of the matters covered by the discussion.
THE TAX CONSEQUENCES OF RECEIVING THE DISTRIBUTION AND OWNING COMPANY
COMMON STOCK (INCLUDING RIGHTS) MAY VARY DEPENDING ON A HOLDER'S PARTICULAR
SITUATION. SEAFIELD SHAREHOLDERS ARE URGED TO CONSULT WITH THEIR OWN TAX
ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM OF RECEIPT OF THE DISTRIBUTION
AND OWNERSHIP OF COMPANY COMMON STOCK (INCLUDING RIGHTS), INCLUDING BUT NOT
LIMITED TO THE APPLICATION TO THEM OF FEDERAL ESTATE AND GIFT, STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS.
Receipt of the Distribution by Seafield Shareholders. The Distribution will
be a taxable event to Seafield's shareholders for Federal income tax purposes.
The amount of the Distribution received by each Seafield shareholder for Federal
income tax purposes will be the fair market value of the SLH Common Stock
(including the rights) received by such shareholder as of the Distribution Date
(including the fair market value of fractional shares). The amount of the
Distribution received by each Seafield shareholder will be treated as a dividend
(i.e., as ordinary income) to such shareholder to the extent of such
shareholder's pro rata share of Seafield's current and accumulated earnings and
profits as computed for Federal income tax purposes. The amount of the
Distribution received by each Seafield shareholder that is not treated as a
<PAGE>
dividend will first be treated as a nontaxable return of capital to the extent
of such shareholder's basis in its Seafield Common Stock, and then as an amount
received by such shareholder from the sale or exchange of property. The amount
that is treated as received by a Seafield shareholder from the sale or exchange
of property will generally be a capital gain, and the capital gain will be
long-term capital gain if the shareholder has held its Seafield stock for more
than one year. For purposes of determining the amount of the Distribution
received by a Seafield shareholder that constitutes a dividend, the
shareholder's pro rata share of Seafield's current and accumulated earnings and
profits will be based on the shareholder's percentage ownership of Seafield
Common Stock.
Based on Seafield's current level of accumulated earnings and profits it is
believed that all or a substantial amount of the Distribution will result in the
recognition by Seafield's shareholders of ordinary income.
Each Seafield shareholder for Federal income tax purposes will acquire an
initial tax basis in such shareholder's Company Common Stock equal to the fair
market value of the property, i.e., the value of the Company Common Stock
(including the Rights), that is received by such shareholder as of the
Distribution Date. Each Seafield shareholder's holding period for Company Common
Stock received in the Distribution will begin on the Distribution Date. Also,
certain special rules, that permit a deduction for certain dividends received by
a corporation, will generally apply in the case of corporations that receive the
Distribution, as described below under the caption "Special Rules Applicable to
Corporate Shareholders -- Deduction for Dividends Received."
18
As mentioned above, the amount of the Distribution received by each
Seafield shareholder for Federal income tax purposes will be the fair market
value of the property, i.e., the value of the Company Common Stock (including
the Rights), that is received by such shareholder as of the Distribution Date
(including the fair market value of fractional shares). Seafield will make a
determination of the fair market value of the SLH Common Stock as of the
Distribution Date after such date based on a number of factors that will
include, without limitation, the trading price of SLH Common Stock at or near
the Distribution Date and information and advice to be received by Seafield from
GKB. Prior to January 31, 1998 Seafield will report the amount of the
Distribution received by each shareholder to such shareholder and to the IRS on
IRS Form 1099- DIV.
There is no assurance that the IRS or the courts will agree that the amount
of the Distribution received by a Seafield shareholder is the amount determined
by Seafield, and it is possible that the IRS and the courts will ultimately
determine that Seafield's shareholders, or some of them, received a larger
Distribution for Federal income tax purposes than the amounts reported to them
by Seafield. If the IRS were to challenge the amount of the Distribution
reportable by any Seafield shareholder on such shareholder's Federal income tax
return, then such shareholder would have to bear the expense and effort of
defending against or otherwise resolving such challenge.
Special Rules Applicable to Corporate Shareholders -- Deduction for
Dividends Received. A corporate holder of Seafield Common Stock will generally
be entitled, in computing its taxable income for the tax year in which the
Distribution occurs, to a deduction in an amount equal to 70 percent of the
amount of the Distribution received by it that constitutes a dividend. This
<PAGE>
deduction does not apply to any portion of the Distribution that constitutes a
return of capital or taxable gain, and it is subject to several limitations as
described in the following paragraphs.
The dividends received deduction will be available only for dividends
received on shares of Seafield Common Stock that the corporate holder has held
for at least 46 days, or at least 91 days if the Distribution is deemed to be
attributable to a period or periods aggregating more than 366 days. A holder's
holding period for these purposes generally will be reduced by periods during
which: (i) the holder has an option to sell, is under a contractual obligation
to sell, or has made (but not closed) a short sale of substantially identical
stock or securities; (ii) the holder is the grantor of an option to purchase
substantially identical stock or securities; or (iii) the holder's risk of loss
with respect to the shares is considered diminished by reason of the holding of
one or more positions in substantially similar or related property.
In addition to the foregoing, no dividends received deduction will be
allowed to a corporate holder of Seafield Common Stock for a dividend received
by such holder with respect to such stock to the extent that the holder is
obligated (whether pursuant to a short sale or otherwise) to make related
payments with respect to positions in substantially similar or related property.
The dividends received deduction allowed to a corporate holder of Seafield
Common Stock with respect to all dividends received by such holder during the
tax year in which the Distribution occurs, and not simply the amount of the
Distribution that is a dividend or other dividends received by such holder from
Seafield, will be limited to a specified proportion of the holder's adjusted
taxable income for such year. Also, the dividends received deduction allowed to
a corporate holder may be reduced or eliminated in accordance with the rules set
forth in Section 246A of the Code if the holder has indebtedness that is
directly attributable to its investment in portfolio stock, such as the Seafield
Common Stock.
Special rules may apply to a corporate holder of Seafield Common Stock if
the amount of the Distribution received by such holder is considered to be an
"extraordinary dividend" within the meaning of Section 1059 of the Code. If the
amount of the Distribution received by a corporate holder constitutes an
extraordinary dividend with respect to such holder's Seafield Common Stock, and
if the holder has not held such stock for more than two years before Seafield
declared, announced, or agreed to the amount or payment of such dividend,
whichever is earliest, then the holder's basis in the stock will be reduced (but
not below zero) by any non-taxed portion of the dividend, which generally is the
amount of the dividends received deduction. For purposes of determining if
Seafield Common Stock has been held for more than two years, rules similar to
those that are applicable to determining how long such stock has been held for
purposes of the dividends received deduction will apply. Upon the sale or
disposition of Seafield Common Stock, any part of the non-taxed portion of an
extraordinary dividend that has not been applied to reduce basis because of the
limitation on reducing basis below zero will be treated as gain from the sale or
exchange of such stock.
19
The amount of the Distribution received by a corporate holder of Seafield
Common Stock generally will constitute an "extraordinary dividend" if the amount
received by such holder: (i) equals or exceeds five percent of the holder's
adjusted basis in the stock, treating all dividends having ex-dividend dates
within an 85-day period as one dividend; or (ii) exceeds 20 percent of the
<PAGE>
holder's adjusted basis in the stock (determined without regard to any reduction
for the non-taxed portion of other extraordinary dividends), treating all
dividends having ex-dividend dates within a 365-day period as one dividend. A
holder may elect to use the fair market value of the stock, rather than its
adjusted basis, for purposes of applying the five percent and 20 percent
limitations, if the holder is able to establish such fair market value to the
satisfaction of the IRS.
In addition to the foregoing rules which limit the dividends received
deduction, a corporate holder of Seafield Common Stock in general may, for
purposes of computing its alternative minimum tax liability, be required to
include in its alternative minimum taxable income the amount of any dividends
received deduction allowed in computing regular taxable income.
Payment of the Distribution by Seafield. Distributions of property made by
Seafield to its shareholders with respect to their stock, such as the
Distribution, must in certain circumstances be treated as if Seafield sold the
property in a taxable sale at its fair market value. This rule will apply to the
Distribution if Seafield's tax basis in the distributed property is less than
the fair market value of the property at the Distribution Date. Seafield
estimates that if the fair market value of the Company Common Stock (including
the Rights) distributed in the Distribution exceeds Seafield's tax basis in such
property at the Distribution Date, the Distribution will be treated as a taxable
sale to Seafield and Seafield will recognize gain on the Distribution in an
amount equal to the excess of the fair market value of the distributed property
on the Distribution Date over Seafield's tax basis on such property. If,
however, Seafield's tax basis in the Company Common Stock (including the Rights)
exceeds the fair market value of such property on the Distribution Date, then no
gain or loss will be recognized by Seafield on the Distribution. As described
above, the amount of the Distribution (i.e., the fair market value of the
property that is distributed) will be determined by Seafield after the
Distribution based on a number of factors that will include, without limitation,
the trading price of Company Common Stock at or near the Distribution Date and
information and advice to be received by Seafield from GKB.
Tax Consequences of Distribution to the Company. The Distribution by
Seafield to its shareholders, although consisting of Company Common Stock and
the Rights, will have no tax consequences to the Company. Immediately preceding
the Distribution, however, Seafield will transfer the Transfer Assets and
Transfer Liabilities to the Company and, in exchange, the Company will issue to
Seafield the Company Common Stock (including the Rights) to Seafield that will
be distributed by Seafield in the Distribution. In that transaction the Company
will acquire a tax basis in the Transfer Assets that, in general, is equal to
Seafield's tax basis in such assets increased by any gain recognized by Seafield
on such transaction. It is anticipated that Seafield will not recognize any gain
on the transfer of the Transfer Assets and Transfer Liabilities to the Company,
and therefore it is anticipated that the Company's tax basis in the Transfer
Assets will be the same as Seafield's tax basis in such assets.
Tax Reporting. As indicated above, the amount of the Distribution received
by each Seafield shareholder will be determined by Seafield after the
Distribution is made based on a number of factors that will include, without
limitation, the trading price of Company Common Stock at or near the
Distribution Date and information and advice received by Seafield from GKB.
After this determination is made (and not later than January 31, 1998) Seafield
will report the amount of the dividend received by each shareholder to such
shareholder and to the IRS on IRS Form 1099-DIV.
<PAGE>
Backup Withholding. Under Section 3406 of the Code and applicable
regulations thereunder, a holder of Seafield Common Stock may be subject to
backup withholding at the rate of 31 percent with respect to the amount of the
Distribution paid to such holder on such stock. If: (i) the shareholder
("payee") fails to furnish or certify a taxpayer identification number to the
payor; (ii) the IRS notifies the payor that the taxpayer identification number
furnished by the payee is incorrect; (iii) there has been a "notified payee
underreporting" described in Section 3406(c) of the Code; or (iv) there has been
a "payee certification failure" described in Section 3406(d) of the Code, then
Seafield generally will be required to withhold an amount equal to 31 percent of
the amount of the Distribution paid to such shareholder with respect to such
Shareholder's Seafield Common Stock. Any amounts withheld under the backup
withholding rules from a payment to a shareholder will be allowed as a credit
against the shareholder's Federal income tax liability or as a refund.
20
No Market for Company Common Stock
There is no current public market for the common stock of the Company.
Although it is anticipated that the SLH Common Stock will initially trade in the
over-the-counter market after the Distribution with quotations being published
in the OTC Bulletin Board and the NQB Pink Sheets, following the Distribution
the Company Common Stock will not be listed on a stock exchange and transactions
and quotations in the Company Common Stock will not be reported by the National
Association of Securities Dealers, Inc. through NASDAQ. Accordingly, there can
be no assurance that an active trading market for the Common Stock will develop
or be sustained following the Distribution nor can their be any assurance as to
the prices at which the Company Common Stock will trade following the
Distribution. Prices at which Company Common Stock may trade prior to the
Distribution on a "when-issued" basis (see the following paragraph) or after the
Distribution cannot be predicted. Until the Company Common Stock is fully
distributed and an orderly market develops, the prices at which trading in such
stock occurs may fluctuate significantly. The prices at which the Company Common
Stock will trade will be determined by the marketplace, and may be influenced by
many factors, including, among others, the proportional value of the Company's
asset base, cash flows, profits or other measure of value in relation to the
prices of the Seafield Common Stock prior to the Distribution, the depth and
liquidity of the market for such shares, investors' perceptions of the Company
and the economic sectors in which it participates, the Company's policy to not
pay dividends, and general economic and market conditions. Such prices may also
be affected by certain provisions of the Company's Articles of Incorporation
(the "Articles of Incorporation") and Bylaws, as amended (the "Bylaws"), as each
will be in effect following the Distribution, that are substantially similar to
existing provisions of Seafield's Articles of Incorporation and Bylaws, as well
as the Rights, which may make the acquisition of control of the Company without
the approval of the Board of Directors of the Company (the "Company Board") more
difficult than would be the case in the absence of such provisions. See "CERTAIN
ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION, THE
BYLAWS, THE RIGHTS, AND KANSAS LAW."
In "when-issued" trading, contracts for the purchase and sale of shares of
stock are made prior to the issuance of such shares in the same manner as
currently issued shares, except that when-issued contracts are settled by
delivery of and payment for the shares on a date chosen by the particular
exchange on which such shares are to be listed. Ordinarily, in connection with a
distribution of stock such as described in this Information Statement, the date
<PAGE>
fixed for settlement of when-issued contracts relating to such stock is the
fourth business day after distribution of such stock. Shareholders who may wish
to effect a when-issued trade in Company Common Stock should consult their
brokers for additional details.
Based on the number of record holders of Seafield Common Stock as of
November 30, 1996, the Company will initially have approximately 1,792
shareholders of record. Approximately 1.6 million shares of Company Common Stock
will be outstanding based on the number of shares of Seafield Common Stock
outstanding as of November 30, 1996. The transfer agent and registrar for the
Company Common Stock will be American Stock Transfer & Trust Company, 40 Wall
Street, 46th Floor, New York, N.Y. 10005. Telephone (718) 921-8200. For certain
information regarding options to purchase Company Common Stock that are expected
to be outstanding after the Distribution, see "EXECUTIVE COMPENSATION."
Shares of Company Common Stock and associated Rights distributed to
Seafield shareholders in the Distribution will be freely transferable, except
for securities received by persons who may be deemed to be "affiliates" of the
Company under the Securities Act of 1933, as amended (the "Securities Act").
Persons who may be deemed to be affiliates of the Company after the Distribution
generally include individuals or entities that control, are controlled by, or
are under common control with, the Company and may include certain officers and
directors of the Company as well as principal shareholders of the Company, if
any. Persons who are affiliates of the Company will be permitted to sell their
shares of Company Common Stock only pursuant to an effective registration
statement under the Securities Act or an exemption from the registration
requirements of the Securities Act, such as an exemption afforded by Rule 144
thereunder.
Company Common Stock Dividend Policy.
It is anticipated that the Company will not pay regular annual or quarterly
cash dividends following the Distribution. The Company plans to reinvest amounts
derived from the sale of Real Estate and Miscellaneous assets in Government
securities, and in corporate debt and equity securities and money market
instruments to the extent that such investments
21
will not subject the Company to regulation as an Investment Company under the
1940 Act. The Company may also make additional investments in Syntroleum or in
existing real estate assets. As further assurance for the Company's obligations
in connection with the Distribution, the Company has agreed that it will not pay
any dividends in cash or property or redeem any of its capital stock for a
period of two years following the Distribution Date, without the consent of the
Seafield Board. That covenant will also limit the extent to which the Company
may pay dividends or otherwise effect a complete liquidation prior to such date.
It is anticipated that, following the Distribution, Seafield will initially
pay quarterly cash dividends at the current quarterly rate of $0.30 per share of
Seafield Common Stock.
Conditions and Termination
The Distribution is conditioned upon (1) certain transactions (including
transfers of certain assets and liabilities to the Company contemplated by the
Distribution Agreement) having been consummated in all material respects (see
<PAGE>
"ARRANGEMENTS BETWEEN SEAFIELD AND THE COMPANY RELATING TO THE DISTRIBUTION --
Distribution Agreement"); (2) the Registration Statement on Form 10 (the
"Registration Statement") having been filed with the Securities and Exchange
Commission (the "Commission") and having become effective and no stop order
being in effect with respect thereto; (3) all authorizations, consents,
approvals and clearances of all federal, state, local and foreign governmental
agencies required to permit the valid consummation of the transactions
contemplated by the Distribution Agreement having been obtained, without any
conditions being imposed that would have a material adverse effect, and all
statutory requirements for such valid consummation having been fulfilled; (4)
Seafield having provided the NMS with prior written notice of the Record Date as
required by the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and the rules and regulations of the NMS; (5) no preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a government, regulatory or administrative agency or
commission, and no statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, being in effect preventing the payment of
the Distribution; and (6) the Distribution being payable in accordance with
applicable law. To the knowledge of the Company, the only material governmental
authorizations required to permit the valid consummation of the transactions
contemplated by the Distribution Agreement is the effectiveness of the
Registration Statement. Even if all the above conditions are satisfied, the
Distribution Agreement may be amended or terminated, and the Distribution may be
abandoned, at any time prior to the Distribution Date for any reason, in the
sole discretion of the Seafield Board.
ARRANGEMENTS BETWEEN SEAFIELD AND THE COMPANY RELATING TO THE DISTRIBUTION
For the purpose of structuring the Distribution and certain of the
relationships between Seafield and the Company after the Distribution, Seafield
and the Company will enter into the Distribution Agreement, a Facilities Sharing
and Interim Services Agreement (the "Interim Services Agreement")," a Blanket
Assignment, Bill of Sale, Deed and Assumption Agreement (the "Assignment") and a
Tax Sharing Agreement (the "Tax Sharing Agreement"). All of these are described
below and are included as exhibits to the Registration Statement filed with the
Commission, of which this Information Statement is a part. The following
summaries are qualified in their entirety by reference to the agreements as
filed.
Distribution Agreement and Assignment
The Distribution Agreement and Assignment provide for, among other things,
the principal corporate transactions required to effect the Distribution and
certain other matters governing the relationship between Seafield and the
Company with respect to or in consequence of the Distribution.
Transfer Assets and Liabilities. Subject to certain exceptions described
below, the Distribution Agreement contains provisions designed principally to
place with the Company (1) the Transfer Assets and the personnel currently
involved in the management of those assets and (2) and the Transfer Liabilities,
which include Seafield's financial responsibility for known and contingent or
unknown liabilities which relate directly to the Real Estate, Energy and
Miscellaneous businesses and assets as conducted on the Distribution Date and
certain other liabilities of Seafield described in the Distribution Agreement,
including Seafield's obligations under the Tax Claims described under "BUSINESS
- - Legal Matters."
22
<PAGE>
As security for the Company's obligations in connection with the
Distribution, the Company has agreed in the Distribution Agreement that it will
not pay any dividends in cash or property or redeem any of its capital stock for
a period of two years following the Distribution Date, without the consent of
the Seafield Board. That covenant will also limit the extent to which the
Company may pay dividends or otherwise effect a complete liquidation prior to
such date.
Contingent Claims and Insurance. There is pending litigation which will be
the responsibility of the Company following the Distribution. See "BUSINESS AND
PROPERTIES -- Legal Matters." Under the Distribution Agreement, the Company will
be entitled to the benefit of insurance coverage under Seafield policies, to the
extent such insurance coverage existed and is available, for claims relating to
the ownership or operation of the Transfer Assets by Seafield prior to the
Distribution Date subject to, among other things, the obligation to reimburse
Seafield for increases in insurance premiums as a result of payments for such
claims.
Employee Benefits. The Distribution Agreement and Assignment contain a
number of provisions relating to current and former employees. The provisions
generally contemplate that the Company will assume no obligations or liabilities
with respect to employee plans or benefits prior to the Distribution Date and
that after the Distribution Date, the Company will be responsible for providing
employee benefits for certain Seafield personnel, primarily consisting of
employees of Scout, that become employees of the Company. The agreements also
contemplate that the Company will contract with Seafield for executive and
administrative services as described under the Interim Services Agreement
described below.
The Distribution Agreement provides that the following actions will be
taken with respect to Seafield employee benefit plans: (a) as soon as
practicable after the Distribution Date, Seafield and the Company will cause the
Seafield Pension and 401(k) Plans to distribute to Company employees their
interests in those plans; (b) The Seafield Stock Purchase Plan will continue in
effect and will remain a retained liability of Seafield; (c ) obligations under
the Seafield Stock Option Plans will remain a liability of Seafield; (d)
obligations of Seafield under Seafield Supplemental Retirement Agreements,
Seafield Severance Agreements, Seafield Termination Compensation Agreements and
Seafield Indemnification Agreements (as defined in the Distribution Agreement")
shall continue to be a retained liability of Seafield; and (e) the Company shall
assume and be responsible for the obligations of Seafield to any Company
employee with respect to accident and health insurance and similar benefits.
No adjustments will be made under the Seafield Stock Option Plans with
respect to the Distribution. Accordingly, the holders of options to purchase
Seafield Common Stock under the Seafield Stock Option Plans may wish to consider
the desirability of exercising those options at least 5 business days prior to
the Record Date for the Distribution. However, persons intending to exercise
options should understand that the Seafield Board may terminate the Distribution
at any time prior to the Distribution Date and therefore there can be no
assurance that a timely exercise of any option under the Seafield Stock Option
Plans will entitle the holder of purchased shares to receive shares of the
Company Common Stock.
The Distribution Agreement provides that Seafield and the Company will take
all action necessary to cause the Company to provide to each officer of the
Company employment agreements and participation in a new Company Stock Incentive
Plan, as defined and described in "EXECUTIVE COMPENSATION."
<PAGE>
No Representations or Warranties. The Distribution Agreement and Assignment
provide that Seafield is transferring the Transfer Assets and Transfer
Liabilities to the Company without representation or warranty "as is, where is,"
except as otherwise expressly provided.
Conditions. The Distribution Agreement provides that the Distribution is
subject to a number of conditions which are described under "THE DISTRIBUTION --
Conditions and Termination." The Distribution Agreement may be amended or
terminated, and the Distribution may be abandoned, or conditions thereto may be
waived, at any time prior to the Distribution Date for any reason, in the sole
discretion of the Seafield Board.
23
Interim Services Agreement
At present all of Seafield's operations are conducted by 17 employees from
13,674 square feet of leased offices at 2600 Grand Boulevard, Kansas City,
Missouri (the "Lease"). Under the Distribution and Assignment Agreements
Seafield will transfer the Lease to the Company and all Seafield employees will
remain employees of Seafield (the "Seafield Personnel") except 15 employees of
Scout Development Corporation and its subsidiaries (the "Company Personnel"). In
particular, Messrs. Jacobs, Seward, and Fitzwater and other administrative
personnel will remain officers and employees of Seafield while also serving the
Company under the Interim Services Agreement.
On or prior to the Distribution Date Seafield and the Company will enter
into the Interim Services Agreement for the purpose of permitting Seafield and
the Company to continue to jointly use their respective personnel and facilities
until either party elects to terminate the arrangement. Under the arrangement,
Seafield agrees to provide to the Company during the term of the arrangement all
services required by the Company for the operation of the offices of the
Company's Chairman, Chief Executive Officer, Chief Financial Officer and Chief
Accounting Officer together with clerical and administrative services, but not
including services required exclusively by Scout Development Corporation and its
subsidiaries. In exchange for those services, the Company agrees to provide the
retained Seafield Personnel with office facilities and equipment sufficient for
the conduct of Seafield's activities. Following the Distribution, Seafield and
the Company will review the amount of personnel and facilities used under the
arrangement and each will reimburse the other to the extent that the exchange of
facilities for services is not equivalent.
Tax Sharing Agreement
Generally. In connection with the Distribution the Company and Seafield
will enter into a Tax Sharing Agreement which provides, among other things, for
the allocation among the parties thereto of Federal, state, local, and foreign
tax liabilities for all periods through the Distribution Date. Though valid as
between the parties thereto, the Tax Sharing Agreement is not binding on the IRS
and does not affect the joint and several liability of Seafield and its
subsidiaries to the IRS for all Federal taxes owed to the IRS by such
corporations.
Prior Tax Agreement. Seafield and all of its subsidiaries are currently
members of a consolidated group of corporations that files consolidated Federal
income tax returns, and all of these corporations are parties to a tax sharing
agreement dated August 1, 1990 that governs their relationship as members of
<PAGE>
this consolidated group (the "Prior Tax Agreement"). The Tax Sharing Agreement
modifies and amplifies the Prior Tax Agreement in certain respects and expressly
provides that the Prior Tax Agreement, as so modified and amplified, will
continue in full force and effect with respect to all tax returns for periods
beginning prior to the Distribution Date that are otherwise covered by such
Prior Tax Agreement.
Under the Prior Tax Agreement each member of the Seafield consolidated
group is essentially liable for the amount of Federal income tax that it would
pay if it filed a separate Federal income tax return. As a result of the
continuation of the Prior Tax Agreement, among other things, Seafield will be
responsible and liable for all Federal income tax liability attributable to it
as the payor of the Distribution. See "THE DISTRIBUTION -- Material Federal
Income Tax Consequences of the Distribution -- Payment of the Distribution by
Seafield." Also under the Prior Tax Agreement as continued in effect by the Tax
Sharing Agreement, each subsidiary of the Company will be liable to Seafield and
will pay to Seafield after the Distribution Date an amount equal to any Federal
income tax liability attributable to income generated by the subsidiary prior to
such date and Seafield will be liable to the Company and will pay to the Company
after the Distribution Date an amount equal to any Federal income tax savings
attributable to losses generated by the subsidiary prior to such date..
Other Matters. The Tax Sharing Agreement generally provides that the
parties will cooperate with each other in the preparation and filing of tax
returns and with regard to handling post-filing audits and similar proceedings.
The Tax Sharing Agreement expressly provides that it does not deal with the
liability of the parties with respect to the Tax Claims or any tax liabilities
that arise out of or are related to the Tax Claims, since such liability is the
subject of the Distribution Agreement and the Assignment.
24
BUSINESS AND PROPERTIES
Overview
The Company is primarily engaged in the business of managing, developing
and disposing of Real Estate and Energy businesses and Miscellaneous assets to
be acquired from Seafield immediately prior to the Distribution (the "Transfer
Assets").
Real Estate assets, as of September 30, 1996, consist of (a) the remaining
inventory from three high end condominium developments located in Santa Fe, New
Mexico (comprising 31 completed homes that have been priced for sale between
$225,000 and $750,000; "Quail Run") and Juno Beach, Florida (primarily
comprising three homes that have been priced for sale between $800,000 and $3.0
million, the "Juno Beach Homes"); (b) a seven story parking garage in Reno,
Nevada (the "Reno Parking Garage"); (c) a 49.9% interest in a community shopping
center in Gillette, Wyoming (the "Shopping Center Interest"); and (d)
approximately 1,147 acres of undeveloped land, with 370 acres in Houston, Texas,
approximately 547 acres in the vicinity of the Alliance Airport, in Ft. Worth,
Texas, 205 acres in West Ft. Worth, Texas, 9 other acres in Corinth, Texas and
16 acres at the intersection of 119th Street and Interstate 35 in the southern
portion of the Kansas City metropolitan area (the "Undeveloped Land"). The total
Real Estate inventory had an aggregate book value as of September 30, 1996, of
approximately $29.4 million.
<PAGE>
Energy assets consist of a 32.5% interest in Syntroleum Corporation
("Syntroleum") and minority interests in four oil and gas general partnerships
which have working interests in producing wells in the Gulf of Mexico (the "Oil
& Gas Properties").
Syntroleum is the developer and owner of a patented process and several
related proprietary technologies ("Syntroleum(R) Process") for the conversion of
natural gas into synthetic liquid hydrocarbons which can be further processed
into fuels such as diesel, kerosene (used by jet aircraft) and naphtha and
related non fuel chemical feedstocks and lubricants. Syntroleum is currently
engaged in negotiations for the licensing of the Syntroleum(R) Process with
major oil companies. Because Syntroleum continues to be in the developmental
phase of its operations, no assurances can be given that it will be able to
successfully conclude any license or agreement on a favorable basis or that a
commercially viable Syntroleum(R) Process plant will be constructed and
successfully operated.
The Company also owns other assets consisting primarily of (a) three
investments in privately held venture capital limited partnerships having an
aggregate book value at September 30, 1996, of $1,364,538, (b) a common stock
interest in Oclassen Pharmaceuticals, Inc. a privately owned pharmaceutical
manufacturer, which is proposed to be converted into approximately 183,673
shares of the common stock of Watson Pharmaceuticals, a publicly traded company,
the shares of which were last traded on December18, 1996, at $41.37 per share,
and (c) a preferred stock interest in Norian Corporation, a privately owned
developer of proprietary bone substitute technology which had a book value of
approximately $1.0 million at September 30, 1996, ("Miscellaneous Assets").
The Company has agreed to assume liabilities relating to the Transfer
Assets as well as certain contingent Seafield liabilities ("Transfer
Liabilities"), including Seafield's liability for disputed income taxes which
the Internal Revenue Service claims to be owed by Seafield for its 1986, 1987,
1988, 1989 and 1990 tax years and which the State of California claims to be
owed for the 1987, 1988 and 1989 years (the "Tax Claims"). The Tax Claims amount
to approximately $14.6 million, plus interest. Although the Company believes
that a combination of defenses against the claims and contested offsetting tax
losses generated by a real estate project sold at a loss in 1990, could result
in a positive outcome, the Company can not provide any assurance that its
defense of such claims will be successful. See "BUSINESS - Legal Matters."
The Company is engaged in the sale of all of its assets in the ordinary
course other than Syntroleum. Following the liquidation of non Syntroleum
assets, the Company plans to continue to promote the management, growth and
development of Syntroleum or it may engage in a merger or some other transaction
that would effectively dispose of all of its assets.
25
The Company's historical operating results during the past four years
reflect the sale or other disposition of a number of real estate assets and
other significant Seafield investments, all of which have culminated in net
capital loss carry forwards at Seafield in the approximate amount of $ 13.0
million. It is the intent of Seafield to utilize such losses in connection with
the Distribution to offset as much as possible any gains that Seafield is
required to recognize for Federal income tax purposes as a result of making the
distribution. However, none of such losses may be applied against any ordinary
income that Seafield shareholders will realize as the result of their receipt of
shares of Company Common Stock in the Distribution.
<PAGE>
As a result of the Distribution, Seafield will own no shares of Company
Common Stock and the Company will operate as an independent publicly traded
company. The Company's principal executive offices are located at 2600 Grand
Boulevard, Suite 500, P.O. Box 410949, Kansas City, Missouri 64141, and its
telephone number is (816) 842-7000.
Management and Disposition of Real Estate Assets.
Real Estate assets at September 30, 1996 primarily consists of (a) the
remaining inventory of three high end condominium developments comprising 34
homes in the Quail Run and Juno Beach Developments (the "Homes"); (b) the Reno
Parking Garage; (c) the Shopping Center Interest in Gillette, Wyoming and (d)
the approximately 1,147 acres of undeveloped real estate consisting of the
Houston, Fort Worth and Kansas City Tracts (the "Undeveloped Land"). The Real
Estate assets are held by Scout Development Corporation and its wholly owned
subsidiary Scout Development Corporation of New Mexico (collectively, "Scout").
Scout and its assets will be a wholly owned subsidiary of the Company following
the Distribution.
The following table shows the book value of the inventory of the Company's
Real Estate Assets as of September 30, 1996:
REAL ESTATE INVENTORY
Book Value as of
Asset Location September 30, 1996
----- -------- ------------------
The 34 Residential Condominiums Santa Fe New Mexico
and Juno Beach, Fla. $ 17,413,000
The Reno Parking Garage Reno, Nevada 3,360,000
The Houston Tract Houston, Texas 3,536,000
The Fort Worth Tracts Ft Worth, Texas 3,029,000
The Kansas City Tract Olathe, Kansas 2,380,000
---------
29,718,000
The Shopping Center Interest Gillette, Wyoming (280,000)
----------
Total ............................................. $ 29,438,000
The Quail Run and Juno Beach residential condominium developments consist
of inventory remaining from real estate development projects commenced by Scout.
The Juno Beach homes consists of two exclusive ocean front homes, each of which
are listed for sale at $3.0 million, a third home within another project in the
same area listed for sale at $800,000 and three marina boat slips. The Quail Run
properties consist of 31 homes ranging in listing prices from $225,000 to
$750,000. The company is actively involved in the marketing of these properties
and anticipates that approximately two years will be required to complete all
home sales. Following the disposition of these newly constructed homes, the
Company will continue to have warranty obligations. None of the home properties
are subject to any mortgage or material encumbrance.
The Reno Parking Garage is a seven story 850-space parking garage located
in downtown Reno, Nevada. Scout owns the building unencumbered except for a
ground lease which expires on February 28, 2023 and which calls for annual lease
payments in the amount of $294,000. The building contains a total of 144,500
square feet of leasable parking space.
26
<PAGE>
Parking revenue totaled approximately $744,000 or $875 per space or $5.15 per
square foot in 1995. In addition, 8,258 square feet located on the ground floor
of the garage is leased to a retail tenant under a 15-year lease. Revenue from
the retail lease during 1995 was $133,800 or $16.20 per square foot. In addition
to basic rent, the retail tenant is responsible for its pro rata share of real
estate taxes and insurance. During 1995, $5,200 was collected from the retail
tenant for taxes and insurance. Scout is presently actively marketing the
property for sale.
The Shopping Center Interest consists of a 49.9% joint venture interest in
a retail shopping center containing approximately 163,000 square feet of net
leasable area and 14 acres of undeveloped land in Gillette, Wyoming. At the end
of 1995, the center was 75% occupied. Rental revenue totaled $686,000 for 1995.
The average annual gross rental per occupied square foot was $6.10. In addition
to rental revenue, tenants are responsible for their share of common area
maintenance (CAM). During 1995, CAM collections from tenants totaled $77,000.
The property is subject to industrial revenue refunding bonds pursuant to a
refinancing in 1996 in the amount of $6.17 million that are secured by a bank
letter of credit and guaranteed by Scout. The letter of credit is secured by a
$3.15 million Treasury Note pledged by Seafield to the issuer of the letter of
credit; the Treasury Note is included in the Transfer Assets and will be owned
by the Company following the Distribution.
The Undeveloped Land consists of an aggregate of approximately 1,147 acres
of undeveloped land, with 370 acres in Houston, Texas, approximately 547 acres
in the vicinity of the Alliance Airport, in Ft. Worth, Texas, 205 acres in West
Ft. Worth, Texas, 9 other acres in Corinth, Texas, and 16 acres at the
intersection of 119th street and Interstate 35 in the southern portion of the
Kansas City metropolitan area. The zoning for the tracts other than the Kansas
City Tract varies from residential to light commercial, with the Kansas City
Tract being zoned for commercial use. None of the property is developed, none
is encumbered with any mortgages, except for a $1.2 million nonrecourse
mortgage on the Kansas City Tract, and all is being actively marketed as is.
The Company does not plan to engage in further development of any of the
Real Estate Assets except to the extent necessary to maximize the value of the
properties on hand. Following the disposition of all properties it intends to
terminate its real estate operations.
The Company also owns an interest in certain contingent accounts receivable
of Tenenbaum & Associates, Inc. ("TAI"), a real estate tax consulting firm, the
business of which was sold in 1995. The book value of the receivables at
September 30, 1996, was $800,000. The Company also has and is actively marketing
a leasehold interest in approximately 14,985 square feet of space located on the
second floor of an office building in Kansas City, Missouri that was formerly
occupied by TAI and that was vacant as of November 30, 1996. The lease, which
expires on May 31, 2000, calls for rents of approximately $19,318 per month,
subject to yearly increases of approximately $850.
Environmental. Scout is subject to the following United States
environmental laws: Clean Air Act, Comprehensive Environmental Response,
Compensation, and Liability Act, Emergency Planning and Community Right-to-Know
Act, Federal Water Pollution Control Act, Oil Pollution Act of 1990, Resource
Conservation and Recovery Act, Safe Drinking Water Act and Toxic Substances
Control Act, all as amended. Scout is also subject to the United States
environmental regulations promulgated under these acts, and also is subject to
state and local environmental regulations which have their foundation in the
foregoing United States environmental laws.
<PAGE>
As is the case with many companies, Scout faces exposure to actual or
potential claims and lawsuits involving environmental matters. However, no such
claims are presently pending and Scout has not suffered, and does not anticipate
that it will suffer, a material adverse effect as a result of any past action by
any governmental agency or other party, or as a result of compliance with such
environmental laws and regulations.
Business and Management of Syntroleum
Background. The Company owns 5,950,000 shares which constitutes
approximately 32.5% of outstanding Syntroleum Common Stock. The shares were
acquired by the Company over a number of years for an aggregate of approximately
$2.1 million. Syntroleum is the developer and owner of a patented process and
several related proprietary technologies ("Syntroleum(R) Process") for the
conversion of natural gas into synthetic liquid hydrocarbons which can be
27
further processed into fuels such as diesel, kerosene (used by jet aircraft) and
naphtha and related non fuel chemical feedstocks and lubricants.
Syntroleum is a privately owned corporation that was founded in 1984 by
Kenneth Agee. Mr. Agee is a chemical engineer who is the inventor of most of
Syntroleum's proprietary technology, the Chairman and Chief Executive Officer
and a principal stockholder of Syntroleum. Syntroleum built an initial two
barrel per day pilot plant in 1990-1991 with the proceeds of the Company's first
significant investment in 1988. In 1995 Syntroleum substantially up graded the
pilot plant to conduct additional tests. Recently, Syntroleum entered into a
joint development agreement and master license agreement with Texaco. Under the
joint development agreement Texaco and Syntroleum have agreed to pool resources
for the refinement of certain aspects of the Syntroleum(R) Process. Under the
master license agreement Syntroleum has granted Texaco a nonexclusive license to
use the Syntroleum(R) Process outside North America (United States, Canada and
Mexico), China and India for the construction of processing plants and the
production of liquid fuels.
Syntroleum's strategy is to license the Syntroleum(R) Process on a non
exclusive basis to producers of natural gas and oil and gas processors in
exchange for license fees and royalties, to market the principal catalyst used
in the Syntroleum(R) Process to plant operators (the " Catalyst") and to
construct and operate its own plants in the United States and other parts of the
world for the production of chemical feedstocks and lubricants.
The Syntroleum(R) Process. Syntroleum's Syntroleum(R) Process essentially
involves two catalytic reactions - the first reaction converts natural gas into
synthesis gas ("syngas"). In the syngas reaction, natural gas consisting
primarily of methane, is combined at high temperature with air, consisting
primarily of oxygen and nitrogen, in a proprietary reactor utilizing a
commercially available catalyst to form syngas. The resulting syngas consists
primarily of carbon monoxide and hydrogen that is "diluted" with nitrogen. The
second reaction converts the syngas into hydrocarbons which are primarily liquid
at room temperature through a catalytic reaction commonly referred to as the
Fischer-Tropsch reaction. In the Fischer-Tropsch reaction, the syngas flows into
a reactor containing a proprietary catalyst developed by Syntroleum. As the
syngas passes over the catalyst, it is converted into hydrocarbons of various
molecular weights, with by-product water and carbon dioxide also being produced.
The hydrocarbons and water drain from the reactor vessel and are subsequently
<PAGE>
separated. Both reactions generate considerable amounts of heat. The nitrogen
helps to remove a portion of the heat from the reactor and is ultimately vented
into the atmosphere. The Syntroleum(R) Process contemplates that a portion of
the excess heat energy will be used in the compression energy necessary for the
syngas and Fischer-Tropsch reactions, with any remaining surplus heat energy
being converted for commercial sale if circumstances permit. Energy integration
is a key component of the capital efficiency of the Syntroleum(R) Process and is
the subject of several patent applications that Syntroleum has in process.
The Syntroleum(R) Process involves a number of unique characteristics that
differentiate it from competing processes developed or under development by a
number of large companies. The Syntroleum(R) Process utilizes oxygen directly
from the atmosphere for the syngas reaction while others utilize pure oxygen to
create a syngas that is free of nitrogen. This difference significantly reduces
costs and equipment to produce syngas in the Syntroleum(R) Process. The
Syntroleum(R) Process also utilizes a unique catalyst under development by
Syntroleum for use in the Fischer-Tropsch conversion reaction. The Catalyst
produces hydrocarbon molecules that are primarily in the liquid fuels range.
This reduces subsequent processing where the desired product is a liquid fuel.
Syntroleum has also developed a catalyst which produces a very waxy synthetic
crude oil which requires further processing in order to produce a liquid fuel. A
third major difference relates to the use of nitrogen in the Syntroleum(R)
Process rather than eliminating it prior to the initial syngas reaction as with
competing processes. The combination of these and other features have led
Syntroleum to believe that plants using its proprietary Syntroleum(R) Process
may be constructed at a capital cost significantly less than those based on
competing processes of comparable size. In addition, Syntroleum believes that
the Syntroleum(R) Process will permit the construction of relatively small cost
effective processing plants that may be used on ships, barges and offshore
platforms for the conversion of gas production from small fields in remote
locations.
Patents and Properties. Syntroleum holds the following patents relating to
the Syntroleum(R) Process: United States patent no 4,833,170 issued May 23, 1989
and no. 4,973,453 issued November 27, 1990. These patents were granted for a
term of seventeen years from the date of issuance. Patent applications were
subsequently filed in Argentina, Australia, Canada, China, India, Malaysia,
Mexico, Netherlands, Nigeria, Norway, Pakistan, United Kingdom and Venezuela.
28
Subsequent patents have been granted in Australia, Canada, China, India,
Malaysia, Mexico, Nigeria, Norway, Pakistan and the United Kingdom. The
applications in Argentina, Netherlands and Venezuela are still pending.
Syntroleum also has several additional patent applications filed and others
in progress.
Syntroleum owns a prototype two barrel per day pilot plant located on 2
acres in Tulsa, Oklahoma and leases 2,500 square feet of laboratory and office
space and 4,500 square feet of executive office space in Tulsa.
Available Natural Gas and Demand for the Syntroleum(R) Process. Syntroleum
believes that a significant demand exists for cost effective gas to liquids
plants due to the availability of large quantities of natural gas in remote
regions of the world that are not currently marketable because the distance to a
market makes them uneconomical to transport as natural gas. When crude oil is
associated with unmarketable natural gas, it is frequently flared or re-injected
<PAGE>
in order to produce the associated oil. However, in many countries flaring is
not allowed by law and re-injection is frequently not an economical option.
Natural gas may also be unmarketable due to the nature or quantity of impurities
in the gas, such as excessive quantities of carbon dioxide, nitrogen or hydrogen
sulfide. A cost effective Syntroleum plant may be a viable option in many of
these cases.
In the Syntroleum(R) Process certain impurities such as nitrogen and carbon
dioxide do not have to be removed in order for the gas to be used as a viable
feedstock. The liquid hydrocarbon or "Syncrude" that results from the
Syntroleum(R) Process is free from sulfur, metals, aromatics, nitrogen, salt and
other impurities that may be found in crude oil. These and other characteristic
make the Syncrude a valuable blending stock for upgrading natural crude oil
products.
Products. Depending on the catalyst used and the design of the plant the
Syntroleum(R) Process will produce short chain liquid hydrocarbons that can be
upgraded into liquid fuels such as diesel, kerosene (for jet fuel) and naphtha
(for use in gasoline production). These may be differentiated from existing
commodity fuels because they are free of sulfur, metals, particulates and
aromatics and may therefore be marketed at premium prices as a blending agent in
US and European markets and as a substitute for LNG (liquefied natural gas).
Other proprietary catalysts may be used to produce longer chain hydrocarbons
that can be further processed to produce synthetic lubricants, waxes and
petrochemical feedstocks.
Competition-Early Stage Development. The Syntroleum(R) Process is in direct
competition with processes developed by or under development by a number of
major oil companies which have substantially greater financial and technical
resources relative to those available to Syntroleum. Furthermore, the
Syntroleum(R) Process has not been tested in a plant designed to produce
commercial quantities and such testing can not occur until a plant has been
developed, which could take up to two years from the commencement of
construction. Although, Syntroleum has entered into a joint development
agreement with Texaco, that agreement does not assure that the development
process will be completed or that Texaco will use its license rights to build a
plant using the Syntroleum(R) Process. Accordingly, until a plant is constructed
and placed in profitable operation, Syntroleum will not have assurance of the
commercial feasibility of its process or whether it will be able to successfully
compete with processes developed by companies having much greater financial
resources.
No Market for Syntroleum Common Stock. Syntroleum's capital stock consists
of a single class of Common Stock, 18,311,057 shares of which were outstanding
at September 30, 1996. There is no public market for the Syntroleum Common
Stock. It is privately held by approximately 114 stockholders under agreements
which restrict the transfer of the stock. During 1996 Syntroleum has sold shares
in two private transactions at $7.42 per share, the largest of which
transactions involved a catalyst supplier who purchased a portion of the shares
for $1.0 million in cash and agreed to purchase the balance at $7.42 per share
through the delivery of $7.0 million of catalyst and other non cash
consideration.
Syntroleum Financial Condition and Results of Operations. As of September
30, 1996, Syntroleum had unaudited accumulated deficit of $3.3 million and net
shareholders' equity of $1.4 million. Unaudited losses from operations for the
nine months ended September 30, 1996, were $766,000.
29
<PAGE>
Syntroleum Management and Employees. Syntroleum's officers consist of:
Mr Kenneth Agee, age 39, who has been Chairman and Chief Executive Officer
since inception and who is a licensed professional engineer and the
inventor of most of Syntroleum's proprietary technology.
Mr. Mark A. Agee, age 43, who has been the President and Chief Operating
Officer of Syntroleum since January 1996, Vice President and Chief
Financial Officer from January 1994 until December, 1996 and who is the
brother of Kenneth Agee. From 1989 to 1993 Mr. Agee was the President and
Chief Executive Officer of Convergent Communications, Inc., a private
telecommunications company that was sold in 1993.
Mr. Peter Snyder, age 51 has been Vice President of Marketing since January
1996. From 1990 to 1995 he was the President of C& C Petroleum and
Chemicals Group , a wax and lubricants marketing company.
Mr. Larry J. Weick, age 48 has been employed as Vice President of Project
Development since January 1996. From 1993 to 1996 he was a consultant for
natural gas and electric utilities. Previously he was employed for twelve
years in finance, planning and business development for ARCO.
Mr. Randall M. Thompson, age 38, has been the Vice President and Chief
Financial Officer since December 1996. From 1994 to December 1996 he was a
Vice President of Tenneco Energy and from 1983 to 1994 was Planning and
Evaluation Manager for Atlantic Richfield Company.
The Syntroleum Board consists of eight directors, two of which are officers
of the Company, being Mr. Seward and Mr. Jacobs, Mr. Frank. M. Bumstead, a
Director of a Seafield Subsidiary, Mr. Kenneth Agee and Mr. Mark Agee, who are
Syntroleum officers, and three other non employee directors, consisting of
Mr. Alvin Albe, Mr. Robert Rosene, Jr., and Mr. Ted Sheridan.
At November 30, 1996, Syntroleum had 8 full time and 8 part time employees.
Oil and Gas Properties.
BMA Resources owns minority general partnership interests in four oil and
gas general partnerships, which were formed from 1987 to 1989, with the purpose
of engaging in the business of acquiring, exploring and developing oil and gas
prospects. The partnerships have working interests in producing wells in the
Gulf of Mexico and have a combined book value of $4,102,122 as of September 30,
1996.
Miscellaneous Assets and Liabilities.
The Company also owns other assets consisting primarily of (a) three
investments in privately held venture capital limited partnerships having an
aggregate book value at September 30, 1996, of $1,364,538, (b) a common stock
interest in Oclassen Pharmaceuticals, Inc. a privately owned pharmaceutical
manufacturer, which is proposed to be converted into approximately 183,673
shares of the common stock of Watson Pharmaceuticals, a publicly traded company
, the shares of which were last traded on December 18, 1996, at $41.37 per
share, and (c ) a preferred stock interest in Norian Corporation, a privately
owned developer of proprietary bone substitute technology, which had a book
value of approximately $1.0 million at September 30, 1996.
<PAGE>
The Company has agreed to assume certain contingent Seafield liabilities,
including Seafield's liability for disputed income taxes which the Internal
Revenue Service and the state of California claim to be owed by Seafield for its
1986, 1987, 1988, 1989 and 1990 tax years (the "Tax Claims"). The Tax Claims
amount to approximately $14.6 million, plus interest. Although the Company
believes that a combination of defenses against the claims and contested
offsetting tax losses generated by a real estate project sold at a loss in 1990,
could result in a positive outcome, the Company can not provide any assurance
that its defense of such claims will be successful. See "BUSINESS - Legal
Matters."
30
Company Employees
As of the Distribution Date it is anticipated that the Company and Scout,
but not including Syntroleum will employ approximately 15 individuals, none of
of whom will be covered by collective bargaining agreements. All of its
employees other than 12 property management employees of Scout provide
management, financial, accounting, tax, administrative and other services with
respect to its assets.
The Company believes that relations with its employees are good.
Company Properties.
The Company's headquarters occupy approximately 13,700 square feet of
leased space in a building at 2600 Grand Boulevard, Suite 500, P.O. Box 410949,
Kansas City, Missouri 64141. The term of this lease expires on April 1, 2002,
subject to an option to cancel the lease on April 1, 1999. Owned real estate is
described under "Management and Disposition of Real Estate Assets."
Regulation - Possible Application of the Investment Company Act of 1940
Generally, and subject to certain exceptions, an issuer of securities is an
"investment company" under the Investment Company Act of 1940 (the "1940 Act")
if, among other criteria, it is engaged in or proposes to engage in the business
of investing, owning, holding or trading of securities and it owns or proposes
to acquire investment securities having a value exceeding 40% of the value of
such issuer's total assets (exclusive of government securities and cash items)
on an unconsolidated basis. "Investment securities" for purposes of this
definition, includes stock of non-majority owned companies, so the Company's
holding of Syntroleum would be part of its investment securities. Although the
value of the Company's investment securities as of September 30, 1996, based in
part on appraisals furnished by GKB, do not exceed 40% of the value of its total
assets (exclusive of government securities and cash), the Company could meet
this definition of an investment company in the future as its real estate assets
are sold and if the value of Syntroleum increases.
However, under a rule adopted under the 1940 Act by the Securities and
Exchange Commission (the "SEC"), an issuer generally will not be deemed to be an
investment company under the 1940 Act if (a) no more than 45% of the value of
the issuer's total assets (exclusive of government securities and cash items)
consists of, and no more than 45% of the issuer's net income after taxes (for
the last four fiscal quarters combined) is derived from, securities other than
(a) government securities, (b) securities issued by certain employees'
securities companies, (c) securities issued by majority owned subsidiaries of
the issuer and (d) securities issued by companies other than investment
<PAGE>
companies which are controlled primarily by the issuer and through which the
issuer engages in a business other than that of investing, reinvesting, owning,
holding or trading in securities (the "45% Rule"). Under the 1940 Act an issuer
is presumed to be in control of another company if it holds more than 25% of the
voting stock of the company. The Company believes that Syntroleum is "primarily
controlled" by the Company based on the amount of actual control exercised by
the Company over Syntroleum's business and the amount of its ownership of voting
stock in Syntroleum. Accordingly, the Company believes that its only assets that
are securities for purposes of the 45% test are its Miscellaneous Assets. Based
in part on appraisals furnished by GKB, the Company's Board believes that the
value of those assets as of September 30, 1996, would be less than 15% of the
Company's total assets as of that date, exclusive of government securities and
cash items, that the income from such assets in the future will be less than 45%
of the Company's anticipated net income in the future and that the Company
should therefore be well within the parameters of the 45% test and not subject
to regulation under the 1940 Act.
Nevertheless, if the Company's percentage ownership interest in Syntroleum
should drop below 25% or if the amount of the Company's Miscellaneous Assets and
other securities that do not fall within the exclusion should become greater
than 45% of the Company's total assets (other than government securities and
cash) or if the income derived from such securities exceeds 45% of the Company's
net income after taxes, and if the Company can not meet the 40% test, then the
Company could become subject to regulation by the SEC under the 1940 Act, which
regulation could significantly and adversely affect the Company's activities. In
order to minimize the likelihood of such event and to stay within the
requirements of the 45% Rule, the Company intends to take such action as may be
reasonable and appropriate in order
31
to maintain its primary control over Syntroleum and to reinvest the proceeds of
sales of its Real Estate, Miscellaneous Assets and Oil and Gas properties in
government securities and other operating assets pending any merger or other
disposition of the Company's assets and businesses.
If the Company does fail to meet the requirements of the 40% or 45% Rules,
it may nevertheless avoid regulation under the 1940 Act if it meets the
requirements of another SEC rule applicable to "transient" investment companies.
Under this rule, a company will not, for a period of one year, be deemed an
investment company, even though it fails the test under the 45% Rule, if it has
a bona fide intent to be engaged primarily, and as soon as reasonably possible
(and in any event by the end of the one-year period), in a non-investment
company business or, under an SEC statement respecting the rule, a bona fide
intent to liquidate within such period of time. The transient investment company
rule is frequently relied on by companies which have received a substantial
amount of cash through a sale of significant assets or through a securities
offering; they typically need time to expand their business or to start up or
acquire a new operating business.
Under the transient investment company rule, a company's intent to engage
primarily in a non-investment company business must be evidenced by appropriate
resolutions of its board of directors and by its business activities. The
Company's board of directors has adopted a resolution evidencing its intent to
engage primarily in a non-investment company business, and the Company presently
believes that its business activities will demonstrate the intent required for
it to fall within the rule.
<PAGE>
If, in the future, the Company meets the definition of an investment
company under the 1940 Act and does not fit within any exceptions to regulation
under such Act, the Company may be able to elect to become a business
development company ("BDC") rather than register as an investment company.
Generally, to be eligible to elect BDC status, a company must be operated for
the purpose of making investments in, and make available significant managerial
assistance to companies, which do not have a liquid public market for their
securities. Such portfolio companies are termed "eligible portfolio companies."
An eligible portfolio company generally is a U.S. company that is not an
investment company and that (i) does not have a class of securities registered
on an exchange or included in the Federal Reserve Board's over-the-counter
margin list; (ii) is actively controlled by a BDC and has an affiliate of a BDC
on its board of directors; or (iii) meets such other criteria as may be
established by the Commission.
Under the 1940 Act, BDCs, are subject to certain of the rules relating to
registered investment companies and to certain complex rules relating only to
BDCs but they generally have greater flexibility than registered investment
companies do in such areas as capital structure, portfolio diversification,
transactions with affiliates and employee compensation matters (such as stock
options or profit sharing plans). On the other hand, BDCs are more limited than
registered investment companies in the types of investments they may make. BDCs
may acquire only certain prescribed qualifying assets and certain assets
necessary for their operations (such as interests in real estate and leasehold
improvements, office furniture, equipment and facilities) unless, at the time of
acquisition, at least 70% of the value of the BDC's assets consists of
"qualifying securities." "Qualifying securities" include privately acquired
securities of companies that were eligible portfolio companies at the time the
BDC acquired such securities; securities of eligible portfolio companies
controlled by the BDC; and cash items, U.S. government securities and high
quality short-term debt. BDCs are also subject to restrictions on the nature of
the transactions in which, and the persons from whom, securities can be
purchased in order for the securities to be considered qualifying securities.
The Company currently expects that if it would be required to register as
an investment company, it would consider whether to elect BDC status. No
assurance can be given that BDC status will be, or will continue to be,
available to the Company. In addition, even if the Company were able to maintain
such status, the restrictions applicable to BDCs could significantly and
adversely affect the Company's activities.
Legal Matters.
Under the Distribution Agreement and Assignment and Assumption Agreement,
the Company will assume the rights and obligations of Seafield with respect to
the legal matters described below.
32
<PAGE>
Internal Revenue Service Audits. Seafield has received notices of proposed
adjustments (Revenue Agent's Reports) from the Internal Revenue Service (IRS)
with respect to 1986-90 federal income taxes. These notices claim total federal
income taxes due for the entire five year period in the approximate net amount
of $13,867,000, exclusive of interest thereon.
The substantive issues raised in these notices for the years 1986-1987 are
primarily composed of the former television subsidiaries' amortization of film
rights, the sale of the stock of a former television station, and certain
life/non-life tax return consolidation issues. The amount of tax claimed as due
by the IRS for the 86-87 period is $13,545,000. For the 1988-1989 periods the
same television film rights amortization issues were raised, including some
reversals of the previous period's adjustments as well as other miscellaneous
issues. The amount of tax claimed by the IRS for the 88-89 period is $182,000.
The sole significant issue for 1990 is the denial of Seafield's $27 million
loss on the 1990 sale of a former real estate partnership interest. This 1990
loss was carried back in part by Seafield to the 1987 tax year, which generated
a refund claim of $7.6 million. The IRS has claimed that the sale did not occur
during 1990, but rather occurred after 1991, thereby negating the carryback
refund claim. Therefore, the total additional 1990 tax proposed by the IRS,
after the denial of the $7.6 million carryback claim for refund, is $139,000.
Seafield has filed protests regarding the 1986-90 notices of proposed
adjustments. Seafield is currently pursuing a compromise with the Appeals
Division of the IRS for the 1986-89 years. The 1990 issues have not yet been
formally addressed at the Appeals Division. Resolution of these tax disputes may
reasonably be expected during 1997, but is not certain.
The Company is assuming from Seafield all contingent tax liabilities and is
acquiring all rights to refunds as well as any interest thereon related to these
tax years (the "Tax Claims") and liabilities and refunds related to any issues
raised by the IRS during 1986-1990 whose resolution may extend to tax years
beyond the 1990 tax year. The Company believes that it will prevail on the 1990
loss carryback issue, and that there are meritorious defenses or pending
favorable compromises for many of the other substantive issues. The Company
believes that adequate accruals for these income tax liabilities have been made.
These accruals will be transferred from Seafield to the Company as part of the
Distribution.
California Tax issues. In December 1996, the California state auditor sent
Seafield an audit report covering the 1987-1989 taxable years. The State of
California has determined to include, as a "unitary taxpayer," all majority
owned non-life insurance subsidiaries and joint ventures of Seafield. The
auditor's report has been forwarded to the California Franchise Tax Board for
action. A billing is expected to be made to Seafield within six months from the
submission of the report by the auditor. The total amount of California state
income taxes due for the 1987-1989 years is expected to be approximately
$750,000, exclusive of interest. The Company is assuming all potential tax
liabilities and interest thereon regarding the California audit for the
1987-1989. The Company believes that it has established on the pro forma balance
sheet herein appropriate accruals for the California state income tax liability.
The Company believes that final resolution of the above Tax Claims after
taking into account offsetting claims for refunds and amounts accrued, should
not have a material adverse effect on the Company's financial position.
<PAGE>
Claim Against Skidmore, Owings & Merrill, et al. In 1986, a lawsuit was
initiated in the Circuit Court of Jackson County, Missouri by Seafield's former
insurance subsidiary (i.e., Business Men's Assurance Company of America) against
Skidmore, Owings & Merrill ("SOM") which is an architectural and engineering
firm, and a construction firm to recover costs incurred to remove and replace
the facade on the former home office building. Because the removal and
replacement costs had been incurred prior to the sale of the insurance
subsidiary, Seafield negotiated with the buyer for an assignment of the cause of
action from the insurance subsidiary. Under the Distribution Agreement Seafield
has assigned to the Company all of its rights to any recoveries and the Company
has assumed any costs relating to the prosecution of any of the above described
claims. Thus any recovery will be for the benefit of the Company and all costs
incurred in connection
33
with the litigation will be paid by the Company. Any ultimate recovery will be
recognized as income when received and would be subject to income taxes. In
September 1993, the Missouri Court of Appeals reversed a $5.7 million judgment
granted in 1992 in favor of Seafield; the Court of Appeals remanded the case to
the trial court for a jury trial limited to the question of whether or not the
applicable statute of limitations barred the claim. The Appeals Court also set
aside $1.7 million of the judgment originally granted in 1992. In July 1996, the
case was retried to a judge. A ruling is expected from the judge by the end of
the first quarter of 1997. The only remaining defendant is SOM; settlement
arrangements with other defendants have resulted in payments to plaintiff which
have offset legal fees and costs to date of approximately $450,000. None of the
prior or future legal fees or costs are recoverable from the remaining
defendant, even if judgment in plaintiff's favor is ultimately granted. Future
legal fees and costs can not reliably be estimated.
34
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited historical and pro forma
capitalization of the Company as of September 30, 1996. The unaudited pro forma
capitalization reflects the transfer to the Company of the Transfer Assets and
Transfer Liabilities including; (i) the assumption by the Company of certain
federal and state tax and related interest claims of Seafield; (ii) the
assumption by the Company of the estimated assets and liabilities of Tenenbaum;
and (iii) the distribution of the shares to Seafield's stockholders. The
accounting for this transfer of assets and liabilities represents a
reorganization of companies under common control and, accordingly, all assets
and liabilities will be reflected at their historical carrying value.
The table should be read in conjunction with the Company's financial
statements and the notes thereto and the unaudited pro forma combined financial
information and notes thereto included elsewhere herein. The unaudited pro forma
information set forth below does not necessarily reflect the capitalization of
the Company in the future or as it would have been had the capitalization
occurred on September 30, 1996.
September 30, 1996
------------------
Historical Adjustments Pro Forma
---------- ----------- ---------
(in thousands)
Stockholders' Equity:
Preferred Stock - authorized 1,000,000
shares, $.01 par value, none issued $ -- -- --
Common Stock - authorized 30,000,000
shares, $.01 par value, 1,620,862
shares issued and outstanding...... -- 16 16
Paid-in Capital......................... -- 46,914 46,914
Total Combined Equity................... 39,063 (39,063) --
------ ------ ------
Total Stockholders' Equity......... 39,063 7,867 46,930
------ ------ ------
Total Capitalization............... $ 39,063 7,867 46,930
====== ====== ======
SLH OPERATIONS
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited Pro Forma Combined Financial Statements of the
Company as of September 30, 1996 have been prepared pursuant to the Distribution
Agreement to reflect the transfer to the Company of the Transfer Assets and
Transfer Liabilities including; (i) the assumption by the Company of certain
federal and state tax and related interest claims of Seafield; (ii) the
assumption by the Company of the estimated assets and liabilities of Tenenbaum;
and (iii) the distribution of the shares to Seafield's stockholders. The
accounting for this transfer of assets and liabilities represents a
reorganization of companies under common control and, accordingly, all assets
and liabilities will be reflected at their historical carrying value.
The unaudited Pro Forma Combined Balance Sheet has been prepared as if the
transactions had occurred on September 30, 1996. The unaudited Pro Forma
Combined Statement of Operations has been prepared as if the transactions had
<PAGE>
occurred on January 1, 1996. The pro forma financial information set forth below
is unaudited and not necessarily indicative of the results that would actually
have occurred if the transactions had been consummated as of September 30, 1996
or January 1, 1996, or results which may be obtained in the future.
The pro forma adjustments, as described in the Notes to the Pro Forma
Combined Financial Statements, are based on available information and upon
certain assumptions that management believes are reasonable. The unaudited Pro
Forma Combined Financial Information should be read in conjunction with the
Company's financial statements and the notes thereto, "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and the other
financial information included elsewhere herein.
35
<PAGE>
SLH OPERATIONS
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
September 30, 1996
Historical Adjustments Pro Forma
---------- ----------- ---------
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents...... $ -- 6,860 (a) 6,860
Short-term investments......... -- 3,140 (a) 3,140
Accounts and notes receivable . 582 582
Real estate under contract..... 2,733 2,733
Other current assets........... 342 800 (d) 1,142
------ ------ ------
Total current assets...... 3,657 10,800 14,457
Real estate held for sale.......... 26,985 26,985
Investment securities.............. 4,879 4,879
Investment in affiliates:
Oil and Gas partnerships and
interests...................... 4,102 4,102
Other.......................... (180) (180)
Property, plant and equipment, net. 488 488
Intangible assets, net............. 769 769
Deferred income taxes.............. 47 47
Other assets....................... 43 43
------- ------ ------
$ 40,790 10,800 51,590
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............... $ 160 160
Income tax payable............. -- 750 (b) 750
Other current liabilities...... 298 1,000 (b) 1,298
--- ----- -----
Total current liabilities. 458 1,750 2,208
Notes payable...................... 1,194 1,194
Deferred income taxes.............. -- 183 (e) 183
Other liabilities.................. 75 1,000 (c)(d) 1,075
-- ----- -----
Total liabilities......... 1,727 2,933 4,660
----- ----- -----
Stockholders' equity:..............
Preferred stock................ -- -- --
Common stock................... -- 16 (f) 16
Paid-in capital................ -- 39,047 (f) 46,914
10,000 (a)
(1,750)(b)
(500)(c)
300 (d)
(183)(e)
Combined equity................ 39,063 (39,063)(f) --
------ ------ ------
Total stockholders' equity. 39,063 7,867 46,930
------ ------ ------
$ 40,790 10,800 51,590
====== ====== ======
36
<PAGE>
SLH OPERATIONS
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
September 30, 1996
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUES (in thousands)
Real estate sales.................. $ 12,801 12,801
Other real estate revenue.......... 801 801
------ ------
Total revenues................. 13,602 13,602
COSTS AND EXPENSES
Real Estate:
Cost of sales.................. 12,720 12,720
Operating expense.............. 1,930 1,930
Provision for loss on real
estate held for sale........ 47 47
General and administrative......... 1,031 1,031
------ ------
Loss from operations........... (2,126) (2,126)
Investment income - net................. 1,189 356 (g) 1,545
Equity in net earnings (loss) of
affiliates............................ (572) (572)
Interest expense........................ (81) (81)
------ ----- ------
Loss before income taxes....... (1,590) 356 (1,234)
------ ----- ------
Taxes on income (benefits):
Current .......................... -- -- --
Deferred........................... 71 -- 71
------ ----- ------
Total.......................... 71 -- 71
------ ----- ------
NET LOSS .............................. $ (1,661) 356 (1,305)
====== ====== ======
..............................
Pro forma net loss per share............ (0.81)
- ------------------------- ======
Notes to Pro Forma Combined Financial Information:
(a) Represents the cash and short-term investments, consisting of U. S.
Treasury obligations, to be transferred to the Company on the date of
distribution.
(b) Represents the estimated state tax liability and accrued interest assumed
by the Company.
(c) Represents the difference between the gross office lease obligation to
be assumed from Seafield and the estimated fair value of the lease.
(d) Represents estimated Tenenbaum assets and liabilities assumed by the
Company.
(e) Represents the assumption by the Company of the estimated net of the
$7.8 million federal income tax liability and the $7.6 million refund
claim resulting from a net operating loss carryback relating to tax
years under audit appeal.
(f) Represents the issuance of 1,620,862 shares of $.01 par value stock to
Seafield's stockholders and the reclassification of the combined equity
in excess of par value to the paid-in capital account.
(g) Represents the interest income earned on the cash and short-term
investments.
(h) Pro forma loss per share is computed based on 1,620,862 shares being
issued.
37
<PAGE>
SLH OPERATIONS
SELECTED HISTORICAL COMBINED
FINANCIAL INFORMATION
The following table sets forth selected historical combined financial data
for the Company. The historical financial information presented reflects periods
during which the Company did not exist but rather reflects the financial
information of Seafield's businesses and assets that will be transferred to the
Company in connection with the Distribution as well as related liabilities to be
assumed by the Company. The historical financial information presented may not
necessarily be indicative of the results of operations or financial condition
that would have been obtained if the Company had been a separate, independent
company during the periods shown. Neither should the information be deemed to be
indicative of the Company's future performances as an independent company. The
financial information should be read in conjunction with the Company's Combined
Financial Statements and the notes thereto found elsewhere in this Information
Statement. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS." Earnings per share data are presented elsewhere in this
Information Statement and on a pro forma basis only. See "PRO FORMA FINANCIAL
DATA."
<TABLE>
<CAPTION>
(unaudited)
Nine months ended
September 30, Years ended December 31,
------------- ------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data
Real estate sales................ $ 12,801 7,815 10,910 10,932 17,147 33,067 17,689
Real estate rentals and other.... 801 723 1,001 1,059 1,173 1,701 1,404
-------- ------ ------- ------ ------- ------- -------
Total Revenues................... 13,602 8,538 11,911 11,991 18,320 34,768 19,093
------ ----- ------ ------ ------ ------ ------
Net loss......................... (1,661) (2,912) (11,602) (6,598) (4,307) (6,046) (3,057)
Balance Sheet Data
Current assets................... $ 3,657 N/A 4,432 3,707 6,006 1,538 1,200
Real estate held for sale........ 26,985 N/A 35,073 40,998 39,047 50,703 75,832
Investment securities............ 4,879 N/A 5,136 6,161 6,624 6,990 6,279
Investment in oil and gas
partnerships and interests... 4,102 N/A 5,255 6,703 8,543 11,427 11,668
Total assets..................... 40,790 N/A 51,638 64,627 70,155 84,471 111,313
Current liabilities.............. 458 N/A 365 239 2,150 1,186 1,977
Stockholders' equity............. 39,063 N/A 49,869 61,330 66,621 81,454 105,032
</TABLE>
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations covers periods when Company's assets were owned by
Seafield and operated as part of Seafield. It should be read in conjunction with
the Company's Historical Combined Financial Statements and Notes thereto
included elsewhere herein. It covers the years ended December 31, 1995, 1994 and
1993, and the nine months ended September 30, 1996 and 1995. The Company is
engaged in the sale of all of its assets in the ordinary course other than
Syntroleum.
Results of Operations
Summary of Combined Financial Results
(unaudited)
Nine months ended
September 30, Year ended December 31,
------------- -----------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
Total revenues............ $13,602 8,538 11,911 11,991 18,320
Loss from operations...... (2,126)(3,312) (12,629) (8,993) (4,274)
Net loss.................. $(1,661)(2,912) (11,602) (6,598) (4,307)
Nine Months 1996 Compared to Nine Months 1995. Real estate revenues were
$13.6 million in 1996's first nine months compared with $8.5 million in 1995's
first nine months. The real estate sales revenues in 1996 include the sale of 34
residential units in Florida and New Mexico ($11.9 million); 20 acres of land in
Oklahoma ($275,000) and 1.5 acres of land in Kansas ($580,000). In 1995's first
nine months, real estate sales revenue included the sale of 17 residential units
or lots in Florida, Missouri and New Mexico ($5.5 million) 125 acres of land in
Kansas and Texas ($1.8 million) and a partnership interest in a commercial
property in Colorado ($425,000).
At September 30, 1996, real estate holdings include residential land,
undeveloped land, single-family housing and commercial structures located in the
following states: Florida, Kansas, Nevada, New Mexico, Texas and Wyoming, all of
which are listed for sale. The total acreage consisted of approximately 1,150
acres and approximately 71 lots or units for sale. Real estate operations are
influenced from period to period by several factors including seasonal sales
cycles for projects in Florida and New Mexico.
Cost of the real estate sales in 1996 totaled $12.7 million, compared with
a cost of approximately $7.8 million in 1995, reflecting the mix of real estate
sold during each period as discussed above in the revenue analysis. Real estate
operating expenses totaled $1.9 million in 1996, compared with $2.4 million in
1995. The decrease is attributable to a reduction in expenses associated with
the substantial completion of the residential projects and a reduction of
<PAGE>
deprecation in 1996 as real estate available for sale is not depreciated under
SFAS No. 121, "accounting for the impairment of Long-Lived Assets and for Long-
Lived Assets to be disposed of," which was implemented effective January 1,
1996. In 1996's third quarter, a $47,000 provision for impairment was recorded
reflecting an expected oss on a contract signed to sell approximately 545 acres
of land in early 1997.
General and administrative expenses include an allocation of Seafield's
actual overhead costs based primarily on the estimated value of the Company's
net assets at September 30, 1996, to the total value of Seafield's assets. The
basis for allocation also considers efforts required to manage the mix of
Seafield's assets. The resulting allocation of Seafield's general and
administrative overhead costs to the Company totaled $961,000 in 1996, as
compared to $1.6 million in 1995. The 1995 general and administrative costs were
higher due to Seafield's accelerating the vesting of compensatory options.
Management estimates that ongoing annual general and administrative expenses
will be approximately $1.5 million.
39
The above factors produced a loss from operations of $2.1 million in 1996,
compared with $3.3 million in 1995.
Investment income in 1996 increased to $1.2 million from $11,000 in 1995.
The 1996 income represents earnings from investment in a privately held venture
capital fund. This fund invested in development stage companies which may cause
earnings to be subject to significant variations.
Equity in affiliates' operations produced a loss of $572,000 in 1996,
compared with a loss of $106,000 in 1995. During 1996, the oil and gas
operations recorded affiliated losses of $440,000, compared to a $59,000 loss in
1995, reflecting variances in operating results of the oil and gas general
partnership interests and increased costs recorded by Syntroleum. Syntroleum is
a developmental venture which is expected to incur losses throughout its
development stage.
See "Business and Management of Syntroleum".
Interest expense decreased to $81,000 in 1996 from $156,000 in 1995
reflecting retirement of a real estate note payable in 1995.
Tax expense of $71,000 were recorded in 1996 compared with tax benefits of
$651,000 in 1995. Because the Company is a party to a tax sharing agreement with
other Seafield entities, benefits were recorded in 1995 for utilization of the
Company's losses by Seafield. In 1996, valuation allowances were provided on the
tax benefits because utilization within the Seafield group was not expected.
The net loss in 1996 of $1.7 million and $2.9 million in 1995 reflect the
above results of operations.
1995 Compared to 1994. Real estate revenues in 1995 were $11.9 million
compared with $12 million in 1994. The real estate sales revenues in 1995
include the sale of 27 residential units or lots in Florida, New Mexico and
Texas ($7.8 million); 304 acres of land in Kansas, Missouri and Texas ($2.7
million); and the sale of a partnership interest in a commercial building
located in Colorado ($425,000). The 1994 real estate sales revenue included the
sale of 47 residential units or lots in Florida, New Mexico and Texas ($10.4
million) and land in California ($500,000). Real estate rental and other
revenues decreased $58,000 to $1 million in 1995 reflecting the sale of a rental
property in 1994.
<PAGE>
At the end of 1995, real estate holdings include residential land,
undeveloped land, single family housing and commercial structures. The total
acreage consisted of approximately 1,165 acres and 99 lots or units for sale.
Cost of the real estate sales in 1995 totaled $11.3 million, compared with
a cost of approximately $10.9 million in 1994, reflecting the mix of real estate
sold during each year. Real estate operating expenses totaled $3.2 million in
1995, compared with $4 million in 1994. The decrease primarily reflects
termination costs in 1994 associated with a real estate project.
During 1995, a $7.9 million provision for loss on sale of real estate was
recorded. The provision reflected values based on recent sales activities,
recent sales transactions of undeveloped land parcels in Texas and sales
activity at the residential project in New Mexico. A $4.4 million loss provision
was recorded in 1994 for a sales contract on Texas land that was signed in
January of 1995. The sale did not close.
General and administrative expenses include an allocation of Seafield's
actual costs. Allocated costs decreased from $2.1 million in 1995, as compared
to $1.6 million in 1994, due to higher 1995 costs related to Seafield's
acceleration of vesting of compensatory options.
The above factors produced a loss from operations of $12.6 million in 1995,
compared with $9 million in 1994.
Investment income in 1995 was $29,000 compared to $894,000 in 1994. The
1994 increase included the recognition of deferred interest income on a real
estate note receivable.
40
Equity in affiliates' operation produced a loss of $267,000 in 1995,
compared with earnings of $254,000 in 1994. During 1995, the oil and gas
operations recorded affiliated losses of $209,000, compared to earnings of
$373,000 in 1994, reflecting variances in operating results of the oil and gas
general partnership interests and increased costs recorded by Syntroleum. See
Notes to Consolidated Financial Statements for additional information regarding
operations accounted for on the equity method.
Interest expense, all associated with real estate, decreased slightly to
$189,000 in 1995 from $222,000 in 1994 reflecting decreases in notes payable.
Tax benefits of approximately $1.5 million were recorded in both 1995 and
1994. Because the Company is a party to a tax sharing agreement with other
Seafield entities, benefits were recorded for utilization of the Company's
losses by Seafield. In 1995, valuation allowances were provided on some tax
benefits because it was not expected Seafield could realize utilization of the
Company's losses.
The net loss in 1995 of $11.6 million and $6.6 million in 1994 reflect the
above results of operations.
1994 Compared to 1993. Real estate revenues in 1994 were $12 million,
compared with $18.3 million in 1993. In 1994, the sale of real estate assets
included the sale of 47 residential units or lots in Florida, New Mexico and
Texas ($10.4 million), and land in California ($500,000). In 1993, the real
estate sales included the sale of 84 residential units or lots in Florida, New
Mexico and Texas ($15.9 million), land in Tennessee ($360,000), and a
<PAGE>
partnership interest in an apartment complex in Georgia ($850,000). Real estate
rental and other revenues decreased $114,000 in 1994 to approximately $1.1
million reflecting utilization variances at the Reno parking garage and
decreased rentals of other rental property.
Cost of the real estate sales in 1994 totaled $10.9 million, compared with
a cost of approximately $17.4 million in 1993, reflecting the mix of real estate
sold during each year. Real estate operating expenses totaled $4 million in
1994, compared with $3.5 million in 1993. The increase primarily reflects
termination costs in 1994 associated with a real estate project.
A $4.4 million loss provision was recorded in 1994 for a sales contract on
Texas land that was signed in January of 1995. The sale did not close.
General and administrative expenses include an allocation of Seafield's
actual overhead costs totaling $1.6 million in 1994, as compared to $1.7 million
in 1993.
The above factors produced a loss from operations in 1994 of $9 million,
compared to $4.3 million in 1993.
Investment income totaled $894,000 in 1994, compared with $170,000 in 1993.
During 1994, income was recorded representing recognition of deferred interest
income on a real estate note receivable.
Equity in affiliates' operations produced earnings of $254,000 in 1994,
compared with a loss of $1.3 million in 1993. During 1994, the oil and gas
operations recorded affiliated earnings of $373,000, compared to a loss of
$926,000 in 1994, primarily reflecting variances in operating results of the oil
and gas general partnership interests. See Notes to Consolidated Financial
Statements for additional information regarding operations accounted for on the
equity method.
Interest expense in 1994 of $222,000 reflects the consolidation of real
estate debt previously accounted for by the equity method.
Other expense in 1993 consisted of a $1.5 million provision for expected
litigation costs related to termination of a real estate partnership.
41
Tax benefits of approximately $1.5 million were recorded in 1994 compared
with $2.6 million in 1993. Because the Company is a party to a tax sharing
agreement with other Seafield entities, benefits were recorded for utilization
of the Company's losses by Seafield.
The net loss in 1994 of $6.6 million and $4.3 million in 1993 reflect the
above results of operations.
Liquidity and Capital Resources
The Company has no liquidity at September 30, 1996. However, as discussed
in the "Pro Forma Financial Data" section, Seafield will transfer $6.9 million
to the Company on the Distribution Date. Also, approximately $3.1 million of
short-term investments (consisting of a U.S. Treasury Note which is pledged to a
bank for a real estate letter of credit), will be transferred to the Company on
<PAGE>
the Distribution Date. Additionally, any cash generated from the sale of the
Company's assets prior to the Distribution Date will be transferred to the
Company on the Distribution Date.
Management anticipates that cash received as capitalization will be
adequate to fund Seafield liabilities that the Company is assuming. The
capitalization would increase the Company's combined historical equity from
approximately $39 million at September 30, 1996 to approximately $46.9 million.
Debt associated with real estate totaled $1.2 million at September 30, 1996
and is due in December 1997. This consolidated debt is non-recourse. The Company
is obligated under recourse debt (with an unpaid balance of $6.2 million) of an
affiliate accounted for on the equity method. The Company's obligation on this
recourse debt is secured by a $3.1 million U.S. Treasury Note to be transferred
to the Company at the Distribution Date . See Notes to Combined Financial
Statements for additional information.
Management anticipates that future additions to property, plant and
equipment will be minimal. Management estimates that construction and disposal
costs to complete real estate projects in development will be approximately $2
million. The Company's financing requirements through date of distribution have
been met by Seafield. The Company may seek its own credit facilities but
management expects cash flow from operations and the sale of investments will be
sufficient to fund cash needs.
MANAGEMENT OF THE COMPANY
The following persons will serve the Company in the capacities indicated,
effective on or before the date of the Distribution:
Name Age Position
- ---- --- --------
James R. Seward, CFA 44 President, Chief Executive
Officer and Class A Director
P. Anthony Jacobs, CFA 55 Chairman of the Board and Class
A Director
Steven K. Fitzwater 50 Vice President, Chief Accounting
and Financial Officer, Treasurer
and Secretary and Class C
Director
Lan C. Bentsen 49 Class C Director
W. D. Grant 80 Class B Director
W.T. Grant II 46 Class B Director
Michael E. Herman 55 Class A Director
David W. Kemper 46 Class B Director
Mr. Seward has been a director of Seafield since 1990, the Executive Vice
President of Seafield since May 1993; Senior Vice President of Seafield from
August 1990 to May 1993 and Chief Financial Officer of Seafield since 1990.
Mr. Seward also is a director of Syntroleum, LabOne and Response.
42
<PAGE>
Mr Jacobs has been a director of Seafield since 1987, the President of
Seafield since May 1993 and Chief Operating Officer of Seafield since 1990. He
is also a director of Response, Syntroleum, Inc., LabOne, and Trenwick Group,
Inc.
Mr. Fitzwater has been the Vice President, Chief Accounting Officer and
Secretary of Seafield since 1990.
Mr. Bentsen has been a Seafield director since 1986 and has been Managing
Partner of Remington Partners (Investments) since 1995; prior to its sale in
1994, Mr. Bentsen was Chairman and Chief Executive Officer of Sovereign
National Management, Inc. (property management).
Mr. W. D. Grant has been a consultant to Seafield since August 1990; he was
Chairman of the Board of Seafield until May 1993. Mr. W. D. Grant also is a
director of LabOne, Inc. and Boatmen's First National Bank of Kansas City.
Mr. W. T. Grant II has been a director of Seafield since 1980, the Chairman
and Chief Executive Officer of Seafield since May 1993; and President of
Seafield prior to May 1993. Since November 1995, Mr. Grant has also served as
President, Chairman of the Board and Chief Executive Officer of LabOne, Inc.
Mr. Grant also is a director of AMC Entertainment, Inc., Commerce Bancshares,
Inc., Kansas City Power & Light Company, and Response Oncology, Inc.
Michael E. Herman has been a Seafield director since 1991 and has been
engaged in private investments since 1990 (partner Herman Family Trading
Company); he has been President of Kansas City Royals Baseball Team (major
league baseball) since 1993; and Chairman of the Finance Committee of Ewing
Marion Kauffman Foundation since 1990. Mr. Herman also is a director of
Boatmen's First National Bank of Kansas City, Cerner Corporation, Janus Capital
Corporation and Agouron Pharmaceuticals, Inc.
Mr. Kemper has been Chairman of the Board, President and Chief Executive
Officer of Commerce Bancshares, Inc. (bank holding company) and Chairman and
Chief Executive Officer and a director of Commerce Bank, N.A. (St. Louis) for
more than the past five years. Mr. Kemper also is a director of Ralcorp
Holdings, Inc., Wave Technologies International, Inc. and Tower Properties
Company.
The Articles of Incorporation and Bylaws provide that the Company Board
will be divided into three classes of directors, with the classes to be as
nearly equal in number as possible, and that, of the initial directors of the
Company following the Distribution as identified above, the Class A directors
will continue to serve until the 2000 Annual Meeting of Stockholders, the Class
B Directors will continue to serve until the 1998 Annual Meeting of Stockholders
and the Class C Directors will continue to serve until the 1999 Annual Meeting
of Stockholders. Starting with the 1997 Annual Meeting of Stockholders, which
was held in January 1997, one class of directors will be elected each year for a
three-year term. The Bylaws provide that beginning in 1998 annual meetings of
stockholders shall be held on the second Wednesday in May or such other date as
may be fixed by resolution of the Company Board. The first annual meeting for
which proxies will be solicited from stockholders is expected to be held on May
13, 1998. See "CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE
ARTICLES OF INCORPORATION, THE BYLAWS, THE RIGHTS, AND KANSAS LAW -- Classified
Board of Directors."
<PAGE>
Certain Board Committees
The Company Board has established an Executive Committee consisting of
Messrs Seward, Jacobs, Fitzwater and Grant II, an Audit Committee consisting
of Messrs. Kemper, Bentsen and W.D. Grant, and a Nominating Committee and
Compensation Committee consisting of Messrs. Bentsen, Kemper and Herman. The
specific duties of such committees will be established at a meeting of the
Company Board following the Distribution.
43
EXECUTIVE COMPENSATION
Compensation of Directors
Nonemployee directors of the Company will receive compensation consisting
of annual cash retainers, meeting fees and stock option awards.
Cash Compensation. It is expected that directors who are not employees of
the Company will initially be paid an annual retainer for Company Board service
of $1,000 per quarter, a fee of $500 for each Company Board meeting attended.
Directors who are employees of the Company and Messrs Seward, Jacobs and
Fitzwater will not be paid any fee or additional remuneration for services as
members of the Company Board or any committee thereof.
Directors' Stock Options. Pursuant to the SLH CORPORATION 1997 Stock
Incentive Plan (the " SLH Stock Option Plan"), all of the above named directors
of the Company other than Messrs. Seward, Jacobs and Fitzwater will, upon the
date of the Distribution receive options to purchase 16,200 shares of the
Company's Common Stock at the fair market value of such stock as of the close of
business on such date.
Compensation of Executive Officers
The following table summarizes compensation expected to be paid to all of
the Company's Executive Officers for services to be rendered in all capacities
during 1997 on behalf of both the Company and Seafield. Under the Interim
Services Agreement, all of the Executive Officers will be full time employees of
Seafield and officers of the Company until the earlier of the termination of
that agreement and the cessation of their full time employment with Seafield.
Pursuant to that agreement, Seafield will make their services and the services
of certain other Seafield employees available to the Company on an as needed
basis in exchange for Seafield's use of the Company's offices , equipment and
other facilities. See "THE DISTRIBUTION - Interim Services Agreement."
Accordingly, the table below includes remuneration which such Executive Officers
have received from Seafield since the beginning of 1997 and which they would
expect to receive from Seafield should that arrangement continue for the
remainder of 1997. Upon any termination of the arrangement during 1997 it is
expected that each of Messrs. Seward, Jacobs and Fitzwater will receive a base
salary from the Company in the amount of $75,000, $75,000 and $60,000,
respectively , auto allowances and usual health insurance, vacation and other
benefits customarily provided to all salaried employees. For purposes of the
Summary Compensation table below, it has been assumed that the first business
day following the Distribution Date will be March 3, 1997; after the
Distribution Date, the salary of each Named Executive Officer is deemed paid in
part by the Company (at the annual rates set forth above), notwithstanding that
<PAGE>
all compensation is expected to be paid by Seafield until termination of the
Interim Services Agreement. Each of Messrs. Jacobs, Seward and Fitzwater will
also participate in the SLH Stock Option Plan of 1997 to the extent indicated in
the table. The principal positions listed in the table are those which will be
held by the Named Executive Officers with the Company as of the Distribution
Date.
SUMMARY COMPENSATION TABLE
<TABLE>
Long-Term
Compensation
Annual Compensation (1) Awards
------------------------------------------- --------------
Securities
Seafield Company Underlying All Other
Name and Salary Salary Total Salary Options Compensation
Principal Position Year ($) ($) ($) (#)(2) ($)
- ----------------------------- ------- ----------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
James R. Seward, CFA
President and Chief 1997 $ 84,790 $ 62,500 $147,290 65,000 ---
Executive Officer
P. Anthony Jacobs, CFA
Chairman of the Board 1997 187,090 62,500 249,590 65,000 ---
Steven K. Fitzwater
Vice President-
Chief Financial and 1997 44,266 50,000 94,266 40,500 ---
Accounting Officer and
Secretary
- -------------
</TABLE>
44
(1) Bonus compensation is not anticipated for 1997 due to provisions to be
made for Stock Options.
(2) All options are nonqualified stock options, which consist of rights to
acquire shares of Company Common Stock at the fair market value of the
Company Common Stock on the Distribution Date; options have ten year
terms and become exerciseable in equal installments as follows: one-
fourth on the Distribution Date and one-fourth on each of the first,
second and third anniversary dates of the Distribution Date. See
"EXECUTIVE COMPENSATION - SLH Stock Incentive Plan."
Employment Agreements
Each of the Executive Officers named in the Summary Compensation Table is a
party to an Employment Agreement with the Company. Each Employment Agreement
provides for employment of the Executive Officer for an initial term commencing
on the date the Executive Officer ceases to be employed by Seafield under the
Interim Services Agreement on behalf of the Company and ending on the third
anniversary of the Distribution Date. The term of the Employment Agreements is
<PAGE>
automatically extended for successive one year periods unless a notice of
non-extension is given by either party at least twelve months prior to the end
of the then current term.
Compensation does not commence under the Employment Agreement until the
date the Executive Officer ceases to be employed by Seafield under the Interim
Services Agreement. Base compensation, which is initially at the rates per annum
set forth above under "Compensation of Executive Officers," is subject to
adjustment annually by the Company Board, provided that base salary may not be
decreased by more than five percent year to year. The Employment Agreements
provide that an Executive Officer's full time is not required and such Executive
Officer is entitled to pursue other employment or business opportunities
simultaneously with his duties to the Company.
The employment of each of the Company's Executive Officers is subject to
termination for cause, which is defined as including willful misconduct with
respect to an Executive Officer's duties, or the perpetration of a fraud,
embezzlement, or other act of dishonesty, or a breach of trust or fiduciary duty
which materially adversely affects the Company or its stockholders or the other
employment or business activities of such Executive Officer conflicting with the
Company's business. The Employment Agreements provide that the Executive
Officers will not compete with the Company during the term of the Employment
Agreements and, if an Executive Officer is terminated with cause or voluntarily
terminates his employment, for a period of one year thereafter.
SLH Stock Incentive Plan
The Company has adopted a stock incentive plan, which provides for the
granting of stock options respecting Company Common Stock to officers, employees
and non-employee directors of the Company. Pursuant to the stock option plan,
the initial non-employee directors of the Company will be granted options
respecting 16,200 shares of Company common stock, effective on the Distribution
Date. Non-employee directors who first become directors of the Company after the
distribution date would be granted stock options respecting 16,200 shares of
Company common stock effective on the date such a non-employee director first
assumes office as a director of the Company. Each option granted to a
non-employee director pursuant to the terms of the stock incentive plan will
have a term of ten years, will provide for an exercise price equal to 100% of
the fair market value of the Company Common Stock on the Distribution Date and
will become exercisable in four installments as follows: one-fourth on the date
of grant and one fourth on each of the first, second and third anniversaries of
the date of grant. Non-employee directors are entitled to receive additional
grants of stock options under the stock option plan, but only subject to
approval of such subsequent grants by Company stockholders. The Company does not
presently expect that non-employee directors will be granted options other than
those described above.
Except for grants of stock options to non-employee directors as discussed
above (which grants are provided for in the stock option plan itself), stock
option grants will be administered by the Nominating and Compensation Committee
of the Company Board ("Committee"). The Committee shall consist of two or more
non-employee directors. The Committee has authority to issue stock options to
officers and employees, with such terms and provisions as the Committee shall
determine. The stock incentive plan limits the number of shares of Company
Common Stock with respect to which stock
45
<PAGE>
options may be granted to 260,000 in the aggregate and further limits the number
of shares of Company Common Stock which may be subject to stock options granted
to any one individual to 65,000. Stock options granted to officers or employees
may be either incentive stock options (ISO's) or non-qualified stock options
(NQSO's), at the discretion of the Committee. Except in the case of officers or
employees who are beneficial owners of more than ten percent of the voting power
of Company Common Stock (which is not expected to be the case with any of the
Company's officers or employees), options, including both NQSO's and ISO's, may
be granted with an exercise price not less than 100% of the fair market value of
the underlying shares on the date of grant. Options granted to officers and
employees may not expire later than the tenth anniversary of the date of grant
and no options may be granted after December 31, 2001. Options granted to
officers and employees may contain such vesting schedule as is deemed
appropriate by the Committee. The options initially granted to officers and
employees and referred to in the Summary Compensation Table above all provide
for vesting in four equal installments as follows: one-fourth on the date of
grant and one-fourth on each of the first, second and third anniversaries of the
date of grant.
All options held by officers and employees expire six months after an
option holder's employment with the Company terminates; provided, however, that
except in the case of an ISO, the period is extended to twelve months in the
case of a holder's death or disability and is extended to three years in the
case of a holder's retirement. A non-employee director's options terminate
ninety days after his term as a director terminates, except that said period is
extended to twelve months if the non-employee director dies while in office or
during the ninety days thereafter. Generally, options which are exercisable
following termination of an option holder's employment or the expiration of a
non-employee director's term as a director may be exercised only to the extent
exercisable on the date employment terminates or the term as a non-employee
director expires. However, vesting shall be accelerated in the event of an
option holder's death, or, in the case of options granted other than to
non-employee directors, disability or retirement.
All unvested options shall become immediately exercisable in the event of
one or more of the following: (i) acquisition of beneficial ownership of 25% or
more of the voting power of Company common stock by any person other than
descendants of W. D. Grant's father; (ii) a change in the composition of the
Company Board such that a majority of the Board is comprised of persons other
than the initial directors and future directors nominated by the initial
directors or persons who have been nominated by the initial directors; (iii)
consummation of a merger or consolidation involving the Company; or (iv)
adoption of a plan of complete liquidation and dissolution by the Company Board
and the Company's stockholders.
Except in the case of ISOs, payment of the exercise price for options may,
at the holder's election, be made either in cash, in the form of shares of
Company Common Stock previously owned by the option holder, or by way of the
Company withholding shares otherwise issuable upon the exercise of an option
with a fair market value at the time of exercise equal to the exercise price.
46
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS OF COMPANY COMMON STOCK
By Management
The following table sets forth the number of shares of Company Common Stock
expected to be beneficially owned following the Distribution, directly or
indirectly, by each director, each Named Executive Officer and all directors and
executive officers as a group, based upon the beneficial ownership by such
persons of Seafield Common Stock as of November 30, 1996. A list of the
individuals who are expected to be executive officers of the Company immediately
following the Distribution is set forth under "MANAGEMENT OF THE COMPANY."
Except as otherwise indicated, each individual named is expected to have sole
investment and voting power with respect to the securities shown.
Amount and Nature of
Name Beneficial Ownership (1)(2)(11) Percentage(12)
---- ------------------------------- --------------
James R. Seward (9).................. 25,197 1.5%
P. Anthony Jacobs (8)................ 28,716 1.8%
Steven K. Fitzwater.................. 13,584 --
Lan C. Bentsen (3)................... 5,969 --
W. D. Grant (4)...................... 314,511 19.4%
W.T. Grant II (5).................... 41,485 2.6%
Michael E. Herman (6)................ 5,819 --
David W. Kemper (7).................. 4,654 --
All Directors and Officers
as a group of eight (10).......... 431,230 25.6%
- ----------------
(1) A beneficial owner of a security includes a person who, directly or
indirectly, has or shares voting or investment power with respect to
such security. Voting power is the power to vote or direct the voting
of the security and investment power is the power to dispose or direct
the disposition of the security. Each person listed has stated that he,
either alone or with his spouse, has sole voting power and sole
investment power with respect to the shares shown as beneficially
owned, except as otherwise indicated.
(2) Shares of Company Common Stock shown as beneficially owned include
shares issuable upon the exercise of stock options that will be
exercisable on the Distribution Date or that become exercisable within
60 days thereafter, as follows: Lan C. Bentsen, 4,050 shares, W. D.
Grant, 4,050 shares; W. T. Grant II, 4,050 shares; Michael E. Herman,
4,050 shares; David W. Kemper, 4,050 shares; P. Anthony Jacobs, 16,250
shares, James R. Seward, 16,250 shares; Steven K. Fitzwater, 10,125
shares, and all directors and executive officers as a group, 62,875
shares.
(3) Includes 355 shares held by a family trust for the benefit of Mr.
Bentsen's children, as to which he disclaims beneficial ownership. An
unaffiliated person is trustee with sole voting and investment powers.
(4) Includes 59,490 shares held by a family trust for which W. D. Grant
serves as a co-trustee and in that capacity shares voting and
investment powers with UMB Bank, Kansas City, N.A.; also including
<PAGE>
6,712 shares owned by W. D. Grant's wife, as to which he disclaims
beneficial ownership.
(5) Includes 7,593 shares held by W. T. Grant II as custodian for his
children; includes 11,250 shares held in a family trust for which W. T.
Grant II serves as a co-trustee with Laura Gamble and in that capacity
shares voting and investment powers; also includes 2,896 shares owned
by the wife of W. T. Grant II, as to which he disclaims beneficial
ownership. Assumes W.T. Grant II acquires all shares of Seafield Common
Stock subject to exercisable options (5,000) before the Record Date for
the Distribution.
47
(6) Includes 50 shares owned by the Herman Family Trading Company of which
Mr. Herman is a general partner and approximately 73% owner.
(7) Includes 489 shares held in a family trust for which Mr. Kemper serves
as a trustee, and in that capacity shares voting power and has sole
investment power.
(8) Includes 250 shares owned by the wife and 50 shares owned by the son of
P. Anthony Jacobs as to which he disclaims beneficial ownership.
(9) Includes 375 shares held in a family trust for which Mr. Seward serves
as a co-trustee with his mother, and in that capacity shares voting and
investment powers.
(10) Includes (i) 62,875 shares of Company Common Stock issuable upon the
exercise of stock options granted under the SLH 1997 Stock Incentive
Plan that will be exercisable on the Distribution Date or that become
exercisable within 60 days thereafter.
(11) Includes as to each of the following individuals, the following numbers
of shares held in their respective accounts under the Seafield Capital
Corporation 401(k) Plan and Trust, as to which shares the individual
shares investment power, but does not have voting power: James R.
Seward, 160 shares; P. Anthony Jacobs, 446 shares; Steven K. Fitzwater,
131 shares; and W.T. Grant II, 265 shares (plus, in the case of both
Messrs. Fitzwater and Seward, the balance of the shares in the Seafield
401(K) Plan as to which each shares voting power as a member of the
Seafield 401(K) Plan Administrative Committee; the Seafield 401(K) Plan
own an aggregate of 5,858 shares).
(12) The percentages represent the total number of shares of Common Stock
shown in the adjacent column divided by the number of issued and
outstanding shares of Seafield Common Stock as of November 30, 1996,
divided by the Distribution Ratio of one share of Company Common Stock
for each four shares of Seafield Common Stock ( 1,620,862 shares),
plus, in each instance, all shares of Common Stock issuable to the
person or group named upon the exercise of stock options granted under
the SLH Corporation Stock Option Plan for 1997 that will be exercisable
on the Distribution Date or that became exercisable within 60 days
thereafter. Percentages of less than one percent are omitted.
<PAGE>
By Others
The following table sets forth each person or entity (other than
persons set forth in the preceding table) that is expected to beneficially own
more than 5% of the Company Common Stock outstanding immediately following the
Distribution, based upon the ownership of Seafield Common Stock as known to the
Company as of November 30, 1996:
Amount and Nature of
Name Beneficial Ownership Percentage(1)
---- -------------------- -------------
Twentieth Century Companies, Inc.(2)..... 97,325 6.0%
4500 Main Street
P.O. Box 418210
Kansas City, Missouri 64141-9210
- -------------------
(1) The percentages represent the total number of shares of Common Stock
shown in the adjacent column divided by the number of issued and
outstanding shares of Seafield Common Stock as of November 30, 1996,
divided by the Distribution Ratio of one share of Company Common Stock
for each four shares of Seafield Common Stock ( 1,620,862 shares).
(2) As reported in a Schedule 13G filing as of December 31, 1995.
48
DESCRIPTION OF COMPANY CAPITAL STOCK
Under the Articles of Incorporation, the total number of shares of all
classes of stock that the Company has authority to issue is 31,000,000
consisting of 1,000,000 shares of Company Preferred Stock, and 30,000,000 shares
of Company Common Stock. No shares of Company Preferred Stock are being issued
in connection with the Distribution. An aggregate of up to approximately
1,620,862 million shares of Company Common Stock is expected to be distributed
in the Distribution, based on the number of shares of Seafield Common Stock
outstanding on November 30, 1996 (the actual number will depend upon the number
of shares of Seafield Common Stock outstanding as of the Record Date). The
Company plans to have authorized and reserved for issuance 50,000 shares of
Company Junior Participating Preferred Stock (as defined herein) in connection
with the Rights to be issued by the Company in connection with the Distribution.
The holders of Company Common Stock are entitled to one vote per share on
all matters voted on by the stockholders, including the elections of directors,
and, except as otherwise required by law or provided in any resolution (a
"Preferred Stock Designation") adopted by the Company Board with respect to any
series of Company Preferred Stock, the holders of such shares exclusively
possess all voting power. The Articles of Incorporation do not provide for
cumulative voting in the election of directors. Subject to any preferential
rights of any outstanding series of Company Preferred Stock, the holders of
Company Common Stock are entitled to such dividends as may be declared from time
to time by the Company Board from funds available therefor, and upon liquidation
are entitled to receive pro rata all assets of the Company available for
distribution to such holders. All shares of Company Common Stock received in the
Distribution will be fully paid and nonassessable and the holders thereof will
not have any preemptive rights. See "CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN
PROVISIONS OF THE ARTICLES OF INCORPORATION, THE BYLAWS, THE RIGHTS, AND KANSAS
LAW."
<PAGE>
The Company Board is authorized to provide for the issuance of shares of
Company Preferred Stock, in one or more series, to establish the number of
shares in each series and to fix the designation, powers, preferences and rights
of each such series and the qualifications, limitations or restrictions thereof.
See "CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE ARTICLES OF
INCORPORATION, THE BYLAWS, THE RIGHTS, AND KANSAS LAW -- Company Preferred
Stock."
CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE ARTICLES
OF INCORPORATION, THE BYLAWS, THE RIGHTS, AND KANSAS LAW
The Articles of Incorporation, the Bylaws and the Rights contain certain
provisions that could make more difficult the acquisition of the Company by
means of a tender offer, a proxy contest or otherwise. The description set forth
below is intended as a summary only and is qualified in its entirety by
reference to the Articles of Incorporation and the Bylaws, and the Rights
Agreement, which are filed as an exhibits to the Registration Statement.
Classified Board of Directors
The Articles of Incorporation and Bylaws provide that the Company Board
will be divided into three classes of directors, with the classes to be as
nearly equal in number as possible. The Company Board consists of the persons
referred to under "MANAGEMENT OF THE COMPANY." The Articles of Incorporation and
the Bylaws provide that one-third of the initial directors will serve until the
1998 Annual Meeting of Stockholders (Class B), approximately one-third will
continue to serve until the 1999 Annual Meeting of Stockholders (Class C) and
approximately one-third will continue to serve until the 2000 Annual Meeting of
Stockholders (Class A). At each Annual Meeting of Stockholders, one class of
directors will be elected each year for a three-year term. The initial Class B
directors, Messrs. Gamble, Grant II and Robinson will serve until the 1998
Annual Meeting of Stockholders; the initial Class C directors, Messrs. Fitzwater
and Bentsen will serve until the 1999 Annual Meeting of Stockholders and the
Class A directors, Messrs. Seward, Jacobs and Herman, who were elected at the
January 1997 Annual Meeting, will serve until the 2000 Annual Meeting of
Stockholders.
The classification of directors will have the effect of making it more
difficult for stockholders to change the composition of the Company Board. At
least two annual meetings of stockholders, instead of one, will generally be
required
49
to effect a change in a majority of the Company Board. Such a delay may help
ensure that the Company's directors, if confronted by a holder attempting to
force a proxy contest, a tender or exchange offer, or an extraordinary corporate
transaction, would have sufficient time to review the proposal as well as any
available alternatives to the proposal and to act in what they believe to be the
best interests of the stockholders. The classification provisions will apply to
every election of directors, however, regardless of whether a change in the
composition of the Company Board would be beneficial to the Company and its
stockholders and whether or not a majority of the Company's stockholders believe
that such a change would be desirable.
The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or otherwise
<PAGE>
attempting to obtain control of the Company, even though such an attempt might
be beneficial to the Company and its stockholders. The classification of the
Company Board could thus increase the likelihood that incumbent directors will
retain their positions. In addition, because the classification provisions may
discourage accumulations of large blocks of the Company's stock by purchasers
whose objective is to take control of the Company and remove a majority of the
Company Board, the classification of the Company Board could tend to reduce the
likelihood of fluctuations in the market price of Company Common Stock that
might result from accumulations of large blocks. Accordingly, stockholders could
be deprived of certain opportunities to sell their shares of Company Common
Stock at a higher market price than might otherwise be the case.
Number of Directors, Filling Vacancies and Removal
The Articles of Incorporation provide that, subject to any rights of
holders of Company Preferred Stock to elect additional directors under specified
circumstances, the number of directors will be fixed in the manner provided in
the Bylaws. The Bylaws provide that, subject to any rights of holders of Company
Preferred Stock to elect directors under specified circumstances, the number of
directors will be fixed from time to time exclusively pursuant to a resolution
adopted by directors constituting a majority of the total number of directors
that the Company would have if there were no vacancies on the Company Board (the
"Whole Board"), but must consist of not more than eleven nor less than three
directors. In addition, the Articles of Incorporation and Bylaws provide that,
subject to any rights of holders of Company Preferred Stock, and unless the
Company Board otherwise determines, any vacancies or newly created directorships
will be filled only by the affirmative vote of a majority of the remaining
directors, though less than a quorum. Accordingly, absent an amendment to the
Articles of Incorporation and Bylaws, the Company Board could prevent any
stockholder from enlarging the Company Board and filling the new directorships
with such stockholder's own nominees.
Under the Kansas General Corporation Code (the "KGCC"), unless otherwise
provided in the Articles of Incorporation, directors serving on a classified
board may only be removed by the stockholders for cause. In addition, the
Articles of Incorporation and the Bylaws provide that directors may be removed
only for cause and only upon the affirmative vote of holders of at least 80% of
the voting power of all the then outstanding shares of stock entitled to vote
generally in the election of directors ("Voting Stock"), voting together as a
single class.
Stockholder Action
The Articles of Incorporation and the Bylaws provide that, subject to the
rights of any holders of Company Preferred Stock, stockholder action can be
taken only at an annual or special meeting of stockholders or by unanimous
written consent of all stockholders. The Bylaws provide that, subject to the
rights of holders of any series of Company Preferred Stock, special meetings of
stockholders can be called only by the Chairman of the Company Board or by the
Company Board pursuant to a resolution adopted by a majority of the Whole Board.
Stockholders are not permitted to call a special meeting or to require that the
Company Board call a special meeting of stockholders. Moreover, the business
permitted to be conducted at any special meeting of stockholders is limited to
the business brought before the meeting pursuant to the notice of meeting given
by the Company.
<PAGE>
The provisions of the Articles of Incorporation and the Bylaws may have the
effect of delaying consideration of a stockholder proposal until the next annual
meeting unless a special meeting is called by the Chairman or at the request of
a majority of the Whole Board. Moreover, a stockholder could not force
stockholder consideration of a proposal over the
50
opposition of the Chairman and the Company Board by calling a special meeting of
stockholders prior to the time the Chairman or a majority of the Whole Board
believes such consideration to be appropriate.
Advance Notice Provisions for Stockholder Nominations and Stockholder Proposals
The Bylaws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors, or bring other business
before an annual meeting of stockholders of the Company (the "Stockholder Notice
Procedure").
The Stockholder Notice Procedure provides that only individuals who are
nominated by, or at the direction of, the Company Board, or by a stockholder who
has given timely written notice to the Secretary of the Company prior to the
meeting at which directors are to be elected, will be eligible for election as
directors of the Company. The Stockholder Notice Procedure provides that at an
annual meeting only such business may be conducted as has been brought before
the meeting by, or at the direction of, the Chairman or the Company Board, or by
a stockholder who has given timely written notice to the Secretary of the
Company of such stockholder's intention to bring such business before such
meeting. Under the Stockholder Notice Procedure, for notice of stockholder
nominations to be made at an annual meeting to be timely, such notice must be
received by the Company not less than seventy days nor more than ninety days
prior to the first anniversary of the previous year's annual meeting (or, if the
date of the annual meeting is advanced by more than twenty days, or delayed by
more than seventy days, from such anniversary date, not earlier than the
ninetieth day prior to such meeting and not later than the later of (1) the
seventieth day prior to such meeting and (2) the tenth day after public
announcement of the date of such meeting is first made) provided that, with
respect to the annual meeting to be held in 1998 the anniversary date shall be
deemed to be May 13, 1998. Notwithstanding the foregoing, in the event that the
number of directors to be elected is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Company Board made by the Company at least eighty days prior to
the first anniversary of the preceding year's annual meeting, a stockholder's
notice will be timely, but only with respect to nominees for any new positions
created by such increase, if it is received by the Company not later than the
tenth day after such public announcement is first made by the Company. Under the
Stockholder Notice Procedure, for notice of a stockholder nomination to be made
at a special meeting at which directors are to be elected to be timely, such
notice must be received by the Company not earlier than the ninetieth day before
such meeting and not later than the later of (1) the seventieth day prior to
such meeting and (2) the tenth day after public announcement of the date of such
meeting is first made.
Under the Stockholder Notice Procedure, a stockholder's notice to the
Company proposing to nominate an individual for election as a director must
contain certain information, including, without limitation, the identity and
address of the nominating stockholder, the class and number of shares of stock
<PAGE>
of the Company which are owned by such stockholder, and all information
regarding the proposed nominee that would be required to be included in a proxy
statement soliciting proxies for the proposed nominee. Under the Stockholder
Notice Procedure, a stockholder's notice relating to the conduct of business
other than the nomination of directors must contain certain information about
such business and about the proposing stockholders, including, without
limitation, a brief description of the business the stockholder proposes to
bring before the meeting, the reasons for conducting such business at such
meeting, the name and address of such stockholder, the class and number of
shares of stock of the Company beneficially owned by such stockholder, and any
material interest of such stockholder in the business so proposed. If the
Chairman of the Board or other officer presiding at a meeting determines that a
person was not nominated, or other business was not brought before the meeting,
in accordance with the Stockholder Notice Procedure, such person will not be
eligible for election as a director, or such business will not be conducted at
such meeting, as the case may be.
By requiring advance notice of nominations by stockholders, the Stockholder
Notice Procedure will afford the Company Board an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Company Board, to inform stockholders about such
qualifications. By requiring advance notice of other proposed business, the
Stockholder Notice Procedure will also provide a more orderly procedure for
conducting annual meetings of stockholders and, to the extent deemed necessary
or desirable by the Company Board, will provide the Company Board with an
opportunity to inform stockholders, prior to such meetings, of any business
proposed to be conducted at such meetings, together with any recommendations as
to the Company Board's position regarding action to
51
be taken with respect to such business, so that stockholders can better decide
whether to attend such a meeting or to grant a proxy regarding the disposition
of any such business.
Although the Bylaws do not give the Company Board any power to approve or
disapprove stockholder nominations for the election of directors or proposals
for action, they may have the effect of precluding a contest for the election of
directors or the consideration of stockholder proposals if the proper procedures
are not followed, and of discouraging or deterring a third party from conducting
a solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to the Company and its stockholders.
Company Preferred Stock
The Articles of Incorporation authorizes the Company Board to establish one
or more series of Company Preferred Stock and to determine, with respect to any
series of Company Preferred Stock, the terms and rights of such series,
including (1) the designation of the series, (2) the number of shares of the
series, which number the Company Board may thereafter (except where otherwise
provided in the Preferred Stock Designation) increase or decrease (but not below
the number of shares thereof then outstanding), (3) whether dividends, if any,
will be cumulative or noncumulative and the dividend rate and the preferences,
if any, of the series, (4) the dates at which dividends, if any, will be
payable, (5) the redemption rights and price or prices, if any, for shares of
the series, (6) the terms and amounts of any sinking fund provided for the
<PAGE>
purchase or redemption of shares of the series, (7) the amounts payable on
shares of the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, (8) whether the shares
of the series will be convertible into or exchangeable for shares of any other
class or series, or any other security, of the Company or any other corporation,
and, if so, the specification of such other class or series or such other
security, the conversion or exchange price or prices or rate or rates, any
adjustments thereof, the date or dates as of which such shares shall be
convertible or exchangeable and all other terms and conditions upon which such
conversion or exchange may be made, (9) restrictions on the issuance of shares
of the same series or of any other class or series, and (10) the voting rights,
if any, of the holders of such series.
Seafield and the Company believe that the ability of the Company Board to
issue one or more series of Company Preferred Stock will provide the Company
with flexibility in structuring possible future financings and acquisitions, and
in meeting other corporate needs which might arise. The authorized shares of
Company Preferred Stock, as well as shares of the Company Common Stock, will be
available for issuance without further action by the Company's stockholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which the Company's securities may be
listed or traded. If the approval of the Company's stockholders is not required
for the issuance of shares of Company Preferred Stock or the Company Common
Stock, the Company Board may determine not to seek stockholder approval.
Although the Company Board has no intention at the present time of doing
so, it could issue a series of Company Preferred Stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. The Company Board will make any determination to issue
such shares based on its judgment as to the best interests of the Company and
its stockholders. The Company Board, in so acting, could issue Company Preferred
Stock having terms that could discourage an acquisition attempt through which an
acquiror may be able to change the composition of the Company Board, including a
tender offer or other transaction that some, or a majority of, the Company's
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then current
market price of such stock.
Business Combinations
The Articles of Incorporation provides that certain "business combinations"
(as defined in the Articles of Incorporation) must be approved by the holders of
at least 66 2/3% of the voting power of the shares not owned by an "interested
shareholder" (as defined in the Articles of Incorporation, the beneficial owner
of 10% or more of the outstanding Voting Stock), unless the business
combinations are approved by the "Continuing Directors" (as defined in the
Articles of Incorporation) or meet certain requirements regarding price and
procedure.
52
Amendment of Certain Provisions of the Articles of Incorporation and Bylaws
Under the KGCC, the stockholders have the right to adopt, amend or repeal
the bylaws and, with the approval of the board of directors, the articles of
incorporation of a corporation. In addition, if the articles of incorporation so
provide, the bylaws may be adopted, amended or repealed by the board of
<PAGE>
directors. The Articles of Incorporation provide that, in addition to approval
by the Company Board, the affirmative vote of the holders of at least 80% of the
voting power of the outstanding shares of Voting Stock, voting together as a
single class, is required to amend provisions of the Articles of Incorporation
relating to the number, election and term of the Company's directors; the
filling of vacancies on the Company Board; the removal of directors and the
amendment of the Bylaws. Approval by the Company Board, together with the vote
of the holders of a majority of the voting power of the outstanding shares of
Voting Stock, is required to amend all other provisions of the Articles of
Incorporation. The Articles of Incorporation further provides that the Bylaws
may be amended by the Company Board or by the affirmative vote of the holders of
at least 80% of the voting power of the outstanding shares of Voting Stock,
voting together as a single class. The Articles of Incorporation also provides
that, in addition to approval by the Company Board, the affirmative vote of the
holders of at least 66 2/3% of the voting power of the outstanding shares of
Voting Stock, including the affirmative vote of the holders of at least 66 2/3%
of the voting power of the outstanding shares of Voting Stock not owned directly
or indirectly by an interested stockholder or any affiliate thereof, is required
to amend provisions of the Articles of Incorporation regarding certain business
combinations. These super majority voting requirements will have the effect of
making more difficult any amendment by stockholders of the Bylaws or of any of
the provisions of the Articles of Incorporation described above, even if a
majority of the Company's stockholders believe that such amendment would be in
their best interests.
Rights
The Company Board has declared a dividend of one preferred share purchase
right (each a "Right" and, collectively, the "Rights"), effective as of the
Distribution Date, to be paid on the Distribution Date in respect of each share
of the Company Common Stock to the holder of record thereof as of the close of
business on the Distribution Date. Each Right will entitle the registered holder
to purchase from the Company one one-hundredth of a share of junior
participating preferred stock, par value $0.01 per share ("Company Junior
Preferred Stock") of the Company at a price of $125.00 per one one-hundredth of
a share (the "Purchase Price"), subject to adjustment. The terms of the Rights
will be set forth in a Rights Agreement (the "Rights Agreement") between the
Company and American Stock Transfer & Trust Company (the "Rights Agent").
Until the earlier to occur of (1) ten days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 25% or more of the then
outstanding shares of the Company Common Stock or (2) ten business days (or such
later date as may be determined by action of Company Board prior to such time as
any person or group becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 25% or more of the outstanding shares of Company Common Stock (the
earlier of such dates being called the "Rights Distribution Date"), the Rights
will be evidenced by the certificates representing shares of Company Common
Stock.
The Rights Agreement will provide that until the Rights Distribution Date
(or earlier redemption or expiration of the Rights), the Rights will be
transferred with and only with the shares of Company Common Stock. Until the
Rights Distribution Date (or earlier redemption or expiration of the Rights),
certificates representing shares of Company Common Stock will contain a notation
<PAGE>
incorporating the terms of the Rights by reference. Until the Rights
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates representing shares of Company Common
Stock will also constitute the transfer of the Rights associated with the shares
of Company Common Stock represented by such certificate. As soon as practicable
following the Rights Distribution Date, separate certificates evidencing the
Rights ("Rights Certificates") will be mailed to holders of record of the shares
of Company Common Stock as of the close of business on the Rights Distribution
Date and such separate Rights Certificates alone will evidence the Rights.
53
The Rights will not be exercisable until the Rights Distribution Date. The
Rights will expire on August 15, 2006 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of shares of Company Junior
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (1) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the shares of Company Junior Preferred Stock, (2) upon the
grant to holders of the shares of Company Junior Preferred Stock of certain
rights or warrants to subscribe for or purchase shares of Company Junior
Preferred Stock at a price, or securities convertible into shares of Company
Junior Preferred Stock with a conversion price, less than the then-current
market price of the shares of Company Junior Preferred Stock or (3) upon the
distribution to holders of the shares of Company Junior Preferred Stock of
evidences of indebtedness or assets (excluding regular periodic cash dividends
paid out of earnings or retained earnings or dividends payable in shares of
Company Junior Preferred Stock) or of subscription rights or warrants (other
than those referred to above).
The number of outstanding Rights and the number of one one-hundredths of a
share of Company Junior Preferred Stock issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of Company Common Stock
or a stock dividend on Company Common Stock payable in Company Common Stock or
subdivisions, consolidations or combinations of Company Common Stock occurring,
in any such case, prior to the Rights Distribution Date.
Shares of Company Junior Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each share of Company Junior Preferred Stock will
be entitled to a minimum preferential quarterly dividend payment of $1.00 per
share but will be entitled to an aggregate dividend equal to 100 times the
dividend declared per share of Company Common Stock. In the event of
liquidation, the holders of the Junior Preferred Stock will be entitled to a
minimum preferential liquidation payment of $100 per share but will be entitled
to an aggregate payment equal to 100 times the payment made per share of Company
Common Stock. Each share of Company Junior Preferred Stock will have 100 votes,
together with Company Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which Company Common Stock is exchanged,
each share of Company Junior Preferred Stock will be entitled to receive an
amount equal to 100 times the amount received per share of Company Common Stock.
These rights are protected by customary antidilution provisions.
<PAGE>
Because of the nature of the dividend, liquidation and voting rights of
Company Junior Preferred Stock, the value of the one one-hundredth interest in a
share of Company Junior Preferred Stock purchasable upon exercise of each Right
should approximate the value of one share of Company Common Stock.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, proper provision will be made so that each holder
of a Right, other than Rights beneficially owned by the Acquiring Person (which
will thereafter be void), will thereafter have the right to receive upon
exercise thereof at the then current exercise price that number of shares of
Company Common Stock having a market value of two times the exercise price of
the Right (such right being referred to as a "Flip-in Right"). In the event
that, at any time on or after the date that any person has become an Acquiring
Person, the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold,
proper provision will be made so that each holder of a Right will thereafter
have the right to receive, upon the exercise thereof at the then current
exercise price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction will have a market value
of two times the exercise price of the Right.
At any time after any person or group of affiliated or associated persons
becomes an Acquiring Person and prior to the acquisition by such person or group
of 25% or more of the outstanding shares of Company Common Stock, the Company
Board may exchange the Rights (other than Rights owned by such person or group
which will have become void), in whole or in part, at an exchange ratio of one
share of Company Common Stock, or one one-hundredth of a share of Company Junior
Preferred Stock, per Right (subject to adjustment).
54
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Company Junior Preferred Stock will
be issued (other than fractions which are integral multiples of one
one-hundredth of a share of Company Junior Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts) and in lieu
thereof, an adjustment in cash will be made based on the market price of the
shares of Company Junior Preferred Stock on the last trading day prior to the
date of exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 25% or more of the outstanding
shares of Company Common Stock, the Company Board may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption Price").
The redemption of the Rights may be made effective at such time, on such basis
and with such conditions as the Company Board in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The terms of the Rights may be amended by the Company Board without the
consent of the holders of the Rights, including an amendment to lower (1) the
threshold at which a person becomes an Acquiring Person and (2) the percentage
of Company Common Stock proposed to be acquired in a tender or exchange offer
that would cause the Rights Distribution Date to occur, to not less than the
greater of (1) the sum of .001% and the largest percentage of the outstanding
<PAGE>
Company Common Stock then known to the Company to be beneficially owned by any
person or group of affiliated or associated persons and (2) 10%, except that,
from and after such time as any person or group of affiliated or associated
persons becomes an Acquiring Person, no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The Rights will have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
and thereby effect a change in the composition of the Company Board on terms not
approved by the Company Board, including by means of a tender offer at a premium
to the market price, other than an offer conditioned on a substantial number of
Rights being acquired. The Rights should not interfere with any merger or
business combination approved by the Company Board since the Rights may be
redeemed by the Company at the Redemption Price prior to the time that a person
or group has become an Acquiring Person.
The foregoing summary of certain terms of the Rights is qualified in its
entirety by reference to the form of the Rights Agreement, a copy of which has
been filed as an exhibit to the Registration Statement. The Rights are being
registered under the Exchange Act, together with Company Common Stock, pursuant
to the Registration Statement in which this Information Statement is included.
In the event that the Rights become exercisable, the Company will register the
shares of the Company Junior Preferred Stock for which the Rights may be
exercised, in accordance with applicable law.
Antitakeover Legislation
Section 17-12,101 of the KGCC provides that, subject to certain exceptions
specified therein, a corporation shall not engage in any business combination
with any "interested stockholder" for a three-year period following the time
that such stockholder becomes an interested stockholder unless (1) prior to such
time, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (2) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain shares), or
(3) on or subsequent to such time, the business combination is approved by the
board of directors of the corporation and by the affirmative vote of at least 66
2/3% of the outstanding voting stock which is not owned by the interested
stockholder. Except as specified in Section 17-12,100 of the KGCC, an interested
stockholder is defined to include any person that is (a) the owner of 15% or
more of the outstanding voting stock of the corporation, or (b) an affiliate or
associate of the corporation that was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within three years
immediately prior to the relevant date and the affiliates and associates of any
such person.
55
<PAGE>
In addition, Section 1286 through Section 1298 of the KGCC (the "Control
Share Act") contain provisions which provide that "control shares" of an issuing
public corporation acquired in a control share acquisition have (a) voting
rights only to the extent approved by the stockholders under certain specified
circumstances, (b) may be redeemed by the issuing public corporation under
certain circumstances and (c ) provides, under certain specified circumstances,
shareholders who dissent from an action granting control shares voting rights
the right to have the dissenting holder's shares purchased by the Corporation at
a "fair value" which may not be less than the highest price paid per share by
the acquiring person in the control share acquisition. A control share
acquisition is the acquisition of voting power of an issuing public corporation
within the following ranges of voting power: (a) one -fifth or more but less
than one third of all voting power, (b) one-third or more but less than a
majority of all the voting power, or (c ) a majority or more of all voting
power. An issuing public corporation is one having one hundred shareholders or
more, its principal place of business, its principal office or substantial
assets within Kansas; and either more than 10% of its shareholders resident in
Kansas, 2,500 shareholders resident in Kansas or more than 10% of its shares
owned by Kansas residents. The Company intends to locate its principal place of
business in Kansas at such time as it is able to terminate, assign or sublease
the lease of office space in Missouri that it presently occupies as its
executive offices. Upon such relocation the Company believes that it will be an
issuing public corporation immediately following the Distribution.
Under certain circumstances, Section 17-12,101 of the KGCC makes it more
difficult for a person who would be an "interested stockholder" or an acquiring
person to effect various business combinations with a corporation for a
three-year period, although the stockholders may elect to exclude a corporation
from the restrictions imposed thereunder. In addition the Control Share Act may
make it more difficult for a person to acquire a controlling interest in the
Company. The Articles of Incorporation do not exclude the Company from the
restrictions imposed under Section 17-12,101 of the KGCC or under the Control
Share Act. It is anticipated that the provisions of Section 17-12,101 and the
Control Share Act of the KGCC may encourage companies interested in acquiring
the Company to negotiate in advance with the Company Board, because the
stockholder approval requirement would be avoided if a majority of the directors
then in office approve either the business combination or the transaction which
results in the stockholder becoming an interested stockholder.
Comparison with Rights of Holders of Seafield Common Stock
Seafield's charter documents are substantially similar to the Articles of
Incorporation and Bylaws of the Company with respect to (1) classification of
the board of directors; (2) inability of stockholders to call special meetings;
(3) advance notice requirements for stockholder nominations and proposals; (4)
the super majority voting requirement to amend provisions of the Articles of
Incorporation relating to the prohibition of stockholder action without a
meeting, the number, election and term of the Company's directors, or the
removal of directors; (5) the super majority voting requirement for stockholders
to amend the Bylaws related to classification of the Company Board or
establishing the size of the Company Board; (6) the elimination of director
liability in certain circumstances; and (7) the application of Section 17-12,101
and the Control Share Act of the KGCC.
<PAGE>
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Limitation of Liability of Directors.
The Articles of Incorporation provide that a director of the Company will
not be personally liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the Company or its stockholders, (2)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (3) under Section 17-6424 of the KGCC, which
concerns unlawful payments of dividends, stock purchases or redemptions, or (4)
for any transaction from which the director derived an improper personal
benefit.
While the Articles of Incorporation provides directors with protection from
awards for monetary damages for breaches of their duty of care, it does not
eliminate such duty. Accordingly, the Articles of Incorporation will have no
effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of his or her duty of care. The
provisions of the Articles of Incorporation described above apply to an officer
of the Company only if he or she is a
56
director of the Company and is acting in his or her capacity as director, and do
not apply to officers of the Company who are not directors.
Indemnification of Directors and Officers.
The Articles of Incorporation provides that each person who is or was or
had agreed to become a director or officer of the Company, or each such person
who is or was serving or who had agreed to serve at the request of the Company
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise (including the heirs, executors, administrators or
estate of such person), will be indemnified by the Company, in accordance with
the Bylaws, to the fullest extent permitted from time to time by the KGCC, as
the same exists or may hereafter be amended (but, if permitted by applicable
law, in the case of any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than said law
permitted the Company to provide prior to such amendment) or any other
applicable laws as presently or hereafter in effect. The Company may, by action
of the Company Board, provide indemnification to employees and agents of the
Company, and to persons serving as employees or agents of another corporation,
partnership, joint venture, trust or other enterprise, at the request of the
Company, with the same scope and effect as the foregoing indemnification of
directors and officers. The Company may be required to indemnify any person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Company Board or is a proceeding to enforce such person's
claim to indemnification pursuant to the rights granted by the Articles of
Incorporation or otherwise by the Company. In addition, the Company may enter
into one or more agreements with any person providing for indemnification
greater or different than that provided in the Articles of Incorporation.
The Bylaws provide that each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit, or
proceeding, whether civil, criminal, administrative or investigative (a
<PAGE>
"Proceeding"), by reason of the fact that he or she or a person of whom he or
she is the legal representative is or was a director or officer of the Company
or is or was serving at the request of the Company as a director or officer of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such Proceeding is alleged action in an official capacity as a
director or officer or in any other capacity while serving as a director or
officer, will be indemnified and held harmless by the Company to the fullest
extent authorized by the KGCC as the same exists or may in the future be amended
(but, if permitted by applicable law, in the case of any such amendment, only to
the extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment), against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification will continue as to a person who
has ceased to be a director or officer and will inure to the benefit of his or
her heirs, executors and administrators; provided, however, except as described
in the second following paragraph with respect to Proceedings to enforce rights
to indemnification, the Company will indemnify any such person seeking
indemnification in connection with a Proceeding (or part thereof) initiated by
such person only if such Proceeding (or part thereof) was authorized by the
Company Board.
Pursuant to the Bylaws, to obtain indemnification, a claimant is to submit
to the Company a written request for indemnification. Upon such written request
by a claimant, a determination, if required by applicable law, with respect to
the claimant's entitlement to indemnification will be made, if requested by the
claimant, by independent legal counsel, or if the claimant does not so request,
by the Company Board by a majority vote of the disinterested directors even
though less than a quorum or, if there are no disinterested directors or the
disinterested directors so direct, by independent legal counsel in a written
opinion to the Company Board, or if the disinterested directors so direct, by
the stockholders of the Company. In the event the determination of entitlement
to indemnification is to be made by independent legal counsel at the request of
the claimant, the independent legal counsel will be selected by the Company
Board unless there shall have occurred within two years prior to the date of the
commencement of the action, suit or proceeding for which indemnification is
claimed a Change of Control, in which case the independent legal counsel will be
selected by the claimant unless the claimant requests that such selection be
made by the Company Board.
Pursuant to the Bylaws, if a claim described in the preceding paragraph is
not paid in full by the Company within thirty days after a written claim
pursuant to the preceding paragraph has been received by the Company, the
claimant may
57
at any time thereafter bring suit against the Company to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant will be
entitled to be paid also the expense of prosecuting such claim. The Bylaws
provide that it will be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any Proceeding in
advance of its final disposition where the required undertaking, if any is
required, has been tendered to the Company) that the claimant has not met the
standard of conduct which makes it permissible under the KGCC for the Company to
<PAGE>
indemnify the claimant for the amount claimed, but the burden of proving such
defense will be on the Company. Neither the failure of the Company (including
the disinterested directors, independent legal counsel or stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the KGCC, nor an actual
determination by the Company (including the disinterested directors, independent
legal counsel or stockholders) that the claimant has not met such applicable
standard of conduct, will be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct. However, the
Company will be bound by a determination pursuant to the procedures set forth in
the Bylaws that the claimant is entitled to indemnification in any suit brought
by a claimant pursuant to the Bylaws.
The Bylaws provide that the right to indemnification and the payment of
expenses incurred in defending a Proceeding in advance of its final disposition
conferred in the Bylaws will not be exclusive of any other right which any
person may have or may in the future acquire under any statute, provision of the
Articles of Incorporation, the Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise. The Bylaws permit the Company to maintain
insurance, at its expense, to protect itself and any director, officer, employee
or agent of the Company or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss, whether or not
the Company would have the power to indemnify such person against such expense,
liability or loss under the KGCC. The Company intends to obtain directors' and
officers' liability insurance providing coverage to its directors and officers.
In addition, the Bylaws authorize the Company, to the extent authorized from
time to time by the Company Board, to grant rights to indemnification and rights
to be paid by the Company the expenses incurred in defending any Proceeding in
advance of its final disposition, to any employee or agent of the Company to the
fullest extent of the provisions of the Bylaws with respect to the
indemnification and advancement of expenses of directors and officers of the
Company.
The Bylaws provide that the right to indemnification conferred therein is a
contract right and includes the right to be paid by the Company the expenses
incurred in defending any Proceeding in advance of its final disposition, except
that if the KGCC requires, the payment of such expenses incurred by a director
or officer in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a Proceeding, will be made only upon
delivery to the Company of an undertaking by or on behalf of such director or
officer, to repay all amounts so advanced if it is ultimately determined that
such director or officer is not entitled to be indemnified under the Bylaws or
otherwise.
INDEPENDENT AUDITORS
The Company Board has appointed KPMG Peat Marwick LLP as the Company's
independent auditors to audit the Company's financial statements for the fiscal
year 1997. KPMG Peat Marwick LLP has served as Seafield's auditors throughout
the periods covered by the financial statements included in this Information
Statement.
58
<PAGE>
SLH OPERATIONS
AND
SLH CORPORATION
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors with Respect to SLH Operations........... F-2
SLH Operations Combined Balance Sheets as of September 30, 1996 and
December 31, 1995 and 1994........................................... F-3
SLH Operations Combined Statements of Operations for the nine months
ended September 30, 1996 and 1995 and the years
ended December 31, 1995, 1994 and 1993............................... F-4
SLH Operations Statements of Combined Equity............................ F-5
SLH Operations Combined Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995 and the years
ended December 31, 1995, 1994 and 1993............................... F-6
Notes to SLH Operations Combined Financial Statements................... F-7
Report of Independent Auditors with Respect to SLH Corporation.......... F-20
SLH Corporation Balance Sheet as of December 20, 1996................... F-21
Notes to SLH Corporation Balance Sheet.................................. F-21
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Seafield Capital Corporation:
We have audited the combined balance sheet of SLH Operations as of December
31, 1995 and 1994 and the related combined statements of operations, equity and
cash flows for each of the years in the three-year period ended December 31,
1995. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of SLH Operations at
December 31, 1995 and 1994 and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1995, in
conformity with generally accepted accounting principles.
s/s KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Kansas City, Missouri
December 20, 1996
F-2
<PAGE>
SLH OPERATIONS
COMBINED BALANCE SHEETS
(unaudited)
September 30, December 31,
1996 1995 1994
---- ---- ----
(in thousands)
ASSETS
Current assets:
Accounts and notes receivable ........... $ 582 69 633
Real estate under contract............... 2,733 3,868 2,516
Other current assets..................... 342 495 558
----- ----- -----
Total current assets................ 3,657 4,432 3,707
Real estate held for sale.................... 26,985 35,073 40,998
Investment securities........................ 4,879 5,136 6,161
Investment in affiliates:
Oil and gas partnerships and interests... 4,102 5,255 6,703
Other.................................... (180) 123 (185)
Property, plant and equipment................ 488 630 881
Notes receivable............................. -- 22 3,978
Intangible assets............................ 769 839 322
Deferred income taxes........................ 47 118 79
Other assets................................. 43 10 1,983
------- ----- -----
$40,790 51,638 64,627
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................... $ 160 115 107
Other current liabilities................ 298 250 132
------ ----- -----
Total current liabilities........... 458 365 239
Notes payable................................ 1,194 1,289 2,689
Other liabilities............................ 75 115 369
------ ----- -----
Total liabilities................... 1,727 1,769 3,297
------ ----- -----
Total combined equity........................ 39,063 49,869 61,330
------ ------ ------
$40,790 51,638 64,627
====== ====== ======
See accompanying notes to combined financial statements.
F-3
<PAGE>
SLH OPERATIONS
COMBINED STATEMENTS OF OPERATIONS
(unaudited)
Nine Months Ended
September 30, Years Ended December 31,
------------- ------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
REVENUES (in thousands)
Real estate sales.............. $12,801 7,815 10,910 10,932 17,147
Real estate rentals and
other...................... 801 723 1,001 1,059 1,173
------ ----- ------ ------ ------
Total revenues............. 13,602 8,538 11,911 11,991 18,320
COSTS AND EXPENSES...............
Real Estate:
Cost of sales.............. 12,720 7,775 11,298 10,897 17,355
Operating expense.......... 1,930 2,400 3,217 4,048 3,470
Provision for loss on real
estate held for sale.. 47 -- 7,901 4,400 --
General and administrative. 1,031 1,675 2,124 1,639 1,769
----- ----- ------ ----- ------
Loss from operations.. (2,126) (3,312) (12,629) (8,993) (4,274)
Investment income--net........... 1,189 11 29 894 170
Equity in net earnings (loss)
of affiliates.................. (572) (106) (267) 254 (1,260)
Interest expense................. (81) (156) (189) (222) --
Provision for litigation costs... -- -- -- -- (1,500)
------ ----- ------ ----- -------
Loss before income taxes.. (1,590) (3,563)(13,056) (8,067) (6,864)
------ ----- ------ ----- -------
Taxes on income (benefits):
Current....................... -- (608) 1,415) (1,670) (2,352)
Deferred...................... 71 (43) (39) 201 (205)
----- ----- ------ ----- -----
Total..................... 71 (651) (1,454) (1,469) (2,557)
----- ----- ------ ----- ------
NET LOSS........................ $(1,661) (2,912)(11,602) (6,598) (4,307)
======= ======= ======= ======= =======
See accompanying notes to combined financial statements.
F-4
<PAGE>
SLH OPERATIONS
STATEMENT OF COMBINED EQUITY
(in thousands)
Balance, December 31, 1992.................................. $81,454
Net loss................................................. (4,307)
Distributions to Seafield Capital Corporation............ (10,526)
--------
Balance, December 31, 1993.................................. 66,621
Net loss................................................. (6,598)
Capital contributions from Seafield Capital Corporation.. 1,307
--------
Balance, December 31, 1994.................................. 61,330
Net loss................................................. (11,602)
Capital contributions from Seafield Capital Corporation.. 141
--------
Balance, December 31, 1995.................................. 49,869
Net loss (unaudited)..................................... (1,661)
Distributions to Seafield Capital Corporation............ (9,145)
--------
Balance, September 30, 1996 (unaudited)..................... $39,063
=======
See accompanying notes to combined financial statements.
F-5
<PAGE>
SLH OPERATIONS
COMBINED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended September 30, Years Ended December 31,
------------------------------- ------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
OPERATING ACTIVITIES
Net loss ................... $(1,661) (2,912) (11,602) (6,598) (4,307)
Adjustments to reconcile
net loss to net cash
provided (used) by
operations
Depreciation and
amortization.......... 297 429 582 641 784
Equity in net (earnings)
loss of affiliates.... 572 106 267 (254) 1,260
Provision for loss on
sale of real estate.. 47 -- 7,901 4,400 --
Sales of real estate..... 10,612 6,669 9,890 9,838 14,439
Collections of notes
receivable from sales
of real estate, net.. 14 205 4,132 521 1,376
Additions to real
estate held for
sale................. (1,436) (10,145) (12,637) (10,991) (6,551)
Provision for litigation
costs................ -- -- -- -- 1,500
Change in accounts
receivable........... (527) (776) 352 (122) (387)
Change in accounts
payable.............. 45 131 8 (419) (407)
Income taxes and other... 195 54 566 (1,033) (606)
----- ---- ----- ------ -------
Net cash provided (used)
by operations........ 8,158 (6,239) (541) (4,017) 7,101
------ ------- ----- ------- ------
INVESTING ACTIVITIES
Investments in affiliates..... (44) (1,000) 1,000) -- (250)
Distributions from affiliates. 872 1,147 1,447 2,314 1,941
Additions to property, plant
and equipment, net........... (25) (13) (21) (112) (63)
Collections of other notes
receivable................... 22 29 35 159 209
Proceeds from sale (purchase)
of affiliates................ -- 314 314 (114) 1,222
Distributions from venture
capital investment funds..... 257 510 1,025 463 366
----- ----- ----- ----- ------
Net cash provided by investing
activities............... 1,082 987 1,800 2,710 3,425
------ ----- ----- ----- ------
<PAGE>
FINANCING ACTIVITIES
Payment of principal on
long-term debt............... (95) (247) (1,400) -- --
Net transactions with Seafield
Capital Corporation.......... (9,145) 5,499 141 1,307 (10,526)
------- ----- ----- ----- -------
Net cash provided (used) by
financing activities..... (9,240) 5,252 (1,259) 1,307 (10,526)
------- ----- ------- ----- --------
Net change in cash and
cash equivalents......... -- -- -- -- --
Cash and cash equivalents -
beginning of period........ -- -- -- -- --
------ ----- ----- ----- ------
Cash and cash equivalents -
end of period.............. $ -- -- -- -- --
======= ======= ======= ======= ======
Supplemental disclosures of cash flow information:
Cash paid (received) during
the year for:
Interest .................. $ 81 156 189 222 --
======= ====== ======= ======= =======
Income taxes, net.......... $ -- (608) (1,415) (1,670) (2,352)
======= ====== ======= ====== ======
Supplemental disclosure of non-cash transactions:
Acquired in purchase of partnership interest
Real Estate............. $ -- -- -- -- 3,292
======= ======= ======= ======= ======
Notes Payable........... $ -- -- -- -- 1,536
======= ======= ======= ======= ======
See accompanying notes to combined financial statements.
F-6
<PAGE>
SLH OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993 and September 30, 1996 and 1995
Note 1 - Summary of Significant Accounting Policies
Principles of Combination and Basis of Presentation
Pursuant to a Distribution Agreement between Seafield Capital Corporation
(Seafield) and SLH Corporation, Seafield will transfer certain assets (the
Transfer Assets) and liabilities (the Transfer Liabilities), including two
wholly-owned subsidiaries, Scout Development Corporation (Scout) and BMA
Resources, Inc. (Resources), to SLH Corporation (SLH). The Transfer Assets and
Transfer Liabilities will be reflected in SLH Corporation's financial statements
at Seafield's historical cost. Stock of SLH Corporation will then be distributed
to the shareholders of Seafield (the Distribution).
The accompanying combined financial statements present the financial
position, results of operations and cash flows of the business, assets and
liabilities comprising the Transfer Assets and Transfer Liabilities which relate
directly to the businesses transferred (SLH Operations or the Company). Other
Transfer Assets and Transfer Liabilities are discussed in Note 11. The Company
is primarily engaged in the business of managing, developing and disposing of
real estate and energy businesses and other assets consisting of stock
investments of privately-held corporations and limited partnership interests in
privately-held venture capital funds.
Scout's assets consist of partially developed and undeveloped land,
residential development projects and commercial property. Resources has
investments in oil and gas partnerships and Syntroleum Corporation (Syntroleum),
a development-stage company with a process for the conversion of natural gas
into synthetic liquid hydrocarbons which can be further processed into fuels,
such as diesel, kerosene and naphtha. Investments with ownerships of 20% to 50%
are accounted for by the equity method. All significant intercompany
transactions have been eliminated in combination.
The financial information included herein may not necessarily reflect the
financial position and results of operations of the Company in the future or
what these amounts would have been if it had been a separate, stand-alone entity
during the periods presented.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
All highly liquid investments with an original maturity of three months or
less when purchased are considered to be cash equivalents.
<PAGE>
Real Estate and Other Long-lived Assets
Prior to January 1, 1996, real estate held for sale was valued at the lower
of cost, including development costs less allowances for depreciation, or
market. Development costs, interest and real estate taxes which are incurred
during the period of development or construction are capitalized. Capitalized
costs are charged to operations as properties or units are sold or, in the case
of income producing properties, are amortized as part of the depreciation
charges.
Effective January 1, 1996, the Company adopted the provisions of Statement
of Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." With the
F-7
adoption of this standard, real estate projects are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. If the sum of the expected future cash flows
(undiscounted and without interest charges) of the asset is less than the
carrying amount of the asset, an impairment would be recognized as the
difference between the carrying amount and estimated fair value less costs to
sell.
Investment Securities
Investment securities consist of stock investments of two privately-held
corporations and limited partnership interests in privately-held venture capital
funds. These securities are carried at cost because fair values are not readily
determinable; however, management believes the estimated fair value of each
investment exceeds its carrying value.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost with depreciation
provided over the useful lives. Upon sale or retirement, the costs and related
accumulated depreciation are eliminated from the accounts. Any resulting gains
or losses are included in the results of operations.
Oil and Gas Investments
Investments in oil and gas partnerships are accounted for using the equity
method. The Company uses the full cost method of accounting for oil and gas
properties. Under this method, all costs incurred in acquisition and development
are capitalized. Depletion is computed on the units of production method based
on all proven reserves. All general operating costs are expensed as incurred.
Intangible Assets
Goodwill is recorded at acquisition as the excess of cost over fair value
of net assets acquired and is being amortized on a straight-line basis over
periods up to twenty years. Goodwill is presented net of accumulated
amortization of $266,000, $195,000 and $135,000 at September 30, 1996, December
31, 1995 and 1994, respectively. On a periodic basis, the Company estimates the
fair value of the business to which goodwill relates in order to ensure that the
carrying value of goodwill has not been impaired.
<PAGE>
Income Taxes
Income taxes are accounted for as if the Company filed separate tax returns
pursuant to tax sharing agreements among Seafield and its subsidiaries. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
General and Administrative Expenses
Seafield's administrative expenses have been allocated to the Company based
primarily on the relationship of the estimated value of the Company's assets to
the total estimated value of Seafield's assets at September 30, 1996. The
amounts allocated were $961,000 and $1,635,000 for the nine months ended
September 30, 1996 and 1995, respectively, and $2,060,000, $1,585,000 and
$1,721,000 for 1995, 1994 and 1993, respectively. Management believes this
allocation approach is reasonable based on efforts expended in managing all of
Seafield's assets; however these costs may not be indicative of the cost
structure had the Company operated as an independent company during these
periods.
F-8
<PAGE>
Unaudited Interim Period Financial Statements
The accompanying combined financial statements and related footnote
information as of and for the nine months ended September 30, 1996 and 1995 is
unaudited. In the opinion of management, the unaudited combined financial
statements contain all adjustments, which are of a normal recurring nature,
necessary to present fairly the financial position as of September 30, 1996 and
the results of operations and cash flows for the nine months ended September 30,
1996 and 1995. Interim results are not necessarily indicative of operating
results for the entire year.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" is required to be implemented for fiscal years
beginning after December 15, 1995. The Company does not plan to adopt an
optional accounting treatment based on the estimated fair value of employee
stock options allowed by Statement No. 123. However, presentation of pro forma
disclosures of net earnings and earnings per share as if the optional accounting
method had been utilized will be required.
Note 2 - Real Estate Held for Sale
A summary of real estate held for sale follows:
(unaudited)
September 30, December 31,
1996 1995 1994
---- ---- ----
(in thousands)
Land investments/developments............ $ 26,522 27,831 32,572
Commercial building
Gross amount............................ 5,296 5,296 5,296
Less accumulated depreciation .......... 1,293 1,293 1,081
------ ------ -----
4,003 4,003 4,215
Residential developments
Gross amount: Land ..................... 2,088 2,697 2,927
Buildings/improvements ............. 26,237 34,074 28,058
------- ------ ------
28,325 36,771 30,985
------- ------ ------
58,850 68,605 67,772
Less valuation allowance ................ 29,132 29,664 24,258
------- ------ ------
29,718 38,941 43,514
Less real estate under contract ......... 2,733 3,868 2,516
------- ------ ------
Net real estate ......................... $ 26,985 35,073 40,998
======= ====== ======
The 1994 provision for loss of $4.4 million was recorded for a sales
contract signed in January 1995. The 1995 provision for loss of $7.9 million
reflects values based on recent sales transactions of undeveloped land parcels
and sales activity at the residential project in New Mexico.
F-9
<PAGE>
Note 3 - Investment in Oil and Gas Partnerships and Interests
The Company's investment in oil and gas consists principally of four oil
and gas partnerships and prior to 1996, oil and gas working interests. The oil
and gas partnerships, which are accounted for on the equity method, represent
36% to 40% general partnership interests in each partnership. Equity in
operations of oil and gas partnerships are generally recorded based on periods
ended within one month of the Company's accounting period. Shown below is
unaudited combined financial information for the oil and gas investments:
(unaudited)
Nine Months
Ended September 30, Years Ended December 31,
------------------- ------------------------
Results of Operations 1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
Oil and gas revenue.......... $4,920 4,074 6,344 8,989 13,990
Net income (loss)............ (524) (438) (647) 1,386 (1,011)
The Company's equity in net
earnings (loss) ........ (226) 24 (70) 464 (851)
Cash distributions received from the partnerships were $871,000 and
$1,048,000 during the nine months ended September 30, 1996 and 1995 and
$1,348,000, $2,264,000 and $1,860,000 in 1995, 1994 and 1993, respectively.
(unaudited)
September 30, December 31,
1996 1995 1994
---- ---- ----
Financial Position (in thousands)
Assets, primarily oil and gas properties
and short-term investments............ $ 5,565 8,386 12,480
Total liabilities.......................... 1,311 1,324 1,322
The Company's investment in oil and
gas partnerships and interests........ 4,102 5,255 6,703
The Company's proportional interest in oil and gas reserves of partnerships
accounted for by the equity method (in equivalent barrels) is 440,000 and
507,000 as of December 31, 1995 and 1994. The Company's proportional share of
standardized measure of discounted future net cash flows from these reserves is
$3,593,000 and $4,276,000 at December 31, 1995 and 1994, respectively.
The Company's proportional share of net capitalized costs relating to oil
and gas producing activities of partnerships accounted for by the equity method
is $4,028,000 and $6,081,000 at December 31, 1995 and 1994, respectively. The
Company's proportional share of costs capitalized during the year was $368,000,
$417,000 and $492,000 in 1995, 1994 and 1993, respectively.
F-10
<PAGE>
Note 4 - Investment in Affiliates
The Company's 32.5% (at September 30, 1996) investment in Syntroleum is
accounted for on the equity method. Equity in operations of Syntroleum is
generally recorded based on periods with a one to two month delay of the
Company's accounting period, depending upon the availability of financial
information. Summarized unaudited financial information for Syntroleum is shown
below.
Nine Months
Ended September 30, Years Ended December 31,
Results of Operations 1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
Revenue........................ $ 188 41 41 68 --
Net income (loss).............. (829) (261) (426) (307) (251)
The Company's equity in net
earnings (loss) ............ (214) (83) (139) (91) (75)
September 30, December 31,
1996 1995 1994
---- ---- ----
(in thousands)
Financial Position
Current assets......................... $ 1,398 500 21
Other assets ......................... 1,129 431 98
------ ----- -----
Total assets...................... 2,527 931 119
------ ----- -----
Current liabilities.................... 153 4 11
Long-term borrowings................... 1,000 -- --
------ ----- --
Total liabilities................. 1,153 4 11
------ ----- --
The Company's investment in Syntroleum. 100 313 30
Total investment in Syntroleum is presented on the combined balance sheet
as follows:
September 30, December 31,
1996 1995 1994
---- ---- ----
(in thousands)
Investment in affiliate $ 100 313 30
Intangible asset - goodwill, net 769 839 322
------ ----- -----
Total $ 869 1,152 352
====== ===== =====
F-11
<PAGE>
The Company is a 49.9% partner in a general partnership which owns a
shopping center. Prior to September 1995, the Company was also a 49.9% partner
in a general partnership which owned a commercial building. Prior to September
1994, the Company was a 50% partner in a general partnership which owned land.
In December 1993, the Company sold its 99% partnership interest in an apartment
complex. All of these partnerships are accounted for on the equity method.
Summarized unaudited financial information for these partnerships are shown
below.
Nine Months
Ended September 30, Years Ended December 31,
Results of Operations 1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
Revenue...................... $ 586 557 764 956 1,184
Net loss..................... (240) (137) (160) (255) (542)
The Company's equity in net
loss of affiliates........ (132) (47) (58) (119) (334)
September 30, December 31,
1996 1995 1994
---- ---- ----
(in thousands)
Financial Position
Current assets....................... $ 233 514 641
Real estate ....................... 2,259 5,466 7,032
Other assets ....................... 209 229 283
----- --- -----
Total assets.................... 5,701 6,209 7,956
------ ----- -----
Short-term borrowings................ -- 130 120
Other current liabilities............ 94 292 293
Long-term borrowings................. 6,170 6,170 7,102
Other long-term liabilities.......... -- -- 8
------ ----- -----
Total liabilities............... 6,264 6,592 7,523
------ ----- -----
The Company's investment in
real estate affiliates............. (280) (190) (215)
F-12
<PAGE>
Note 5 - Property, Plant and Equipment and Accounts and Notes Receivable
A summary of property, plant and equipment follows:
(unaudited)
Rate of September 30, December 31,
Depreciation 1996 1995 1994
------------ ---- ---- ----
(in thousands)
Property, plant and equipment.... 5%-33% $ 2,579 2,554 2,533
Less accumulated depreciation.... 2,091 1,924 1,652
----- ----- -----
$ 488 630 881
====== ==== ====
A summary of accounts and notes receivable follows:
(unaudited)
September 30, December 31,
1996 1995 1994
---- ---- ----
(in thousands)
Accounts receivable.................. $ 582 55 408
Notes receivable..................... -- 36 4,203
------ ----- -----
582 91 4,611
Less current portion................. 582 69 633
------ ----- -----
$ -- 22 3,978
====== ===== ======
Interest rates on notes receivable were 6% to 10% in 1995 and 1994.
Note 6 - Notes Payable
Notes payable are as follows:
(unaudited)
September 30, December 31,
1996 1995 1994
---- ---- ----
(in thousands)
8.625% loan, secured by real estate,
final maturity in December 1997..... $ 1,194 1,289 1,536
6.25% note, unsecured.................... -- -- 1,153
------ ----- -----
$ 1,194 1,289 2,689
====== ===== =====
The Company is obligated under recourse debt (with an unpaid balance of
$6,170,000 at December 31, 1995) of an affiliate accounted for on the equity
method (see Note 5). The Company's obligation on this recourse debt is secured
by a $3,130,000 U.S. Treasury note to be transferred to the Company as part of
the Distribution and is not reflected in the accompanying combined balance
sheets.
F-13
<PAGE>
Note 7 - Other Assets and Liabilities
The components of other current assets, other current liabilities and other
liabilities follow:
(unaudited)
September 30, December 31,
1996 1995 1994
---- ---- ----
(in thousands)
Other Current Assets
Prepaid expenses..................... $ 234 386 264
Restricted cash...................... 108 109 294
------ --- ---
Total ....................... $ 342 495 558
====== === ===
Other Current Liabilities
Accrued property tax................. $ 241 191 52
Deferred income...................... 47 47 30
Other ....................... 10 12 50
------ ----- -----
Total ....................... 298 250 132
====== ===== =====
Other Liabilities
Deferred income...................... $ 71 106 170
Interest payable..................... -- -- 186
Other ....................... 4 9 13
------ ----- -----
Total ....................... $ 75 115 369
====== ===== =====
F-14
<PAGE>
Note 8 - Income Taxes
The real estate assets, energy assets, and other miscellaneous assets of
the Company were acquired from Seafield, and were included in Seafield's
consolidated U.S. federal income tax returns. The income tax provisions and tax
liabilities have been calculated as if the Company had filed separate returns,
utilizing a tax sharing agreement with Seafield.
During 1995, the Company generated approximately $1 million in current
capital losses that exceeded capital gains. These losses are carried forward
through the year 2000. Future realization of these tax assets or any existing
deductible temporary differences or carryforwards ultimately depend on
sufficient taxable income of the appropriate character occurring within the
carryover period. When it becomes more likely than not that a deferred tax asset
will not be realized, a valuation allowance is accrued against that deferred tax
asset.
The components of the provision (benefit) for income taxes on income from
the Company are as follows:
(unaudited)
Nine months ended Years ended
September 30, December 31,
------------- ------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
Current: (In thousands)
Federal............. $ -- (617) (1,424) (1,508) (2,349)
State............... -- 9 9 (162) (3)
----- - ------ ------- ------
-- (608) (1,415) (1,670) (2,352)
----- ----- ----- ----- -----
Deferred:
Federal............. -- -- -- -- --
State............... 71 (43) (39) 201 (205)
----- ----- ----- ----- -----
71 (43) (39) 201 (205)
----- ----- ----- ----- -----
$ 71 (651) (1,454) (1,469) (2,557)
===== ===== ===== ===== =====
<PAGE>
The reconciliation of income tax computed at federal statutory tax rates to
income tax expense is as follows:
(unaudited)
Nine months ended Years ended
September 30, December 31,
------------- ------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
Computed expected tax
expense (benefit)..... $ (541) (1,212) (4,439) (2,743) (2,334)
State income taxes, net of
federal benefit and
changes in state
valuation allowances.. 47 (23) (20) 26 (121)
Goodwill amortization...... 24 11 20 16 15
Tax benefits not available
for subsidiary losses. 73 28 47 31 26
Increase (decrease) in
federal taxes due to
valuation allowances.. 465 621 2,845 1,518 (919)
Other, net................. 3 (76) 93 (317) 776
----- ----- ----- ------ ------
Actual income tax expense
(benefit)............. $ 71 (651) (1,454) (1,469) (2,557)
===== ===== ===== ===== =====
Effective tax rates........ 4% (18%) (11%) (18%) (37%)
F-15
<PAGE>
The significant components of deferred income tax assets and liabilities
are as follows:
(unaudited)
Nine months ended
September 30, December 31,
------------- ------------
1996 1995 1994
---- ---- ----
(In thousands)
Current deferred income tax assets:
Excess book expense accruals................. $ 490 229 --
Other, net................................... 12 12 87
----- ----- --
Gross current deferred income tax assets..... 502 241 87
Current valuation allowance.................. (502) (241) (87)
----- ----- -----
Net current deferred income tax assets....... -- -- --
----- ----- -----
Non-current deferred income tax assets:
Excess book expense accruals.................. 266 267 257
Excess book partnership expenses.............. 200 200 187
Excess book oil and gas expenses.............. 5 225 378
Real estate valuation allowances and
other basis differences.................. 6,644 7,282 4,886
Excess book depreciation and amortization..... 175 238 247
Alternative minimum tax credit................ 157 157 --
Other, net.................................... 28 42 138
Capital loss carryforwards.................... 1,363 337 --
Federal audit adjustment carryback............ 535 535 --
State net operating loss carryforwards........ 3,112 3,000 2,733
------ ------ ------
Gross non-current deferred income tax assets..12,485 12,238 8,826
Valuation allowance for non-current deferred
income tax assets.......................(12,438) (12,165) (8,747)
------ ------ ------
Net non-current deferred income tax assets... 47 118 79
------ ------ ------
Net deferred income tax assets...............$ 47 118 79
====== ====== ======
The federal and state valuation allowances increased during the nine months
ending September 30, 1996 by $534,000; increased during 1995 by approximately
$3,572,000; and increased by $1,603,000 during 1994. The federal and state
valuation allowances as of December 31, 1993 were $7,231,000.
F-16
<PAGE>
Note 9 - Lease Commitments
Office space, equipment, land and buildings are leased under various,
noncancelable leases that expire over the next several years. Rental expense,
including an allocation of Seafield's total lease expense, was $279,000 during
the nine month periods ended September 30, 1996 and 1995 and was $372,000,
$352,000 and $325,000 for 1995, 1994 and 1993, respectively.
Total future minimum lease payments under these agreements as of December
31, 1995 are as follows:
Year Amount
---- ------
(In thousands)
1996 $ 552
1997 543
1998 538
1999 355
2000 294
Thereafter 6,512
Included above is annual rent for the ground lease on a parking garage in
Reno, Nevada of $294,000. The lease agreement provides for increases every five
years based on the Consumer Price Index and expires in 2023.
Note 10 - Fair Value of Financial Instruments
The estimated fair values of the Company's significant financial
instruments at December 31, 1995 are summarized as follows:
Estimated
Carrying Amount Fair Value
--------------- ----------
(in thousands)
Accounts and notes receivable.................. $ 69 69
Investment securities - not practical to
estimate fair value.......................... 5,136 --
Note payable................................... 1,289 1,092
The fair value of accounts and notes receivable approximate cost because of
the short-term maturity of these financial instruments. The investment
securities represent equity investments in unrelated entities for which there is
not a market and, therefore, it is not practical to estimate fair value. The
estimated fair value of the note payable was calculated by discounting scheduled
cash flows using estimated market discount rates.
Note 11- Subsequent Events and Contingencies
Transfer of Certain Assets and Liabilities from Seafield
On the date of the Distribution, Seafield will transfer to the Company the
Transfer Assets and Transfer Liabilities pursuant to a Distribution Agreement
and a Blanket Assignment, Bill of Sale, Deed and Assumption Agreement (the
Agreements). These Agreements also provide for the Company to receive cash and a
U.S. Treasury note, rights with respect to claims in pending litigation and to
incur obligations described below which are not reflected in the accompanying
combined financial statements.
<PAGE>
Employee Benefits
The Agreements contain a number of provisions relating to employees. The
provisions generally contemplate that the Company will assume no obligations or
liabilities with respect to Seafield employee plans or benefits prior to the
F-17
Distribution Date and that after the Distribution Date, the Company will be
responsible for providing employee benefits for Seafield personnel that become
employees of the Company.
The Agreements provide that the Company will provide each executive officer
of the Company employment agreements and participation in a new stock incentive
plan.
Tax Agreements
Through the Distribution Date, the results of the operations of the Company
will be included in Seafield's consolidated Federal income tax returns. As part
of the Distribution, the Company and Seafield will enter into a Tax Sharing
Agreement which provides, among other things, for the allocation among the
parties of Federal, state, local and foreign tax liabilities for all periods
through the Distribution Date. In general, the Tax Sharing Agreement provides
that the Company will be liable for all Federal, state, local and foreign tax
liabilities, including any such liabilities resulting from the audit or other
adjustment to previously filed tax returns, which are attributable to the
Company, and that Seafield will be responsible for all other such taxes, except
for the tax liabilities arising out of or that are related to the tax claims as
described below.
Interim Services Agreement
On or prior to the Distribution Date, Seafield and the Company will enter
into the Interim Services Agreement for the purpose of permitting Seafield and
the Company to continue to jointly use their respective personnel and
facilities. Under the arrangement, Seafield agrees to provide to the Company
services required by the Company for its executive and administrative
operations. In exchange for those services, the Company agrees to provide the
retained Seafield personnel with office facilities and equipment sufficient for
the conduct of Seafield's activities. Following the Distribution, Seafield and
the Company will review the amount of personnel and facilities used under the
arrangement and each will reimburse the other to the extent that the exchange of
facilities for services is not equivalent.
Claims in Pending Litigation
In 1986, a lawsuit was initiated in the Circuit Court of Jackson County,
Missouri by Seafield's former insurance subsidiary (i.e., Business Men's
Assurance Company of America) against Skidmore, Owings & Merrill (SOM) which is
an architectural and engineering firm, and a construction firm to recover costs
incurred to remove and replace the facade on the former home office building.
Because the removal and replacement costs had been incurred prior to the sale of
the insurance subsidiary, Seafield negotiated with the buyer for an assignment
of the cause of action from the insurance subsidiary. Pursuant to the
Distribution Agreement this lawsuit will be assigned to the Company. Thus, any
recovery will be for the benefit of the Company and all future costs incurred in
<PAGE>
connection with the litigation will be paid by the Company. Any ultimate
recovery will be recognized as income when received and would be subject to
income taxes. In September 1993, the Missouri Court of Appeals reversed a $5.7
million judgment granted in 1992 in favor of Seafield; the Court of Appeals
remanded the case to the trial court for a jury trial limited to the question of
whether or not the applicable statute of limitations barred the claim. The
Appeals Court also set aside $1.7 million of the judgment originally granted in
1992. In July 1996, this case was retried to a judge. A ruling is expected from
the judge by the end of the first quarter of 1997. The only remaining defendant
is SOM; settlement arrangements with other defendants have resulted in payments
to plaintiff which have offset legal fees and costs to date of approximately
$450,000. None of the prior or future legal fees or costs are recoverable from
the remaining defendant, even if the judgment in plaintiff's favor is ultimately
granted. Future legal fees and costs can not reliably be estimated.
Tax Issues
Internal Revenue Service Audits. Seafield has received notices of proposed
adjustments (Revenue Agent's Reports) from the Internal Revenue Service (IRS)
with respect to 1986-90 federal income taxes. These notices claim total federal
income taxes due for the entire five year period in the approximate net amount
of $13,867,000, exclusive of interest thereon.
F-18
The substantive issues raised in these notices for the years 1986-1987 are
primarily composed of the former television subsidiaries' amortization of film
rights, the sale of the stock of a former television station, and certain
life/non-life tax return consolidation issues. The amount of tax claimed as due
by the IRS for the 86-87 period is $13,545,000. For the 1988-1989 periods the
same television film rights amortization issues were raised, including some
reversals of the previous period's adjustments as well as other miscellaneous
issues. The amount of tax claimed by the IRS for the 88-89 period is $182,000.
The sole significant issue for 1990 is the denial of Seafield's $27 million
loss on the 1990 sale of a former real estate partnership interest. This 1990
loss was carried back in part by Seafield to the 1987 tax year, which generated
a refund claim of $7.6 million. The IRS has claimed that the sale did not occur
during 1990, but rather occurred after 1991, thereby negating the carryback
refund claim. Therefore, the total additional 1990 tax proposed by the IRS,
after the denial of the $7.6 million carryback claim for refund, is $139,000.
Seafield has filed protests regarding the 1986-90 notices of proposed
adjustments. Seafield is currently pursuing a compromise with the Appeals
Division of the IRS for the 1986-89 years. The 1990 issues have not yet been
formally addressed at the Appeals Division. Resolution of these tax disputes may
reasonably be expected during 1997, but is not certain.
The Company is assuming from Seafield all contingent tax liabilities and is
acquiring all rights to refunds as well as any interest thereon related to these
tax years (the "Tax Claims") and liabilities and refunds related to any issues
raised by the IRS during 1986-1990 whose resolution may extend to tax years
beyond the 1990 tax year. The Company believes that it will prevail on the 1990
loss carryback issue, and that there are meritorious defenses or pending
favorable compromises for many of the other substantive issues. The Company
believes that adequate accruals for these income tax liabilities have been made.
These accruals will be transferred from Seafield to the Company as part of the
Distribution.
<PAGE>
California Tax issues. In December 1996, the California state auditor sent
Seafield an audit report covering the 1987-1989 taxable years. The State of
California has determined to include, as a "unitary taxpayer," all majority
owned non-life insurance subsidiaries and joint ventures of Seafield. The
auditor's report has been forwarded to the California Franchise Tax Board for
action. A billing is expected to be made to Seafield within six months from the
submission of the report by the auditor. The total amount of California state
income taxes due for the 1987-1989 years is expected to be approximately
$750,000, exclusive of interest. The Company is assuming all potential tax
liabilities and interest thereon regarding the California audit for the
1987-1989. The Company believes that it has established on the pro forma balance
sheet herein appropriate accruals for the California state income tax liability.
The Company believes that final resolution of the above Tax Claims after
taking into account offsetting claims for refunds and amounts reserved, should
not have a material adverse effect on the Company's financial position.
Other
In 1995, Tenenbaum & Associates, Inc., a former 80%-owned subsidiary of
Seafield, sold certain assets, distributed the remaining net assets to
shareholders and filed for dissolution. Ongoing activity for this investment
relates to collecting accounts receivable and monitoring unbilled revenue
accounts. Seafield also assumed an office lease that expires in 2000. Seafield
accounts for Tenenbaum activity on a cost recovery basis. In conjunction with
the Distribution, the Company will record accounts receivable estimated at
$800,000 and a lease liability of $500,000 to reflect the estimated fair value
of the lease based on a discounted cash flow analysis.
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
SLH Corporation:
We have audited the balance sheet of SLH Corporation as of December 20,
1996. This balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of SLH Corporation as of December
20, 1996 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Kansas City, Missouri
December 20, 1996
F-20
<PAGE>
SLH CORPORATION
Balance Sheet
December 20, 1996
ASSETS
Cash............................................. $ 100
------
Total assets................................. $ 100
======
STOCKHOLDERS' EQUITY:
Preferred stock of $.01 par value.
Authorized 1,000,000 shares, none issued
Common stock of $.01 par value................... $ ---
Authorized 30,000,000 shares;
issued 1,620,862 shares....................... 1
Paid-in capital.................................. 99
------
Total stockholders' equity................... $ 100
======
The accompanying notes are an integral part of this balance sheet.
Notes to Balance Sheet
Note 1. Organization
SLH Corporation (SLH) was formed on December 5, 1996 to acquire certain
assets and liabilities of Seafield Capital Corporation.
Note 2. Distribution
On the date of Distribution, pursuant to the Distribution Agreement,
Seafield Capital Corporation will transfer to SLH the Transfer Assets and
Transfer Liabilities. There will be a distribution of one share of SLH stock
for each four shares of Seafield stock.
SLH will also enter into a Tax Sharing Agreement and an Interim Services
Agreement and assume certain liabilities and contingencies. See Note 11 of Notes
to Combined Financial Statements of SLH Operations.
F-21
<PAGE>
Annex A
GEORGE K. BAUM & COMPANY
INVESTMENT BANKERS
MEMBER Twelve Wyandotte Plaza
NEW YORK STOCK EXCHANGE, INC. 120 West 12th Street
CHICAGO STOCK EXCHANGE, INC. Kansas City, Missouri 64105
Telephone (816) 474-1100
December 21, 1996
Board of Directors
Seafield Capital Corporation
c/o Mr. P. Anthony Jacobs
President & COO
2600 Grand Avenue, Suite 500
P. O. Box 410949
Kansas City, Missouri 64141
Gentlemen:
You have asked George K. Baum & Company ("GKB") to render our opinion
as to the Fair Market Value of the Common Stock of SLH Corporation, a Kansas
corporation ("SLH") to be distributed to the shareholders of Seafield Capital
Corporation ("Seafield") pursuant to a Distribution Agreement between Seafield
and SLH dated as of December 20, 1996 (the "Distribution Agreement") and
following the transfer by Seafield to SLH of the Transfer Assets and Transfer
Liabilities described in the Distribution Agreement as if the Distribution had
occurred as of September 30, 1996. Our opinion of the Fair Market Value of the
Stock is based in part on the Form 10 of SLH to be filed with the Securities and
Exchange Commission dated December 21, 1996, and the financial statements of SLH
included in the Information Statement thereof, and in particular the unaudited
balance sheet of SLH as of September 30, 1996, and related statements of
operations for the nine months then ended, all of which have been prepared by
SLH and reviewed by KPMG Peat Marwick LLP (the "Form 10"). For purposes of this
opinion "Fair Market Value" means the price at which property would change hands
between a willing seller and a willing buyer when neither is under compulsion
and when both have reasonable knowledge of the relevant facts.
We understand that in connection with the Asset transfer from Seafield
to SLH and the subsequent distribution of one share of SLH stock for each four
shares of Seafield Common Stock, that the distribution is conditioned upon,
among other things, completion of the transfer of the Transfer Assets and
assumption by SLH of the Transfer Liabilities. Any of the conditions to the
distribution may be waived, at any time prior to the proposed distribution date
of February 28, 1997, for any reason, in the sole discretion of the Board of
Directors of Seafield. Even if all conditions are satisfied, the Board of
Directors of Seafield has reserved the right to abandon, defer or modify the
distribution and the related transaction as described in the Form 10 at any time
prior to February 28, 1997 for any reason.
<PAGE>
Board of Directors
Seafield Capital Corporation
December 21, 1996
Page 2
In rendering our opinion, GKB has, among other things, (i) reviewed
information put together by Seafield and SLH management of the
assets/liabilities to be spun-off to SLH dated July 1996, (ii) visited the
following assets and/or properties that are proposed to be spun-off to SLH: (1)
a small shopping center in Gillette, Wyoming; (2) a seven story parking garage
in the center of downtown Reno, Nevada; (3) Quail Run, an exclusive residential
real estate development in Santa Fe, New Mexico; (4) undeveloped real estate
consisting of one 370 acre tract in Houston, Texas; (5) undeveloped real estate
consisting of three tracts totaling 761 acres in Fort Worth, Texas; (6) 16 acres
of commercially zoned property in southern Johnson County, Kansas; and (7)
Syntroleum Corporation's ("Syntroleum") headquarters and pilot plant in Tulsa,
Oklahoma;(iii) reviewed appraisals of the following properties: (1) Powder Basin
Shopping Center, Gillette, Wyoming, prepared as of February 22, 1996; (2)
undeveloped real estate, 370 acres in Houston, Texas as of November 20, 1996;
(iv) reviewed real estate offering material on the following properties: (1)
Powder Basin Shopping Center, Gillette, Wyoming; (2) the Prairie Vista and
Springview tracts, totaling 547 acres, Fort Worth, Texas; and (3) a single
tract, totaling 205 acres, Fort Worth, Texas, (v) interviewed Syntroleum's
management as to Syntroleum's business and possible future trends, and reviewed
projections prepared by Syntroleum management as well as, various 1996
funding/pricing transactions with Syntroleum's common stock and various
contracts and other documents, (vi) reviewed certain correspondence from the
general partners of (1) First Century Partnership III, dated October 28, 1996 as
to values as of September 30, 1996 for the equity partnership and (2) Bundy
Partners, Westgate Partners, and Bentel Partners, dated May 13, 1996 as to
values as of December 31, 1995 for those oil and gas partnerships, (vii)
reviewed preliminary prospectus on Norian Corporation ("Norian") which was
scheduled to go public in June/July of 1996 but was called off due to market
pricing conditions (SLH owns 181,250 shares of Norian), (viii) reviewed certain
internal financial analyses and forecasts prepared by Seafield management; (ix)
reviewed certain documents relevant to the Tax Claims described in the
Information Statement; and (x) reviewed various other documents relating to
SLH and its businesses, assets and liabilities. GKB also held discussions with
members of the senior management regarding SLH's proposed assets' past and
current operations, financial condition and future prospects. In addition, GKB
reviewed Seafield's closing stock price as of the end of the month from January
1995 through November 1996 and deducted the market value of LabOne, Response,
and cash to see what value the market was placing on the proposed assets to be
spun-off into SLH.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of all of the financial and other information used by
us as the basis of our opinion. It should be noted that this opinion is based,
in part, on economic, market and other conditions as in effect on, and
information made available to us prior to October 1, 1996, and does not
represent an opinion as to what value SLH Stock actually will have if and when
the distribution is consummated. Such actual value could be affected by changes
in such market conditions, general
Board of Directors
Seafield Capital Corporation
December 21, 1996
Page 3
<PAGE>
economic conditions and other factors which generally influence the price of
securities. Furthermore, any valuation of securities is only an approximation,
subject to uncertainties and contingencies all of which are difficult to predict
and beyond the control of the firm preparing such valuation.
GKB, as part of its investment banking business, is regularly engaged
in the evaluation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of securities,
private placements and for corporate planning and other purposes. In the
ordinary course of our business, we may, from time to time, effect transactions
for the accounts of our customers in securities of Seafield and receive
customary compensation in connection therewith. Prior to Seafield's engagement
of George K. Baum & Company on October 7, 1996, to render financial advisory
and investment banking services to Seafield, we had not previously been engaged
to provide investment banking services to Seafield , except for underwriting
activities with respect to a $6 million bond offering early in 1996.
It is understood that this opinion may be included in any statement or
written communication distributed to holders of SLH Stock in connection with the
distribution; provided that this opinion, any summary of this opinion, any
excerpt of this opinion, and any reference to our services to Seafield may be
used in such statement or otherwise only with our prior written approval.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, it is our opinion that the Fair
Market Value per share of SLH's Common Stock, including the associated preferred
share purchase rights, as if the Distribution had occurred at the close of
business on September 30, 1996, is $26.00 per share.
Respectfully submitted,
s/s George K. Baum & Company
GEORGE K. BAUM & COMPANY
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
The Board of Directors and Stockholders
Seafield Capital Corporation:
Under the date of December 20, 1996, we reported on the combined balance sheets
of SLH Operations as of December 31, 1995 and 1994 and the related combined
statements of operations, equity and cash flows for each of the years in the
three-year period ended December 31, 1995, which are included in SLH
Corporation's registration statement on Form 10 to be filed with the Securities
and Exchange Commission. In connection with our audits of the aforementioned
combined financial statements, we also audited the related combined financial
statement schedule in the registration statement. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule based on our
audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic combined financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
s/s KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Kansas City, Missouri
December 20, 1996
S-1
<PAGE>
<TABLE>
SLH OPERATIONS
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<CAPTION>
Costs Capitalized Gross Amount
Initial Cost Subsequent at which Carried
to Company to Acquisition at December 31, 1995
Buildings Buildings Date
& Improve- Improve- Carrying & Improve- Accum. Tax Constr. Date Depr.
Description Land ments ments Costs Land ments Total Reserves Depr. Basis Began Acquired Life
- ----------- ---- -------- -------- -------- ---- ---------- ----- -------- ----- ------ ------ -------- ----
(in thousands)
Land Investments/
Developments:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Houston, TX $ 6,158 49 1,014 1,553 4,463 -- 4,463 890 -- 4,615 -- 1974 --
Tulsa, OK 754 -- -- -- 754 -- 754 589 -- 754 -- 1980 --
Ft. Worth, TX 11,501 -- 91 -- 7,720 -- 7,720 5,506 -- 7,495 -- 1986 --
Ft. Worth, TX 3,886 -- -- -- 3,886 -- 3,886 3,487 -- 3,886 -- 1986 --
Ft. Worth, TX 2,770 -- -- 42 2,812 -- 2,812 2,642 -- 1,932 -- 1984 --
Ft. Worth, TX 4,633 -- -- -- 4,633 -- 4,633 4,364 -- 2,203 -- 1989 --
Ft. Worth, TX 1,000 -- -- -- 665 -- 665 631 -- 665 -- 1986 --
Olathe, KS 3,292 -- 46 -- 2,898 -- 2,898 -- -- 2,681 -- 1991 --
Commercial:
Reno, NV -- 5,277 19 -- -- 5,296 5,296 643 1,293 4,572 -- 1989 20 yrs
Residential:
Juno Beach, FL 13,740 -- 32,969 2,689 1,328 6,363 7,691 1,643 -- 5,340 1985 1983 --
Santa Fe, NM 4,576 -- 65,122 14,200 1,369 27,711 29,080 9,269 -- 23,044 1987 1985 --
------ ----- ------ ------- ------ ------ ------ -----
$52,310 5,326 99,261 18,484 30,528 39,370 69,898 29,664 1,293 57,187
====== ===== ====== ====== ====== ====== ====== ====== ======
Reserves (29,664)
------
Net real estate before depreciation 40,234
Less accumulated depreciation (1,293)
------
Net real estate 38,941
Less current portion (3,868)
------
Real Estate, net of current portion $ 35,073
</TABLE>
S-2
<PAGE>
SLH OPERATIONS
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
RECONCILIATION BETWEEN YEARS
A) Reconciliations of total real estate carrying values for the three years
ended December 31, 1995 are as follows:
1995 1994 1993
---- ---- ----
(In thousands)
Balance at beginning of year.....................$ 44,595 44,550 52,438
Additions during year:
Improvements............................... 12,637 10,991 6,551
Consolidate joint venture.................. -- 3,292 --
------ ------ -----
57,232 58,833 58,989
Deductions during year:
Value of real estate sold................... 9,890 9,838 14,439
Provision for loss on sale of real estate.. 7,108 4,400 --
------ ------ ------
16,998 14,238 14,439
------ ------ ------
Balance at end of year...........................$ 40,234 44,595 44,550
======= ====== ======
A) Reconciliations of accumulated depreciation for the three years ended
December 31, 1995 are as follows:
1995 1994 1993
---- ---- ----
(In thousands)
Balance at beginning of year.....................$ 1,081 868 655
Additions during year - depreciation............. 212 213 213
------- --- ---
1,293 1,081 868
Deductions during year - accumulated
depreciation of real estate sold............ -- -- --
------- ------ -----
Balance at end of year......................$ 1,293 1,081 868
======= ====== =====
S-3
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EXHIBIT INDEX
Exhibit
Number Description
------- -----------
2(a) Form of Distribution Agreement.
2(b) Form of Blanket Assignment, Bill of Sale, Deed and
Assumption Agreement [incorporated by reference to
exhibit D to Exhibit 2 (a)].
3(a) Articles of Incorporation of SLH Corporation.
3(b) Bylaws of SLH Corporation.
4 Form of Rights Agreement
8 Opinion of Lathrop & Gage L.C. with regard to certain tax
matters.
10(a) Form of Facilities Management and Interim Services
Agreement [incorporated by reference to exhibit A to
Exhibit 2(a)].
10(b) Form of Tax Sharing Agreement [incorporated by reference to
exhibit C to Exhibit 2 (a)].
10(c) Form of SLH Corporation 1997 Stock Incentive Plan
[incorporated by reference to exhibit E to Exhibit 2(a)].
10(d) Form of Employment Agreements with certain executive
officers of SLH [(incorporated by reference to
exhibit B to Exhibit 2(a)].
21 Subsidiaries of SLH Corporation
Scout Development Corporation (Missouri)
Scout Development Corporation of New Mexico (Missouri)
BMA Resources, Inc. (Missouri)
27 Financial Data Schedule
<PAGE>
<PAGE>
Exhibit 2(a)
DISTRIBUTION AGREEMENT
between
SEAFIELD CAPITAL CORPORATION
and
SLH CORPORATION
dated as of
December 20, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION DATE 1
1.1 ISSUANCE OF STOCK. 1
1.2 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. 2
1.3 VALUATION OF TRANSFER ASSETS AND LIABILITIES. 2
1.4 CONDUCT OF BUSINESS PENDING THE DISTRIBUTION DATE. 2
1.5 REGISTRATION. 2
ARTICLE II THE DISTRIBUTION 3
2.1 RECORD DATE AND DISTRIBUTION DATE. 3
2.2 THE AGENT. 3
2.3 DELIVERY OF SHARE CERTIFICATES TO THE AGENT. 3
2.4 DISTRIBUTION. 3
2.5 PAYMENT IN LIEU OF FRACTIONAL SHARES. 3
2.6 DELIVERY OF TAX INFORMATION. 4
ARTICLE III SURVIVAL, ASSUMPTION AND INDEMNIFICATION 4
3.1 SURVIVAL OF AGREEMENTS. 4
3.2 TAXES AND EMPLOYEE-RELATED ASSETS AND LIABILITIES. 4
3.3 ASSUMPTION AND INDEMNIFICATION. 4
3.4 PROCEDURE FOR INDEMNIFICATION. 6
3.5 REMEDIES CUMULATIVE. 7
ARTICLE IV CERTAIN ADDITIONAL COVENANTS 7
4.1 FURTHER ASSURANCES. 7
4.2 SLH BOARD. 8
4.3 CONTINUING CONTRACTUAL ARRANGEMENTS. 8
4.4 INTERCOMPANY ACCOUNTS AND SLH NOTE. 8
4.5 OTHER AGREEMENTS. 9
ARTICLE V ACCESS TO INFORMATION 9
5.1 PROVISION OF CORPORATE RECORDS. 9
5.2 ACCESS TO INFORMATION. 9
5.3 PRODUCTION OF WITNESSES. 9
5.4 RETENTION OF RECORDS. 9
5.5 CONFIDENTIALITY. 10
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ARTICLE VI EMPLOYEE BENEFITS 10
6.1 SEAFIELD PENSION PLAN. 10
6.2 SEAFIELD 401K PLAN. 10
6.3 SEAFIELD STOCK PURCHASE PLAN. 10
6.4 SEAFIELD STOCK OPTION PLANS. 10
6.5 SEAFIELD SUPPLEMENTAL RETIREMENT AGREEMENTS. 11
6.6 SEAFIELD SEVERANCE AGREEMENTS, TERMINATION COMPENSATION
AGREEMENTS, AND SEVERANCE PAY. 11
6.7 SEAFIELD CONSULTING AGREEMENT. 12
6.8 SEAFIELD INDEMNIFICATION AGREEMENTS. 12
6.9 WELFARE PLANS. 12
6.10 DIRECTORS' PLANS. 13
6.11 OTHER BALANCE SHEET ADJUSTMENTS. 13
6.12 PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS. 14
6.13 REIMBURSEMENT; INDEMNIFICATION. 14
6.14 FURTHER TRANSFERS. 14
6.15 SLH OFFICERS, EMPLOYEES AND FACILITIES. 14
6.16 COMPLIANCE. 15
ARTICLE VII NO REPRESENTATIONS OR WARRANTIES; EXCEPTIONS 15
7.1 NO REPRESENTATIONS OR WARRANTIES; EXCEPTIONS. 15
ARTICLE VIII INSURANCE 15
8.1 INSURANCE POLICIES AND RIGHTS INCLUDED WITHIN SLH ASSETS. 15
8.2 POST-DISTRIBUTION DATE CLAIMS. 15
8.3 ADMINISTRATION AND RESERVES. 16
8.4 INSURANCE PREMIUMS. 16
8.5 ALLOCATION OF INSURANCE PROCEEDS; COOPERATION. 16
8.6 REIMBURSEMENT OF EXPENSES. 17
8.7 INSURER INSOLVENCY. 17
8.8 NO REDUCTION OF COVERAGE. 17
8.9 ASSISTANCE, WAIVER OF CONFLICT AND SHARED DEFENSE. 17
ARTICLE IX MISCELLANEOUS 18
9.1 CONDITIONS TO OBLIGATIONS. 18
ii
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9.2 COMPLETE AGREEMENT. 19
9.3 EXPENSES. 19
9.4 GOVERNING LAW. 19
9.5 NOTICES. 19
9.6 AMENDMENT AND MODIFICATION. 20
9.7 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. 20
9.8 COUNTERPARTS. 20
9.9 INTERPRETATION. 20
9.10 LEGAL ENFORCEABILITY. 20
9.11 REFERENCES; CONSTRUCTION. 20
9.12 TERMINATION. 21
ARTICLE X DEFINITIONS 21
10.1 GENERAL. 21
10.2 REFERENCES TO TIME. 30
iii
<PAGE>
Exhibits
Exhibit No. Description
A Facilities Sharing and Interim Services Agreement.
B Form of SLH Employment Agreement.
C Form of Tax Sharing Agreement.
D Assignment and Assumption Agreement.
F SLH Stock Incentive Plan.
iv
<PAGE>
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, dated as of December 20, 1996, by and among
Seafield Capital Corporation, a Missouri corporation ("Seafield") and SLH
Corporation, a newly formed Kansas corporation which is a wholly owned
subsidiary of Seafield ("SLH").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Seafield and SLH have determined that
it is in the best interests of the shareholders of Seafield: (1) to transfer to
SLH substantially all of Seafield's assets (the "Transfer Assets") other than
its holdings of LabOne, Inc. ("Lab"), and certain other assets (the "Retained
Assets" as more particularly defined below) and certain liabilities (the
"Transfer Liabilities") and (2) to distribute to the holders of the issued and
outstanding shares of common stock, par value $1 per share, of Seafield all of
the issued and outstanding shares of common stock, par value $0.01 per share, of
SLH (the "Shareholders") in accordance with Article II hereof (the
"Distribution");
WHEREAS, the Distribution is intended to constitute a dividend taxable to
the Shareholders to the extent of Seafields current and accumulated earnings and
profits under the Internal Revenue Code of 1986, as amended and applicable state
laws;
WHEREAS, the parties hereto have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
such Distribution and to set forth other agreements that will govern certain
other matters prior to and following the Distribution;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound thereby, the parties hereto
agree as follows:
ARTICLE I
CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION DATE
1.1 ISSUANCE OF STOCK. Prior to or as of the Distribution Date, the
parties hereto shall take all steps necessary to reclassify the outstanding
shares of SLH Common Stock so that, except as otherwise contemplated by this
Agreement, immediately prior to or as of the Distribution Date the number of
shares of SLH Common Stock outstanding and held by Seafield shall equal
approximately one fourth the number of shares of Seafield Common Stock
outstanding on the Record Date.
<PAGE>
1.2 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. Prior to the
Distribution Date, the parties hereto shall take all action necessary to
transfer to SLH, and to cause SLH to assume, as the case may be, effective as of
the Distribution Date, (1) all of the Transfer Assets and (2) all of the
Transfer Liabilities.
1.3 VALUATION OF SLH COMMON STOCK. Seafield and SLH shall take such
steps as may be necessary or appropriate subsequent to the Distribution Date to
determine the Fair Market Value of the SLH Common Stock to be distributed in
the Distribution, as of the Distribution Date. Prior to January 31 1998,
Seafield will report the amount of the Distribution received by each Seafield
shareholder to such shareholder and to the IRS on IRS Form 1099-DIV.
1.4 CONDUCT OF BUSINESS PENDING THE DISTRIBUTION DATE. Each of the
parties hereto agrees that from the date hereof until the Distribution Date,
except as otherwise contemplated by this Agreement, it will use its best efforts
to carry on the SLH Business diligently in the ordinary course and substantially
in the same manner as heretofore conducted and to preserve intact the business
organization and goodwill of the SLH Business (including using its best efforts
to cause its Subsidiaries to take such actions).
1.5 REGISTRATION. Prior to the Distribution Date:
(a) Seafield and SLH shall prepare the Information Statement and
the Registration Statement. SLH shall file the Registration Statement with the
SEC. Seafield and SLH shall use reasonable efforts to cause the Registration
Statement to become effective under the Exchange Act as promptly as reasonably
practicable. Seafield and SLH shall prepare the Information Statement; and
after the Registration Statement becomes effective, Seafield shall mail the
Information Statement to the holders of Seafield Common Stock as of the Record
Date.
(b) The parties hereto shall use their best efforts to take all
such action as may be necessary or appropriate under state securities and Blue
Sky laws in connection with the transactions contemplated by this Agreement.
(c) The parties hereto shall cooperate in preparing, filing with
the SEC and causing to become effective any registration statements or
amendments thereto which are necessary or appropriate in order to effect the
transactions contemplated hereby or to reflect the establishment of, or
amendments to, any Plans contemplated hereby.
2
<PAGE>
ARTICLE II
THE DISTRIBUTION
2.1 RECORD DATE AND DISTRIBUTION DATE. Subject to the satisfaction of
the conditions set forth in Section 9.1, the Board of Directors of Seafield, or
the Executive Committee thereof, if so authorized by the Board of Directors,
shall establish the Record Date and the Distribution Date and any appropriate
procedures in connection with the Distribution.
2.2 THE AGENT. Prior to the Distribution Date, Seafield or such
financial instituion specializing in securities tranfers as Seafield may appoint
(the "Agent") shall make appropriate arrangements for, among other things, the
payment of the Distribution to the holders of Seafield Common Stock in
accordance with this Article II.
2.3 DELIVERY OF SHARE CERTIFICATES TO THE AGENT. Prior to or as of the
Distribution Date, SLH shall deliver to the Agent, a share certificate
representing all of the outstanding shares of SLH Common Stock to be
distributed in connection with the payment of the Distribution. After the
Distribution Date, upon the request of Seafield, as Agent, SLH shall provide
all certificates for shares of SLH Common Stock that the Agent shall require in
order to effect the Distribution.
2.4 DISTRIBUTION. Except as otherwise contemplated by this Agreement,
Seafield, as Agent, shall distribute, as of the Distribution Date, one share of
SLH Common Stock in respect of each four shares of Seafield Common Stock held
by holders of record of Seafield Common Stock on the Record Date. All shares of
SLH Common Stock issued in the Distribution shall be duly authorized, validly
issued, fully paid and nonassessable.
2.5 PAYMENT IN LIEU OF FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of SLH Common Stock will be issued to Seafield
shareholders or to the accounts of participants in the Seafield 401K Plan or the
Seafield Stock Purchase Plan as part of the Distribution. The Agent will
aggregate fractional shares into whole shares and sell them in the open market
at then prevailing prices on behalf of holders who otherwise would be entitled
to receive fractional share interests, and such persons will receive instead a
cash payment in the amount of their pro rata share of the total sale proceeds.
Proceeds from sales of fractional shares will be paid by the Agent based upon
the average gross selling price per share of Common Stock of all such sales.
Seafield will bear the cost of commissions incurred in connection with such
sales. Such sales are expected to be made as soon as practicable after the
Record Date. None of Seafield, SLH or the Distribution Agent will guarantee any
minimum sale price for the shares of SLH Common Stock, and no interest will be
paid on the proceeds.
3
<PAGE>
2.6 DELIVERY OF TAX INFORMATION. Subsequent to the Distribution Date,
Seafield shall deliver the Tax Information to each holder of Seafield Common
Stock on the Record Date January 31, 1998..
ARTICLE III
SURVIVAL, ASSUMPTION AND INDEMNIFICATION
3.1 SURVIVAL OF AGREEMENTS. All covenants and agreements of the
parties hereto contained in this Agreement shall survive the Distribution Date.
3.2 TAXES AND EMPLOYEE-RELATED ASSETS AND LIABILITIES. This Article
III shall not be applicable to any Plan Assets or any Indemnifiable Losses or
Liabilities related to (1) Taxes, which shall be governed by the Tax Sharing
Agreement or (2) the current or former employment of any Seafield Individual or
SLH Individual, or the compensation or benefits for any Seafield Director or SLH
Director, under any Plan or otherwise, which shall be governed by Article VI
hereof and the Assignment and Assumption Agreement.
3.3 ASSUMPTION AND INDEMNIFICATION.
(a) Subject to Section 3.2, the Assignment and Assumption
Agreement, the Tax Sharing Agreement and Article VI, from and after the
Distribution Date, Seafield shall retain or assume, as the case may be, and
shall indemnify, defend and hold harmless each SLH Individual and each member of
the SLH Group, and each of their Representatives and Affiliates, from and
against:
(1) all liabilities for third party claims relating to, arising
out of or due to, directly or indirectly, the Distribution or to the
service by any SLH Individual as an officer, director or employee of
any member of the Seafield Group prior to the Distribution, except to
the extent covered by insurance and provided such indemnification
would be permitted by law if such officer, director or employee made a
claim for indemnification,
(2) all Seafield Liabilities and Liabilities of any member of
the Seafield Group under this Agreement or any of the Other
Agreements, and
(3) all Indemnifiable Losses of any such SLH Individual, member
of the SLH Group, Representative or Affiliate relating to, arising out
of or due to, directly or indirectly, the Seafield Assets, the
Seafield Liabilities, the Seafield Business, the Seafield Individuals
or the Seafield Group's Representatives, whether relating to or
arising out of occurrences prior to or after the Distribution Date.
4
<PAGE>
(b) Subject to Section 3.2, the Tax Sharing Agreement, the
Assignment and Assumption Agreement and Article VI, and except as specifically
provided in Section 3.3(a), from and after the Distribution Date, SLH shall
assume, and shall indemnify, defend and hold harmless each Seafield Individual
and each member of the Seafield Group, and each of their Representatives and
Affiliates, from and against,
(1) all SLH Liabilities and all Liabilities of the SLH Group
under this Agreement or any of the Other Agreements, and
(2) all Indemnifiable Losses of any such Seafield Individual,
member of the Seafield Group, Representative or Affiliate relating to,
arising out of or due to, directly or indirectly, the SLH Assets, the
SLH Liabilities, the SLH Business, the SLH Employees or the SLH
Group's Representatives, whether relating to or arising out of
occurrences prior to or after the Distribution Date.
(c) If an Indemnitee realizes a Tax benefit or detriment by reason
of having incurred an Indemnifiable Loss for which such Indemnitee receives an
Indemnity Payment from an Indemnifying Party or by reason of receiving an
Indemnity Payment, then such Indemnitee shall pay to such Indemnifying Party an
amount equal to the Tax benefit, or such Indemnifying Party shall pay to such
Indemnitee an additional amount equal to the Tax detriment (taking into account
any Tax detriment resulting from the receipt of such additional amounts), as the
case may be. If, in the opinion of counsel to an Indemnifying Party reasonably
satisfactory in form and substance to the affected Indemnitee, there is a
substantial likelihood that the Indemnitee will be entitled to a Tax benefit by
reason of an Indemnifiable Loss, the Indemnifying Party promptly shall notify
the Indemnitee and the Indemnitee promptly shall take any steps (including the
filing of such returns, amended returns or claims for refunds consistent with
the claiming of such Tax benefit) that, in the reasonable judgment of the
Indemnifying Party, are necessary and appropriate to obtain any such Tax
benefit. If, in the opinion of counsel to an Indemnitee reasonably satisfactory
in form and substance to the affected Indemnifying Party, there is a substantial
likelihood that the Indemnitee will be subjected to a Tax detriment by reason of
an Indemnification Payment, the Indemnitee promptly shall notify the
Indemnifying Party and the Indemnitee promptly shall take any steps (including
the filing of such returns or amended returns or the payment of Tax
underpayments consistent with the settlement of any Liability for Taxes arising
from such Tax detriment) that, in the reasonable judgment of the Indemnitee, are
necessary and appropriate to settle any Liabilities for Taxes arising from such
Tax detriment. If, following a payment by an Indemnitee or an Indemnifying Party
pursuant to this Section 3.3(c) in respect of a Tax benefit or detriment, there
is an adjustment to the amount of such Tax benefit or detriment, then each of
Seafield and SLH shall make appropriate payments to the other, including the
payment of interest thereon at the federal statutory rate then in effect, to
reflect such adjustments.
5
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(c) The amount which an Indemnifying Party is required to pay to
any Indemnitee pursuant to this Section 3.3 shall be reduced (including
retroactively) by any Insurance Proceeds and other amounts actually recovered by
such Indemnitee in reduction of the related Indemnifiable Loss, it being
understood and agreed that each of Seafield and SLH shall use its best efforts
to collect any such proceeds or other amounts to which it or any of its
Subsidiaries is entitled, without regard to whether it is the Indemnifying Party
hereunder. If an Indemnitee receives an Indemnity Payment in respect of an
Indemnifiable Loss and subsequently receives Insurance Proceeds or other amounts
in respect of such Indemnifiable Loss, then such Indemnitee shall pay to such
Indemnifying Party an amount equal to the difference between (1) the sum of the
amount of such Indemnity Payment and the amount of such Insurance Proceeds or
other amounts actually received and (2) the amount of such Indemnifiable Loss,
adjusted (at such time as appropriate adjustment can be determined) in each case
to reflect any premium adjustment attributable to such claim. Notwithstanding
anything to the contrary in this Section 3.3, each party's indemnity under this
Section 3.3 shall include the increased cost and expense of purchasing insurance
against future losses, provided and to the extent that such cost and expense is
directly attributable to Indemnifiable Losses.
3.4 PROCEDURE FOR INDEMNIFICATION.
(a) If any Indemnitee receives notice of the assertion of any
Third-Party Claim with respect to which an Indemnifying Party is obligated under
this Agreement to provide indemnification, such Indemnitee shall give such
Indemnifying Party notice thereof promptly after becoming aware of such
Third-Party Claim; provided, however, that the failure of any Indemnitee to give
notice as provided in this Section 3.4 shall not relieve any Indemnifying Party
of its obligations under this Article III, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice. Such
notice shall describe such Third-Party Claim in reasonable detail and, if
practicable, shall indicate the estimated amount of the Indemnifiable Loss that
has been or may be sustained by such Indemnitee.
(b) An Indemnifying Party, at such Indemnifying Party's own
expense and through counsel chosen by such Indemnifying Party (which counsel
shall be reasonably satisfactory to the Indemnitee), may elect to defend any
Third-Party Claim; provided, however, that such an election by the Indemnifying
Party shall be deemed an admission of its obligation to indemnify the Indemnitee
with respect to such Third-Party Claim. If an Indemnifying Party elects to
defend a Third-Party Claim, then, within ten Business Days after receiving
notice of such Third-Party Claim (or sooner, if the nature of such Third-Party
Claim so requires), such Indemnifying Party shall notify the Indemnitee of its
intent to do so, and such Indemnitee shall cooperate in the defense of such
Third-Party Claim. Such Indemnifying Party shall pay such Indemnitee's
reasonable out-of-pocket expenses incurred in connection with such cooperation.
After notice from an Indemnifying Party to an Indemnitee of its election to
assume the defense of a
6
<PAGE>
Third-Party Claim, such Indemnifying Party shall not be liable to such
Indemnitee under this Article III for any legal or other expenses subsequently
incurred by such Indemnitee in connection with the defense thereof; provided,
however, that such Indemnitee shall have the right to employ one law firm as
counsel to represent such Indemnitee (which firm shall be reasonably acceptable
to the Indemnifying Party) if, in such Indemnitee's reasonable judgment, either
a conflict of interest between such Indemnitee and such Indemnifying Party
exists in respect of such claim or there may be defenses available to such
Indemnitee which are different from or in addition to those available to such
Indemnifying Party, and in that event (1) the reasonable fees and expenses of
such separate counsel shall be paid by such Indemnifying Party and (2) each of
such Indemnifying Party and such Indemnitee shall have the right to run its own
defense in respect of such claim. If an Indemnifying Party elects not to defend
against a Third-Party Claim, or fails to notify an Indemnitee of its election as
provided in this Section 3.4 within the period of ten Business Days described
above, such Indemnitee may defend, compromise and settle such Third-Party Claim;
provided, however, that no such Indemnitee may compromise or settle any such
Third-Party Claim without the prior written consent of the Indemnifying Party,
which consent shall not be withheld unreasonably. Notwithstanding the foregoing,
the Indemnifying Party shall not, without the prior written consent of the
Indemnitee, (1) settle or compromise any Third-Party Claim or consent to the
entry of any judgment which does not include as an unconditional term thereof
the delivery by the claimant or plaintiff to the Indemnitee of a written release
from all Liability in respect of such Third-Party Claim or (2) settle or
compromise any Third-Party Claim in any manner that may adversely affect the
Indemnitee.
3.5 REMEDIES CUMULATIVE. The remedies provided in this Article III
shall be cumulative and shall not preclude assertion by any Indemnitee of any
other rights or the seeking of any other remedies against any Indemnifying
Party.
ARTICLE IV
CERTAIN ADDITIONAL COVENANTS
4.1 FURTHER ASSURANCES.
(a) In addition to the actions specifically provided for elsewhere
in this Agreement and the Other Agreements, each of the parties hereto shall use
its best efforts to take, or cause to be taken, all actions, and to do, or cause
to be done, all things reasonably necessary, proper or advisable under
applicable laws, regulations and agreements to consummate and make effective the
transactions contemplated by this Agreement. Without limiting the foregoing,
each party hereto shall cooperate with the other parties, and execute and
deliver, or use its best efforts to cause to be executed and delivered, all
instruments, including instruments of conveyance, assignment and transfer, and
to make all filings with, and to obtain all consents, approvals or
authorizations of, any
7
<PAGE>
governmental or regulatory authority or any other Person under any permit,
license, agreement, indenture or other instrument, and take all such other
actions as such party may reasonably be requested to take by any other party
hereto from time to time, consistent with the terms of this Agreement, in order
to effectuate the provisions and purposes of this Agreement and the transfers of
Assets and Liabilities and the other transactions contemplated hereby and the
Other Agreements. If any such transfer of Assets or Liabilities is not
consummated prior to or at the Distribution Date, then the party hereto
retaining such Asset or Liability shall thereafter hold such Asset in trust for
the use and benefit of the party entitled thereto (at the expense of the party
entitled thereto), or shall retain such Liability for the account of the party
by whom such Liability is to be assumed pursuant hereto, as the case may be, and
shall take such other action as may be reasonably requested by the party to whom
such Asset is to be transferred, or by whom such Liability is to be assumed, as
the case may be, in order to place such party, insofar as reasonably possible,
in the same position as if such Asset or Liability had been transferred as
contemplated hereby. If and when any such Asset or Liability becomes
transferable, such transfer shall be effected forthwith. The parties hereto
agree that, as of the Distribution Date, each party hereto shall be deemed to
have acquired complete and sole beneficial ownership of all of the Assets,
together with all rights, powers and privileges incident thereto, and shall be
deemed to have assumed in accordance with the terms of this Agreement all of the
Liabilities, and all duties, obligations and responsibilities incident thereto,
that such party is entitled to acquire or required to assume pursuant to the
terms of this Agreement.
(b) Without limiting the generality of Section 4.1(a), Seafield,
as the sole stockholder of SLH, shall ratify any actions which are reasonably
necessary or desirable to be taken by SLH to effectuate the transactions
contemplated by this Agreement in a manner consistent with the terms of this
Agreement, including the preparation and implementation of appropriate Plans for
SLH Employees.
4.2 SLH BOARD. Prior to, or simultaneously with, the Distribution
Date, SLH shall take such actions as are necessary such that its Board of
Directors is comprised of those individuals named as directors in the
Information Statement.
4.3 CONTINUING CONTRACTUAL ARRANGEMENTS. Notwithstanding anything in
this Agreement to the contrary, except as set forth in Sections 4.4 and 4.5, to
the extent that any member of either Group is now providing or selling, or in
the future may provide or sell, to any member of the other Group any services,
benefits or products pursuant to any written or oral agreement or understanding
whatsoever, such agreement or understanding shall not be deemed altered, amended
or terminated as a result of this Agreement or the consummation of the
transactions contemplated hereby.
4.4 INTERCOMPANY ACCOUNTS AND SLH NOTE. Effective as of the
Distribution Date all intercompany receivables, payables, loans or advances
between
8
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Seafield and SLH shall be treated in the manner provided in the Assignment and
Assumption Agreement.
4.5 OTHER AGREEMENTS. Each of Seafield and SLH shall use reasonable
efforts to enter into, or to cause the appropriate members of its Group to enter
into, the Other Agreements prior to the Distribution Date. If there shall be a
conflict between the provisions of this Agreement and the provisions of the
Other Agreements, the provisions of the Other Agreements shall control.
ARTICLE V
ACCESS TO INFORMATION
5.1 PROVISION OF CORPORATE RECORDS. Prior to or as promptly as
practicable after the Distribution Date, Seafield shall deliver to SLH all
corporate books and records of the SLH Group and copies of all corporate books
and records of the Seafield Group relating to the SLH Assets, the SLH
Liabilities, or the SLH Business, including in each case all active agreements,
active litigation files and government filings. From and after the Distribution
Date, all books, records and copies so delivered shall be the property of SLH.
5.2 ACCESS TO INFORMATION. From and after the Distribution Date, each
of Seafield and SLH shall afford to the other and to the other's Representatives
reasonable access and duplicating rights during normal business hours to all
Information within such party's possession relating to such other party's
businesses, Assets or Liabilities, insofar as such access is reasonably required
by such other party. Without limiting the foregoing, Information may be
requested under this Section 5.2 for audit, accounting, claims, litigation and
Tax purposes, as well as for purposes of fulfilling disclosure and reporting
obligations.
5.3 PRODUCTION OF WITNESSES. After the Distribution Date, each of
Seafield and SLH shall use reasonable efforts to make available to the other,
upon written request, its directors, officers, employees and agents as witnesses
to the extent that any such Person may reasonably be required (giving
consideration to business demands of such Persons) in connection with any legal,
administrative or other proceedings in which the requesting party may from time
to time be involved.
5.4 RETENTION OF RECORDS. Except as otherwise required by law or
agreed in writing, or as otherwise provided in the Tax Sharing Agreement, each
of Seafield and SLH shall retain, for a period of at least ten years following
the Distribution Date, all significant Information in such party's possession or
under its control relating to the business, Assets or Liabilities of the other
party and, after the expiration of such ten-year period, prior to destroying or
disposing of any of such Information, (a) the party
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proposing to dispose of or destroy any such Information shall provide no less
than 30 days' prior written notice to the other party, specifying the
Information proposed to be destroyed or disposed of, and (b) if, prior to the
scheduled date for such destruction or disposal, the other party requests in
writing that any of the Information proposed to be destroyed or disposed of be
delivered to such other party, the party proposing to dispose of or destroy such
Information promptly shall arrange for the delivery of the requested Information
to a location specified by, and at the expense of, the requesting party.
5.5 CONFIDENTIALITY. From and after the Distribution Date, each of
Seafield and SLH shall hold, and shall use its reasonable best efforts to cause
its Affiliates and Representatives to hold, in strict confidence all Information
concerning the other party obtained by it prior to the Distribution Date or
furnished to it by such other party pursuant to this Agreement or the Other
Agreements and shall not release or disclose such Information to any other
Person, except its Representatives, who shall be bound by the provisions of this
Section 5.5; provided, however, that Seafield and SLH may disclose such
Information to the extent that (a) disclosure is compelled by judicial or
administrative process or, in the opinion of such party's counsel, by other
requirements of law, or (b) such party can show that such Information was (1)
available to such party on a nonconfidential basis prior to its disclosure by
the other party, (2) in the public domain through no fault of such party or (3)
lawfully acquired by such party from other sources after the time that it was
furnished to such party pursuant to this Agreement or the Other Agreements.
Notwithstanding the foregoing, each of Seafield and SLH shall be deemed to have
satisfied its obligations under this Section 5.5 with respect to any Information
if it exercises the same care with regard to such Information as it takes to
preserve confidentiality for its own similar Information.
ARTICLE VI
EMPLOYEE BENEFITS
6.1 SEAFIELD PENSION PLAN. As soon as practicable after the
Distribution Date Seafield and SLH will take such steps as the Seafield Board
shall determine to distribute to or for the benefit of SLH Employees their
interests in the Seafield Pension Plan. Any liability relating to such plan
shall be deemed a Retained Liability under the Assignment and Assumption
Agreement.
6.2 SEAFIELD 401K PLAN. As soon as practicable after the Distribution
Date Seafield and SLH will take steps steps as the Seafield Board shall
determine to distribute to or for the benefit of SLH Employees their interests
in the Seafield Pension Plan. Any liability relating to such plan shall be
deemed a Retained Liability under the Assignment and Assumption Agreement.
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6.3 SEAFIELD STOCK PURCHASE PLAN. The Seafield Stock Purchase Plan
shall continue in effect after the Distribution and Obligations thereunder shall
be a Retained Liability under the Assignment and Assumption Agreement.
6.4 SEAFIELD STOCK OPTION PLANS. Obligations under the Seafield Stock
Option Plans shall be deemed a Retained Liability under the Assignment and
Assumption Agreement. However, Seafield and SLH shall cooperate and take all
action necessary to adopt the SLH Option Plan (in the form of Exhibit E hereto).
As of the Distribution Date, employment of an Optionee under any of the Seafield
Stock Option Plans as a director, officer or employee of SLH or any SLH
Subsidiary, shall be deemed to constitute employment by Seafield under the
Seafield Stock Option Plans so that the Optionee's termination of employment
with Seafield shall not accelerate the expiration of the term of the Option;
provided that this provision shall not apply to an Incentive Stock Option
without the express written consent of the Optionee. In addition, employees of
Seafield who are provided to SLH under the Facilities Sharing and Interim
Services Agreements who become optionees under the SLH Option Plan shall be
deemed to be employees of SLH for purposes of that plan.
6.5 SEAFIELD SUPPLEMENTAL RETIREMENT AGREEMENTS. As of the
Distribution Date as to any SLH Employee who is a party to a Seafield
Supplemental Retirement Agreement, Seafield shall retain, or cause one or more
members of the Seafield Group to assume or retain, as the case may be, and
shall be solely responsible for, all liabilities and obligations whatsoever of
either Group whether or not incurred prior to the Distribution Date in
connection with claims under such Seafield Supplemental Retirement Agreement in
respect of any such SLH Employee.
6.6 SEAFIELD SEVERANCE AGREEMENTS, TERMINATION COMPENSATION AGREEMENTS,
AND SEVERANCE PAY.
(a) Pursuant to the Facilities Sharing and Interim Services
Agreement, it is contemplated that for an indefinite period subsequent to the
Distribution Date Seafield will provide to SLH certain management services from
individuals that will remain employees of Seafield and that will be compensated
by Seafield. Under such arrangement SLH shall have no liability with respect to
Seafield's obligations to such Employees before or after the Distribution Date
except to the extent of arrangements entered into as contemplated by this
Agreement and all of such Seafield obligations to such individuals shall be
deemed to be Retained Liabilities under the Assignment and Assumption Agreement.
Accordingly, SLH directors or officers who do not become SLH Employees (for
purposes of this paragraph, a Seafield employee whose services are provided to
SLH under the Facitliy Sharing and Interim Services Agreement shall not be
deemed an SLH Employee) and who are parties to Seafield Severance Agreements or
Termination Compensation Agreements shall continue to be subject to such
agreements and all
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obligations thereunder shall be Retained Liabilities under the Assignment and
Assumption Agreement.
(b) On or prior to the Distribution Date and effective as of the
Distribution Date SLH and SLH officers shall enter into SLH Employment
Agreements in the form appended hereto as Exhibit B.
(c) Seafield and SLH agree that, with respect to individuals who,
in connection with the Distribution, cease to be employees of the Seafield Group
and become SLH Employees, such cessation shall not be deemed a severance of
employment from either Group for purposes of any Plan or the Seafield Severance
Agreements that provide for the payment of severance, salary continuation or
similar benefits and shall, in connection with the Distribution, if and to the
extent appropriate obtain waivers from individuals against any such assertion.
(d) Except as otherwise provided above and subject to the terms of
the Other Agreements, the Seafield Group shall assume and be solely responsible
for all liabilities and obligations whatsoever in connection with claims made by
or on behalf of Seafield Individuals and the SLH Group shall assume and be
solely responsible for all liabilities and obligations whatsoever in connection
with claims made by or on behalf of SLH Individuals in respect of severance pay,
salary continuation and similar obligations relating to the termination or
alleged termination of any such person's employment either before, to the extent
unpaid, or on or after the Distribution Date.
6.7 SEAFIELD CONSULTING AGREEMENT. The Seafield Consulting Agreement
shall not be affected by the Distribution. shall be Retained Liabilities under
the Assignment and Assumption Agreement.
6.8 SEAFIELD INDEMNIFICATION AGREEMENTS.
(a) The Distribution shall not effect a Termination of any
existing Seafield Indemnification Agreement and Seafield obligations thereunder
shall be deemed to be Retained Liabilities under the Assignment and Assumption
Agreement.
(b) Seafield and SLH agree that activities of SLH Individuals for
SLH from and after the Distribution Date shall be covered under the SLH
Indemnification Provisions of the SLH Articles of Incorporation and Bylaws or
under such other indemnification agreement as SLH may adopt and not under the
Seafield Indemnification Agreements and that such SLH Individuals in such
capacities shall not be deemed to be acting for SLH at the "request of Seafield"
under the Seafield Indemnification Agreements.
6.9 WELFARE PLANS.
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(a) Subject to the terms of the Assignment and Assumption
Agreement, as of the Distribution Date, SLH shall assume or retain, or cause one
or more members of the SLH Group to assume or retain, as the case may be, and
shall be solely responsible for, or cause its insurance carriers to be
responsible for all liabilities and obligations whatsoever of the Seafield
Group, whether or not incurred prior to the Distribution Date in connection with
claims under any Seafield Welfare Plan (including any Seafield Welfare Plan
providing for post-retirement or retiree medical benefits) in respect of any SLH
Employee and Seafield shall cease to have any liability or obligation with
respect thereto.
(b) Subject to the terms of the Assignment and Assumption
Agreement, as of the Distribution Date, SLH shall take, or cause to be taken,
all actions necessary and appropriate on behalf of itself and the SLH Group (1)
to assume any existing Welfare Plan of the Seafield Group, which Welfare Plan,
as of the Distribution Date, provides benefits solely for SLH Employees or (2)
otherwise to adopt such Welfare Plans as necessary to provide welfare benefits,
effective as of the Distribution Date, and to assume the liabilities and
obligations to SLH Employees which are or shall become the responsibility of SLH
to the extent specified in Section 6.9(a). For this purpose, with respect to any
SLH Employee, Seafield, SLH or a member of the SLH Group shall, to the extent
applicable, credit such Individual with any term of service provided to any
member of either Group, and consider such SLH Individual to have satisfied any
other eligibility criteria (including satisfaction of applicable deductibles or
coinsurance amounts) to the extent so satisfied as of the Distribution Date, as
if such service had been rendered to SLH or the member of the SLH Group and as
if such eligibility criteria had been satisfied while employed by SLH or the
member of the SLH Group. In connection with the foregoing, Seafield agrees to
provide SLH or its designated insurance representative with such information (in
the possession of the Seafield Group and not already in the possession of the
SLH Group) as may be reasonably requested by SLH and necessary for the SLH Group
to assume or establish any such Welfare Plan.
(c) Seafield shall assume, or retain, all liabilities and
obligations whatsoever of any Group for benefits under any Welfare Plan other
than as set forth in Section 6.9(a).
(d) Notwithstanding any other term or provision hereof, SLH shall
not assume or be liable for any Welfare or other Plan of any member of the
LabResponse Group.
6.10 DIRECTORS' PLANS. SLH shall not assume or be liable for any
compensation or other remuneration of any Seafield Director. SLH shall provide
each SLH Director (other than directors who are Seafield Employees after the
Distribution) with participation in the SLH Option Plan and, until
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further directed by the SLH Board, a quarterly retainer of $1,000 per quarter
and meeting fees of $500 per meeting. Until further directed by the SLH Board,
salary and other compensation paid to an employee Director shall compensate
such employee for service as a SLH Director.
6.11 OTHER BALANCE SHEET ADJUSTMENTS. To the extent not otherwise
provided in this Agreement, Seafield and SLH shall take such action as is
necessary to effect an adjustment to the books of Seafield and SLH so that, as
of the Distribution Date, the prepaid expense balances and accrued employee
liabilities with respect to any employee liability or obligation assumed or
retained as of the Distribution Date by the Seafield and the SLH Group are
appropriately reflected on the consolidated balance sheets as of the
Distribution Date of Seafield and SLH, respectively.
6.12 PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS. No provisions
of this Agreement or the Assignment and Assumption Agreement, including the
agreement of Seafield or SLH that it, or Seafield or any member of the SLH
Group, will make a contribution or payment to or under any Plan herein referred
to for any period, shall be construed as a limitation on the right of Seafield
or SLH or any member of the SLH Group to amend such Plan or terminate its
participation therein which Seafield or SLH or any member of the SLH Group
would otherwise have under the terms of such Plan or otherwise, and no provision
of this Agreement shall be construed to create a right in any employee or former
employee or beneficiary of such employee or former employee under a Plan which
such employee or former employee or beneficiary would not otherwise have under
the terms of the Plan itself.
6.13 REIMBURSEMENT; INDEMNIFICATION. Each of the parties hereto
acknowledges that the Seafield Group, on the one hand, and the SLH Group, on the
other hand, may incur costs and expenses (including contributions to Plans and
the payment of insurance premiums) arising from or related to any of the Plans
which are, as set forth in this Agreement, the responsibility of the other party
hereto. Accordingly, Seafield and SLH agree to reimburse each other, as soon as
practicable but in any event within 30 days of receipt from the other party of
appropriate verification, for all such costs and expenses reduced by the amount
of any tax reduction or recovery of tax benefit realized by Seafield or SLH, as
the case may be, in respect of the corresponding payment made by it.
6.14 FURTHER TRANSFERS. Seafield and SLH recognize that there may be
SLH Individuals who will, after the Distribution Date, become employed by
Seafield and there may be Seafield individuals who become employed, after the
Distribution Date, by SLH. If Seafield and SLH so agree with respect to any such
individuals, the assets and liabilities with respect to such employees which are
associated with the plans and programs described in this Agreement may be
transferred and assumed in a manner consistent with this Agreement. Any such
transfers or assumptions will be considered to be governed by the terms of this
Agreement and the Facilities Sharing and Interim Services Agreement and shall
not require the agreement of Seafield and SLH if they occur within 3 months of
the Distribution Date.
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6.15 SLH OFFICERS, EMPLOYEES AND FACILITIES.
(a) Effective as of the Distribution Date the employees of SLH and
the SLH Group shall be as specified in the Assignment and Assumption Agreement.
(b) Seafield shall also provide certain services and personnel to
SLH and SLH shall provide certain facilities to Seafield during the Transition
Period pursuant to the Facilities Sharing and Interim Services Agreement.
(c) SLH shall provide each SLH Officer with participation in the
SLH Option Plan.
6.16 COMPLIANCE. Notwithstanding anything to the contrary in this
Article VI, to the extent any actions of the parties contemplated in this
Article are determined prior to Distribution to violate law or result in
unintended tax liability for Seafield Individuals or SLH Individuals, such
action may be modified to avoid such violation of law or unintended tax
liability.
ARTICLE VII
NO REPRESENTATIONS OR WARRANTIES; EXCEPTIONS
7.1 NO REPRESENTATIONS OR WARRANTIES; EXCEPTIONS. SLH understands and
agrees that no member of the Seafield Group is, in this Agreement or in any
other agreement or document, representing or warranting to SLH in any way as to
the SLH Assets, the SLH Liabilities, or the SLH Business or as to any consents
or approvals required in connection with the consummation of the transactions
contemplated by this Agreement, it being agreed and understood that SLH shall
take all of the SLH Assets "as is, where is" and that, except as provided in the
Assignment and Assumption Agreement and Section 4.1, SLH shall bear the economic
and legal risk that conveyances of the SLH Assets shall prove to be insufficient
or that the title of any member of the SLH Group to any SLH Assets shall be
other than good and marketable and free from encumbrances.
ARTICLE VIII
INSURANCE
8.1 INSURANCE POLICIES AND RIGHTS INCLUDED WITHIN SLH ASSETS. Without
limiting the generality of the definition of Transfer Assets set forth in
Section 10.1, the Transfer Assets shall include (a) any and all rights of an
insured party under each of the Seafield Policies, including rights of indemnity
and the right to be defended by or at the expense of the insurer, with respect
to all SLH Claims; provided, however, that nothing in this clause (a) shall be
deemed to constitute (or to reflect) the
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assignment of any of the Seafield Policies to SLH, and (b) the SLH Policies. SLH
shall be entitled to receive from Seafield any Insurance Proceeds paid to any
member of the Seafield Group with respect to any third-party SLH Claim under any
Seafield Policy.
8.2 POST-DISTRIBUTION DATE CLAIMS. If, subsequent to the Distribution
Date, any Person shall assert a SLH Claim, then Seafield shall at the time such
SLH Claim is asserted be deemed to assign, without need of further
documentation, to SLH all of the Seafield Group's rights, if any, as an insured
party under the applicable Seafield Policy with respect to such SLH Claim,
including rights of indemnity and the right to be defended by or at the expense
of the insurer; provided, however, that nothing in this Section 8.2 shall be
deemed to (1) constitute (or to reflect) the assignment of any of the Seafield
Policies to SLH or (2) affect the Seafield indemnity set forth in Section 3.3 of
this Agreement.
8.3 ADMINISTRATION AND RESERVES. Notwithstanding the provisions of
Article III, from and after the Distribution Date:
(a) Seafield shall be responsible for (1) Insurance Administration
with respect to the Seafield Policies and (2) Claims Administration with respect
to any Liabilities of Seafield; provided, however, that the retention of the
Seafield Policies by Seafield is in no way intended to limit, inhibit or
preclude any right to insurance coverage for any Insured Claim of a named
insured under the Seafield Policies;
(b) SLH shall be responsible for (1) Insurance Administration with
respect to the SLH Policies, and (2) Claims Administration with respect to any
Liabilities of SLH; provided, however, that the retention of the SLH Policies
by SLH is in no way intended to limit, inhibit or preclude any right to
insurance coverage for any Insured Claim of a named insured under the SLH
Policies;
(c) Seafield shall be entitled to reserves established by any
member of any Group, or the benefit of reserves held by any insurance carrier,
with respect to any Seafield Liabilities; and
(d) SLH shall be entitled to reserves established by any member of
any Group, or the benefit of reserves held by any insurance carrier, with
respect to any SLH Liabilities.
8.4 INSURANCE PREMIUMS. SLH shall pay premiums (retrospectively-rated
or otherwise) under the Seafield Policies with respect to SLH Liabilities which
are Insured Claims under the Seafield Policies. Seafield shall have the right
but not the obligation to pay premiums (retrospectively-rated or otherwise)
under the Seafield Policies with respect to SLH Liabilities which are Insured
Claims under the Seafield Policies to the extent that SLH does not pay such
premiums, whereupon SLH
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shall forthwith reimburse Seafield for any premiums paid by Seafield with
respect to such SLH Liabilities.
8.5 ALLOCATION OF INSURANCE PROCEEDS; COOPERATION. Insurance Proceeds
received with respect to claims, costs and expenses under the Insurance Policies
shall be paid to Seafield with respect to Seafield Liabilities which are Insured
Claims under the Seafield Policies and to SLH with respect to the SLH
Liabilities which are Insured Claims under the Seafield Policies. Payment of
the allocable portions of indemnity costs of Insurance Proceeds resulting from
the Liability Policies will be made to the appropriate party upon receipt from
the insurance carrier. In the event of the exhaustion of coverage under any
Seafield Policy, Seafield and SLH shall allocate Insurance Proceeds equitably
based upon the bona fide claims of the Seafield Group and the SLH Group,
respectively. The parties hereto agree to use their best efforts to cooperate
with respect to insurance matters.
8.6 REIMBURSEMENT OF EXPENSES. SLH shall (a) upon the request of
Seafield, reimburse the relevant insurer or the relevant third-party
administrator, to the extent required under any Insurance Policy or Service
Agreement with respect to any and all SLH Claims which are paid, settled,
adjusted, defended and/or otherwise handled by such insurer or third-party
administrator pursuant to the terms and conditions of such Insurance Policy or
Service Agreement and (b) to the extent the cost incurred exceeds internal
charges made by Seafield to SLH prior to the Distribution Date, pay and/or
reimburse Seafield, or such third party as Seafield may require, for any and all
costs, premiums, expenses, losses paid, attorneys' fees and/or charges incurred
prior to the Distribution Date by either Group or after the Distribution Date by
the Seafield Group arising directly or indirectly in connection with the
payment, settlement, adjustment, defense and/or handling of any such SLH Claim
or under the terms and conditions of any Insurance Policies or Service
Agreements (including any reimbursement paid by Seafield with respect to any
such SLH Claim to any insurer or third-party administrator pursuant to the terms
of any Insurance Policy or Service Agreement). SLH shall make any reimbursement
required by clause (a) of this Section 8.6 at the time required by the relevant
Insurance Policy or Service Agreement. SLH shall make any reimbursement required
by clause (b) of this Section 8.6, on a monthly basis.
8.7 INSURER INSOLVENCY. Seafield shall not be obligated to reimburse
SLH for any SLH Claim under any Insurance Policies where such SLH Claim would
have been paid by the insurer or other third party, but for the insolvency of
such insurer or other third party or the refusal by any insurer or other third
party to pay such SLH Claim.
8.8 NO REDUCTION OF COVERAGE. Seafield shall take no action to
eliminate or materially reduce coverage under any Seafield Policy or Service
Agreement for any SLH Claim.
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8.9 ASSISTANCE, WAIVER OF CONFLICT AND SHARED DEFENSE. Each of the
parties hereto agrees to provide reasonable assistance to the other parties
hereto as regards any dispute with any third party (including insurers,
third-party administrators and state guaranty funds) as to any matter related to
the Insurance Policies or Service Agreements, but only insofar as such dispute
arises out of the acts or omissions of any third party with respect to a SLH
Claim. In the event that Insured Claims of more than one Group exist relating to
the same occurrence, the parties hereto agree to defend such Insured Claims
jointly and to waive any conflict of interest necessary to the conduct of such
joint defense. Nothing in this Section 8.9 shall be construed to limit or
otherwise alter in any way the indemnity obligations of the parties hereto,
including those created by this Agreement or by operation of law.
ARTICLE IX
MISCELLANEOUS
9.1 CONDITIONS TO OBLIGATIONS.
(a) The obligations of the parties hereto to consummate the
payment of the Distribution are subject to the satisfaction of each of the
following conditions:
(1) The transactions contemplated by Sections 1.1, 1.2, 1.3, and
1.4 shall have been consummated in all material respects;
(2) The Registration Statement shall have been filed with the
SEC and shall have become effective, and no stop order with respect
thereto shall be in effect;
(3) All authorizations, consents, approvals and clearances of
all federal, state, local and foreign governmental agencies required
to permit the valid consummation by the parties hereto of the
transactions contemplated by this Agreement shall have been obtained;
and no such authorization, consent, approval or clearance shall
contain any conditions which would have a material adverse effect on
(A) the Seafield Business, the LabResponse Business or the SLH
Business, (B) the Assets, results of operations or financial condition
of Seafield or the SLH Group or (C) the ability of Seafield or SLH
to perform its obligations under this Agreement; and all statutory
requirements for such valid consummation shall have been fulfilled;
(4) Seafield shall have provided the NASD with the prior written
notice of the Record Date required by Rule 10b-17 of the Exchange Act
and the rules and regulations of the SLH;
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(5) No preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
government, regulatory or administrative agency or commission, and no
statute, rule, regulation or executive order promulgated or enacted by
any governmental authority, shall be in effect preventing the payment
of the Distribution;
(6) The Distribution shall be payable in accordance with
applicable law;
(7) All necessary consents, waivers or amendments to each bank
credit agreement, debt security or other financing facility to which
any member of the Seafield Group or the SLH Group is a party or by
which any such member is bound shall have been obtained, or each such
agreement, security or facility shall have been refinanced, in each
case on terms satisfactory to Seafield and SLH and to the extent
necessary to permit the Distribution to be consummated without any
material breach of the terms of such agreement, security or facility;
(b) Any determination made by the Board of Directors of Seafield
in good faith prior to the Distribution Date concerning the satisfaction or
waiver of any or all of the conditions set forth in Section 9.1(a) shall be
conclusive.
9.2 COMPLETE AGREEMENT. This Agreement, the Exhibits hereto and the
agreements and other documents referred to herein shall constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and shall supersede all previous negotiations, commitments and writings with
respect to such subject matter.
9.3 EXPENSES. Except as otherwise provided in this Agreement and the
Other Agreements, all costs and expenses of any party hereto in connection with
the preparation, execution, delivery and implementation of this Agreement and
with the consummation of the transactions contemplated by this Agreement shall
be paid by the party for whose benefit such costs and expenses are incurred,
with any costs and expenses that cannot be allocated on the foregoing basis to
be divided equally among the parties hereto.
9.4 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Missouri (other than the laws
regarding choice of laws and conflicts of laws) as to all matters (other than
SLH corporate matters which are governed by the KGCC), including matters of
validity, construction, effect, performance and remedies.
9.5 NOTICES. All notices, requests, claims, demands and other
communications hereunder (collectively, "Notices") shall be in writing and shall
be given (and shall be deemed to have been duly given upon receipt) by delivery
in person, by
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cable, telegram, telex or other standard form of telecommunications, or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Seafield:
Seafield Capital Corporation
2600 Grand Boulevard, Suite 500
Kansas City, Missouri 64108
Attention: President
If to SLH:
SLH Corporation
2600 Grand Boulevard, Suite 500
Kansas City, Missouri 64108
Attention: President
or to such other address as any party hereto may have furnished to the other
parties by a notice in writing in accordance with this Section 9.5. Copies of
all notices, requests, claims, demands and other communications hereunder shall
also be given to:
Lathrop & Gage L.C.
2345 Grand Boulevard
Suite 2800
Kansas City, Missouri 64108-2684
Attention: Lathrop M. Gates, Esq.
9.6 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by a written agreement signed by all of the
parties hereto.
9.7 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their successors and permitted assigns,
but neither this Agreement nor any of the rights, interests and obligations
hereunder shall be assigned by any party hereto without the prior written
consent of each of the other parties (which consent shall not be unreasonably
withheld). Except for the provisions of Sections 3.3 and 3.4 relating to
Indemnities, which are also for the benefit of the Indemnitees, this Agreement
is solely for the benefit of the parties hereto and their Subsidiaries and
Affiliates and is not intended to confer upon any other Persons any rights or
remedies hereunder.
9.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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9.9 INTERPRETATION. The Article and Section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties hereto and shall not in any way affect the meaning or
interpretation of this Agreement.
9.10 LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Each party acknowledges
that money damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
9.11 REFERENCES; CONSTRUCTION. References to any "Article",
"Exhibit"or "Section", without more, are to Appendices, Articles, Exhibits and
Sections to or of this Agreement. Unless otherwise expressly stated, clauses
beginning with the term "including" set forth examples only and in no way limit
the generality of the matters thus exemplified.
9.12 TERMINATION. Notwithstanding any provision hereof this Agreement
may be terminated and the Distribution abandoned at any time prior to the
Distribution Date by and in the sole discretion of the Board of Directors of
Seafield without the approval of any other party hereto or of Seafield's
shareholders. In the event of such termination, no party hereto shall have any
Liability to any Person by reason of this Agreement.
ARTICLE X
DEFINITIONS
10.1 GENERAL. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
95 Form 10-K. the Seafield Capital Corporation annual report on Form 10-K
for the year ended December 31, 1995.
Affiliate: with respect to any specified Person, a Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such specified Person.
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Agent: Seafield or such financial institution, trust company or other
institutional stock transfer agent as Seafield may appoint, which shall act as
distribution agent to distribute the shares of SLH Common Stock pursuant to the
Distribution.
Asset: any and all assets and properties, tangible or intangible, including
the following: (1) cash, notes and accounts receivable (whether current or
non-current); (2) certificates of deposit, banker's acceptances, stock,
debentures, evidences of indebtedness, certificates of interest or participation
in profit-sharing agreements, collateral-trust certificates, preorganization
certificates or subscriptions, transferable shares, investment contracts,
voting-trust certificates, fractional undivided interests in oil, gas or other
mineral rights, puts, calls, straddles, options and other securities of any
kind; (3) trade secrets, confidential information, registered and unregistered
trademarks, service marks, service names, trade styles and trade names, product
bar codes and associated goodwill; statutory, common law and registered
copyrights; applications for any of the foregoing, rights to use the foregoing
and other rights in, to and under the foregoing; (4) rights under leases,
contracts, licenses, permits, distribution arrangements, sales and purchase
agreements, other agreements and business arrangements; (5) real estate and
buildings and other improvements thereon; (6) leasehold improvements, fixtures,
trade fixtures, machinery, equipment (including transportation and office
equipment), tools, dies and furniture; (7) office supplies, production supplies,
spare parts, other miscellaneous supplies and other tangible property of any
kind; (8) raw materials, work-in-process, finished goods, consigned goods and
other inventories; (9) prepayments or prepaid expenses; (10) claims, causes of
action, choses in action, rights of recovery and rights of set-off of any kind;
(11) the right to receive mail, payments on accounts receivable and other
communications; (12) lists of advertisers, records pertaining to advertisers and
accounts, personnel records, lists and records pertaining to suppliers and
agents, and books, ledgers, files and business records of every kind; (13)
advertising materials and other printed or written materials; (14) goodwill as a
going concern and other intangible properties; (15) employee contracts,
including any rights thereunder to restrict an employee from competing in
certain respects; and (16) licenses and authorizations issued by any
governmental authority.
Assignment and Assumption Agreement: Assignment and Assumption Agreement
between Seafield and SLH providing for the transfer by Seafield to SLH of the
Transfer Assets and SLH's assumption of the Transfer Liabilities, to be entered
into between Seafield and SLH substantially in the form attached hereto as
Exhibit D, with such changes as may be mutually satisfactory to Seafield and
SLH.
Business Day: any day other than a Saturday, a Sunday or a day on which
banking institutions located in the States of Kansas or Missouri are authorized
or obligated by law or executive order to close.
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Claims Administration: the processing of claims made under the Insurance
Policies, including the reporting of claims to the insurance carrier, management
and defense of claims and providing for appropriate releases upon settlement of
claims.
Code: the Internal Revenue Code of 1986, as amended, or any successor
legislation and the regulations promulgated thereunder.
Collective Bargaining Agreement: any collective bargaining or other labor
agreement to which any member of either Group is a party.
Current Plan Year: the plan year or fiscal year, to the extent applicable
with respect to any Plan, during which the Distribution Date occurs.
Cut-Off Date: the last day of the calendar month immediately preceding the
Distribution Date or, if such day is less than 14 days before the Distribution
Date, the last day of the next preceding calendar month.
Disclosure Document: the Registration Statement on Form 10 and the related
Information Statement.
Distribution: the distribution to holders of shares of Seafield Common
Stock to be effected pursuant to Article II on the basis of one share of SLH
Common Stock for each share of Seafield Common Stock held of record as of the
Record Date.
Distribution Date: the date, to be determined by the Board of Directors of
Seafield, or the Executive Committee thereof, as of which the Distribution shall
be effected and as of which the Transfer Assets are transferred to SLH and the
Transfer Liabilities are assumed by SLH pursuant to the Assignment and
Assumption Agreement.
ERISA: the Employee Retirement Income Security Act of 1974, as amended, or
any successor legislation, and any regulations promulgated thereunder.
Exchange Act: the Securities Exchange Act of 1934, as amended, together
with the rules and regulations promulgated thereunder.
Facilities Sharing and Interim Services Agreement: A Facilities Sharing and
Interim Services Agreement between SLH and Seafield in the form attached as
Exhibit A providing for Seafield making available certain personnel and
services to SLH and SLH making available certain facilities to Seafield during
the Transition Period and for a period of time following the Distribution Date.
Group: the Seafield Group, LabResponse Group or SLH Group.
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Incentive Option: a Seafield Option that qualifies as an Incentive Stock
Option under Section 422A of the Code.
Indemnifiable Losses: all losses, Liabilities, damages, claims, demands,
judgments or settlements of any nature or kind, known or unknown, fixed,
accrued, absolute or contingent, liquidated or unliquidated, including all
reasonable costs and expenses (legal, accounting or otherwise as such costs are
incurred) relating thereto, suffered by an Indemnitee.
Indemnifying Party: a Person who or which is obligated under this
Agreement to provide indemnification.
Indemnitee: a Person who may seek indemnification under this Agreement.
Indemnity Payment: an amount that an Indemnifying Party is required to pay
to an Indemnitee pursuant to Article III.
Information: all records, books, contracts, instruments, computer data and
other data and information.
Information Statement: the Information Statement to be sent to the holders
of shares of Seafield Common Stock in connection with the Distribution.
Insurance Administration: with respect to each Insurance Policy, (1) the
accounting for premiums (including retrospectively-rated premiums), defense
costs, indemnity payments, deductibles and retentions as appropriate under the
terms and conditions of each of the Insurance Policies, (2) the reporting to
excess insurance carriers of any losses or claims which may cause the
per-occurrence or aggregate limits of any Insurance Policy to be exceeded and
(3) the distribution of Insurance Proceeds as contemplated by this Agreement.
Insurance Policy: insurance policies and insurance contracts of any kind
that are owned or maintained by any member of either the Seafield or SLH Group
as the insured interest, including primary and excess policies, comprehensive
general liability policies, automobile, aircraft and workers' compensation
insurance policies, and self-insurance and captive insurance company
arrangements, together with the rights, benefits and privileges thereunder.
Insurance Proceeds: those monies received by an insured from an insurance
carrier or paid by an insurance carrier on behalf of the insured, in either case
net of any applicable premium adjustment, retrospectively-rated premium,
deductible, retention, cost or reserve paid or held by or for the benefit of
such insured.
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Insured Claims: those Liabilities that, individually or in the aggregate,
are covered within the terms and conditions of any of the Insurance Policies,
whether or not subject to deductibles, coinsurance, uncollectability or
retrospectively-rated premium adjustments, but only to the extent that such
Liabilities are within applicable Insurance Policy limits, including aggregates.
IRS: the Internal Revenue Service.
Lab: LabOne, Inc. and any Subsidiary thereof.
LabResponse Assets: All assets held by members of the LabResponse Group.
LabResponse Business: All of the businesses conducted immediately prior to
the Distribution Date by any member of any Group, and reported by Seafield in
the "Healthcare and Insurance" segments in Note 6 to the Seafield consolidated
financial statements (or which would have been so reported had it been conducted
as of September 30, 1996) in the Annual Report on Form 10-K for the year ended
December 31, 1995.
LabResponse Employee: any individual who is, has been or will be an
officer or employee of a member of the LabResponse Group.
LabResponse Group: Lab, Response, Pyramid and any subsidiary of Lab,
Response or Pyramid.
LabResponse Individual: any individual who (1) is a LabResponse Employee,
(2) at any time prior to the Distribution Date is or was an officer or employee
of any LabResponse Business or (3) is a beneficiary of any individual specified
in clause (1) or (2).
LabResponse Plan: any Plan maintained primarily for the benefit of
directors, officers, employees and agents of the LabResponse Group.
KGCC: the Kansas General Corporation Code.
Liabilities: all debts, liabilities and obligations, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, and whether or not the same would
properly be reflected on a balance sheet, including all costs and expenses
relating thereto.
NASDAQ: The Nasdaq National Market Automated Quotation System of the
National Association of Securities Dealers, Inc.
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Other Agreements: The Assignment and Assumption Agreement, Facilities
Sharing and Interim Services Agreement, and Tax Sharing Agreement in the Form of
Tax Sharing Agreement appended hereto as Exhibit C.
Person: an individual, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization or a government or any department or
agency thereof.
Plan: any plan, policy or arrangement or contract or agreement providing
benefits (including bonuses, deferred compensation, incentive compensation,
savings, stock purchases, pensions, profit sharing or retirement or other
retiree benefits, including retiree medical benefits) for any group of employees
or former employees or individual employee or former employee, or the
beneficiary or beneficiaries of any such employee or former employee, whether
formal or informal or written or unwritten and whether or not legally binding,
and including any means, whether or not legally required, pursuant to which any
benefit is provided by an employer to any employee or former employee or the
beneficiary or beneficiaries of any such employee or former employee.
Pyramid: Pyramid Diagnostic Services, Inc., a Seafield Subsidiary.
Qualified Plan: a Plan which is an employee pension benefit plan (within
the meaning of Section 3(2) of ERISA) and which constitutes or is intended in
good faith to constitute a qualified plan under Section 401(a) of the Code.
Prior Plan Year: to the extent applicable with respect to any Plan, any
plan year or fiscal year that ended on or prior to the Cut-Off Date.
Record Date: the date to be determined by the Board of Directors of
Seafield, or the Executive Committee thereof, as the record date for determining
shareholders of Seafield entitled to receive the Distribution.
Registration Statement: a registration statement on Form 10 to effect the
registration of the SLH Common Stock pursuant to the Exchange Act.
Relocation Date. The date on which Seafield and SLH no longer share
personnel, facilities and services under the Facilities Sharing Agreement.
Representative: with respect to any Person, any of such Person's
directors, officers, employees, agents, consultants, advisors, accountants,
attorneys and representatives.
Response: Response Oncology, Inc. and any Subsidiary thereof.
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Response Plan: any Plan maintained primarily for the benefit of directors,
officers, employees and agents of Response.
Retained Assets: Assets to be retained by Seafield under the Assignment and
Assumption Agreement.
Seafield: as defined in the recitals to this Agreement.
Seafield 401-K Plan: The Seafield Capital Corporation 401-K Plan and
Trust.
Seafield Assets: subject to the provisions of the Other Agreements, all of
the Assets, other than the SLH Assets, held immediately prior to the
Distribution Date by any member of any Group.
Seafield Business: All of the businesses other than the SLH Business
conducted by any member of the Seafield Group and LabResponse Group.
Seafield Common Stock: the common stock, par value $1 per share, of
Seafield.
Seafield Consulting Agreement: Consulting agreement referred to in
exhibits 10.16 and 10.17 of the 95 Form 10-K.
Seafield Director: any individual who is a director of Seafield following
the Distribution.
Seafield Employee: any individual who is or has been an officer or
employee of a member of the Seafield Group.
Seafield Group: Seafield and subsidiaries other than any subsidiary that is
a member of the SLH Group.
Seafield Indemnification Agreements: Seafield Capital Corporation
Indemnification Agreements between Seafield and corporate/executive officers
referred to in exhibits 10.22 of the 95 Form 10-K.
Seafield Individual: any individual who (1) is a Seafield Employee, (2) at
any time prior to the Distribution Date is or was an officer or employee of any
Seafield Business or (3) is a beneficiary of any individual specified in clause
(1) or (2).
Seafield Liabilities: subject to the provisions of the Other Agreements,
all of the Liabilities, other than the SLH Liabilities, of any member of any
Group.
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Seafield Option: an option to purchase shares of Seafield Common Stock
granted pursuant to the Seafield Stock Option Plans, together with any stock
appreciation right or limited stock appreciation right issued in connection
therewith.
Seafield Plans: The Seafield 401-K Plan, Pension Plan, Stock Purchase
Plan, Supplemental Retirement Agreements, Consulting Agreements, Termination
Compensation Agreements, Indemnification Agreements, Severance Agreements, Stock
Option Plans, Welfare Plans; and any other plan maintained for the benefit of
Seafield Employees.
Seafield Policies: all Insurance Policies, current and past, which relate
to the Seafield, LabResponse and SLH Businesses.
Seafield Pension Plan: The Seafield Capital Corporation Money Purchase
Pension Plan.
Seafield Restricted Stock: shares of Seafield Common Stock issued to an
individual pursuant to any Seafield Plan which are subject to forfeiture in the
event that certain terms and conditions are not satisfied.
Seafield Severance Agreements: Seafield Capital Corporation Severance
Agreements between Seafield and corporate/executive officers referred to in
exhibits 10.23 and 10.24 of the 95 Form 10-K.
Seafield Stock Purchase Plan: The Seafield Capital Corporation Stock
Purchase Plan, as amended.
Seafield Stock Option Plans. Seafield Capital Corporation 1984 and 1989
Stock Option Incentive Plans, as amended and Seafield Capital Corporation 1991
Non-Employee directors' Stock Option Plan, as amended.
Seafield Supplemental Retirement Agreements: Supplemental retirement
agreements referred to in exhibits 10.15 and 10.17 of the 95 Form 10-K.
Seafield Termination Compensation Agreements: Seafield Capital Corporation
Termination Compensation or "change-in-control" agreements between Seafield and
corporate/executive officers referred to in exhibits 10.19, 10.20 and 10.21 of
the 95 Form 10-K.
Seafield Welfare Plan: any Plan which is not a Qualified Plan and which
provides medical, health, disability, accident, life insurance, death, dental or
other welfare benefits, including any post-employment benefits or retiree
medical benefits.
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SEC: the Securities and Exchange Commission.
Securities Act: the Securities Act of 1933, as amended, together with the
rules and regulations promulgated thereunder.
Service Agreement: any third-party administrator or claims handling
agreement of any kind or nature to which any member of either Group is directly
or indirectly a party, in effect as of the date hereof, related to the handling
of SLH Claims.
SLH: as defined in the recitals to this Agreement.
SLH Assets: Subject to the provisions of the Other Agreements, (1) all of
the Transfer Assets and (2) all other assets held by the SLH Group as of the
date of any determination.
SLH Business: All business conducted prior to the Distribution Date by any
SLH Subsidiary and by Seafield with respect to its investments in the following
assets and entities (a) interests in First Century II, First Century III and
New Enterprises Associates II, LP, three venture capital funds, (b) interests
in Oclassen Pharmaceuticals, Inc. and Norian Corporation, (c) leasehold
interests relating to the Tenenbaum property and offices at 2600 Grand
Boulevard, Suite 500, Kansas City, Missouri and (d) interests in the suit
against Skidmore, Owings & Merrill, et. al. and any Seafield's claims or rights
against the IRS or any state or local taxing authority arising out of Seafield's
Tax years beginning after 1985 and ending with the 1995 tax year.
SLH Common Stock: the common stock, par value $0.01 per share, of SLH.
SLH Claim: any claim against any SLH Employee, SLH Individual or member of
the SLH Group with respect to any injury, loss, Liability, damage or expense
that (1) is or was incurred or asserted to have been incurred prior to the
Distribution Date in, or in connection with, the conduct of the Assets or
business of any member of any Group and (2) arose or may have arisen out of one
or more occurrences or events that are or may be insured or insurable under one
or more of the Seafield Policies.
SLH Director: any individual who is a director of SLH.
SLH Employee: any individual who is an employee of the SLH Group at the
Distribution Date or becomes an employee of SLH Group immediately following the
Distribution Date as contemplated by the Assignment and Assumption Agreement or
who provides services to SLH under the Facilities Sharing and Iterim Serivces
Agreement.
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SLH Employment Agreement: an employment agreement to be entered into
between SLH and each SLH Officer in accordance with the form of Employment
Agreement appended hereto as Exhibit B.
SLH Group: SLH and the SLH Subsidiaries.
SLH Individual: any individual who (1) is a SLH Employee, (2) an officer
or director of SLH or (3) is a beneficiary of any individual who is a SLH
Employee.
SLH Liabilities: subject to the provisions of the Other Agreements, all of
the Liabilities of any member of any Group (1) which relate directly to the SLH
Assets or the SLH Business as conducted immediately prior to the Distribution
Date, whether incurred or arising prior to, or after, the Distribution Date and
(2) which are specifically assumed by SLH under an express provision of this
Agreement or as a Transfer Liability under the Assignment and Assumption
Agreement.
SLH Option Plan: a new Plan to be adopted by SLH in connection with the
Distribution, pursuant to which, among other things, options to purchase, and
restricted, shares of SLH Common Stock may be granted to SLH Employees and SLH
Directors.
SLH Plan: Any plan created on or after the Distribution Date by SLH for the
Benefit of SLH directors, officers, employees or agents of SLH.
SLH Policies: all Insurance Policies, current and past, which relate to
the SLH Business and do not relate to the LabResponse Business.
SLH Subsidiaries: BMA Resources, Inc., Scout Development Corporation,
Scout Development Corporation of New Mexico, Carousel Apartment Homes, Inc.,
andTenenbaum, Inc.
SLH Support Agreements: any obligation or agreement of the Seafield Group
under any guarantee, letter of credit, letter of comfort or working capital
maintenance agreement obtained prior to the Distribution Date for the benefit of
the SLH Business or any member of the SLH Group.
SLH Shares: SLH Common Stock to be issued to Seafield in the Distribution.
Subsidiary: with respect to any specified Person, any corporation or other
legal entity of which such Person or any of its Subsidiaries controls or owns,
directly or indirectly, more than 50% of the stock or other equity interest
entitled to vote on the election of members to the board of directors or similar
governing body.
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Tax: as defined in the Tax Sharing Agreement.
Tax Information: Information to be furnished to Seafield Shareholders and
the IRS on IRS Form 1099-Div in connection with the Distribution.
Tax Sharing Agreement: a tax sharing agreement to be entered into between
Seafield and SLH substantially in the form attached hereto as Exhibit C, with
such changes as may be mutually satisfactory to Seafield and SLH.
Third-Party Claim: any claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal asserted by a
Person who is not a party hereto.
Transfer Assets: The assets to be transferred by Seafield to SLH under the
Assignment and Assumption Agreement.
Transfer Liabilities: The liabilities to be assumed by SLH under the
Assignment and Assumption Agreement.
Transition Period. The period of time from the Distribution Date to the
Relocation Date.
10.2 REFERENCES TO TIME. All references in this Agreement to times of
the day shall be to Kansas City, Missouri time.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SEAFIELD CAPITAL CORPORATION
By: _______________________________
SLH CORPORATION
By: _______________________________
<PAGE>
Exhibit A
FACILITIES SHARING AND INTERIM SERVICES AGREEMENT
This FACILITIES SHARING AND INTERIM SERVICES AGREEMENT is made as of the
_____ day of ____________________, 1996, between Seafield Capital Corporation, a
Missouri corporation ("Seafield") and SLH CORPORATION., a newly formed Kansas
corporation which is a wholly owned subsidiary of Seafield ("SLH").
RECITALS
A. The Boards of Directors of Seafield and SLH have determined that it
is in the best interests of the shareholders of Seafield: (1) to transfer to
SLH substantially all of Seafield's assets (the "Transfer Assets") other than
its holdings of LabOne, Inc. ("Lab") and its holdings of Response Oncology,
Inc. ("Response") and certain other assets (the "Retained Assets" as more
particularly defined below) and certain liabilities (the "Transfer Liabilities")
and (2) to distribute to the holders of the issued and outstanding shares of
common stock, par value $1 per share, of Seafield all of the issued and
outstanding shares of common stock, par value $0.01 per share, of SLH (the
"Distribution") in accordance with Article II of a DISTRIBUTION AGREEMENT to
which this agreement is appended as Exhibit A ("Distribution Agreement").
B. Pursuant to Section 6.15 of the Distribution Agreement Seafield has
agreed to provide SLH with certain services and SLH has agreed to provide
Seafield with certain facilities in accordance with the terms of this agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound thereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1. Definitions and Terms. Except as otherwise provided herein, the
capitalized terms in this agreement shall have the same meaning as those terms
are defined to have in the Distribution Agreement.
ARTICLE II
FACILITIES AND SERVICES
2.01 AGREEMENT TO PROVIDE FACILITIES AND SERVICES. Subject to the terms
and conditions hereof Seafield agrees to provide to SLH and SLH agrees to
<PAGE>
accept during the term specified in Section 2.03 (the "Term") all services
required by SLH for the operation of the offices of SLH's Chairman, Chief
Executive Officer, Chief Accounting Officer and Chief Financial Officer,
together with clerical and administrative services, but not including services
provided exclusively by Scout Development Corporation and its subsidiaries.
Services to be provided hereunder shall be provided on a reasonably timely
basis. The Services provided hereunder shall be provided in exchange for the
facilities to be provided by SLH to Seafield as set forth in Section 2.02
hereof.
2.02 AGREEMENT TO PROVIDE FACILITIES AND SERVICES. Subject to the terms
and conditions hereof SLH agrees to provide Seafield and Seafield agrees to
accept during the term specified in Section 2.02 (the "Term") the use of SLH
facilities at 2600 Grand Boulevard, Suite 500, Kansas City, Missouri (the
"Offices") for up to 16 Seafield officers and employees, including the Seafield
employees performing services for SLH under Section 2.01. The facilities shall
include appropriate office space, furniture, equipment and supplies to support
the day to day activities of such personnel during the term of this agreement.
The facilities provided hereunder shall be provided in exchange for the services
to be provided by SLH to Seafield as set forth in Section 2.02 hereof; provided,
however, following the Distribution, Seafield and the Company will review the
amount of personnel and facilities used under the arrangement and each will
reimburse the other to the extent that the exchange of facilities for services
is not reasonably equivalent.
2.03 TERM. This Agreement shall be effective on the date first written
above and shall continue until terminated by either party by giving written
notice to the other party of termination to become effective as of the end of
the month following the month in which notice of termination is given.
ARTICLE III
MISCELLANEOUS
3.01 SEAFIELD INDEMNIFICATION. SLH further agrees to indemnify and
hold harmless Seafield, its officers, agents, employees, directors,
representatives and successors from any claims, liabilities, damages, losses,
costs, attorneys fees, damages and/or liability, worker's compensation and
discrimination actions and/or any other type of civil, administrative or
criminal action(s) whether such action(s) be brought by Seafield's personnel
and/or any other third party(ies), that they, or any one of them, may suffer or
sustain as a result of any claims, demands or causes of action arising out of,
or in any way related to the action or inaction of SLH relating to SLH's use of
Services provided to SLH by Seafield hereunder.
3.02 SLH INDEMNIFICATION. Seafield further agrees to indemnify and
hold harmless SLH, its officers, agents, employees, directors, representatives
and successors from any claims, liabilities, damages, losses, costs, attorneys
fees, damages and/or liability, worker's compensation and discrimination actions
and/or any other type of civil,
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administrative or criminal action(s) whether such action(s) be brought by SLH's
personnel and/or any other third party(ies), that they, or any one of them, may
suffer or sustain as a result of any claims, demands or causes of action arising
out of, or in any way related to the action or inaction of Seafield relating to
Seafield's use of facilities provided to Seafield by SLH hereunder.
3.03 MUTUAL COVENANT. Except to the extent otherwise provided herein,
SLH and Seafield covenant and warrant that in the event that it appears that the
exchange of services for facilities as herein provided is not a fair exchange,
then a fair charge for the services or facilities provided hereunder shall be
determined in a fair and equitable manner and thereafter paid to the party
providing such service or facility..
3.04 FORCE MAJEURE. If either party is unable to perform any of its
duties or fulfill any of its covenants or obligations under this Agreement as a
result of causes beyond its control and without its fault or negligence,
including but not limited to acts of God or government, fire, flood, war,
governmental controls, and labor strife, then such party shall not be deemed to
be in default of this Agreement during the continuance of such events which
rendered it unable to perform; such party shall have such additional time
thereafter as is reasonably necessary to enable it to resume performance of its
duties and obligations under this Agreement; and the party entitled to such
performance shall not be required to pay the other party for such performance to
the extent that such other party is unable to perform. Notwithstanding the
foregoing, if the suspension of a party's obligation to perform under this
Agreement is of such a nature or duration as to substantially frustrate the
purpose of this Agreement, then SLH or Seafield, as the case may be, shall have
the right to terminate this Agreement by giving to the other 30 days' prior
written notice of termination, in which case termination shall be effective upon
the expiration of such 30-day period unless performance is resumed prior to such
expiration.
3.05 SEVERABILITY. The invalidity of any provision of this Agreement
as determined by a court of competent jurisdiction in no way shall affect the
validity of any other provision hereof. If a provision is determined to be
invalid, the parties shall negotiate in good faith in an effort to agree upon a
suitable and equitable alternative provision to effect the original intent of
the parties.
3.06 TIME OF THE ESSENCE. The parties hereto agree that with respect
to the performance of all terms, conditions and covenants of this Agreement,
time is of the essence.
3.07 CAPTIONS. Section captions are not a part hereof and are merely
for the convenience of the parties.
3.08 BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof,
this Agreement shall bind the parties, their successors and assigns. This
Agreement
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shall be governed by the laws of the State of Missouri without reference to the
conflict or choice of law provisions thereof.
3.09 ASSIGNMENT. Neither party shall assign or sublease this Agreement
or any Services to be provided hereunder without the prior written consent of
the other, which consent shall not be withheld unreasonably. Notwithstanding
the foregoing, consent shall not be required for an assignment or sublease of
this Agreement or any Service provided hereunder by either party to a corporate
affiliate of such party or to any third party vendor or third party record
keeper who had been providing all or a material portion of the Services to or on
behalf of SLH or Seafield, as the case may be, prior to the date first written
above.
3.09 AMENDMENT. This Agreement may not be amended without the express
written agreement of all parties hereto.
3.10 NOTICES. All notices under this Agreement must be in writing and
delivered personally or sent by United States mail, postage prepaid, addressed
as follows, except that any party by written notice given as aforesaid, may
change its address for subsequent notices to be given hereunder.
If to Seafield:
Seafield Capital Corporation
2600 Grand Boulevard, Suite 500
Kansas City, Missouri 64108
Attention: President
If to SLH:
SLH CORPORATION.
2600 Grand Boulevard, Suite 500
Kansas City, Missouri 64108
Attention: President
Notice sent by U.S. mail will be deemed given when deposited with the U.S.
postal service.
3.11 LIABILITY FOR NONPERFORMANCE. None of the parties hereto nor any
subsidiaries of such parties shall have any liability to each other for failure
to perform its obligations hereunder unless such failure arises out of, directly
or indirectly, the misconduct or gross negligence on the part of the
nonperforming party. Seafield shall not be required to perform any Service (or
any part of any Service) to the extent that performance of such Service (or such
part of such Service) would violate any law, rule or regulation.
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3.12 INDEPENDENT ENTITIES. In carrying out the provisions of this
Agreement, Seafield and SLH are and shall be deemed to be for all purposes,
separate and independent entities. Seafield and SLH shall select their employees
and agents, and such employees and agents shall be under the exclusive and
complete supervision and control of Seafield or SLH, as the case may be.
Seafield and SLH hereby acknowledge responsibility for full payment of wages and
other compensation to all employees and agents engaged by either in the
performance of their respective Services under this Agreement. It is the express
intent of this Agreement that the relationship of Seafield to SLH and SLH to
Seafield shall be solely that of separate and independent companies and not that
of a joint venture, partnership or any other joint relationship.
3.13 NONFIDUCIARY STATUS. In carrying out the provisions of this
Agreement, neither party shall be a fiduciary (as defined in Section 3(21) of
ERISA) with respect to any employee benefit plan, program or arrangement
maintained by or on behalf of the other party. Each party will provide Services
pursuant to the terms and conditions of this Agreement in accordance with the
directions, guidelines and/or procedures established by SLH or Seafield, as the
case may be, or the plan administrator (as defined in Section 3(16) of ERISA) of
each party's employee benefit plans or arrangements.
3.14 THIRD PARTY BENEFICIARIES. The provisions of this Agreement are
solely for the benefit of the parties and are not intended to confer upon any
person except the parties any rights or remedies hereunder. There are no third
party beneficiaries of this Agreement, and this Agreement shall not provide any
third person with any remedy, claim, liability, reimbursement, action or other
right in excess of those existing without reference to this Agreement.
3.14 CONSTRUCTION. For purposes of this Agreement, references to
Seafield, with respect to events or periods prior to the date first written
above, shall mean and include, where appropriate, SLH's operation of the
Transferred Businesses as they existed prior to such date.
IN WITNESS WHEREOF, this Agreement has been executed in multiple
counterparts on the date set forth above, each of which shall, for all purposes,
be deemed an original and all of which shall evidence but one agreement between
the parties hereto.
SLH CORPORATION, SEAFIELD CAPITAL CORPORATION,
a Kansas corporation a Missouri corporation
By: ______________________________ By: ______________________________
Name: ____________________________ Name: ____________________________
Title: ___________________________ Title: ___________________________
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<PAGE>
Exhibit B
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of________________, 1997, by and
between SLH CORPORATION, a Kansas corporation (the "Company"), and____________
(the "Executive").
WHEREAS, by the effective date of this Agreement, the Company will be a
publicly traded company which owns various venture capital and other investments
and is engaged in real estate and energy businesses; and
WHEREAS, the Company desires to employ the Executive as __________________
of the Company; and
WHEREAS, the Executive desires to be employed on the terms and subject to
the conditions hereinafter stated.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Employment Agreement, the parties hereby agree as follows:
SECTION 1
POSITION AND RESPONSIBILITIES
During the Term of this Employment Agreement, the Executive shall perform
such duties for such compensation and subject to such terms and conditions as
are hereinafter set forth.
SECTION 2
TERM AND DUTIES
2.1 Term; Extension. The term of this Employment Agreement (the "Term
of this Employment Agreement") will commence on such date, following the date on
which shares of the Company's stock are distributed by Seafield Capital
Corporation ("Seafield") to its shareholders (the "Distribution Date"), as that
certain Facilities Sharing and Interim Services Agreement between the Company
and Seafield is terminated by either party thereto, and shall continue until the
third anniversary of the Distribution Date; provided that the Term of this
Employment Agreement shall be automatically extended for successive one year
periods unless notice of non-extension is given by either party to the other not
less than twelve months prior to the end of the then current Term. If such
notice is given, the Term of this Employment Agreement shall end on the earliest
anniversary of the Distribution Date which is at least twelve months after the
date of such notice. Termination of the Executive's employment pursuant to this
Employment Agreement, other than upon expiration of the Term of this Employment
Agreement, shall be governed by Sections 4 and 5.
<PAGE>
2.2 Duties. The Executive shall devote appropriate time, attention and
efforts during normal business hours to the Company's affairs, but the Company
and Executive agree that Executive's position and responsibilities with the
Company will not require Executive's full time and attention and Executive is
entitled to pursue other employment opportunities simultanously with his duties
hereunder. The Executive shall have such duties and responsibilities as are
assigned to him from time to time by the Board of Directors. As of the
effective date of this Employment Agreement, the Executive shall have senior
management authority and responsibility with respect to the long term management
of the Company, consistent with directions from the Board of Directors.
2.3 Location. The duties of the Executive shall be performed at such
locations and places as may be directed by the Board of Directors.
SECTION 3
COMPENSATION AND BENEFITS
3.1 Base Compensation. The Company shall pay the Executive a base
salary ("Base Salary") of $75,000 per annum, subject to applicable withholdings.
Base Salary shall be payable according to the customary payroll practices of the
Company but in no event less frequently than once each month. The Base Salary
shall be reviewed annually and shall be subject to increase or decrease
according to the policies and practices adopted by the Board of Directors from
time to time; provided, however, that in no event shall the Base Salary for any
year be decreased by more than five percent (5%) from the immediately preceding
year's Base Salary as a result of any such annual review.
3.2 Additional Benefits. The Executive will be entitled to participate
in all employee benefit plans or programs and receive all benefits and
perquisites to which any salaried employees are eligible under any existing or
future plans or programs established by the Company for salaried employees.
These are expected to consist of group health insurance, simplified employee
pension plans, car allowance, and a stock option plan. The Executive will
participate to the extent permissible under the terms and provisions of such
plans or programs in accordance with program provisions. Nothing in this
Agreement will preclude the Company from amending or terminating any of the
plans or programs applicable to salaried employees or senior executives. The
Executive will be entitled to an annual paid vacation as established by the
Board of Directors.
3.3 Business Expenses. The Company will reimburse the Executive for
all reasonable travel and other expenses incurred by the Executive in connection
with the performance of his duties and obligations under this Employment
Agreement.
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3.4 Withholding. The Company may directly or indirectly withhold from
any payments under this Employment Agreement all federal, state, city or other
taxes that shall be required pursuant to any law or governmental regulation.
SECTION 4
DEATH BENEFIT; DISABILITY COMPENSATION; KEY MAN INSURANCE
4.1 Payment in Event of Death. In the event of the death of the
Executive during the Term of this Employment Agreement, the Company's obligation
to make payments under this Employment Agreement shall cease as of the date of
death, except for earned but unpaid Base Salary.
4.2 Disability Compensation. Notwithstanding the disability of the
Executive, the Company will continue to pay the Executive during the Term of
this Employment Agreement, according to the compensation provisions of this
Employment Agreement. In the event the disability continues for a period of
three (3) months, the Company may thereafter terminate this Employment Agreement
and the Executive's employment as of the end of said period. Following such
termination, the Company will pay the Executive amounts equal to his regular
installments of Base Salary, as of the time of termination, for a period of six
(6) months.
4.3 Responsibilities in the Event of Disability. During the period the
Executive is receiving payments following his disability and as long as he is
physically and mentally able to do so, the Executive will furnish information
and assistance to the Company and from time to time will make himself available
to the Company to undertake assignments consistent with his position or prior
position with the Company and his physical and mental health. If the Company
fails to make a payment or provide a benefit required as part of this Employment
Agreement, the Executive's obligation to provide information and assistance will
end.
4.4 Definition of Disability. The term "disability" will have such
meaning as is determined in the reasonable discretion of the Board of Directors.
4.5 Key-Man Life Insurance. Upon request by the Company, the Executive
agrees to cooperate with the Company in obtaining "key man" life insurance on
the life of the Executive, with death benefits payable to the Company. Such
cooperation shall include the submission by the Executive to a medical
examination and his response to inquiries regarding his medical history.
3
<PAGE>
SECTION 5
TERMINATION OF EMPLOYMENT
Notwithstanding anything herein to the contrary, this Employment Agreement
and the Executive's employment with the Company may be terminated under the
circumstances and subject to the terms and provisions of this Section 5.
5.1 Termination Without Cause. If the Executive suffers a Termination
Without Cause (hereinafter defined), the Company will continue to pay the
Executive amounts equal to his Base Salary, as in effect at the time of the
Termination Without Cause, for the remaining Term of this Employment Agreement.
For the remaining Term of this Employment Agreement, the Company shall reimburse
the Executive for the cost of the Executive's health insurance as in effect at
the date of termination. The exercisability of stock options granted to the
Executive shall be governed by any applicable stock option agreements and the
terms of the respective stock option plans.
5.2 Termination With Cause; Voluntary Termination. If the Executive
suffers a Termination with Cause or the Executive terminates his employment with
the Company (a "Voluntary Termination"), then, the Company will not be obligated
to pay the Executive any amounts of compensation or benefits following the date
of termination. However, earned but unpaid Base Salary through the date of
termination will be paid in a lump sum at such time.
5.3 Definitions. For purposes of this Employment Agreement, the
following terms have the following meanings:
(a) "Termination With Cause" means termination of the Executive's
employment by the Company, acting in good faith, by written notice to the
Executive specifying the event relied upon for such termination, either (i) due
to the Executive's serious, willful misconduct with respect to his duties under
this Employment Agreement or (ii) due to the Executive's conviction for a
felony, the Executive's perpetration of a fraud, embezzlement or other act of
dishonesty or the Executive's breach of a trust or fiduciary duty which
materially adversely affects the Company or its shareholders or (iii) the
Executive's other employment or business activities constituting a conflict with
all or a material part of the Company's business.
(b) "Termination Without Cause" means termination of the
Executive's employment by the Company other than due to the Executive's death or
disability or Termination With Cause.
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<PAGE>
SECTION 6
OTHER DUTIES OF THE EXECUTIVE DURING
AND AFTER THE TERM OF THIS EMPLOYMENT AGREEMENT
6.1 Additional Information. The Executive will, upon reasonable
notice, during or after the Term of this Employment Agreement, furnish
information as may be in his possession and cooperate with the Company as may
reasonably be requested in connection with any claims or legal actions in which
the Company is or may become a party. The Executive shall receive reasonable
compensation for the time expended by him pursuant to this Section 6.1.
6.2 Confidentiality. The Executive recognizes and acknowledges that
all information pertaining to the affairs, business, clients, customers or other
relationships of the Company, as hereinafter defined, is confidential and is a
unique and valuable asset of the Company. Access to and knowledge of this
information are essential to the performance of the Executive's duties under
this Employment Agreement. The Executive will not during the Term of this
Employment Agreement or thereafter, except to the extent reasonably necessary in
the performance of his duties under this Agreement, give to any person, firm,
association, corporation or governmental agency any information concerning the
affairs, business, clients, customers or other relationships of the Company
except as required by law. The Executive will not make use of this type of
information for his own purposes or for the benefit of any person or
organization other than the Company. The Executive will also use his best
efforts to prevent the disclosure of this information by others. All records,
memoranda, etc. relating to the business of the Company whether made by the
Executive or otherwise coming into his possession are confidential and will
remain the property of the Company.
6.3 Noncompetition.
(a) During the Term of Employment. The Executive will not Compete
with the Company at any time while he is employed by the Company or receiving
payments from the Company.
(b) Voluntary Termination; Termination With Cause. In the event
of a Voluntary Termination or a Termination With Cause, the Executive will not
Compete (hereinafter defined) with the Company for a period consisting of the
remaining Term of this Employment Agreement plus one (1) year.
(c) Termination Without Cause; Non-Extension of the Term. In the
event of a Termination Without Cause or in the event the Company gives notice
under Section 2.1 that the Term of this Employment Agreement will not be
automatically extended, the Executive will not Compete with the Company for the
then remaining Term of this Employment Agreement.
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<PAGE>
(d) Definition of "Compete" with the Company. For the purposes of
this Section 6, the term "Compete with the Company" means action by the
Executive, direct or indirect, for his own account or for the account of others,
either as an officer, director, stockholder, owner, partner, member, promoter,
employee, consultant, advisor, agent, manager, creditor or in any other
capacity, resulting in the Executive having any pecuniary interest, legal or
equitable ownership, or other financial or non-financial interest in, or
employment, association or affiliation with, any corporation, business trust,
partnership, limited liability company, proprietorship or other business or
professional enterprise that engages in an energy related business substantially
similar to or in competition with any energy business engaged in by the Company
or in which the Company has an equity interest exceeding 5%.
(e) Reasonableness of Scope and Duration; Remedies. The Executive
acknowledges that the covenants contained herein are reasonable as to geographic
and temporal scope. The Executive acknowledges that his breach or threatened or
attempted breach of any provision of Section 6 would cause irreparable harm to
the Company not compensable in monetary damages and that the Company shall be
entitled, in addition to all other applicable remedies, to a temporary and
permanent injunction and a decree for specific performance of the terms of
Section 6 without being required to prove damages or furnish any bond or other
security.
SECTION 7
CONSOLIDATION, MERGER OR SALE OF ASSETS
Nothing in this Employment Agreement shall preclude the Company from
consolidating or merging into or with, or transferring all or substantially all
of its assets to, another corporation or organization which assumes this
Employment Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation, merger or sale of assets, the term "the
Company" as used herein will mean or include the other corporation or
organization and, unless terminated as herein provided, this Employment
Agreement shall continue in full force and effect. This Section 7 is not
intended to modify or limit the rights of the Executive hereunder.
SECTION 8
MISCELLANEOUS
8.1 Entire Agreement. This Employment Agreement contains the entire
understanding between the Company and the Executive with respect to the subject
matter and supersedes any prior employment or severance agreements between the
Company and its affiliates, and the Executive.
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8.2 Amendment; Waiver. This Employment Agreement may not be modified
or amended except in writing signed by the parties. No term or condition of
this Employment Agreement will be deemed to have been waived except in writing
by the party charged with waiver. A waiver shall operate only as to the
specific term or condition waived and will not constitute a waiver for the
future or act on anything other than that which is specifically waived.
8.3 Severability; Modification of Covenant. Should any part of this
Employment Agreement be declared invalid for any reason, such invalidity shall
not affect the validity of any remaining portion hereof and such remaining
portion shall continue in full force and effect as if this Employment Agreement
had been originally executed without including the invalid part. Should any
covenant of this Employment Agreement be unenforceable because of its geographic
scope or term, its geographic scope or term shall be modified to such extent as
may be necessary to render such covenant enforceable.
8.4 Effect of Captions. Titles and captions in no way define, limit,
extend or describe the scope of this Employment Agreement nor the intent of any
provision thereof.
8.5 Counterpart Execution. This Employment Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
8.6 Governing Law; Arbitration. This Employment Agreement has been
executed and delivered in the State of Kansas and its validity, interpretation,
performance and enforcement shall be governed by the laws of that state. Any
dispute among the parties hereto shall be settled by arbitration in the Kansas
City area, in accordance with the rules then obtaining of the American
Arbitration Association and judgment upon the award rendered may be entered in
any court having jurisdiction thereof. All provisions hereof are for the
protection and are intended to be for the benefit of the parties hereto and
enforceable directly by and binding upon each party. Each party hereto agrees
that the remedy at law of the other for any actual or threatened breach of this
Employment Agreement would be inadequate and that the other party shall be
entitled to specific performance hereof or injunctive relief or both, by
temporary or permanent injunction or such other appropriate judicial remedy,
writ or orders as may be decided by a court of competent jurisdiction in
addition to any damages which the complaining party may be legally entitled to
recover together with reasonable expenses of litigation, including attorney's
fees incurred in connection therewith, as may be approved by such court.
8.7 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed first-class postage prepaid by registered mail, return
receipt requested, or when delivered if by hand, overnight delivery service or
confirmed facsimile transmission, to the following:
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(1) If to the Company, at _________________, _________________,
Attention: Chairman of the Nominating and Compensation Committee, or
at such other address as may have been furnished to the Executive by
the Company in writing; or
(2) If to the Executive, at _________________, _______________,
or such other address as may have been furnished to the Company by the
Executive in writing.
8.8 Binding Agreements. This Employment Agreement shall be binding on
the parties' successors, heirs and assigns.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Employment Agreement
as of the date first above written.
SLH CORPORATION
By: _____________________________
Chairman of the Nominating and
Compensation Committee
EXECUTIVE:
__________________________________
9
<PAGE>
Exhibit C
TAX SHARING AGREEMENT
Between
SEAFIELD CAPITAL CORPORATION
and
SLH CORPORATION
<PAGE>
TABLE OF CONTENTS
ARTICLE I. PREPARATION AND FILING OF TAX RETURNS . . . . . . . . . . . . . . 2
1.1 General Rules . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Pre-Distribution Period Tax Returns . . . . . . . . . . . . 2
1.3 Post-Distribution Period Tax Returns . . . . . . . . . . . 4
ARTICLE II. DEFICIENCIES AND REFUNDS OF TAXES . . . . . . . . . . . . . . . . 4
2.1 Definition of Final Determination . . . . . . . . . . . . . 4
2.1 Payment of Deficiencies by SLH . . . . . . . . . . . . . . 5
2.3 Payment of Refunds to SLH . . . . . . . . . . . . . . . . . 7
ARTICLE III. TAX AUDITS, TRANSACTIONS AND OTHER MATTERS . . . . . . . . . . . 8
3.1 Tax Audits and Controversies . . . . . . . . . . . . . . . 8
3.2 Retention of Books and Records . . . . . . . . . . . . . . 9
3.3 Cooperation Regarding Tax Matters . . . . . . . . . . . . .10
3.4 Survival of Agreement . . . . . . . . . . . . . . . . . . .11
ARTICLE IV. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Severability . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Modification of Agreement . . . . . . . . . . . . . . . . 9
4.3 Conflict with the Distribution Agreement . . . . . . . . 9
4.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Application to Present and Future Subsidiaries . . . . .10
4.6 Term . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.7 Titles and Headings . . . . . . . . . . . . . . . . . . .10
4.8 Singular and Plural . . . . . . . . . . . . . . . . . . .10
4.9 Governing Law . . . . . . . . . . . . . . . . . . . . . .10
4.10 Counterparts . . . . . . . . . . . . . . . . . . . . . .10
<PAGE>
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT (the "Agreement") is made as of _______, 1997 by
Seafield Capital Corporation, a Missouri corporation ("Seafield"), and SLH
Corporation, a Kansas corporation ("SLH").
WHEREAS, SLH is a newly-formed corporation to which Seafield has on the
date hereof transferred certain assets, subject to certain liabilities, in
exchange for 100 percent of the issued and outstanding common stock of SLH
(which common stock is the only issued and outstanding capital stock of SLH);
and
WHEREAS, the assets transferred by Seafield to SLH on the date hereof
include 100 percent of the outstanding capital stock of BMA Resources, Inc., a
Missouri corporation, and 100 percent of the outstanding capital stock of Scout
Development Corporation, a Missouri corporation which itself owns 100 percent of
the capital stock of Scout Development Corporation of New Mexico, a Missouri
corporation and 100 percent of the capital stock of Carousel Apartment Homes,
Inc. ("Carousel") (SLH, BMA Resources, Inc., Scout Development Corporation,
Scout Development Corporation of New Mexico and Carousel are hereinafter
collectively the "SLH Group"); and
WHEREAS, Seafield and SLH have contemporaneously herewith entered into a
Distribution Agreement (the "Distribution Agreement") pursuant to which all of
the issued and outstanding common stock of SLH is to be distributed effective as
of the close of business on the date hereof (the "Distribution Date") by
Seafield to the holders of its common stock on a pro rata basis (the
"Distribution"); and
WHEREAS, the parties hereto desire to provide for the payment of tax lia-
bilities and entitlement to tax refunds for the taxable periods ending before,
on, and after the Distribution Date, to allocate responsibility for and provide
for cooperation in the preparation and filing of tax returns with respect to
such taxable periods, and to provide for certain other related matters;
NOW, THEREFORE, Seafield, on behalf of itself and its present, former, and
future subsidiaries, other than members of the SLH Group as hereinafter defined
(the "Seafield Group"), and SLH, on behalf of itself and the SLH Group, in
consideration of the premises and the mutual covenants contained herein,
acknowledge and agree as follows:
<PAGE>
ARTICLE I.
PREPARATION AND FILING OF TAX RETURNS
Section 1.1. General Rules.
(a) Certain Definitions. For purposes of this Agreement:
the term "Taxes" shall mean all forms of taxation and shall include without
limitation income, alternative minimum, superfund, sales, use, ad valorem, gross
receipts, franchise, transfer, recording, withholding, employment, excise, and
occupation taxes, together with any related interest, penalties, and additions
to tax, or additional amounts, imposed by any governmental authority upon the
Seafield Group, the SLH Group, or any of their respective members or any
combination thereof; the term "Tax" shall mean any of the Taxes; and the term
"Tax Return" shall mean any return, filing, questionnaire, or other document
required by law to be filed, including any amendment and refund claim that
constitutes an amendment to any of the foregoing that is required or permitted
to be filed, for any period with any governmental authority or other person in
connection with any Taxes (whether or not a payment is required to be made with
respect to such filing).
(b) Preservation of Accounting Methods and Tax Elections.
All Tax Returns filed by any member of the Seafield Group or by any member of
the SLH Group after the Distribution Date shall be prepared on a basis which
does not have an adverse effect on the elections, accounting methods,
conventions, closing agreements, and principles of taxation used in any Tax
Return filed by any such person for any taxable period ending on or before the
Distribution Date, and shall be filed on a timely basis by the party responsible
for such filing under this Agreement.
(c) Decisions Regarding Tax Returns. Subject to the
provisions of this Agreement, all decisions relating to the preparation and
filing of Tax Returns and relating to the handling of any audit or other review
of such Tax Returns by any governmental authority shall be made in the sole
discretion of the party responsible under this Agreement for such filing.
Section 1.2. Pre-Distribution Period Tax Returns.
(a) Continued Effectiveness of Prior Seafield Tax Sharing
Agreement. The parties acknowledge that Seafield, its subsidiaries, and members
of the SLH Group are parties to a Tax Sharing Agreement dated as of August 1,
1990 (the "Prior Tax Agreement"). Notwithstanding the change in the federal
income tax consolidated group of which Seafield is the common parent corporation
that results from the Distribution (and similar changes that may result under
state or local law), the Prior Tax Agreement shall continue in full force and
effect after the Distribution Date with respect to all Tax Returns otherwise
subject to the provisions of such Prior Tax Agreement that relate to fiscal
periods beginning before the Distribution Date. The Prior Tax Agreement, as
modified, amplified, and supplemented by this Agreement, shall be interpreted in
accordance with
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the past practices under such agreement of the parties thereto. The parties
acknowledge that, in accordance with the preceding provisions of this Section
1.2(a), Seafield shall be responsible for and shall pay all Federal income Taxes
arising as a result of the Distribution.
(b) Performance of Parties Under Prior Tax Agreement. SLH
shall cause each member of the SLH Group to perform on a timely basis all of
such member's obligations, if any, under the Prior Tax Agreement and, in
addition, shall promptly provide to Seafield upon request all information that
Seafield may reasonably request from time to time (including tax computations,
reconciliations of book and taxable incomes, and other similar information that
SLH or a member of the SLH Group must affirmatively prepare) that may be needed
by Seafield to file Tax Returns or otherwise perform under the Prior Tax
Agreement or to monitor the performance of any other party under such contract.
Seafield shall itself and shall cause each other member of the Seafield Group to
perform on a timely basis all of its or such member's obligations, respectively,
under the Prior Tax Agreement and shall promptly provide to SLH upon request all
information that SLH may reasonably request from time to time relating to the
Tax liability of any member of the Seafield Group or the SLH Group with respect
to a Tax Return that is subject to the provisions of the Prior Tax Agreement or
to the performance under such contract of any of the parties thereto.
(c) Tax Returns Not Governed by Prior Tax Agreement. For
purposes of the preceding Sections 1.2(a) and (b) (i.e., for purposes of filing
Tax Returns and paying Taxes pursuant to the Prior Tax Agreement for fiscal
periods beginning prior to the Distribution Date), paragraph 7 of the Prior Tax
Agreement is hereby modified to refer to and include all municipal and state
Taxes with respect to which combined, consolidated, or unitary reporting is
permissible, rather than merely referring to and including state income Taxes.
All Tax Returns other than the Tax Returns described in Section 1.2(a) and the
preceding sentence which include or are filed with respect to a member of the
Seafield Group or the SLH Group for periods beginning before the Distribution
Date shall be filed by the member of the Seafield Group or the SLH Group, as the
case may be, that is required to file such return by law.
(d) Carryback of Tax Attributes. For purposes of this
Agreement: the term "Tax Attribute" shall mean any net operating loss, capital
loss, or tax credit allowed by the Internal Revenue Code of 1986 or any
successor thereto and the regulations promulgated thereunder (the "Code") or
equivalent state statute or local ordinance; and the term "Tax Benefit" shall
mean the amount of the decrease in Taxes resulting from any increase or decrease
in any item including, but not limited to, any item of income or deduction, gain
or loss, or tax credit. If any member of the SLH Group shall have a Tax
Attribute that can only be utilized on a consolidated, combined, or unitary Tax
Return filed by Seafield for a fiscal year beginning before the Distribution
Date, then Seafield shall promptly upon SLH's request (and upon SLH furnishing
to Seafield all information relevant to such Tax Attribute) file an amended Tax
Return for such fiscal year reporting
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such Tax Attribute and shall pay to such member of the SLH Group the Tax Benefit
attributable to such Tax Attribute, all in accordance with the provisions of the
Prior Tax Agreement; provided, Seafield may withhold from such payment and
retain for itself a reasonable fee to compensate it for the effort and expense
incurred by it in filing such amended Tax Return. If any member of the SLH
Group shall have a Tax Attribute that can be utilized either on a consolidated,
combined, or unitary Tax Return filed by Seafield for a fiscal year beginning
before the Distribution Date or on a Tax Return for a fiscal year beginning on
or after the Distribution Date, then such Tax Attribute may be carried back to
the earlier fiscal period's Tax Return (in accordance with the procedures de-
scribed in the preceding sentence) if Seafield and SLH mutually so agree, and if
not then the SLH Group member may utilize the Tax Attribute only on the later
fiscal period's Tax Return.
(e) Apportionment of Tax Attributes. If all or a portion of
any Tax Attribute arising in any taxable period beginning before the
Distribution Date is apportioned to a tax year of any member of the SLH Group
beginning on or after the Distribution Date pursuant to any provisions of the
Code (or equivalent state or local law or regulation), then SLH shall retain the
Tax Benefit related to the Tax Attribute so apportioned.
Section 1.3. Post-Distribution Period Tax Returns. All Tax Returns and
Taxes for periods beginning on or after the Distribution Date shall be the
responsibility of the Seafield Group if such Tax Returns or Taxes are legally
due from the Seafield Group and shall be the responsibility of the SLH Group if
such Tax Returns or Taxes are legally due from the SLH Group.
ARTICLE II
DEFICIENCIES AND REFUNDS OF TAXES
Section 2.1. Definition of Final Determination. For purposes of this
Agreement the term "Final Determination" shall mean the final resolution of
liability for any Tax for a taxable period: (i) by Internal Revenue Service
("IRS") Form 870-AD (or any successor forms thereto) on the date of acceptance
by or on behalf of the IRS, or by a comparable form under the laws of other
jurisdictions; (ii) by a decision, judgment, decree, or other order by a court
of competent jurisdiction which has become final and unappealable; (iii) by
closing agreement or accepted offer in compromise under Section 7121 or 7122 of
the Code, or comparable agreement under the laws of other jurisdictions; (iv) by
any allowance of a refund or credit in respect of an overpayment of Tax, but
only after the expiration of all periods during which such refund may be
recovered (including by way of offset) by the Tax-imposing jurisdiction; or (v)
by any other final disposition, including by reason of the expiration of the
applicable statute of limitations or by mutual agreement of the parties.
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Section 2.2. Payment of Deficiencies by SLH. The provisions of this
Section 2.2 are intended to amplify the provisions of paragraph 6 of the Prior
Tax Agreement. If a Final Determination is made that results in any adjustments
to any Tax Return of Seafield in which any member of the SLH Group is included
for taxable periods beginning before the Distribution Date, then to the extent
that such adjustments result in a greater Tax for such SLH Group member or any
Seafield Group member (in either case without regard to any offsetting
adjustments to other members of the Seafield Group), such member of the SLH
Group shall be liable for such increase in Taxes. If any member of the SLH
Group shall have any liability as a result of this Section 2.2, SLH shall pay to
Seafield, hold Seafield harmless, and indemnify Seafield for any such Tax
liability, costs, and attorneys fees, and the amount thereof shall be paid by
SLH to Seafield within 15 days of the receipt by SLH of written notice of such
liability, together with a computation of the amount due and supporting
documentation in such detail as SLH may reasonably request to verify the
computation of the amount due. Any such required payment not made within such
15-day period shall thereafter bear interest until paid at the then most
recently published rate of interest charged by the IRS on income tax
deficiencies pursuant to Code section 6621(a)(2).
Section 2.3. Payment of Refunds to SLH. The provisions of this Section
2.3 are intended to amplify further the provisions of paragraph 6 of the Prior
Tax Agreement. If a Final Determination is made that results in any adjustments
to any Tax Return of Seafield in which any member of the SLH Group is included
for taxable periods beginning before the Distribution Date, then to the extent
that such adjustments decrease the Tax liability attributable to any member of
the SLH Group and result in a Tax Benefit to Seafield or any member of the
Seafield Group (without regard to any offsetting adjustments to other members of
the Seafield Group), then Seafield shall remit to SLH any refunds of Taxes
received by or credited to it as a result of the adjustments attributable to a
member of the SLH Group. Seafield shall pay any amounts due from it to SLH as a
result of this Section 2.3 within 15 days of its receipt of the relevant refund
or credit from the IRS or any state or other governmental unit, as the case may
be. Any such required payment not made within such 15-day period shall
thereafter bear interest until paid at the then most recently published rate at
which the IRS pays interest on tax refunds pursuant to Code section 6621(a)(1).
Such payments shall be accompanied by a computation of the amount due and
supporting documentation in such detail as SLH may reasonably request to verify
the computation of the amount due. Anything herein to the contrary
notwithstanding, except as provided in this Section 2.3, no member of the SLH
Group shall be entitled to any payment or benefit as a result of the receipt of
any Tax refund received by any member of the Seafield Group except to the extent
such refund is attributable to the overpayment of estimated Taxes by the SLH
Group or any member thereof.
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ARTICLE III
TAX AUDITS, TRANSACTIONS AND OTHER MATTERS
Section 3.1. Tax Audits and Controversies.
(a) Federal, State, or Local Income or Franchise Taxes.
Except as otherwise provided in this Section 3.1, Seafield shall have the
exclusive authority and obligation to represent each member of the SLH Group
before the IRS or any other governmental agency or authority or before any court
with respect to any matter affecting the federal, state, or local income or
franchise Tax liability of any member of either the Seafield Group or the SLH
Group for any Tax period beginning before the Distribution Date, in each such
case: (i) allowing representatives of the SLH Group, including without
limitation outside counsel and consultants, to participate in good faith in all
respects in all such Tax proceedings affecting any member of the SLH Group; and
(ii) acting in the best interests of both the Seafield Group and the SLH Group.
Such representation shall include but shall not be limited to
exclusive control over: (i) any response to any examination of federal, state,
or local income or franchise Tax Returns; and (ii) any contest or litigation
through a Final Determination of any issue included in any Tax Return that
includes a member of the Seafield Group, including but not limited to: (A)
whether and in what forum to conduct such contest; and (B) whether and on what
basis to settle such contest, except that Seafield shall not without SLH's
consent settle any claim, suit, action, or proceeding in respect of which any
member of the SLH Group may incur any then known (by Seafield) future Tax
liability, or in respect of which indemnity for federal, state, or local income
or franchise Taxes may be sought hereunder against SLH or any member of the SLH
Group, which consent shall not be unreasonably withheld. Seafield shall give
timely notice to SLH of any inquiry, the assertion of any claim, or the
commencement of any suit, action, or proceeding in respect of which any member
of the SLH Group may incur any then known (by Seafield) future Tax liability or
in respect of which indemnity for federal, state, or local income or franchise
Taxes may be sought under this Agreement against SLH or any member of the SLH
Group and shall give SLH such information with respect thereto as SLH may
reasonably request.
Anything in this Section 3.1 or elsewhere in this Agreement to the
contrary notwithstanding, if SLH contests or litigates any federal, state, or
local income or franchise tax issue in any forum, SLH shall pay and shall
indemnify and hold harmless each member of the Seafield Group from any and all
costs, expenses, and/or liabilities of any type or nature including without
limitation, any federal income tax liability (including interest and penalties
thereon), that are incurred by or imposed upon Seafield or any member of the
Seafield Group which Seafield or such Seafield Group member would not otherwise
have incurred.
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(b) Other Taxes. Except as otherwise provided in this
Section 3.1, the party responsible for filing any Tax Return (other than
federal, state, or local income or franchise Tax Returns) pursuant to Section
1.2(c) hereof shall, at its own expense, have the exclusive authority to
represent each member of the Seafield Group and the SLH Group before any
governmental agency or authority or before any court with respect to any matter
affecting the Tax liability of any member of either the Seafield Group or the
SLH Group for any Tax period beginning before the Distribution Date in each
case: (i) allowing representatives of the other group to participate in good
faith in all respects in all such Tax proceedings affecting any member of the
other group; and (ii) acting in the best interests of both the Seafield Group
and the SLH Group.
Such representation shall include but shall not be limited to
exclusive control over: (i) any response to any examination by the governmental
authority of such Tax Returns; and (ii) any contest through a Final
Determination of any issue included in any Tax Return that includes a member of
the SLH Group or the Seafield Group, including but not limited to: (A) whether
and in what forum to conduct such contest; and (B) whether and on what basis to
settle such contest, except that Seafield or any member of the Seafield Group
shall not settle any claim, suit, action, or proceeding in respect of which
indemnity for such Taxes may be sought hereunder against SLH or any member of
the SLH Group without SLH's consent, which consent shall not be unreasonably
withheld, and except that SLH or any member of the SLH Group shall not settle
any claim, suit, action, or proceeding in respect of which indemnity for such
Taxes may be sought hereunder against Seafield or any member of the Seafield
Group without Seafield's consent, which consent shall not be unreasonably
withheld.
Section 3.2. Retention of Books and Records. SLH and Seafield each agrees
to retain and preserve in accessible and reproducible form all Tax Returns,
related schedules, and workpapers, and all accounting and computer records (in
whatever media) and other documents relating thereto (collectively, the "Tax
Documents"), existing on the date hereof or created through or with respect to
taxable periods ending on or before the Distribution Date until the later of:
(a) the expiration of the statute of limitations (including extensions) of the
taxable years to which such Tax Returns and Tax Documents relate; or (b)
December 31, 2006. No Tax Documents shall be destroyed or otherwise disposed of
by either Seafield or SLH (or any member of their respective groups) until the
party intending to make such disposition has given the other party at least 30
days advance notice thereof, whereupon the party receiving such notice shall
have the right, at its own expense, to take possession of such Tax Documents.
Section 3.3. Cooperation Regarding Tax Matters.
(a) SLH's Obligations. In addition to any obligations
imposed pursuant to the Distribution Agreement, SLH and each other member of the
SLH Group shall fully cooperate with Seafield and its representatives, in a
prompt and timely manner, in connection with the preparation and filing of, and
any inquiry, audit, examination,
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investigation, dispute, or litigation involving, any Tax Return filed or
required to be filed by or for any member of the Seafield Group for any taxable
period beginning before the Distribution Date. Such cooperation shall include
but not be limited to making available to Seafield during normal business hours,
and within 30 days of any request therefor, all Tax Documents, books, records,
and information, and the assistance of all officers and employees, necessary or
useful in connection with any Tax inquiry, audit, examination, investigation,
dispute, litigation, or other matter.
SLH agrees on behalf of itself and each other member of the SLH Group
to execute and deliver to Seafield, when so requested by Seafield, any power of
attorney that may be necessary or appropriate to allow Seafield and its counsel
to represent SLH or such SLH Group member in any controversy which Seafield
shall have the right to control pursuant to the terms of Section 3.1 of this
Agreement.
(b) Seafield's Obligation. Except as otherwise provided in
this Article III, Seafield shall fully cooperate with SLH and its
representatives, in a prompt and timely manner, in connection with the
preparation and filing of, and any inquiry, audit, examination, investigation,
dispute, or litigation involving, any Tax Return filed or required to be filed
pursuant to Section 1.2(c) by or for any member of the SLH Group. Such
cooperation shall include but not be limited to making available to SLH during
normal business hours, and within 30 days of any request therefor, all books,
records, and information, and the assistance of all officers and employees,
necessary or useful in connection with any tax inquiry, audit, examination,
investigation, dispute, litigation, or other matter.
Seafield agrees on behalf of itself and each other member of the
Seafield Group to execute and deliver to SLH, when so requested by SLH, any
power of attorney that may be necessary or appropriate to allow SLH and its
counsel to represent Seafield or such other Seafield Group member in any
controversy which SLH shall have the right to control pursuant to the terms of
Section 3.1(b) of this Agreement.
(c) Remedy for Failure to Comply. If Seafield reasonably
determines that SLH is not for any reason fulfilling its obligations under
Section 3.3(a), or if SLH reasonably determines that Seafield is not for any
reason fulfilling its obligations under Section 3.3(b), then Seafield or SLH, as
the case may be, shall have the right to appoint, at the expense of the other,
an independent entity such as a nationally recognized public accounting firm to
assist the other in meeting its obligations under this Section 3.3. Such entity
shall have complete access to all books, records, and information, and the
complete cooperation of all officers and employees, of SLH or Seafield, as the
case may be.
Section 3.4. Survival of Agreement. This Agreement and all covenants
contained herein shall survive the expiration of all statutes of limitations
prescribed by the Code and other tax laws and any extensions thereof that apply
to any Tax Returns and any Taxes and any Final Determination relating to any
Taxes.
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ARTICLE IV
MISCELLANEOUS
Section 4.1. Severability. In case any one or more of the provisions con-
tained in this Agreement should be invalid, illegal, or unenforceable, the
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
Section 4.2. Modification of Agreement. No modification, amendment, or
waiver of any provision of this Agreement shall be effective unless the same
shall be in writing and signed by each of the parties hereto and then such
modification, amendment, or waiver shall be effective only in the specific
instance and for the purpose for which given.
Section 4.3. Conflict with Other Agreements. Anything in this Agreement
or the Distribution Agreement to the contrary notwithstanding, in the event and
to the extent that there shall be a conflict between the provisions of this
Agreement and the Distribution Agreement, the provisions of this Agreement shall
control. In the event and to the extent that there shall be a conflict between
the provisions of this Agreement and the Prior Tax Agreement as modified,
amplified, and supplemented by this Agreement, the provisions of this Agreement
shall control. Notwithstanding any other provision of this Agreement, however,
this Agreement shall not amend, modify, or affect in any way the provisions of
the Distribution Agreement and the Blanket Assignment, Bill of Sale, Deed and
Assumption Agreement between Seafield and SLH dated the date hereof (the
"Assignment") that relate to the "Tax Claims" (as defined in the Assignment) or
the liability of any party for the Tax Claims; the parties expressly intend for
all matters relating to the Tax Claims to be governed by the Distribution
Agreement and the Assignment.
Section 4.4. Notices. All notices or other communications required or
permitted under this Agreement shall be delivered by hand, mailed by certified
or registered mail, postage prepaid and return receipt requested, or sent by
cable, telegram, telex, or telecopy (confirmed by regular, first-class mail), to
the parties at the following addresses (or at such other addresses for a party
as shall be specified by like notice) and shall be deemed given on the date on
which such notice is received:
(a) In the case of Seafield, to
Seafield Capital Corporation
2600 Grand Boulevard, Suite 500
Kansas City, Missouri 64108
Attention: President
(b) In the case of SLH, to
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SLH Corporation
2600 Grand Boulevard, Suite 500
Kansas City, Missouri 64108
Attention: President
Section 4.5. Application to Present and Future Subsidiaries. This Agree-
ment is being entered into by Seafield and SLH on behalf of themselves and each
member of the Seafield Group and the SLH Group, respectively. This Agreement
shall constitute a direct obligation of each such member and shall be deemed to
have been readopted and affirmed on behalf of any corporation which becomes a
member of the Seafield Group or the SLH Group in the future. Seafield and SLH
hereby guarantee the performance of all actions, agreements, and obligations
provided for under this Agreement of each member of the Seafield Group and the
SLH Group, respectively. Seafield and SLH shall, upon the written request of
the other, cause any of their respective group members formally to execute this
Agreement. This Agreement shall be binding upon, and shall inure to the benefit
of, the successors, assigns, and persons controlling any of the corporations
bound hereby.
Section 4.6. Term. This Agreement shall commence on the date of execution
indicated above and shall continue in effect until otherwise agreed to in
writing by Seafield and SLH, or their successors.
Section 4.7. Titles and Headings. Titles and headings to sections herein
are inserted for the convenience of reference only and are not intended to be a
part or to affect the meaning or interpretation of this Agreement.
Section 4.8. Singular and Plural. As used herein, the singular shall
include the plural and vice versa.
Section 4.9. Governing Law. This Agreement shall be governed by the laws
of the State of Missouri.
Section 4.10. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become a binding agreement when one or more counterparts have been signed
by each party and delivered to the other parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all on the day and year first
above written.
SEAFIELD CAPITAL CORPORATION,
a Missouri corporation
By: ________________________
Title: _____________________
SLH CORPORATION,
a Kansas corporation
By: ________________________
Title: _____________________
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Exhibit D
BLANKET ASSIGNMENT, BILL OF SALE, DEED AND
ASSUMPTION AGREEMENT
This BLANKET ASSIGNMENT, BILL OF SALE, DEED AND ASSUMPTION AGREEMENT, dated
as of February __, 1997, ("Assignment and Assumption Agreement") by and among
Seafield Capital Corporation, a Missouri corporation ("Seafield") and SLH
Corporation, a newly formed Kansas corporation which is a wholly owned
subsidiary of Seafield ("SLH").
RECITALS
A. The Boards of Directors of Seafield and SLH have determined that it
is in the best interests of the shareholders of Seafield: (1) to transfer to
SLH substantially all of Seafield's assets (the "Transfer Assets") other than
its holdings (including any capital stock and debt) of LabOne, Inc. ("Lab") and
Response Oncology, Inc. ("Response") and certain other assets (the "Retained
Assets" as more particularly defined below) and certain liabilities (the
"Transfer Liabilities") and (2) to distribute to the holders of the issued and
outstanding shares of common stock, par value $1 per share, of Seafield all of
the issued and outstanding shares of common stock, par value $0.01 per share, of
SLH (the "Distribution") in accordance with Article II of a DISTRIBUTION
AGREEMENT dated as of December 1, 1996 ("Distribution Agreement").
B. Pursuant to Section 1.02 of the Distribution Agreement Seafield and
SLH are required to take all action necessary to transfer to SLH, and to cause
SLH to assume, as the case may be, effective as of the Distribution Date, (1)
all of the Transfer Assets and (2) all of the Transfer Liabilities. This
agreement is intended to effect such transfers and assumptions, subject to the
terms of the Distribution Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound thereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1. Definitions and Terms. Except as otherwise provided herein, the
capitalized terms in this agreement shall have the same meaning as those terms
are defined to have in the Distribution Agreement.
<PAGE>
ARTICLE II
TRANSFER OF TRANSFER ASSETS
2.1 Contribution and Transfer. KNOW ALL MEN BY THESE PRESENTS: for
good and valuable consideration, the receipt of which is hereby acknowledged,
Seafield, subject to the terms hereof, has contributed, granted, conveyed,
transferred, assigned, and set over, and does by these presents grant, convey,
transfer, assign and set over to SLH all of its right, title and interest in
those assets held by Seafield in the name of or for the exclusive benefit of the
SLH Business (the "SLH Assets") other than the assets listed in Section 2.2
hereof (the "Retained Assets," with the SLH Assets other than the Retained
Assets being hereinafter referred to as the "Transfer Assets"), TO HAVE AND TO
HOLD the same unto SLH, its successors and assigns, forever. Without limiting
the foregoing, the Transfer Assets expressly include all Transfer Assets
reflected on Seafield's books and records as being allocated for the exclusive
use or consumption by the SLH Business, including, without limitation, the
Transfer Assets reflected on the September 30, 1996, unaudited Consolidated
Balance Sheet attached to the SLH Form 10 under the Securities and Excahange
Commission dated December 21, 1996 (the "Balance Sheet" and the "Form 10") as
well as those acquired by the SLH Business since September 30, 1996, less those
disposed of since September 30, 1996. Without limiting the foregoing, the
Transfer Assets include the following:
2.11 SLH Subsidiaries. All of the issued and outstanding shares of
the capital stock of the following Seafield subsidiaries, which together with
the indirectly owned subsidiaries of such Seafield subsidiaries constitute the
SLH Subsidiaries as defined in the Distribution Agreement:
a. BMA Resources, Inc. ("Resources"), which owns, among other
things (i) 5,950,000 shares of the issued and outstanding shares of common
stock of Syntroleum Corporation and (ii) interests in the following oil and gas
general partnerships: Bundy, Bentel, Westgate and Chenault.
b. Scout Development Corporation ("Scout"), which owns, among
other things (i) Scout Development Corporation of New Mexico ("Scout NM"), and
(ii) Carousel Apartment Homes, Inc. ("Carousel"); and
c. Tenenbaum Associates, Inc. ("Tenenbaum"),together with any
accounts receivable and other assets that may have been retained by Seafield in
connection with the sale of Tenenbaum's business and assets.
2.12 SLH Investments. The following Securities held by Seafield
which are hereinafter referred to as the SLH Investments:
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a. Securities issued by Norian Corporation, a California
corporation consisting of 181,250 shares of convertible preferred stock, no par
value;
b. Securities issued by: (i) First Century Partnership III, a
limited partnership consisting of a 3.7% capital interest; (ii) First Century
Partnership II, a limited partnership; (iii) New Enterprise Associates II,
L.P. a limited partnership;
c. Securities issued by Oclassen Pharmaceuticals, Inc. a
Delaware corporation consisting of 500,000 shares of common stock;
d. Cash and short term investments in the face amount of
$6,850,000.
e. Contract rights formerly relating to or arising out of
Tenenbaum Associates, Inc. and its stockholders, including all rights of
Seafield in and to payments and other consideation required tobe made by Ernst &
Young U.S. LLP ("E&Y") pursuant to that certain Asset Purchase Agreement dated
May 31, 1995 (the "E&Y Agreement) and any rights arising out of that certain
Agreement of Purchase and Sale of Assets dated as of July 10, 1995 between
Seafield and Wayne A. tanenbaum (the "WAT Agreement") and all accounts and notes
receivable by Seafield with respect to the sale of Tennenbaum Associates, Inc.
assets and the liquidation of Tennenbaum; and
f. Treasury notes or similar instruments pledged by Seafield in
the approximate amount of $3.0 million to secure payment of a certain Gillet
letter of credit.
2.13 Information and Records. All books, records and information
recorded on any form of media, including paper, magnetic disks, computer drives,
microfiche or other form of information storage equipment or materials owned by
Seafield and used exclusively by the SLH Business.
2.14 Accounts and Notes Receivable. All payments of currency
receivable by Seafield upon accounts generated with respect to the SLH Business
and upon notes, leases, refunds and other evidences of indebtedness or
reimbursements arising out of transactions between the SLH Business and persons
or entities other than Seafield (hereinafter "Third Parties"), including any
receivables reflected on the Balance Sheet and now owned by Seafield.
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2.15 Contracts and Agreements. All of Seafield's right, title and
interest in all contracts and agreements between Seafield and any Third Party
made by or for the exclusive benefit of the SLH Business, other than such rights
and interests in contracts and agreements included among the Retained Assets
(the "Contract Rights," and "Contracts," respectively with the excluded rights
and interests hereinafter referred to as the "Retained Contract Rights" and
"Retained Contracts," respectively) including, without limitation the following:
2.151 Real estate leases consisting of (i) the lease for the
space occupied by Seafield at 2600 Grand Boulevard , Suite 500, Kansas City,
Missouri (the "Seafield Offices") and (ii) the Tenenbaum leases.
2.152 Equipment leases with respect to any items of equipment
located at the Seafield Offices on the Distribution Date;
2.153 Insurance and indemnity contracts and policies to the
extent set forth under Article VIII of the Distribution Agreement;
2.154 SLH Business orders for the purchase of goods and or
services from Third Parties;
2.155 Employee benefit plans and arrangements for the benefit
of employees who on the Distribution Date are employed by and are on the payroll
of the SLH or any SLH Subsidiary (the "SLH Employees"); and
2.156 Any SLH Support Agreement as defined in the Distribution
Agreement including the pledge by Seafield of the Gillete cash and short term
securities.
2.157 The E&Y Agreement and the WAT Agreement.
2.16 Claims, Suits and Choses in Action. All asserted and unasserted
claims, suits, and choses in action now owned by Seafield and arising out of the
business and operations of the SLH Business or relating to any of the Transfer
Assets (the "Claims") including without limitation, the following:
a. Any Seafield claim for tax refunds or off sets arising out
of losses recognized or recognizable by Seafield with respect to the disposition
prior to the Distribution Date of any assets of the SLH Business, or which is
usable by Seafield as an off
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set agaisnt or a reduction of any tax liability which is included in the
Transfer Liabilities; and
b. The action described in the second paragraph of Item 3 of
the Seafield report on Form 10-K for the fiscal year ended December 31, 1995
(the "Seafield 10-K") (BMA v. Skidmore, Owings & Merrill);
2.17 Permits and Licenses. All permits and licenses held by Seafield
for the exclusive benefit of the SLH Business to the extent that such permits
and licenses may be legally transferrable (The "Permits").
2.2 Retained Assets. Notwithstanding the foregoing, the following Retained
Assets shall not be deemed to be within the Transfer Assets and shall not be
contributed or otherwise transferred to SLH hereunder:
2.21 Retained Information and Records. All books, records and
information recorded on any form of media, including paper, magnetic disks,
computer drives, microfiche or other form of information storage equipment or
materials owned by Seafield and including information or data relating to or for
the benefit of the SLH Business as well as businesses other than the SLH
Business (the "Joint Records"). SLH shall be permitted access to the Joint
Records at Seafield's discretion and on an otherwise mutually agreeable basis.
2.22 Retained Accounts and Notes Receivable. All of the following
Retained Accounts Receivable: All intracompany accounts receivable by the SLH
Business from Seafield other than the following accounts: O' Byrne Note
receivable.
2.23 Retained Contracts and Contract Rights. All of the following
Retained Contracts and Retained Contract Rights:
2.231 All contract rights to be retained by Seafield or any
member of the Seafield Group under Article VI and VIII of the Distribution
Agreement.
2.24 Assets Subject to Restrictions on Transfer. The Retained Assets
shall include, subject to the terms hereof, any asset otherwise included in the
above description of the Transfer Assets which is subject to a restriction on
transfer or otherwise requires the consent of a third party prior to transfer
and with respect to which the restriction has not been removed or a consent has
not been obtained as of the Distribution Date. Subsequent to the Distribution
Date Seafield and SLH shall use reasonable efforts to remove any such
restriction or to obtain such consent and upon the removal of such restriction
or the receipt of such consent such asset shall become a Contributed Asset,
deemed by the parties to have been contributed at and as of the Distribution
Date. Upon such occurrence Seafield and SLH
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shall execute such further instruments of transfer necessary to complete the
legal transfer of such Contributed Asset, dated as of the Distribution Date if
permissible. Pending removal of such restriction and receipt of any such
required consent, Seafield shall arrange for SLH to enjoy the benefits of such
Asset to the extent legally permissible and SLH shall provide Seafield with the
resources necessary for Seafield to continue to satisfy SLH's obligations with
respect to such asset.
2.25 Other Retained Assets. All of the following other assets held
by Seafield in the name of or for the exclusive benefit of the SLH Business:
None other than an Accura Legend automobile used by W.T. Grant II, a whale
sculupture in the Seafield Board Room and a fish tank in the offices of W.T.
Grant II.
ARTICLE III
ASSUMPTION OF TRANSFER LIABILITIES
3.1 Liabilities Assumed by SLH. SLH hereby unconditionally assumes and
agrees to discharge and perform in accordance with their terms all of the
obligations, liabilities and duties of Seafield arising out of its operation of
the SLH Business and its ownership, use or operation of the Transfer Assets
other than such Retained liabilities and obligations that are enumerated in
Section 3.2 (the "Transfer Liabilities," with such Retained liabilities and
obligations hereinafter referred to as the "Retained Liabilities"), including
without limitation the following Transfer Liabilities:
3.11 Balance Sheet Liabilities. All of Seafield's liabilities
relating to the SLH Business which are referred to or which are reflected on the
Balance Sheet as well as such liabilities which have been incurred by the SLH
Business since September 30, 1996, other than such liabilities included in the
Retained Liabilities (the "Balance Sheet Liabilities" with the such Retained
balance sheet liabilities hereinafter referred to as the "Retained Balance Sheet
Liabilities").
3.12 Liabilities to SLH Employees. All of Seafield's liabilities to
SLH Employees, including, without limitation, all Seafield's obligations under
and pursuant to any SLH collective bargaining, union benefit, salary, bonus,
employee welfare, pension, retirement, vacation pay, disability, accident and
health insurance, life insurance, profit sharing, severance pay or other benefit
plan other than such liabilities and obligations included in the Retained
Liabilities (the "Employee Liabilities" with the such other employee liabilities
hereinafter referred to as the "Retained Employee Liabilities").
3.121 Employment of SLH Employees. At the Distribution Date,
(a) all of the following individuals who were prior to the Distribution Date
employees of Seafield shall become the employees of SLH, with their employment
continuing on the same terms and conditions as in effect immediately prior to
the Distribution Date, subject to the rights of each such employee to decline
such employment with SLH: All persons full time
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employed by an SLH Subsidiary, but not including P. Anthony Jacobs, James R.
Seward, Steven K. Fitzwater, Linda McCoy, D. Rick Linhardt, Lisa Wall, Sandy
Crain, Brian Elvin, Kim Schaefer, Paula Sheridan, Julie Tushaus, Patti Campbell
or Linda Stilley; and (b) all SLH Employees who were immediately prior to the
Distribution Date employees of SLH or of any SLH Subsidiary shall continue as
employees of SLH or such subsidiary of SLH, as the case may be, with their
employment continuing on the same terms and conditions as in effect immediately
prior to the Distribution Date. In no event shall there be deemed to be any
separation from service or termination of employment with respect to any of the
SLH Employees for any purpose on account of the transfer of assets and
liabilities relating to the SLH Business contemplated hereby.
3.13 Contract Liabilities. All of Seafield's liabilities and
obligations under the contracts and agreements included in the Transfer Assets,
including those specified in Section 2.15.
3.14 Liabilities Relating to Certain Tax Claims. Without limiting
the foregoing, the Transfer Liabilities shall include any and all liability of
Seafield to the IRS or any state or local taxing authority with respect to any
matter relating to or arising out of any proposed adjustments by the IRS as
described under "Legal Matters" in the Information Statement that is a part of
the the Form 10 (the "Information Statement") as well as any other matters to be
assumed by SLH as set forth in the Tax Sharing Agreement.
3.15 Transfer and Distribution Tax Liabilities. Without limiting the
foregoing, the Transfer Liabilities shall include Tax liabilities only to the
extent provided in Section 3.14 and as provided in the Tax Sharing Agreement.
3.16 Other Liabilities. All other liabilities and obligations of
Seafield arising out of or relating to any of the Transfer Assets other than
such liabilities and obligations included in the Retained Liabilities (the
"Other Liabilities" with the such other Retained liabilities hereinafter
referred to as the "Other Retained Liabilities").
3.2 Retained Liabilities. Notwithstanding the foregoing, the following
Retained Liabilities shall not be deemed to be within the Transfer Liabilities
and shall not be assumed by SLH hereunder:
3.21 Retained Employee Liabilities. Retained Employee Liabilities
consisting of all of Seafield's obligations (a) with respect to the following
Seafield employees:P. Anthony Jacobs, James R. Seward, Steven K. Fitzwater,
Linda McCoy, D. Rick Linhardt, Lisa Wall, Sandy Crain, Brian Elvin, Kim
Schaefer, Paula Sheridan, Julie Tushaus, Patti Campbell or Linda Stilley; (b)
under Retained Liabilities identified in Article VI of the Distribution
Agreement, and (c ) arising under employee benefit plans that are not for the
exclusive benefit of the SLH Employees but that cover the employees of Seafield
and/or of its subsidiaries in addition to the SLH Employees such as stock option
or award plans relating to securities issued or issuable by Seafield, umbrella
employee benefit or
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welfare plans such as the 401-K Plan, to the extent such obligations relate to
employees other than the SLH Employees and to the extent that such obligations
are excluded from the Transfer Liabilities under the Distribution Agreement.
3.22 Transfer and Distribution Tax Costs and Expenses. Without
limiting the foregoing, the Transfer Liabilities shall not include any expense
or liability (other than Tax Liabilities under Section 3.14) incurred by
Seafield with respect to (a) the transfer of the Transfer Assets and the
assumption of the Transfer Liabilities hereunder and (b) the distribution of the
SLH Common Stock to the Seafield shareholders under the Distribution Agreement.
3.24 Retained Other Liabilities. All of the following Retained Other
Liabilities: None.
3.3 No Other Liabilities Assumed. Anything in this Agreement to the
contrary notwithstanding, SLH shall not assume, or shall be deemed to have
assumed, any debt, claim, obligation or other liability of Seafield or any of
Seafield's subsidiaries or other affiliates whatsoever other than as
specifically set forth in this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES, INDEMNIFICATION AND
ACCESS TO INFORMATION
4.1 Representations and Warranties. Except as otherwise provided
herein, Seafield makes no representations or warranties with respect to the
Transfer Assets, the Transfer Liabilities or the accuracy or completeness of the
Balance Sheet and SLH understands that it is accepting the Transfer Assets "AS
IS AND WITH ALL FAULTS" and assuming the Transfer Liabilities without any
limitation.
4.2 Indemnification. Obligations of the parties with respect to
indemnification are provided for under Article III of the Distribution
Agreement.
4.3 Access to Information. Obligations of the parties with respect to
access to Information are provided for under Article V of the Distribution
Agreement.
4.4 Restriction On Payment of Dividends and Redemption of Stock. As
further assurance for its obligations hereunder, SLH agrees that until the
second anniversary of this agreement SLH shall not distribute property to its
stockholders with respect to its outstanding stock as a dividend or redeem any
of its capital stock without the prior written consent of the Seafield Board.
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ARTICLE V
MISCELLANEOUS AND
CERTAIN ADDITIONAL COVENANTS OF SEAFIELD AND SLH
5.1 Taxes. Subject to the specific terms of the Tax Sharing Agreement,
Seafield shall pay all sales, use, stamp, transfer, service, recording, real
estate and like taxes or fees, if any, imposed by the United States or any state
or political subdivision thereof on Seafield and or SLH, required to be paid in
connection with the transfer and assignment of the Transfer Assets, if any and
in connection with the Distribution; provided, however, neither SLH nor Seafield
shall be responsible for or obligated with respect to any taxes required to be
recognized by any Seafield shareholder or SLH stockholder arising out of or in
connection with the distribution of the SLH Common Stock in the Distribution.
5.2 Amendment. This Agreement may be amended, modified or supplemented
in a writing signed by Seafield and SLH.
5.3 Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.4 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Missouri.
5.5 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
5.6 No Third Party Beneficiaries. Except as otherwise indicated
herein, this Agreement is solely for the benefit of the parties hereto and no
provision of this Agreement shall be deemed to confer upon third parties any
remedy, claim, liability, reimbursement, claim of action or other right in
excess of the specific rights granted hereunder.
5.7 Conveyances and Further Assurances. The transfer of the Transfer
Assets hereunder shall be further evidenced by the delivery by Seafield to SLH
of stock certificates together with duly executed instruments of assignment
separate from certificates, deeds, bills of sale, properly endorsed certificates
of title and other specific conveyances requested by SLH. The assumption by SLH
of the Transfer Liabilities shall be further evidenced by the delivery by SLH to
Seafield of such other instruments as Seafield may reasonably request and as may
otherwise be required by this Agreement, the Distribution Agreement and the
Other Agreements. In addition, upon the reasonable request of any of party to
this Agreement, the other party will on and after the Distribution Date execute
and deliver to the requesting party such other documents, releases, assignments
and other instruments as may be required to effectuate completely the
transactions contemplated by this Agreement.
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5.8. Notices. All notices, requests, claims, demands and other
communications hereunder (collectively, "Notices") shall be in writing and shall
be given (and shall be deemed to have been duly given upon receipt) by delivery
in person, by cable, telegram, telex or other standard form of
telecommunications, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to Seafield:
Seafield Capital Corporation
2600 Grand Boulevard, Suite 500
Kansas City, Missouri 64108
Attention: President
If to SLH:
SLH Corporation
2600 Grand Boulevard, Suite 500
Kansas City, Missouri 64108
Attention: President
or to such other address as any party hereto may have furnished to the other
parties by a notice in writing in accordance with this Section 9.05. Copies of
all notices, requests, claims, demands and other communications hereunder shall
also be given to:
Lathrop & Gage L.C.
2345 Grand Boulevard
Suite 2800
Kansas City, Missouri 64108-2684
Attention: Lathrop M. Gates, Esq.
5.9 Entire Understanding. This Agreement sets forth the entire
agreement and understanding of the parties hereto in respect to the transactions
contemplated hereby and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof.
5.10 Written Consent of Sole Stockholder. Seafield owns all of the
issued and outstanding capital stock of SLH, consisting of 100 shares of $0.001
par value Common Stock. The officer of Seafield executing this Agreement has
been duly authorized by the Board of Directors of Seafield, consistent with its
Articles of Incorporation and Bylaws, to vote such stock and execute written
consents of the holders of such stock, and his execution of this Agreement shall
constitute the written consent of the Sole Stockholder of SLH to this
transaction.
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5.11 Approval of Seafield's and SLH's Boards of Directors. Consistent
with and in accordance with the Certificates of Incorporation and Bylaws of
Seafield and SLH, the Boards of Directors of Seafield and SLH have authorized
and approved of this agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
SEAFIELD CAPITAL CORPORATION
Attest:
_______________________ By: _____________________________
Steven K. Fitzwater W Thomas Grant II
Secretary Chairman
SLH CORPORATION
Attest:
_______________________ By: _____________________________
Steven K. Fitzwater James R. Seward, CFA
Secretary President
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ACKNOWLEDGEMENTS
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
BE IT REMEMBERED, that on this __st day of _________, 199_, before me, the
undersigned, a notary public in and for said state, came W. Thomas Grant II
Chairman and Steven K. Fitzwater, Secretary, respectively of Seafield Capital
Corporation, a Missouri corporation, to me personally known to be such officers
and the same persons who executed as such officers the foregoing instrument on
behalf of said corporation, and such persons duly acknowledged the execution of
the same to be the act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above mentioned.
_____________________________
Notary Public in and for said
County and State
My commission expires:
, 19
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
BE IT REMEMBERED, that on this __st day of _________, 199_, before me, the
undersigned, a notary public in and for said state, came James R. Seward, CFA,
Chairman and Steven K. Fitzwater, Secretary, respectively of SLH Corporation, a
Kansas corporation, to me personally known to be such officers and the same
persons who executed as such officers the foregoing instrument on behalf of said
corporation, and such persons duly acknowledged the execution of the same to be
the act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above mentioned.
_____________________________
Notary Public in and for said
County and State
My commission expires:
, 19
<PAGE>
Exhibit E
SLH CORPORATION
1997 STOCK INCENTIVE PLAN
1. PURPOSE
The SLH Corporation 1997 Stock Incentive Plan is designed to enable Non-Employee
Directors of and qualified executive, managerial, supervisory and professional
officers and employees of the Company and its Subsidiaries to acquire or
increase their ownership of the $.01 par value common stock of the Company on
reasonable terms. The opportunity so provided is intended to foster in
participants a strong incentive to exert maximum effort for the continued
success and growth of the Company and its Subsidiaries and the enhancement of
stockholders' interests, to aid in retaining individuals who exert such efforts
and to assist in attracting the best available individuals in the future.
2. DEFINITIONS
When used herein, the following terms shall have the meaning set forth below:
2.1 "Board" means the Board of Directors of SLH Corporation.
2.2 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.3 "Committee" means the members of the Board's Nominating and
Compensation Committee. Each Committee member shall be, at any time that an
Option is granted hereunder, a Non-Employee Director.
2.4 "Company" means SLH Corporation.
2.5 "Director" means a member of the Board.
2.6 "Distribution Date" means the date on which Shares are distributed
by Seafield Capital Corporation to is shareholders.
2.7 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.8 "Fair Market Value" means with respect to the Company's Shares, the
average of the closing "bid" and "asked" prices of the Shares, as reported on
the OTC Bulletin Board, or, if not so reported, the closing sales price as
reported by any other appropriate reporting system of general circulation, on
the date for which the value is to be determined, or if there is no closing
"bid" and "asked" price or sales price on such date, then on
<PAGE>
the first day following such date for which there is a closing "bid" and "asked"
price (where value is to be determined on the Distribution Date) or on the last
day prior to such date for which prices for Shares were so reported (where value
is to be determined as of a date other than the Distribution Date).
2.9 "Grantee" means a person to whom an Option is granted.
2.10 "Incentive Stock Option" or "ISO" means an Option awarded under the
Plan which meets the terms and conditions established by Code Section 422 and
applicable regulations thereunder for such an Option.
2.11 "Non-Employee Director" means a Director who is a "Non-Employee
Director" within the meaning of both (i) Rule 16b-3 under the Exchange Act or
any successor rule of similar import, and (ii) Section 162(m) of the Code and
applicable regulations thereunder.
2.12 "Non-Qualified Stock Option" or "NQSO" means an Option awarded
under the Plan which by its terms and conditions is not an ISO.
2.13 "Option" means the right to purchase, at a price, for a term, under
conditions, and for cash or other considerations fixed either by the Plan or by
the Committee in accordance with such restrictions as the Plan and the Committee
impose, a number of Shares specified by the Plan or the Committee, as the case
may be. An Option can be either an ISO or NQSO or a combination thereof.
2.14 "Plan" means the Company's 1997 Stock Incentive Plan.
2.15 "Securities Act" means the Securities Act of 1933, as amended.
2.16 "Shares" means shares of the Company's $.01 par value common stock
or, if by reason of the adjustment provisions hereof any rights under an Option
granted under the Plan pertain to any other security, such other security.
2.17 "Subsidiary" means any business, whether or not incorporated, in
which the Company, at the time an Option is granted or in other cases at the
time of reference, owns directly or indirectly not less than 50% of the equity
interest.
2.18 "Successor" means the legal representative of the estate of a
deceased Grantee or the person or persons who shall acquire the right to
exercise an Option, by bequest or inheritance or by reason of the death of the
Grantee, as provided in accordance with Section 8 hereof.
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2.19 "Tax Date" means the date on which the amount of tax to be withheld
with respect to an Option is determined.
2.20 "Term" means the period during which a particular Option may be
exercised.
3. ADMINISTRATION OF THE PLAN
3.1 The Plan shall be administered by the Committee, comprised from
time to time of not fewer than two members, each of whom shall be Non-Employee
Directors.
3.2 The Committee shall have plenary authority, subject to provisions
of the Plan (including without limitation the provisions of Section 6 hereof
respecting Options granted the Non-Employee Directors pursuant to Section 6.2),
to determine when and to whom Options shall be granted, the Term of each Option,
the number of Shares covered by it, the participation by Grantees in other
plans, and any other terms or conditions of each such Option. The number of
Shares, the Term and the other terms and conditions of a particular Option need
not be the same, even as to similarly situated Grantees. The Committee's
actions in granting Options and fixing their size, Term, and other terms and
conditions shall be final and conclusive on all persons. Notwithstanding
anything in the Plan to the contrary, the maximum number of Shares with respect
to which Options may be granted under the Plan to any individual other than a
Non-Employee Director is 65,000.
3.3 The Committee shall have the sole responsibility for construing and
interpreting the Plan, for establishing and amending such rules and regulations
as it deems necessary or desirable for the proper administration of the Plan,
and for resolving all questions arising under the Plan. Any decision or action
taken by the Committee arising out of or in connection with the construction,
administration, interpretation and effect of the Plan and of its rules and
regulations shall, to the extent permitted by law, be within its absolute
discretion, except as otherwise specifically provided herein, and shall be
conclusive and binding upon all Grantees, all Successors, and any other person,
whether that person is claiming under or through any Grantee or otherwise.
3.4 The Committee shall designate one of its members as Chairman. It
shall hold its meetings at such times and places as it may determine. A
majority of its members shall constitute a quorum, and all determinations of the
Committee shall be made by a majority of its members. Any determination reduced
to writing and signed by all members shall be fully as effective as
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<PAGE>
if it had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a Secretary, who need not be a member of the Committee.
The Committee may make such rules and regulations for the conduct of its
business as it shall deem advisable.
3.5 Service on the Committee shall constitute service as a Director, so
that the members of the Committee shall be entitled to indemnification and
reimbursement as Directors pursuant to its Bylaws and to any agreements between
the Company and its Directors providing for indemnification.
3.6 The Committee shall regularly inform the Board as to its actions
with respect to all Options under the Plan and the Terms and conditions of such
Option grants in a manner, at such times, and in such form as the Board may
reasonably request.
4. ELIGIBILITY
Options may be granted under the Plan only to either (a) employees of the
Company or a Subsidiary who have executive, managerial, supervisory or
professional responsibilities or (b) Non-Employee Directors; provided that only
NQSOs may be granted to Non-Employee Directors. Officers shall be employees for
this purpose, whether or not they are also Directors. Options may be granted to
eligible employees and Non-Employee Directors whether or not they have received
prior Options under the Plan or under any previously adopted plan, and whether
or not they are participants in other benefit plans of the Company or any
Subsidiary.
5. SHARES SUBJECT TO PLAN
The Company hereby reserves 260,000 Shares for issuance in connection with
Options under the Plan, subject to adjustment under Section 17. The Shares so
issued may be unreserved Shares held in the treasury, however acquired, or
Shares which are authorized but unissued. Any Shares subject to issuance upon
exercise of Options but which are not issued because of a surrender, lapse,
expiration or termination of any such Option prior to issuance of the Shares,
any Shares withheld by the Company as payment of the exercise price pursuant to
Section 11.4 or pursuant to a tax withholding election permitted under Section
19.2 hereof, and any Shares owned by a Grantee which are used in the exercise of
an Option under Section 11.3 hereof shall be deemed issued under the Plan.
6. GRANTING OF OPTIONS
6.1 Subject to the terms of the Plan, the Committee may from time to
time grant Options to persons eligible under Section 4 above; provided that if
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Options are granted to a Non-Employee Director either for more than 16,200
Shares or with a grant date other than either the Distribution Date (in the case
of Non-Employee Directors who are first appointed or elected on the date this
Plan is first approved by the Board) or on the later of the Distribution Date
and the date a Non-Employee Director first assumes office as a Director (in the
case of any Non-Employee Director who first assumes office as a Director after
the date this Plan is first approved by the Board), such grant shall be subject
to approval by the Company's stockholders.
6.2 Each person who is a Non-Employee Director as of the Distribution
Date shall, as of the Distribution Date, receive a grant of Options respecting
16,200 Shares, and each Non-Employee Director who first becomes a Director after
the Distribution Date shall, upon first becoming a Director, receive a grant of
Options respecting 8,125 Shares, in all cases without further action by the
Committee, the Board or otherwise.
6.3 Pursuant to Code Section 422 and applicable regulations, an Option
shall not be deemed to be an ISO to the extent that the aggregate Fair Market
Value, as determined on the date or dates of grant, of Shares with respect to
which such ISOs are exercisable for the first time by any individual during any
calendar year (under all stock option incentive plans of the Company or a
Subsidiary) exceeds $100,000. ISOs which first become exercisable during a
calendar year shall be taken into account in the order granted. Options that
exceed the $100,000 limit shall be treated as NQSOs.
6.4 The purchase price of each Share subject to an Option (other than
Options granted to Non-Employee Directors pursuant to Section 6.2 hereof) shall
be fixed by the Committee, provided the purchase price for all Options shall not
be less than 100% of the Fair Market Value of the Shares on the date the Option
is granted. The purchase price of each Share subject to an Option granted to a
Non-Employee Director pursuant to Section 6.2 hereof shall be 100% of the Fair
Market Value of the Shares on the effective grant date of such Option.
6.5 Notwithstanding Section 6.4 above, pursuant to Code Section 422 and
applicable regulations, the minimum purchase price of an ISO shall be 110% of
the Fair Market Value of the Shares on the date the ISO is granted with respect
to Grantees who at the time of grant are deemed to own 10% or more of the voting
power of the Company's outstanding Shares.
6.6 Each Option (other than an Option granted to Non-Employee Directors
pursuant to Section 6.2 hereof) shall expire and all rights to purchase Shares
thereunder shall cease on the date fixed by the Committee. Options
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granted to Non-Employee Directors pursuant to Section 6.2 hereof shall expire on
the tenth anniversary of the effective date of grant.
6.7 Notwithstanding Section 6.6 above, pursuant to Code Section 422 and
applicable regulations, ISO Options shall expire and all rights to purchase
Shares thereunder shall cease no later than the fifth anniversary of the date on
which the Option was granted with respect to Grantees who at the time of grant
are deemed to own 10% or more the voting power of the Company, and no later than
the tenth anniversary of the date on which the Option was granted with respect
to other Grantees.
6.8 Each Option (other than Options granted to Non-Employee Directors
pursuant to Section 6.2 hereof) shall become exercisable at the time, and for
the number of Shares, fixed by the Committee. Options granted to Non-Employee
Directors pursuant to Section 6.2 hereof shall become exercisable in four equal
installments: one-fourth on the effective date of grant and one-fourth on each
of the first, second and third anniversaries of the effective date of grant.
7. NON-TRANSFERABILITY OF RIGHTS
No ISO and no rights under any ISO shall be assignable or transferable otherwise
than by will or the laws of descent and distribution and, except to the extent
otherwise provided in Section 11, the rights and the benefits of any such Option
may be exercised and received, respectively, during the lifetime of the Grantee
only by him or by his guardian or legal representative.
8. DEATH, DISABILITY, RETIREMENT AND OTHER TERMINATION OF EMPLOYMENT
8.1 Subject to the terms of the Plan, the Committee may make such
provisions concerning exercise or lapse of Options upon the Grantee's death,
disability, retirement, or other termination of employment as it shall in its
discretion determine, provided:
(i) no provision shall extend the Term of an Option,
(ii) except upon a Grantee's death or disability no provision shall
permit an ISO to be exercised after the date three months following the
Grantee's termination of employment,
(iii) no provision shall permit an Option to be exercised after the
date which is twelve months following a Grantee's death or disability,
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(iv) no provision shall permit a NQSO to be exercised after the date
which is three years following the Grantee's retirement from the Company or a
Subsidiary,
(v) except upon a Grantee's death, disability or retirement, no
provision shall permit an NQSO to be exercised after the date which is six
months following a Grantee's termination of employment,
(vi) Options granted to a Non-Employee Director pursuant to Section
6.2 hereof shall expire to the extent unexercised on the date which is 90 days
after the date said Non-Employee Director's term as a Director shall terminate;
provided further, that in the event of the death of a Non-Employee Director
during such person's term as a Director or during the 90-day period following
expiration of such term, such Options shall expire to the extent unexercised by
such person's Successor on that date which is 12 months after the date of death,
and
(vii) No provision representing disability or retirement shall be
made a part of any option granted to a Non-Employee Director pursuant to
Section 6.2 hereof, except to the extent provided for in clause (vi) above.
For purposes of this Section 8, the term "disability" shall mean the inability
of the Grantee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or to last for a continuous period of not less than twelve
months, based on the opinion of a qualified physician (or other medical
certificate) and other evidence acceptable to the Committee, and the term
"retirement" shall mean normal retirement at or after attaining age 65.
8.2 Unless the Committee determines otherwise (but only with respect to
Options granted other than to Non-Employee Directors pursuant to Section 6.2
hereof), Options which pursuant to their terms are exercisable following
termination of a Grantee's employment or the expiration of a Non-Employee
Director's term as a Director:
(i) may be exercised only to the extent exercisable upon the date
such employment terminates, or such term as a Director expires if such
termination or expiration is other than by reason of the Grantee's death, or, in
the case of Options granted other than to Non-
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Employee Directors pursuant to Section 6.2 hereof, disability or retirement, and
(ii) shall be accelerated if not yet vested and shall be exercisable
in full,free and clear of all restrictions if such termination or expiration is
by reason of the Grantee's death or, in the case of Options granted other than
to Non-Employee Directors pursuant to Section 6.2 hereof, disability or
retirement.
8.3 Each Grantee may name, from time to time, any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit or rights under the Plan is to be paid or transferred in case of his
death before he receives any or all of such benefit or exercises such rights.
Each designation will revoke all prior designations by the same Grantee, shall
be in a form prescribed by the Committee, and will be effective only when filed
by the Grantee in writing with the Committee during his lifetime. In the
absence of any such designation, benefits or rights remaining unpaid or
unexercised at the Grantee's death shall be paid to or shall be exercisable by
his estate, subject to the terms hereof.
8.4 Transfers of employment between the Company and a Subsidiary, or
between Subsidiaries, shall not constitute termination of employment for
purposes of any Option. The Committee may specify in the terms and conditions
of an Option grant whether any authorized leave of absence or absence for
military or governmental service or for any other reason shall constitute a
termination of employment for purposes of the Option and the Plan.
9. PROVISIONS RELATING TO CHANGE IN CONTROL OR EXTRAORDINARY CORPORATE
TRANSACTION
Notwithstanding any provision in this Plan to the contrary, all outstanding
Options shall become exercisable immediately if any of the following events
occur, unless, in the case of Options granted other than to Non-Employee
Directors pursuant to Section 6.2 hereof, otherwise determined by the Committee:
(1) Any "person" (as defined in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the combined voting power of
the Company's then outstanding securities, provided that this provision shall
not apply to the direct, indirect or beneficial ownership of Shares by
descendants of W.T. Grant or their spouses, or
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(2) At any time there shall cease to be a majority of the Board
comprised as follows: individuals who on the date this Plan is adopted by the
Board constitute the Board and any new Director(s) whose election by the Board
or nomination for election by the Company's shareholders was approved by a vote
of at least two-thirds (2/3) of the Directors then still in office who either
were Directors on the date this Plan is adopted by the Board or whose election
or nomination for election was previously so approved, or
(3) Any merger or consolidation involving the Company, provided that if
the Company is the surviving entity in a merger then with respect to any Grantee
whose employment with the surviving entity in such merger is confirmed for the
then remaining term of his employment agreement, if any, such merger shall not
be considered a merger for purposes of this Section 9, or
(4) The adoption or approval by the Company's Board and stockholders of
a plan of complete liquidation and dissolution of the Company.
Any Options not exercised prior to consummation of a transaction referred to in
(3) or (4) above shall terminate upon consummation of such transaction, unless,
in the case of Options granted other than to Non-Employee Directors pursuant to
Section 6.2 hereof, otherwise determined by the Committee.
10. WRITING EVIDENCING OPTIONS
Each Option granted under the Plan shall be evidenced by a writing which may,
but need not, be in the form of an agreement to be signed by the Grantee. The
writing shall set forth the nature and size of the Option grant, its Term, the
other terms and conditions thereof, other than those set forth in the Plan, and
such other information as the Committee directs. Acceptance of, or receipt of
the benefits of, an Option grant by the Grantee shall be conclusively presumed
to be assent to the terms and conditions set forth therein, whether or not the
writing is in the form of an agreement to be signed by the Grantee.
11. EXERCISE OF RIGHTS UNDER OPTIONS
11.1 A person entitled to exercise an Option may do so by delivery of a
written notice to that effect specifying the number of Shares with respect to
which the Option is being exercised and any other information the Committee may
prescribe.
11.2 The notice of exercise shall be accompanied by payment in full of
the purchase price for any Shares to be purchased, with such payment being made
in cash or in Shares having a Fair Market Value at that time
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equivalent to the purchase price of such Shares to be purchased, or a
combination thereof.
11.3 In lieu of delivery of a stock certificate or certificates
evidencing Shares tendered by the Grantee in payment of the purchase price in
exercising an NQSO (but not on ISO), the Grantee may furnish a notarized
statement executed by the Grantee, in such form as prescribed by the Committee,
as payment for all or a portion of the purchase price for such Shares. The
statement shall recite the number of Shares being purchased by the Grantee
pursuant to the Option and the number of Shares owned by the Grantee which
otherwise could be freely delivered as payment of the purchase price by the
Grantee based on their Fair Market Value at that time. The Grantee will then be
issued a certificate for new Shares equal to the number of Shares- acquired by
the Grantee hereunder upon exercise of the Option, less the number of Shares
owned by the Grantee and described in the notarized statement. No Shares shall
be issued upon exercise of an Option until full payment has been made therefor.
11.4 In lieu of payment by the Grantee in cash or in Shares or by
delivery of a notarized statement of ownership pursuant to Sections 11.2 and
11.3, respectively, the Grantee may elect to pay all or part of the purchase
price for Shares pursuant to an exercise of an NQSO (but not an ISO) by
requesting the Company to reduce the number of Shares otherwise issuable to the
Grantee upon the exercise of the Option by the number of Shares with a Fair
Market Value at that time sufficient to pay the exercise price. Any such
election shall be made by delivering written notice thereof to the Company,
together with such information and documents as the Committee may prescribe.
11.5 Upon exercise of an Option but before a distribution of Shares in
satisfaction thereof, the Grantee may request in writing that the Shares to be
issued in satisfaction of the Option exercise be issued in the name of the
Grantee and another person as joint tenants with right of survivorship or as
tenants in common.
11.6 All notices or requests to the Company provided for herein shall be
delivered to the Secretary of the Company.
12. EFFECTIVE DATE OF THE PLAN AND DURATION
12.1 The Plan shall become effective on the Distribution Date, subject
to approval by any governmental body having jurisdiction over the Company with
respect to this Plan within the time limits applicable to any such governmental
approvals.
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12.2 The Plan shall remain in effect until all Options have been
exercised in accordance herewith, but no Options may be granted under the Plan
after December 31, 2001. The terms of any Option may be amended at any time
prior to the end of its Term in accordance with the Plan.
13. DATE OF OPTION GRANT
The date of an Option grant shall be the date on which the Committee's
determination to grant the same is final, or such later date as shall be
specified by the Committee in connection with its determination; provided that
the date of grant for an Option granted pursuant to Section 6.2 hereof shall be
as specified in Section 6.
14. SHAREHOLDER STATUS
No person shall have any rights as a shareholder by virtue of the grant of an
Option under the Plan, except with respect to Shares actually issued to that
person.
15. POSTPONEMENT OR NON-EXERCISE
The Company shall not be required to issue any certificate or certificates for
Shares upon the exercise of an Option granted under the Plan prior to (i) the
obtaining of any approval from any governmental agency which the Company shall,
in its sole discretion, determine to be necessary or advisable, (ii) the taking
of any action in order to comply with restrictions or regulations incident to
the maintenance of a public market for its Shares; and (iii) the completion of
any registration or other qualification of such Shares under any state or
Federal law or rulings or regulations of any governmental body which the Company
shall, in its sole discretion, determine to be necessary or advisable. The
Company shall not be obligated by virtue of any terms and conditions of any
Option or any provisions of the Plan to recognize the exercise of an Option or
to sell or issue shares in violation of the Securities Act or the law of any
government having jurisdiction thereof. Any postponement or delay by the
Company in recognizing the exercise of any Option or in issuing any Shares
hereunder shall not extend the Term of an Option and neither the Company nor its
directors or officers shall have any obligation or liability to the Grantee of
an Option, to a Successor or to any other person with respect to any Shares as
to which the Option shall lapse because of such postponement.
16. TERMINATION, SUSPENSION OR MODIFICATION OF PLAN
The Board may terminate, suspend or modify the Plan at any time and in any
manner, provided, however, that to the extent stockholder approval is required
by the Code (including without limitation, pursuant to Sections 162 or 422
thereof)
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or regulations promulgated thereunder, or is required by regulations issued
under the Securities Act or the Exchange Act, in order to create or preserve
Company or Grantee benefits or rights under or with respect to Options, the
Board shall not, without authorization of the stockholders, effect any change
(other than through adjustment for changes in capitalization or as otherwise
herein provided) which:
(i) increases the aggregate number of Shares for which Options may be
granted under the Plan or increases in the maximum number of Shares for which
Options may be granted to any one Grantee;
(ii) lowers the minimum option price;
(iii) lengthens the maximum period during which an Option may be
exercised;
(iv) materially modifies the requirements as to eligibility to
participate in the Plan;
(v) extends the period of time during which Options may be granted;
or
(vi) materially increases the benefits of the Plan accruing to
Grantees.
Notwithstanding the foregoing, (i) the Board may amend the Plan, without
stockholder authorization, to comply with section 16(b) of the Exchange Act or
regulations issued thereunder, to effect registration of the Plan or securities
issuable thereunder under the Securities Act or the laws of any state, or to
obtain any required regulatory approval and (ii) if amendments to the Code or to
the Securities Act or Exchange Act, or regulations issued thereunder, are
adopted after the date of adoption of the Plan, which amendments permit
termination, suspension or modification of the Plan, including but not limited
to the changes referred to above, without stockholder approval, no authorization
by the Company's stockholders of any Board action hereunder shall be required.
No termination, suspension or modification of the Plan shall adversely affect
any right acquired by any Grantee or any Successor under an Option granted
before the date of such termination, suspension or modification unless such
Grantee or Successor shall consent but it shall be conclusively presumed that
any adjustment for changes in capitalization as provided for herein does not
adversely affect any such right.
17. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
17.1 In the event of a recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation, rights offering,
reorganization or liquidation, or any other change in the corporate structure or
shares
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of the Company, the Committee shall (i) make equitable adjustments, to protect
against dilution or enlargement, in the number and kind of Shares authorized by
the Plan and, with respect to outstanding Options, in the number and kind of
Shares covered thereby and in the Option price, and (ii) make such arrangements,
which shall be binding upon the holders of unexpired Options for the
substitution of new Options for any unexpired Options then outstanding under the
Plan or for the assumption of any such unexpired Options.
17.2 The grant of any Option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets, or the business, assets or stock of a Subsidiary.
18. NON-UNIFORM DETERMINATION
The Committee's determination under the Plan including, without limitation,
determination of the persons to receive Options, the form, amount and type of
Options (i.e., ISOs or NQSOs) the terms and provisions of Options and the
written material evidencing such Options, any amendments to the terms and
provisions of any Options, and the granting or rejecting of applications for
delivery of Shares or affidavits of ownership in lieu of cash payments, need not
be uniform and may be made selectively among otherwise eligible employees or
Non-Employee Directors whether or not such employees or Non-Employee Directors
are similarly situated.
19. TAXES
19.1 The Company may pay, withhold or require a Grantee to remit to it
amounts sufficient to satisfy the Company's federal, state, local or other tax
withholding obligations attributable to any Option exercise, after giving notice
to the Grantee, and the Company may defer issuance of Shares in connection with
an Option exercise if any such tax, charge or assessment may be pending, until
indemnified to its satisfaction.
19.2 In connection with the exercise of an NQSO, a Grantee may make an
irrevocable election to have Shares otherwise issuable withheld, or tender back
to the Company Shares received, or deliver to the Company previously-acquired
Shares, having a Fair Market Value at the time sufficient to satisfy all or part
of the Company's total federal, state, local and other tax withholding
obligations associated with the transaction.
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20. TENURE
Nothing in the Plan or in any agreement entered into pursuant to the Plan shall
confer upon any Grantee the right to continue in the employment of the Company
or any Subsidiary or affect any right which the Company or Subsidiary has to
terminate the employment of such participant. An employee terminated for cause,
as determined by the Company, shall forfeit all of his rights under the Plan,
except as to Options already exercised.
21. APPLICATION OF PROCEEDS
The proceeds received by the Company from the sale of its shares under the Plan
shall be used for general corporate purposes of the Company and its
Subsidiaries.
22. OTHER ACTIONS
Nothing in the Plan shall be construed to limit the authority of the Company to
exercise its corporate rights and powers, including, by way of illustration and
not by way of limitation, the right to grant options for proper corporate
purposes otherwise than under the Plan to any employee or any other person,
firm, corporation, association or other entity, or to grant options to, or
assume options of, any person in connection with the acquisition by purchase,
lease, merger, consolidation or otherwise, of all or any part of the business
and assets of any person, firm, corporation, association or other entity.
23. GENDER AND NUMBER
Except when otherwise indicated by the context, words in the masculine gender
when used in the Plan shall include the feminine gender, the singular shall
include the plural, and the plural shall include the singular.
24. REQUIREMENTS OF LAW, GOVERNING LAW
The granting of Options and the issuance of shares of Stock shall be subject to
all applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges and self-regulating
entities as may be required. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Kansas.
25. EFFECT ON OTHER PLANS
Participation in this Plan shall not affect an employee's eligibility to
participate in any other benefit or incentive plan of the Company or a
Subsidiary. Any Options granted pursuant hereto shall not be used in
determining the benefits provided
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under any other plan of the Company or a Subsidiary unless specifically provided
therein.
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<PAGE>
EXHIBIT 3(a)
ARTICLES OF INCORPORATION
of
SLH CORPORATION
The undersigned incorporator hereby forms and establishes a corporation
for profit under the General Corporation Code of Kansas.
ARTICLE I
Name
The name of the corporation (which is hereinafter referred to as the
"Corporation") is:
SLH CORPORATION
ARTICLE II
Registered Office and Agent
The registered office of the Corporation is located at 9401 Indian
Creek Parkway, Suite 1050 Overland Park, Johnson, County, Kansas 66210. The name
of the Corporation's resident agent at such address is Registered Agent Kansas,
Ltd.
ARTICLE III
Purpose
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized and incorporated under the
General Corporation Code of Kansas.
ARTICLE IV
Capital Stock
The total number of shares of stock which the Corporation shall have
authority to issue is Thirty One Million (31,000,000), consisting of One Million
(1,000,000) shares of Preferred Stock, par value $0.01 per share (hereinafter
referred to as "Preferred Stock"), and Thirty Million (30,000,000) shares of
Common Stock, par value $0.01 per share (hereinafter referred to as "Common
Stock").
The Preferred Stock may be issued from time to time in one or more
series.The Board of Directors is hereby authorized to provide for the issuance
of shares of Preferred Stock in series and, by filing a certificate pursuant to
the applicable law of the State of Kansas (hereinafter referred to as a
"Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof. The authority of the
<PAGE>
Board of Directors with respect to each series shall include, but not be limited
to, determination of the following:
(1) The designation of the series, which may be by distinguishing
number, letter or title.
(2) The number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in the Preferred Stock
Designation) increase or decrease (but not below the number of shares thereof
then outstanding).
(3) The amounts payable on, and the preferences, if any, of shares
of the series in respect of dividends, and whether such dividends, if any, shall
be cumulative or noncumulative.
(4) Dates at which dividends, if any, shall be payable.
(5) The redemption rights and price or prices, if any, for shares of
the series.
(6) The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series.
(7) The amounts payable on, and the preferences, if any, of shares
of the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation.
(8) Whether the shares of the series shall be convertible into or
exchangeable for shares of any other class or series, or any other security,
of the Corporation or any other corporation, and, if so, the specification of
such other class or series of such other security, the conversion or exchange
price or prices or rate or rates, any adjustments thereof, the date or dates at
which such shares shall be convertible or exchangeable and all other terms and
conditions upon which such conversion or exchange may be made.
(9) Restrictions on the issuance of shares of the same series or of
any other class or series.
(10) The voting rights, if any, of the holders of shares of the
series.
The Common Stock shall be subject to the express terms of the Preferred
Stock and any series thereof. Except as may be provided in these Articles of
Incorporation or in a Preferred Stock Designation, the holders of shares of
Common Stock shall be entitled to one vote for each such share upon all
questions presented to the stockholders, the Common Stock shall have the
exclusive right to vote for the election of directors and for all other
purposes, and holders of Preferred Stock shall not be entitled to receive notice
of any meeting of stockholders at which they are not entitled to vote.
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The Corporation shall be entitled to treat the person in whose name any
share of its stock is registered as the owner thereof for all purposes and shall
not be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not the Corporation shall have
notice thereof, except as expressly provided by applicable law.
ARTICLE V
Board of Directors
In furtherance of, and not in limitation of, the powers conferred by
law, the Board of Directors is expressly authorized and empowered:
(1) to adopt, amend or repeal the Bylaws of the Corporation;
provided, however, that the Bylaws adopted by the Board of Directors under the
powers hereby conferred may be amended or repealed by the Board of Directors or
by the stockholders having voting power with respect thereto, provided further
that, in the case of amendments by stockholders, the affirmative vote of the
holders of at least 80 percent of the voting power of the then outstanding
Voting Stock, voting together as a single class, shall be required in order for
the stockholders to alter, amend or repeal any provision of the Bylaws or to
adopt any additional Bylaw; and
(2) from time to time to determine whether and to what extent,
and at what times and places, and under what conditions and regulations, the
accounts and books of the Corporation, or any of them, shall be open to
inspection of stockholders; and, except as so determined or as expressly
provided in these Articles of Incorporation or in any Preferred Stock
Designation, no stockholder shall have any right to inspect any account, book or
document of the Corporation other than such rights as may be conferred by
applicable law.
The Corporation may in its Bylaws confer powers upon the Board of
Directors in addition to the foregoing and in addition to the powers and
authorities expressly conferred upon the Board of Directors by applicable law.
Notwithstanding anything contained in these Articles of Incorporation to the
contrary, and in addition to approval by the Board of Directors, the affirmative
vote of the holders of at least 80 percent of the voting power of the then
outstanding Voting Stock, voting together as a single class, shall be required
to amend, repeal or adopt any provision inconsistent with paragraph (1) of this
Article V. For the purposes of these Articles of Incorporation, "Voting Stock"
shall mean the outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors.
ARTICLE VI
Initial Board of Directors
The names of the persons who are to serve as the initial directors of
the Corporation and the Class in which they are to serve from the filiing of
these Articles of Incorporation until the expiration of their terms of office as
provided under Article VII or until their successors are elected and qualify
are:
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Initial Class A Director: P. Anthony Jacobs
Initial Class B Director: James R. Seward
Initial Class C Director: Steven K. Fitzwater
The mailing address of each of the initial directors is: SLH
Corporation, 2600 Grand Boulevard, Suite 500, P.O. Box 410949, Kansas City,
Missouri 64141.
ARTICLE VII
Number, Election and Classification of Directors
Subject to the rights of the holders of any series of Preferred Stock
or any other series or class of stock as set forth in the Articles of
Incorporation to elect additional directors under specified circumstances, the
number of directors of the Corporation shall be fixed by the Bylaws of the
Corporation and may be increased or decreased from time to time in such a manner
as may be prescribed by the Bylaws.
Unless and except to the extent that the Bylaws of the Corporation
shall so require, the election of directors of the Corporation need not be by
written ballot.
The directors, other than those who may be elected by the holders of
any series of Preferred Stock or any other series or class of stock as set forth
in the Articles of Incorporation, shall be divided into three classes, as nearly
equal in number as possible, consisting of Class A, Class B and Class C. The
initial Class A directors shall hold office for a term expiring at the annual
meeting of stockholders to be held in 1997, the initial Class B directors shall
hold office for a term expiring at the annual meeting of stockholders to be held
in 1998, and the initial Class C directors shall hold office for a term expiring
at the annual meeting of stockholders to be held in 1999. Members of each class
shall hold office until their successors are elected and qualified. At each
annual meeting of the stockholders of the Corporation commencing with the 1997
annual meeting, (1) directors elected to succeed those directors whose terms
then expire shall be elected by a plurality vote of all votes cast at such
meeting to hold office for a term expiring at the third succeeding annual
meeting of stockholders after their election, with each director to hold office
until his or her successor shall have been duly elected and qualified, and (2)
only if authorized by a resolution of the Board of Directors, directors may be
elected to fill any vacancy on the Board of Directors, regardless of how such
vacancy shall have been created.
Subject to the rights of the holders of any series of Preferred Stock,
or any other series or class of stock as set forth in these Articles of
Incorporation, to elect additional directors under specified circumstances, and
unless the Board of Directors otherwise determines, vacancies resulting from
death, resignation, retirement, disqualification, removal from office or other
cause, and newly created directorships resulting from any increase in the
authorized number of directors, may be filled only by the affirmative vote of a
majority of the remaining directors, though less than a quorum of the Board of
Directors, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected
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expires and until such director's successor shall have been duly elected and
qualified. No decrease in the number of authorized directors constituting the
Board of Directors shall shorten the term of any incumbent director.
Subject to the rights of the holders of any series of Preferred Stock
or any other series or class of stock as set forth in the Articles of
Incorporation to elect additional directors under specified circumstances, any
director may be removed from office at any time, but only for cause and only by
the affirmative vote of the holders of at least 80 percent of the voting power
of the then outstanding Voting Stock, voting together as a single class.
Notwithstanding anything contained in these Articles of Incorporation
to the contrary, and in addition to approval by the Board of Directors, the
affirmative vote of the holders of at least 80 percent of the voting power of
the then outstanding Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with this Article
VII.
ARTICLE VIII
Business Combinations
(1) Vote Required for Certain Business Combinations.
(a) Higher Vote for Certain Business Combinations. In addition
to any affirmative vote required by law or these Articles of Incorporation,
and except as otherwise expressly provided in Section 2 of this Article VIII:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested Stockholder (as
hereinafter defined), or (b) any other corporation, limited liability company,
limited partnership or other entity (whether or not itself is an Interested
Stockholder) which is, or after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of an Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of transactions) to or
with any Interested Stockholder, including all Affiliates of the Interested
Stockholder, of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value (as hereinafter defined) of $10,000,000 or more; or
(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any securities
of the Corporation or any Subsidiary to any Interested Stockholder, including
all Affiliates of the Interested Stockholder, in exchange for cash, securities
or other property (or a combination thereof) having an aggregate Fair Market
Value of $10,000,000 or more; or
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliates of any
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Interested Stockholder; or
(v) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not an Interested Stockholder is a party thereto) which
has the effect, directly or indirectly, of increasing the proportionate share
of the outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which are directly or indirectly owned by
any Interested Stockholder or one or more Affiliates of the Interested
Stockholder;
shall require the affirmative vote of the holders of at least 66 2/3%
of the voting power of the then outstanding Voting Stock, voting together as a
single class, including the affirmative vote of the holders of at least 66 2/3%
of the voting power of the then outstanding Voting Stock not owned directly or
indirectly by any Interested Stockholder or any Affiliate of any Interested
Stockholder, unless the requirement of such vote is not permitted under Kansas
law. Such affirmative vote shall be required notwithstanding the fact that no
vote may be required, or that a lesser percentage may be permitted, by law or in
any agreement with any national securities exchange or otherwise.
(b) Definition of "Business Combination." The term "Business
Combination" as used in this Article VIII shall mean any transaction described
in any one or more of clauses (i) through (v) of paragraph (a) of this Section
(1).
(2) When Higher Vote is Not Required. The provisions of Section (1) of
this Article VIII shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such affirmative
vote as is required by law or any other provision of these Articles of
Incorporation, if the conditions specified in either of the following paragraphs
(a) or (b) are met:
(a) Approval by Continuing Directors. The Business Combination
shall have been approved by a majority of the Continuing Directors (as
hereinafter defined).
(b) Price and Procedure Requirements. All of the following
conditions shall have been met:
(i) The aggregate amount of the cash and the Fair Market
Value (as hereinafter defined) as of the date of the consummation of the
Business Combination of consideration other than cash, to be received per
share by holders of Common Stock in such Business Combination, shall be at least
equal to the highest of the following:
(A) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of Common Stock acquired
by it (1) within the two-year period immediately prior to the first public
announcement of the proposal of such Business Combination
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<PAGE>
(the "Announcement Date"), or (2) in the transaction in which it became an
Interested Stockholder, whichever is higher;
(B) the Fair Market Value per share of Common
Stock on the Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (the "Determination Date"),
whichever is higher; and
(C ) (if applicable) the price per share equal to
the Fair Market Value per share of Common Stock determined pursuant to
paragraph (b)(i)(B) above, multiplied by the ratio of (1) the highest per share
price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Stockholder for any shares of Common Stock
acquired by it within the two-year period immediately prior to the Announcement
Date to (2) the Fair Market Value per share of Common Stock on the first day in
such two-year period upon which the Interested Stockholder acquired any shares
of Common Stock.
(ii) The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of shares of
any other class, other than Common Stock or Excluded Preferred Stock, of
outstanding Voting Stock shall be at least equal to the highest of the following
(it being intended that the requirements of this paragraph (b)(ii) shall
be required to be met with respect to every such class of outstanding Voting
Stock, whether or not the Interested Stockholder has previously acquired any
shares of a particular class of Voting Stock):
(A) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of such class of Voting
Stock acquired by it (1) within the two-year period immediately prior to the
Announcement Date, or (2) in the transaction in which it became an Interested
Stockholder, whichever is higher;
(B) (if applicable) the highest preferential
amount per share to which the holders of shares of such class of Voting Stock
are entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(C ) the Fair Market Value per share of such
class of Voting Stock on the Announcement Date or on the Determination Date,
whichever is higher; and
(D) (if applicable) the price per share equal
to the Fair Market Value per share of such class of Voting Stock determined
pursuant to paragraph (b)(ii)(C) above, multiplied by the ratio of (1) the
highest per share price (including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by the Interested Stockholder for any shares
of such class of Voting Stock acquired by it within the two-year period
immediately prior to the Announcement Date to (2) the Fair Market Value per
share of such class of Voting Stock on the first day in such two-year period
upon which the Interested Stockholder acquired any shares of such class
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<PAGE>
of Voting Stock.
(iii) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including Common Stock and other
than Excluded Preferred Stock) shall be in cash or in the same form as the
Interested Stockholder has previously paid for shares of such class of Voting
Stock. If the Interested Stockholder has paid for shares of any class of Voting
Stock with varying forms of consideration, the form of consideration for such
class of Voting Stock shall be either cash or the form used to acquire the
largest number of shares of such class of Voting Stock previously acquired by
it.
(iv) After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such Business
Combination: (A) there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not cumulative)
on any outstanding preferred stock, except as approved by a majority of the
Continuing Directors; (B) there shall have been no reduction in the annual rate
of dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a majority of the
Continuing Directors; (C) there shall have been an increase in the annual rate
of dividends as necessary fully to reflect any recapitalization (including
any reverse stock split), reorganization or any similar reorganization which
has the effect of reducing the number of outstanding shares of the Common Stock,
unless the failure so to increase such annual rate is approved by a majority of
the Continuing Directors; and (D) such Interested Stockholder shall not have
become the Beneficial Owner of any additional Voting Stock except as part of the
transaction which results in such Interested Stockholder becoming an Interested
Stockholder.
(v) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not have received
the benefit, directly or indirectly (except proportionately as a shareholder),
of any loans, advances, guarantees, pledges or other financial assistance or
any tax credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing the
proposed Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or regulations) shall be mailed
to stockholders of the Corporation at least thirty (30) days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions).
(3) Certain Definitions. For purposes of this Article VIII:
(a) "Person" shall mean any individual, firm, corporation or other
entity.
(b) "Interested Stockholder" shall mean any Person (other than the
Corporation or any Subsidiary) who or which:
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(i) itself, or along with its Affiliates, is the
Beneficial Owner, directly or indirectly, of more than 10% of the then
outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to the date in question was itself,
or along with its Affiliates, the Beneficial Owner, directly or indirectly, of
10% or more of the then outstanding Voting Stock; or
(iii is an assignee of or has otherwise succeeded to
any Voting Stock which was at any time within the two-year period immediately
prior to the date in question beneficially owned by an Interested Stockholder,
if such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering within
the meaning of the Securities Act of 1933.
(c ) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations of the Securities
Exchange Act of 1934, as in effect on December 30, 1996. In addition, a Person
shall be the "Beneficial Owner" of any Voting Stock which such Person or any
of its Affiliates or Associates has (i) the right to acquire (whether such
right is exercisable immediately or only after the passage of time), pursuant
to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, provided
that, in the case of rights issued pursuant to the Rights Agreement between
the Corporation and Wells Fargo Bank of Arizona, N.A., as rights agent, dated as
of December 30, 1996, or any successor rights agreement, once such rights
are exercisable, a holder thereof shall not be deemed to be a "Beneficial Owner"
for purposes of this provision of the shares of Voting Stock issuable pursuant
to such rights unless and until such holder, on or after the date that such
rights become exercisable, acquires any additional such rights or shares of
Voting Stock, or (ii) the right to vote pursuant to any agreement, arrangement
or understanding (but neither such Person nor any such Affiliate or Associate
shall be deemed to be the Beneficial Owner of any shares of Voting Stock solely
by reason of a revocable proxy granted for a particular meeting of stockholders,
pursuant to a public solicitation of proxies for such meeting, and with respect
to which shares neither such Person nor any such Affiliate or Associate is
otherwise deemed the Beneficial Owner).
(d) For the purpose of determining whether a Person is an
Interested Stockholder pursuant to paragraph (b) of this Section (3), the number
of shares of Voting Stock deemed to be outstanding shall include shares deemed
owned through application of paragraph (c) of this Section (3) but shall not
include any other shares of Voting Stock which may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options or otherwise.
(e) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December 30, 1996.
(f) "Subsidiary" shall mean any corporation of which a majority of
any
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share of equity security is owned, directly or indirectly, by the Corporation,
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in paragraph (b) of this Section (3), the term
"Subsidiary" shall mean only a corporation of which a majority of each share of
equity security is owned, directly or indirectly, by the Corporation.
(g) "Continuing Director" shall mean any member of the Board of
Directors of the Corporation (the "Board") who is unaffiliated with the
Interested Stockholder and was a member of the Board prior to the time that the
Interested Stockholder became an Interested Stockholder, and any director who is
thereafter chosen to fill any vacancy on the Board or who is elected and who, in
either event, is unaffiliated with the Interested Stockholder and in connection
with his or her initial assumption of office is recommended for appointment or
election by a majority of Continuing Directors then on the Board.
(h) "Fair Market Value" shall mean (i) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composite Tape for New York
Stock Exchange listed stocks, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or, if such stock is not listed on such
exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc. National Market
System, or, if such stock is not quoted thereon, on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then in use
in its stead, or if no such quotations are available, the fair market value on
the date in question of a share of such stock as determined by the Board in
accordance with Section (4) of this Article VIII; and (ii) in the case of
property other than cash or stock, the fair market value of such property on the
date in question as determined by the Board in accordance with Section (4) of
this Article VIII.
(i) In the event of any Business Combination in which the
Corporation survives, the phrase "other consideration to be received" as used in
paragraphs (b)(i) and (ii) of Section (2) of this Article VIII shall include the
shares of Common Stock and/or the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
(j) "Excluded Preferred Stock" means any series of Preferred Stock
with respect to which a majority of the Continuing Directors have approved a
Preferred Stock Designation creating such series that expressly provides that
the provisions of this Article VIII shall not apply.
(4) Certain Powers of the Board. The Continuing Directors of the
Corporation shall have the power and duty to determine for the purposes of this
Article VIII, on the basis of information known to them after reasonable
inquiry, all facts necessary to determine compliance with this Article VIII,
including, without limitation (a) whether a Person is an Interested Stockholder,
(b) the number of shares of Voting Stock beneficially owned by any Person, (c)
whether a Person is an Affiliate or Associate of another, (d) whether the
applicable conditions set
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forth in paragraph (b) of Section (2) of this Article VIII have been met with
respect to any Business Combination, (e) the Fair Market Value of stock or other
property, in accordance with paragraph (h) of Section (3) of this Article VIII,
and (f) whether the assets which are the subject of any Business Combination
have, or the consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business Combination has,
an aggregate Fair Market Value of $10,000,000 or more.
(5) No Effect on Fiduciary Obligations of Interested Stockholders.
Nothing contained in this Article VIII shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
(6) Amendment, Repeal, etc. Notwithstanding any other provisions of
these Articles of Incorporation or the Bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage may be permitted by law, these
Articles of Incorporation or the Bylaws of the Corporation), but in addition to
any affirmative vote of the holders of any particular class of the Voting Stock
required by law or these Articles of Incorporation and in addition to approval
by the Board of Directors, the affirmative vote of the holders of at least 66
2/3% of the voting power of the shares of the then outstanding Voting Stock
voting together as a single class, including the affirmative vote of the holders
of at least 66 2/3% of the voting power of the then outstanding Voting Stock not
owned directly or indirectly by any Interested Stockholder or any Affiliate of
any Interested Stockholder, shall be required to amend or repeal, or adopt any
provisions inconsistent with, this Article VIII of these Articles of
Incorporation.
ARTICLE IX
Indemnification of Directors and Officers
Each person who is or was or had agreed to become a director or officer
of the Corporation, or each such person who is or was serving or who had agreed
to serve at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise (including
the heirs, executor, administrators or estate of such person), shall be
indemnified by the Corporation, in accordance with the Bylaws of the
Corporation, to the fullest extent permitted from time to time by the General
Corporation Code of Kansas as the same exists or may hereafter be amended (but,
if permitted by applicable law, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) or any other applicable laws as presently or hereafter in
effect. The Corporation may, by action of the Board of Directors, provide
indemnification to employees and agents of the Corporation, and to persons
serving as employees or agents of another corporation, partnership, joint
venture, trust or other enterprise, at the request of the Corporation, with the
same scope and effect as the foregoing indemnification of directors and
officers. The Corporation shall be required to indemnify any person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors or is a proceeding to enforce such person's claim to
indemnification pursuant to the rights granted by these Articles of
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Incorporation or otherwise by the Corporation. Without limiting the generality
or the effect of the foregoing, the Corporation may enter into one or more
agreements with any person which provide for indemnification greater or
different than that provided in this Article IX. Any amendment or repeal of this
Article IX shall not adversely affect any right or protection existing hereunder
in respect of any act or omission occurring prior to such amendment or repeal.
ARTICLE X
Limitation on Liability of Directors
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (3) under the provisions of Section 17-6424 of the General
Corporation Code of Kansas, or (4) for any transaction from which the director
derived an improper personal benefit. Any amendment or repeal of this Article X
shall not adversely affect any right or protection of a director of the
Corporation existing hereunder in respect of any act or omission occurring prior
to such amendment or repeal.
ARTICLE XI
Amendment
Except as may be expressly provided in these Articles of Incorporation,
the Corporation reserves the right at any time and from time to time to amend,
alter, change or repeal any provision contained in these Articles of
Incorporation or a Preferred Stock Designation, and any other provisions
authorized by the laws of the State of Kansas at the time in force may be added
or inserted, in the manner now or hereafter prescribed herein or by applicable
law, and all rights, preferences and privileges of whatsoever nature conferred
upon stockholders, directors or any other persons whomsoever by and pursuant to
these Articles of Incorporation in its present form or as hereafter amended are
granted subject to the right reserved in this Article XI; provided, however,
that any amendment or repeal of Article IX or Article X of these Articles of
Incorporation shall not adversely affect any right or protection existing
hereunder in respect of any act or omission occurring prior to such amendment or
repeal, and provided further that no Preferred Stock Designation shall be
amended after the issuance of any shares of the series of Preferred Stock
created thereby, except in accordance with the terms of such Preferred Stock
Designation and the requirements of applicable law.
ARTICLE VI
Incorporator
The name and mailing address of the incorporator is: Lathrop M. Gates,
2345 Grand Boulevard, Kansas City, Missouri 64108-2684.
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The powers of the incorporator shall terminate upon the filing of these
Articles of Incorporation.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name this __ day of
December, 1996.
______________________________
Lathrop M. Gates
Incorporator
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
Personally appeared before me, a Notary Public in and for said county
and state, the above-named Lathrop M. Gates, who is personally known to me to be
the same person who executed the foregoing instrument of writing and duly
acknowledged the execution of the same.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
official seal this __ day of December, 1996.
______________________________
Notary Public
My commission expires: ______________________.
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EXHIBIT 3(b)
BYLAWS
of
SLH CORPORATION
Incorporated under the Laws of the State of Kansas
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. Principal Office. The principal office of the Corporation
shall be in such place as the Board of Directors from time to times designates.
Until the Board of Directors otherwise designates, the principal office of the
Corporation shall be at 2600 Grand Boulevard, Suite 500, P.O. Box 410949, Kansas
City, Missouri 64141.
SECTION 1.2. Other Offices. The Corporation may have such other
offices, either within or without the State of Kansas, as the Board of Directors
may designate or as the business of the Corporation may from time to time
require.
SECTION 1.3. Books and Records. The books and records of the
Corporation may be kept at the Corporation's headquarters in Phoenix, Arizona or
at such other locations outside the State of Kansas as may from time to time be
designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. Annual Meeting. The 1997 annual meeting of the
stockholders of the Corporation shall be held on January 8th, at 10:00 a.m.,
local time, at the principal executive offices of the Corporation, or at such
other date, place and/or time as may be fixed by resolution of the Board of
Directors. Commencing in 1997, the annual meeting of the stockholders of the
Corporation shall be held on the second Wednesday in May of each year, if not a
legal holiday, and if a legal holiday then on the next succeeding business day,
at 11:00 a.m., local time, at the principal executive offices of the
Corporation, or at such other date, place and/or time as may be fixed by
resolution of the Board of Directors.
SECTION 2.2. Special Meeting. Subject to the rights of the holders of
any series of preferred stock, par value $0.01 per share, of the Corporation
(the "Preferred Stock") or any other series or class of stock as set forth in
the Articles of Incorporation, special meetings of the stockholders may be
called only by the Chairman of the Board or by the Board of Directors pursuant
to a resolution adopted by a majority of the total number of directors specified
in the resolution pursuant to Section 3.2 which the Corporation would have if
there were no vacancies (the "Whole Board").
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SECTION 2.3. Place of Meeting. The Board of Directors may designate the
place of meeting for any meeting of the stockholders. If no designation is made
by the Board of Directors, the place of meeting shall be the principal office of
the Corporation.
SECTION 2.4. Notice of Meeting. Written or printed notice, stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be prepared and delivered by the Corporation not less
than ten days nor more than sixty days before the date of the meeting, either
personally, or by mail, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail with postage thereon prepaid, addressed to the
stockholder at his address as it appears on the stock transfer books of the
Corporation. Such further notice shall be given as may be required by law. Only
such business shall be conducted at a special meeting of stockholders as shall
have been brought before the meeting pursuant to the Corporation's notice of
meeting. Meetings may be held without notice if all stockholders entitled to
vote are present (except as otherwise provided by law), or if notice is waived
by those not present in accordance with Section 6.4 of these Bylaws. Any
previously scheduled meeting of the stockholders may be postponed, and (unless
the Articles of Incorporation otherwise provides) any special meeting of the
stockholders may be cancelled, by resolution of the Board of Directors upon
public notice given prior to the time previously scheduled for such meeting of
stockholders.
SECTION 2.5. Quorum and Adjournment. Except as otherwise provided by
law or by the Articles of Incorporation, the holders of a majority of the voting
power of the outstanding shares of the Corporation entitled to vote generally in
the election of directors (the "Voting Stock"), represented in person or by
proxy shall constitute a quorum at a meeting of stockholders, except that when
specified business is to be voted on by a class or series voting as a class, the
holders of a majority of the voting power of the shares of such class or series
shall constitute a quorum for the transaction of such business. The chairman of
the meeting or a majority of the shares of Voting Stock so represented may
adjourn the meeting from time to time, whether or not there is such a quorum
(or, in the case of specified business to be voted on by a class or series, the
chairman or a majority of the shares of such class or series so represented may
adjourn the meeting with respect to such specified business). No notice of the
time and place of adjourned meetings need be given except as required by law.
The stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 2.6. Proxies. At all meetings of stockholders, a stockholder
may vote by proxy executed in writing by the stockholder or as may be permitted
by law, or by his duly authorized attorney-in-fact. Such proxy must be filed
with the Secretary of the Corporation or his representative at or before the
time of the meeting.
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SECTION 2.7. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders (a)
pursuant to the Corporation's notice of meeting delivered pursuant to Section
2.4 of these Bylaws, (b) by or at the direction of the Chairman or the Board of
Directors or (c) by any stockholder of the Corporation who is entitled to vote
at the meeting, who complied with the notice procedures set forth in clauses
(2) and (3) of this paragraph (A) of this Bylaw and who was a stockholder of
record at the time such notice is delivered to the Secretary of the Corporation.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause (c) of
paragraph (A)(1) of this Bylaw, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such other business
must otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not less than seventy days nor more than
ninety days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that with respect to the annual meeting to be held
in 1997, the anniversary date shall be deemed to be May 14th, 1997; and
provided, further, that in the event that the date of the annual meeting is
advanced by more than twenty days, or delayed by more than seventy days, from
such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the ninetieth day prior to such annual meeting and
not later than the close of business on the later of the seventieth day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. In no event shall the
public announcement of an adjournment of an annual meeting commence a new time
period for the giving of a stockholder's notice as described in this Section
2.7(A). Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or
is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14a-11
thereunder, including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected; (b) as to any
other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest
in such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made (i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
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(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by the
Corporation at least eighty days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Bylaw shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall
be conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting pursuant to
Section 2.4 of these Bylaws. Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting (a) by or at
the direction of the Board of Directors or (b) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this Bylaw and who is a stockholder of record at the
time such notice is delivered to the Secretary of the Corporation. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate such number of persons for election to such position(s) as are
specified in the Corporation's Notice of Meeting, if the stockholder's notice as
required by paragraph (A)(2) of this Bylaw shall be delivered to the Secretary
at the principal executive offices of the Corporation not earlier than the
ninetieth day prior to such special meeting and not later than the close of
business on the later of the seventieth day prior to such special meeting or the
tenth day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a stockholder's notice as described above.
(C) General.
(1) Only persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Bylaw. Except as otherwise provided by law, the Articles of Incorporation
or these Bylaws, the chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in this Bylaw and,
if any proposed nomination or business is not in compliance with this Bylaw, to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or
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comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall
also comply with all applicable requirements of the Exchange Act and the rules
and regulations thereunder with respect to the matters set forth in this Bylaw.
Nothing in this Bylaw shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
SECTION 2.8. Procedure for Election of Directors. Election of directors
at all meetings of the stockholders at which directors are to be elected shall
be by written ballot, and, except as otherwise set forth in the Articles of
Incorporation with respect to the right of the holders of any series of
Preferred Stock or any other series or class of stock to elect additional
directors under specified circumstances, a plurality of the votes cast thereat
shall elect directors. Except as otherwise provided by law, the Articles of
Incorporation or these Bylaws, all matters other than the election of directors
submitted to the stockholders at any meeting shall be decided by the affirmative
vote of a majority of the shares present in person or represented by proxy at
the meeting and entitled to vote thereon.
SECTION 2.9. Inspectors of Elections; Opening and Closing the Polls.
(A) The Board of Directors by resolution shall appoint one or
more inspectors, which inspector or inspectors may include individuals who serve
the Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at the meeting
and make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are unable to act, at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspectors
shall have the duties prescribed by the General Corporation Code of Kansas.
(B) The chairman of the meeting shall fix and announce at the
meeting the date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting.
SECTION 2.10. Action Without Meeting. Any action required or permitted
to be taken at any meeting of the stockholders may be taken without a meeting,
prior notice or a vote if a consent in writing, setting forth the action so
taken, is signed (personally or by duly authorized attorney) by all persons who
would be entitled to vote upon such action at a meeting. The Secretary of the
Corporation shall file any and every such consent with the minutes of the
meetings of the stockholders.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these Bylaws expressly
conferred upon them, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law or by the
Articles of Incorporation or by these Bylaws required to be exercised or done by
the stockholders.
SECTION 3.2. Number, Tenure and Qualifications. Subject to the rights
of the holders of any series of Preferred Stock, or any other series or class of
stock as set forth in the Articles of Incorporation, to elect directors under
specified circumstances, the number of directors shall be fixed from time to
time exclusively pursuant to a resolution adopted by a majority of the Whole
Board, but shall consist of not more than twenty-five nor less than three
directors. The directors, other than those who may be elected by the holders of
any series of Preferred Stock, or any other series or class of stock as set
forth in the Articles of Incorporation, shall be divided, with respect to the
time for which they severally hold office, into three classes, as nearly equal
in number as possible, consisting of Class A, Class B and Class C. The term of
office of Class A shall expire at the 1997 annual meeting of stockholders, the
term of office Class B shall expire at the 1998 annual meeting of stockholders
and the term of office of Class C shall expire at the 1999 annual meeting of
stockholders. Each director shall hold office until his or her successor shall
have been duly elected and qualified. At each annual meeting of stockholders,
commencing with the 1997 annual meeting, (i) directors elected to succeed those
directors whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election, with each director to hold office until his or her successor shall
have been duly elected and qualified, and (ii) only if authorized by a
resolution of the Board of Directors, directors may be elected to fill any
vacancy on the Board of Directors, regardless of how such vacancy shall have
been created.
SECTION 3.3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, each annual meeting of stockholders. The Board of
Directors may, by resolution, provide the time and place for the holding of
additional regular meetings without other notice than such resolution.
SECTION 3.4. Special Meetings. Special meetings of the Board of
Directors shall be called at the request of the Chairman of the Board, the
President or a majority of the Board of Directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
and time of the meetings.
SECTION 3.5. Notice. Notice of any special meeting shall be given to
each director at his business or residence in writing or by telegram or by
telephone communication. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mails so addressed, with postage
thereon prepaid, at least five days before such meeting. If by telegram, such
notice shall be deemed adequately delivered when the telegram is delivered to
the telegraph company at least
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twenty-four hours before such meeting. If by facsimile transmission, such notice
shall be transmitted at least twenty-four hours before such meeting. If by
telephone, the notice shall be given at least twelve hours prior to the time set
for the meeting. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the Board of Directors need be specified in
the notice of such meeting, except for amendments to these Bylaws as provided
under Section 8.1 of Article VIII hereof. A meeting may be held at any time
without notice if all the directors are present (except as otherwise provided by
law) or if those not present waive notice of the meeting in accordance with
Section 6.4 hereof, either before or after such meeting.
SECTION 3.6. Conference Telephone Meetings. Members of the Board of
Directors, or any committee thereof, may participate in a meeting of the Board
of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
SECTION 3.7. Quorum. A whole number of directors equal to at least a
majority of the Whole Board shall constitute a quorum for the transaction of
business, but if at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of the directors present may adjourn the
meeting from time to time without further notice. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. If permitted by applicable law, the directors present at
a duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.
SECTION 3.8. Vacancies. Subject to the rights of the holders of any
series of Preferred Stock, or any other series or class of stock as set forth in
the Articles of Incorporation, to elect additional directors under specified
circumstances, and unless the Board of Directors otherwise determines, vacancies
resulting from death, resignation, retirement, disqualification, removal from
office or other cause, and newly created directorships resulting from any
increase in the authorized number of directors, may be filled only by the
affirmative vote of a majority of the remaining directors, though less than a
quorum of the Board of Directors and not by stockholders. Directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires
and until such director's successor shall have been duly elected and qualified.
No decrease in the number of authorized directors constituting the Whole Board
shall shorten the term of any incumbent director.
SECTION 3.9. Executive and Other Committees. The Board of Directors may
designate an Executive Committee to exercise, subject to applicable provisions
of law, all the powers of the Board in the management of the business and
affairs of the Corporation when the Board is not in session, including the power
to adopt a certificate of ownership and merger pursuant to Section 17- 6703 of
the General Corporation Code of Kansas, provided that, the Executive Committee
shall not have the power to declare dividends or to authorize the issuance of
the Corporation's capital stock. The Board of Directors may also, by resolution
similarly adopted, designate one or more other
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committees. The Executive Committee and each such other committee shall consist
of two or more directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Any such committee, other
than the Executive Committee (the powers of which are expressly provided for
herein), may to the extent permitted by law exercise such powers and shall have
such responsibilities as shall be specified in the designating resolution. In
the absence or disqualification of any member of such committee or committees,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member. Each committee shall keep written minutes of its
proceedings and shall report such proceedings to the Board when required.
A majority of any committee may determine its action and fix the time
and place of its meetings, unless the Board shall otherwise provide. Notice of
such meetings shall be given to each member of the committee in the manner
provided for in Section 3.5 of these Bylaws. The Board shall have power at any
time to fill vacancies in, to change the membership of, or to dissolve any such
committee. Nothing herein shall be deemed to prevent the Board from appointing
one or more committees consisting in whole or in part of persons who are not
directors of the Corporation; provided, however, that no such committee shall
have or may exercise any authority of the Board.
SECTION 3.10. Removal. Subject to the rights of the holders of any
series of Preferred Stock, or any other series or class of stock as set forth in
the Articles of Incorporation, to elect additional directors under specified
circumstances, any director, or the entire Board of Directors, may be removed
from office at any time, but only for cause and only by the affirmative vote of
the holders of at least 80 percent of the voting power of the then outstanding
Voting Stock, voting together as a single class.
SECTION 3.11 Action by Consent. Any action required or permitted to be
taken at a meeting of the Board of Directors or any committee thereof may be
taken without a meeting if all members of the Board or the committee consent to
such action in writing and the writing or writings are filed with the minutes of
proceedings of the Board or the committee.
ARTICLE IV
OFFICERS
SECTION 4.1. Elected Officers. The elected officers of the Corporation
shall be a Chairman of the Board, a President, a Secretary, a Treasurer, and
such other officers (including, without limitation, a Chief Executive Officer, a
Chief Accounting Officer and a Chief Financial Officer) as the Board of
Directors from time to time may deem proper. The Chairman of the Board shall be
chosen from the directors. All officers chosen by the Board of Directors shall
each have such powers and duties as generally pertain to their respective
offices, subject to the specific provisions of this Article IV. Such officers
shall also have powers and duties as from time to time may be conferred by the
Board of Directors or by any committee thereof.
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SECTION 4.2. Election and Term of Office. The elected officers of the
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Subject to Section
4.7 of these Bylaws, each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign.
SECTION 4.3. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors. The
Chairman of the Board shall be responsible for the general management of the
affairs of the Corporation and shall perform all duties incidental to his office
which may be required by law and all such other duties as are properly required
of him by the Board of Directors. Except where by law the signature of the
President is required, the Chairman of the Board shall possess the same power as
the President to sign all certificates, contracts, and other instruments of the
Corporation which may be authorized by the Board of Directors. He shall make
reports to the Board of Directors and the stockholders, and shall perform all
such other duties as are properly required of him by the Board of Directors. He
shall see that all orders and resolutions of the Board of Directors and of any
committee thereof are carried into effect.
SECTION 4.4. President. The President shall act in a general executive
capacity and shall assist the Chairman of the Board in the administration and
operation of the Corporation's business and general supervision of its policies
and affairs. The President shall, in the absence of or because of the inability
to act of the Chairman of the Board, perform all duties of the Chairman of the
Board and preside at all meetings of stockholders and of the Board of Directors.
The President may sign, alone or with the Secretary, or an Assistant Secretary,
or any other proper officer of the Corporation authorized by the Board of
Directors, certificates, contracts, and other instruments of the Corporation as
authorized by the Board of Directors.
SECTION 4.5. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and Directors and all other notices
required by law or by these Bylaws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the Chairman of the Board or the President, or by the Board of Directors,
upon whose request the meeting is called as provided in these Bylaws. He shall
record all the proceedings of the meetings of the Board of Directors, any
committees thereof and the stockholders of the Corporation in a book to be kept
for that purpose, and shall perform such other duties as may be assigned to him
by the Board of Directors, the Chairman of the Board or the President. He shall
have the custody of the seal of the Corporation and may affix the same to all
instruments requiring it and attest to the same.
SECTION 4.6. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. The Treasurer
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors.
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The Treasurer shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, the Chairman of the Board, or the President, taking
proper vouchers for such disbursements. The Treasurer shall render to the
Chairman of the Board, the President and the Board of Directors, whenever
requested, an account of all his transactions as Treasurer and of the financial
condition of the Corporation. If required by the Board of Directors, the
Treasurer shall give the Corporation a bond for the faithful discharge of his
duties in such amount and with such surety as the Board of Directors shall
prescribe.
SECTION 4.7. Removal. Any officer elected by the Board of Directors may
be removed by a majority of the members of the Whole Board whenever, in their
judgment, the best interests of the Corporation would be served thereby. No
elected officer shall have any contractual rights against the Corporation for
compensation by virtue of such election beyond the date of the election of his
successor, his death, his resignation or his removal, whichever event shall
first occur, except as otherwise provided in an employment contract or an
employee plan.
SECTION 4.8. Vacancies. A newly created office and a vacancy in any
office because of death, resignation, or removal may be filled by the Board of
Directors for the unexpired portion of the term at any meeting of the Board of
Directors.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
SECTION 5.1. Stock Certificates and Transfers.
(A) The interest of each stockholder of the Corporation shall
be evidenced by certificates for shares of stock in such form as the appropriate
officers of the Corporation may from time to time prescribe, provided, that the
Board of Directors may provide by resolution or resolutions that some or all of
any or all classes or series of the stock of the Corporation shall be
uncertificated shares. Notwithstanding the adoption of such a resolution by the
Board of Directors, every holder of stock represented by certificates and upon
request every holder of uncertificated shares shall be entitled to have a
certificate signed by, or in the name of the Corporation by the Chairman or
Vice-Chairman of the Board of Directors, or the President or Vice-President, and
by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation representing the number of shares registered in
certificate form. Except as otherwise expressly provided by law, the rights and
obligations of the holders of uncertificated stock and the rights and
obligations of the holders of certificates representing stock of the same class
and series shall be identical.
(B) The certificates of stock shall be signed, countersigned
and registered in such manner as the Board of Directors may by resolution
prescribe, which resolution may permit all or any of the signatures on such
certificates to be in facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer, transfer agent or registrar at the date of
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issue.
(C) The shares of the stock of the Corporation represented by
certificates shall be transferred on the books of the Corporation by the holder
thereof in person or by his attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require. Upon receipt of proper transfer instructions from the
registered owner of uncertificated shares such uncertificated shares shall be
cancelled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the Corporation. Within a reasonable time after the
issuance or transfer of uncertificated stock, the Corporation shall send to the
registered owner thereof a written notice containing the information required to
be set forth or stated on certificates pursuant to the Kansas General
Corporation Law or, unless otherwise provided by the Kansas General Corporation
Law, a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
SECTION 5.2. Lost, Stolen or Destroyed Certificates. No certificate for
shares or uncertificated shares of stock in the Corporation shall be issued in
place of any certificate alleged to have been lost, destroyed or stolen, except
on production of such evidence of such loss, destruction or theft and on
delivery to the Corporation of a bond of indemnity in such amount, upon such
terms and secured by such surety, as the Board of Directors or any financial
officer may in its or his discretion require.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. Fiscal Year. The fiscal year of the Corporation shall
consist of the year ending on each December 31st.
SECTION 6.2. Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and its Certificate of
Incorporation.
SECTION 6.3. Seal. The corporate seal shall be in circular form and
shall have inscribed thereon the name of the Corporation and the words
"Corporate Seal -- Kansas 1996."
SECTION 6.4. Waiver of Notice. Whenever any notice is required to be
given to any stockholder or director of the Corporation under the provisions of
the General Corporation Code of Kansas, a waiver thereof in writing, signed by
the person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice. Neither
the business to be transacted at, nor the purpose of, any annual or special
meeting of the
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stockholders or any meeting of the Board of Directors or committee thereof need
be specified in any waiver of notice of such meeting.
SECTION 6.5. Audits. The accounts, books and records of the Corporation
shall be audited upon the conclusion of each fiscal year by an independent
certified public accountant selected by the Board of Directors, and it shall be
the duty of the Board of Directors to cause such audit to be made annually.
SECTION 6.6. Resignations. Any director or any officer, whether elected
or appointed, may resign at any time by serving written notice of such
resignation on the Chairman of the Board, the President or the Secretary, and
such resignation shall be deemed to be effective as of the close of business on
the date said notice is received by the Chairman of the Board, the President, or
the Secretary or at such later date as is stated therein. No formal action shall
be required of the Board of Directors or the stockholders to make any such
resignation effective.
SECTION 6.7. Indemnification and Insurance.
(A) Each person who was or is made a party or is threatened
to be made a party to or is involved in any action, suit, or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she or a person of whom he or she is the legal
representative is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans maintained or sponsored
by the Corporation, whether the basis of such proceeding is alleged action in an
official capacity as a director or officer or in any other capacity while
serving as a director or officer, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the General Corporation Code of
Kansas as the same exists or may hereafter be amended (but, if permitted by
applicable law, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment), against
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that except as provided in paragraph (C) of
this Bylaw, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors. The right to indemnification conferred in this Bylaw shall
be a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition, such advances to be paid by the Corporation within 20 days after
the receipt by the Corporation of a statement or statements from the claimant
requesting such advance or advances from time to time; provided, however, that
if the General Corporation Code of Kansas requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a
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director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Bylaw or otherwise.
B) To obtain indemnification under this Bylaw, a claimant
shall submit to the Corporation a written request, including therein or
therewith such documentation and information as is reasonably available to the
claimant and is reasonably necessary to determine whether and to what extent the
claimant is entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this paragraph (B), a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by the claimant,
by Independent Counsel (as hereinafter defined), or (2) if no request is made by
the claimant for a determination by Independent Counsel, (i) by a majority vote
of the Disinterested Directors (as hereinafter defined), even though less than a
quorum, or (ii) if there are no Disinterested Directors or, if the Disinterested
Directors so direct, by Independent Counsel in a written opinion to the Board of
Directors, a copy of which shall be delivered to the claimant, or (iii) if the
Disinterested Directors so direct, by the stockholders of the Corporation. In
the event the determination of entitlement to indemnification is to be made by
Independent Counsel at the request of the claimant, the Independent Counsel
shall be selected by the Board of Directors unless there shall have occurred
within two years prior to the date of the commencement of the action, suit or
proceeding for which indemnification is claimed a "Change of Control" as defined
in the SLH Corporation 1997 Stock Incentive Plan, in which case the Independent
Counsel shall be selected by the claimant unless the claimant shall request that
such selection be made by the Board of Directors. If it is so determined that
the claimant is entitled to indemnification, payment to the claimant shall be
made within 10 days after such determination.
(C) If a claim under paragraph (A) of this Bylaw is not paid
in full by the Corporation within 30 days after a written claim pursuant to
paragraph (B) of this Bylaw has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the General Corporation Code of Kansas
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including without limitation, the Disinterested Directors,
Independent Counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Code of Kansas, nor an actual determination
by the Corporation
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(including, without limitation, the Disinterested Directors, Independent Counsel
or stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(D) If a determination shall have been made pursuant to
paragraph (B) of this Bylaw that the claimant is entitled to indemnification,
the Corporation shall be bound by such determination in any judicial proceeding
commenced pursuant to paragraph (C) of this Bylaw.
(E) The Corporation shall be precluded from asserting in any
judicial proceeding commenced pursuant to paragraph (C) of this Bylaw that the
procedures and presumptions of this Bylaw are not valid, binding and enforceable
and shall stipulate in such proceeding that the Corporation is bound by all the
provisions of this Bylaw.
(F) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Bylaw shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Articles of
Incorporation, Bylaws, agreement, vote of stockholders or Disinterested
Directors or otherwise. No repeal or modification of this Bylaw shall in any way
diminish or adversely affect the rights of any director, officer, employee or
agent of the Corporation hereunder in respect of any occurrence or matter
arising prior to any such repeal or modification.
(G) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Code of Kansas. To the extent that the Corporation
maintains any policy or policies providing such insurance, each such director or
officer, and each such agent or employee to which rights to indemnification have
been granted as provided in paragraph (H) of this Bylaw, shall be covered by
such policy or policies in accordance with its or their terms to the maximum
extent of the coverage thereunder for any such director, officer, employee or
agent.
(H) The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification, and rights to
be paid by the Corporation the expenses incurred in defending any proceeding in
advance of its final disposition, to any employee or agent of the Corporation,
and to persons serving as employees or agents of another corporation,
partnership, joint venture, trust or other enterprise, at the request of the
Corporation, to the fullest extent of the provisions of this Bylaw with respect
to the indemnification and advancement of expenses of directors and officers of
the Corporation.
(I) If any provision or provisions of this Bylaw shall be held
to be invalid, illegal or unenforceable for any reason whatsoever: (1) the
validity, legality and enforceability of the remaining provisions of this Bylaw
(including, without limitation, each portion of any paragraph of this Bylaw
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself
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held to be invalid, illegal or unenforceable) shall not in any way be affected
or impaired thereby; and (2) to the fullest extent possible, the provisions of
this Bylaw (including, without limitation, each such portion of any paragraph of
this Bylaw containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
(J) For purposes of this Bylaw:
(1) "Disinterested Director" means a director of the
Corporation who is not and was not a party to the proceeding or matter in
respect of which indemnification is sought by the claimant.
(2) "Independent Counsel" means a law firm, a member of a
law firm, or an independent practitioner, that is experienced in matters of
corporation law and shall include any person who, under the applicable
standards of professional conduct then prevailing, would not have a conflict of
interest in representing either the Corporation or the claimant in an action to
determine the claimant's rights under this Bylaw.
(K) Any notice, request or other communication required or
permitted to be given to the Corporation under this Bylaw shall be in writing
and either delivered in person or sent by telecopy, telex, telegram, overnight
mail or courier service, or certified or registered mail, postage prepaid,
return receipt requested, to the Secretary of the Corporation and shall be
effective only upon receipt by the Secretary.
ARTICLE VII
CONTRACTS, PROXIES, ETC.
SECTION 7.1. Contracts. Except as otherwise required by law, the
Articles of Incorporation or these Bylaws, any contracts or other instruments
may be executed and delivered in the name and on the behalf of the Corporation
by such officer or officers of the Corporation as the Board of Directors may
from time to time direct. Such authority may be general or confined to specific
instances as the Board may determine. The Chairman of the Board, the President
or any Vice President may execute bonds, contracts, deeds, leases and other
instruments to be made or executed for or on behalf of the Corporation. Subject
to any restrictions imposed by the Board of Directors or the Chairman of the
Board, the President or any Vice President of the Corporation may delegate
contractual powers to others under his jurisdiction, it being understood,
however, that any such delegation of power shall not relieve such officer of
responsibility with respect to the exercise of such delegated power.
SECTION 7.2. Proxies. Unless otherwise provided by resolution adopted
by the Board of Directors, the Chairman of the Board, the President or any Vice
President may from time to time appoint an attorney or attorneys or agent or
agents of the Corporation, in the name and on behalf of the Corporation, to cast
the votes which the Corporation may be entitled to cast as the holder of stock
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or other securities in any other corporation or entity, any of whose stock or
other securities may be held by the Corporation, at meetings of the holders of
the stock or other securities of such other corporation or entity, or to consent
in writing, in the name of the Corporation as such holder, to any action by such
other corporation or entity, and may instruct the person or persons so appointed
as to the manner of casting such votes or giving such consent, and may execute
or cause to be executed in the name and on behalf of the Corporation and under
its corporate seal or otherwise, all such written proxies or other instruments
as he may deem necessary or proper in the premises.
SECTION 7.3. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors and shall not be more than 60
nor less than 10 days before the date of such meeting. If no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived by all stockholders entitled to vote at the meeting,
either in writing or by attendance at the meeting, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting, except that the
Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and shall not be more than 10 days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
this act, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the Corporation
by delivery to its registered office in this state, its principal place of
business, or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to
the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
the Kansas general corporation code, the Articles of Incorporation or these
Bylaws, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the Board of Directors adopts the resolution taking such
prior action.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the
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date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than 60 days prior to such action. If no record
date is fixed, the record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
ARTICLE VIII
AMENDMENTS
SECTION 8.1. Amendments. These Bylaws may be altered, amended, or
repealed at any meeting of the Board of Directors or of the stockholders,
provided notice of the proposed change was given in the notice of the meeting
and, in the case of a meeting of the Board of Directors, in a notice given no
less than twenty- four hours prior to the meeting; provided, however, that, in
the case of amendments by stockholders, notwithstanding any other provisions of
these Bylaws or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the stock required by law, the Articles of
Incorporation or these Bylaws, the affirmative vote of the holders of at least
80 percent of the voting power of the then outstanding Voting Stock, voting
together as a single class, shall be required in order for the stockholders to
alter, amend or repeal any provision of these Bylaws or to adopt any additional
Bylaws.
CERTIFICATE
I, the undersigned, hereby certify that I am the Secretary of SLH
Corporation, and the keeper of its corporate records; that the foregoing Bylaws
were duly adopted by said corporation's Board of Directors as and for the Bylaws
of said corporation, effective as of the day of December, 1996; that the
foregoing constitute the Bylaws of said corporation; and that such Bylaws are
now in full force and effect.
Dated: ______________________
_________________________________
Steven K. Fitzwater, Secretary
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<PAGE>
Exhibit 4
FORM OF
RIGHTS AGREEMENT
between
SLH CORPORATION
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Rights Agent
Dated as of __________, 1997
<PAGE>
TABLE OF CONTENTS
Section 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . 4
Section 3. Issue of Right Certificates . . . . . . . . . . . . . . . . . 4
Section 4. Form of Right Certificates . . . . . . . . . . . . . . . . . 6
Section 5. Countersignature and Registration . . . . . . . . . . . . . . 6
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 8. Cancellation and Destruction of Right Certificates . . . . . 9
Section 9. Availability of Preferred Shares . . . . . . . . . . . . . . 9
Section 10. Preferred Shares Record Date . . . . . . . . . . . . . . . . 9
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 14. Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . 18
Section 16. Agreement of Right Holders . . . . . . . . . . . . . . . . . 19
Section 17. Right Certificate Holder Not Deemed a Stockholder . . . . . . 19
Section 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . 19
Section 19. Merger or Consolidation or Change of Name of Rights Agent . . 20
Section 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . 20
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Section 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . 22
Section 22. Issuance of New Right Certificates . . . . . . . . . . . . . 23
Section 23. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 24. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 25. Notice of Certain Events . . . . . . . . . . . . . . . . . . 25
Section 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 27. Supplements and Amendments . . . . . . . . . . . . . . . . . 26
Section 28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 29. Benefits of this Agreement . . . . . . . . . . . . . . . . . 27
Section 30. Severability . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 31. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 32. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 33. Descriptive Headings . . . . . . . . . . . . . . . . . . . . 27
Exhibit A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Exhibit B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Exhibit C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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FORM OF RIGHTS AGREEMENT
Agreement, dated as of ____________, 1997, between SLH Corporation, a
Kansas corporation (the "Company"), and American Stock Transfer & Trust Company
(the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Company outstanding as of the close of business
on _____________, 1997 (the "Record Date"), each Right representing the right to
purchase one one-hundredth of a Preferred Share (as hereinafter defined), upon
the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right with respect to each Common
Share that shall become outstanding between the Record Date and the earliest of
the Distribution Date, the Redemption Date and the Final Expiration Date (as
such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 25% or more of the Common Shares
of the Company then outstanding, but shall not include the Company, any
Subsidiary (as such term is hereinafter defined) of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any entity
holding Common Shares for or pursuant to the terms of any such plan. For the
purpose of determining whether any Person is an "Acquiring Person," the
percentage of Common Shares as to which such Person, and the Affiliates and
Associates of such Person, is the Beneficial Owner shall be (i) the percentage
of the outstanding Common Shares as to which such Person (but excluding the
Affiliates and Associates of such Person) is the Beneficial Owner as of the
Record Date (calculated by dividing (A) the number of Common Shares as to which
such Person (but excluding the Affiliates and Associates of such Person) is the
Beneficial Owner on the Record Date by (B) the number of Common Shares
outstanding on the Record Date), plus (ii) the percentage that represents the
additional Common Shares as to which such Person, or any Affiliate or Associate
of such Person, first became the Beneficial Owner on any date after the Record
Date (calculated by dividing (A) the number of additional Common Shares as to
which such Person, or any Affiliate or Associate of such Person, became the
Beneficial Owner on any date by (B) the number of Common Shares outstanding on
such date), and minus (iii) the percentage that represents the Common Shares as
to which such Person, or any Affiliate or Associate of such Person, ceases to be
the Beneficial Owner on any date
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after the Record Date (calculated by dividing (A) the number of Common Shares as
to which such Person, or any Affiliate or Associate of such Person, ceases to be
the Beneficial Owner on any date by (B) the number of Common Shares outstanding
on such date). In determining the percentage of Common Shares as to which any
Person, is the Beneficial Owner there shall be excluded any Common Shares as to
which such Person, or any Affiliate or Associate of such Person, or any
Affiliate or Associate of such Person, became the Beneficial Owner after the
Record Date (i) by reason of the operation of the laws of descent and
distribution or as the result of any transaction or arrangement entered into for
bona fide estate planning purposes (including, without limitation, transfers by
will or the establishment, modification, operation of the terms of, or the
termination of any trust or similar arrangement), as determined in the sole
discretion of the Board of Directors of the Company; (ii) a "qualified domestic
relations order" as defined by the Internal Revenue Code of 1986, as amended;
(iii) any acquisition by gift or similar transaction; or (iv) pursuant to the
terms of any Company-sponsored benefit plan (including, without limitation, any
stock purchase, savings, option, bonus, stock appreciation, profit-sharing,
thrift, incentive, pension or similar plan). Notwithstanding the foregoing, if
the Board of Directors of the Company determines in good faith that a Person who
would otherwise be an "Acquiring Person", as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates
or Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than these Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, securities tendered
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pursuant to a tender or exchange offer made by or on behalf of such Person or
any of such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a Person shall
not be deemed the Beneficial Owner of, or to beneficially own, any security if
the agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations promulgated under the Exchange Act and (2)
is not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso to Section
1(c)(ii)(B)) or disposing of any securities of the Company. Notwithstanding
anything in this definition of Beneficial Ownership to the contrary, the phrase
"then outstanding," when used with reference to a Person's Beneficial Ownership
of securities of the Company, shall mean the number of such securities then
issued and outstanding together with the number of such securities not then
actually issued and outstanding which such Person would be deemed to own
beneficially hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in Missouri are authorized or
obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00 P.M.,
Kansas City, Missouri time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., Kansas City, Missouri time, on
the next succeeding Business Day.
(f) "Common Shares" when used with reference to the Company
shall mean the shares of common stock, par value $0.01 per share, of the
Company. "Common Shares" when used with reference to any Person other than the
Company shall mean the capital stock (or equity interest) with the greatest
voting power of such other Person or, if such other Person is a Subsidiary of
another Person, the Person or Persons which ultimately control such
first-mentioned Person.
(g) "Distribution Date" shall have the meaning set forth in
Section 3 hereof.
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(h) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(i) "Person" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
(j) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.01 per share, of the Company having
the rights and preferences set forth in the Form of Certificate of Designations
attached to this Agreement as Exhibit A.
(k) "Redemption Date" shall have the meaning set forth in
Section 7 hereof.
(l) "Shares Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such. In the event of a public announcement by any Person that such Person,
alone or in combination with any Affiliate or Associate of such Person, is the
Beneficial Owner of 25% or more of the then outstanding Common Shares, such
Person shall be deemed an Acquiring Person, unless such Person within five
business days of such public announcement shall establish to the satisfaction of
the Board of Directors of the Company that such Person is not an Acquiring
Person.
(m) "Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the tenth day after the Shares
Acquisition Date or (ii) the tenth business day (or such later date as may be
determined by action of the Board of Directors prior to such time as any Person
becomes an Acquiring Person) after the date of the commencement by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company or any entity holding
Common Shares for or pursuant to the terms of any such plan) of, or of the first
public announcement of the intention of any Person (other than the
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Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company or any entity holding Common Shares for or
pursuant to the terms of any such plan) to commence, a tender or exchange offer
the consummation of which would result in any Person becoming the Beneficial
Owner of Common Shares aggregating 25% or more of the then outstanding Common
Shares (including any such date which is after the date of this Agreement and
prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Shares registered in the names of the holders thereof (which certificates
shall also be deemed to be Right Certificates) and not by separate Right
Certificates, and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of Common Shares. As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Right Certificate, in substantially the form of
Exhibit B hereto (a "Right Certificate"), evidencing one Right for each Common
Share so held. As of the Distribution Date, the Rights will be evidenced solely
by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter,
the Company will send a copy of a Summary of Rights to Purchase Preferred
Shares, in substantially the form of Exhibit C hereto (the "Summary of Rights"),
by first-class, postage-prepaid mail, to each record holder of Common Shares as
of the close of business on the Record Date, at the address of such holder shown
on the records of the Company. With respect to certificates for Common Shares
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders thereof
together with a copy of the Summary of Rights attached thereto. Until the
Distribution Date (or the earlier of the Redemption Date or the Final Expiration
Date), the surrender for transfer of any certificate for Common Shares
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (c)) on or after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date or the Final Expiration
Date shall have impressed on, printed on, written on or otherwise affixed to
them the following legend: This certificate also evidences and entitles the
holder hereof to certain rights as set forth in a Rights Agreement between SLH
Corporation, and American Stock Transfer & Trust Company, dated as of
____________, 1997 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the principal
executive offices of SLH
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Corporation. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. SLH Corporation, will mail to the holder of this
certificate a copy of the Rights Agreement without charge after receipt of a
written request therefor. Under certain circumstances, as set forth in the
Rights Agreement, Rights issued to any Person who becomes an Acquiring Person
(as defined in the Rights Agreement) may become null and void. With respect to
such certificates containing the foregoing legend, until the Distribution Date,
the Rights associated with the Common Shares represented by such certificates
shall be evidenced by such certificates alone, and the surrender for transfer of
any such certificate shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby. In the event that the Company
purchases or acquires any Common Shares after the Record Date but prior to the
Distribution Date, any Rights associated with such Common Shares shall be deemed
canceled and retired so that the Company shall not be entitled to exercise any
Rights associated with the Common Shares which are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-hundredths of a Preferred
Share as shall be set forth therein at the price per one one-hundredth of a
Preferred Share set forth therein (the "Purchase Price"), but the number of such
one one-hundredths of a Preferred Share and the Purchase Price shall be subject
to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, its President, any of its Vice Presidents, or its
Treasurer, either manually or by facsimile signature, shall have affixed thereto
the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate,
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shall be a proper officer of the Company to sign such Right Certificate,
although at the date of the execution of this Rights Agreement any such person
was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its principal office, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Right Certificates, the number of Rights evidenced
on its face by each of the Right Certificates and the date of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Section 14 hereof, at any time after the close of business
on the Distribution Date, and at or prior to the close of business on the
earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or other Right Certificates,
entitling the registered holder to purchase a like number of one one- hundredths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the
person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) The registered holder of any Right Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein) in whole or
in part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each
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one one-hundredth of a Preferred Share as to which the Rights are exercised, at
or prior to the earliest of (i) the close of business on _____________, 2007
(the "Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-hundredth of a
Preferred Share purchasable pursuant to the exercise of a Right shall initially
be $125.00, and shall be subject to adjustment from time to time as provided in
Section 11 or 13 hereof and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the shares to be purchased and
an amount equal to any applicable transfer tax required to be paid by the holder
of such Right Certificate in accordance with Section 9 hereof by certified
check, cashier's check or money order payable to the order of the Company, the
Rights Agent shall thereupon promptly
(i) (A) requisition from any transfer agent of the
Preferred Shares certificates for the number of Preferred Shares to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply with
all such requests, or (B) requisition from the depositary agent depositary
receipts representing such number of one one-hundredths of a Preferred Share as
are to be purchased (in which case certificates for the Preferred Shares
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company hereby directs the depositary agent to comply
with such request;
(ii) when appropriate, requisition from the Company the
amount of cash to be paid in lieu of issuance of fractional shares in accordance
with Section 14 hereof;
(iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Right Certificate, registered in such name or names as may be
designated by such holder; and
(iv) when appropriate, after receipt, deliver such cash to
or upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate
shall exercise less than all the Rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered
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holder of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 14 hereof.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Preferred Shares. The Company covenants and
agrees that it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any Preferred Shares held in its
treasury, the number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with Section 7. The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such Preferred Shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that no
such tax is due.
Section 10. Preferred Shares Record Date. Each person in whose name any
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Shares transfer books of the Company are closed, such person
shall be deemed to have
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become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the Preferred Shares transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a holder of
Preferred Shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, he would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the event
any Person becomes an Acquiring Person, each holder of a Right shall thereafter
have a right to receive, upon exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable, in accordance with the
terms of this Agreement and in lieu of Preferred Shares, such number of Common
Shares of the Company as shall equal the result obtained by (x) multiplying the
then current Purchase Price by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable and dividing that product by (y) 50%
of the then current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of the occurrence of
such event. In the event that any Person shall become an Acquiring Person and
the Rights shall then
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be outstanding, the Company shall not take any action which would eliminate or
diminish the benefits intended to be afforded by the Rights.
From and after the occurrence of such event, any Rights that are or
were acquired or beneficially owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be void and any holder of such Rights
shall thereafter have no right to exercise such Rights under any provision of
this Agreement. No Right Certificate shall be issued pursuant to Section 3 that
represents Rights beneficially owned by an Acquiring Person whose Rights would
be void pursuant to the preceding sentence or any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon the transfer of
any Rights to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to any nominee of
such Acquiring Person, Associate or Affiliate; and any Right Certificate
delivered to the Rights Agent for transfer to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence shall be canceled.
(iii) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii), the Company shall take all such action as may be necessary to authorize
additional Common Shares for issuance upon exercise of the Rights. In the event
the Company shall, after good faith effort, be unable to take all such action as
may be necessary to authorize such additional Common Shares, the Company shall
substitute, for each Common Share that would otherwise be issuable upon exercise
of a Right, a number of Preferred Shares or fraction thereof such that the
current per share market price of one Preferred Share multiplied by such number
or fraction is equal to the current per share market price of one Common Share
as of the date of issuance of such Preferred Shares or fraction thereof.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or securities convertible into Preferred Shares or
equivalent preferred shares at a price per Preferred Share or equivalent
preferred share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred shares) less than the
then current per share market price of the Preferred Shares (as defined in
Section 11(d)) on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Preferred Shares outstanding on such record date plus the
number of Preferred Shares which the aggregate offering price of the total
number of Preferred Shares and/or equivalent preferred shares so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such
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<PAGE>
current market price and the denominator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of additional
Preferred Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the purpose
of this Section 11(d)(i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the 30 consecutive Trading
Days (as such term is hereinafter defined) immediately prior to such date;
provided, however, that in the event that the current per share market price of
the Security is determined during a period following the
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<PAGE>
announcement by the issuer of such Security of (A) a dividend or distribution on
such Security payable in shares of such Security or securities convertible into
such shares, or (B) any subdivision, combination or reclassification of such
Security and prior to the expiration of 30 Trading Days after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
exchange on which the Security is listed or admitted to trading or, if the
Security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to trading
on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share market
price of the Common Shares as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one hundred. If
neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, "current per share market price" shall mean the fair value per
share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent.
(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to
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<PAGE>
the nearest one one-millionth of a Preferred Share or one ten-thousandth of any
other share or security as the case may be. Notwithstanding the first sentence
of this Section 11(e), any adjustment required by this Section 11 shall be made
no later than the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the date of the expiration of the right
to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section
11(a) hereof, the holder of any Right thereafter exercised shall become entitled
to receive any shares of capital stock of the Company other than Preferred
Shares, thereafter the number of such other shares so receivable upon exercise
of any Right shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a Preferred Share (calculated to the nearest one
one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number
of one one-hundredths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in substitution
for any adjustment in the number of one one-hundredths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record
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<PAGE>
date for the adjustment, and, if known at the time, the amount of the adjustment
to be made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Right Certificates have been issued,
shall be at least 10 days later than the date of the public announcement. If
Right Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Right Certificates
on such record date Right Certificates evidencing, subject to Section 14 hereof,
the additional Rights to which such holders shall be entitled as a result of
such adjustment, or, at the option of the Company, shall cause to be distributed
to such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Right Certificates evidencing
all the Rights to which such holders shall be entitled after such adjustment.
Right Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein and shall be registered in the
names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-hundredths
of a Preferred Share which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-hundredth of the then par value, if
any, of the Preferred Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those
15
<PAGE>
adjustments expressly required by this Section 11, as and to the extent that it
in its sole discretion shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Shares, issuance wholly for cash
of any Preferred Shares at less than the current market price, issuance wholly
for cash of Preferred Shares or securities which by their terms are convertible
into or exchangeable for Preferred Shares, dividends on Preferred Shares payable
in Preferred Shares or issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such stockholders.
(n) In the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i) declare or
pay any dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (A) the
number of one one-hundredths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-hundredths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (B) each
Common Share outstanding immediately after such event shall have issued with
respect to it that number of Rights which each Common Share outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(n) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or consolidation
is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. In the event, directly or indirectly, at any time after a Person has
become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person other than the
16
<PAGE>
Company or one or more of its wholly-owned Subsidiaries, then, and in each such
case, proper provision shall be made so that (i) each holder of a Right (except
as otherwise provided herein) shall thereafter have the right to receive, upon
the exercise thereof at a price equal to the then current Purchase Price
multiplied by the number of one one-hundredths of a Preferred Share for which a
Right is then exercisable, in accordance with the terms of this Agreement and in
lieu of Preferred Shares, such number of Common Shares of such other Person
(including the Company as successor thereto or as the surviving corporation) as
shall equal the result obtained by (A) multiplying the then current Purchase
Price by the number of one one-hundredths of a Preferred Share for which a Right
is then exercisable and dividing that product by (B) 50% of the then current per
share market price of the Common Shares of such other Person (determined
pursuant to Section 11(d) hereof) on the date of consummation of such
consolidation, merger, sale or transfer; (ii) the issuer of such Common Shares
shall thereafter be liable for, and shall assume, by virtue of such
consolidation, merger, sale or transfer, all the obligations and duties of the
Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be
deemed to refer to such issuer; and (iv) such issuer shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares in accordance with Section 9 hereof) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
Common Shares thereafter deliverable upon the exercise of the Rights. The
Company shall not consummate any such consolidation, merger, sale or transfer
unless prior thereto the Company and such issuer shall have executed and
delivered to the Rights Agent a supplemental agreement so providing. The Company
shall not enter into any transaction of the kind referred to in this Section 13
if at the time of such transaction there are any rights, warrants, instruments
or securities outstanding or any agreements or arrangements which, as a result
of the consummation of such transaction, would eliminate or substantially
diminish the benefits intended to be afforded by the Rights. The provisions of
this Section 13 shall similarly apply to successive mergers or consolidations or
sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights or to distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated
17
<PAGE>
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share).
Fractions of Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary selected by it; provided, that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-hundredth of a Preferred
Share, the Company shall pay to the registered holders of Right Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one Preferred Share. For the
purposes of this Section 14(b), the current market value of a Preferred Share
shall be the closing price of a Preferred Share (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such
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<PAGE>
Right Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the Distribution Date,
the associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificate or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or
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<PAGE>
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
The Rights Agent shall be protected and shall incur no liability for, or in
respect of any action taken, suffered or omitted by it in connection with, its
administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
corporate trust powers of the Rights Agent or any successor Rights Agent, shall
be the successor to the Rights Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the parties
hereto; provided, that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
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(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after actual
notice that such change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
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(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Secretary or the Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered by it in
good faith in accordance with instructions of any such officer or for any delay
in acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of the State of Missouri (or of any other state of the United States so long as
such corporation is authorized to do business as a banking institution in the
State of Missouri), in good standing, having an office in the State of Missouri,
which is authorized under such laws
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to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares or Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.
Section 23. Redemption.
(a) The Board of Directors of the Company may, at its option,
at any time prior to such time as any Person becomes an Acquiring Person, redeem
all but not less than all the then outstanding Rights at a redemption price of
$.01 per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"). The redemption
of the Rights by the Board of Directors may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights pursuant to paragraph (a) of
this Section 23, and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights, the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is
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mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made. Neither the Company
nor any of its Affiliates or Associates may redeem, acquire or purchase for
value any Rights at any time in any manner other than that specifically set
forth in this Section 23 or in Section 24 hereof, and other than in connection
with the purchase of Common Shares prior to the Distribution Date.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option,
at any time after any Person becomes an Acquiring Person, exchange all or part
of the then outstanding and exercisable Rights (which shall not include Rights
that have become void pursuant to the provisions of Section 11(a)(ii) hereof)
for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to paragraph (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of Common Shares equal to
the number of such Rights held by such holder multiplied by the Exchange Ratio.
The Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights which have become void pursuant to the provisions
of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated
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in accordance with this Section 24, the Company shall take all such action as
may be necessary to authorize additional Common Shares for issuance upon
exchange of the Rights. In the event the Company shall, after good faith effort,
be unable to take all such action as may be necessary to authorize such
additional Common Shares, the Company shall substitute, for each Common Share
that would otherwise be issuable upon exchange of a Right, a number of Preferred
Shares or fraction thereof such that the current per share market price of one
Preferred Share multiplied by such number or fraction is equal to the current
per share market price of one Common Share as of the date of issuance of such
Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For the
purposes of this paragraph (d), the current market value of a whole Common Share
shall be the closing price of a Common Share (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of its Preferred Shares (other than a
regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the Common
Shares payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the
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case of any action covered by clause (i) or (ii) above at least 10 days prior to
the record date for determining holders of the Preferred Shares for purposes of
such action, and in the case of any such other action, at least 10 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, whichever
shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof
shall occur, then the Company shall as soon as practicable thereafter give to
each holder of a Right Certificate, in accordance with Section 26 hereof, a
notice of the occurrence of such event, which notice shall describe such event
and the consequences of such event to holders of Rights under Section 11(a)(ii)
hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
SLH Corporation
2600 Grand Boulevard
Suite 500
Kansas City, Missouri 64108
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. The Company may from time to time
supplement or amend this Agreement without the approval of any holders of Right
Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other provisions with respect to the Rights
which the Company may deem necessary or desirable, any such supplement or
amendment to be evidenced by a writing signed by the Company and the Rights
Agent;
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provided, however, that from and after such time as any Person becomes an
Acquiring Person, this Agreement shall not be amended in any manner which would
adversely affect the interests of the holders of Rights. Without limiting the
foregoing, the Company may at any time prior to such time as any Person becomes
an Acquiring Person amend this Agreement to lower the thresholds set forth in
Sections 1(a) and 3(a) to not less than the greater of (i) the sum of .001% and
the largest percentage of the outstanding Common Shares then known by the
Company to be beneficially owned by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any
Subsidiary of the Company, or any entity holding Common Shares for or pursuant
to the terms of any such plan) and (ii) 10%.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Kansas and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
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SLH CORPORATION
By: ___________________________
Title: ________________________
ATTEST:
By: _________________________
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: ___________________________
Title: ________________________
ATTEST:
By: _________________________
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Exhibit A
FORM OF CERTIFICATE OF DESIGNATIONS OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK OF
SLH CORPORATION
(Pursuant to Section 17-6401 of the Kansas General Corporation Code)
SLH Corporation, a corporation organized and existing under the General
Corporation Code of the State of Kansas (hereinafter called the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 17-6401 of the General
Corporation Code at a meeting duly called and held on _____________, 1997:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (hereinafter called the "Board of Directors" or
the "Board") in accordance with the provisions of the Certificate of
Incorporation, the Board of Directors hereby creates a series of Preferred
Stock, par value $0.01 per share (the "Preferred Stock"), of the Corporation and
hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 1,000,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions. (A) Subject to the rights of the
holders of any shares of any series of Preferred Stock (or any similar stock)
ranking prior and superior to the Series A Preferred Stock with respect to
dividends, the holders of shares of Series A Preferred Stock, in preference to
the holders of Common Stock, par value $0.01 per share (the "Common Stock"), of
the Corporation, and of any other junior stock, shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first day
of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $1 or (b) subject to the
provision for adjustment hereinafter set forth, 100 times
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the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event. (B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the
Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights: (A) Subject to the provision for
adjustment hereinafter set forth, each share of Series A Preferred Stock shall
entitle the holder thereof to 100 votes on all matters submitted to a vote of
the stockholders of the Corporation. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of Common
Stock,
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or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation. (C) Except as set forth herein, or as
otherwise provided by law, holders of Series A Preferred Stock shall have no
special voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions. (A) Whenever quarterly dividends or
other dividends or distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
A Preferred Stock outstanding shall have been paid in full, the Corporation
shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon
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such terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes. (B) The
Corporation shall not permit any subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of stock of the Corporation
unless the Corporation could, under paragraph (A) of this Section 4, purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(1) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in
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any such case each share of Series A Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Preferred Stock
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all series of
any other class of the Corporation's Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its Chairman of the Board and attested by its Secretary
this ____ day of ____________ , 1997.
________________________________
Chairman of the Board
ATTEST:
________________________
Secretary
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Exhibit B
RIGHT CERTIFICATE OF
SLH CORPORATION
NOT EXERCISABLE AFTER _____________, 2007 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
This certifies that ____________, or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of ____________, 1997 (the "Rights Agreement"), between SLH
Corporation, a Kansas corporation (the "Company"), and American Stock Transfer &
Trust Company (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 P.M., Kansas City, Missouri time, on ________________, 2007 at
the principal office of the Rights Agent, or at the office of its successor as
Rights Agent, one one-hundredth of a fully paid non-assessable share of Series A
Junior Participating Preferred Stock, par value $0.01 per share (the "Preferred
Shares"), of the Company, at a purchase price of $125.00 per one one-hundredth
of a Preferred Share (the "Purchase Price"), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of one
one-hundredths of a Preferred Share which may be purchased upon exercise hereof)
set forth above, and the Purchase Price set forth above, are the number and
Purchase Price as of _______________, 1997, based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of one one-hundredths of a Preferred Share which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall
34
<PAGE>
be exercised in part, the holder shall be entitled to receive upon surrender
hereof another Right Certificate or Right Certificates for the number of whole
Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at a redemption price of
$.01 per Right or (ii) may be exchanged in whole or in part for Preferred Shares
or shares of the Company's Common Stock, par value $0.01 per share.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of ________________, 199___.
SLH CORPORATION
By: ___________________________
Title: ________________________
ATTEST:
By: _________________________
35
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Countersigned:
_______________________________
By: ___________________________
Authorized Signature
ATTEST:
By: _________________________
36
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ______________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: ________________
__________________________________
Signature
__________________________________
Signature Guaranteed
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States. The undersigned hereby certifies that the Rights evidenced
by this Right Certificate are not beneficially owned by an Acquiring Person or
an Affiliate or Associate thereof (as defined in the Rights Agreement).
__________________________________
Signature
37
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by the Right
Certificate.)
To: SLH CORPORATION
The undersigned hereby irrevocably elects to exercise __________________
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and requests that certificates for
such Preferred Shares be issued in the name of: ____________________________
(Please insert social security or other identifying number) _________________
__________________________________ (Please print name and address).
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to: _________________
(Please insert social security or other identifying number) ________________
__________________________________ (Please print name and address).
Dated: ________________
__________________________________
Signature
__________________________________
Signature Guaranteed
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
__________________________________
Signature
NOTICE: The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever. In the event the certification set forth above in the
Form of Assignment or the Form of Election to Purchase, as the case may be, is
not completed, the Company and the Rights Agent will deem the beneficial owner
of the Rights evidenced by this Right Certificate to be an Acquiring Person or
an Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
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<PAGE>
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On __________, 1997, the Board of Directors of SLH Corporation (the
"Company") declared a dividend of one preferred share purchase right (a "Right")
for each outstanding share of common stock, par value $0.01 per share (the
"Common Shares"), of the Company. The dividend is payable on ____________, 1997
(the "Record Date") to the stockholders of record on that date. Each Right
entitles the registered holder to purchase from the Company one one-hundredth of
a share of Series A Junior Participating Preferred Stock, par value $0.01 per
share (the "Preferred Shares"), of the Company at a price of $125.00 per one
one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and American Stock
Transfer & Trust Company, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") have acquired beneficial ownership of 25% or more of the outstanding
Common Shares or (ii) 10 business days (or such later date as may be determined
by action of the Board of Directors prior to such time as any person or group of
affiliated persons becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 25% or more of the outstanding Common Shares (the earlier of such dates
being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Share certificates outstanding as of the Record
Date, by such Common Share certificate with a copy of this Summary of Rights
attached thereto.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Shares. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Common Share certificates issued after the
Record Date upon transfer or new issuance of Common Shares will contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights), the surrender for
transfer of any certificates for Common Shares outstanding as of the Record
Date, even without such notation or a copy of this Summary of Rights being
attached thereto, will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Common Shares
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on ____________, 2007 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or
39
<PAGE>
unless the Rights are earlier redeemed or exchanged by the Company, in each
case, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then-current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 100 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preferred Shares will be entitled to a minimum
preferential liquidation payment of $100 per share but will be entitled to an
aggregate payment of 100 times the payment made per Common Share. Each Preferred
Share will have 100 votes, voting together with the Common Shares. Finally, in
the event of any merger, consolidation or other transaction in which Common
Shares are exchanged, each Preferred Share will be entitled to receive 100 times
the amount received per Common Share. These rights are protected by customary
antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
exercise price of the Right. In the event that any person or group of
affiliated or associated persons becomes an Acquiring Person, proper provision
shall be made so that each holder of a Right, other than Rights
40
<PAGE>
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Common Shares
having a market value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
Common Shares, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such person or group which will have become void),
in whole or in part, at an exchange ratio of one Common Share, or one
one-hundredth of a Preferred Share (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and privileges),
per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 25% or more of the outstanding
Common Shares, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption Price").
The redemption of the Rights may be made effective at such time on such basis
with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower certain thresholds described above to not less than the greater of (i)
the sum of .001% and the largest percentage of the outstanding Common Shares
then known to the Company to be beneficially owned by any person or group of
affiliated or associated persons and (ii) 10%, except that from and after such
time as any person or group of affiliated or associated persons becomes an
Acquiring Person no such amendment may adversely affect the interests of the
holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. A copy of the Rights Agreement has been filed
with the Securities and Exchange Commission as an Exhibit to a Registration
Statement on Form 10 dated __________, 1997.
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<PAGE>
A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.
42
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<PAGE>
Exhibit 8
RUSSELL D. JONES
816-460-5725
____________, 1997
Board of Directors
Seafield Capital Corporation
2600 Grand Boulevard, Suite 500
Kansas City, Missouri 64108
Re: Federal income tax consequences of distribution by Seafield Capital
Corporation to its stockholders of all of the issued and
outstanding capital stock of SLH Corporation
Dear Sirs:
You have asked us to provide you with our opinions regarding the principal
federal income tax consequences of the distribution (the "Distribution") by
Seafield Capital Corporation ("Seafield") to its stockholders of all of the
issued and outstanding capital stock of SLH Corporation ("SLH").
Statement of Facts
A registration statement on Form 10 (the "Registration Statement") has been
filed by Seafield with the United States Securities and Exchange Commission to
register the common stock of SLH pursuant to Section 12(b) of The Securities
Exchange Act of 1934 and is expected to become effective on or about _________,
1997. The Registration Statement includes an Information Statement that is
intended to provide information to Seafield's stockholders regarding (among
other things) SLH and the Distribution (such Information Statement, in its
current form, the "Information Statement").
The Information Statement includes all of the facts that are relevant to
the opinions that are set forth herein. Therefore, the factual information set
forth in the Information Statement regarding SLH and the Distribution is
incorporated herein by reference. We understand and assume for purposes of
rendering the opinions that are set forth herein that you have reviewed the
Registration Statement in substantially final form and that you have determined
that all of the facts contained in the Information Statement are materially
correct and that no facts are omitted from the Information Statement that are
needed in order to make the facts set forth therein not misleading. We further
assume, for purposes of rendering the opinions that are set
<PAGE>
Board of Directors
_____________, 1997
Page 2
forth herein, that the Distribution will occur on the "Distribution Date" (as
defined in the Information Statement), and that the transfer of properties from
Seafield to SLH and other transactions related to the Distribution that are con-
templated by the Information Statement will take place, in the exact manner
described in the Information Statement.
Opinions
GENERALLY
Set forth below are our opinions about the principal federal income tax
consequences of the Distribution. These opinions are based upon the Internal
Revenue Code of 1986 (the "Code"), Treasury regulations, Internal Revenue
Service rulings, and judicial decisions now in effect, all of which are subject
to change at any time, possibly with retroactive effect, by legislative,
judicial, or administrative action.
In connection with the issuance of the opinions that are set forth below we
have examined such documents, made such inquiry, and taken such action as we
believe necessary and appropriate. Without limiting the generality of the
foregoing we have examined: (i) the Registration Statement, including the
Information Statement; (ii) the Articles of Incorporation and Bylaws of SLH and
other documents that are attached to the Registration Statement as exhibits
thereto; (iii) the form of appraiser's opinion that is attached to the
Information Statement as Annex A thereto; and (iv) the Articles of Incorporation
and Bylaws of Seafield and minutes of meetings and actions taken by unanimous
consent without meetings of and by the Board of Directors of Seafield.
On the basis of our examination, inquiry, and action, we hereby render the
following opinions.
PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES OF DISTRIBUTION TO SEAFIELD
STOCKHOLDERS
The principal federal income tax consequences of the Distribution to
Seafield's stockholders (other than stockholders which are subject to special
rules that do not apply to taxpayers generally, such as life insurance
companies, tax-exempt organizations, regulated investment companies,
S corporations, financial institutions, broker-dealers in securities, foreign
entities, and nonresident alien individuals) will be as follows.
The Distribution will be a taxable event to Seafield's stockholders for
federal income tax purposes. The amount of the Distribution received by each
Seafield stockholder will be
<PAGE>
Board of Directors
_____________, 1997
Page 3
treated as a dividend (i.e., as ordinary income) to such stockholder to the
extent of such stockholder's pro rata share of Seafield's current and
accumulated earnings and profits as computed for federal income tax purposes.
The amount of the Distribution received by each Seafield stockholder that is not
treated as a dividend will first be treated as a nontaxable return of capital to
the extent of such stockholder's basis in its Seafield common stock, and then as
an amount received by such stockholder from the sale or exchange of property.
The amount that is treated as received by a Seafield stockholder from the sale
or exchange of property will generally be a capital gain, and such capital gain
will be long-term capital gain if the stockholder has held its Seafield stock
for more than one year. For purposes of determining the amount of the
Distribution received by a Seafield stockholder that constitutes a dividend,
such stockholder's pro rata share of Seafield's current and accumulated earnings
and profits will be based on such stockholder's percentage ownership of Seafield
common stock.
The amount of the Distribution received by each Seafield stockholder for
federal income tax purposes will be the fair market value of the property, i.e.,
the value of the SLH common stock (including the "Rights," as defined in the
Information Statement) and cash received in lieu of fractional shares, that is
received by such stockholder as of the Distribution Date.
Each Seafield stockholder for federal income tax purposes will acquire an
initial tax basis in such stockholder's SLH common stock equal to the fair
market value of the property, i.e., the value of the SLH common stock (including
the Rights), that is received by such stockholder as of the Distribution Date.
Each Seafield stockholder's holding period for SLH common stock received in the
Distribution will begin on the Distribution Date.
Certain special rules that permit a deduction for certain dividends
received by a corporation will generally apply in the case of corporations that
receive the Distribution. Under these rules a corporate holder of Seafield
common stock will generally be entitled, in computing its taxable income for the
tax year in which the Distribution occurs, to a deduction in an amount equal to
70 percent of the amount of the Distribution received by it that constitutes a
dividend. This deduction does not apply to any portion of the Distribution that
constitutes a return of capital or taxable gain, and it is subject to several
limitations as described in the following paragraphs.
The dividends received deduction will be available only for dividends
received on shares of Seafield common stock that the corporate holder has held
for at least 46 days. A holder's holding period for these purposes generally
will be reduced by periods during which: (i) the holder has an option to sell,
is under a contractual obligation to sell, or has made (but not closed) a short
sale of substantially identical stock or securities; (ii) the holder is the
grantor of an option to purchase substantially identical stock or securities; or
(iii) the holder's risk of
<PAGE>
Board of Directors
_____________, 1997
Page 4
loss with respect to the shares is considered diminished by reason of the
holding of one or more positions with respect to substantially similar or
related property.
In addition to the foregoing, no dividends received deduction will be
allowed to a corporate holder of Seafield common stock for a dividend received
by such holder with respect to such stock to the extent that the holder is
obligated (whether pursuant to a short sale or otherwise) to make related
payments with respect to positions in substantially similar or related property.
The dividends received deduction allowed to a corporate holder of Seafield
common stock with respect to all dividends received by such holder during the
tax year in which the Distribution occurs, and not simply the amount of the
Distribution that is a dividend or other dividends received by such holder from
Seafield, will be limited to a specified proportion of the holder's adjusted
taxable income for such year. Also, the dividends received deduction allowed to
a corporate holder may be reduced or eliminated if the holder has indebtedness
that is directly attributable to its investment in portfolio stock, such as the
Seafield common stock.
Special rules may apply to a corporate holder of Seafield common stock if
the amount of the Distribution received by such holder is considered to be an
"extraordinary dividend" within the meaning of Section 1059 of the Code. If the
amount of the Distribution received by a corporate holder constitutes an
extraordinary dividend with respect to such holder's Seafield common stock, and
if the holder has not held such stock for more than two years before Seafield
declared, announced, or agreed to the amount or payment of such dividend,
whichever is earliest, then the holder's basis in the stock will be reduced (but
not below zero) by any nontaxed portion of the dividend, which generally is the
amount of the dividends received deduction. For purposes of determining if
Seafield common stock has been held for more than two years, rules similar to
those that are applicable to determining how long such stock has been held for
purposes of the dividends received deduction will apply. Upon the sale or
disposition of Seafield common stock, any part of the nontaxed portion of an
extraordinary dividend that has not been applied to reduce basis because of the
limitation on reducing basis below zero will be treated as gain from the sale or
exchange of such stock.
The amount of the Distribution received by a corporate holder of Seafield
common stock generally will constitute an "extraordinary dividend" if the amount
received by such holder: (i) equals or exceeds five percent of the holder's
adjusted basis in the stock, treating all dividends having ex-dividend dates
within an 85-day period as one dividend; or (ii) exceeds 20 percent of the
holder's adjusted basis in the stock (determined without regard to any reduction
for the nontaxed portion of other extraordinary dividends), treating all
dividends having ex-dividend dates within a 365-day period as one dividend. A
holder may elect to use the fair market value of the stock, rather than its
adjusted basis, for purposes of applying the five
<PAGE>
Board of Directors
_____________, 1997
Page 5
percent and 20 percent limitations, if the holder is able to establish such fair
market value to the satisfaction of the IRS.
In addition to the foregoing rules which limit the dividends received
deduction, a corporate holder of Seafield common stock in general may, for
purposes of computing its alternative minimum tax liability, be required to
include in its alternative minimum taxable income the amount of any dividends
received deduction allowed in computing regular taxable income.
A holder of Seafield common stock may be subject to backup withholding at
the rate of 31 percent with respect to the amount of the Distribution paid to
such holder on such stock. If: (i) the stockholder ("payee") fails to furnish
or certify a taxpayer identification number to the payor; (ii) the IRS notifies
the payor that the taxpayer identification number furnished by the payee is
incorrect; (iii) there has been a "notified payee underreporting" described in
the Code; or (iv) there has been a "payee certification failure" described in
the Code, then Seafield generally will be required to withhold an amount equal
to 31 percent of the amount of the Distribution paid to such stockholder with
respect to such stockholder's Seafield common stock. Any amounts withheld under
the backup withholding rules from a payment to a stockholder will be allowed as
a credit against the stockholder's federal income tax liability or as a refund.
PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES OF DISTRIBUTION TO SEAFIELD
The principal federal income tax consequences of the Distribution to
Seafield will be as follows.
Distributions of property made by Seafield to its stockholders with respect
to their stock, such as the Distribution, must in certain circumstances be
treated as if Seafield sold the property in a taxable sale at its fair market
value. This rule will apply to the Distribution if Seafield's tax basis in the
distributed property is less than the fair market value of the property at the
Distribution Date. Thus, if the fair market value of the SLH common stock
(including the Rights) distributed in the Distribution exceeds Seafield's tax
basis in such property at such date, then the Distribution will be treated as if
Seafield sold the property in a taxable sale and Seafield will recognize gain on
the Distribution in an amount equal to the excess of the fair market value of
the distributed property on the Distribution Date over Seafield's tax basis on
such property.
If Seafield's tax basis in the SLH common stock (including the Rights)
exceeds the fair market value of such property on the Distribution Date, then no
gain or loss will be recognized by Seafield on the Distribution.
<PAGE>
Board of Directors
_____________, 1997
Page 6
We understand, and it is assumed for purposes of this opinion letter, that
Seafield currently files a consolidated federal income tax return with certain
of its subsidiary corporations. The Distribution will cause some of the
corporations that are members of the Seafield consolidated group to cease to be
members of such group (because after the Distribution such corporations will be
owned by SLH rather than by Seafield, and SLH will be independent from
Seafield). The discussion in this opinion letter does not consider any of the
tax consequences that will result from such change in the membership of the
Seafield consolidated group.
NO FEDERAL INCOME TAX CONSEQUENCES TO SLH
The Distribution will have no federal income tax consequences to SLH.
Further Information Regarding Scope of Opinions
We have assumed for purposes of this letter that all documents and forms of
documents that we have examined in connection with rendering the opinions set
forth herein are authentic and, if unexecuted, are in substantially final form
and that all such documents have been or will be signed in substantially the
form examined by us by the persons who purport to be the signatories thereto.
We have further assumed that the execution, delivery, and performance of all
documents and forms of documents that we have examined in connection with
rendering the opinions set forth herein have been, and that the consummation of
all of the transactions described in the Statement of Facts set forth above
either have been or will be, duly authorized pursuant to all necessary corporate
action.
We express no opinions except as expressly set forth herein. In
particular, we express no opinion about the tax consequences of the transfer by
Seafield to SLH and the assumption by SLH of the "Transfer Assets" and the
"Transfer Liabilities" (as such terms are defined in the Information Statement).
We assume no obligation to update or supplement this letter in response to
subsequent changes in the law (which may occur at any time, potentially with
retroactive effect) or future events affecting the transactions described in the
above Statement of Facts.
The opinions contained herein are rendered to you in connection with the
filing of the Registration Statement with the United States Securities and
Exchange Commission. No other
<PAGE>
Board of Directors
_____________, 1997
Page 7
use of this letter or any statements contained herein may be made without our
prior written consent.
Very truly yours,
LATHROP & GAGE L.C.
By:
Russell D. Jones
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Form 10 for the periods ended September 30, 1996 and December 31, 1995
and is qualified in its entirety by reference to such Form 10.
</LEGEND>
<CIK> 0001029023
<NAME> SLH CORPORATION
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 DEC-31-1995
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 582 69
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,657 4,432
<PP&E> 2,579 2,554
<DEPRECIATION> 2,091 1,924
<TOTAL-ASSETS> 40,790 51,638
<CURRENT-LIABILITIES> 458 365
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 39,063 49,869
<TOTAL-LIABILITY-AND-EQUITY> 40,790 51,638
<SALES> 12,801 10,910
<TOTAL-REVENUES> 13,602 11,911
<CGS> 12,720 11,298
<TOTAL-COSTS> 14,697 22,416
<OTHER-EXPENSES> 1,031<F1> 2,124<F1>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 81 189
<INCOME-PRETAX> (1,590) (13,056)
<INCOME-TAX> 71 (1,454)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,661) (11,602)
<EPS-PRIMARY> 0<F2> 0<F2>
<EPS-DILUTED> 0<F2> 0<F2>
<FN>
<F1>Represents general and administrative expenses
<F2>Computation not applicable.
</FN>
<PAGE>
</TABLE>
