<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 14, 1999
----------------
RAILTEX, INC.
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(Exact name of registrant as specified in its charter)
Texas 34-022552 74-1948121
----- --------- ----------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
4040 Broadway, Suite 200, San Antonio, TX 78209
- ----------------------------------------- -----
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (210) 841-7600
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
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Item 5. Other Events
------------
(a) On October 14, 1999, RailTex, Inc., a Texas corporation (the "Company")
entered into an Agreement and Plan of Merger (the "Merger Agreement") with
RailAmerica, Inc., a Delaware corporation ("RailAmerica") and Cotton
Acquisition Corp., a Texas corporation and a wholly owned subsidiary of
RailAmerica ("Merger Sub"). Pursuant to the terms and subject to the
satisfaction of the conditions contained in the Merger Agreement (including
the approval and adoption of the Merger Agreement and the approval of the
Merger (as defined below) by the Company's shareholders, the approval of
the issuance of RailAmerica Common Stock (as defined below) by
RailAmerica's shareholders and the receipt of any necessary regulatory
approval), Merger Sub will merge with and into the Company (the "Merger"),
with the Company as the surviving corporation. As a result of the Merger,
each outstanding share of common stock, par value $0.10 per share, of the
Company (other than shares owned by the Company or RailAmerica or shares
with respect to which the holders have demanded and not lost their right to
dissent pursuant to the Merger Agreement and the Texas Business Corporation
Act) will be converted into the right to receive (i) $13.50 in cash, and
(ii) 0.66666667 shares of common stock, par value $0.001 per share, of
RailAmerica ("RailAmerica Common Stock"). The foregoing description of the
Merger and the Merger Agreement is qualified in its entirety by reference
to the Merger Agreement, a copy of which is attached hereto as Exhibit 2.1
and incorporated herein by reference.
(b) A copy of the press release issued by the Company and RailAmerica on
October 14, 1999 in respect of the Merger is attached hereto as Exhibit
99.1 and incorporated herein by reference.
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements of business acquired: None
(b) Pro Forma Financial Information: None
(c) Exhibits:
2.1 Agreement and Plan of Merger, dated as of October 14, 1999, by and
among RailAmerica, Inc., Cotton Acquisition Corp. and RailTex, Inc.
99.1 Press Release issued by the Company and RailAmerica on October 14,
1999
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RAILTEX, INC.
Dated: October 19, 1999 By: /s/ Joseph P. Jahnke
------------------------------
Name: Joseph P. Jahnke
Title: Senior Vice President - Finance
and Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger, dated as of October 14, 1999,
by and among RailAmerica, Inc., Cotton Acquisition Corp. and
RailTex, Inc.
99.1 Press Release issued by the Company and RailAmerica on
October 14, 1999
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Among
RailAmerica, Inc.
Cotton Acquisition Corp.
and
RailTex, Inc.
Dated as of October 14, 1999
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
The Merger
SECTION 1.01. The Merger......................................................1
SECTION 1.02. Closing.........................................................1
SECTION 1.03. Effective Time..................................................2
SECTION 1.04. Effects of the Merger...........................................2
SECTION 1.05. Articles of Incorporation and Bylaws............................2
SECTION 1.06. Directors.......................................................2
SECTION 1.07. Officers........................................................2
SECTION 1.08. Supplementary Action............................................2
ARTICLE II
Effect of the Merger on the Capital Stock of
the Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock.........................................3
SECTION 2.02. Exchange of Certificates........................................6
SECTION 2.03. Dissenting Shares...............................................7
ARTICLE III
Representations and Warranties of the Company
SECTION 3.01. Organization....................................................8
SECTION 3.02. Subsidiaries....................................................8
SECTION 3.03. Capitalization..................................................8
SECTION 3.04. Authority.......................................................9
SECTION 3.05. Consents and Approvals; No Violations...........................9
SECTION 3.06. SEC Reports and Financial Statements...........................10
SECTION 3.07. Absence of Certain Changes or Events...........................10
SECTION 3.08. No Undisclosed Liabilities.....................................11
SECTION 3.09. Information Supplied...........................................11
SECTION 3.10. Benefit Plans..................................................12
SECTION 3.11. Other Compensation Arrangements................................13
SECTION 3.12. Litigation.....................................................13
SECTION 3.13. Permits; Compliance with Law...................................13
SECTION 3.14. Tax Matters....................................................14
SECTION 3.15. Brokers; Fees and Expenses.....................................15
SECTION 3.16. Intellectual Property..........................................15
SECTION 3.17. Vote Required..................................................16
SECTION 3.18. Labor Matters..................................................16
SECTION 3.19. Title to and Condition of Property.............................16
SECTION 3.20. Environmental Matters..........................................17
SECTION 3.21. Customers......................................................17
SECTION 3.22. Interested Party Transactions..................................18
(i)
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Page
SECTION 3.23. Absence of Certain Payments....................................18
SECTION 3.24. Insurance......................................................18
SECTION 3.25. Fairness Opinion...............................................18
SECTION 3.26. Full Disclosure................................................18
SECTION 3.27. No Knowledge of Inaccurate Representation......................18
ARTICLE IV
Representations and Warranties of Parent and Sub
SECTION 4.01. Organization...................................................18
SECTION 4.02. Subsidiaries...................................................19
SECTION 4.03. Capitalization.................................................19
SECTION 4.04. Authority......................................................20
SECTION 4.05. Consents and Approvals; No Violations..........................20
SECTION 4.06. SEC Reports and Financial Statements...........................20
SECTION 4.07. Absence of Certain Changes or Events...........................21
SECTION 4.08. No Undisclosed Liabilities.....................................21
SECTION 4.09. Information Supplied...........................................21
SECTION 4.10. Benefit Plans..................................................22
SECTION 4.11. Litigation.....................................................23
SECTION 4.12. Permits; Compliance with Law...................................23
SECTION 4.13. Tax Matters....................................................24
SECTION 4.14. Interim Operations of Sub......................................25
SECTION 4.15. Brokers........................................................25
SECTION 4.16. Intellectual Property..........................................25
SECTION 4.17. Vote Required..................................................25
SECTION 4.18. Labor Matters..................................................26
SECTION 4.19. Title to Property..............................................26
SECTION 4.20. Environmental Matters..........................................26
SECTION 4.21. Interested Party Transactions..................................27
SECTION 4.22. Absence of Certain Payments....................................27
SECTION 4.23. Insurance......................................................27
SECTION 4.24. Fairness Opinion...............................................27
SECTION 4.25. Full Disclosure................................................27
SECTION 4.26. Financial Capability...........................................27
SECTION 4.27. No Knowledge of Inaccurate Representation......................28
ARTICLE V
Covenants
SECTION 5.01. Covenants of the Company.......................................28
SECTION 5.02. No Solicitation................................................30
SECTION 5.03. Company Other Actions..........................................32
SECTION 5.04. Covenants of Parent............................................32
SECTION 5.05. Parent Other Actions...........................................32
SECTION 5.06. Registration Rights............................................32
SECTION 5.07. Board Seats....................................................33
(ii)
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Page
ARTICLE VI
Additional Agreements
SECTION 6.01. Registration Statement/Proxy Statement; Quotation on Nasdaq
National Market................................................33
SECTION 6.02. Stockholder Approvals; Recommendations.........................34
SECTION 6.03. Access to Information..........................................35
SECTION 6.04. Reasonable Efforts.............................................35
SECTION 6.05. Confidentiality................................................35
SECTION 6.06. Fees and Expenses..............................................36
SECTION 6.07. Indemnification; Insurance.....................................36
SECTION 6.08 STB Filings....................................................37
SECTION 6.09. Employee Matters...............................................37
ARTICLE VII
Conditions
SECTION 7.01. Conditions to Each Party's Obligation To Effect the Merger.....38
SECTION 7.02. Conditions to Obligations of Parent and Sub to Effect the
Merger.........................................................39
SECTION 7.03. Conditions to Obligations of the Company to Effect the Merger..39
ARTICLE VIII
Termination and Amendment
SECTION 8.01. Termination....................................................40
SECTION 8.02. Effect of Termination..........................................42
SECTION 8.03. Amendment......................................................42
SECTION 8.04. Extension; Waiver..............................................42
ARTICLE IX
Miscellaneous
SECTION 9.01. Nonsurvival of Representations and Warranties..................42
SECTION 9.02. Notices........................................................42
SECTION 9.03. Interpretation.................................................43
SECTION 9.04. Counterparts...................................................44
SECTION 9.05. Entire Agreement; Third Party Beneficiaries....................44
SECTION 9.06. Governing Law..................................................44
SECTION 9.07. Publicity......................................................44
SECTION 9.08. Assignment.....................................................44
SECTION 9.09. Enforcement....................................................44
EXHIBIT 5.06 Registration Rights
EXHIBIT 6.09(d) Retention Plan
(iii)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of October
14, 1999, among RailAmerica, Inc., a Delaware corporation ("Parent"), Cotton
Acquisition Corp., a Texas corporation and a wholly owned subsidiary of Parent
("Sub"), and RailTex, Inc., a Texas corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Company and Parent have
each determined that it is in the best interests of their respective companies
and stockholders that Parent acquire the business of the Company pursuant to the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have each approved the merger of Sub into the Company (the "Merger"), upon the
terms and subject to the conditions set forth in this Agreement whereby each
outstanding share (each a "Company Share") of common stock, par value $0.10 per
share, of the Company ("Company Common Stock"), other than those Shares of
Company Common Stock owned directly or indirectly by Parent or the Company, will
be converted into the right to receive (i) $13.50 in cash and (ii) 0.66666667
shares of common stock, par value $.001 of Parent (each whole share a "Parent
Share");
WHEREAS, the respective Boards of Directors of the Company and Parent have
each determined that the Merger is fair to, and in the best interests of, their
respective companies and stockholders, and have approved the Merger, and the
Board of Directors of the Company has recommended the approval and adoption of
this Agreement by the Company's stockholders; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Sub and the Company hereby agree as follows:
ARTICLE I
The Merger
----------
SECTION 1.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Texas Business Corporation
Act (the "Texas Corporation Act"), Sub shall be merged with and into the Company
at the Effective Time (as defined in Section 1.03). Following the Effective
Time, the separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in accordance with
the Texas Corporation Act. At the election of Parent, any direct or indirect
wholly owned subsidiary (as defined in Section 9.03) of Parent may be
substituted for Sub as a constituent corporation in the Merger. In such event,
the parties agree to execute an appropriate amendment to this Agreement in order
to reflect the foregoing.
SECTION 1.02. Closing. The closing of the Merger will take place at 10:00
a.m. (Miami time) on a date to be specified by Parent or Sub, which shall be no
later than the fifth business day after satisfaction or waiver of the conditions
set forth in Article VII (the "Closing Date"), at the offices of
<PAGE>
Greenberg Traurig, P.A., counsel to Parent, unless another date, time or place
is agreed to in writing by the parties hereto.
SECTION 1.03. Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file
Articles of Merger or other appropriate documents (in any such case, the
"Articles of Merger") executed in accordance with the relevant provisions of the
Texas Corporation Act and shall make all other filings or recordings required
under the Texas Corporation Act. The Merger shall become effective at such time
as the Articles of Merger is duly filed with the Texas Secretary of State, or at
such later time as Sub and the Company shall agree and as is specified in the
Articles of Merger (the time the Merger becomes effective being hereinafter
referred to as the "Effective Time").
SECTION 1.04. Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the Texas Corporation Act.
SECTION 1.05. Articles of Incorporation and Bylaws.
(a) The Articles of Incorporation of the Surviving Corporation shall
be amended as of the Effective Time so that such articles are the same as the
Articles of Incorporation of Sub as in effect immediately prior to the Effective
Time until thereafter changed or amended as provided therein or by applicable
law; provided that Article I thereof shall continue to provide that the
corporate name of the Surviving Corporation is "RailTex, Inc."
(b) The bylaws of Sub as in effect immediately prior to the Effective
Time shall be the bylaws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
SECTION 1.06. Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of Sub immediately prior to the
Effective Time or such other persons as Parent shall designate shall be the
officers of the Surviving Corporation until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
SECTION 1.08. Supplementary Action. If at any time after the Effective
Time, any further assignments or assurances are necessary or desirable to vest
or to perfect or confirm of record in the Surviving Corporation the title to any
property or rights of the Company or Sub, or otherwise to carry out the
provisions of this Agreement, the officers and directors of the Surviving
Corporation are hereby authorized and empowered in the name of and on behalf of
the Company and the Sub to execute and deliver any and all things necessary or
proper to vest or to perfect or confirm title to such property or rights in the
Surviving Corporation, and otherwise to carry out the purposes and provisions of
this Agreement.
2
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ARTICLE II
Effect of the Merger on the Capital Stock of
the Constituent Corporations; Exchange of Certificates
------------------------------------------------------
SECTION 2.01. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any Company
Shares or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one fully paid and nonassessable
share of Common Stock, par value $0.01 per share, of the Surviving Corporation.
(b) Cancellation of Company Owned Stock. All Company Shares (if any)
that are held in the treasury of the Company or by any wholly owned subsidiary
of the Company shall be canceled and no consideration shall be delivered in
exchange therefor.
(c) Conversion of Company Common Stock. Each Company Share (other than
Company Shares to be canceled in accordance with Section 2.01(b) and Company
Shares which are held by stockholders who have demanded and not waived or lost
their right to dissent pursuant to Section 2.03 and Articles 5.12 and 5.13 of
the Texas Corporation Act and who have not withdrawn or lost such right to
dissent) shall be converted into the right to receive
(i) $13.50 in cash, without interest (the "Cash Consideration"),
and
(ii) 0.66666667 Parent Shares (the "Stock Consideration" and
together with the Cash Consideration, the "Merger Consideration").
As of the Effective Time, all such Company Shares shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such Company Shares
shall cease to have any rights with respect thereto, except the right to receive
the Cash Consideration and the number of Parent Shares into which the shares
represented by such certificate have been converted in accordance with this
Section 2.01(c). If subsequent to the date of this Agreement but prior to the
Effective Time, Parent should split or combine the Parent Shares or pay a stock
dividend or other stock distribution in Parent Shares, then the number of Parent
Shares issuable as Stock Consideration shall be appropriately adjusted to
reflect such split, combination, dividend or other distribution.
Prior to the Effective Time, the Board of Directors of Parent
shall, for purposes of Rule 16b-3(d)(1) promulgated under Section 16 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), specifically approve the issuance of Parent
Shares pursuant to the Merger to directors, officers and stockholders of the
Company subject to Section 16 of the Exchange Act.
(d) Stock Options. The Company shall take all actions necessary to
provide that all outstanding options to acquire shares of Company Common Stock
("Options") granted under any stock option plan, program or similar arrangement
of the Company, each as amended (the "Stock Option Plans"), shall become fully
exercisable and vested immediately prior to the Effective Time whether or not
otherwise exercisable and vested. The Company shall comply with the terms of the
Stock Option Plans, as applicable, and, to the extent required thereunder,
provide written notice to the holders of Options that such
3
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Options shall be treated as set forth herein. All Options which are outstanding
immediately prior to the Effective Time shall be canceled and each holder
thereof shall be entitled to receive, subject to reduction for any applicable
withholding taxes, from Parent or the Surviving Corporation, at the same time
and in the same manner as the holders of Company Shares pursuant to Section
2.02, for each Option to acquire one share of Company Common Stock, (i) an
amount in cash equal to (A) the Cash Consideration payable to the holder of one
share of Company Common Stock pursuant to Section 2.01(c)(i) assuming such
Option had been exercised immediately prior to the Effective Time minus (B) the
exercise price of such Option (the "Exercise Difference"), plus (ii)
certificates representing that number of Parent Shares that the holder of one
share of Company Common Stock would have the right to receive pursuant to
Section 2.01(c)(ii) assuming such Option had been exercised prior to the
Effective Time; provided, however, if the Exercise Difference is a negative
number, at the election of the holder of any Option, such holder can elect to
pay for the Exercise Difference in cash or the number of Parent Shares to be
provided to the Option holder under clause (ii) shall be reduced by an amount
that is equal in value to the Exercise Difference based on the higher of the
average closing price for a Parent Share on the Nasdaq National Market for the
five trading days ending two business days prior to the Effective Time and a
value of $9.75 per share. Prior to the Effective Time, the Company shall use its
reasonable best efforts to obtain such consents, if any, from the holders as are
required to cancel the Options. All applicable withholding taxes attributable to
the payments made hereunder or to distributions contemplated hereby shall, at
the election of the holders of any Option, first be deducted from the amount, if
any, payable under clause (i) of the preceding sentence and, if such amount is
insufficient to satisfy the Option holder's tax withholding liability,
thereafter, at the election of Parent, the Parent shall (x) use its reasonable
best efforts (including, without limitation, by preparing and filing any
registration statement and by causing such registration statement to become
effective), and the Company shall cooperate in seeking, as of the Effective
Time, standby purchasers for Parent Shares for the holders of Options or (y)
reduce the Stock Consideration payable in respect of such Options by an amount
equal in value to the amount of the remaining withholding based on the higher of
the average closing price for a Parent Share on the Nasdaq National Market for
the five trading days ending two business days prior to the Effective Time and a
value of $9.75 per share, in each case to enable such holder to pay applicable
withholding taxes. Except as provided herein or as otherwise agreed to by the
parties and to the extent permitted by the Stock Option Plans, the Company shall
cause the Stock Option Plans to terminate as of the Effective Time.
(e) Company Long-Term Incentive Plans. The Company shall take all
actions necessary to provide that all units representing shares of Company
Common Stock ("Stock Units") granted under the Company's Long Term Incentive
Plans, each as amended (the "LTIPs"), shall become fully vested immediately
prior to the Effective Time whether or not otherwise vested. All Stock Units
which are outstanding immediately prior to the Effective Time shall be canceled
and each holder thereof shall be entitled to receive the Merger Consideration,
subject to reduction for any applicable withholding taxes, from Parent or the
Surviving Corporation, for each Stock Unit. All applicable withholding taxes
attributable to the Cash Consideration shall be deducted from the Cash
Consideration payable as contemplated hereby. All applicable withholding taxes
attributable to the Stock Consideration shall, at the election of the holder of
the Stock Units, either be (i) deducted from the Cash Consideration or (ii) the
Parent shall, at its election, (x) use its reasonable best efforts (including,
without limitation, by preparing and filing any registration statement and by
causing any registration statement to become effective), and the Company shall
cooperate, in seeking, as of the Effective Time, standby purchasers for the
Parent Shares of any such holder to enable such holders to pay applicable
withholding taxes or (y) reduce the Stock Consideration payable with respect to
the Stock Unit by an amount that is equal to the amount of the withholding based
on the higher of the average closing price for a Parent Share on the Nasdaq
National Market for the five trading days ending two business days prior to the
Effective Time and a value of $9.75 per share to enable such holder to pay
applicable withholding taxes. Prior to the Effective Time, the
4
<PAGE>
Company shall use its reasonable best efforts to obtain such consents, if any,
from the holders as are required to cancel the Stock Units. Except as provided
herein or as otherwise agreed to by the parties, the Company shall cause the
LTIPs to terminate as of the Effective Time. The Company shall comply with the
terms of the LTIPs, as applicable, and, to the extent required thereunder,
provide written notice to the holders of the Stock Units of the matters set
forth herein.
(f) Company Employee Stock Purchase Plan. The Company shall take all
actions necessary to terminate the Company's Employee Stock Purchase Plan as
promptly as practicable after the date hereof but in no event later than
November 1, 1999 in accordance with the terms thereof.
(g) Restricted Stock. The Company shall take all actions necessary to
provide that all outstanding shares of Company Common Stock issued pursuant to
any restricted stock plan, program or similar arrangement of the Company, each
as amended (the "Restricted Stock Plans", and the Company Common Stock issued
thereunder, the "Restricted Stock"), shall become fully vested and all
applicable restrictions shall lapse immediately prior to the Effective Time
whether or not otherwise vested. The Company shall comply with the terms of the
Restricted Stock Plans, as applicable, and, to the extent required thereunder,
provide written notice to the holders of Restricted Stock that such Restricted
Stock shall be treated as set forth herein. All Restricted Stock outstanding
immediately prior to the Effective Time shall be canceled and each holder
thereof shall be entitled to receive the Merger Consideration, net of any
applicable withholding taxes, from Parent or the Surviving Corporation, at the
same time and in the same manner as the holders of Company Shares pursuant to
Section 2.01(c). All applicable withholding taxes attributable to the Cash
Consideration shall be deducted from the Cash Consideration payable as
contemplated hereby. All applicable withholding taxes attributable to the Stock
Consideration shall, at the election of the holder of Restricted Stock, either
be (i) deducted from the Cash Consideration or (ii) the Parent shall, at its
election, (x) use its reasonable best efforts (including, without limitation, by
preparing and filing any registration statement and by causing any registration
statement to become effective), and the Company shall cooperate, in seeking, as
of the Effective Time, standby purchasers for the Parent Shares of any such
holder to enable such holders to pay applicable withholding taxes or (y) reduce
the Stock Consideration payable with respect to the Restricted Stock by an
amount that is equal to the amount of the withholding based on the higher of the
average closing price for a Parent Share on the Nasdaq National Market for the
five trading days ending two business days prior to the Effective Time and a
value of $9.75 per share to enable such holder to pay applicable withholding
taxes. Except as provided herein or as otherwise agreed to by the parties and to
the extent permitted by the Stock Plans, the Company shall cause the Stock Plans
to terminate as of the Effective Time.
(h) Adjustment to Merger Consideration. In the event the sale of the
Company's assets listed in Section 2.01(h) of the Disclosure Schedule is not
consummated prior to the Effective Time for net proceeds of at least $9.0
million, the definition of (1) Cash Consideration in Section 2.01(c)(i) shall be
automatically amended to reduce the Cash Consideration set forth in Section
2.01(c)(i) by an amount (the "Reallocation Amount") equal to the quotient
determined by dividing (i) $9.0 million less the amount of net proceeds, if any,
received by the Company from the sale of all or a portion of such assets by (ii)
the number of fully diluted shares of Company Common Stock as of the Effective
Time (but without giving effect to any Company Stock Options which as of the
Effective Time have terminated without having been exercised or exchanged
pursuant to Section 2.01(d)(e)(f) or (g)), and (2) the Stock Consideration in
Section 2.01(c)(ii) shall be automatically amended to increase the Stock
Consideration set forth in Section 2.01(c)(ii) by the number of Parent Shares
(valued at $9.75) equal to the Reallocation Amount.
5
<PAGE>
SECTION 2.02. Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate a bank or trust company to act as exchange agent in the Merger (the
"Exchange Agent"). No later than the Effective Time, Parent shall make
available, or cause the Surviving Corporation to make available, to the Exchange
Agent the aggregate Cash Consideration (including the cash payable pursuant to
Section 2.02(e)) and Stock Consideration with respect to all holders of Company
Shares (other than Company Shares to be canceled in accordance with Section
2.01(b) and Company Shares which are held by stockholders who have demanded
their right to dissent pursuant to Section 2.03 and Articles 5.12 and 5.13 of
the Texas Corporation Act and who have not withdrawn or lost such right to
dissent). The Parent Shares issuable with respect to Company Shares in the
Merger shall be deemed to have been issued at the Effective Time.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented Company Shares (other than Company Shares to be canceled in
accordance with Section 2.01(b) and Company Shares which are held by
stockholders who have demanded and perfected their right to dissent pursuant to
Section 2.03 and Articles 5.12 and 5.13 of the Texas Corporation Act and who
have not withdrawn or lost such right to dissent) (the "Certificates"), (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the amount of cash and the
number of Parent Shares into which the Company Shares theretofore represented by
such Certificate shall have been converted pursuant to Section 2.01, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Shares that is not registered in the transfer
records of the Company, payment may be made to a person other than the person in
whose name the Certificate so surrendered is registered, if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 2.02, each such Certificate shall be deemed at any time after
the Effective Time to represent only the right to receive upon such surrender
the Merger Consideration, without interest. No interest will be paid or will
accrue on the cash payable upon the surrender of any Certificate. In the event
any Certificate shall have been lost, stolen or destroyed, Parent may, in its
discretion and as a condition precedent to the payment of the Merger
Consideration in respect of the shares represented by such Certificate, require
the owner of such lost, stolen or destroyed Certificate to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against Parent, the Surviving Corporation or the Exchange Agent.
(c) Dividends. No dividends that are declared on Parent Shares will be
paid to persons entitled to receive certificates representing Parent Shares
until such persons surrender their Certificates representing Company Shares.
Upon such surrender, there shall be paid to the person in whose name the
certificates representing such Parent Shares shall be issued any dividends which
shall have become payable with respect to such Parent Shares between the
Effective Time and the time of such surrender.
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(d) No Further Ownership Rights in Company Common Stock. The Cash
Consideration paid and Stock Consideration issuable upon the surrender of
Certificates in accordance with the terms of this Article II shall be deemed to
have been paid and issued in full satisfaction of all rights pertaining to the
Company Shares theretofore represented by such Certificates. At the Effective
Time, the stock transfer books of the Company shall be closed, and there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the Company Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Exchange Agent for any reason,
they shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Securities. No certificates or scrip representing
fractional Parent Shares shall be issued in connection with the Merger, and such
fractional interest shall not entitle the owner thereof to vote or to any rights
of a stockholder. In lieu of any such fractional shares, each holder of Company
Shares who would otherwise have been entitled to a fraction of a Parent Share
upon surrender of stock certificates for exchange pursuant to this Article II
shall be paid cash upon such surrender in an amount equal to the product of such
fraction multiplied by the average closing price for a Parent Share on the
Nasdaq National Market for the five (5) trading days ending two business days
prior to the Effective Time.
(f) No Liability. At any time following the expiration of six months
after the Effective Time, the Surviving Corporation shall be entitled to require
the Exchange Agent to deliver to it any funds (including any interest received
with respect thereto, which shall be payable to Parent at Parent's request)
which had been made available to the Exchange Agent and which have not been
disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to any applicable
abandoned property, escheat or similar law) only as general creditors thereof
with respect to the Merger Consideration payable and issuable upon due surrender
of their Certificates, without any interest thereon. Notwithstanding the
foregoing, none of Parent, Sub, the Company or the Exchange Agent shall be
liable to any person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
SECTION 2.03. Dissenting Shares.
(a) Each outstanding share of Company Common Stock, the holder of
which has demanded such holder's right to dissent in accordance with Articles
5.12 and 5.13 of the Texas Corporation Act and has not effectively withdrawn or
lost such holder's right to dissent ("Dissenting Shares"), shall not be
converted into or represent a right to receive the Merger Consideration, but the
holder thereof shall be entitled only to such rights as are granted by such
Articles 5.12 and 5.13. Each holder of Dissenting Shares who becomes entitled to
payment for such holder's Company Common Stock pursuant to Articles 5.12 and
5.13 of the Texas Corporation Act shall receive payment therefor from the
Surviving Corporation from funds provided by Parent (but only after the amount
thereof shall have been agreed upon or finally determined pursuant to such
Articles 5.12 and 5.13).
(b) If any holder of Company Common Stock who demands such holder's
right to dissent with respect to such holder's shares under Articles 5.12 and
5.13 of the Texas Corporation Act shall effectively withdraw or lose (through
failure to perfect or otherwise) such holder's right to dissent, whether before
or after the Effective Time, the Company Common Stock held by such holder shall
be converted into a right to receive the Merger Consideration in accordance with
Section 2.01(c).
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(c) The Company shall give Parent (i) prompt notice of any written
objections to the Merger, written demands exercising the right to dissent,
withdrawals of written demands exercising the right to dissent and any other
instruments served pursuant to Articles 5.12 and 5.13 of the Texas Corporation
Act and received by the Company, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to written demands exercising the
right to dissent under such Articles 5.12 and 5.13. The Company will not
voluntarily make any payment with respect to any exercises of rights to dissent
and will not, except with the prior written consent of Parent, settle or offer
to settle any such exercises.
ARTICLE III
Representations and Warranties of the Company
---------------------------------------------
The Company represents and warrants to Parent and Sub as follows:
SECTION 3.01. Organization. Each of the Company and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to carry on its business as now being conducted. The Company and
each of its subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing could not
reasonably be expected to have a material adverse effect (as defined in Section
9.03) on the Company or prevent or materially delay the consummation of the
Merger. The Company has made available to Parent complete and correct copies of
its restated articles of incorporation and bylaws and the certificate of
incorporation and bylaws (or similar organizational documents) of each of the
Company's subsidiaries.
SECTION 3.02. Subsidiaries. The only subsidiaries of the Company (the
"Subsidiaries") are listed in Section 3.02(a) of the disclosure schedule annexed
hereto (the "Disclosure Schedule"). All the outstanding shares of capital stock
of each such subsidiary are owned by the Company, by another wholly owned
subsidiary of the Company or by the Company and another wholly owned subsidiary
of the Company as set forth in Section 3.02(a) of the Disclosure Schedule, free
and clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens"), and are duly
authorized, validly issued, fully paid and nonassessable. The Company also owns
the partnership interests and membership interests identified in Section 3.02(b)
of the Disclosure Schedule. Except as otherwise specified in Section 3.02(b) of
the Disclosure Schedule, the Company owns 100% of the partnership interests and
membership interests in said partnerships and limited liability companies.
Except for the capital stock of the Subsidiaries and the partnership interests
and membership interests in the partnerships and limited liability companies
listed in Section 3.02(b), the Company does not own, directly or indirectly, any
capital stock or other ownership interest in any corporation, partnership, joint
venture or other entity.
SECTION 3.03. Capitalization. The authorized capital stock of the Company
consists of 30,000,000 shares of Company Common Stock and 10,000,000 shares of
preferred stock, par value $1.00 per share ("Company Preferred Stock"). At the
close of business on October 1, 1999, (i) 9,218,314 shares of Company Common
Stock were issued and outstanding, (ii) 1,076,484 shares of Company Common Stock
were reserved for issuance upon exercise of outstanding Company Stock Options
(as defined below) as set forth in Section 3.03 of the Disclosure Schedule and
(iii) no shares of Company Preferred Stock were issued and outstanding. Except
as set forth above, and except for shares issued upon the exercise of
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Company Stock Options, as of the date of this Agreement, no shares of capital
stock or other voting securities of the Company were issued, reserved for
issuance or outstanding. All outstanding shares of capital stock of the Company
are, and all shares which may be issued will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth in Section 3.03 of the Disclosure Schedule, there
are no bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of the Company may vote.
Except as set forth above, there are not any securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which the Company or any of the Subsidiaries is a party or by which any of
them is bound obligating the Company or any of the Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or of any of the
Subsidiaries or obligating the Company or any of the Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. Except as set forth in
Section 3.03 of the Disclosure Schedule, there are not any outstanding
contractual obligations (i) of the Company or any of the Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or (ii) of the Company to vote or to dispose of any shares of the
capital stock of any of the Subsidiaries. Except as set forth in Section 3.03 of
the Disclosure Schedule, there are no restrictions on the right of the Company
to vote or dispose of any shares of the capital stock of the Subsidiaries.
SECTION 3.04. Authority. The Company has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of the terms of this Agreement by the holders of a
majority of the Shares (the "Company Stockholder Approval")). The execution,
delivery and performance of this Agreement and the consummation by the Company
of the Merger and of the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated (in
each case, other than, with respect to the Merger, the Company Stockholder
Approval). This Agreement has been duly executed and delivered by the Company
and, assuming this Agreement constitutes a valid and binding obligation of
Parent and Sub, constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally.
SECTION 3.05. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, and the rules and
regulations promulgated thereunder (including the filing with the Securities and
Exchange Commission (the "SEC") of a proxy statement relating to any required
approval by the Company's stockholders of this Agreement, the Surface
Transportation Board (the "STB"), the Texas Corporation Act, and except as set
forth in Section 3.05 of the Disclosure Schedule, neither the execution,
delivery or performance of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the Articles of Incorporation or Bylaws
of the Company or of the similar organizational documents of any of the
Subsidiaries, (ii) require any filing with, or permit, authorization, consent or
approval of, any federal, state or local government or any court, tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency, domestic, foreign or supranational (a "Governmental
Entity") (except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings could not reasonably be expected
to have a material adverse effect on the Company or prevent or materially delay
the consummation of the Merger), (iii) result in a
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violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of the Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound, or (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company, any of the Subsidiaries or any of their
properties or assets, except in the case of clause (iii) or (iv) for violations,
breaches or defaults that could not reasonably be expected to have a material
adverse effect on the Company or prevent or materially delay the consummation of
the Merger.
SECTION 3.06. SEC Reports and Financial Statements. The Company and the
Subsidiaries have filed with the SEC true and complete copies of, all forms,
reports, exhibits, schedules, statements and other documents (other than
preliminary materials) required to be filed by it under the Exchange Act or the
Securities Act of 1933 (the "Securities Act") from and after December 31, 1996
(such forms, reports, exhibits schedules, statements and other documents,
including any financial statements or schedules included therein, are referred
to as the "Company SEC Documents"). The Company SEC Documents, at the time
filed, (a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. Except
to the extent revised or superseded by a subsequently filed Company SEC
Document, the Company SEC Documents do not contain an untrue statement of a
material fact or omit to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Company SEC
Documents as well as the Company's financial statements as of and for the three
months and six months ended June 30, 1999 heretofore delivered to Parent, as of
the dates thereof comply as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Rule
10-01 of Regulation S-X promulgated by the SEC) and fairly present (subject, in
the case of the unaudited statements, to normal, recurring audit adjustments,
none of which will be material and except for the absence of notes thereto) the
consolidated financial position of the Company and the Subsidiaries as at the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended.
SECTION 3.07. Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Documents or as set forth in Section 3.07 of the Disclosure
Schedule and except as provided in this Agreement, since June 30, 1999, the
Company and the Subsidiaries have conducted their respective businesses only in
the ordinary course consistent with past practice, and there has not been any
material adverse change (as defined in Section 9.03) with respect to the
Company. Except as disclosed in the Company SEC Documents or as set forth in
Section 3.07 of the Disclosure Schedule, since June 30, 1999, there has not been
(i) any declaration, setting aside or payment of any dividend or other
distribution with respect to the Company's capital stock or any redemption,
purchase or other acquisition of any of its capital stock, (ii) any split,
combination or reclassification of any of the Company's capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, other than
the issuance of Company Shares upon the exercise of Options or the issuance of
Restricted Stock or Stock Units (collectively, the "Company Stock Options"),
(iii) any material change in accounting methods, principles or practices by the
Company, (iv) (w) any granting by the
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Company or any of the Subsidiaries to any executive officer of the Company or
any of the Subsidiaries of any increase in compensation, except in the ordinary
course of business (including in connection with promotions) consistent with
past practice or as was required under employment agreements in effect as of
June 30, 1999, (x) any granting by the Company or any of the Subsidiaries to any
such officer of any increase in severance or termination pay, except as part of
a standard employment package to any person promoted or hired, or as was
required under employment, severance or termination agreements in effect as of
June 30, 1999, (y) except employment arrangements in the ordinary course of
business consistent with past practice with employees other than any executive
officer of the Company, any entry by the Company or any of the Subsidiaries into
any employment, severance or termination agreement with any executive officer,
or (z) any increase in or establishment of any bonus, insurance, deferred
compensation, pension, retirement, profit-sharing, stock option (including the
granting of stock options, stock appreciation rights, performance awards or
restricted stock awards or the amendment of any existing stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan or agreement or arrangement, (v) any
damage, destruction or loss, whether or not covered by insurance, that has or
reasonably would be expected to have a material adverse effect on the Company,
(vi) any amendments or changes in the articles of incorporation or bylaws of the
Company, or (vii) any material revaluation by the Company of any of its assets,
including writing off notes or accounts receivable other than in the ordinary
course of business.
SECTION 3.08. No Undisclosed Liabilities. Except as and to the extent set
forth in the Company SEC Documents or in Section 3.08 or in any other Section of
the Disclosure Schedule, as of June 30, 1999, neither the Company nor any of the
Subsidiaries had any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by GAAP to be reflected
on an interim consolidated balance sheet of the Company and the Subsidiaries.
Since June 30, 1999, except as and to the extent set forth in the Company SEC
Documents or in Section 3.08 or any other Section of the Disclosure Schedule and
except for liabilities or obligations incurred in the ordinary course of
business consistent with past practice, neither the Company nor any of the
Subsidiaries has incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, that could not be reasonably expected to have a
material adverse effect on the Company, or would be required by GAAP to be
reflected on a consolidated balance sheet of the Company and the Subsidiaries.
The Company and its subsidiaries had no more than an aggregate of $125 million
of indebtedness for borrowed money (excluding trade payables) outstanding on a
consolidated basis as of September 30, 1999.
SECTION 3.09. Information Supplied. None of the information supplied or to
be supplied by the Company in writing specifically for inclusion in (a) the
Registration Statement on Form S-4 (or such other form required or deemed
appropriate by the SEC) to be filed with the SEC by Parent under the Securities
Act for the purpose of registering the Parent Shares to be issued in the Merger
or pursuant to this Agreement (the "Registration Statement") and/or (b) the
joint proxy statement to be distributed in connection with the Special Meeting
(as defined in Section 6.02(a)) and the Parent Stockholders' Meeting (as defined
in Section 6.02(b)) (the "Proxy Statement"), will, in the case of the
Registration Statement, at the time it becomes effective and the Effective Time,
or, in the case of the Proxy Statement and any amendments or supplements
thereto, at the time of the mailing of the Proxy Statement and any amendments or
supplements thereto, and at the time of each of the Special Meeting and the
Parent Stockholders' Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement, insofar as it pertains to
the Company, will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder.
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SECTION 3.10. Benefit Plans.
(a) Except as set forth in Section 3.10 of the Disclosure Schedule,
each "employee pension benefit plan" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (a "Pension
Plan"), "employee welfare benefit plan" (as defined in Section 3(1) of ERISA) (a
"Welfare Plan") and each other plan, arrangement or policy (written or oral)
relating to stock options, stock purchases, compensation, deferred compensation,
bonuses, severance, fringe benefits or other employee benefits, in each case
maintained or contributed to, or required to be maintained or contributed to, by
the Company or the Subsidiaries for the benefit of any present or former
employee, officer or director (each of the foregoing, including any Pension Plan
or Welfare Plan, is a "Benefit Plan") has been administered in all material
respects in accordance with its terms. Except as set forth in Section 3.10 of
the Disclosure Schedule, the Company and the Subsidiaries and all the Benefit
Plans are in compliance in all material respects with the applicable provisions
of ERISA, the Internal Revenue Code of 1986, as amended (the "Code"), all other
applicable laws and all applicable collective bargaining agreements. Section
3.10 of the Disclosure Schedule sets forth a list of all material Benefit Plans.
Except as set forth in Section 3.10(a) of the Disclosure Schedule, none of the
Welfare Plans promises or provides retiree medical or other retiree welfare
benefits to any person. To the Knowledge of the Company (as defined in Section
9.03), no fiduciary of a Benefit Plan has breached any of the responsibilities
or obligations imposed upon fiduciaries under Title I of ERISA, which breach
would reasonably be expected to result in any material liability to the Company.
Each Benefit Plan intended to qualify under section 401(a) of the Code and each
trust intended to qualify under section 501(a) of the Code is the subject of a
favorable determination letter from the IRS, and, to the Knowledge of the
Company, nothing has occurred which would reasonably be expected to impair such
determination. All contributions required to be made with respect to any Benefit
Plan pursuant to the terms of the Benefit Plan or any collective bargaining
agreement, have been made on or before their due dates.
(b) None of the Pension Plans is subject to Title IV of ERISA and none
of the Company or any other person or entity that, together with the Company, is
treated as a single employer under Section 414 of the Code or pursuant to Title
IV of ERISA (each, including the Company, a "Commonly Controlled Entity") has
any liability under Title IV of ERISA (whether actual or contingent) with
respect to a Pension Plan, or to any other employee pension benefit plan that is
or was maintained, contributed to or required to be contributed to by a Commonly
Controlled Entity (other than for contributions not yet due) or to the Pension
Benefit Guaranty Corporation (other than for payment of premiums not yet due),
which liability has not been fully paid.
(c) No Commonly Controlled Entity is required to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the meaning of Section 4201
of ERISA) that has not been fully paid or as to which a Commonly Controlled
Entity would have liability pursuant to Section 4212(c) of ERISA.
(d) Each Benefit Plan that is a Welfare Plan may be amended or
terminated at any time after the Effective Time without material liability to
the Company or the Subsidiaries, except as set forth in the plan or in any
agreement related thereto, as provided by law or as disclosed in Section 3.10(d)
of the Disclosure Schedule or as otherwise set forth in this Agreement.
(e) With respect to each Benefit Plan, the Company has delivered or,
not less than 30 days prior to the Effective Time shall deliver, to Parent (i)
current, accurate and complete copies of each such Benefit Plan (including all
trust agreements, insurance or annuity contracts, descriptions, agreements
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and any other material documents or instruments relating thereto); (ii) copies
of the most recent Internal Revenue Service determination letter (including
copies of any outstanding requests for determination letters) with respect to
each such Benefit Plan which is intended to qualify under Section 401(a) of the
Code; and (iii) copies of the most recent Form 5500 annual report and
accompanying schedules, the most recent actuarial report (to the extent
applicable), and the most recent summary plan descriptions.
(f) With respect to the Benefit Plans, individually and in the
aggregate, no event has occurred, and to the Knowledge of the Company, there
exists no condition or set of circumstances (including without limitation the
transactions contemplated by this Agreement) in connection with which the
Company or the Subsidiaries could be subject to any material liability (except
liability for benefits claims and funding obligations payable in the ordinary
course) under ERISA, the Code or any other applicable law.
SECTION 3.11. Other Compensation Arrangements.
(a) Except as disclosed in the Company SEC Documents or in Section
3.11(a) of the Disclosure Schedule, and except as provided in this Agreement, as
of the date of this Agreement, neither the Company nor any of the Subsidiaries
is a party to any oral or written (i) consulting agreement not terminable on 180
calendar days notice or less and involving the payment of more than $150,000 per
annum, (ii) agreement with any executive officer of the Company or any of the
Subsidiaries (x) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
of the nature contemplated by this Agreement, or (y) providing any term of
employment or compensation guarantee extending for a period longer than two
years or the payment of more than $150,000 per year, or (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(b) Except as disclosed in the Company SEC Documents or as set forth
in Section 3.11(b) of the Disclosure Schedule, since January 1, 1999, neither
the Company nor any of the Subsidiaries has entered into, adopted, amended or
terminated any Benefit Plan or other employee benefit plan or any agreement,
arrangement, plan or policy for the benefit of any director or executive
officer, except in accordance with the terms thereof. Set forth in Section
3.11(b) of the Disclosure Schedule is a payroll schedule reflecting salary
increases for the Company's employees between June 30, 1999 and September 30,
1999.
SECTION 3.12. Litigation. Except as disclosed in the Company SEC Documents
or Section 3.12 of the Disclosure Schedule, as of the date hereof there is no
suit, claim, action, proceeding or investigation pending before any Governmental
Entity or, to the Knowledge of the Company, threatened against the Company or
any of the Subsidiaries that, individually or in the aggregate, would reasonably
be expected to have a material adverse effect on the Company or prevent or
materially delay the consummation of the Merger. Except as disclosed in the
Company SEC Documents or Section 3.12 of the Disclosure Schedule, neither the
Company nor any of the Subsidiaries is subject to any outstanding order, writ,
injunction or decree that, individually or in the aggregate, would reasonably be
expected to have a material adverse effect on the Company or prevent or
materially delay the consummation of the Merger.
SECTION 3.13. Permits; Compliance with Law. The Company and the
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for
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the lawful conduct of their respective businesses (the "Company Permits"),
except for failures to hold such permits, licenses, variances, exemptions,
orders and approvals that could not reasonably be expected to have a material
adverse effect on the Company. The Company and the Subsidiaries are in
compliance with the terms of the Company Permits, except where the failure so to
comply could not reasonably be expected to have a material adverse effect on the
Company. Except as disclosed in the Company SEC Documents or in Section 3.13 of
the Disclosure Schedule, the businesses of the Company and the Subsidiaries are
not being conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for violations that could not reasonably be expected
to have a material adverse effect on the Company or prevent or materially delay
the consummation of the Merger. As of the date of this Agreement, no
investigation or review by any Governmental Entity with respect to the Company
or any of the Subsidiaries is pending or, to the Knowledge of the Company,
threatened, nor has any Governmental Entity indicated an intention to conduct
any such investigation or review, other than, in each case, those the outcome of
which could not be reasonably expected to have a material adverse effect on the
Company or prevent or materially delay the consummation of the Merger.
SECTION 3.14. Tax Matters.
(a) The Company and each of the Subsidiaries has filed all Federal
income tax returns and all other material tax returns and reports required to be
filed by it. All such returns are complete and correct in all material respects.
Each of the Company and each of the Subsidiaries has paid (or the Company has
paid on the Subsidiaries' behalf) all taxes required to be paid by it (without
regard to whether a tax return is required or to the amount shown on any tax
return), except taxes for which an adequate reserve has been established on the
most recent financial statements contained in the Company SEC Documents (the
"Most Recent Financial Statements")). The Most Recent Financial Statements
reflect an adequate reserve for all taxes payable by the Company and the
Subsidiaries for all taxable periods and portions thereof through the date of
such financial statements.
(b) Except as set forth in Section 3.14 of the Disclosure Schedule, no
material tax return of the Company or any of the Subsidiaries is under audit or
examination by any taxing authority, and no written or unwritten notice of such
an audit or examination has been received by the Company or any of the
Subsidiaries. Each material deficiency resulting from any audit or examination
relating to taxes by any taxing authority has been paid, except for deficiencies
being contested in good faith. No material issues relating to taxes were raised
in writing by the relevant taxing authority during any presently pending audit
or examination, and no material issues relating to taxes were raised in writing
by the relevant taxing authority in any completed audit or examination that can
reasonably be expected to recur in a later taxable period. The Federal income
tax returns of the Company and each of the Subsidiaries consolidated in such
returns have not been examined by and settled with the Internal Revenue Service.
(c) There is no agreement or other document extending, or having the
effect of extending, the period of assessment or collection of any taxes and no
power of attorney with respect to any taxes has been executed or filed with any
taxing authority.
(d) No material liens for taxes exist with respect to any assets or
properties of the Company or any of the Subsidiaries, except for liens for taxes
not yet due or being contested in good faith.
(e) None of the Company or any of the Subsidiaries is liable for taxes
of any other person (other than taxes of the Company and the Subsidiaries) or is
a party to or is bound by any tax sharing agreement.
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(f) None of the Company or any of the Subsidiaries shall be required
to include in a taxable period ending after the Effective Time for a material
amount of taxable income attributable to income that accrued in a prior taxable
period but was not recognized in any prior taxable period as a result of the
installment method of accounting, the completed contract method of accounting,
the long-term contract method of accounting or Section 481 of the Code or
comparable provisions of state, local or foreign tax law.
(g) As used in this Agreement, "taxes" shall include all Federal,
state, local and foreign income, property, sales, excise, withholding and other
taxes, tariffs or governmental charges of any nature whatsoever, together with
all interest, penalties and additions imposed with respect to such amounts.
(h) Neither the Company nor, to the Knowledge of the Company, any of
the Subsidiaries has filed a consent pursuant to or agreed to the application of
Section 341(f) of the Code.
(i) Except as set forth in Section 3.14(i) of the Disclosure Schedule,
neither the Company nor any of the Subsidiaries is a party to any agreement,
contract, arrangement or plan that would result (taking into account the
transactions contemplated by this Agreement), separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
(j) All material elections with respect to taxes affecting the Company
and the Subsidiaries are attached to the Company's tax returns, to the extent so
required.
(k) There are no private letter rulings in respect of any material tax
pending between the Company or the Subsidiaries and any taxing authority.
SECTION 3.15. Brokers; Fees and Expenses. No broker, investment banker,
financial advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company other than Chase Securities, Inc. ("Chase"), whose fees
(which shall not exceed $3,200,000) shall be paid by the Company.
SECTION 3.16. Intellectual Property.
(a) Except as set forth in Section 3.16 of the Disclosure Schedule and
except to the extent that the inaccuracy of any of the following (or the
circumstances giving rise to such inaccuracy) could not reasonably be expected
to have a material adverse effect on the Company:
(1) the Company and each of the Subsidiaries owns, clear of any
liens or encumbrances of any kind, or is licensed or otherwise has the legally
enforceable right to use, all Intellectual Property (as hereinafter defined)
used in or necessary for the conduct of its business as currently conducted;
(2) no claims are pending or, to the Knowledge of the Company,
threatened that the Company or any of the Subsidiaries is infringing on or
otherwise violating the rights of any person with regard to any Intellectual
Property used by, owned by and/or licensed to the Company or any of the
Subsidiaries and, to the Knowledge of the Company, there are no valid grounds
for any such claims;
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(3) to the Knowledge of the Company, no person is infringing on
or otherwise violating any right of the Company or any of the Subsidiaries with
respect to any Intellectual Property owned by and/or licensed to the Company or
any of the Subsidiaries.
(4) to the Knowledge of the Company, there are no valid grounds
for any claim challenging the ownership or validity of any Intellectual Property
owned by the Company or any of the Subsidiaries or challenging the Company's or
any of the Subsidiaries' license or legally enforceable right to use any
Intellectual Property licensed by it; and
(5) to the Knowledge of the Company, all patents, registered
trademarks, service marks and copyrights held by the Company and each of the
Subsidiaries are valid and subsisting.
(b) For purposes of this Agreement, "Intellectual Property" means
trademarks (registered or unregistered), service marks, brand names,
certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patented, patentable or not in any jurisdiction; trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works of authorship, whether
copyrighted, copyrightable or not in any jurisdiction; registration or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; computer programs and software (including source
code, object code and data); licenses, immunities, covenants not to sue and the
like relating to the foregoing; and any claims or causes of action arising out
of or related to any infringement or misappropriation of any of the foregoing.
SECTION 3.17. Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class of capital stock necessary to approve this Agreement
and the Merger.
SECTION 3.18. Labor Matters. Except as set forth in Section 3.18 of the
Disclosure Schedule or the Company SEC Documents, as of the date hereof, (i)
there are no controversies pending or, to the Knowledge of the Company,
threatened, between the Company or any of the Subsidiaries and any of their
respective employees, which controversies have had, or would reasonably be
expected to have, a material adverse effect on the Company; (ii) neither the
Company nor any of the Subsidiaries is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or the Subsidiaries, nor does the Company or any of the Subsidiaries
know of any activities or proceedings of any labor union to organize any such
employees; and (iii) to the Knowledge of the Company there are no strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of the Company or any of the Subsidiaries which would reasonably
be expected to have a material adverse effect on the Company.
SECTION 3.19. Title to and Condition of Property. Except as set forth in
the Company SEC Documents or Section 3.19 of the Disclosure Schedule, the
Company and each of the Subsidiaries have good title to all of their owned
properties and assets, free and clear of all liens, charges and encumbrances,
except liens for taxes not yet due and payable and such liens or other
imperfections of title, if any, as do not materially detract from the value of
or interfere with the present use of the property affected thereby in accordance
with industry standards or which could not reasonably be expected to have a
material adverse effect on the Company; and all leases pursuant to which the
Company or any of the Subsidiaries lease from others material amounts of real or
personal property are in good standing, valid and effective in accordance
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with their respective terms, and there is not under any of such leases, any
existing default or event of default by the Company or the Subsidiaries or to
the Knowledge of the Company any other party thereto (or event which with notice
or lapse of time, or both, would constitute a default), except where the lack of
such good standing, validity and effectiveness or the existence of such default
or event of default could not reasonably be expected to have a material adverse
effect on the Company. Except as set forth in Section 3.19 of the Disclosure
Schedule, since October 1, 1999, there has been no material adverse change in
any of such material tangible personal property, whether owned or leased. None
of the Company or the Subsidiaries has granted any option or other right to
acquire any portion of its material owned properties or assets, except as set
forth in Section 3.19 of the Disclosure Schedule.
SECTION 3.20. Environmental Matters. Except as set forth in Section 3.20 of
the Disclosure Schedule or the Company SEC Documents, and except where such has
not had and could not reasonably be expected to have a material adverse effect,
on the Company or any of the Subsidiaries to the Knowledge of the Company, the
Company and each of the Subsidiaries (i) have obtained all applicable permits,
licenses and other authorizations, including Company Permits, which are required
to be obtained under all applicable federal, state or local laws or any
applicable regulation, code, plan, order, decree, judgment, notice or demand
letter issued, entered, promulgated or approved thereunder relating to pollution
or protection of the environment ("Environmental Laws"), including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic material or wastes, including petroleum, into
ambient air, surface water, ground water or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes, including petroleum, by the Company or any of the
Subsidiaries (or their respective agents); (ii) are in compliance with all terms
and conditions of such required permits, licenses and authorizations, and also
are in compliance with all other applicable limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in applicable Environmental Laws; (iii) as of the date
hereof, are not aware of nor have received notice of any uncured past or present
violations of Environmental Laws or any event, condition, circumstance,
activity, practice, incident, action or plan which is reasonably likely to
interfere with or prevent continued compliance with Environmental Laws or which
could give rise to any material capital expenditure or common law or statutory
liability, or otherwise form the basis of any claim, action, suit or proceeding
against the Company or any of the Subsidiaries under any Environmental Law or
otherwise based on or resulting from the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, handling, emission, discharge or
release into the environment of any pollutant, contaminant, or hazardous or
toxic material or waste, including petroleum; (iv) have taken all actions
necessary under applicable Environmental Laws to register any products or
materials required to be registered by the Company or any of the Subsidiaries
(or any of their respective agents) thereunder and (v) none of the Company nor
any of the Subsidiaries has entered into any agreement to undertake or pay for
any response action of any kind or nature or to pay any damages (including
punitive damages), costs, fines or penalties associated with any release or
threatened release of any pollutant, contaminant or hazardous or toxic material
or waste, including petroleum, at any location.
SECTION 3.21. Customers. Section 3.21 of the Disclosure Schedule sets forth
a list of the Company's twenty five (25) largest customers (detailed, in the
case of government agencies, by separate government agency) in terms of gross
sales for the fiscal year ended December 31, 1998. Except as set forth in
Section 3.21 of the Disclosure Schedule, since December 31, 1998, to the
Knowledge of the Company there have not been any changes in the business
relationships of the Company with any of the customers named therein that would
constitute a material adverse effect on the Company.
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SECTION 3.22. Interested Party Transactions. Except as set forth in Section
3.22 of the Disclosure Schedule or the Company SEC Documents, since January 1,
1999, no event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the SEC, except for contracts with terms no less favorable to the
Company than would reasonably be expected in a similar transaction with an
unaffiliated third party.
SECTION 3.23. Absence of Certain Payments. None of the Company, any of the
Subsidiaries or any of their respective affiliates, officers, directors,
employees or agent or other people acting on behalf of any of them have (i)
engaged in any activity prohibited by the United States Foreign Corrupt
Practices Act of 1977 or any other similar law, regulation, decree, directive or
order of any other country and (ii) without limiting the generality of the
preceding clause (i), used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others.
None of the Company, any of the Subsidiaries or any of their respective
affiliates, directors, officers, employees or agents of other persons acting on
behalf of any of them, has accepted or received any unlawful contributions,
payments, gifts or expenditures.
SECTION 3.24. Insurance. All material fire and casualty, general liability,
business interruption, product liability and sprinkler and water damage
insurance policies maintained by the Company or any of the Subsidiaries are with
reputable insurance carriers, provide coverage of all normal risks incident to
the business of the Company and the Subsidiaries and their respective properties
and assets and are in character and amount at least equivalent to that carried
by persons engaged in similar businesses and subject to the same or similar
perils or hazards, except as could not reasonably be expected to have a material
adverse effect on the Company.
SECTION 3.25. Fairness Opinion. The Board of Directors of the Company has
received an opinion of Chase, financial advisor to the Company dated the date
hereof to the effect that the Merger Consideration is fair, from a financial
point of view, to the holders of Company Common Stock.
SECTION 3.26. Full Disclosure. (i) No written statement contained in any
certificate or schedule furnished by the Company or the Subsidiaries to Parent
or Sub in, or pursuant to the provisions of, this Agreement, and (ii) none of
the monthly consolidated financial statements for July and August 1999
heretofore furnished by the Company to Parent, including the accompanying
commentary, contains any untrue statement of a material fact or omits to state
any material fact necessary, in light of the circumstances under which it was
made, in order to make the statements herein or therein not misleading.
SECTION 3.27. No Knowledge of Inaccurate Representation. The Company has no
Knowledge as of the date hereof that any representation or warranty of the
Parent or the Sub in this Agreement is not true and correct.
ARTICLE IV
Representations and Warranties of Parent and Sub
------------------------------------------------
Parent and Sub represent and warrant to the Company as follows:
SECTION 4.01. Organization. Each of Parent, Sub and each of Parent's other
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now being
conducted. Each of Parent, Sub and each of Parent's other subsidiaries is duly
qualified or licensed to do
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business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing could not
reasonably be expected to have a material adverse effect on Parent or prevent or
materially delay the consummation of the Merger. Each of Parent, Sub and
Parent's other subsidiaries has made available to the Company complete and
correct copies of its certificate of incorporation and bylaws (or similar
organizational documents).
SECTION 4.02. Subsidiaries. The only subsidiaries of Parent are listed in
Section 4.02(a) of the Disclosure Schedule. Except as set forth in Section 4.02
of the Disclosure Schedule, all the outstanding shares of capital stock of each
such subsidiary are owned by Parent, by another wholly owned subsidiary of
Parent or by Parent and another wholly owned subsidiary of Parent as set forth
in Section 4.02(a) of the Disclosure Schedule, free and clear of all Liens, and
are duly authorized, validly issued, fully paid and nonassessable. Parent also
owns the partnership interests identified in Section 4.02(b) of the Disclosure
Schedule. Except as otherwise specified in Section 4.02(b) of the Disclosure
Schedule, Parent owns 100% of the partnership interests in said partnerships.
Except for the capital stock of the listed subsidiaries and the partnership
interests in the partnerships listed in Section 4.02(b), Parent does not own,
directly or indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture or other entity.
SECTION 4.03. Capitalization. The authorized capital stock of Parent
consists of 30,000,000 Parent Shares and 1,000,000 shares of preferred stock,
par value $.01 per share ("Parent Preferred Stock"). At the close of business on
October 4, 1999, (i) 11,670,152 Parent Shares were outstanding (and an
additional 692,089 Parent Shares were in the treasury), (ii) 1,714,500 Parent
Shares were reserved for issuance upon exercise of outstanding options
exercisable to purchase Parent Shares ("Parent Stock Options") and (iii) 460,400
shares of Parent Preferred Stock were issued and outstanding. Except as set
forth above or in Section 4.03 of the Disclosure Schedule, and except for shares
issued upon the exercise of Parent Stock Options since October 4, 1999, as of
the date of this Agreement, no shares of capital stock or other voting
securities of the Parent were issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of the Parent are, and all shares which may
be issued will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set forth in
Section 4.03 of the Disclosure Schedule, there are no bonds, debentures, notes
or other indebtedness of the Parent having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which stockholders of the Parent may vote. Except as set forth above or in
Section 4.03 of the Disclosure Schedule, there are not any securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Parent or any of its Subsidiaries is a party or by
which any of them is bound obligating Parent or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of Parent or any of its
subsidiaries or obligating Parent or any of its subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are not any outstanding
contractual obligations (i) of the Parent to repurchase, redeem or otherwise
acquire any shares of capital stock of Parent or (ii) Parent to vote or to
dispose of any shares of the capital stock of any of its subsidiaries. Except as
set forth in Section 4.03 of the Disclosure Schedule, there are no restrictions
on the right of Parent to vote or dispose of any shares of the capital stock of
its subsidiaries.
The authorized capital stock of Sub consists of 1,000 shares of common
stock, par value $0.01 ("Sub Common Stock"), 1,000 of which are issued and
outstanding as of the date hereof. Parent owns all
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issued and outstanding shares of Sub Common Stock. All of the issued and
outstanding shares of Sub Common Stock are validly issued, fully paid and
non-assessable and not subject to preemptive rights.
SECTION 4.04. Authority. Parent and Sub have requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of the terms of this Agreement and the issuance of shares
pursuant to this Agreement by the holders of a majority of the Parent Shares
voting at the Parent Stockholders' Meeting (the "Parent Stockholder Approval")).
The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent and Sub and no other corporate
proceedings on the part of Parent and Sub are necessary to authorize this
Agreement or to consummate such transactions (in each case, other than, with
respect to the Merger, Parent Stockholder Approval). This Agreement has been
duly executed and delivered by Parent and Sub, as the case may be, and, assuming
this Agreement constitutes a valid and binding obligation of the Company,
constitutes a valid and binding obligation of each of Parent and Sub enforceable
against them in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally.
SECTION 4.05. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required by or under,
as applicable, and other applicable requirements of, the Exchange Act, and the
rules and regulations promulgated thereunder (including filing with the SEC of a
proxy statement relating to the approval by Parent's stockholders of the
issuance of more than 20% of Parent's outstanding shares pursuant to this
Agreement), the STB and the Texas Corporation Act, and except as set forth in
Section 4.05 of the Disclosure Schedule, neither the execution, delivery or
performance of this Agreement by Parent and Sub nor the consummation by Parent
and Sub of the transactions contemplated hereby will (i) conflict with or result
in any breach of any provision of the respective certificate of incorporation or
bylaws of Parent and Sub, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity (except where the
failure to obtain such permits, authorizations, consents or approvals or to make
such filings could not be reasonably expected to have a material adverse effect
on the Parent or prevent or materially delay the consummation of the Merger),
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license, lease,
contract, agreement or other instrument or obligation to which Parent or Sub is
a party or by which either of them or any of their properties or assets may be
bound or (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent or Sub or any of their properties or assets,
except in the case of clause (iii) and (iv) for violations, breaches or defaults
that could not be reasonably expected to have a material adverse effect on the
Parent or prevent or materially delay the consummation of the Merger.
SECTION 4.06. SEC Reports and Financial Statements. Parent and its
Subsidiaries have filed with the SEC true and complete copies of, all forms,
reports, exhibits, schedules, statements and other documents (other than
preliminary materials) required to be filed by it under the Exchange Act or the
Securities Act from and after December 31, 1996 (such forms, reports, exhibits,
schedules, statements and other documents, including any financial statements or
schedules included therein, are referred to as the "Parent SEC Documents"). The
Parent SEC Documents, at the time filed, (a) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (b) complied
in all material respects with the applicable requirements of the Exchange Act
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and the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. Except to the extent revised or superseded by
a subsequently filed Parent SEC Document, the Parent SEC Documents do not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of Parent included in the
Parent SEC Documents as well as the Parent's financial statements as of and for
the three months and six months ended June 30, 1999 heretofore delivered to the
Company, as of the dates thereof comply as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X
promulgated by the SEC) and fairly present (subject, in the case of the
unaudited statements, to normal, recurring audit adjustments, none of which will
be material and except for the absence of notes thereto) the consolidated
financial position of Parent and its subsidiaries as at the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended.
SECTION 4.07. Absence of Certain Changes or Events. Except as disclosed in
the Parent SEC Documents or as set forth in Section 4.07 of the Disclosure
Schedule, since June 30, 1999, Parent and its subsidiaries have conducted their
respective businesses only in the ordinary course of business consistent with
past practice through the date hereof, and there has not been any material
adverse change (as defined in Section 9.03) with respect to Parent. Except as
disclosed in the Parent SEC Documents or as set forth in Section 4.07 of the
Disclosure Schedule, since June 30, 1999, there has not been (i) any
declaration, setting aside or payment of any dividend or other distribution with
respect to Parent's capital stock or any redemption, purchase or other
acquisition of any of its capital stock, (ii) any split, combination or
reclassification of any of Parent's capital stock or, through the date hereof,
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock other
than the issuance of Parent Shares upon the exercise of Parent Stock Options,
(iii) any material change in accounting methods, principles or practices by
Parent, (iv) any damage, destruction or loss, whether or not covered by
insurance, that has or reasonably could be expected to have a material adverse
effect on Parent, (v) any amendments or changes in the Certificate of
Incorporation or Bylaws of Parent, or (vi) any material revaluation by Parent of
any of its assets, including writing off of notes or accounts receivable other
than in the ordinary course of business.
SECTION 4.08. No Undisclosed Liabilities. Except as and to the extent set
forth in the Parent SEC Documents or in Section 4.08 of the Disclosure Schedule
or in any other Section of the Disclosure Schedule, as of June 30, 1999, neither
Parent nor any of its subsidiaries had any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would be required
by GAAP to be reflected on an interim consolidated balance sheet of Parent and
its subsidiaries. Since June 30, 1999, except as and to the extent set forth in
the Parent SEC Documents or in Section 4.08 or any other Section of the
Disclosure Schedule and except for liabilities or obligations incurred in the
ordinary course of business consistent with past practice, neither Parent nor
any of its subsidiaries has incurred any liabilities of any nature, whether or
not accrued, contingent or otherwise, that could not be reasonably expected to
have a material adverse effect on Parent, or would be required by GAAP to be
reflected on a consolidated balance sheet of Parent and its subsidiaries. The
Parent and its subsidiaries had no more than an aggregate of $290 million of
indebtedness for borrowed money (excluding trade payables) outstanding on a
consolidated basis as of September 30, 1999.
SECTION 4.09. Information Supplied. None of the information supplied or to
be supplied by Parent or Sub in writing specifically for inclusion in the
Registration Statement and/or the Proxy
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Statement, will in the case of the Registration Statement, at the time it
becomes effective and the Effective Time, or, in the case of the Proxy Statement
and any amendments or supplements thereto, at the time of the mailing of the
Proxy Statement and any amendments or supplements thereto, and at the time of
each of the Special Meeting and the Parent Stockholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Registration Statement will comply as to form in all material respects with the
provisions of the Securities Act, and the rules and regulations promulgated
thereunder. The Proxy Statement, insofar as it pertains to Parent and Sub, will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder.
SECTION 4.10. Benefit Plans.
(a) Except as set forth in Section 4.10 of the Disclosure Schedule,
each "employee pension benefit plan" (as defined in Section 3(2) of ERISA) (a
"Parent Pension Plan"), "employee welfare benefit plan" (as defined in Section
3(1) of ERISA) (a "Parent Welfare Plan") and each other plan, arrangement or
policy (written or oral) relating to stock options, stock purchases,
compensation, deferred compensation, bonuses, severance, fringe benefits or
other employee benefits, in each case maintained or contributed to, or required
to be maintained or contributed to, by Parent or its subsidiaries for the
benefit of any present or former employee, officer or director (each of the
foregoing, a "Parent Benefit Plan") has been administered in all material
respects in accordance with its terms. Parent and its subsidiaries and all the
Parent Benefit Plans are in compliance in all material respects with the
applicable provisions of ERISA, the Code, all other applicable laws and all
applicable collective bargaining agreements. Section 4.10 of the Disclosure
Schedule sets forth a list of all material Parent Benefit Plans. Except as set
forth in Section 4.10(a) of the Disclosure Schedule, none of the Parent Welfare
Plans promises or provides retiree medical or other retiree welfare benefits to
any person. To the Knowledge of Parent (as defined in Section 9.03), no
fiduciary of a Parent Benefit Plan has breached any of the responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA, which breach would
reasonably be expected to result in any material liability to Parent. Each
Parent Benefit Plan intended to qualify under section 401(a) of the Code and
each trust intended to qualify under section 501(a) of the Code is the subject
of a favorable determination letter from the IRS, and to the Knowledge of Parent
nothing has occurred which would reasonably be expected to impair such
determination. All contributions required to be made with respect to any Parent
Benefit Plan pursuant to the terms of the Parent Benefit Plan or any collective
bargaining agreement, have been made on or before their due dates.
(b) None of the Parent Pension Plans is subject to Title IV of ERISA
and none of Parent or any other person or entity that, together with Parent, is
or was treated as a single employer under Section 414 of the Code or pursuant to
Title IV of ERISA (each, including Parent, a "Parent Commonly Controlled
Entity") has any liability under Title IV of ERISA (whether actual or
contingent) with respect to a Parent Pension Plan, or to any other employee
pension benefit plan that is or was maintained, contributed to or required to be
contributed to by a Parent Commonly Controlled Entity (other than for
contributions not yet due) or to the Pension Benefit Guaranty Corporation (other
than for payment of premiums not yet due), which liability has not been fully
paid.
(c) No Parent Commonly Controlled Entity is required to contribute to
any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the meaning of Section 4201
of ERISA) that has not been fully paid or as to which a commonly controlled
entity would have liability pursuant to Section 4212(c) of ERISA.
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(d) Each Parent Benefit Plan that is a Parent Welfare Plan may be
amended or terminated at any time after the Effective Time without material
liability to Parent or its subsidiaries, except as set forth in the plan, as
provided by law or as disclosed in Section 4.10(d) of the Disclosure Schedule.
(e) With respect to each Parent Benefit Plan, the Parent has
delivered, or not less than 30 days prior to the Effective Time shall deliver,
to Company (i) current, accurate and complete copies of each such Parent Benefit
Plan (including all trust agreements, insurance or annuity contracts,
descriptions, agreements and any other material documents or instruments
relating thereto); (ii) copies of the most recent Internal Revenue Service
determination letter (including copies of any outstanding requests for
determination letters) with respect to each such Parent Benefit Plan which is
intended to qualify under Section 401(a) of the Code; and (iii) copies of the
most recent Form 5500 annual report and accompanying schedules, the most recent
actuarial report (to the extent applicable), and the most recent summary plan
descriptions.
(f) With respect to the Parent Benefit Plans, individually and in the
aggregate, no event has occurred, and to the Knowledge of the Parent, there
exists no condition or set of circumstances (including without limitation the
transactions contemplated by this Agreement) in connection with which the Parent
could be subject to any material liability (except liability for benefits claims
and funding obligations payable in the ordinary course) under ERISA, the Code or
any other applicable law.
SECTION 4.11. Litigation. Except as disclosed in the Parent SEC Documents
or Section 4.11 of the Disclosure Schedule, as of the date hereof, there is no
suit, claim, action, proceeding or investigation pending before any Governmental
Entity or, to the Knowledge of Parent, threatened against Parent or any of its
subsidiaries that, individually or in the aggregate, would reasonably be
expected to have a material adverse effect on Parent or prevent or materially
delay the consummation of the Merger. Except as disclosed in the Parent SEC
Documents or Section 4.11 of the Disclosure Schedule, neither Parent nor any of
its subsidiaries is subject to any outstanding order, writ, injunction or decree
that, individually or in the aggregate, would reasonably be expected to have a
material adverse effect on Parent or prevent or materially delay the
consummation of the Merger.
SECTION 4.12. Permits; Compliance with Law. Parent and its subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Parent Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals that could not reasonably
be expected to have a material adverse effect on Parent. Parent and its
subsidiaries are in compliance with the terms of the Parent Permits, except
where the failure so to comply could not reasonably be expected to have a
material adverse effect on Parent. Except as disclosed in the Parent SEC
Documents or in Section 4.12 of the Disclosure Schedule, the businesses of
Parent and its subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for violations that
could not reasonably be expected to have a material adverse effect on Parent or
prevent or materially delay the consummation of the Merger. As of the date of
this Agreement, no investigation or review by any Governmental Entity with
respect to Parent or any of its subsidiaries is pending or, to the Knowledge of
Parent, threatened, nor has any Governmental Entity indicated an intention to
conduct any such investigation or review, other than, in each case, those the
outcome of which could not be reasonably expected to have a material adverse
effect on Parent or prevent or materially delay the consummation of the Merger.
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SECTION 4.13. Tax Matters.
(a) Parent and each of its subsidiaries has filed all Federal income
tax returns and all other material tax returns and reports required to be filed
by it. All such returns are complete and correct in all material respects. Each
of Parent and each of its subsidiaries has paid (or Parent has paid on the
subsidiaries' behalf) all taxes required to be paid by it (without regard to
whether a tax return is required or to the amount shown on any tax return),
except taxes for which an adequate reserve has been established on the most
recent financial statements contained in the Parent SEC Documents (the "Parent
Most Recent Financial Statements")). The Parent Most Recent Financial Statements
reflect an adequate reserve for all taxes payable by Parent and its subsidiaries
for all taxable periods and portions thereof through the date of such financial
statements.
(b) Except as set forth in Section 4.13 of the Disclosure Schedule, no
material tax return of Parent or any of its subsidiaries is under audit or
examination by any taxing authority, and no written or unwritten notice of such
an audit or examination has been received by Parent or any of its subsidiaries.
Each material deficiency resulting from any audit or examination relating to
taxes by any taxing authority has been paid, except for deficiencies being
contested in good faith. No material issues relating to taxes were raised in
writing by the relevant taxing authority during any presently pending audit or
examination, and no material issues relating to taxes were raised in writing by
the relevant taxing authority in any completed audit or examination that can
reasonably be expected to recur in a later taxable period. The Federal income
tax returns of Parent and each of its subsidiaries consolidated in such returns
have not been examined by and settled with the Internal Revenue Service.
(c) There is no agreement or other document extending, or having the
effect of extending, the period of assessment or collection of any taxes and no
power of attorney with respect to any taxes has been executed or filed with any
taxing authority.
(d) No material liens for taxes exist with respect to any assets or
properties of Parent or any of its subsidiaries, except for liens for taxes not
yet due or being contested in good faith.
(e) None of Parent or any of its subsidiaries is liable for taxes of
any other person (other than taxes of Parent and its subsidiaries) or is a party
to or is bound by any tax sharing agreement.
(f) None of Parent or any of its subsidiaries shall be required to
include in a taxable period ending after the Effective Time for a material
amount of taxable income attributable to income that accrued in a prior taxable
period but was not recognized in any prior taxable period as a result of the
installment method of accounting, the completed contract method of accounting,
the long-term contract method of accounting or Section 481 of the Code or
comparable provisions of state, local or foreign tax law.
(g) As used in this Agreement, "taxes" shall include all Federal,
state, local and foreign income, property, sales, excise, withholding and other
taxes, tariffs or governmental charges of any nature whatsoever, together with
all interest, penalties and additions imposed with respect to such amounts.
(h) Neither Parent nor, to the Knowledge of Parent, any of its
subsidiaries has filed a consent pursuant to or agreed to the application of
Section 341(f) of the Code.
(i) Neither Parent nor any of its subsidiaries is a party to any
agreement, contract, arrangement or plan that would result (taking into account
the transactions contemplated by this
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Agreement), separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(j) All material elections with respect to taxes affecting Parent and
its subsidiaries are disclosed or attached to Parent's tax returns, to the
extent so required.
(k) There are no private letter rulings in respect of any material tax
pending between Parent or its subsidiaries and any taxing authority.
SECTION 4.14. Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
SECTION 4.15. Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or Sub
other than Credit Suisse First Boston and Donaldson, Lufkin & Jenrette, Inc.,
whose fees shall be paid by Parent.
SECTION 4.16. Intellectual Property.
(a) Except to the extent that the inaccuracy of any of the following
(or the circumstances giving rise to such inaccuracy) could not reasonably be
expected to have a material adverse effect on Parent:
(1) Parent and each of its subsidiaries owns clear of any liens
or encumbrances of any kind, or is licensed or otherwise has the legally
enforceable right to use, all Intellectual Property used in or necessary for the
conduct of its business as currently conducted;
(2) no claims are pending or, to the Knowledge of Parent,
threatened that Parent or any of its subsidiaries is infringing on or otherwise
violating the rights of any person with regard to any Intellectual Property used
by, owned by and/or licensed to Parent or any of its subsidiaries and, to the
Knowledge of Parent, there are no valid grounds for any such claims;
(3) to the Knowledge of Parent, no person is infringing on or
otherwise violating any right of Parent or any of its subsidiaries with respect
to any Intellectual Property owned by and/or licensed to Parent or any of its
subsidiaries.
(4) to the Knowledge of Parent, there are no valid grounds for
any claim challenging the ownership or validity of any Intellectual Property
owned by Parent or any of its subsidiaries or challenging Parent's or any of its
subsidiaries' license or legally enforceable right to use any Intellectual
Property licensed by it; and
(5) to the Knowledge of Parent, all patents, registered
trademarks, service marks and copyrights held by Parent and each of its
subsidiaries are valid and subsisting.
SECTION 4.17. Vote Required. The affirmative vote of the holders of a
majority of the Parent Shares voting at the Parent stockholders meeting (so long
as a quorum is present at such stockholders
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meeting) is the only vote of the holders of any class of capital stock necessary
to approve this Agreement and the issuance of Parent Shares pursuant to the
Merger.
SECTION 4.18. Labor Matters. Except as set forth in Section 4.18 of the
Disclosure Schedule or the Parent SEC Documents, as of the date hereof (i) there
are no controversies pending or, to the Knowledge of Parent, threatened, between
Parent or any of its subsidiaries and any of their respective employees, which
controversies have had, or would reasonably be expected to have, a material
adverse effect on Parent; (ii) neither Parent nor any of its subsidiaries is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by Parent or its subsidiaries, nor does Parent or
any of its subsidiaries know of any activities or proceedings of any labor union
to organize any such employees; and (iii) to the Knowledge of Parent there are
no strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any employees of Parent or any of its subsidiaries which could
reasonably be expected to have a material adverse effect on Parent.
SECTION 4.19. Title to Property. Except as set forth in the Parent SEC
Documents or Section 4.19 of the Disclosure Schedule, Parent and each of its
subsidiaries have good title to all of their owned properties and assets, free
and clear of all liens, charges and encumbrances, except liens for taxes not yet
due and payable and such liens or other imperfections of title, if any, as do
not materially detract from the value of or interfere with the present use of
the property affected thereby in accordance with industry standards or which
could not reasonably be expected to have a material adverse effect on Parent;
and, all leases pursuant to which Parent or any of its subsidiaries lease from
others material amounts of real or personal property are in good standing, valid
and effective in accordance with their respective terms, and there is not, to
the Knowledge of Parent, under any of such leases, any existing default or event
of default by Parent or the Subsidiaries to the Knowledge of Parent any other
party thereto (or event which with notice or lapse of time, or both, would
constitute a default), except where the lack of such good standing, validity and
effectiveness or the existence of such default or event of default could not
reasonably be expected to have a material adverse effect on Parent. Except as
set forth in Section 4.19 of the Disclosure Schedule, since October 1, 1999,
there has been no material adverse change in any of such material tangible
personal property, whether owned or leased. None of Parent or its subsidiaries
has granted any option or other right to acquire any portion of its material
owned properties or assets, except as set forth in Section 4.19(c) of the
Disclosure Schedule.
SECTION 4.20. Environmental Matters. Except as set forth in Section 4.20 of
the Disclosure Schedule or the Parent SEC Documents, and except where such has
not had and could not reasonably be expected to have a material adverse effect,
on Parent or any of its Subsidiaries, to the Knowledge of Parent, Parent and
each of its subsidiaries (i) have obtained all applicable permits, licenses and
other authorizations, including Parent Permits, which are required to be
obtained under all applicable Environmental Laws, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic material or wastes, including petroleum into
ambient air, surface water, ground water or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes, including petroleum, by Parent or any of its subsidiaries
(or their respective agents); (ii) are in compliance with all terms and
conditions of such required permits, licenses and authorizations, and also are
in compliance with all other applicable limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in applicable Environmental Laws; (iii) as of the date hereof, is not
aware of nor has received notice of any uncured past or present violations of
Environmental Laws or any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued compliance with Environmental Laws or which could give rise to any
material capital expenditure or common law or statutory liability, or
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otherwise form the basis of any claim, action, suit or proceeding against Parent
or any of its subsidiaries under any Environmental Law or otherwise based on or
resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, handling, emission, discharge or release into the
environment of any pollutant, contaminant, or hazardous or toxic material or
waste, including petroleum; (iv) have taken all actions necessary under
applicable Environmental Laws to register any products or materials required to
be registered by Parent or any of its subsidiaries (or any of their respective
agents) thereunder; and (v) none of Parent or any of its subsidiaries has
entered into any agreement to undertake or pay for any response action of any
kind or nature or to pay any damages (including punitive damages), costs, fines
or penalties associated with any release or threatened release of any pollutant,
contaminant or hazardous or toxic material or waste, including petroleum, at any
location.
SECTION 4.21. Interested Party Transactions. Except as set forth in Section
4.21 of the Disclosure Schedule or the Parent SEC Documents, since January 1,
1999, no event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the SEC, except for contracts with terms no less favorable to
Parent than would reasonably be expected in a similar transaction with an
unaffiliated third party.
SECTION 4.22. Absence of Certain Payments. None of Parent, any of its
subsidiaries or any of their respective affiliates, officers, directors,
employees or agent or other people acting on behalf of any of them have (i)
engaged in any activity prohibited by the United States Foreign Corrupt
Practices Act of 1977 or any other similar law, regulation, decree, directive or
order of any other country and (ii) without limiting the generality of the
preceding clause (i), used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others.
None of Parent, any of its subsidiaries or any of their respective affiliates,
directors, officers, employees or agents of other persons acting on behalf of
any of them, has accepted or received any unlawful contributions, payments,
gifts or expenditures.
SECTION 4.23. Insurance. All material fire and casualty, general liability,
business interruption, product liability and sprinkler and water damage
insurance policies maintained by Parent or any of its subsidiaries are with
reputable insurance carriers, provide coverage of all normal risks incident to
the business of Parent and its subsidiaries and their respective properties and
assets and are in character and amount at least equivalent to that carried by
persons engaged in similar businesses and subject to the same or similar perils
or hazards, except as could not reasonably be expected to have a material
adverse effect on Parent.
SECTION 4.24. Fairness Opinion. The Board of Directors of Parent has
received an opinion of Credit Suisse First Boston, financial advisor to Parent,
dated the date hereof to the effect that the Merger Consideration is fair, from
a financial point of view, to the Parent.
SECTION 4.25. Full Disclosure. (i) No written statement contained in any
certificate or schedule furnished by Parent or Sub to the Company in, or
pursuant to the provisions of, this Agreement, and (ii) none of the monthly
consolidated financial statements for July and August 1999 heretofore furnished
by Parent to the Company contains or shall contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in the
light of the circumstances under which it was made, in order to make the
statements herein or therein not misleading.
SECTION 4.26. Financial Capability. Parent has delivered to the Company a
complete, correct and duly executed copy of a commitment letter addressed to
Parent from Donaldson, Lufkin & Jenrette for the aggregate amount of up to $530
million in financing, together with a complete and correct
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copy of any other related written arrangement or agreement (the "Financing
Commitment"). The Financing Commitment is sufficient to consummate the Merger in
accordance with the terms hereof. Parent knows of no circumstances or condition
that will prevent the availability at the closing of the Merger (pursuant to
Section 1.02) of the requisite financing to consummate the transactions
contemplated by this Agreement on the terms set forth herein, as provided in the
Financing Commitment.
SECTION 4.27. No Knowledge of Inaccurate Representation. The Parent has no
Knowledge as of the date hereof that any representation or warranty of the
Company in this Agreement is not true and correct.
ARTICLE V
Covenants
---------
SECTION 5.01. Covenants of the Company. The Company agrees as to itself and
the Subsidiaries that (except as expressly contemplated or permitted by this
Agreement, as set forth in the Disclosure Schedule or to the extent that Parent
shall otherwise give prior written consent):
(a) Ordinary Course. The Company shall, and shall cause the
Subsidiaries to, carry on their respective businesses in all material respects
according to their usual, regular and ordinary course and the Company shall, and
shall cause the Subsidiaries to, use all reasonable efforts to preserve intact
their present business organizations, keep available the services of their
present officers and employees and maintain satisfactory relationships with
customers, suppliers and others having material business relationships with the
Company and the Subsidiaries.
(b) Dividends; Changes in Stock. The Company shall not, and shall not
permit any of the Subsidiaries to, (i) declare or pay any dividends on or make
other distributions in respect of any of its capital stock, except for dividends
by a direct or indirect wholly owned subsidiary of the Company to its parent,
(ii) split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii) repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or the Subsidiaries
or any other securities thereof other than the repurchase of director's
qualifying shares upon the resignation or removal of the director.
(c) Issuance of Securities. The Company shall not, and shall not
permit any of the Subsidiaries to, issue, deliver, sell, pledge or encumber, or
authorize or propose the issuance, delivery, sale, pledge or encumbrance of, any
shares of its capital stock of any class or any securities convertible into, or
any rights, warrants, calls, subscriptions or options to acquire, any such
shares or convertible securities, or any other ownership interest (including
stock appreciation rights or phantom stock) other than (i) the issuance of
shares of Company Common Stock upon the exercise of Company Stock Options and
convertible securities of the Company outstanding on the date of this Agreement
and in accordance with the terms of such Company Stock Options and convertible
securities, (ii) issuances by a Subsidiary of the Company of its capital stock
to the Company or (iii) the issuance of director's qualifying shares upon the
election or appointment of the director.
(d) Governing Documents. The Company shall not, and shall not permit
any of the Subsidiaries to, amend or propose to amend its certificate of
incorporation or bylaws (or similar organizational documents).
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(e) No Acquisitions. The Company shall not, and shall not permit any
of the Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or any substantial assets of
(other than inventory and equipment in the ordinary course consistent with past
practice, to the extent not otherwise prohibited by this Agreement), or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof, other than the
acquisition set forth in Section 5.01(e) of the Disclosure Schedule or any other
acquisitions for a purchase price not to exceed $2.0 million. For purposes of
this section, a substantial asset is an asset that has a purchase price of more
than $200,000.
(f) No Dispositions. Other than dispositions in the ordinary course of
business consistent with past practice, the Company shall not, and shall not
permit any of the Subsidiaries to, sell, lease, license, encumber or otherwise
dispose of, or agree to sell, lease, license, encumber or otherwise dispose of,
any of its assets. Notwithstanding the foregoing, the Company may execute
definitive purchase and sale agreements for the sale by the Company of the
assets listed in Section 2.01(h) of the Disclosure Schedule.
(g) Indebtedness. The Company shall not, and shall not permit any of
the Subsidiaries to, (i) incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or warrants or rights
to acquire any debt securities of the Company or any of the Subsidiaries,
guarantee any debt securities of others, enter into any "keep-well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
except for working capital borrowings incurred in the ordinary course of
business consistent with past practice under the Company's line of credit
described in Section 5.01(g) of the Disclosure Schedule, indebtedness not to
exceed an aggregate of $5.0 million or hedging transactions described in Section
5.01(g) of the Disclosure Schedule, or (ii) make any loans, advances or capital
contributions to, or investments in, any other person, other than, with respect
to both clauses (i) and (ii) above, (A) to the Company or any direct or indirect
wholly owned subsidiary of the Company, or (B) any advances to employees in
accordance with past practice.
(h) Advice of Changes; Filings. The Company shall confer with Parent
on a regular and frequent basis as reasonably requested by Parent, report on
operational matters and promptly advise Parent of any change or event having, or
which, insofar as can reasonably be foreseen, is likely to have, a material
adverse effect on the Company. The Company shall promptly provide to Parent (or
its counsel) copies of all filings made by the Company with any Governmental
Entity in connection with this Agreement and the transactions contemplated
hereby.
(i) Accounting Changes. The Company shall not make any material
change, other than in the ordinary course of business, consistent with past
practice, or as required by the SEC or law, with respect to any accounting
methods, principles or practices used by the Company (except insofar as may be
required by a change in GAAP, of which the Company shall promptly notify
Parent).
(j) Discharge of Liabilities. Except for fees and expenses related to
the transactions contemplated herein, the Company shall not, and shall not
permit any of the Subsidiaries to, pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) in excess of an aggregate of $1 million, other than the
payment, discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their terms, of (i)
liabilities recognized or disclosed in the Most Recent Financial Statements, or
(ii) liabilities incurred since the date of such financial statements in the
ordinary course of business consistent with past practice. The Company shall
not, and shall not permit any of the Subsidiaries to, waive the benefits of, or
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agree to modify in any manner, any confidentiality, standstill or similar
agreement to which the Company or any of the Subsidiaries is a party.
(k) Compensation of Company Employees. Except as provided in Section
3.07 of the Disclosure Schedule or as otherwise contemplated by this Agreement,
the Company and the Subsidiaries will not, except as may be required by law, (i)
enter into, adopt, amend or terminate any Benefit Plan or other employee benefit
plan or any agreement, arrangement, plan or policy for the benefit of any
director, executive officer or current or former key employee, (ii) increase in
any manner the compensation or fringe benefits of, or pay any bonus to, any
director, executive officer or key employee, except as required by any Benefit
Plan or agreement with such employees existing on the date of this Agreement and
except for increases in the compensation of any executive officer or key
employee of not more than an aggregate of 15% of such officer's or employee's
compensation on the date hereof, (iii) enter into, adopt, amend or terminate any
Benefit Plan or other benefit plan or agreement, arrangement, plan or policy for
the benefit of any employees who are not directors, executive officers or
current or former key employees of the Company, other than increases in the
compensation of employees made in the ordinary course of business consistent
with past practice, or (iv) pay any benefit not required by any plan or
arrangement as in effect as of the date hereof (including the granting of,
acceleration of exercisability of or vesting of stock options, stock
appreciation rights or restricted stock).
(l) Material Contracts. Neither the Company nor any of the
Subsidiaries shall (i) modify, amend or terminate any material contract or
agreement to which the Company or such Subsidiary is a party, or (ii) waive,
release or assign any material rights or claims of the Company.
(m) No Dissolution, Etc. The Company shall not authorize, recommend,
propose or announce an intention to adopt a plan of complete or partial
liquidation of the Company or any of the material Subsidiaries.
(n) Tax Election. Except as set forth in Section 3.14 of the
Disclosure Schedule, the Company shall not make any material tax election or
settle or compromise any material income tax liability.
(o) General. The Company shall not, and shall not permit any of the
Subsidiaries to, authorize any of, or commit or agree to take any of, the
foregoing actions described in this Section 5.01.
SECTION 5.02. No Solicitation.
(a) The Company and its officers, directors, employees,
representatives and agents shall immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to an Acquisition
Proposal (as hereinafter defined). From and after the date hereof until the
termination of this Agreement, the Company shall not, nor shall it permit any of
the Subsidiaries to, authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it or any of the Subsidiaries to, directly or
indirectly, (i) solicit, initiate or knowingly encourage (including by way of
furnishing non-public information or assistance), or knowingly take any other
action to facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal,
or (ii) participate in any discussions or negotiations regarding any Acquisition
Proposal; provided, however, that if, at any time the Board of Directors of the
Company determines in good faith, based upon the opinion of independent legal
counsel (who may be the Company's regularly engaged independent counsel), that
it is necessary to act in a manner which is consistent with its fiduciary duties
to the Company's stockholders under applicable law, the
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Company may, in response to an unsolicited Superior Proposal (as hereinafter
defined), and subject to compliance with Section 5.02(c), (x) furnish
information with respect to the Company to the person making such unsolicited
Superior Proposal pursuant to a confidentiality agreement in substantially the
same form as the confidentiality agreement executed by the Company and Parent,
and (y) participate in discussions or negotiations regarding such Superior
Proposal. For purposes of this Agreement, "Acquisition Proposal" means any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 20% or more of the assets of the Company and the
Subsidiaries or 20% or more of any class of equity securities of the Company or
any of the Subsidiaries, any tender offer or exchange offer that if consummated
would result in any person beneficially owning 20% or more of any class of
equity securities of the Company or any of the Subsidiaries, any merger,
consolidation, business combination, sale of all or substantially all the
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of the Subsidiaries (other than the transactions
between the parties hereto contemplated by this Agreement). For purposes of this
Agreement, a "Superior Proposal" means any bona fide proposal made by a third
party to acquire, directly or indirectly, for consideration consisting of cash
and/or securities, more than 20% of the shares of Company Common Stock then
outstanding or all or substantially all the assets of the Company and otherwise
on terms which the Board of Directors of the Company determines in its good
faith judgment (based upon the written advice of Chase) to be more favorable to
the Company's stockholders than the terms of the Merger set forth in this
Agreement, provided that Chase advises the Company that it reasonably believes
that such third party has the ability to finance the transaction.
(b) Except as set forth in this Section 5.02, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation of this Agreement or the Merger by such Board of Directors or
such committee, (ii) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal, or (iii) cause the Company to enter into any agreement
with respect to any Acquisition Proposal. Notwithstanding the foregoing, in the
event that the Board of Directors of the Company determines in good faith, based
upon the written advice of its financial advisors and advice of independent
legal counsel (who may be the Company's regularly engaged independent counsel),
that it is necessary to do so in order for the Board of Directors to act in a
manner which is consistent with its fiduciary duties to the Company's
stockholders under applicable law, the Board of Directors of the Company may
(subject to the other provisions of Section 5.02) withdraw or modify its
approval or recommendation of this Agreement and the Merger, approve or
recommend a Superior Proposal (as defined below), cause the Company to enter
into an agreement with respect to a Superior Proposal or terminate this
Agreement, but in each case only at a time that is after the third business day
following Parent's receipt of written notice (a "Notice of Superior Proposal")
advising Parent that the Board of Directors of the Company has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal. In addition,
if the Company proposes to enter into a binding agreement (other than a
confidentiality agreement in accordance with Section 5.02(a)) with respect to
any Acquisition Proposal, it shall concurrently with entering into such binding
agreement pay, or cause to be paid, to Parent the Termination Fee (as such term
is defined in Section 6.06(b)). The Board of Directors of the Company may
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent, the approval or recommendation of this Agreement or the Merger by such
Board of Directors during the occurrence and continuation of any change,
condition, event or development that would permit the Company not to consummate
the Merger as contemplated by Section 7.03(a), provided that at such time as
such change, condition, event or development no longer exists or would no longer
permit the Company not to consummate the Merger as contemplated by Section
7.03(a), the Board of Directors of the Company shall again recommend that
holders of Company Common Stock approve and adopt this Agreement and approve the
Merger.
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(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.02, the Company shall promptly advise
Parent orally and in writing of any request for information or of any
Acquisition Proposal, the material terms and conditions of such request or
Acquisition Proposal and the identity of the person making such request or
Acquisition Proposal.
(d) Nothing contained in this Section 5.02 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the good faith judgment of the Board of Directors
of the Company, after consultation with independent legal counsel (who may be
the Company's regularly engaged independent counsel), failure so to disclose
would be inconsistent with its fiduciary duties to the Company's stockholders
under applicable law; provided, however, neither the Company nor its Board of
Directors nor any committee thereof shall, except as permitted by Section
5.02(b), withdraw or modify, or propose to withdraw or modify, its position with
respect to this Agreement or the Merger or approve or recommend, or propose to
approve or recommend, an Acquisition Proposal.
(e) The Company acknowledges and agrees that money damages may not be
an adequate remedy in the event of any breach of the provisions of this Section
5.02 and that the Parent and Sub may in their sole discretion apply to any court
of law or equity of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce or prevent any violations of the
provisions of this Section 5.02.
SECTION 5.03. Company Other Actions. Except as contemplated by Section 5.02
or the other provisions of this Agreement, the Company shall not, and shall not
permit any of the Subsidiaries to, take any action that would reasonably be
expected to result in any of the conditions to the Merger set forth in Article
VII hereof not being satisfied in all material respects.
SECTION 5.04. Covenants of Parent. Parent agrees as to itself and its
subsidiaries that (except as expressly contemplated or permitted by this
Agreement, as set forth in the Disclosure Schedule or to the extent that the
Company shall otherwise give prior written consent:
(a) Advice of Changes; Filings. Parent shall promptly advise the
Company of any change or event having, or which, insofar as can reasonably be
foreseen, is likely to have, a material adverse effect on Parent. Parent shall
promptly provide to the Company (or its counsel) copies of all filings made by
Parent with any Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
(b) No Dissolution, Etc. Parent shall not authorize, recommend,
propose or announce an intention to adopt a plan of complete or partial
liquidation of Parent or any of its material subsidiaries.
SECTION 5.05. Parent Other Actions. Except as contemplated by this
Agreement, Parent shall not, and shall not permit any of its subsidiaries to,
take any action that would reasonably be expected (a) to result in any of the
conditions to the Merger set forth in Article VII hereof not being satisfied in
all material respects or (b) to materially and adversely affect the Parent's or
the Company's ability to consummate the Merger (including, without limitation,
the availability of the Financing Commitment).
SECTION 5.06. Registration Rights. Parent shall take such actions as are
necessary to provide the registration rights set forth in Exhibit 5.06 hereto to
those persons who constitute Holders (as defined in Exhibit 5.06), and Parent
shall take such actions to register the Parent Shares issuable thereunder as
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provided therein. This Section 5.06 shall survive and be in full force and
effect until the Termination Date (as defined in Exhibit 5.06 hereto).
SECTION 5.07. Board Seats. Parent shall cause two (2) individuals
designated by the Company prior to the mailing of the definitive Proxy Statement
to be elected to its Board of Directors effective as of the Effective Time, to
serve until their respective successors shall be duly elected and qualified or
until their earlier resignation, removal or death, which designees shall be two
(2) of the individuals listed on Section 5.07 of the Disclosure Schedule.
ARTICLE VI
Additional Agreements
---------------------
SECTION 6.01. Registration Statement/Proxy Statement; Quotation on Nasdaq
National Market.
(a) As promptly as practicable after the execution of this Agreement,
the Company and Parent shall prepare and file with the SEC preliminary proxy
materials which shall constitute the preliminary Proxy Statement and a
preliminary prospectus with respect to the Parent Shares to be issued in
connection with the Merger. As promptly as practicable after comments are
received from the SEC with respect to the preliminary proxy materials and after
the furnishing by the Company and Parent of all information required to be
contained therein (including, without limitation, financial statements and
supporting schedules and certificates and reports of independent public
accountants), the Company and Parent shall file with the SEC the definitive
Proxy Statement and Parent shall file with the SEC the Registration Statement,
which Proxy Statement and Registration Statement shall each comply in all
material respects with the applicable requirements of the Exchange Act and
Securities Act, respectively, and the applicable rules and regulations of the
SEC thereunder. Parent and the Company shall use their reasonable efforts to
cause the Registration Statement to become effective as soon thereafter as
practicable.
(b) The Company and Parent shall cause the Proxy Statement to be
mailed to their respective stockholders and, if necessary, after the Proxy
Statement shall have been so mailed, promptly circulate amended, supplemental or
supplemented proxy material and, if required in connection therewith, resolicit
proxies.
(c) Each of Parent and Sub, on the one hand, and the Company, on the
other hand, warrants to the other that the information provided and to be
provided by Parent and Sub and the Company, respectively (or incorporated by
reference to filings made with the SEC by Parent and the Company, respectively),
for use in each of the Registration Statement, on the date the Registration
Statement becomes effective, and the Proxy Statement, on the date the Proxy
Statement is filed with the SEC and on the date it is first mailed to the
Company's stockholders and the date it is first mailed to Parent's stockholders,
shall not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of Parent and
Sub, on the one hand, and the Company, on the other, shall notify the other
parties promptly of the receipt of any comments by the SEC and of any request by
the SEC for amendments or supplements to the preliminary Proxy Statement, the
Proxy Statement or the Registration Statement or for additional information, and
shall supply one another with copies of all correspondence with the SEC with
respect to any of the foregoing. If at any time prior to the Special Meeting,
any event should occur relating to Parent or Sub (or any of their respective
affiliates, directors or officers) which should be described in an amendment or
supplement to the Proxy Statement or the
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Registration Statement, Parent shall promptly inform the Company. If at any time
prior to the Parent Stockholders' Meeting, any event should occur relating to
the Company, the Subsidiaries or any of their respective affiliates, directors
or officers which should be described in an amendment or supplement to the Proxy
Statement or the Registration Statement, the Company shall promptly inform
Parent. Whenever any event occurs which should be described in an amendment or
supplement to the Proxy Statement or the Registration Statement, Parent and the
Company shall, upon learning of such event, cooperate with each other promptly
to file and clear with the SEC and, if applicable, mail such amendment or
supplement to the stockholders of the Company and Parent.
(d) Parent shall use its best efforts to obtain approval for quotation
on the Nasdaq National Market, upon official notice of issuance, of the Parent
Shares to be issued pursuant to the Merger.
SECTION 6.02. Stockholder Approvals; Recommendations.
(a) The Company, acting through its Board of Directors, shall (i)
call, give notice of, convene and hold a special meeting of the holders of
Company Common Stock for the purpose of voting upon this Agreement and the
Merger (the "Special Meeting") and (ii) subject to Section 5.02(b), include in
the Proxy Statement the recommendation of its Board of Directors that holders of
Company Common Stock approve and adopt this Agreement and approve the Merger at
the Special Meeting. The Special Meeting will be held as promptly as practicable
after the Registration Statement is declared effective under the Securities Act.
The Company shall ensure that the Special Meeting is called, noticed, convened,
held and conducted, and that all proxies solicited, in connection with the
Special Meeting are solicited in compliance with all applicable laws,
regulations, orders, judgments and decrees. The Company's obligation to call,
give notice of, convene and hold the Special Meeting in accordance with this
Section 6.02(a) shall not be limited or otherwise affected by the disclosure,
announcement, commencement, submission or making of any Superior Proposal or
other Acquisition Proposal, or by any withdrawal or modification of the
recommendation of the Board of Directors of the Company with respect to the
Merger. The Company shall, at the direction of Parent, solicit from holders of
Company Shares entitled to vote at the Special Meeting proxies in favor of the
Company Stockholder Approval. The Company shall not be permitted to delay,
adjourn, postpone or reschedule the Special Meeting, or delay the vote of the
Company's stockholders on the Merger, without Parent's prior written consent
(which consent will not be unreasonably withheld or delayed if the need for the
delay, adjournment, postponement or rescheduling of the Special Meeting or the
delay in such vote is attributable solely to factors outside the Company's
control).
(b) Parent, acting through its Board of Directors, shall (i) call,
give notice of, convene and hold a special meeting of its stockholders for the
purpose of voting upon this Agreement and the issuance of Parent Shares pursuant
to the Merger (the "Parent Stockholders' Meeting"), and (ii) include in the
Proxy Statement the recommendation of its Board of Directors that its
stockholders vote in favor of the issuance of Parent Shares in the Merger at the
Parent Stockholders' Meeting. The Parent Stockholders' Meeting will be held as
promptly as practicable after (and, to the extent feasible, on the same day as)
the Special Meeting. Parent shall ensure that the Parent Stockholders' Meeting
is called, noticed, convened, held and conducted, and that all proxies solicited
in connection with the Parent Stockholders' Meeting are solicited, in compliance
with all applicable laws, regulations, orders, judgments and decrees.
(c) Notwithstanding anything to the contrary contained in this Section
6.02, the Company's Board of Directors shall be permitted to withdraw or modify
its recommendation in favor of the Merger only in accordance with the provisions
of Section 5.02(b) and upon payment of the Termination Fee in accordance with
the terms of this Agreement.
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SECTION 6.03. Access to Information. Upon reasonable notice and subject to
restrictions contained in confidentiality agreements to which the Company or
Parent is subject (from which such party shall use reasonable efforts to be
released), each of the Company and Parent shall, and the Company shall cause
each of the Subsidiaries to, afford to the other party and to the officers,
employees, accountants, counsel and other representatives or advisors of the
other party access, during normal business hours to all their respective
properties, books, contracts, commitments and records and, during such period,
each of Parent and the Company shall (and the Company shall cause each of the
Subsidiaries to) furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to SEC requirements, and (b) all other information
concerning its business, properties and personnel as the other party may
reasonably request.
SECTION 6.04. Reasonable Efforts. Each of the Company, Parent and Sub
agrees to use its reasonable efforts to take, or cause to be taken, all actions
necessary to comply promptly with all legal requirements which may be imposed on
itself with respect to the Merger (which actions shall include furnishing all
information required in connection with approvals of or filings with any
Governmental Entity) and shall promptly cooperate with and furnish information
to each other in connection with any such requirements imposed upon any of them
or any of their subsidiaries in connection with the Merger. Each of the Company,
Parent and Sub will, and the Company shall cause each of the Subsidiaries to,
use its reasonable efforts to take all reasonable actions necessary to obtain
(and will cooperate with each other in obtaining) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or other
public or private third party required to be obtained or made by Parent, Sub,
the Company or any of their subsidiaries in connection with the Merger or the
taking of any action contemplated by this Agreement, except that no party need
waive any substantial rights or agree to any substantial limitation on its
operations or to dispose of or hold separate any material assets.
SECTION 6.05. Confidentiality.
(a) Prior to the Closing, each of Parent and Sub shall, and shall
cause its affiliates (as defined in Section 9.03) and its and their employees,
agents, accountants, legal counsel and other representatives and advisers to,
hold in strict confidence all, and not divulge or disclose any information of
any kind concerning the Company and its business; provided, however, that the
foregoing obligation of confidence shall not apply to (i) information that is or
becomes generally available to the public other than as a result of a disclosure
by Parent, Sub, any of their respective affiliates or any of their respective
employees, agents, accountants, legal counsel or other representatives or
advisers, (ii) information that is or becomes available to Parent, Sub, any of
their respective affiliates or any of their respective employees, agents,
accountants, legal counsel or other representatives or advisers from a source
not bound by a confidentiality agreement or arrangement (written or oral) with
the Company, and (iii) information that is required to be disclosed by Parent,
Sub, any of their respective affiliates or any of their respective employees,
agents, accountants, legal counsel or other representatives or advisers as a
result of any applicable law, rule or regulation of any Governmental Entity; and
provided further that Parent promptly shall notify the Company of any disclosure
pursuant to clause (iii) of this Section 6.05. Promptly after any termination of
this Agreement, Parent, Sub and their representatives shall return to the
Company or destroy all copies of documentation with respect to the Company that
were supplied by or on behalf of the Company pursuant to this Agreement, without
retaining any copy thereof, and destroy any notes or analyses Parent, Sub and/or
their representatives may have prepared containing information derived from such
materials.
(b) Prior to the Closing, the Company shall, and shall cause its
affiliates (as defined in Section 9.03) and its and their employees, agents,
accountants, legal counsel and other representatives and
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advisers to, hold in strict confidence all, and not divulge or disclose any
information of any kind concerning Parent and its business; provided, however,
that the foregoing obligation of confidence shall not apply to (i) information
that is or becomes generally available to the public other than as a result of a
disclosure by the Company, any of its affiliates or any of their respective
employees, agents, accountants, legal counsel or other representatives or
advisers, (ii) information that is or becomes available to the Company any of
its affiliates or any of their respective employees, agents, accountants, legal
counsel or other representatives or advisers from a source not bound by a
confidentiality agreement or arrangement (written or oral) with Parent or Sub,
and (iii) information that is required to be disclosed by the Company any of its
affiliates or any of their respective employees, agents, accountants, legal
counsel or other representatives or advisers as a result of any applicable law,
rule or regulation of any Governmental Entity; and provided further that the
Company promptly shall notify Parent of any disclosure pursuant to clause (iii)
of this Section 6.05. Promptly after any termination of this Agreement, the
Company and its representatives shall return to Parent or destroy all copies of
documentation with respect to Parent that were supplied by or on behalf of
Parent pursuant to this Agreement, without retaining any copy thereof, and
destroy any notes or analyses the Company and/or its representatives may have
prepared containing information derived from such materials.
SECTION 6.06. Fees and Expenses.
(a) Except as provided below in this Section 6.06, all fees and
expenses incurred in connection with the Merger, this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such fees or expenses, whether or not the Merger is consummated. Notwithstanding
the foregoing, the Company and Parent shall share equally all costs and expenses
incurred in connection with the filing, printing and mailing of the Proxy
Statement (including SEC filing fees) in connection with the Merger and the
transactions contemplated hereby.
(b) If (i) Parent or Sub terminates this Agreement under Section
8.01(d) (except under the circumstances contemplated by the last sentence of
Section 5.02(b)) or (ii) the Company terminates this Agreement pursuant to
Section 8.01(e), the Company shall pay to Parent, or cause to be paid, within
two (2) days of receipt of notice of a termination pursuant to subsection (i)
above or immediately following the notice by the Company pursuant to subsection
(ii) above, a termination fee in an amount equal to the sum of (x) $8,000,000
plus (y) expenses incurred and paid by Parent and Sub exclusively in connection
with the transactions contemplated hereby not to exceed $2.0 million in the
aggregate (such sum is referred to herein as the "Termination Fee").
SECTION 6.07. Indemnification; Insurance.
(a) Parent and Sub agree that all rights to indemnification for acts
or omissions occurring prior to the Effective Time now existing in favor of the
current and former directors, officers and employees (the "Indemnified Parties")
of the Company and the Subsidiaries as provided in their respective certificates
of incorporation or bylaws (or similar organizational documents) or existing
indemnification contracts or under applicable law shall survive the Merger and
shall continue in full force and effect in accordance with their terms, and, in
any event, for not less than six years following the Effective Time, Parent and
Sub agree to cause the Surviving Corporation to fulfill and honor such
obligations to the maximum extent permitted by law.
(b) In addition, Parent will provide, or cause the Surviving
Corporation to provide, for a period of not less than six years after the
Effective Time, the Company's current directors and officers an insurance and
indemnification policy that provides coverage for events occurring at or prior
to the Effective
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Time (the "D&O Insurance") that is no less favorable than the Company's existing
D&O Insurance policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; provided, however, that Parent and the
Surviving Corporation shall not be required to pay an annual premium for the D&O
Insurance in excess of 200% of the last annual premium paid by the Company for
such insurance, but in such case shall purchase the maximum amount of coverage
available for such amount.
(c) This Section 6.07 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, Parent, the Surviving
Corporation and the Indemnified Parties and their respective heirs, personal
representatives, successors and assigns, and shall be binding on all successors
and assigns of Parent and the Surviving Corporation.
SECTION 6.08 STB Filings. Parent will cause to be made all filings and
submissions under the ICC Termination Act of 1995 and any other laws or
regulations applicable to the consummation of the transactions contemplated by
this Agreement, including a notice of exemption under 49 C.F.R. Section
1180.2(d)(2) to obtain exemption from the prior approval requirements of 49
U.S.C. Section 11323 to control more than one non-contiguous rail carrier.
Parent shall be responsible for all filing fees and other expenses in connection
with such filings. The Company shall assist and support such filings, and shall
have an opportunity to review and comment on all such filings.
SECTION 6.09 Employee Matters.
(a) As of the Effective Time, the employees of the Company and the
Subsidiaries (excluding the individuals set forth in Section 6.09(a) of the
Disclosure Schedule) shall continue their employment with the Surviving
Corporation and the Subsidiaries without interruption at the same base annual
salary or hourly wage rate, as applicable, and the same position as pertained to
such employees immediately prior to the Effective Time. Except as may be
specifically required by applicable law or the terms of any employment or
collective bargaining agreement, neither the Surviving Corporation nor any
Subsidiary shall have any obligation to continue any employment relationship
with any employee for any specific period of time after the Effective Time.
(b) As of the Effective Time, Parent shall cause the Surviving
Corporation and the Subsidiaries to: (i) honor and satisfy all obligations and
liabilities under the Benefit Plans and all employment and collective bargaining
agreements to which the Company or any Subsidiary is a party, and (ii) continue
all Benefit Plans that are maintained by the Company or the Subsidiaries as of
the Effective Time in accordance with their terms and applicable law.
Notwithstanding the foregoing, the Surviving Corporation and the Subsidiaries
reserve the right to amend or terminate any of the Benefit Plans following the
first anniversary of the Effective Time in accordance with their respective
terms and applicable law. To the extent that any such Benefit Plan is terminated
or amended at any time after the first anniversary of the Effective Time so as
to materially reduce the benefits that are then being provided with respect to
participants thereunder, Parent shall arrange for each individual who is then a
participant in such terminated or amended arrangement to participate in a
benefit arrangement maintained by Parent or its subsidiaries that provides, in
the aggregate, benefits that are no less favorable than those offered to
similarly situated employees of the Parent and its subsidiaries, provided that
(i) such participants shall receive full credit for all service with the
Company, the Surviving Corporation and the Subsidiaries, including, but not
limited to, recognition of service for eligibility, vesting and, to the extent
not duplicative of benefits received under any such arrangement, the amount of
benefits, (ii) such participants shall participate in such benefit arrangements
on terms that are no less favorable than offered to similarly situated employees
of Parent and its subsidiaries, (iii) Parent shall waive, or cause its insurance
carriers to waive, all limitations as to pre-existing and at-work conditions, if
any, with respect to participation and
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coverage requirements applicable to the employees of the Company and the
Subsidiaries under the Welfare Plans (except for limitations or waiting periods
that are already in effect and that have not been satisfied with respect to such
employees), and (iv) shall provide credit to the employees of the Company and
the Subsidiaries for any co-payments and deductibles paid by such employees
under the Welfare Plans.
(c) Parent acknowledges and agrees that at the earlier of the
Effective Time or February 1, 2000, the Company shall pay to each eligible
employee designated in Section 6.09(c) of the Disclosure Schedule the amount for
each such employee determined in accordance with the Company's 1999 Annual Bonus
Plan. The aggregate amount for all eligible employees is currently expected to
be approximately $1,350,000, but could be as high as $2,500,000 depending on the
Company's performance.
(d) Parent acknowledges and agrees that prior to the Effective Time
the Company shall adopt a retention bonus program substantially in the form
attached hereto as Exhibit 6.09(d) (the "Retention Plan") covering employees of
the Company and the Subsidiaries. The Retention Plan shall provide, in the
aggregate, bonus payments to eligible employees of not more than $1.0 million.
ARTICLE VII
Conditions
----------
SECTION 7.01. Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act.
(b) This Agreement and the Merger shall have been approved and adopted
by the affirmative vote or consent of the holders of at least a majority of the
outstanding shares of Company Common Stock;
(c) This Agreement and the issuance of Parent Shares pursuant to the
Merger shall have been approved by the affirmative vote of the holders of at
least a majority of the Parent Shares voting at the Parent Stockholder Meeting;
(d) All consents, authorizations, orders and approvals of (or filings
or registrations with) any Governmental Authority or other regulatory body
required in connection with the execution, delivery and performance of this
Agreement, the failure to obtain which would prevent the consummation of the
Merger or have a material adverse effect on the Company, shall have been
obtained without the imposition of any condition having a material adverse
effect on the Company;
(e) The fairness opinions referred to in each of Section 3.25 and
Section 4.24 hereof shall be in effect, and shall not have been withdrawn on or
prior to the Effective Time;
(f) Exemption or approval for the transactions contemplated by this
Agreement shall have been obtained from the STB, and shall be in full force and
effect; and
(g) No Governmental Authority or other regulatory body (including any
court of competent jurisdiction) shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
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which is then in effect and has the effect of making illegal, materially
restricting or in any way preventing or prohibiting the Merger or the
transactions contemplated by this Agreement.
SECTION 7.02. Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger are further
subject to satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) On and after the date hereof, there shall not have occurred any
change, condition, event or development that, individually or in the aggregate,
has resulted in, or would reasonably be expected to result in, a material
adverse effect on the Company;
(b) The representations and warranties of the Company in this
Agreement that are qualified by materiality shall be true and correct in all
respects when made or at and as of the Effective Time (other than
representations and warranties that speak as of a specific time or date which
shall have been true as of the specified date), except in any case (other than
the representations in Section 3.03) where such failure to be true and correct
would not reasonably be likely to have a material adverse effect on the Company;
(c) The representations and warranties of the Company in this
Agreement that are not qualified by materiality shall be true and correct in all
material respects when made or at and as of the Effective Time (other than
representations and warranties that speak as of a specific time or date which
shall have been true as of the specified date), except in any case (other than
the representations in Section 3.03) where such failure to be true and correct
would not reasonably be likely to have a material adverse effect on the Company;
(d) The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement;
(e) The Company shall have delivered to Parent and Sub a certificate
of an officer of the Company to the effect that each of the conditions specified
in Sections 7.02(b), (c) and (d) is satisfied in all respects;
(f) All authorizations, consents, waivers and approvals from parties
to contracts or other agreements to which any of the Company or the Subsidiaries
is a party, or by which any of them is bound, as are set forth in Section
7.02(f) of the Disclosure Schedule, the failure to obtain which would prevent
the consummation of the Merger or have, individually or in the aggregate, a
material adverse effect on the Company, shall have been obtained; and
(g) There shall not have occurred (i) any general suspension of, or
limitation on the prices for, trading in securities on the New York Stock
Exchange or the Nasdaq National Market for more than one trading day, (ii) any
decline, measured from the date hereof, in the Dow Jones Industrial Average by
an amount in excess of 20%, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iv) any direct
material limitation by any Governmental Authority on the extension of credit by
banks or other lending institutions, (v) a declaration of war, or (vi) in the
case of any of the foregoing existing on the date hereof, a material
acceleration or worsening thereof.
SECTION 7.03. Conditions to Obligations of the Company to Effect the
Merger. The obligations of the Company to effect the Merger are further subject
to satisfaction or waiver at or prior to the Effective Time of the following
conditions:
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(a) On and after the date hereof, there shall not have occurred any
change, condition, event or development that, individually or in the aggregate,
has resulted in, or would reasonably be expected to result in, a material
adverse effect on Parent;
(b) The representations and warranties of Parent and Sub in this
Agreement that are qualified by materiality shall be true and correct in all
respects when made or at and as of the Effective Time (other than
representations and warranties that speak as of a specific time or date which
shall have been true as of the specified date), except in any case where such
failure to be true and correct would not reasonably be likely to have a material
adverse effect on the Parent;
(c) The representations and warranties of the Parent and Sub in this
Agreement that are not qualified by materiality shall be true and correct in all
material respects when made or at and as of the Effective Time (other than
representations and warranties that speak as of a specific time or date which
shall have been true as of the specified date), except in any case where such
failure to be true and correct would not reasonably be likely to have a material
adverse effect on the Parent;
(d) Parent and Sub shall have performed in all material respects all
obligations required to be performed by them under this Agreement;
(e) Parent and Sub shall have delivered to the Company a certificate
of an officer of each of Parent and Sub, respectively, to the effect that each
of the conditions specified in Sections 7.03(b), (c) and (d) is satisfied in all
respects;
(f) All authorizations, consents, waivers and approvals from parties
to contracts or other agreements to which any of Parent or its subsidiaries is a
party, or by which any of them is bound, as are set forth in Section 7.03(f) of
the Disclosure Schedule, the failure to obtain which would prevent the
consummation of the Merger or have, individually or in the aggregate, a material
adverse effect on the Parent, shall have been obtained;
(g) The Parent Shares to be issued pursuant to the Merger shall have
been approved for quotation on the Nasdaq National Market; and
(h) The Company shall have received an opinion, dated the Effective
Time, of Greenberg Traurig, P.A., counsel to Parent and Sub, as to the due
authorization, issuance and non-assessability of the Parent Shares to be issued
pursuant to the Merger, in form and substance reasonably satisfactory to the
Company.
ARTICLE VIII
Termination and Amendment
-------------------------
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the terms of
this Agreement by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the acceptance for payment of,
or payment for, shares of Company Common Stock pursuant to the Merger
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and such order, decree or ruling or other action shall have become final and
nonappealable; provided, however, that the right to terminate this Agreement
pursuant to this Section 8.01(b) shall not be available to any party that has
failed to perform its obligations under Section 6.04;
(c) by Parent or Sub, if
(i) there has been a breach of any representation or warranty on
the part of the Company, which breach (x) causes the conditions set forth in
Section 7.02(b) or (c) not to be satisfied, and (y) in the case of breaches of
the representations and warranties contained in Sections 3.01, 3.02, 3.04, 3.05,
3.07, 3.09, 3.10, 3.11, 3.13, 3.14, 3.15, 3.16, 3.19, 3.20, 3.21, 3.22 and 3.24,
shall not have been cured within 30 days following written notice from Parent of
such breach;
(ii) the Company shall have failed to comply in any material
respect with any of its material obligations or covenants contained herein; or
(iii) the holders of more than 10% of the Company Common Stock
shall have given written objections to the Merger or written demands exercising
their dissenter's rights under Section 2.03 hereof and Articles 5.12 and 5.13 of
the Texas Corporation Act prior to the Special Meeting which holders have not
withdrawn such objections or demands or otherwise lost their right to dissent;
(d) by Parent or Sub, if
(i) the Board of Directors of the Company shall have failed to
approve and recommend or shall have withdrawn or modified in a manner adverse to
Parent or Sub its approval or recommendation of the Merger or this Agreement, or
approved or recommended any Acquisition Proposal;
(ii) the Company shall have entered into any binding agreement
(other than a confidentiality agreement in accordance with Section 5.02(a)) with
respect to any Superior Proposal in accordance with Section 5.02(b); or
(iii) the Board of Directors of the Company shall have resolved
to take any of the foregoing actions;
(e) by the Company in connection with entering into a definitive
agreement in accordance with Section 5.02(b), provided it has complied with all
provisions thereof, including the notice provisions therein and the payment of
the Termination Fee, and provided that the Company shall not have breached in
any material respect the provisions of Section 5.02(a);
(f) by the Company, if
(i) there has been a breach of any representation or warranty on
the part of Parent or Sub, which breach (a) causes the conditions set forth in
Section 7.03(b) or (c) not to be satisfied, and (b) in the case of breaches of
the representations and warranties contained in Sections 4.01, 4.02, 4.04, 4.05,
4.07, 4.09, 4.10, 4.12, 4.13, 4.14, 4.15, 4.16, 4.19, 4.20, 4.21 and 4.23, shall
not have been cured within 30 days following written notice by the Company of
such breach; or
(ii) Parent or Sub fails to comply in any material respect with
any of its material obligations or covenants contained herein; or
41
<PAGE>
(g) by either Parent or the Company, if the Effective Time shall not
have occurred by April 15, 2000 (unless the failure to consummate the Merger is
attributable to a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party at or prior to the Effective Time).
SECTION 8.02. Effect of Termination. In the event of a termination of this
Agreement by either the Company, Sub or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
officers, directors, stockholders or affiliates, except with respect to Section
3.15, Section 4.15, Section 6.05, Section 6.06, this Section 8.02 and Article
IX; provided, however, that nothing herein shall relieve any party for liability
for any breach of this Agreement, notwithstanding that the Company shall have no
such liability if the Agreement is terminated in accordance with Section 8.01(d)
or (e) and the Termination Fee has been paid in full in accordance with the
terms hereof.
SECTION 8.03. Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after obtaining the Company Stockholder Approval, but,
after any such approval, no amendment shall be made which by law requires
further approval by such stockholders (or which reduces the amount or changes
the Merger Consideration to be delivered to such stockholders) without obtaining
such further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
SECTION 8.04. Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time or, in the case of
the Company, shall survive the acceptance for payment of, and payment for,
Shares by Sub pursuant to this Agreement.
SECTION 9.02. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed), sent by overnight courier (providing proof of delivery) or
mailed by registered or certified mail (return receipt requested) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
42
<PAGE>
(a) if to Parent or Sub, to: RailAmerica, Inc.
5300 Broken Sound Boulevard N.W.
Boca Raton, Florida 33487
Attention: Gary O. Marino
Telecopy No.: (561) 994-3929
Confirm No.: (561) 994-6015
with a copy to: Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Fern Watts, Esq.
Telecopy No.: (305) 579-0717
Confirm No.: (305) 579-0500
and
(b) if to the Company, to: RailTex Inc.
4040 Broadway, Suite 200
San Antonio, Texas 78209
Attention: Ron Rittenmeyer
Telecopy No.: (210) 841-8278
Confirm No.: (210) 841-7610
with a copy to: Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Serge Benchetrit, Esq.
Telecopy No.: (212) 728-8111
Confirm No.: (212) 728-8000
SECTION 9.03. Interpretation. When a reference is made in this Agreement to
an Article or a Section, such reference shall be to an Article or a Section of
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not effect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." The phrase "made
available" in this Agreement shall mean that the information referred to has
been made available if requested by the party to whom such information is to be
made available. As used in this Agreement, the term "subsidiary" of any person
means another person, an amount of the voting securities, other voting ownership
or voting partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if there are no
such voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first person, and the term "affiliate" shall have
the meaning set forth in Rule 12b-2 promulgated under the Exchange Act. As used
in this Agreement, "material adverse change" or "material adverse effect" means
any change or effect (or any development that, insofar as can reasonably be
foreseen, is likely to result in any change or effect) that, individually or in
the aggregate with any such other changes or effects, is materially adverse to
the business, assets (including intangible assets), financial condition or
results of operations of such entity
43
<PAGE>
and its subsidiaries taken as a whole. As used in this Agreement, "Knowledge of
the Company" means to the actual knowledge, after reasonable due inquiry, of
those individuals listed in Section 9.03(a) of the Disclosure Schedule. As used
in this Agreement, "Knowledge of Parent" means to the actual knowledge, after
reasonable due inquiry, of those individuals listed in Section 9.03(b) of the
Disclosure Schedule.
SECTION 9.04. 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 effective when said counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all parties
need not sign the same counterpart.
SECTION 9.05. Entire Agreement; Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a) constitute
the entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) except as provided in Section 6.07 and the exhibits hereto, are not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
SECTION 9.06. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
SECTION 9.07. Publicity. Except as otherwise required by law, or as
expressly contemplated by this Agreement for so long as this Agreement is in
effect, neither the Company, Sub nor Parent shall, nor shall the Company permit
any of the Subsidiaries to, issue or cause the publication of any press release
or other public announcement with respect to the transactions contemplated by
this Agreement without the consent of the other party, which consent shall not
be unreasonably withheld or delayed.
SECTION 9.08. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
SECTION 9.09. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement. In addition, each of the parties
hereto (i) consents to submit such party to the exclusive personal jurisdiction
of any Federal court located in the State of New York in the event any dispute
arises out of this Agreement or any of the transactions contemplated hereby,
(ii) agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (iii)
agrees that such party will not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a Federal
court sitting in the State of New York. The prevailing party in any judicial
action shall be entitled to receive from the other party reimbursement for the
prevailing party's reasonable attorneys' fees and disbursements, and court
costs.
[The remainder of this page is intentionally left blank.]
44
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
RailAmerica, Inc.
By: /s/ Gary O. Marino
------------------------------
Name: Gary O. Marino
Title: Chairman, Chief Executive
Officer and President
Cotton Acquisition Corp.
By: /s/ Gary O. Marino
------------------------------
Name: Gary O. Marino
Title: President
RailTex, Inc.
By: /s/ Ronald A. Rittenmeyer
------------------------------
Name: Ronald A. Rittenmeyer
Title: Chairman of the Board,
President and Chief
Executive Officer
45
<PAGE>
EXHIBIT 5.06
Rights and Obligations with respect to
Registrable Securities
--------------------------------------
Each person listed on Schedule A hereto shall have the following rights and
obligations with respect to the Parent Shares issued to such person pursuant to
the Agreement and Plan of Merger, dated as of October 14, 1999 (the "Merger
Agreement"), by and among RailAmerica, Inc., Cotton Acquisition Corp. and
RailTex, Inc.:
1. Definitions. Capitalized terms used herein without definition shall have
the respective meanings set forth in the Merger Agreement. As used in this
Exhibit 5.06, unless the context otherwise requires, the following terms have
the following respective meanings:
"Affiliate" means any person (as defined in the Merger Agreement), directly
or indirectly, controlling, controlled by or under common control with such
person.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such successor federal statute.
"NASD" means the National Association of Securities Dealers, Inc.
"Majority Holders" means stockholders owning a majority of the Registrable
Securities outstanding at the time of determination.
"Parent Shares" means the shares of common stock, par value $0.001 per
share, of Parent to be received by the Holders in the Transactions.
"Registrable Securities" means (i) Parent Shares received in the Merger by
the holders of Company Shares at the Effective Time by virtue of the Merger who
may be considered, in the reasonable judgment of the Company, an Affiliate of
Parent (such holders and their transferees, the "Holders", and each such holder
and any transferee, a "Holder"), (ii) Parent Shares received by the Holders in
exchange for any Options, Stock Units or Restricted Stock pursuant to Section
2.01 of the Merger Agreement, and (iii) any Related Registrable Securities. As
to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been otherwise transferred, and new certificates
for them not bearing a legend restricting further transfer shall have been
delivered by Parent and subsequent public distribution of them shall not, in the
opinion of counsel to the holders, require registration of them under the
Securities Act, or (c) they shall have ceased to be outstanding.
"Registration Expenses" means all costs, fees and expenses incident to
Parent's performance of or compliance with Section 2, including, without
limitation, all registration, filing and NASD fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating and
printing
Exhibit 5.06-1
<PAGE>
expenses, messenger and delivery expenses and the fees and disbursements of
counsel for Parent and of its independent public accountants and of one counsel
for the Holders, but excluding any underwriting fees, expenses, discounts or
other costs payable to any underwriter, broker or dealer.
"Registration Statement" has the meaning set forth in Section 2.1.
"Related Registrable Securities" means any securities of Parent issued or
issuable with respect to the Parent Shares received by the Holders in connection
with the Transactions by way of a dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise.
"Representative" has the meaning set forth in Section 2.3.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such successor federal statute.
"Seller Indemnified Parties" has the meaning set forth in Section 2.4(a).
"Target Date" means the Closing Date.
"Termination Date" means the first date on which all of the Registrable
Securities may be distributed to the public by each Holder pursuant to Rule
144(k) (or any similar successor provision) under the Securities Act.
"Transactions" means the transactions described in clauses (i) and (ii) of
the definition of "Registrable Securities".
2. Registration Under Securities Act, etc.
2.1 Filing of Registration Statement.
(a) As soon as practicable, but in any event no later than the date on
which the Company and Parent file with the Commission the definitive Proxy
Statement, Parent shall file a "shelf" registration statement pursuant to Rule
415 under the Securities Act (the "Registration Statement") with respect to the
Registrable Securities to be issued to the Holders pursuant to the Merger
Agreement. Parent shall use its reasonable best efforts to (i) have the
Registration Statement declared effective on or before the Target Date, and (ii)
keep the Registration Statement continuously effective from the date such
Registration Statement is declared effective until the Termination Date.
(b) Subject to Section 9 hereof, Parent shall promptly supplement or
amend, if necessary, the Registration Statement as required by the registration
form utilized by Parent or by the instructions applicable to such registration
form or by the Securities Act and, in each case, Parent shall furnish to the
holders of the Registrable Securities to which the Registration Statement
relates and the managing underwriters, if any, copies of any such supplement or
amendment prior to its being used and/or filed with the Commission. Parent shall
pay all Registration Expenses incurred in connection with the Registration
Statement and any supplements or amendments thereto, whether or not it becomes
effective, and whether all, none or some of the Registrable Securities are sold
pursuant to the Registration Statement.
Exhibit 5.06-2
<PAGE>
2.2 Registration Procedures.
(a) In connection with any registration statement filed pursuant to
Section 2.1, Parent will, as expeditiously as possible:
(i) subject to Section 9 hereof, prepare and file with the
Commission such registration statement and such amendments and
supplements to such registration statement and the prospectus used in
connection therewith continuously as may be necessary to keep such
registration statement effective and to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement or as may be
reasonably requested by the Majority Holders, until such time as all
of such Registrable Securities have been disposed of in accordance
with the intended methods of disposition (including methods described
in any amendment or supplement referred to in (ii) below) by the
seller or sellers thereof set forth in such registration statement
(without limiting the generality of the foregoing, Parent will prepare
and file such amendments and supplements as may be required to permit
the distributees of any Registrable Securities held by a partnership
or other entity or the donees of any Registrable Securities held by
any stockholder to sell such shares pursuant to the registration
statement);
(ii) if requested by the managing underwriter or underwriters or
the Majority Holders of the Registrable Securities being sold in
connection with an underwritten offering, promptly incorporate in a
prospectus supplement or post-effective amendment such information as
the managing underwriters or such holders request should be included
therein relating to the plan of distribution with respect to such
Registrable Securities being sold to such underwriters, the purchase
price being paid therefor by such underwriters and with respect to any
other terms of the underwritten (or best efforts underwritten)
offering of the Registrable Securities to be sold in such offering;
and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after receiving
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement and the managing underwriters, if any,
without charge, one original and as many conformed copies of such
registration statement and of each such amendment thereto as
reasonably requested by such seller or underwriter (including, in the
case of the original copy, all exhibits) and such number of copies of
the prospectus contained in such registration statement (including
each preliminary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements of
the Securities Act, and such other documents, as such seller or
underwriter may reasonably request;
(iv) use its best efforts (x) to register or qualify all
Registrable Securities and other securities covered by such
registration statement and the managing underwriters, if any, under
such other securities or blue sky laws of such States of the United
States of America where an exemption is not available and as the
sellers of Registrable Securities covered by such registration
statement and the managing underwriter, if any, shall reasonably
request, (y) to keep such registrations and qualifications, in effect
for so long as such registration statement remains in effect, and (z)
to take any other action which may be necessary or advisable to enable
such sellers or managing underwriters to consummate the disposition in
such jurisdictions of the securities to be sold by such sellers or
managing underwriters, provided that in connection therewith Parent
shall not be required to qualify as a foreign corporation or as a
dealer in securities or to file a general consent to service of
process or to subject itself to taxation in any jurisdiction;
Exhibit 5.06-3
<PAGE>
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other federal or state governmental agencies or
authorities or self regulatory organizations as may be necessary or
desirable, in the opinion of counsel to Parent, the seller or sellers
of the Registrable Securities or the managing underwriters, to enable
the seller or sellers thereof or the managing underwriters, if any, to
consummate the disposition of such Registrable Securities;
(vi) promptly notify each seller of Registrable Securities
covered by such registration statement and the managing underwriters,
if any, at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, in the light of the circumstances under which
they were made, and, subject to Section 9 hereof, at the request of
any such seller, and the managing underwriters, if any, promptly
prepare and furnish to each prospective seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made;
(vii) in connection with any underwritten offering of Registrable
Securities pursuant to the Registration Statement, enter into an
underwriting agreement, in form, scope and substance as is customary
in underwritten offerings, and take all such other actions as are
reasonably requested by the managing underwriters in order to expedite
or facilitate the disposition of such Registrable Securities, and in
connection therewith (a) make such representations and warranties to
the underwriters in form, substance and scope as are customarily made
by issuers to underwriters in primary underwritten offerings with
respect to the business of Parent and the Registration Statement; (b)
obtain opinions of counsel to Parent and updates thereof (which
counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, shall be
addressed to the underwriters and shall cover the matters customarily
covered in opinions requested in underwritten offerings and such other
matters as may be reasonably requested by underwriters); (c) obtain
"cold comfort" letters and updates thereof from Parent's independent
certified public accountants addressed to the underwriters, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in
connection with primary underwritten offerings; (d) if any
underwriting agreement is entered into, the same shall set forth in
full the indemnification provisions and procedures of Section 2.4
hereof with respect to all parties to be indemnified pursuant to said
Section; and (e) Parent shall deliver such documents and certificates
as may be requested by the managing underwriters to evidence
compliance with clause (iv) above and with any customary conditions
contained in the underwriting agreement or other agreement entered
into by Parent. The above shall be done at each closing under such
underwriting or similar agreement as and to the extent required
thereunder, and if at any time the representations and warranties of
Parent contemplated in clause (vii)(a) above cease to be true and
correct, Parent shall so advise the underwriter(s), if any, and each
seller promptly and, if requested by such seller, shall confirm such
advice in writing;
(viii) to maintain on file with the Nasdaq National Market and
each other exchange on which Parent Shares are listed a copy of the
most recent prospectus and otherwise use
Exhibit 5.06-4
<PAGE>
its best efforts to allow the sellers to satisfy the prospectus
delivery requirements of the Securities Act in a manner not requiring
physical delivery of a prospectus.
(b) Parent may require each holder of Registrable Securities as to
which any registration is being effected to (i) furnish Parent such information
regarding such holder and the distribution of such securities as Parent may from
time to time reasonably request in writing and (ii) otherwise agree to comply
with the Securities Act and the Exchange Act in connection with the registration
and distribution of the Registrable Securities.
(c) As a condition to including shares in any registration statement,
Parent may require any holder of Registrable Securities to agree that, upon
receipt of any notice from Parent of the happening of any event of the kind
described in (i) subdivision (vi) of Section 2.2(a) or (ii) Section 9, such
holder will forthwith discontinue such holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until (x) in the case of a notice under clause (i) above, such
holder's receipt of the copies of the supplemented or amended prospectus
contemplated by subdivision (vi) of Section 2.2(a), or until it is advised in
writing by Parent that the use of the applicable prospectus may be resumed, and,
if so directed by Parent, such holder will promptly deliver to Parent (at
Parent's expense) all copies, other than permanent file copies, then in such
holder's possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice or (y) in the case of a notice
under clause (ii) above, until expiration of the 30th day following the date of
such notice or of any subsequent notice given in accordance with Section 8
hereof.
(d) If Parent suspends a registration statement or requires
stockholders to cease sales of Registrable Securities pursuant to this section,
Parent shall, as promptly as practicable following the termination of the
circumstances which entitled Parent to do so, take such actions as may be
necessary to reinstate the effectiveness of such registration statement and/or
give written notice to all sellers of Registrable Securities authorizing them to
resume sales pursuant to such registration statement.
(e) As a condition to including any Registrable Securities in any
registration statement, each prospective seller shall agree to be bound by such
lock-up agreements (not to exceed a period of 180 days) as the managing
underwriter of any offering by the Company of its securities shall reasonably
specify.
2.3 Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement, Parent (i) shall give a
representative holder designated in writing to Parent by the Majority Holders
(the "Representative"), any underwriter participating in any disposition of
Registrable Securities, and counsel and accountants designated by the
Representative and such underwriters the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto,
(ii) shall give each of them such reasonable access to its books and records and
such opportunities to discuss the business of Parent with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of the Representative and any underwriter
participating in any disposition of Registrable Securities, and such counsel or
accountants, to conduct a reasonable investigation within the meaning of the
Securities Act, subject to each such person agreeing to treat confidentially any
non-public information disclosed to them as a result of such investigation and
(iii) shall promptly notify the Representative and any underwriter participating
in any disposition of Registrable Securities, and their counsel of any stop
order issued or threatened by the Commission and promptly take all reasonable
actions required to prevent the entry of such stop order or to remove it if
entered.
Exhibit 5.06-5
<PAGE>
2.4 Indemnification.
(a) Indemnification by Parent. Parent shall indemnify and hold
harmless, in the case of any registration statement filed pursuant to Section
2.1, each seller of any Registrable Securities covered by such registration
statement, each other person, if any, who controls such seller within the
meaning of the Securities Act, each broker, dealer or underwriter acting on
behalf of such seller and their respective directors, officers, partners,
shareholders, employees and affiliates ("Seller Indemnified Parties") against
any losses, claims, expenses, damages or liabilities (or actions or proceedings,
whether commenced or threatened, or inquiries or investigations, in respect
thereof), joint or several, to which such Seller Indemnified Parties may become
subject under the Securities Act or otherwise, including, without limitation,
the reasonable fees and expenses of legal counsel, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, or inquiries or investigations, in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by Parent of the Securities Act, and Parent will reimburse each
such Seller Indemnified Parties for any reasonable legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, expense, damage, liability, action or proceeding, inquiry or
investigation; provided, that Parent shall not be liable in any such case to the
extent that any such loss, claim, damage, liability (or action, proceeding,
inquiry or investigation in respect thereof) or expense arises out of or is
based upon (i) an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to Parent
through an instrument duly executed by or on behalf of such seller specifically
stating that it is for use in the preparation thereof or (ii) the sale of
Registrable Securities pursuant to the registration statement to any person, if
such seller (x) failed to send or give a copy of the prospectus, as the same may
be then supplemented or amended, to such person within the time required by the
Securities Act and the untrue statement or alleged untrue statement or omission
or alleged omission of a material fact contained in such prospectus was
corrected in the prospectus, as amended or (y) engaged in such sale in breach of
its agreements pursuant to Section 2.2(c). Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of any
such Seller Indemnified Parties and shall survive the transfer of such
securities by such seller.
(b) Indemnification by the Sellers. As a condition to including any
Registrable Securities in any registration statement, each prospective seller
shall agree to indemnify and hold harmless severally and not jointly (in the
same manner and to the same extent as set forth in Section 2.4(a)) Parent, and
each director, officer, employee and shareholder of Parent and each other
person, if any, who participates or may be considered as an underwriter in the
offering or sale of such securities and each other person who controls Parent
within the meaning of the Securities Act ("Parent Indemnified Parties") with
respect to (i) any untrue statement or alleged untrue statement of a material
fact contained in or any omission or alleged omission to state therein a
material fact in any such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to Parent through an instrument duly executed by
or on behalf of such seller specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement (provided that the
liability of such indemnifying party under this clause (i) shall
Exhibit 5.06-6
<PAGE>
be limited to the amount of net proceeds received by such indemnifying party in
the offering giving rise to such liability), or (ii) any sale of any Registrable
Securities by such seller under the circumstances described in clause (ii) of
the proviso to Section 2.4(a). Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of Parent
Indemnified Parties and shall survive the transfer of such securities by such
seller.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action, proceeding, investigation or
inquiry involving a claim referred to in the preceding subparagraphs of this
Section 2.4, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of such
commencement; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subparagraphs of this Section 2.4, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action, proceeding, claim, liability,
investigation or inquiry is brought against an indemnified party, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that if the indemnified party reasonably believes it is advisable for it to be
represented by separate counsel because there exists a conflict of interest
between its interests and those of the indemnifying party with respect to such
claim, or there exist defenses available to such indemnified party which may not
be available to the indemnifying party, or if the indemnifying party shall fail
to assume responsibility for such defense, the indemnified party may retain
counsel satisfactory to it and the indemnifying party shall pay all fees and
expenses of one such counsel, provided that in no event shall Parent be required
to pay the expenses of more than one such counsel. No indemnifying party shall
be liable for any settlement of any action or proceeding effected without its
written consent, which consent shall not be unreasonably withheld or delayed. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim,
proceeding, inquiry, investigation or litigation or which requires action other
than the payment of money by the indemnifying party. Each indemnified party
shall furnish such information regarding itself or the claim in question as an
indemnifying party may reasonably request in writing and as shall be reasonably
requested in connection with the defense of such claim and litigation resulting
therefrom.
(d) Contribution. If the indemnification provided for in this Section
2.4 shall for any reason be held by a court of competent jurisdiction to be
unavailable to an indemnified party under subparagraph (a) or (b) hereof in
respect of any loss, claim, damage, liability, inquiry or investigation or any
action or proceeding in respect thereof, then, in lieu of the amount paid or
payable under subparagraph (a) or (b) hereof, the indemnified party and the
indemnifying party under subparagraph (a) or (b) hereof shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of Parent and
the sellers of Registrable Securities covered by the registration statement in
connection with the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations (the relative fault of Parent and such sellers to be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by Parent or such sellers and
the parties' relative intent, knowledge, access
Exhibit 5.06-7
<PAGE>
to information and opportunity to correct or prevent such statement or omission)
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as shall be appropriate to reflect the
relative benefits received by Parent and such sellers from the offering of the
securities covered by such registration statement. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Such sellers' obligations to
contribute as provided in this subparagraph (d) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint and no seller shall be liable under this
subparagraph (d) for any amount in excess of the proceeds received by the seller
in the offering giving rise to the liability hereunder. In addition, no person
shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such person's consent, which
consent shall not be unreasonably withheld or delayed.
(e) Other Indemnification. Indemnification and contribution similar to
that specified in the preceding subparagraphs of this Section 2.4 (with
appropriate modifications) shall be given by Parent and each seller of
Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law, rule or regulation
of any governmental authority other than the Securities Act.
(f) Indemnification Payments. The indemnification and contribution
required by this Section 2.4 shall be made by prompt periodic payments of the
amount thereof during the course of the investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred.
3. Rule 144 and Rule 145. Parent shall take all actions reasonably
necessary to enable holders of Registrable Securities to sell such securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, (b) Rule 145 under the Securities Act, as such
Rule may be amended from time to time, and (c) any similar rules or regulations
hereafter adopted by the Commission, including, without limiting the generality
of the foregoing, filing on a timely basis all reports required to be filed by
the Exchange Act. Upon the request of any holder of Registrable Securities or
holder of rights to acquire Registrable Securities, Parent will deliver to such
holder a written statement as to whether it has complied with such requirements.
4. Participation in Underwritten Registrations.
(a) If any of the Registrable Securities covered by the Registration
Statement are to be sold in an underwritten offering, the investment bank or
investment bankers and manager or managers that will administer the offering
will be selected by the Majority Holders and shall be reasonably satisfactory to
the Majority Holders of the Registrable Securities included in such offering and
the Company.
(b) In the event any holder proposes to sell Registrable Securities
covered by the Registration Statement in an underwritten offering, it will so
notify Parent and provide Parent with the information to be included in the
notice to be given by Parent hereinafter set forth. Promptly (and in any event
within ten (10) Business Days) after receipt of such notice, Parent will give
written notice to each other holder of Registrable Securities of (i) the name of
the proposing holder, (ii) the number of Registrable Securities proposed to be
sold by such proposing holder, and (iii) the right of each other holder to elect
to have all or a portion of the Registrable Securities owned by such holder
included in such underwritten offering by notifying Parent and the proposing
holder of such election (and specifying the number of Registrable Securities to
be so included) within ten (10) Business Days after receipt of such notice from
Exhibit 5.06-8
<PAGE>
Parent. A holder making such an election on a timely basis shall be entitled to
have the number of Registrable Securities specified in such election included in
the underwritten offering; provided, however, that, if the managing underwriter
advises the participating holders in writing that marketing factors require a
limitation of the number of Registrable Securities to be underwritten, the
amount of Registrable Securities that may be included in the underwriting shall
be so limited and shall be allocated among the participating holders pro rata in
accordance with the number of Registrable Securities proposed to be included in
the underwritten offering by the participating holders.
(c) No holder may participate in any underwritten registration
hereunder unless such holder (x) agrees to sell such holder's securities on the
basis provided in any underwriting arrangements approved by the holders entitled
hereunder to approve such arrangements and (y) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
Nothing in this Section 4 shall be construed to create any additional rights
regarding the registration of Registrable Securities in any holder otherwise
than as set forth herein.
5. Amendments. This Exhibit 5.06 may be amended only upon the prior written
consent of Parent and the Majority Holders. Each holder of any Registrable
Securities at the time or thereafter outstanding shall be bound by any consent
authorized by this Section 5, whether or not such Registrable Securities shall
have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to Parent, be
treated as the holder of such Registrable Securities for purposes of any
request, consent, waiver or other action by any holder or holders of Registrable
Securities pursuant to this Exhibit 5.06 or any determination of any number or
percentage of shares of Registrable Securities held by any holder or holders of
Registrable Securities contemplated by this Exhibit 5.06. If the beneficial
owner of any Registrable Securities so elects, Parent may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Securities.
7. Notices. All notices, demands and other communications provided for or
permitted hereunder shall be made in the manner provided in the Merger
Agreement, and, in the case of the Holders, shall be addressed in the manner set
forth in the stock record books of Parent.
8. Assignment. This Exhibit 5.06 shall be binding upon and inure to the
benefit of and shall be enforceable by the Holders, by virtue of the approval of
the Merger and such stockholder's receipt of Parent Shares pursuant to the
Merger Agreement, and by Parent and its respective successors and assigns and,
with respect to any Company Stockholder, any Original Holder of any Registrable
Securities and their transferees and assigns, provided that, with respect to a
transferee or assignee of shares of Registrable Securities, (i) such transfer is
effected in accordance with applicable securities law, (ii) Parent is given
written notice of such assignment contemporaneous with such assignment or
promptly thereafter, and (iii) the transferee or assignee by written agreement
acknowledges that he is bound by the terms of this Exhibit 5.06.
9. Holdback Agreements. Notwithstanding anything in this Exhibit 5.06 to
the contrary, if (a)(i) Parent is in possession of material non-public
information, (ii) the Board of Directors of Parent determines that disclosure of
such material non-public information would not be in the best interests of
Parent and its stockholders and (iii) the Board of Directors or Chief Executive
Officer of Parent determines that suspension of the rights of the Holders to
make sales pursuant to the Registration Statement is
Exhibit 5.06-9
<PAGE>
necessary in order to avoid a requirement to disclose such material, non-public
information, (b) the Parent has made a public announcement relating to an
acquisition or business combination including Parent or a subsidiary of Parent,
or (c) the Board of Directors of Parent determines in good faith that it is in
the best interests of Parent and its stockholders not to disclose the existence
of facts surrounding any proposed or pending corporate transaction involving
Parent, then Parent may notify the Holders that it elects to suspend the rights
of the Holders to make sales pursuant to the Registration Statement for a period
of time not to exceed ninety (90) days from the date of such notice, provided
that, Parent may exercise its rights under this Section 9 no more than one time
during any period of 180 consecutive days.
10. No Inconsistent Agreements. Parent will not hereafter enter into any
agreement with respect to its securities which is inconsistent with the rights
granted to the holders of Registrable Securities in this Exhibit 5.06.
11. Remedies. Each holder of Registrable Securities, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights hereunder. Parent agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Exhibit 5.06 and hereby
agrees to waive the defense in any action for specific performance that a remedy
at law would be adequate.
Exhibit 5.06-10
<PAGE>
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
FOR IMMEDIATE RELEASE
CONTACTS:
Wayne A. August Judy Brennan/Isadora Kriegel Joseph P. Jahnke
Investor Relations Sard Verbinnen & Co., Inc. CFO
RailAmerica, Inc. 212-687-8080 RailTex, Inc.
561-994-6015 210-841-7600
RAILAMERICA TO ACQUIRE RAILTEX, CREATING WORLD=S
LARGEST SHORT LINE/REGIONAL FREIGHT RAILROAD OPERATOR
Transaction Expected to be Accretive to Earnings Per Share
--------------------------
Boca Raton, FL and San Antonio, TX -- October 14, 1999 -- RailAmerica, Inc.
(NASDAQ: RAIL) and RailTex, Inc. (NASDAQ: RTEX) today announced that RailAmerica
will acquire RailTex, creating the world's largest short line/regional freight
railroad operator, with expected first year revenues of approximately $450
million. Upon completion of the acquisition, RailAmerica will own or have equity
interests in 51 railroads operating over 12,500 total track miles in key regions
of the United States, Canada, Chile, Mexico and Australia.
Under terms of the definitive acquisition agreement, unanimously approved
by the Boards of both companies, RailAmerica will acquire all of the outstanding
stock of RailTex. The transaction is valued at approximately $325 million,
including the assumption of RailTex's outstanding long term debt. RailTex=s
shareholders will receive $13.50 in cash and two-thirds of a share of
RailAmerica stock in exchange for each share of RailTex stock. At the market
close on October 13, 1999, the value to RailTex shareholders was approximately
$20 per share. Following the transaction, RailTex shareholders will own
approximately 35% of the combined company. The transaction, which is expected to
close in early 2000, is subject to shareholder approval by both companies, any
necessary regulatory approvals and other customary closing conditions.
RailAmerica states that the transaction, which will be accounted for using
the purchase method of accounting, is expected to be accretive to its cash flow
and earnings per share. Synergies of the combined operations are expected to
approximate at least $10 million. Following completion of the transaction,
RailAmerica will generate approximately 75% of its EBITDA from its North
American operations, and will employ approximately 2,600 people worldwide.
The short line/regional railroad sector comprises about one-third of the
nation=s rail lines, representing more than 500 railroads. Short line railroads
have become increasingly important due to their ability to provide highly
customized services to shippers of all sizes, particularly since the recent
spate of Class I railroad company mergers. RailTex, operating 26 railroads over
approximately 4,100 route miles, is currently North America's largest short line
railroad company, with operations concentrated in the southeastern, midwestern
and New England regions of the United States, as well as Eastern Canada and
Mexico. RailAmerica owns or has equity interests in 25 short line and regional
railroads operating more than 8,400 route miles in the United States, Australia,
Canada and the Republic of Chile.
- more -
<PAGE>
"The combination of RailAmerica and RailTex is extremely compelling on a
number of fronts," said Gary O. Marino, RailAmerica's Chairman, President and
Chief Executive Officer, who will continue in those same roles. "This
acquisition will result in significant cost efficiencies and earnings accretion.
It also brings strong complementary management talent to RailAmerica and
establishes a solid platform for us to become the world's premier,
cost-efficient and customer-focused operator of short line and regional
railroads."
Marino continued: "We will have a stronger balance sheet, a significantly
larger market capitalization, enhanced shareholder liquidity and a more
diversified, balanced portfolio of North American and international railroads
that should provide superior performance under ever-changing economic
conditions. We expect that with RailAmerica's increased scale, reputation for
customer service and safety, and its proven ability to efficiently integrate
railroad operations, we will see increased opportunities for future growth and
further execution of our strategic vision."
Said Ronald Rittenmeyer, Chairman, President and Chief Executive Officer of
RailTex, "This is an excellent opportunity for our shareholders who will receive
significant immediate value for their investment and the upside of participating
in the ownership of an even stronger player in the short line and regional
railroad sector. Our impressive portfolio of North American properties, added to
RailAmerica's solid domestic rail base and expanding international portfolio,
will create a company that should provide enhanced equity value that will
benefit all shareholders. Historically, both RailTex and RailAmerica have
achieved strong market positions through the implementation of disciplined
acquisition strategies. Both companies purchased properties which were believed
to be undervalued, or where value could be enhanced by improved management and
aggressive marketing initiatives. These attributes should be strengthened by the
combining of these two companies." Rittenmeyer will remain as an advisor and
consultant to RailAmerica after completion of the transaction.
Credit Suisse First Boston is acting as financial advisor to RailAmerica,
and Chase Securities is acting as financial advisor to RailTex. RailAmerica has
obtained commitments for financing of this transaction provided by affiliates of
Donaldson, Lufkin & Jenrette Securities Corporation.
RailTex, Inc. (www.railtex.com) is North America's leading operator of
short line freight railroads, concentrated in the southeastern and midwestern
United States, as well as in the Great Lakes and New England regions of the
United States, and Eastern Canada.
RailAmerica, Inc. (www.railamerica.com) is a diversified international
transportation company that owns or has equity interests in 25 short line and
regional railroads operating more than 8,400 route miles in the United States,
Australia, Canada and the Republic of Chile. The Company also owns
Kalyn/Siebert, L.P. and Kalyn/Siebert, Canada, Inc., specialty truck trailer
manufacturers with production facilities in Gatesville, Texas and
Trois-Rivieres, Quebec, Canada.
###
This press release contains forward-looking statements regarding future events
and the performance of RailAmerica and RailTex that involve risks and
uncertainties that could cause actual results to differ materially including,
but not limited to, failure to achieve expected synergies, failure to
successfully integrate operations, availability of financing, economic
conditions, customer demand, increased competition in the relevant market, and
others. We refer you to the documents that RailAmerica and RailTex files from
time to time with the Securities and Exchange Commission, such as the Form 10-K,
Form 10-Q and Form 8-K, which contain additional important factors that could
cause its actual results to differ from its current expectations and from the
forward-looking statements contained in this press release.
