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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
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RAILAMERICA, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
0-20618 65-0328006
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(Commission File Number) (IRS Employer Identification No.)
5300 BROKEN SOUND BLVD., N.W.
BOCA RATON, FLORIDA 33487
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(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code (561) 994-6015
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N/A
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On October 14, 1999, RailAmerica, Inc. (the "Company"), and its wholly
owned subsidiary, Cotton Acquisition Corp., entered into an Agreement and Plan
of Merger with RailTex, Inc. ("RailTex"), providing for the acquisition (the
"Acquisition") by the Company of all of the outstanding common stock of RailTex
for an aggregate purchase price of approximately $325 million (including the
assumption of RailTex's outstanding long term debt). Pursuant to the
Acquisition, RailTex's shareholders will receive $13.50 in cash and two-thirds
of a share of RailAmerica common stock in exchange for each share of RailTex
stock. It is anticipated that following the Acquisition, 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. The Company has obtained commitments for the financing of this
transaction from affiliates of Donaldson, Lufkin & Jenrette Securities
Corporation. The Acquisition will be accounted for as a purchase. The foregoing
description of the Acquisition and the Agreement and Plan of Merger is qualified
in its entirety by reference to the Agreement and Plan of Merger, a copy of
which is attached hereto as Exhibit 2.1 and incorporated herein by reference.
RailTex is North America's leading operator of short line freight
railroads, concentrated in the southeastern, midwestern, Great Lakes and New
England regions of the United States and Eastern Canada.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION
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2.1 Agreement and Plan of Merger, dated as of October 14, 1999,
among RailAmerica, Inc., Cotton Acquisition Corp. and RailTex,
Inc.
99.1 Press Release, dated October 14, 1999, issued by the Company.
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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 thereunto duly authorized.
RAILAMERICA, INC.
Dated: October 18, 1999 By:/s/Gary O. Marino
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Name: Gary O. Marino
Its: Chairman of the Board, President and
Chief Executive Officer
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
RAILAMERICA, INC.
COTTON ACQUISITION CORP.
AND
RAILTEX, INC.
DATED AS OF OCTOBER 14, 1999
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TABLE OF CONTENTS
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ARTICLE I
The Merger
SECTION 1.01....................................................................................The Merger 1
SECTION 1.02.......................................................................................Closing 2
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 9
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 11
SECTION 3.08....................................................................No Undisclosed Liabilities 11
SECTION 3.09..........................................................................Information Supplied 12
SECTION 3.10.................................................................................Benefit Plans 12
SECTION 3.11...............................................................Other Compensation Arrangements 13
SECTION 3.12....................................................................................Litigation 14
SECTION 3.13..................................................................Permits; Compliance with Law 14
SECTION 3.14...................................................................................Tax Matters 14
SECTION 3.15....................................................................Brokers; Fees and Expenses 16
SECTION 3.16.........................................................................Intellectual Property 16
SECTION 3.17.................................................................................Vote Required 17
SECTION 3.18.................................................................................Labor Matters 17
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SECTION 3.19............................................................Title to and Condition of Property 17
SECTION 3.20.........................................................................Environmental Matters 17
SECTION 3.21.....................................................................................Customers 18
SECTION 3.22.................................................................Interested Party Transactions 18
SECTION 3.23...................................................................Absence of Certain Payments 18
SECTION 3.24.....................................................................................Insurance 19
SECTION 3.25..............................................................................Fairness Opinion 19
SECTION 3.26...............................................................................Full Disclosure 19
SECTION 3.27.....................................................No Knowledge of Inaccurate Representation 19
ARTICLE IV
Representations and Warranties of Parent and Sub
SECTION 4.01..................................................................................Organization 19
SECTION 4.02..................................................................................Subsidiaries 19
SECTION 4.03................................................................................Capitalization 20
SECTION 4.04.....................................................................................Authority 20
SECTION 4.05.........................................................Consents and Approvals; No Violations 21
SECTION 4.06..........................................................SEC Reports and Financial Statements 21
SECTION 4.07..........................................................Absence of Certain Changes or Events 22
SECTION 4.08....................................................................No Undisclosed Liabilities 22
SECTION 4.09..........................................................................Information Supplied 22
SECTION 4.10.................................................................................Benefit Plans 23
SECTION 4.11....................................................................................Litigation 24
SECTION 4.12..................................................................Permits; Compliance with Law 24
SECTION 4.13...................................................................................Tax Matters 24
SECTION 4.14.....................................................................Interim Operations of Sub 26
SECTION 4.15.......................................................................................Brokers 26
SECTION 4.16.........................................................................Intellectual Property 26
SECTION 4.17.................................................................................Vote Required 26
SECTION 4.18.................................................................................Labor Matters 27
SECTION 4.19.............................................................................Title to Property 27
SECTION 4.20.........................................................................Environmental Matters 27
SECTION 4.21.................................................................Interested Party Transactions 28
SECTION 4.22...................................................................Absence of Certain Payments 28
SECTION 4.23.....................................................................................Insurance 28
SECTION 4.24..............................................................................Fairness Opinion 28
SECTION 4.25...............................................................................Full Disclosure 28
SECTION 4.26..........................................................................Financial Capability 29
SECTION 4.27.....................................................No Knowledge of Inaccurate Representation 29
ARTICLE V
Covenants
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SECTION 5.01......................................................................Covenants of the Company 29
SECTION 5.02...............................................................................No Solicitation 31
SECTION 5.03.........................................................................Company Other Actions 33
SECTION 5.04...........................................................................Covenants of Parent 33
SECTION 5.05..........................................................................Parent Other Actions 34
SECTION 5.06...........................................................................Registration Rights 34
SECTION 5.07...................................................................................Board Seats 34
ARTICLE VI
Additional Agreements
SECTION 6.01...................Registration Statement/Proxy Statement; Quotation on Nasdaq National Market 34
SECTION 6.02........................................................Stockholder Approvals; Recommendations 35
SECTION 6.03.........................................................................Access to Information 36
SECTION 6.04............................................................................Reasonable Efforts 36
SECTION 6.05...............................................................................Confidentiality 37
SECTION 6.06.............................................................................Fees and Expenses 37
SECTION 6.07....................................................................Indemnification; Insurance 38
SECTION 6.08...................................................................................STB Filings 38
SECTION 6.09..............................................................................Employee Matters 39
ARTICLE VII
Conditions
SECTION 7.01....................................Conditions to Each Party's Obligation To Effect the Merger 40
SECTION 7.02..............................Conditions to Obligations of Parent and Sub to Effect the Merger 40
SECTION 7.03.................................Conditions to Obligations of the Company to Effect the Merger 41
ARTICLE VIII
Termination and Amendment
SECTION 8.01...................................................................................Termination 42
SECTION 8.02.........................................................................Effect of Termination 43
SECTION 8.03.....................................................................................Amendment 44
SECTION 8.04.............................................................................Extension; Waiver 44
ARTICLE IX
Miscellaneous
SECTION 9.01.................................................Nonsurvival of Representations and Warranties 44
SECTION 9.02.......................................................................................Notices 44
SECTION 9.03................................................................................Interpretation 45
SECTION 9.04..................................................................................Counterparts 46
SECTION 9.05...................................................Entire Agreement; Third Party Beneficiaries 46
SECTION 9.06.................................................................................Governing Law 46
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SECTION 9.07.....................................................................................Publicity 46
SECTION 9.08....................................................................................Assignment 46
SECTION 9.09...................................................................................Enforcement 46
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EXHIBIT 5.06 Registration Rights
EXHIBIT 6.09(d) Retention Plan(1)
(iv)
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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.
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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
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
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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.
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.
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(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 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
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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 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
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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.
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
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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.
(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.
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(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).
(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
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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,
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(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 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
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(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 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
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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 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
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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.
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
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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 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.
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(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
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Governmental Entities necessary for 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.
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(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.
(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.
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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;
(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.
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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 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
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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.
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
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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 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
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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.
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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 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.
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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
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.
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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 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
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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.
(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
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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.
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.
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(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 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.
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(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 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
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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,
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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 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.
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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 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
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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).
(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
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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 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
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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 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
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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
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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 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
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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 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
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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.
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
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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 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
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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 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.
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(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)
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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 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
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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)
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;
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(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:
(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
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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 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
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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
(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
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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):
(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
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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 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
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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
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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.]
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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 of the Board, President and
Chief Executive Officer
Cotton Acquisition Corp.
By: /s/Gary O. Marino
---------------------------------------------
Name: Gary O. Marino
Title: President
RailTex, Inc.
By: /s/Ronald Rittenmeyer
---------------------------------------------
Name: Ronald Rittenmeyer
Title: Chairman of the Board, President and
Chief Executive Officer
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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 expenses, messenger and delivery expenses and the fees and
disbursements of counsel for Parent and of its independent
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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.
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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;
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(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 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.
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(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.
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,
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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 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 of inquiry involving a claim referred to in the preceding
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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 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
60
<PAGE> 66
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 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.
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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 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.
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LIST OF SCHEDULES (1)
---------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule 2.01(h) - Adjustment to Merger Consideration
Schedule 3.02(a) - List of Subsidiaries
Schedule 3.03 - Capitalization
Schedule 3.05 - Consents and Approvals; No violations
Schedule 3.07 - Absence of Certain Changes or Events
Schedule 3.08 - Undisclosed Liabilities
Schedule 3.10 - Benefit Plans
Schedule 3.11 - Other Compensation Agreements
Schedule 3.12 - Litigation
Schedule 3.13 - Permits; Compliance with Law
Schedule 3.14 - Tax Matters
Schedule 3.16 - Intellectual Property
Schedule 3.18 - Labor Matters
Schedule 3.19 - Title to and Condition of Property
Schedule 3.20 - Environmental Matters
Schedule 3.21 - Customers
Schedule 3.22 - Interested Party Transactions
Schedule 5.01(e) - No Acquisitions
Schedule 5.01(g) - Indebtedness
Schedule 5.07 - Board Seats
Schedule 6.09 - Employee Matters
Schedule 7.03(f) - Conditions to Obligations of the Company to Effect the Merger
Schedule 9.03 - Interpretation
</TABLE>
- ---------------------------
(1) The List of Schedules and the List of Exhibits have been appended in
compliance with Item 601(2) of Regulation S-K. The Company agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Commission
upon request.
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<PAGE> 1
EXHIBIT 99.1
[RailAmerica Logo] [RailTex Logo]
FOR IMMEDIATE RELEASE
<TABLE>
<CAPTION>
<S> <C> <C>
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
</TABLE>
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,
<PAGE> 2
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 -
"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.
<PAGE> 3
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.
<PAGE> 4
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.
