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EXHIBIT 2.1
THIS PRE-ACQUISITION AGREEMENT entered into this 17th day of May, 1999
BETWEEN:
RAILAMERICA INC., a corporation under the laws of Delaware,
(hereinafter called the "Offeror")
and
RAILINK LTD., a corporation under the laws of Alberta,
(hereinafter called the "Company")
RECITALS
WHEREAS:
1. The board of directors of the Company wishes to encourage the
Offeror to propose an acquisition transaction to the shareholders of the
Company;
2. The board of directors of each of the Offeror and the Company
believe that it is in the best interests of their respective corporations and
shareholders that the Offeror and the Company combine their business interests
with the result that the Company shall be owned by the Offeror or the
shareholders of the Offeror. This combination shall be effected through an offer
by the Offeror to purchase all outstanding shares of the Company on the basis of
$8.75 (cash) for each share of the Company as described in Section 1.1 and any
second stage transaction as described in Section 1.5.
3. The Offeror is willing to make an offer subject to the terms and
conditions of this Agreement.
NOW THEREFORE IN CONSIDERATION of the mutual covenants hereinafter set
out, the parties hereby agree as follows:
ARTICLE 1
THE OFFER
1.1 THE OFFER
Subject to the terms and conditions of this Agreement, the Offeror
agrees to mail on or before May 28, 1999 to the holders of shares of
the Company an offer to purchase all of the outstanding shares
(including any associated rights issued pursuant to the Company's
Shareholder Rights Plan Agreement, as may be amended from time to time,
hereinafter called the "Rights" and together with the shares called the
"Shares" and the holders of Shares are hereinafter called
"Shareholders") on the basis of $8.75 for each share of the Company,
subject to the terms and conditions set out in Schedule "A" to this
Agreement (the "Offer"). The price per share to be paid by the Offeror
shall be subject to adjustment upon the occurrence of certain events as
described in Schedule "A" hereto. The Offeror further agrees that it
will not amend the terms of the Offer other than, at its option, to
increase the consideration payable thereunder or to extend the expiry
thereof, except with the prior consent of the Company.
1.2 COMPANY APPROVAL OF THE OFFER
(a) The Company represents that its board of directors, upon
consultation with its advisors and upon unanimous
recommendation of any special committee of the board of
directors established for the purpose of considering the
transaction contemplated by this Agreement, has determined
unanimously that:
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(i) the Offer is fair to the Shareholders and is in the
best interests of the Company and the Shareholders;
(ii) the board of directors will recommend that
Shareholders accept the Offer; and
(iii) this Agreement is in the best interests of the
Company and the Shareholders.
(b) The Company represents that the board of directors has
received an opinion from the Company's financial advisors that
the consideration to be offered under the Offer is fair from a
financial point of view to the Shareholders.
1.3 COMPANY COOPERATION
(a) The Company covenants to cooperate with the Offeror, to take
all reasonable action to support the Offer and to provide the
Offeror with a draft copy of any Directors' Circular issued by
the Company, from time to time, prior to the mailing thereof,
on a confidential basis, and to provide the Offeror with a
reasonable opportunity to review and provide comments thereon.
(b) As soon as practicable following the date hereof and in any
event prior to the close of business on May 21, 1999, the
Company shall cause to be delivered to the Offeror a list (in
paper and electronic form, if available) made up to a date not
more than two business days before the date hereof setting out
the matters set forth in paragraphs 21(5)(a) through (c) of
the Business Corporations Act (Alberta) together with
supplemental lists (as contemplated in subsection 21(6) of
such Act), and lists of holders of options or other rights to
acquire Shares, as and when reasonably requested by the
Offeror, until the expiry of the Offer. The Company shall
permit and request its registrar and transfer agent to assist
the Offeror and the Offeror's depositary under and in
connection with the Offer and shall from time to time furnish
the Offeror with such additional information, including
updated or additional lists of shareholders, mailing labels
and lists of securities positions, and other assistance as the
Offeror may reasonably request in order to be able to
communicate the Offer to the Company's Shareholders, at the
Offeror's expense, and to such other persons as are entitled
to receive the Offer under applicable laws.
1.4 JOINT PRESS RELEASE AND PUBLIC DISCLOSURE
The parties agree to issue jointly a press release as soon as
practicable in the form attached as Schedule "B" to this Agreement. The
parties shall consult with each other with respect to any public
disclosure regarding this Agreement, the Offer and any related matter
and neither party shall issue any press release or other public
statement relating to or referring to this Agreement, the Offer
(including the terms thereof) and any related matters without the prior
written consent of the other party hereto, unless such party is
compelled by law to do so, including pursuant to public disclosure
requirements under applicable securities legislation, and then only
with prior written notice to the other party.
1.5 POST-OFFER COVENANTS
If the Offeror takes up and pays for Shares pursuant to the Offer, the
Offeror and the Company agree to use all reasonable commercial efforts
to enable the Offeror to acquire the balance of the Shares as soon as
practicable after completion of the Offer by way of compulsory
acquisition, arrangement, amalgamation or other type of acquisition
transaction carried out for consideration per Share equal to the
consideration per share offered under the Offer or such other amount as
may be required by a court of competent jurisdiction.
1.6 OUTSTANDING STOCK OPTIONS
(a) The Company agrees and represents that its board of directors
has determined unanimously to use its and their respective
reasonable efforts to encourage all persons holding options to
purchase Shares pursuant to the Company's stock option plan
and other compensation arrangements or otherwise, to exercise
their options prior to the expiry of the Offer and to tender
all Shares issued in connection therewith to the Offeror. The
Company further agrees and represents that the board of
directors of the Company has also resolved and has authorized
and
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directed the Company to, subject to any required regulatory or
stock exchange approval, cause the vesting of option
entitlements under its stock option plan and other
compensation arrangements to accelerate prior to or concurrent
with the expiry of the Offer, such that all outstanding
options to acquire Shares are exercisable prior to or
concurrent with the expiry of the Offer, and to arrange for
all Shares that are fully paid thereunder to be distributed to
those persons entitled thereto so as to be able to be tendered
into the Offer and to thereafter satisfy all other obligations
of the Company under such plans or, upon the acquisition by
the Offeror of Shares pursuant to the Offer, to cause all
entitlements under such plans to terminate upon the payment of
an amount in respect of each outstanding option equal to the
amount, if any, by which $8.75 per Share exceeds the per share
exercise price of the option.
(b) The Offeror and the Company agree that the Company may agree
with holders of options that, in lieu of such optionholders
exercising the options, the Company before the expiry of the
Offer will enter into an agreement to pay to such
optionholders immediately after the expiry of the Offer the
amount, if any, by which $8.75 per Share exceeds the per share
exercise price of the option, in exchange for the termination
of the option. Upon the expiry of the Offer, the Company shall
take such steps or make such arrangements as are necessary to
(i) ensure that all then outstanding options are exercised or
terminated and (ii) terminate the Company's stock option plan.
1.7 SHAREHOLDER RIGHTS PLAN
(a) The Company covenants to take all action necessary pursuant to
the Shareholder Rights Plan to effect a waiver of the
application of the Shareholder Rights Plan as soon as
reasonably possible following receipt of written notice from
the Offeror advising that the Offeror intends to take up and
pay for the Shares deposited and not withdrawn under the
Offer, but in any event prior to the Effective Date, and to
ensure that the "Separation Time" (as defined in the
Shareholder Rights Plan) does not occur.
(b) The Company agrees and represents that its board of directors
has resolved to:
(i) not waive the application of the Shareholder Rights
Plan or to redeem any of the outstanding Rights or
take any action that would limit the application of
the Shareholder Rights Plan to any transaction other
than the Offer or a Superior Proposal that expires no
sooner than the Expiry Date; and
(ii) subject to receipt of any required approval from The
Toronto Stock Exchange, if requested by the Offeror
prior to the termination of this Agreement or receipt
by the Company of notice under subsection 1.7(a),
extend the Expiration Time (as defined under the
Shareholder Rights Plan) to a date not later than
August 15, 1999.
(c) The Offeror acknowledges and agrees that upon the application
of the Shareholder Rights Plan being waived in favor of the
Offer, the Shareholder Rights Plan shall be deemed to have
been waived in respect of any other Acquisition Proposal made
by means of a take-over bid circular to all holders of record
of Shares prior to the Expiry Date.
ARTICLE 2
COVENANTS OF THE COMPANY
2.1 ORDINARY COURSE OF BUSINESS
The Company covenants and agrees that, from the date of this Agreement
until the earlier of (x) the date on which this Agreement is terminated
and (y) such time as the Offeror's designees pursuant to Section 7.3
hereof shall constitute at least a majority of the Company's board of
directors (the "Effective Time"), unless the Offeror shall otherwise
agree in writing or as otherwise expressly contemplated or permitted by
this Agreement:
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(a) the Company shall, and shall cause each of its direct and
indirect subsidiaries (collectively its "Subsidiaries") to,
conduct its and their respective business only in, and not
take any action except in, the usual, ordinary and regular
course of business and consistent with past practice;
(b) the Company shall not directly or indirectly do or permit to
occur any of the following (provided that the following shall
not limit the ability of the Company to comply with any
existing obligations which have been described or set forth in
the Disclosure Schedule attached hereto or in the material
referred to therein);
(i) issue, sell, pledge, lease, dispose of, encumber or
agree to issue, sell, pledge, lease, dispose of or
encumber (or permit any of its Subsidiaries to issue,
sell, pledge, lease, dispose of, encumber or agree to
issue, sell, pledge, lease, dispose of or encumber):
(A) any shares of its capital stock including
the Shares), or any options, warrants,
calls, conversion privileges or rights of
any kind to acquire any shares of, any
share. capital of the Company or any of its
Subsidiaries (other than pursuant to the
exercise of stock options or other
instruments outstanding on the date hereof
and set forth or described in the Disclosure
Schedule attached hereto or in the material
referred to therein), or
(B) except in the ordinary course of business,
any assets of the Company or any of its
Subsidiaries;
(ii) amend or propose to amend its articles or by-laws or
those of any of its Subsidiaries;
(iii) subdivide, consolidate or reclassify any outstanding
securities of the Company, or declare, set aside or
pay any dividend or other distribution payable in
cash, stock, property or otherwise with respect to
any outstanding securities of the Company;
(iv) redeem, purchase or offer to purchase (or permit any
of its Subsidiaries to redeem, purchase or offer to
purchase) any Shares or other securities of the
Company or any of its Subsidiaries;
(v) reorganize, amalgamate or merge the Company or any of
its Subsidiaries with any other person, corporation,
partnership or other entity, organization or division
whatsoever;
(vi) acquire or agree to acquire (by merger, amalgamation,
acquisition of shares or assets or otherwise) any
person, corporation, partnership or other business
organization or division or acquire or agree to
acquire any material assets other than in the
ordinary course of business;
(vii) incur or guarantee, or commit to incur or guarantee
any indebtedness for borrowed money or otherwise or
issue any debt securities except for the borrowing of
working capital not to exceed $2 million in the
aggregate;
(viii) make any loans, advances or capital contributions to,
or investments in, any other person or entity, other
than to a wholly-owned subsidiary of the Company or
otherwise in the ordinary course of business
(including in accordance with the Company's
established expense reimbursement policies)
consistent with past practice;
(ix) except as contemplated by the Company's capital
expenditure plan described or set forth in the
Disclosure Schedule attached hereto or in the
material referred to therein, make or agree to make
any new capital expenditures which in the aggregate
are in excess of $250,000;
(x) make or agree to make any tax election that could
reasonably be expected to have a material adverse
effect on the Company or settle or compromise any
material income tax liability;
(xi) make any change to its accounting methods, principles
or practices;
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(xii) pay, discharge or satisfy any material claims,
liabilities or obligations (whether absolute,
accrued, asserted or un-asserted, contingent or
otherwise), other than in the ordinary course of
business consistent with past practice, or fail to
pay or otherwise satisfy any material accounts
payable, liabilities or obligations when due and
payable; or
(xiii) except for transactions in the ordinary course of
business under existing contractual arrangements with
Quebec Railway Corporation or its subsidiaries and
consistent with past practice, engage in any
transactions with any of the Company's affiliates;
(c) the Company shall not, and shall cause each of its
Subsidiaries to not (otherwise than as may be contemplated in
section 1.6 of this Agreement or pursuant to existing offers
which are capable of acceptance and which are set forth or
described in the Disclosure Schedule attached hereto or in the
material referred to therein):
(i) enter into or modify any employment, severance,
collective bargaining, incentive stock option or
similar agreements, policies or arrangements with, or
grant any bonuses, salary increases, severance or
termination pay to, any officers or directors of the
Company other than pursuant to agreements, policies
or arrangements in effect (without amendment) on the
date hereof; or
(ii) in the case of employees who are not officers or
directors, take any action other than in the
ordinary, regular and usual course of business and
consistent with past practice (none of which actions
shall be unreasonable) with respect to the entering
into or modifying of any employment, severance,
collective bargaining or similar agreements, policies
or arrangements or with respect to the grant of any
bonuses, salary increases, stock options, pension or
other benefits, retirement allowances, deferred
compensation, severance or termination pay or any
other form of compensation or profit sharing or with
respect to any increase of benefits payable otherwise
than pursuant to agreements, policies or arrangements
in effect (without amendment) on the date hereof;
(d) the Company shall use its reasonable efforts to cause its
current insurance (or reinsurance) policies not to be
cancelled or terminated or any of the coverage thereunder to
lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies underwritten by
insurance and re-insurance companies of nationally recognized
standing providing coverage equal to or greater than the
coverage under the cancelled, terminated or lapsed policies
for substantially similar premiums are in full force and
effect;
(e) the Company shall:
(i) use its reasonable efforts, and cause each of its
Subsidiaries to use its reasonable efforts, to
preserve intact their respective business
organizations and goodwill, to keep available the
services of its officers and employees as a group and
to maintain satisfactory relationships with
suppliers, agents, distributors, customers and others
having business relationships with it or its
Subsidiaries;
(ii) maintain all of its properties and assets in good
repair, order and condition;
(iii) maintain its books of account and records in the
usual, regular and ordinary manner, in accordance
with generally accepted accounting principles,
consistently applied;
(iv) comply with all laws, regulations and orders
applicable to it and the conduct of its business;
(v) maintain all existing operating authorities and
permits in good standing;
(vi) not take any action, or permit any of its
Subsidiaries to take any action that would render, or
that reasonably may be expected to render, any
representation or warranty made by it in this
Agreement untrue at any time prior to the Effective
Time if then made; and
(vii) promptly notify the Offeror orally and in writing of
any material adverse change in the normal course of
its or
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any of its Subsidiaries' businesses or in the
operation of its or any of its Subsidiaries'
businesses or in the operation of its or any of its
Subsidiaries' properties (in each case on a
consolidated basis), and of any material governmental
or third party complaints, investigations or hearings
(or communications indicating that the same may be
contemplated);
(f) the Company shall not settle or compromise any claim brought
by any present, former or purported holder of any securities
of the Company or any party to any agreement with the Company
in connection with the transaction contemplated by this
Agreement or the Offer prior to the Effective Time without the
prior written consent of the Offeror;
(g) the Company shall not enter into or modify any contract,
agreement, commitment or arrangement including those relating
to any of the matters set forth in this section 2.1;
(h) the Company shall ensure that its board of directors refrains
from taking any action pursuant to employment agreements or
similar agreements between the Company and any of its officers
or employees which would have the effect of permitting such
persons to terminate their employment with the Company and to
thereupon become entitled to receive payments from the
Company, as a result of the Offer or any other action
contemplated hereby; and
(i) the Company shall not authorize or commit or agree to take any
of the actions described in subsections 2.1(b), (c), (f) or
(g).
2.2 NON-SOLICITATION
(a) The Company shall not, directly or indirectly, through any
officer, director, employee, representative or agent of the
Company or any of its Subsidiaries or otherwise,
(i) solicit or encourage (including by way of furnishing
information or entering into any form of agreement,
arrangement or understanding) the initiation of any
inquiries or proposal regarding any merger,
amalgamation, take-over bid, variation of a take-over
bid, sale of substantial assets, sale of treasury
shares or rights or interests therein or thereto or
similar transactions involving the Company or any
Subsidiaries of the Company (any of the foregoing
inquiries or proposals being referred to herein as an
"Acquisition Proposal"); or
(ii) provide any confidential information to, participate
in any discussions or negotiations relating to any
such transactions with, or otherwise cooperate with
or assist or participate in any effort to take such
action by, any person, corporation, partnership or
other entity, organization or division,
provided nothing contained in this section 2.2 or any other provision
of this Agreement shall,
(b) subject to compliance with section 2.2(c) and Article 3
hereof, prevent the Company or the board of directors of the
Company from considering, negotiating, approving and
recommending to the Shareholders an unsolicited bona fide
written Acquisition Proposal for which adequate financial
arrangements have been made, or are reasonably likely to, be
made, and which does not expire poor to the Expiry Date, which
the board of directors of the Company determines in good faith
(after consultation with its financial advisors) would, if
consummated in accordance with its terms, result in a
transaction financially superior to the Shareholders than the
transaction contemplated by this Agreement (any such
Acquisition Proposal being referred to herein as a "Superior
Proposal"); or
(i) prevent the Company and its officers and directors
from complying with Section 138 of the Securities Act
(Alberta) and similar provisions under applicable
Canadian securities laws relating to the provision of
directors' circulars and making appropriate
disclosure with respect thereto to the Company's
shareholders.
(c) The Company shall, and shall cause its officers, directors,
employees, representatives and agents to, immediately cease
and cause to be terminated any existing discussions or
negotiations with any parties (other than the Offeror) with
respect to any potential Acquisition Proposal.
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(d) The Company shall notify the Offeror within one business day
of receiving any request for confidential information or any
Acquisition Proposal or inquiry with respect to or which could
reasonably be expected to lead to any Acquisition Proposal,
the identity of the Person making such request, Acquisition
Proposal or inquiry and all of the terms and conditions
thereof. Such notification shall initially be made orally,
with subsequent written confirmation. In no event shall such
notification be made more than one day after the occurrence of
the relevant event. The Company will keep the Offeror fully
informed with respect to the status of such request,
Acquisition Proposal or inquiry.
(e) If the board of directors of the Company receives a request
for material non-public information from a party who proposes
to the Company a bona fide Acquisition Proposal and the board
of directors of the Company determines, after being so advised
in writing by the Company's financial advisors, that such
proposal is a Superior Proposal pursuant to section 2.2(a),
then, and only in such case, the Company may, subject to the
execution of a confidentiality agreement substantially similar
to that then in effect between the Company and the Offeror and
compliance by the Company with section 2.2(c) hereof, provide
such party with access to information regarding the Company.
2.3 ACCESS TO INFORMATION
Subject to the existing letter agreement in respect of confidentiality
between the Company and the Offeror dated March 19, 1999, upon written
request for access from the Offeror, the Company shall (and shall cause
each of its Subsidiaries to) afford the Offeror's officers, employees,
counsel, accountants and other authorized representatives, advisors and
agents ("Representatives") access, during normal business hours from
the date hereof and until the expiration of this Agreement, to its
properties, books, contracts and records and all information relating
to it and its Subsidiaries, as well as to its management personnel,
and, during such period,:
(a) the Company shall (and shall cause each of its Subsidiaries
to) furnish promptly to the Offeror all information concerning
it and its business, properties and personnel as the Offeror
may reasonably request; and
(b) cause the information in the data room established by the
Company at the offices of Fraser Xxxxxx and reviewed by the
Offeror and its representatives to be maintained intact.
2.4 NOTIFICATION OF CERTAIN MATTERS
The Company and the Offeror shall each give notice to the other of:
(a) the occurrence or failure to occur of any event, which
occurrence or failure would cause or may cause any
representation or warranty on its part contained in this
Agreement to be untrue or inaccurate in any respect at any
time from the date hereof to the Effective Time; and
(b) any failure of the Company or the Offeror, or any of its
respective officers, directors, employees, representatives or
agents, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
2.5 OTHER ACTIONS
Between the date of this Agreement and the Effective Time, the Company
and the Offeror shall use their commercially reasonable efforts to
cause the conditions of the Offer set forth in Schedule "A" hereto to
be satisfied. Except as contemplated by Section 2.2, the Company and
the Offeror shall not, and shall not permit any of their respective
subsidiaries to, take any action that would, or that could reasonably
be expected to:
(a) result in any of the representations and warranties of such
party set forth in this Agreement becoming untrue;
(b) result in any of the conditions set forth in Schedule "A" not
being satisfied; or
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(c) prevent or delay consummation of the transactions contemplated
by this Agreement or to otherwise prevent the Company from
timely performance of its obligations under this Agreement.
ARTICLE 3
FEES AND OTHER ARRANGEMENTS
3.1 ACQUISITION PROPOSAL FEE
Provided that there is no material breach by the Offeror of its
obligations under this Agreement, if at any time after execution of
this Agreement:
(a) the board of directors of the Company has failed to make,
withdrawn or changed any of its recommendations or
determinations referred to in sections 1.2 or 1.7 in a manner
adverse to Offeror or shall have resolved to do so prior to
the expiry of the Offer provided that such failure, withdrawal
or change is not due to the Offeror's failure to perform its
obligations under this Agreement;
(b) during the period from the date of this Agreement to the
Expiry Date a bona fide Take-over Proposal is made to the
Shareholders or the Company and at least 50% of the Shares of
the Company (including any Shares then held by the party
making the Take-over Proposal) have been taken up and paid for
pursuant to the Takeover Proposal or the Take-over Proposal
otherwise results in a merger, consolidation, amalgamation or
other business combination involving the Company or any
acquisition in any manner of a 50% or greater equity or
beneficial interest in, or a material amount of the assets of,
the Company (whether prior to the Expiry Date or within a
three (3) month period thereafter);
(c) a bona fide Take-over Proposal that constitutes a Superior
Proposal is made to the Shareholders or the Company and the
Company elects to terminate this Agreement in accordance with
section 8.1 (e) hereof;
(d) the board of directors shall have failed to reaffirm its
recommendation of this Offer by press statements within five
(5) days after the public announcement or commencement of any
Take-over Proposal or in a Directors' Circular within ten (10)
days after the mailing of any such Take-over Proposal;
(e) during the period from the date of this Agreement to the
Effective Time the Company breaches any of its
representations, warranties or covenants made in this
Agreement which breach would have a Material Adverse Effect on
the Company or have a material adverse effect on the
completion of the Offer;
(f) during the period ending three (3) months after the
termination of this Agreement other than,
(i) by consent of the parties pursuant to and in
accordance with section 8.1 (a); or
(ii) by the Offeror pursuant to and in accordance with
section 8.1(e) because of the failure to satisfy one
of the conditions set forth in section 4 of Schedule
"A" hereto (other than section 4(i) thereof);
the Company or any of its subsidiaries shall enter into an
agreement to consummate, and shall thereafter (whether or not
prior to three (3) months after the termination of this
Agreement) consummate, all or any portion of a Take-over
Proposal,
(the occurrence of any such event being referred to as a "Fee Event"),
then the Company shall pay to the Offeror an amount equal to the
aggregate of:
(i) the Transaction Expenses; and
(ii) 4.00% of the greater of (A) $71,500,000 or (B) the
value (calculated based on the offer price per share
of any such proposal multiplied by the number of
Shares outstanding on
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a fully diluted basis (but excluding any options not
then in-the-money)) of the Take-over Proposal having
the highest value from time to time considered by the
Company, whether or not there is a Take-over
Proposal. Such payment shall be made in immediately
available funds to an account designated by the
Offeror. In the event there is more than one
Take-over Proposal, or a Take-over Proposal is
proposed to the Company for the first time after a
fee has been paid to the Offeror pursuant to this
section, then the fee required to be paid hereby
shall be recalculated and any incremental fee shall
be paid to the Offeror within one business day after
the event that gives rise to the recalculation;
provided that, except as provided above with respect
to any incremental fee, the Company shall only be
obliged to make one payment under this section 3.1
In the event that any Take-over Proposal is for consideration other
than all cash, then the value of that Take-over Proposal shall be as
determined by agreement by the financial advisors to the Offeror and
the Company, or failing such agreement, the value of the Take-over
Proposal shall be calculated to be the greater of:
(i) $71,500,000; and
(ii) if the non-cash consideration consists of securities
listed on a stock exchange or other stock quotation
system, the aggregate of the amount of cash offered
in connection with such Take.-over Proposal and the
value of the non-cash consideration being offered,
valued on the basis of the weighted average of the
closing price of the relevant securities on such
stock exchange or system for the 20 business days
preceding the day the public announcement of the
Take-over Proposal is made.
3.2 RIGHT OF FIRST REFUSAL
The Company covenants that it will not enter into any agreement
regarding a Take-over Proposal (the "Proposed Agreement") without
providing the Offeror with an opportunity to amend this Agreement to
provide for substantially similar terms to those included in the
Proposed Agreement. In particular, the Company covenants to provide the
Offeror with a copy of any Proposed Agreement as executed by the party
making the proposal, at least 48 hours prior to its proposed execution
by the Company. In the event the Offeror agrees to amend this Agreement
as provided above, the Company covenants not to enter into the Proposed
Agreement.
3.3 OTHER FEES
If the Company breaches any of its covenants, representations or
warranties hereunder or otherwise fails to perform any of its
obligations hereunder in any material respect, the Company shall pay to
the Offeror an amount equal to the Offeror's Transaction Expenses. If
the Offeror breaches any of its covenants, representations or
warranties hereunder or otherwise fails to perform any of its
obligations hereunder in any material respect, the Offeror shall pay to
the Company an amount equal to the Company's Transaction Expenses.
Notwithstanding the foregoing, in the event that either party is
required to file suit to seek payment of any amount due to it
hereunder, and it ultimately succeeds on the merits, such party shall
be entitled to all expenses, including reasonable attorneys' fees,
which it has incurred in enforcing its rights hereunder.
3.4 LIMITATION
Nothing contained in this Article 3, including the payment of any
amount under section 3.1 or 3.3, shall, however, relieve or have the
effect of resulting in relieving any party in any way from liability
for damages incurred or suffered by a party as a result of a breach of
this agreement by a party acting in bad faith intended and designed to
result in the conditions precedent to this Agreement not being
satisfied.
3.5 DEFINITIONS
In this Article 3 and in the Schedules to this Agreement:
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(a) "Material Adverse Effect" and "Material Adverse Change" means
an effect or change, respectively, in each case which is
materially adverse to the business, assets, properties,
condition (financial or otherwise), results of operations or
prospects of the Company and its Subsidiaries, taken as a
whole; provided that a Material Adverse Effect or Material
Adverse Change shall not include any adverse effect or change
in the Company's operations resulting from changes in general
economic conditions generally affecting the industries in
which the Company operates; and
(b) "Take-over Proposal" means any take-over bid for 50% or more
of the issued and outstanding Shares or any proposal or offer
for a merger, consolidation, amalgamation or other business
combination involving the Company or any proposal or offer to
acquire in any manner a 50% or greater equity or beneficial
interest in, or a material amount of the assets of, the
Company, other than pursuant to the Offer.
3.6 TRANSACTION EXPENSES
As used in this Agreement, the term "Transaction Expenses" means all
reasonable out-of-pocket expenses and fees actually incurred or accrued
by the Offeror or the Company, as the case may be, or on its behalf in
connection with this Agreement, the Offer and the other transactions
contemplated hereby (including, without limitation, all fees and
expenses of counsel, financial advisors, banks or other entities
providing financing to such party, accountants and other experts and
consultants to such party), and in connection with the negotiation,
preparation, execution, performance and termination of this Agreement
and the transactions contemplated hereby, provided that in no event
shall such expenses and fees exceed $150,000 in the aggregate.
3.7 FORM OF PAYMENTS
All payments made pursuant to this Articles 3 shall be paid within two
(2) days of demand in same day funds in accordance with written
instructions furnished by the payee to the payor at the time of
payment.
ARTICLE 4
COVENANTS OF THE OFFEROR
4.1 EMPLOYMENT AGREEMENTS
The Offeror covenants and agrees, and after the Effective Date will
cause the Company and any successor to the Company to agree, to honour
and comply with the terms of those existing employment and severance
agreements, plans or policies of the Company and its Subsidiaries which
are set forth or described in the Disclosure Schedule attached hereto
or in the material referred to therein.
4.2 DIRECTORS' AND OFFICERS' INSURANCE
The Offeror agrees to use reasonable efforts to secure directors' and
officers' liability insurance coverage for the Company's current and
former directors and officers on a six (6) year "trailing" or "run off"
basis from and after the Effective Date; provided that such insurance
coverage does not have an aggregate cost in excess of $250,000. If a
trailing policy is not available, then the Offeror agrees that for the
entire period from the Effective Date until three years after the
Effective Date, the Offeror will exercise its reasonable best efforts
to cause the Company or any successor to the Company to maintain the
Company's current directors' and officers' insurance policy or an
equivalent policy, subject in either case to terms and conditions, in
the aggregate, no less advantageous to the directors and officers of
the Company than those contained in the policy in effect on the date
hereof, for all present and former directors and officers of the
Company, covering claims made prior to or within three (3) years after
the Effective Date; provided however, that in the event the annual
premium required to maintain in effect the policy that is in effect on
the date hereof exceeds the annual premium currently paid by the
Company (which is acknowledged by the parties to be the sum of
$104,000), the Offeror (or other surviving corporation) shall obtain
such lesser coverage as may be obtained for the presently effective
premium. Further, the Offeror agrees that after the expiration of such
three (3) year period it will use reasonable
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efforts to cause such directors and officers to be covered under its
then existing directors' and officers' insurance policy.
4.3 DIRECTORS' AND OFFICERS' INDEMNIFICATION
From and after the Effective Date, the Offeror shall indemnify, defend
and hold harmless, in each case to the full extent permitted under
applicable law and currently permitted in the by-laws of the Offeror,
each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Date, an officer or
director of the Company and any of its Subsidiaries, their respective
heirs, executors, administrators and other legal representatives (the
"Indemnified Individuals") against all losses, claims, damages, costs,
expenses, liabilities or judgements or amounts that are paid in
settlement of or in connection with any claim, action, suit, proceeding
or investigation based in whole or in part on or arising in whole or in
part out of the fact that such person is or was a director or officer
of the Company or any of its Subsidiaries, pertaining to any matter
existing or occurring at or prior to the Effective Date and whether
asserted or claimed prior to, or at or after, the Effective Date;
provided, however, that:
(a) the Offeror shall not be required to pay the fees and
disbursements of more than one Counsel for all Indemnified
Individuals in any single action unless there is a conflict of
interest between two or more of such Indemnified Individuals;
(b) the Offeror shall not be liable for any settlement effected
without its written consent (which consent will not be
unreasonably withheld or delayed); and
(c) such indemnification shall not be available to an officer or
director unless, in respect of the matter for which
indemnification is sought,
(i) he acted honestly and in good faith with a view to
the best interests of the Company; and
(ii) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, he
had reasonable grounds for believing that his conduct
was lawful.
Notwithstanding the foregoing, the Offeror acknowledges and agrees
that:
(d) the Company is currently a party to an amended and restated
indemnification agreement (the "Existing Indemnity") in the
form attached as Schedule "E" to this Agreement, with each of
the directors and officers of the Company;
(e) the indemnity contained in this section 4.3 shall not derogate
from or lessen the obligations of the Company under the
Existing Indemnity; and
(f) the Offeror agrees to observe, adhere to and fulfill, and
cause the Company to observe, adhere to and fulfill, the
obligations of the Company under the Existing Indemnity as
though the Offeror was a party to the Existing Indemnity and
bound by the terms of the Existing Indemnity applicable to the
Company.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.1 REPRESENTATIONS
The Company hereby provides to the Offeror those representations and
warranties as set forth in Schedule "C" to this Agreement (and
acknowledges that the Offeror is relying upon those representations and
warranties in connection with entering into this Agreement). The
representations and warranties set forth in Schedule "C" hereto shall
not survive the Effective Time.
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5.2 INVESTIGATION
Except as acknowledged in section 5.3 hereof, any investigation by the
Offeror and its directors, officers, employees, advisors or
representatives shall not mitigate, diminish or affect the
representations and warranties of the Company provided pursuant to this
Agreement.
5.3 ACKNOWLEDGEMENT
Except for such consents, waivers and approvals as may be required
under:
(a) the debenture granted by Central Western Railway Corporation
in favor of Canadian National Railway Company in respect of
the Lakeland & Waterways lines;
(b) any debenture granted by Central Western Railway Corporation
in favor of Canadian National Railway Company in respect of
the Coronado-Bonnyville lines;
(c) the business cooperation agreement between the Company,
RaiLink Canada Ltd. and Canadian National Railway Company in
respect of the Mackenzie Northern lines;
(d) the business cooperation agreement between the Company,
Central Western Railway Corporation and Canadian National
Railway Company in respect of the Coronado-Bonnyville lines;
and
(e) Article 11 of the amended and restated unanimous shareholders
agreement in respect of Quebec Railway Company,
(all as referred to in the Disclosure Schedule attached hereto), the
Offeror acknowledges and agrees that, based solely on the disclosure
made in the Disclosure Schedule attached hereto and the materials
referred to therein, it is not aware of any fact or circumstance that,
in its judgement, would cause the conditions under section 4(b) of
Schedule "A" to not be satisfied or to otherwise allow the Offeror to
avoid completing the Offer.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE OFFEROR
6.1 REPRESENTATIONS
The Offeror hereby represents and warrants to the Company as provided
in Schedule "D" to this Agreement (and acknowledges that the Company is
relying upon such representations and warranties in connection with the
entering into of this Agreement). The representations and warranties
set forth in Schedule "D" hereto shall not survive the Effective Time.
6.2 INVESTIGATION
Any investigation by the Company and its directors, officers,
employees, advisors or representatives shall not mitigate, diminish or
affect the representations and warranties of the Offeror provided
pursuant to this Agreement.
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ARTICLE 7
MUTUAL COVENANTS
7.1 CONSULTATION
The Offeror and the Company agree to consult with each other in issuing
any press releases or otherwise making public statements with respect
to the Offer or any other Acquisition Proposal and in making any
filings with any federal, provincial or state governmental or
regulatory agency or with any securities exchange with respect thereto.
Each party shall enable the other party to review and consent to all
such press releases prior to release thereof.
7.2 FURTHER ASSURANCE
Subject to the terms and conditions herein, the Offeror and the Company
agree to use their respective reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations,
to consummate the transactions contemplated by this Agreement and the
Offer. The Company and the Offeror will, and will cause each of their
respective Subsidiaries to, use their reasonable efforts to:
(a) obtain all necessary waivers, consents and approvals from
other parties to material loan agreements, leases and other
contracts or agreements (including, in particular but without
limitation, the agreement of any persons as may be required
pursuant to any agreement, arrangement or understanding
relating to the Company's operations),
(b) obtain all necessary consents, approvals and authorizations as
are required to be obtained under any federal, provincial or
foreign law or regulations with respect to this Agreement or
the Offer,
(c) lift or rescind any injunction or restraining order or other
order adversely affecting the ability of the parties to
consummate the transactions contemplated hereby or by the
Offer, and
(d) fulfill all conditions and satisfy all provisions of this
Agreement and the Offer.
For greater certainty, the Company and the Offeror agree that an order
of a regulatory authority having jurisdiction which cease trades the
Rights issued pursuant to the Shareholder Rights Plan does not in and
of itself constitute a breach of this Agreement, or relieve either
party of its obligations hereunder.
7.3 COMPANY BOARD REPRESENTATION
Promptly upon the Minimum Condition being satisfied and the purchase by
the Offeror of Shares pursuant to the Offer, that number of directors
of the Company which applicable law permits to be replaced, upon their
resignation, by nominees of the Offeror without the calling of a
meeting of the Shareholders of the Company shall resign and shall be
replaced by nominees of the Offeror and the board of directors shall
take all steps necessary, in accordance with applicable law, to give
effect to the foregoing. Notwithstanding the foregoing, until the
Effective Time, the board of directors of the Company shall have at
least one director who is a director on the date hereof and who is not
a designee or officer, director, employee or affiliate of the Offeror
or officer or employee of the Company ("Independent Director").
Following the date hereof and prior to the Effective Time, any
amendment or termination of this Agreement by the Company, extension
for the performance or waiver of the obligations of the Offeror by the
Company, or waiver of the Company's rights hereunder, shall require the
concurrence of the Independent Director.
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ARTICLE 8
TERMINATION
8.1 TERMINATION
This Agreement may be terminated at any time prior to the first day
upon which the Offeror takes up and pays for all Shares deposited and
not withdrawn under the Offer (the "Effective Date"):
(a) by mutual written consent of the Offeror and the Company;
(b) by either the Offeror or the Company, if the Minimum Condition
or any other condition of the Offer has not been satisfied or
waived by August 15, 1999; provided however, that the right to
terminate this Agreement under this section 8.1(b) shall not
be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or
resulted in, the failure to satisfy any such condition of the
Offer;
(c) by the Offeror, in the event that the fee contemplated in
Section 3.1 shall have been paid or become payable by the
Company to the Offeror in accordance with the terms thereof;
or
(d) by the Company if:
(i) the board of directors of the Company shall have
determined in good faith (after consultation with its
financial and legal advisors), that it is necessary
to terminate this Agreement to enter into a written
agreement with respect to or to consummate a
transaction constituting a Superior Proposal,
(ii) the Company shall have given notice to the Offeror
advising the Offeror that it has received a Superior
Proposal from a third party, specifying the material
terms and conditions of such Superior Proposal
(including the identity of the third party) and the
material terms and conditions of any agreements or
arrangements to be entered into in connection with a
Superior Proposal and that the Company intends to
terminate this Agreement in accordance with this
section 8.1 (d), and
(iii) either:
(A) the Offeror shall not have revised its Offer
within 48 hours after the date on which such
notice is deemed to have been given to the
Offeror hereunder, or
(B) if the Offeror within such period shall have
revised the Offer, the board of directors of
the Company, after receiving advice from its
financial advisor, shall have determined, in
its good faith reasonable judgement that the
third party's Acquisition Proposal is
superior to the Offeror's revised
Acquisition Proposal; provided that the
Company may not effect such termination
pursuant to this section 8.1(d) unless the
Company has complied with the provisions of
section 3.1 hereof contemporaneously with
such termination and tendered payment to the
Offeror of the Termination Fee and
Transaction Expenses that are due to the
Offeror pursuant to Article 3 hereof;
(e) by the Company, if the Offeror does not announce the Offer as
provided in section 1.4 or does not mail the Offer as provided
in section 1.1, provided in either case that no Fee Event has
occurred;
(f) by either the Company or the Offeror, in the event that the
other of them shall not have complied with or performed, in
all material respects, its covenants and obligations under
this Agreement to be complied with or performed at or prior to
the Expiry Date, or any of the representations and warranties
of the other of them under this Agreement are not true and
correct in all material respects at or prior to the Expiry
Date.
8.2 EFFECT OF TERMINATION
If this Agreement is terminated as provided in section 8.1 above, all
obligations of the parties hereto shall terminate, without any
liability or obligation on the part of the Company or the Offeror,
except obligations of the parties under section 2.3 (Access to
Information) and Article 3. No termination of this
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Agreement shall affect the obligations of the parties pursuant to the
letter agreement between the parties dated March 19, 1999, except to
the extent specified herein or therein.
ARTICLE 9
MISCELLANEOUS
9.1 AMENDMENT OR WAIVER
This Agreement may be amended, modified or superseded, and any of the
terms, covenants, representations, warranties or conditions hereof may
be waived, but only by written instrument executed by the Offeror and
the Company; provided, however, that either the Offeror or the Company
may in its discretion waive a condition herein which is solely for its
benefit without the consent of the other. No waiver of any nature, in
any one or more instances, shall be deemed or construed as a further or
continued waiver of any condition or any breach of any other term,
representation or warranty in this Agreement.
9.2 ENTIRE AGREEMENT
This Agreement and the documents referred to herein constitute the
entire agreement between the parties with respect to the subject matter
hereof and supersede all prior agreements, arrangements or
understandings with respect thereto, except the letter agreement
between the parties dated March 19, 1999.
9.3 HEADINGS
The insertion of descriptive headings in this Agreement are for
convenience of reference only and shall not control or affect the
meaning of construction of any provisions of this Agreement. Unless
otherwise stated, all references herein to sections and schedules are
to be sections and schedules in this Agreement.
9.4 NOTICES
All notices or other communications which are required or permitted
hereunder shall be communicated confidentially and in writing and shall
be sufficient if delivered personally, or sent by confidential
telecopier addressed as follows:
To the Offeror: Xxxx X. Xxxxxx
Chairman, President and CEO
Xxxxx 0000, 000 Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx, XXX 00000
Fax: (561) 994 - 3929
with a copy to: Xxxxxxxxx Traurig, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx, XXX 00000
Attention: Xxxx X. Xxxxxxx
Fax: (000) 000-0000
with a copy to: Xxxxxx Blaikie
0000 Xxxx-Xxxxxxxx Xxxx. Xxxx
Xxxxx 0000
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Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxx Clerk
Fax: (000) 000-0000
To the Company: RaiLink Ltd.
1165 Xxxxx Centre
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxx X. Xxxxxxxxx
President and CEO
Fax: (780) 439 - 5658
with a copy to: Fraser Xxxxxx
Banisters and Solicitors
0000 Xxxxxxxx Xxxxx
00000 - 000 Xxxxxx
Xxxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxx X. Xxxx
Fax: (780) 423 - 7276
9.5 COUNTERPARTS
This Agreement may be executed in any number of counterparts and each
such counterpart shall be deemed to be an original instrument but all
such counterparts together shall constitute one agreement.
9.6 EXPENSES
Except as otherwise provided in Article 3 hereof, each party will pay
its own expenses. The Offeror and the Company represent and warrant to
each other that, except for HSBC Securities in the case of the Company
and RBC Dominion Securities in the case of the Offeror, no broker,
finder or investment banker is entitled to any brokerage, finder's or
other fee or commission, or to the reimbursement of any of its
expenses, in connection with the Offer. The Company has provided to the
Offeror a correct and complete copy of all agreements between the
Company and each of its financial advisors as are in existence at the
date hereof. The Company covenants not to amend the terms of any such
agreement relating to the payment of fees and expenses or indemnities
without the prior written approval of the Offeror.
9.7 ASSIGNMENT
The Offeror may assign all or any part of its rights or obligations
under this Agreement to a direct or indirect wholly-owned subsidiary of
the Offeror, provided that if such assignment takes place, the Offeror
shall continue to be liable to the Company for any default in
performance by the assignee. This Agreement shall not otherwise be
assignable by either party without the prior written consent of the
other party.
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9.8 SEVERABILITY
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated and the
parties shall negotiate in good faith to modify the Agreement to
preserve each party's anticipated benefits under the Agreement.
9.9 CHOICE IN LAW
This Agreement shall be governed by, construed and interpreted in
accordance with the laws of the Province of Alberta. The parties hereby
agree to submit to the courts of the Province of Alberta for all
matters arising out of or in connection with this Agreement or any
transactions contemplated hereby.
9.10 CURRENCY
All references herein to monetary amounts refer to Canadian dollars
unless otherwise specified.
9.11 REMEDIES
The parties hereto 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 unconditionally and irrevocably agreed that the parties
shall be entitled to an injunction or injunctions to remedy or prevent
noncompliance or breaches with the terms of this Agreement and to
enforce specifically the terms and provisions hereof in any court
having jurisdiction, without the requirement to post bond or other
security and without proof of actual damages in the event of any actual
or threatened non-compliance or breach; provided that such remedies
shall be in addition to, and not in substitution for, any other remedy
to which the parties may be entitled at law or in equity.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed on their behalf by their officers thereunto duly authorized as of the
date first written above.
RAILAMERICA INC.
Per: /s/ Xxx Xxxxxxx
----------------------------
RAILINK LTD.
Per: /s/ Signature Illegible
----------------------------
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SCHEDULE "A"
TERMS OF THE OFFER
1. General Terms
The Offer shall be made by a circular bid prepared in compliance with
the Securities Act (Alberta) and other applicable provincial securities laws and
in accordance with applicable securities laws to United States Shareholders.
2. Expiry Date
The Offer shall be open until the date (the "Expiry Date") which is 21
days from the date of mailing of the Offer (provided that the Offeror may extend
such period of time in its sole discretion).
3. Offer Price
The Offer shall provide that the Offeror shall pay $8.75 for each Share
of the Company (including Shares which may become outstanding on the exercise of
options, warrants or other rights to purchase Shares (other than any rights
issued pursuant to the Shareholder Rights Agreement)("Shares"). In the event the
outstanding number of Shares is changed into a different number of shares or a
different class, by reason of any stock dividend, reclassification,
recapitalization, split, division, combination or exchange of shares, then the
purchase price per Share shall be correspondingly adjusted as necessary to
reflect such occurrence without increasing the aggregate purchase price to be
paid by the Offeror hereunder. The Offeror shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Shares such amounts as the Offeror is required to deduct or
withhold with respect to any such payment under any provision of any applicable
state, local or foreign tax law. To the extent such amounts are so withheld and
paid over to the appropriate taxing authority or paying agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
by the Offeror to the applicable holder of the Shares.
4. Conditions of the Offer
Notwithstanding any other provision of the Offer, the Offeror shall not
be required to accept for payment or pay for any Shares tendered pursuant to the
Offer, arid may terminate or amend the Offer and may postpone the acceptance for
payment of and payment for Shares tendered, at any time on or after the date of
this Agreement, and prior to the acceptance for payment of the Shares, if any of
the following conditions is not satisfied:
(a) at the expiry time there shall have been validly deposited
under the Offer and not withdrawn at least 66 2/3% of the
outstanding Shares (calculated on a fully diluted basis)
excluding Shares held by the Offeror and its associates and
affiliates and by persons whose Shares may not be voted as
part of the minority on any subsequent going private
transaction pursuant to Ontario Securities Commission Policy
9.1 and Quebec Securities Commission Policy Q-27 (the "Minimum
Condition");
(b) the Offeror shall have determined in its sole judgement that:
(i) no material right, franchise or license of the
Company or any of its Subsidiaries has been or may be
impaired or threatened to be impaired (which
impairment has not been cured or waived) or otherwise
adversely affected, whether as a result of the making
of the Offer, the taking up and paying for Shares
deposited under the Offer or otherwise which makes it
inadvisable for the Offeror to proceed with the Offer
and/or with the taking up and paying for the Shares
under the Offer, and
(ii) no covenant, term or condition of any instrument or
agreement of the Company or its Subsidiaries or by
which they or their assets are bound exists which
makes it inadvisable for the Offeror to proceed with
the Offer and/or with the taking up and paying for
the Shares under the Offer (including without
limitation any default, acceleration or other adverse
event that may ensue as a result of the Offeror
taking up and paying for the Shares under the Offer);
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(c) no act, action, suit or proceeding shall have been taken
before or by any federal, provincial, state or foreign court
or other tribunal or governmental agency or other regulatory
or administrative agency or commission or by any elected or
appointed public official whether or not having the force of
law, and no law, regulation or policy shall have been
proposed, enacted, promulgated or applied, whether or not
having the force of law, which could reasonably be expected to
have the effect of:
(i) making illegal, or otherwise directly or indirectly
restraining or prohibiting or making materially more
costly, or adversely affecting the ability of the
Offeror to proceed with, the making of the Offer, the
acceptance for payment of, payment for, or ownership,
directly or indirectly, of some or all of the Shares
by the Offeror, the completion of a compulsory
acquisition or any subsequent acquisition transaction
or the consummation of any of the transactions
contemplated by the Offer;
(ii) prohibiting the ownership or operation by the Company
or any of its Subsidiaries, or by the Offeror,
directly or indirectly, of all or any material
portion of the business or assets of the Company, or
any of its Subsidiaries, on a consolidated basis, or
compelling the Offeror, directly or indirectly, to
dispose of or hold separate all or any material
portion of the business or assets of the Company, or
any of its Subsidiaries, on a consolidated basis, as
a result of the transactions contemplated by the
Offer;
(iii) imposing or confirming limitations on the ability of
the Offeror, directly or indirectly, effectively to
acquire or hold or to exercise full rights of
ownership of the Shares, including without limitation
the right to vote any Shares acquired or owned by the
Offeror, directly or indirectly, on all matters
properly presented to the Shareholders of the
Company, including without limitation the right to
vote any shares of capital stock of any Subsidiary
(other than immaterial Subsidiaries) directly or
indirectly owned by the Company;
(iv) requiring divestiture by the Offeror, directly or
indirectly, of any Shares or material assets of the
Company or its Subsidiaries; or
(v) materially adversely affecting the business,
financial condition or results of operations of the
Company and its Subsidiaries taken as a whole or the
value of the Shares to the Offeror;
(d) there shall not exist any prohibition at law against the
Offeror making the Offer or taking up and paying for all of
the Shares under the Offer or completing any compulsory
acquisition or any subsequent acquisition transaction;
(e) there shall not have occurred following the date of the
Pre-Acquisition Agreement, any change (or any condition, event
or development involving a prospective change) in the
business, operations, assets, capitalization, financial
condition, licenses, permits, rights, privileges, prospects or
liabilities (including without limitation any contingent
liabilities that may arise through outstanding, pending or
threatened litigation or otherwise), whether contractual or
otherwise, of the Company or any of its Subsidiaries which, in
the sole judgement of the Offeror, is or would be materially
adverse to the business or condition, financial or otherwise,
of the Company and its Subsidiaries considered on a
consolidated basis or to the value of the Shares to the
Offeror;
(f) the board of directors of the Company shall have redeemed all
outstanding Rights or waived the application of the Company's
Shareholder Rights Plan to the Offer;
(g) (i) the board of directors of the Company or any
committee thereof shall not have withdrawn or
modified in any manner adverse to the Offeror the
approval or recommendation of the Offer and shall not
have approved or recommended any proposal or any
other acquisition of Shares other than the Offer,
(ii) any corporation, partnership, person or other entity
or group, other than the Offeror, shall not have
entered into a definitive agreement or an agreement
in principle with the Company, with respect to a
take-over bid, tender offer or exchange offer,
acquisition of Shares other than pursuant to the
Offer, merger, sale of assets, amalgamation, plan of
arrangement, reorganization, consolidation, business
combination, recapitalization,
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liquidation, dissolution or similar transaction with
or involving the Company or any of its Subsidiaries,
or
(iii) the board of directors of the Company or any
committee thereof shall not have resolved to do any
of the foregoing;
(h) there shall not have occurred any breach by the Company of any
of the terms of the Pre-Acquisition Agreement that has had or
is reasonably likely to have a material adverse effect or
prevent or materially delay consummation of the transactions
contemplated by the Pre-Acquisition Agreement or the Offer or
any termination of the Pre-Acquisition Agreement pursuant to
the terms thereof, and all representations and warranties of
the Company thereunder shall be true and correct, in all
materials respects, on the Expiry Date as if made on such
date;
(i) it shall not have been publicly disclosed that beneficial
ownership of more than 25% of the outstanding Shares is held
or has been acquired by any corporation, partnership, person
or other entity or group of persons or entities, other than
the Offeror or any of the Offerors affiliates;
(j) all necessary governmental and regulatory consents, approvals
or exemptions necessary to enable the Offeror to acquire the
Shares pursuant to the Offer or a subsequent acquisition
transaction shall have been received on terms and conditions
satisfactory to the Offeror, acting reasonably, including,
without limitation any consent required under the Investment
Canada Act,
(k) the acquisition of an interest in controlled land as a result
of the Offeror's acquisition of the Shares shall be excluded
from the operation of the Regulations respecting the ownership
of Agricultural and Recreation Land in Alberta, pursuant to
section 14 of such regulations;
(l) there shall not have occurred any actual change (including a
proposal by the Minister of Finance of Canada to amend the
Income Tax Act (Canada) or regulations thereunder) or any
publicly stated administrative practice that directly or
indirectly increases materially the effective tax cost of, or
reduces the proceeds from, the sale or other disposition of
any assets or securities owned by the Company or any of its
Subsidiaries or that, in the judgement of the Offeror, has or
may have a material adverse effect on the Company and the
Subsidiaries (taken as a whole) or a material adverse
significance with respect to the financial condition and
prospects of the Offeror or in relation to the Offer and the
transactions contemplated thereby; and
(m) there shall not have occurred, developed or come into effect
or existence any event, action, state, condition or major
financial occurrence of national or international consequence
or any law, regulation, action, government regulation, enquiry
or other occurrence of any nature whatsoever which, in the
opinion of the Offeror, materially adversely or seriously
adversely affects or involves, or may materially adversely or
seriously adversely affect or involve, the financial markets
in Canada or the United States generally, or the financial
condition, business, operations, assets, affairs or prospects
of the Company and its Subsidiaries (taken as a whole).
The foregoing conditions are for the sole benefit of the Offeror and may be
asserted by the Offeror regardless of the circumstances giving rise to any such
condition or may be waived by the Offeror in whole or in part at any time and
from time to time in its sole and absolute discretion. The failure by the
Offeror at any time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right; the waiver of any such right with respect to
particular facts and circumstances; and each such right shall be deemed an
ongoing right that may be asserted at any time and from time to time.
A-3
21
SCHEDULE "B"
JOINT PRESS RELEASE
FOR IMMEDIATE RELEASE
RaiLink Ltd.
TSE Symbol: RLK
RailAmerica, Inc.
NASDAQ NNM Symbol: RAIL
RAILINK LTD. AGREES TO CDN$8.75 PER SHARE ALL CASH BID BY RAILAMERICA, INC.
EDMONTON, ALBERTA, CANADA and BOCA RATON, FLORIDA, USA: May 17, 1999 -- RaiLink
Ltd. ("RaiLink") and RailAmerica, Inc. ("RailAmerica") announced today that they
have entered into an agreement pursuant to which RailAmerica will, on or prior
to May 28, 1999, commence an all cash bid for all of the common shares of
RaiLink at a price of Cdn. $8.75 per share. The agreement with RailAmerica is
the result of RaiLink's previously announced process to identify parties
interested in pursuing a transaction with the Company to enhance shareholder
value. Upon the unanimous recommendation of the independent special committee of
the Board of Directors established in connection with the Company's process, the
Board of Directors of RaiLink is unanimously recommending that shareholders
accept the offer.
Xxxxxx Xxxxxxxxx, President and Chief Executive Officer of RaiLink, said "we are
enthusiastic about the offer being made by RailAmerica. In addition to providing
an attractive price to our shareholders, the combined operations of RaiLink and
RailAmerica will provide further opportunities for growth and advancement in our
industry."
Xxxx X. Xxxxxx, RailAmerica, Inc. Chairman, President and CEO, said, "All of us
at RailAmerica look forward to the consolidation of RaiLink's fine portfolio of
Canadian rail properties with our North American rail operations. We believe
that there are significant synergies and benefits to be derived from a larger
core group of railroads. Upon completion of the transaction, RailAmerica will
operate more than 3,700 miles of railroads in North America and approximately
8,100 miles worldwide, making us one of the largest rail operators in the rail
industry."
The offer of Cdn. $8.75 per common share represents a substantial premium to the
RaiLink share price prior to the March 10, 1999 announcement that RaiLink had
commenced a process to identify parties interested in pursuing a possible
business combination. As of May 14, 1999, RaiLink had approximately 8.35 million
common shares outstanding on a fully diluted basis, giving the transaction a
potential equity value of approximately Cdn. $73.2 million.
The takeover bid offer will be made by a wholly-owned subsidiary of RailAmerica,
Inc. The offer will be open for acceptance for a period of 21 days from the date
of mailing of the offer, unless the offer is withdrawn or extended. The bid is
conditional upon, among other things, at least 66 2/3% (on a fully-diluted
basis) of the common shares of RaiLink being validly deposited under the offer
and not withdrawn, and the receipt of any required regulatory approvals.
In connection with the agreement, RaiLink has agreed not to initiate or seek a
competing transaction to RailAmerica's offer. RaiLink has also agreed to pay a
"break fee" equal to a minimum of Cdn. $2.86 million to RailAmerica in certain
specified circumstances, including if any other person acquires shares of
RaiLink carrying more than 50% of the outstanding voting rights.
HSBC Securities has provided RaiLink with an opinion that the consideration to
be offered under the offer by RailAmerica is fair, from a financial point of
view, to holders of common shares of RaiLink. RBC Dominion Securities has been
retained by RailAmerica as dealer manager for the offer.
B-2
22
RaiLink is a publicly traded regional railway company based in Edmonton, Alberta
and provides freight transportation services to the national railways and to a
wide variety of shippers. RaiLink and its 26.3% owned affiliate, Quebec Railway
Corporation, currently operate eleven regional railways covering approximately
2,500 miles of track in Alberta, the Xxxxxxxxx Xxxxxxxxxxx, Xxxxxxx, Xxxxxx and
New Brunswick. RaiLink's common shares trade under the symbol RLK on the Toronto
Stock Exchange.
RailAmerica, Inc., a diversified international transportation company, operates
14 railroads over approximately 5,600 xxxxx xxxxx xx xxxxx X.X. xxxxxx,
Xxxxxxxxx, Xxxxxx and the Republic of Chile. The Company holds a minority equity
interest in Australia's transcontinental passenger rail service and owns
Kalyn/Xxxxxxx, Inc., a specialty truck trailer manufacturer with production
facilities in Gatesville, Texas and Trois-Rivieres, Quebec, Canada.
This press release contains forward-looking statements regarding future events
and the future performance of the companies that involve risks and uncertainties
that could cause actual results to differ materially, including, but not limited
to, economic conditions, customer demand, increased competition in the relevant
market, and others. We refer you to the documents that RailAmerica files from
time to time with the Securities and Exchange Commission in the United States,
such as the Form 10-K, Form 10-Q and Form 8-K reports of RailAmerica, 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.
For information contact: RaiLink Ltd.
Xxxxxx Xxxxxxxxx
President and Chief Executive Officer
(000) 000-0000
RailAmerica Inc.
Xxxxx August
Director of Investor Relations
(000) 000-0000
X-0
00
XXXXXXXX "X"
XXXXXXXXXXXXXXX AND WARRANTIES OF THE COMPANY
1. ORGANIZATION
The Disclosure Schedule or the materials referred to therein sets forth, as of
the date hereof, a true and correct list of all of the Subsidiaries of the
Company, together with the jurisdiction of organization and qualification of
each Subsidiary and the percentage of the outstanding capital stock (or other
ownership interest) of each Subsidiary owned by the Company and each other
Subsidiary. Except as described or set forth in the Disclosure Schedule attached
hereto or in the material referred to therein, the Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
Each of the Company and its Subsidiaries, has been duly incorporated or formed
under applicable law, is validly existing and has full corporate or legal power
and authority to own its properties and conduct its businesses as presently
owned and conducted. All of the outstanding shares of capital stock and other
ownership interests of the Subsidiaries are validly issued, fully paid and
non-assessable and all such shares and other ownership interests owned directly
or indirectly by the Company are owned free and clear of all liens, claims or
encumbrances, and except as described or set forth in the Disclosure Schedule
attached hereto or in the material referred to therein, there are no outstanding
options, rights, entitlements, understandings or commitments (contingent or
otherwise) regarding the right to acquire any shares of capital stock or other
ownership interests in any of the Subsidiaries.
2. CAPITALIZATION
As of the date hereof, there are 8,043,746 Shares issued and outstanding, which
Shares constitute all of the issued and outstanding shares of the capital stock
of the Company. All of the Shares are validly issued, fully paid and
non-assessable and are not subject to preemptive rights. The Disclosure Schedule
or the materials referred to therein sets forth a complete and correct list, as
of the date hereof, of the holders of all options, warrants, stock appreciation
rights or other rights (excluding the Rights) relating to the issued or unissued
capital stock of the Company or any of its Subsidiaries, the number shares
subject to each such option, warrant, stock appreciation rights or other rights,
and the exercise prices thereof, As at the date hereof, up to a maximum of
427,284 Shares may be issued pursuant to outstanding stock option entitlements.
Except as set forth in the Disclosure Schedule or the materials referred to
therein, there are no options, warrants, conversion privileges or other rights,
agreements, arrangements or commitments obligating the Company or any Subsidiary
to issue or sell any shares of any capital stock of the Company or any of its
Subsidiaries or securities or obligations of any kind convertible into or
exchangeable for any shares of capital stock of the Company, any Subsidiary or
any other person, nor is there outstanding any stock appreciation rights,
phantom equity or similar rights, agreements, arrangements or commitments based
upon the book value, income or any other attribute of the Company or any
Subsidiary. There are no outstanding contractual obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any Shares of
the Company's capital stock or any capital stock of any Subsidiary of the
Company.
3. AUTHORITY
The Company has the requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated by this Agreement have been duly authorized by the
board of directors of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or the transaction
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms subject to
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and
other laws relating to or affecting creditors' rights generally and to general
principles of equity. Except as described or set forth in the Disclosure
Schedule attached hereto or in the material referred to therein, the execution
and delivery by the Company of this Agreement and performance by it of its
obligations hereunder and the completion of the Offer and the transactions
contemplated thereby, will not:
(a) result in a violation or breach of, require any consent to be
obtained under or give rise to any termination rights under
any provision of:
C-1
24
(i) its or any Subsidiary's certificate of incorporation,
articles, by-laws or other charter documents,
including any shareholder agreement or any other
agreement or understanding with any party holding an
ownership interest in any Subsidiary;
(ii) any law, regulation, order, judgement or decree; or
(iii) any material contract, agreement, license, franchise
or permit to which the Company or any Subsidiary is
bound or is subject or is the beneficiary;
(b) give rise to any right of termination or acceleration of
indebtedness, or cause any indebtedness to come due before its
stated maturity or cause any available credit to cease to be
available; or
(c) result in the imposition of any encumbrance, charge or lien
upon any of its assets or the assets of any Subsidiary, or
restrict, hinder, impair or limit the ability of the Company
or any Subsidiary to carry on the business of the Company or
any Subsidiary as and where it is now being carried on or as
and where it may be carried on in the future.
4. ABSENCE OF CHANGES
Since March 31, 1999, and except as has been publicly disclosed in any document
filed with the Alberta Securities Commission:
(a) the Company and the Subsidiaries have conducted their
respective businesses only in the ordinary course,
(b) no liability or obligation of any nature (whether absolute,
accrued, contingent or otherwise) material to the Company or
any Subsidiary has been incurred, and
(c) there has not been any material adverse change in the
financial condition, results of operations or businesses of
the Company or any Subsidiary.
5. BOOKS AND RECORDS
The corporate records and minutes books of the Company and the Subsidiaries have
been maintained in accordance with all applicable statutory requirements and are
complete and accurate in all material respects.
6. LITIGATION, ETC
Except as described or set forth in the Disclosure Schedule attached hereto or
in the material referred to therein, there is no claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
relating to the Company or any Subsidiary or affecting any of their properties
or assets before any court or governmental or regulatory authority or body that,
if adversely determined, is likely to have a material adverse effect on the
Company or any Subsidiary or prevent or materially delay consummation of the
transactions contemplated by this Agreement or the Offer, nor is the Company
aware of any basis for any such claim, action, proceeding or investigation.
Neither the Company nor any Subsidiary is subject to any outstanding order,
writ, injunction or decree that has had or is reasonably likely to have a
material adverse effect or prevent or materially delay consummation of the
transactions contemplated by this Agreement or the Offer.
7. ENVIRONMENTAL
Except as described or set forth in the Disclosure Schedule attached hereto or
in the material referred to therein, neither the Company nor any Subsidiary:
(a) is aware of, or has received:
(i) any order or directive which relates to environmental
matters, and which requires any material work,
repairs, construction, or capital expenditures; or
C-2
25
(ii) any demand or notice with respect to the material
breach of any environmental, health, or safety law
applicable to the Company or any Subsidiary,
including, without limitation, any regulations
respecting the use, storage, treatment,
transportation, or disposition of environmental
contaminants.
(b) is aware of any material adverse fact relating to the
environmental condition of its real property or any
environmental assessment or survey of their real property that
discloses an environmental condition which materially impairs
or would materially impair the value or utility of the
business of the Company or its Subsidiaries or which would
impose material remediation costs on the Offeror, the Company
or its Subsidiaries.
8. INSURANCE. Policies of insurance in force as of the date hereof naming
the Company as an insured adequately cover all risks reasonably and
prudently foreseeable in the operation and conduct of the business of
the Company and the Subsidiaries as would be customary in respect of
the business carried on by the Company. All such policies of insurance
shall remain in force and effect and shall not be cancelled or
otherwise terminated as a result of the transactions contemplated
hereby or by the Offer.
9. UNITED STATES ASSETS, SALES AND OWNERSHIP. The Company and its
Subsidiaries had no assets in the United States as at December 31,
1998, and had no sales attributable to United States operations or
assets in the fiscal year ended December 31, 1998. The Company does not
have actual knowledge that the level of ownership by U.S. holders of
the Company's Shares equals or exceeds 25% of the total of such
outstanding class of securities. The term "U.S. holder" means any
person whose address appears on the records of the Company, any voting
or other trustee, any depository, any share transfer agent or any
person acting in a similar capacity on behalf of the Company, as being
located in the United States.
10. TAX MATTERS.
(a) Definitions
For purposes of this Agreement, the following definitions
shall apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or
other additions that may become payable in respect
thereof, imposed by any federal, provincial,
territorial, state, local or foreign government or
any agency or political subdivision of any such
government, which taxes shall include, without
limiting the generality of the foregoing, all income
or profits taxes (including, but not limited to,
federal income taxes, provincial income taxes and
income tax of a non-Canadian jurisdiction), payroll
and employee withholding taxes, unemployment
insurance, social insurance taxes, sales and use
taxes, goods and services taxes, customs duties,
withholding taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal
property taxes, stamp taxes, environmental taxes,
transfer taxes, workers' compensation, health tax and
other governmental charges, and other obligations of
the same or of a similar nature to any of the
foregoing, which the Company or any of its material
Subsidiaries is required to pay, withhold or collect.
(ii) The term "Returns" shall mean all reports, estimates,
declarations of estimated tax, information statements
and returns relating to, or required to be filed in
connection with, any Taxes, including all reports
with respect to withholding at source or payments to
third parties, up until and including the date the
Offer is complete.
(b) Returns Filed and Taxes Paid
All Returns required to be filed by or on behalf of the
Company or any material Subsidiaries have been duly filed on a
timely basis and such Returns are true, complete and correct
in all material respects. All Taxes shown to be payable on the
Returns or on subsequent assessments with respect thereto have
been paid in full on a timely basis, and no other Taxes are
payable by the Company or any material Subsidiaries with
respect to items or periods covered by such Returns which
would be material to the Company.
C-3
26
The Company has filed on a timely basis all Returns required
to be filed from January 1, 1999 to the date hereof. All
installments or other payments on account of Taxes that relate
to periods for which Returns are not yet due have been paid on
a timely basis. The Company is not currently the beneficiary
of any extension of time within which to file any Return. The
Disclosure Schedule or the materials referred to therein
contains a complete and accurate summary of all Canadian
federal or provincial income tax assessments that have been
issued to the Company covering all past periods up to and
including the fiscal years ended on or before the date hereof
that remain open for reassessment. The Disclosure Schedule or
the materials referred to therein contains a complete and
accurate summary of all fiscal periods that remain open for
assessment of additional taxes.
The Company has withheld, collected and paid to the proper
governmental authority all Taxes required to have been
withheld, collected and paid in connection with:
(i) amounts paid, credited or owing to any employee,
independent or dependent contractor, creditor,
shareholder, non-resident of Canada or other third
party, and
(ii) goods and services received from or provided to any
person from December 31, 1998 to date.
(c) Tax Reserves
The Company has paid or provided adequate accruals in its
financial statements for the year ended December 31, 1998 for
Taxes, including income taxes and related deferred taxes, in
conformity with generally accepted accounting principles
applicable in Canada.
(d) Returns Furnished
For all periods ending on and after December 31,
1998, the Offeror has been furnished by the Company
true and complete copies of (i) relevant portions of
income tax audit reports, statements of deficiencies,
closing or other agreements received by the Company
or any material Subsidiary or on behalf of the
Company or any material Subsidiary relating to Taxes,
and (ii) all pro-forma separate federal and
provincial income or franchise tax returns for the
Company or any material Subsidiaries.
(e) Tax Deficiencies; Audits; Statues of Limitations
Except as described or set forth in the Disclosure Schedule
attached hereto or in the material referred to therein, no
deficiencies exist or have been asserted with respect to the
Taxes of the Company or any material Subsidiary. Neither the
Company nor any material Subsidiary is a party to any action
or proceeding for assessment or collection of Taxes, nor has
such event been asserted or threatened against the Company or
any material Subsidiary or any of their respective assets. No
waiver or extension of any statue of limitations is in effect
with respect to Taxes or Returns of the Company or any
material Subsidiary. Except as described or set forth in the
Disclosure Schedule attached hereto or in the material
referred to therein, the Returns of the Company and any
material Subsidiary have never been audited by a government or
taxing authority, nor is any such audit in process, pending or
threatened.
11. PENSION AND TERMINATION BENEFITS
Except as described or set forth in the Disclosure Schedule attached
hereto or in the material referred to therein, the Company has provided adequate
accruals in its financial statements for the year ended December 31, 1998 (or
such amounts are fully funded) for all pension or other employee benefit
obligations of the Company arising under or relating to each of the pension or
retirement income plans or other employee benefit plans or agreements or
policies maintained by or binding on the Company or any of its Subsidiaries as
well as for any other payment required to be made by the Company in connection
with the termination of employment or retirement of any employee of the Company
or any Subsidiary.
C-4
27
12. PERMITS
(a) The Disclosure Schedule or the materials set forth therein
sets forth a list of all permits, licenses or other federal,
provincial or state governmental authorizations held by the
Company or its Subsidiaries (each, a "Company Permit" and,
collectively, the "Company Permits"). The Company Permits are
the only permits, licenses or federal, provincial or state
governmental authorizations that are required for the Company
and the Subsidiaries to conduct their respective businesses as
presently conducted, except for those the absence of which
will not have a Material Adverse Effect on the Company or the
Subsidiaries, or their ability to conduct their respective
businesses.
(b) Except as set forth or described in the Disclosure Schedule or
in the materials referred to therein, neither the Company nor
the Subsidiaries has received any written warning notice,
notice of violation or probable violation, or notice of
revocation from or on behalf of any federal, provincial or
state governmental authority, alleging:
(i) any violation of any Company Permit which violation
has not been corrected or otherwise settled as
confirmed in writing by the applicable governmental
authority, or
(ii) that the Company requires any permit other than the
Company Permits.
13. SECURITIES FILINGS
The Company has filed all forms, reports and documents required to be
filed by it with all applicable federal, provincial or state governmental
authorities in Canada (collectively, the "Securities Reports"). The Securities
Reports, after giving effect to any amendments thereto prior to the date hereof:
(a) were prepared in all material respects in accordance with the
requirements of applicable federal, provincial or state
securities legislation and the rules and regulations
promulgated thereunder, and
(b) did not, at the time they were filed, 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 made therein, in light of the circumstances
under which they were made, not misleading. No Subsidiary is
currently required to file any form, report or other document
with any federal, provincial or state governmental authority.
14. FINANCIAL STATEMENTS
(a) Each of the financial statements (including, in each case, any
notes thereto) contained in the Securities Reports was
prepared in accordance with generally accepted accounting
principles in Canada, applied on a consistent basis ("GAAP")
throughout the periods indicated (except as may be indicated
in the notes thereto) and each fairly presented in all
material respects the financial position, results of
operations and changes in stockholders' equity and cash flows
of the Company and its consolidated Subsidiaries as of the
respective dates thereof and for the respective periods
indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which
were not and are not expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company).
(b) Except:
(i) to the extent set forth on the audited consolidated
balance sheet of the Company as of December 31, 1998,
including the notes to the audited financial
statements of which such balance sheet is a part and
which is included in the Company's Securities Reports
for the year ended December 31, 1998 (the "Company
Balance Sheet"), or
(ii) to the extent set forth in the consolidated balance
sheet of the Company as of March 31, 1999, including
the notes to the financial statements of which such
balance sheet is a part and which is included in the
Company's Securities Reports for the three months
ended March 31, 1999 (the "Company Interim Balance
Sheet"),
C-5
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Neither the Company nor any of its Subsidiaries has any
liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise) which would be required to
be reflected on a balance sheet, or in the notes thereto,
prepared in accordance with GAAP, except for liabilities and
obligations incurred in (X) the ordinary course of business
consistent with past practice since December 31, 1998 which
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company or
(Y) connection with the Agreement.
(c) The Company has heretofore delivered to the Offeror true,
complete and correct copies of all amendments and
modifications (if any) that have not been filed by the Company
with all appropriate federal, provincial or state governmental
authorities to all agreements, documents and other instruments
currently in effect.
15. INTELLECTUAL PROPERTY
The Disclosure Schedule or the materials set forth therein sets forth a
list of all patents, copyrights, trademarks, trade names and other intellectual
property or similar rights owned by the Company or any of the Subsidiaries, or
otherwise used directly in connection with the business of the Company or its
Subsidiaries (collectively, the "Intellectual Property"). Except as set forth or
described in the Disclosure Schedule or the materials set forth therein, neither
the Company nor the Subsidiaries has granted any third party any license to use
any of the Intellectual Property. The Disclosure Schedule or the materials set
forth therein lists any material contracts under which the Company or any
Subsidiary has a license from an unaffiliated person to use the Intellectual
Property. The Company has delivered to the Offeror complete copies of all
written documents evidencing the Intellectual Property as currently in effect.
To the knowledge of the Company:
(a) no other person has any rights to any such Intellectual
Property except pursuant to agreements or licenses specified
in the Disclosure Schedule or the materials referred to
therein; and
(b) no other person is infringing, violating or misappropriating
any such Intellectual Property.
The Company or the Subsidiaries, as applicable, own or have sufficient right to
use all such Intellectual Property used in the operation of their respective
businesses as presently conducted. Except as set forth or described in the
Disclosure Schedule or the materials referred to therein, (X) neither the
Company nor any Subsidiary has agreed to indemnify any person for or against any
infringement, misappropriation or other conflict relating to the Intellectual
Property and (Y) none of the Intellectual Property is the subject of any claim,
action, proceeding or pending investigation.
16. LABOUR AND EMPLOYMENT MATTERS
The Disclosure Schedule or the materials referred to therein lists:
(a) each collective bargaining agreement with a labour union or
similar organization covering any employee of the Company or
any Subsidiary; and
(b) each individual written employment or consulting agreement
that will remain in effect after the Effective Date between
the Company or any Subsidiary and any Company or Subsidiary
employee or third party. The Company has delivered or made
available to the Offeror complete copies of all such
agreements as currently in effect. In addition to the
foregoing, the Disclosure Schedule or the materials referred
to therein contains:
(i) a list identifying each employee of the Company and
the Subsidiaries,
(ii) a description of the rate and nature of all
compensation payable by the Company or any of the
Subsidiaries to each of its employees, and
(iii) a description of all existing severance, accrued
vacation or other leave policies or retiree or other
benefits of any current or former director, officer,
employee or consultant of the Company.
C-6
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The Company and the Subsidiaries have complied in all respects
with all applicable federal, provincial and state laws, rules
and regulations affecting or involving employment and
employment practices.
17. REAL PROPERTY; LEASES
(a) The Disclosure Schedule or the materials set forth therein
sets forth a description of any parcels of real property owned
by the Company and used in connection with the business of the
Company (collectively, the "Real Property"). Except as set
forth or described in the Disclosure Schedule or the materials
referred to therein, as of the date hereof the Company has
good and marketable title to all Real Property, free and clear
of all liens, charges and encumbrances and the right, title
and interest of the Company and its Subsidiaries to such Real
Property is sufficient to enable the Company and its
Subsidiaries to continue to conduct railway operations as they
are currently conducted by the Company and its Subsidiaries.
(b) The Disclosure Schedule sets forth a description of the
railway lines leased by the Company and used in connection
with the business of the Company (collectively, the "Leased
Real Property"). True and complete copies of all such leases
have been furnished to the Offeror. Except as set forth or
described in the Disclosure Schedule or the materials referred
to therein, the Company has good title to the leasehold
interests in the Leased Real Property free and clear of all
liens, charges and encumbrances. Each such lease is in full
force and effect, all accrued and payable payments have been
paid, the Company has not violated any term of any such lease
in any material respect and no event of default under any such
lease has occurred.
18. TANGIBLE PROPERTY; ASSETS
The Disclosure Schedule or the materials referred to therein contains a list of
all of the assets and tangible personal property owned or leased by the Company
with a book value (before depreciation) of U.S. $50,000 or more (the "Assets").
Except as set forth in the Disclosure Schedule, the Assets constitute all of the
assets which are necessary to operate the business of the Company. The
equipment, computer software and hardware and other tangible personal property
included in the Assets and all other Assets (whether owned or leased) have been
well-maintained in accordance with industry standards, are in good condition and
repair (subject to normal wear and tear) and are reasonably sufficient and
adequate in quantity and quality for the operation of the business of the
Company as previously and presently conducted. Except as set forth or described
in the Disclosure Schedule or in the materials referred to therein, the Assets
are not subject to any lien, charge or encumbrance, and there are no other
defects in the Company's title to any of the Assets that would materially
interfere with the continued use or operation thereof in the manner heretofore
used or operated by the Company in its business.
19. ACCOUNTS RECEIVABLE
Except as would not have a Material Adverse Effect on the Company, all of the
accounts receivable reflected in the Financial Statements or created thereafter:
(a) are valid receivables subject to no setoffs or counterclaims;
(b) are current and collectible in the ordinary course of
business; and
(c) will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts
set forth in the Financial Statements, as adjusted for
operations and transactions through the date hereof in
accordance with the past custom and practice of the Company
and its Subsidiaries.
20. CHANGE IN CONTROL
Except as set forth or described in the Disclosure Schedule or in the materials
referred to therein, neither the Company nor any Subsidiary is a party to any
contract, agreement or understanding which is currently expected to result in
the payment or receipt by the Company or any Subsidiary of U.S. $50,000 or more
individually and U.S. $100,000 or more in the aggregate which contains a "change
in control", "potential change in control" or similar provision, including any
provision which is triggered by the acquisition of 25% or more of the common
shares of the Company by a third party. Except as set forth or described in the
Disclosure Schedule or in the materials
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referred to therein, neither the execution and delivery of the Agreement nor the
consummation of the transactions contemplated thereby will:
(a) result in any payment (whether of severance pay or otherwise)
becoming due from the Company or any Subsidiary to any person;
(b) materially increase any benefits becoming due from the Company
or any Subsidiary; or
(c) result in the acceleration of the time of payment or vesting
of any such benefits.
21. RESTRICTIONS ON BUSINESS ACTIVITIES
Except as set out in the change of control provisions referred to in the
Disclosure Schedule and the materials referred to therein, there is no material
agreement, and to the knowledge of the Company, there is no judgement,
injunction, order or decree binding upon the Company or any Subsidiary, or any
of their respective assets or properties, that has, or reasonably could be
expected to have, the effect of prohibiting or materially impairing any current
or future business practice of the Company or any Subsidiary or the conduct of
business by the Company or any Subsidiary, any acquisition of property by the
Company or any Subsidiary or the conduct of business by the Company or any
Subsidiary as currently conducted or as proposed to be conducted by the Company
or any Subsidiary.
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SCHEDULE "D"
REPRESENTATIONS AND WARRANTIES OF THE OFFEROR
1. ORGANIZATION
The Offeror has been duly incorporated and organized, and is validly
existing, as a corporation under the laws of Delaware and has the requisite
corporate power and authority to carry on its business as it is now being
conducted.
2. AUTHORITY
The Offeror has the requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement by the Offeror and the consummation by the Offeror of
the transactions contemplated by this Agreement have been duly authorized by the
board of directors of the Offeror and no other corporate proceedings on the part
of the Offeror are necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Offeror and constitutes a valid and binding obligation of the Offeror,
enforceable against the Offeror in accordance with its terms subject to
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and
other laws relating to or affecting creditors' rights generally and to general
principles of equity. Except as disclosed in writing to the Company on or prior
to the date hereof, the execution and delivery by the Offeror of this Agreement
and performance by it of its obligations hereunder and the completion of the
Offer and the transactions contemplated thereby, will not result in a violation
or breach of, require any consent to be obtained under or give rise to any
termination rights under any provision of:
(a) its or any Subsidiary's certificate of incorporation,
articles, by-laws or other charter documents, including any
unanimous shareholder agreement or any other agreement or
understanding with any party holding an ownership interest in
any Subsidiary;
(b) any law, regulation, order, judgement or decree; or
(c) any material contract agreement, license, franchise or permit
to which the Offeror or any Subsidiary is bound or is subject
or is the beneficiary.
3. OFFEROR FINANCING
The Offeror has sufficient funds or financing available to make the
Offer on the terms as contemplated hereby and to purchase all outstanding Shares
deposited pursuant to the Offer and to pay all related fees and expenses.
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SCHEDULE "E"
RAILINK LTD.
AMENDED AND RESTATED INDEMNIFICATION AGREEMENT
THIS AGREEMENT made the 18th day of November, 1998.
BETWEEN:
RAILINK LTD., a body corporate having its registered office in
the City of Edmonton, Province of Alberta, ("RaiLink")
OF THE FIRST PART
- and -
_____________________, an individual having his principal
residence in the City of Edmonton, Province of Alberta, (the
"Indemnitee")
OF THE SECOND PART
WHEREAS RaiLink was incorporated under the Business Corporations Act
(Alberta) on September 22, 1983;
AND WHEREAS the Indemnitee is a Director and/or Officer of RaiLink or,
at the request of RaiLink, a Director and/or Officer of one or more bodies
corporate of which RaiLink is or was a shareholder (collectively, the
"Subsidiaries", and together with RaiLink, the "Corporations");
AND WHEREAS the Indemnitee may in the future become a Director and/or
Officer of other Corporations;
AND WHEREAS the board of directors of RaiLink provided by resolution on
the 7th day of February, 1997, that RaiLink adopt a policy of indemnifying all
Directors and Officers of RaiLink and all Directors and Officers of the
Subsidiaries acting as such at the request of RaiLink against all personal
liabilities incurred or losses of any kind suffered by any such Director or
Officer in connection with any proceedings to which a person is made party by
reason of being a Director or Officer of RaiLink or by reason of being a
Director or Officer of a Subsidiary at the request of RaiLink;
AND WHEREAS this Agreement is intended to give full effect to the
resolution referred to in the above and to set out in more precise detail the
nature and scope of the indemnification.
NOW THEREFORE THIS AGREEMENT WITNESSES that for good and valuable
consideration, the nature, receipt and sufficiency of which is acknowledged, the
parties hereto covenant and agree as follows:
1. DEFINITIONS
As used in this Agreement:
(a) the terms "Director" and "Directors" mean a person or persons
occupying the position of director by whatever name called and
"Directors" and "board of directors" includes a single
Director;
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(b) the term "Expenses" shall include, without limitation,
expenses, costs, and charges of investigations, or of
investigating a claim, expenses of judicial or administrative
proceedings or appeals, amounts paid in settlement by or on
behalf of the Indemnitee, legal fees and disbursements and any
expenses of establishing a right to indemnification under
Section 4 of this Agreement, as well as the value of the time
of the Indemnitee, spent as a witness or in preparation for an
investigation or Proceeding, but shall not include the amount
of judgements, fines or penalties against the Indemnitee;
(c) the term "Officer" means a person or persons appointed to
occupy a position designated by the Directors of the
Corporations as being an office in their respective
Corporations; and
(d) the term "Proceeding" shall include any threatened, pending or
completed action now, or in the future, and any and all claims
of every nature and kind whatsoever which may be made against
the Indemnitee by any person, firm, corporation, government,
or by any governmental department, body, commission, board,
bureau, agency or instrumentality including the Crown in any
of its capacities arising out of or in any way in connection
with the management, operation, activities or existence of any
one or more of the Corporations of which the Indemnitee is
now, or in the future may become, a Director or Officer, but
shall exclude actions by or on behalf of any of the respective
Corporations to procure a judgement in its own favor.
2. EXTENDED MEANINGS
In this Agreement words importing the singular number only shall
include the plural and vice versa, words importing the masculine gender shall
include the feminine and neuter genders and vice versa, and words importing
persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations and vice versa.
3. DISCLAIMER OF LIABILITY
The Indemnitee shall not be liable for the acts, receipts, neglects or
defaults of any other Director or Officer or any employee or for any liability
or expense sustained or incurred by the Corporations in the execution of the
duties of the Indemnitee's office, provided that nothing herein contained shall
relieve the Indemnitee of any liability in contravention of the Business
Corporations Act (Alberta) or any other applicable statute.
4. INDEMNIFICATION
RaiLink shall indemnify and save harmless the Indemnitee in accordance
with the provisions of this Section 4:
(a) if the Indemnitee is a party to or threatened with being made
a party to any Proceeding, against all Expenses, judgements,
fines and penalties actually and reasonably incurred by the
Indemnitee in connection with the defence or settlement of
such Proceeding, but only if:
(i) the Indemnitee acted in an official capacity,
honestly and in good faith with a view to the best
interests of the Corporations of which the Indemnitee
is or was a Director or Officer; and,
(ii) in the case of a criminal or administrative
Proceeding that is enforced by a monetary penalty,
the Indemnitee had reasonable grounds for believing
that his/her conduct was lawful;
(b) in respect of a Proceeding by or on behalf of a Corporation to
procure a judgement in its favor, to which the Indemnitee is
made, directly or indirectly, a party by reason of being or
having been a Director of Officer of the Corporation, RaiLink
shall make application at its expense for approval of the
court to indemnify and save harmless the Indemnitee and the
Indemnitee's heirs and legal representatives against all
Expenses, judgements, fines and penalties reasonably incurred
by the
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Indemnitee in connection with such Proceeding, provided that
the Indemnitee fulfills the conditions set out in Subsections
4(a)(i) and (ii);
(c) notwithstanding anything to the contrary in this Agreement,
RaiLink shall indemnify and save harmless the Indemnitee
against all Expenses, judgements, fines and penalties actually
and reasonably incurred by the Indemnitee in connection with
the defence or settlement of a Proceeding, if the Indemnitee
was substantially successful on the merits of the Indemnitee's
defence of the Proceeding and the Indemnitee fulfills the
conditions set out in Subsections 4(a)(i) and (ii);
(d) in particular, and without in any way limiting the generality
of the foregoing, from and against all liabilities and
penalties at any time imposed upon the Indemnitee or any
claims at any time made against the Indemnitee:
(i) by virtue of the Canada Business Corporations Act,
the Business Corporations Act (Alberta), The Workers'
Compensation Act (Alberta), the Workers' Compensation
Act, R.S.O. 1990, c.W. 11 as amended, the Bankruptcy
Act (Canada) and The Income Tax Acts of Canada and
Alberta, or any re-enactment or amendment of any such
Acts, or
(ii) by virtue of any legislation of like tenor with and
effect to that referred to in Section 4(d)(i) above,
applicable in Canada, and which in any way involve
the affairs or business of any one or more of the
Corporations of which the Indemnitee is now, or in
the future may become, a Director or Officer;
(e) in the case of a dispute between the Indemnitee and RaiLink as
to whether indemnification should be available (including any
advances under Section 5), the disinterested and independent
members of the board of directors shall determine the question
and, if determined adverse to the position of the Indemnitee,
shall be finally resolved by arbitration pursuant to the
Arbitration Act (Alberta). Further, in the event of a change
of control in RaiLink (defined as there being a change in the
composition of the majority of members of the board of
directors), the question whether indemnification should be
available shall be determined exclusively by arbitration; and
(f) the settlement, conviction, or plea of NOLO CONTENDERE, or its
equivalent, shall not, of itself, create a presumption that
the Indemnitee did not act in good faith and in a manner which
the Indemnitee reasonably believed to be in, or not opposed
to, the best interests of the Corporations of which the
Indemnitee is a Director or Officer, and, with respect to any
criminal proceeding, that the Indemnitee intentionally engaged
in unlawful conduct.
5. ADVANCES
Expenses incurred by the Indemnitee against which indemnification is
provided pursuant to Section 4 shall be paid in advance promptly by RaiLink upon
request and reasonable justification and verification. The Indemnitee shall,
however, be required to refund any advance where the underlying indemnification
is determined not permissible under applicable law.
6. INDEMNIFICATION PROHIBITED
Notwithstanding the provisions of Section 4, no indemnification shall
be paid in connection with any Proceeding charging improper personal benefit to
the Indemnitee, whether or not involving action in an official capacity, in
which the Indemnitee was judged liable on the basis that personal benefit was
improperly received by the Indemnitee.
7. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE
(a) The Indemnification provided by this Agreement shall not be
deemed exclusive of any other rights to which the Indemnitee
may be entitled under the constating documents of any one or
more of the Corporations of which the Indemnitee is a Director
or Officer, the Bylaws of any one or more of the Corporations
of which the Indemnitee is a Director or Officer, any
agreement, any vote of shareholders or Directors of any one or
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more of the Corporations of which the Indemnitee is a Director
or Officer, the corporation law applicable in Canada, or
otherwise.
(b) The Indemnification under this Agreement shall continue as to
the Indemnitee even though the Indemnitee may have ceased to
be a Director or Officer of any one or more of the
Corporations and shall inure to the benefit of the heirs and
personal representatives of the Indemnitee.
8. INSURANCE
Unless otherwise agreed between the parties hereto, RaiLink shall
purchase and maintain, or cause to be purchased and maintained, while the
Indemnitee remains a Director or Officer of the Corporations and for a period of
six (6) years thereafter, directors' and officers' errors and omissions
insurance for the benefit of the Indemnitee on terms no less favorable in terms
of coverage and amounts, to the extent permitted by law and available on
reasonable commercial terms than such insurance maintained in effect by RaiLink
on the date hereof, provided that such insurance shall not apply to any
liability incurred by the Indemnitee relating to any failure by the lndemnitee
to act honestly and in good faith with a view to the best interests of the
Corporations.
9. SAVING CLAUSE
Nothing in this Agreement is intended to require or shall be construed
as requiring any one or more of the Corporations of which the Indemnitee is a
Director or Officer to do or fail to do any act in violation of applicable law.
The provisions of this Agreement shall be severable in accordance with this
Section 9. If this Agreement or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, RaiLink shall nevertheless
indemnify the Indemnitee as to Expenses, judgements, fines and penalties with
respect to any Proceeding to the full extent permitted by any applicable portion
of this Agreement that shall not have been invalidated or by any other
applicable law.
10. TAXATION
In the event that any amount payable to the Indemnitee under the terms
of this contract (including amounts payable under this Section 10) is required
to be included in income subject to taxation under the laws of Canada or any
political subdivision of Canada, RaiLink will pay to the Indemnitee the amount
of any additional tax payable by the Indemnitee on account of such inclusion.
The Indemnitee shall forward to RaiLink a claim for such amount together with
proof of the amount so payable. The amount payable by RaiLink to the Indemnitee
under the terms of this Section 10 shall be calculated as the amount by which:
(a) the amount of tax payable to Canada, or any political
subdivision thereof, as shown in a tax return required to be
filed by the Indemnitee on which the amount payable under this
Agreement (including this Section 10) is required to be
included in income
exceeds
(b) the amount of tax that would be payable under that return of
income of the Indemnitee had the Indemnitee not received any
amount under the terms of this Agreement.
11. NOTICE
The Indemnitee shall, as a condition precedent to the right to be
indemnified under this Agreement, give to the Corporations of which the
Indemnitee is a Director or Officer notice in writing as soon as practicable of
any claim made against the Indemnitee for which indemnity will or could be
sought under this Agreement. Notice to the Corporations shall be directed to
them at the following address:
RaiLink Ltd.
1165 Xxxxx Centre
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx
X0X 0X0
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(or such other address as the Corporations shall designate in writing to the
Indemnitee). In addition, the Indemnitee shall give the Corporations such
information and cooperation as they may reasonably require and shall be within
the Indemnitee's power.
12. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall constitute an original.
13. APPLICABLE LAW
This Agreement shall be construed in accordance with and be governed by
the laws of the Province of Alberta. For greater certainty but not so as to
restrict the generality of the foregoing, it is expressly agreed that this
Agreement is intended to provide indemnification to the fullest extent not
prohibited by current law and that may be permitted under law in effect in the
future.
14. SUCCESSORS AND ASSIGNS
The duties and obligations of RaiLink under this Agreement shall be
binding upon, and enforceable by the Indemnitee and the Indemnitee's heirs and
legal representatives against, RaiLink and its successors and assigns, including
any corporation with which RaiLink is merged or amalgamated. RaiLink covenants
and agrees that it shall not, without the consent of the Indemnitee, transfer or
dispose of all or substantially all of its assets or undertakings to any entity
that does not agree to assume all of the obligations of RaiLink under this
Agreement.
15. LEGAL FEES
In the event that any action is instituted by the Indemnitee under this
Agreement to enforce or interpret any of the terms hereof, the Indemnitee shall
be entitled to be paid all court costs and expenses, including reasonable legal
fees, incurred by the Indemnitee with respect to such action, unless as a part
of such action, the court of competent jurisdiction determines that other
material assertions made by the Indemnitee as a basis for such action were not
made in good faith or were frivolous.
16. SUBSEQUENT INSTRUMENTS AND ACTS
The parties hereto agree that they will execute any further instruments
and perform any acts that may become necessary from time to time to carry out
the terms of this Agreement.
17. OBLIGATIONS OF RAILINK ABSOLUTE
The obligations of RaiLink under this Agreement are absolute and
unconditional and shall not be released, discharged or reduced, and the rights
of the Indemnitee hereunder shall not be prejudiced or impaired by any neglect,
delay or forbearance in demanding, requiring or enforcing payment or performance
by RaiLink of any of its obligations hereunder or by granting any extensions of
time for such performance or by waiving any performance (except as to any
particular performance which has been waived), or by permitting or consenting to
any assignment in bankruptcy, receivership, insolvency or any other creditor's
proceedings of or against RaiLink or by the winding-up or dissolution of RaiLink
or any other event or occurrence which would or might otherwise have the effect
at law of terminating the obligations of RaiLink under this Agreement.
18. COURT APPROVAL
RaiLink shall use its best efforts to obtain any approval of a court
required by law for the indemnification of the Indemnitee and the Indemnitee's
heirs and representatives pursuant to the provisions of this Agreement.
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00. EFFECTIVE DATE
Notwithstanding the date of execution of this Agreement, the terms and
provisions hereof shall be effective, binding upon, and enforceable by the
parties as of and from the date on which the Indemnitee was first appointed or
elected a Director or Officer of a Corporation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and signed on the date first above written.
RAILINK LTD.
WITNESS By:
-----------------------------------
---------------------------------
By:
-----------------------------------
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EXHIBIT 10.1
10.1 - 1
