Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SMITHWAY MOTOR XPRESS CORP.
WESTERN EXPRESS, INC.
AND
WESTERN EXPRESS ACQUISITION CORPORATION
DATED AS OF
MARCH 22, 2007
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER..................................................... 1
1.1 The Merger....................................................... 1
1.2 Closing.......................................................... 1
1.3 Articles of Incorporation and Bylaws of the Surviving
Corporation...................................................... 2
1.4 Directors and Officers of the Surviving Corporation.............. 2
ARTICLE II CONVERSION OF SHARES.......................................... 3
2.1 Conversion of Capital Stock...................................... 3
2.2 Exchange of Certificates......................................... 3
2.3 Change in Shares................................................. 5
2.4 Company Stock Option Plans....................................... 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 6
3.1 Organization..................................................... 6
3.2 Capitalization................................................... 7
3.3 Authorization; Validity of Agreement............................. 8
3.4 No Violations; Consents and Approvals............................ 9
3.5 SEC Reports and Financial Statements............................. 10
3.6 [Intentionally Omitted].......................................... 12
3.7 Absence of Certain Changes....................................... 12
3.8 Absence of Undisclosed Liabilities............................... 13
3.9 Proxy Statement.................................................. 13
3.10 Employee Benefit Plans; ERISA.................................... 13
3.11 Litigation; Compliance with Law.................................. 16
3.12 Intellectual Property............................................ 17
3.13 Contracts........................................................ 18
3.14 Taxes............................................................ 19
3.15 Environmental Matters............................................ 21
3.16 Assets........................................................... 22
3.17 Real Property.................................................... 23
3.18 Customers and Suppliers.......................................... 24
3.19 Insurance........................................................ 24
3.20 Labor Matters.................................................... 24
3.21 Affiliate Transactions........................................... 25
3.22 Key Personnel.................................................... 25
3.23 Brokers.......................................................... 25
3.24 Opinion of Financial Advisor..................................... 26
3.25 Company's Independent Investigation.............................. 26
3.26 Assurance of Auditors............................................ 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER.... 27
4.1 Organization..................................................... 27
4.2 Authorization; Validity of Agreement............................. 27
4.3 No Violations; Consents and Approvals............................ 28
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4.4 Information in Proxy Statement; Merger Documents................. 28
4.5 Broker........................................................... 29
4.6 Financing Commitments............................................ 29
4.7 Ownership or Control of Shares................................... 29
4.8 Parent's and the Purchaser's Independent Investigation........... 30
ARTICLE V COVENANTS...................................................... 30
5.1 Interim Operations of the Company................................ 30
5.2 Acquisition Proposals............................................ 33
5.3 Takeover Statute................................................. 37
5.4 Access to Information and Properties............................. 37
5.5 Further Action; Reasonable Efforts............................... 38
5.6 Proxy Statement; Stockholders' Meeting........................... 39
5.7 Notification of Certain Matters.................................. 40
5.8 Directors' and Officers' Indemnification and Insurance........... 41
5.9 Publicity........................................................ 42
5.10 Ownership or Control of Shares................................... 42
5.11 Waiver of Right to Repurchase and Refund Benefit................. 42
ARTICLE VI CONDITIONS.................................................... 42
6.1 Conditions to Each Party's Obligation to Effect the Merger....... 42
6.2 Conditions to the Obligation of the Company to Effect the
Merger........................................................... 43
6.3 Conditions to Obligations of Parent and the Purchaser to Effect
the Merger....................................................... 43
ARTICLE VII TERMINATION.................................................. 45
7.1 Termination...................................................... 45
7.2 Effect of Termination............................................ 46
ARTICLE VIII MISCELLANEOUS............................................... 47
8.1 Fees and Expenses................................................ 47
8.2 Amendment; Waiver................................................ 49
8.3 Notices.......................................................... 50
8.4 Interpretation; Definitions...................................... 51
8.5 Headings; Schedules.............................................. 59
8.6 Counterparts..................................................... 59
8.7 Entire Agreement................................................. 59
8.8 Severability..................................................... 59
8.9 Governing Law.................................................... 60
8.10 Assignment....................................................... 60
8.11 Parties in Interest.............................................. 60
8.12 Specific Performance............................................. 60
8.13 Incorporation of Disclosure Letters.............................. 60
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 22, 2007 (the "Agreement"),
by and among Smithway Motor Xpress Corp., a Nevada corporation (the "Company"),
Western Express, Inc., a Tennessee corporation ("Parent"), and Western Express
Acquisition Corporation, a Nevada corporation and wholly owned subsidiary of
Parent (the "Purchaser").
WHEREAS, the board of directors of the Company (the "Board"), at a meeting
duly called and held, unanimously (i) adopted this Agreement, the Merger (as
defined herein) and the transactions contemplated hereby and (ii) resolved to
recommend approval of this Agreement and the Merger by the stockholders of the
Company; and
WHEREAS, Parent, Purchaser and the Company desire to make certain
representations, warranties, covenants, agreements and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements, and conditions set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement and in accordance with the Nevada Revised Statutes, as amended
(the "NRS"), at the Effective Time, the Purchaser shall be merged with and into
the Company, the separate corporate existence of the Purchaser shall cease and
the Company shall continue as the surviving corporation (sometimes hereinafter
referred to as the "Surviving Corporation") in the merger (the "Merger"). The
Merger shall have the effect as provided in the applicable provisions of the
NRS. Without limiting the generality of the foregoing, upon the Merger, all the
rights, privileges, immunities, powers and franchises of the Company and the
Purchaser shall vest in the Surviving Corporation and all obligations, duties,
debts and liabilities of the Company and the Purchaser shall be the obligations,
duties, debts and liabilities of the Surviving Corporation.
1.2 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated herein abandoned pursuant to Section 7.1 and subject
to the satisfaction or waiver of the conditions set forth in Article VI, the
closing of the Merger (the "Closing") will take place at 10:00 a.m., local time,
on a date to be specified by the parties hereto, which shall be no later than
the third Business Day after satisfaction or waiver (by the party entitled to
waive the condition) of all of the conditions set forth in
Article VI hereof (except for those conditions that can by their nature be
satisfied only at the time of the Closing) (the "Closing Date"), at the offices
of Xxxxxxx Law Firm, P.C., L.L.O., 000 Xxxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxxx, XX
00000 unless another date or place is agreed to in writing by the parties
hereto. Subject to the provisions of this Agreement, on the Closing Date, the
Purchaser and the Company will cause articles of merger (the "Articles of
Merger") to be executed and filed with the Secretary of State of the State of
Nevada (the "Secretary of State") in such form and executed as provided in the
NRS. The Merger shall become effective on the date and at the time at which the
Articles of Merger have been duly filed with the Secretary of State or such
other time as is agreed upon by the parties hereto and specified in the Articles
of Merger, and such time is hereinafter referred to as the "Effective Time."
1.3 Articles of Incorporation and Bylaws of the Surviving Corporation.
Pursuant to the Merger, (a) the Amended and Restated Articles of Incorporation
of the Company shall be amended at the Effective Time to be in the form of to be
provided by Purchaser and, as so amended, such Amended and Restated Articles of
Incorporation shall be the Articles of Incorporation of the Surviving
Corporation (the "Articles of Incorporation") until thereafter changed or
amended as provided therein or by applicable Law (as defined in Section 3.4(a))
and (b) the Bylaws of the Company shall be amended at the Effective Time to be
in the form to be provided by Purchaser and, as so amended, such Bylaws shall be
the Bylaws of the Surviving Corporation (the "Bylaws") until thereafter changed
or amended as provided therein or by applicable Law.
1.4 Directors and Officers of the Surviving Corporation.
(a) At or prior to the Closing, the current directors of the
Company shall submit their resignations effective as of the Effective Time. By
resolution of the Parent adopted at or after the Effective Time, the directors
of Purchaser shall be the directors of the Surviving Corporation until their
successors shall have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Articles of
Incorporation and the Bylaws.
(b) At or prior to the Closing, the current officers of the
Company shall submit their respective resignations effective as of the Effective
Time. By resolution of the board of directors of the Surviving Corporation, such
board of directors shall elect the new officers of the Surviving Corporation who
shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
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ARTICLE II
CONVERSION OF SHARES
2.1 Conversion of Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders of any shares of
Class A Stock or Class B Stock (together, referred to herein as "Shares" or
"Company Common Stock") or the holders of any shares of the common stock, par
value $0.001 per share, of the Purchaser (the "Purchaser Common Stock"):
(a) Each issued and outstanding share of Company Common Stock
shall be converted into the right to receive $10.63 per share in cash, payable
to the holder thereof, without interest (the "Merger Consideration"). All such
shares of Company Common Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate or certificates representing any such Shares shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration therefore upon the surrender of such certificate in accordance
with Section 2.2. Payment of the Merger Consideration shall be made upon
surrender of the certificate or certificates that immediately prior to the
Effective Time represented issued and outstanding shares of Company Common Stock
in the manner provided in Section 2.2. Any payment made pursuant to this Section
2.1(a) shall be subject to applicable withholding taxes to the extent such
withholding is required by Law.
(b) Each issued and outstanding share of the Purchaser Common
Stock shall be converted into and become one fully paid and nonassessable share
of common stock of the Surviving Corporation.
(c) All shares of Company Common Stock that are held by the
Company or any of its Subsidiaries as treasury stock prior to the Effective Time
shall be cancelled and retired and shall cease to exist and no Merger
Consideration shall be delivered in exchange therefor.
2.2 Exchange of Certificates.
(a) Prior to the Effective Time, Parent shall designate the
Company's registrar and transfer agent or such other bank or trust company as
may be selected by Parent, to act as paying agent for the holders of Shares in
connection with the Merger (the "Paying Agent"), to receive the funds to which
holders of Shares shall become entitled pursuant to Section 2.1(a). Upon the
Effective Time, Parent and the Purchaser will cause to be deposited in trust
with the Paying Agent for the benefit of holders of Company Common Stock the
funds necessary to complete the payments contemplated by Section 2.1(a) with
respect to shares of Company Common Stock.
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(b) Promptly following the Effective Time, the Surviving
Corporation will instruct the Paying Agent to mail to each holder of record of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"),
whose Shares were converted pursuant to Section 2.1(a) into the right to receive
the Merger Consideration (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
such form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for payment of the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by the Surviving Corporation, together with such
letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefore the Merger Consideration for each
share of Company Common Stock formerly represented by such Certificate, and the
Certificate so surrendered shall forthwith be cancelled. If payment of the
Merger Consideration is to be made to a Person other than the Person in whose
name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the Person requesting such
payment shall have paid to the Paying Agent in advance any transfer and other
taxes required by reason of the payment of the Merger Consideration to a Person
other than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.2, each Certificate (other than Certificates representing Company
Common Stock held by Parent, the Purchaser or any of their respective
affiliates) shall be deemed at any time from and after the Effective Time to
represent only the right to receive the Merger Consideration as contemplated by
this Section 2.2. No interest or dividends shall be paid or will accrue on any
Merger Consideration payable to holders of Certificates pursuant to the
provisions of this Article II.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with this Article II,
provided that the Person to whom the Merger Consideration is paid shall, as a
condition precedent to the payment thereof, give the Surviving Corporation a
bond in such sum as the Surviving Corporation may direct or otherwise indemnify
the Surviving Corporation in a manner reasonably satisfactory to it against any
claim that may be made against the Surviving Corporation with respect to the
Certificate claimed to have been lost, stolen or destroyed.
(d) At the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no transfers on the stock transfer
books of the Surviving Corporation of Shares that were outstanding immediately
prior to the Effective
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Time. If, after the Effective Time, Certificates are presented for transfer to
the Surviving Corporation, they shall be cancelled and exchanged for the Merger
Consideration as provided in this Article II, subject to the NRS.
(e) If any cash deposited with the Paying Agent for purposes of
payment in exchange for Shares remains unclaimed after the one year anniversary
of the Effective Time, the Paying Agent shall give notice to the Surviving
Corporation of such cash and such cash, together with all interest and earnings
thereon shall be returned to the Surviving Corporation, upon demand, and any
such holder who has not theretofore complied with this Article II prior to that
time shall thereafter look only to the Surviving Corporation for payment of the
Merger Consideration. Notwithstanding the foregoing, none of Parent, the
Surviving Corporation, the Paying Agent or any other Person shall be liable to
any holder of Shares for any amount paid to a public official pursuant to
applicable unclaimed property, escheat or similar Laws.
2.3 Change in Shares. If, between the date of this Agreement and the
Effective Time, the Shares shall have been changed into, or exchanged for, a
different number of shares or a different class, or if there has been any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Merger Consideration shall be correspondingly adjusted
to provide the holders of Shares the same economic effect as contemplated by
this Agreement prior to such event.
2.4 Company Stock Option Plans.
(a) The Company, the Board and each relevant committee of the
Board shall take any and all actions necessary or desirable (including, without
limitation, obtaining consents) to provide that, effective immediately prior to
the consummation of the Merger, each option to purchase shares of Company Common
Stock (collectively, the "Stock Options") held by or issued or granted to any
current or former employee, consultant or director that is outstanding
immediately prior to the consummation of the Merger granted under the Company
New Employee Incentive Stock Plan, the Company 2005 Omnibus Stock Plan, the
Company Incentive Stock Plan, as amended, the Company Outside Director Stock
Option Plan, as amended, or any other stock option plan (collectively, the
"Stock Option Plans"), or otherwise, shall in accordance with the Stock Option
Plans and related agreements (i) become fully vested or exercisable and (ii)
unless otherwise terminated, be cancelled in exchange for an amount in cash
(less any applicable tax withholding), payable at the Effective Time, equal to
(A) in the case of Stock Options with respect to which the Merger Consideration
is greater than the per share exercise price of such Stock Option, the product
of (x) (1) the excess of the Merger Consideration over (2) the per share
exercise price of such Stock Option, and (y) the number of shares of Company
Common Stock subject to such Stock Option; and (B) in the case of Stock Options
with respect to which the per share exercise price of such Stock Option is equal
to or greater than the Merger Consideration, the
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product of (x) $.01 and (y) the number of shares of Company Common Stock subject
to such Stock Option.
(b) The Company, the Board and each relevant committee of the
Board shall take any and all actions necessary or desirable to provide that all
Stock Option Plans shall terminate as of the Effective Time and the provisions
in any Stock Option Plan or any other plan, agreement or arrangement providing
for the issuance, transfer or grant of any capital stock of the Company or any
interest in respect of any capital stock of the Company shall be terminated as
of the Effective Time, and the Company shall ensure that following the Effective
Time no holder of a Stock Option or any participant in any Stock Option Plan or
any other plan, agreement or arrangement shall have any right thereunder to
acquire any capital stock of the Company or the Surviving Corporation or any
interest in respect of any capital stock of the Company or the Surviving
Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as is disclosed in the disclosure letter delivered by Company to
Parent on or prior to the date hereof (the "Disclosure Letter") and subject to
Section 8.13, the Company hereby represents and warrants to Parent and the
Purchaser as follows:
3.1 Organization.
(a) The Company and each of its Subsidiaries is a corporation, in
each case, duly organized, validly existing, and in good standing under the laws
of the jurisdiction of its incorporation, and has all requisite corporate power
and authority to own, lease, use and operate its properties and to carry on its
business as it is now being conducted. Except as set forth in Section 3.1(a) of
the Disclosure Letter, each of the Company and each of its Subsidiaries is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which such qualification or licensing is
required except when the failure to be so qualified would not be reasonably
expected, either individually or in the aggregate, to have a Material Adverse
Effect on the Company. The Company has previously delivered to Parent a complete
and correct copy of each of its articles of incorporation and bylaws in each
case as amended (if so amended) to the date of this Agreement, and has delivered
the articles of incorporation and bylaws of each of its Subsidiaries, in each
case as amended (if so amended) to the date of this Agreement. Neither the
Company nor any of its Subsidiaries is in violation of its articles of
incorporation or bylaws.
(b) Section 3.1(b) of the Disclosure Letter sets forth a true and
correct list of all of the Subsidiaries of the Company and their respective
jurisdictions of incorporation. Other than as set forth in Section 3.1(b) of the
Disclosure Letter, the
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respective articles of incorporation and bylaws of the Subsidiaries of the
Company do not contain any provision limiting or otherwise restricting the
ability of the Company to control its Subsidiaries.
3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Class A Common Shares, par value $0.01 per share (the
"Class A Stock"), 5,000,000 shares of Class B Common Shares, par value $0.01 per
share (the "Class B Stock"), and 5,000,000 shares of Preferred Shares, par value
$0.01 per share. As of the date hereof, (i) 3,991,124 shares of Class A Stock
are issued and outstanding, (ii) 1,000,000 shares of Class B Stock are issued
and outstanding, and (iii) 149,350 shares of Class A Stock are reserved for
issuance upon exercise of previously issued Stock Options under the Stock Option
Plans. No bonds, debentures, notes or other indebtedness having the right to
vote (or convertible into or exchangeable for securities having the right to
vote) on any matters on which stockholders of the Company may vote are issued or
outstanding. All issued and outstanding shares of the Company's capital stock
are, and all shares that may be issued or granted pursuant to the exercise of
Stock Options will be, when issued or granted in accordance with the terms
thereof, duly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights. Except as set forth in Section 3.2(a) of the Disclosure
Letter, there are no outstanding or authorized (i) options, warrants, preemptive
rights, subscriptions, calls, or other rights, convertible securities,
agreements, claims or commitments of any character obligating the Company or any
of its Subsidiaries to issue, transfer or sell any shares of capital stock or
other equity interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests, (ii)
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any capital stock of the Company or any of its Subsidiary or
any such securities or agreements listed in clause (i) of this sentence or (iii)
voting trusts or similar agreements to which the Company or any of its
Subsidiaries is a party with respect to the voting of the capital stock of the
Company or any of its Subsidiaries.
(b) Except as set forth in Section 3.2(b) of the Disclosure
Letter (i) all of the issued and outstanding shares of capital stock of each of
the Company's Subsidiaries are owned, directly or indirectly, by the Company
free and clear of any Liens, and all such shares have been duly authorized,
validly issued and are fully paid and non-assessable and free of preemptive
rights, and (ii) neither the Company nor any of its Subsidiaries owns any shares
of capital stock or other securities of, or interest in, any other Person, or is
obligated to make any capital contribution to or other investment in any other
Person.
(c) Section 3.2(c) of the Disclosure Letter lists all
indebtedness, and obligations to issue indebtedness of the Company and its
Subsidiaries, having a principal amount outstanding in excess of $100,000, other
than trade payables
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arising in the Ordinary Course of Business. The Company has made available to
Parent and the Purchaser all material operative documents relating to the
indebtedness of the Company and its Subsidiaries and any obligations to issue
indebtedness of the Company and its Subsidiaries.
3.3 Authorization; Validity of Agreement.
(a) The Company has the requisite corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby, subject to, in the case
of consummation of the Merger, approvals of its stockholders as contemplated by
Section 5.6. The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by the Board. The Board has directed that this
Agreement and the transactions contemplated hereby be submitted to the Company's
stockholders for approval and adoption at a meeting of such stockholders and,
except for (i) setting the record date and the meeting date for the
Stockholders' Meeting and (ii) the approval and adoption of this Agreement by
the Required Vote no other corporate proceedings on the part of the Company are
necessary to authorize the execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and, assuming
due authorization, execution and delivery of this Agreement by Parent and the
Purchaser, is a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except that such enforceability (i)
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity (regardless of
whether considered in a proceeding in equity or at law).
(b) The Board has adopted all resolutions necessary under the
sections of the NRS that are applicable to the Merger or any of the other
transactions contemplated by this Agreement. Assuming that the representations
and warranties of Parent and the Purchaser contained in Section 4.7 are true and
correct and that Parent and the Purchaser are in full compliance with the
covenants contained in Section 5.10, no "moratorium," "control share," "fair
price" or other antitakeover laws are applicable to the Merger or any of the
other transactions contemplated by this Agreement.
(c) Under applicable Law, the articles of incorporation and
bylaws of the Company, and this Agreement, the affirmative vote of the holders
of a majority of the voting power of the outstanding Shares, voting as a single
class (the "Required Vote"), is the only vote of the Company's stockholders
required to approve this Agreement and the transactions contemplated hereby.
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(d) The Board, at a meeting duly called and held, unanimously (i)
determined that this Agreement, the Merger, and the transactions contemplated
hereby are fair to, and in the best interests of, the Company and its
stockholders, (ii) adopted this Agreement, the Merger, and transactions
contemplated hereby and (iii) recommended approval of this Agreement, the
Merger, and the transactions contemplated hereby by the stockholders of the
Company.
(e) Notwithstanding any representations or warranties of the
Company or any other provisions contained in this Agreement, pursuant to NRS
92A.120(10), the Board has an express obligation to cancel the contemplated
meeting of the Company's stockholders or remove this Agreement and the Merger
from consideration at such meeting if the Board determines that it is not
advisable to submit this Agreement or the Merger to the Company's stockholders
for approval; no such representations, warranties, or other provisions shall
operate to abrogate or limit the Board's express or implicit duties and
responsibilities under such NRS provision.
3.4 No Violations; Consents and Approvals.
(a) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation by the Company of the Merger or
any other transactions contemplated hereby will (i) violate any provision of the
articles of incorporation or the bylaws of the Company or any of the Company's
Subsidiaries, (ii) except as set forth in Section 3.4(a) of the Disclosure
Letter, violate, conflict with, result in a breach of any provision of or the
loss of any benefit under, constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination, cancellation or amendment under,
accelerate the performance required by, or result in the creation of any Lien
(as defined in Section 8.4) upon any of the respective properties or assets of
the Company or any of its Subsidiaries under, or result in the acceleration or
trigger of any payment, time of payment, vesting or increase in the amount of
any compensation or benefit payable pursuant to, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, guarantee or other evidence
of indebtedness, lease, license, contract, agreement, plan or other instrument
or obligation to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their respective properties or assets may be bound
or affected or (iii) conflict with or violate any federal, state, local or
foreign order, writ, injunction, judgment, settlement, award, decree, statute,
law, rule or regulation (collectively, "Laws") applicable to the Company, any of
its Subsidiaries or any of their respective properties or assets; except in the
case of clauses (ii) and (iii) for such conflicts, violations, breaches,
defaults or Liens which have been waived or which, individually or in the
aggregate, would not reasonably be likely to have or result in a Material
Adverse Effect on the Company.
(b) Except (i) for the Proxy Statement relating to the meeting of
the Company's stockholders to be held in connection with this Agreement and the
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transactions contemplated hereby, (ii) for the filing of the Articles of Merger
with the Secretary of State, and (iii) as disclosed in Section 3.4(b) of the
Disclosure Letter, no material filing or registration with, declaration or
notification to, or order, authorization, consent or approval of, any federal,
state, local or foreign court, arbitral, legislative, executive or regulatory
authority or agency (a "Governmental Entity") or any other Person is required in
connection with the execution, delivery and performance of this Agreement by the
Company or the consummation by the Company of the Merger or any other
transactions contemplated hereby.
3.5 SEC Reports and Financial Statements.
(a) Except as set forth in Section 3.5(a) of the Disclosure
Letter, the Company has timely filed, after giving effect to any extended time
for filing under Rule 12b-25, with the SEC all forms and documents required to
be filed by it since January 1, 2004, under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), including (i) its Annual Reports on Form 10-K,
(ii) its Quarterly Reports on Form 10-Q, (iii) its Current Reports on Form 8-K,
(iv) all proxy statements relating to meetings of stockholders of the Company
(in the form mailed to stockholders) and (v) all other forms, reports and
registration statements required to be filed by the Company with the SEC. The
documents described in clauses (i)-(v) above, as amended (whether filed before,
on or after the date hereof), are referred to in this Agreement collectively as
the "Company SEC Documents." As of their respective dates, the Company SEC
Documents, including the financial statements and schedules provided therein or
incorporated by reference therein, (x) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (y) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act of 1933, as amended (the "Securities Act"), as the case may be, and the
applicable rules and regulations of the SEC thereunder.
(b) The December 31, 2004 and December 31, 2005 consolidated
balance sheets of the Company and the related consolidated statements of
operations, consolidated statements of stockholders' equity and consolidated
statements of cash flows (including, in each case, the related notes, where
applicable), as reported in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2005 filed with the SEC under the Exchange Act,
and the unaudited consolidated balance sheets of the Company and its
Subsidiaries (including the related notes, where applicable) as of September 30,
2005 and September 30, 2006 and the related (i) unaudited consolidated
statements of operations for the three and nine-month periods then ended and
(ii) unaudited consolidated statements of cash flows and changes in
stockholders' equity for the nine-month periods then ended (in each case
including the related notes, where applicable), as reported in the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 2006 filed with
the SEC under the Exchange Act, fairly present in all material respects, and the
financial statements to be filed by the Company
10
with the SEC after the date of this Agreement will fairly present in all
material respects (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount), the consolidated
financial position and the results of the consolidated operations of the Company
and its Subsidiaries as of the respective dates or for the respective fiscal
periods therein set forth; each of such statements (including the related notes,
where applicable) complies, and the financial statements to be filed by the
Company with the SEC after the date of this Agreement will comply, with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto; and each of such statements (including the
related notes, where applicable) has been, and the financial statements to be
filed by the Company with the SEC after the date of this Agreement will be,
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q. The books and records of the Company and its Subsidiaries have been, and
are being, maintained in accordance with GAAP and any other applicable legal and
accounting requirements. KPMG LLP is an independent public accounting firm with
respect to the Company and has not resigned or been dismissed as independent
public accountants of the Company as a result of or in connection with any
disagreements with the Company on a matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.
(c) Since January 1, 2004, the Company and each of its
Subsidiaries has had in place "internal control over financial reporting" (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) designed and
maintained to provide reasonable assurance that (a) transactions are executed in
accordance with management's general or specific authorizations, (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (c) access to assets is permitted only in a
manner designed to prevent or timely detect unauthorized acquisition, use or
disposition that could have a material effect on the Company's financial
statements, and (d) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. Since January 1, 2004, the Company and each of its
Subsidiaries has had in place "disclosure controls and procedures" (as defined
in Rules 13a-15(e) and 15d-15(e)) designed and maintained to ensure that (a) all
information (both financial and non-financial) required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC and (b) all such information is accumulated
and communicated to the Company's management as appropriate to allow timely
decisions regarding required disclosure and to make the certifications of the
Chief Executive Officer and Chief Financial Officer of the Company required
under the Exchange Act with respect to such reports. The Company's and its
Subsidiaries' financial records, data or information are maintained under the
direct control of the Company or its Subsidiaries. Except as provided in Section
3.5(c) of the Disclosure
11
Letter, since September 30, 2006, there have been no changes in the Company's
"internal control over financial reporting" (as such term is defined in Rule
13a-15(f) and Rule 15d-15(f) under the Exchange Act) that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
(d) The Company has made available to Parent and the Purchaser
copies of all comment letters and other material correspondence received by the
Company from the SEC since January 1, 2004, relating to the Company SEC
Documents, together with all written responses of the Company thereto. There are
no outstanding or unresolved comments in any such comment letters received by
the Company from the SEC. As of the date of this Agreement, to the Knowledge of
the Company, none of the Company SEC Documents is the subject of any ongoing
review by the SEC.
3.6 [Intentionally Omitted].
3.7 Absence of Certain Changes.
(a) Except as disclosed in Section 3.7(a) of the Disclosure
Letter, since September 30, 2006, (i) the Company and its Subsidiaries have
conducted their respective operations only in the Ordinary Course of Business,
and (ii) there has not occurred or continued to exist any event, change,
occurrence, effect, fact, circumstance or condition which, individually or in
the aggregate, has had, or is reasonably likely to have, a Material Adverse
Effect on the Company.
(b) Except as set forth in Section 3.7(b) of the Disclosure
Letter, since September 30, 2006, neither the Company nor any of its
Subsidiaries has (i) increased or agreed to increase the wages, salaries,
compensation, pension, or other fringe benefits or perquisites payable to any
officer or director from the amount thereof in effect as of September 30, 2006,
granted any severance or termination pay, entered into any contract to make or
grant any severance or termination pay, entered into or made any loans to any of
its officers, directors, employees, affiliates, agents or consultants other than
advances of expenses in the Ordinary Course of Business and not material in the
aggregate or made any change in its borrowing or lending arrangements for or on
behalf of any of such Persons, whether pursuant to an employee benefit plan or
otherwise, or granted, issued, accelerated, paid, accrued or agreed to pay or
make any accrual or arrangement for payment of salary or other payments or
benefits pursuant to, or adopted or amended any new or existing Plan, (ii)
declared, set aside or paid any dividend or other distribution (whether in cash,
stock or property) with respect to any of the Company's capital stock, (iii)
effected or authorized any split, combination or reclassification of any of the
Company's capital stock or any issuance thereof or issued any other securities
in respect of, in lieu of or in substitution for shares of the Company's capital
stock, except
12
for issuances of Company Common Stock upon the exercise of Company Stock
Options, in each case awarded prior to the date hereof in accordance with their
present terms, (iv) changed, or has Knowledge of any reason that would have
required or would require changing, any accounting methods (or underlying
assumptions), principles or practices of the Company or its Subsidiaries,
including any reserving, renewal or residual method, practice or policy, (v)
made any tax election or settled or compromised any income tax liability, (vi)
to the Knowledge of the Company, had any union organizing activities, (vii)
sold, leased, exchanged, transferred or otherwise disposed of any of its Assets
other than in the Ordinary Course of Business, (viii) revalued, or has Knowledge
of any reason that would have required or would require revaluing, any of the
Assets, including writing down the value of any Assets or writing off notes or
accounts receivable other than in the Ordinary Course of Business, or (ix) made
any agreement or commitment (contingent or otherwise) to do any of the
foregoing.
3.8 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the balance sheet dated as of September 30,
2006 included in the Company's Quarterly Report on Form 10-Q for the period
ended September 30, 2006 (the "Balance Sheet") or in the notes thereto, neither
the Company nor any of its Subsidiaries had as of that date any liabilities or
obligations (accrued, contingent or otherwise) that would be material to the
Company and its Subsidiaries taken as a whole. Except as set forth in the
Balance Sheet or in Section 3.8 of the Disclosure Letter, since the date of the
Balance Sheet, neither the Company nor any of its Subsidiaries has incurred any
liabilities or obligations (accrued, contingent or otherwise) that would be
material to the Company and its Subsidiaries taken as a whole, except for
liabilities and obligations (i) arising in the Ordinary Course of Business, or
(ii) resulting from the execution and delivery of this Agreement. Except as set
forth in Section 3.8 of the Disclosure Letter, neither the Company nor any of
its Subsidiaries is in default in respect of the terms and conditions of any
indebtedness or other agreement which would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
3.9 Proxy Statement. The Proxy Statement (and any amendment thereof or
supplement thereto) at the date mailed to Company stockholders and at the time
of the Stockholders' Meeting, (i) will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading and (ii) will comply in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
3.10 Employee Benefit Plans; ERISA.
(a) Section 3.10(a) of the Disclosure Letter contains a true and
complete list of each bonus, deferred compensation, incentive compensation,
stock purchase, stock option, stock appreciation right or other equity-based
incentive,
13
severance, termination, change in control, retention, employment,
hospitalization or other medical, life or insurance, disability, other welfare,
supplemental unemployment benefits, profit-sharing, pension, or retirement plan,
program, agreement or arrangement, and each other employee compensation or
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to by the Company, any of its Subsidiaries or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), since January 1,
2004 that together with the Company or any of its Subsidiaries would be deemed a
"single employer" within the meaning of section 4001 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), for the benefit of any
current or former employee or director of the Company, any of its Subsidiaries
or any ERISA Affiliate or with respect to which the Company or any of its
Subsidiaries has or would reasonably be expected to have any material liability
(matured or unmatured, absolute or contingent) (the "Plans"). Section 3.10(a) of
the Disclosure Letter identifies each of the Plans that is an "employee benefit
plan," subject to ERISA (the "ERISA Plans").
(b) With respect to each Plan, the Company has heretofore
delivered or made available to Parent true and complete copies of each of the
following documents (including all amendments to such documents):
(i) the Plans or a written description of any Plans not in
writing;
(ii) a copy of the annual report or Internal Revenue Service
Form 5500 Series, if required under ERISA, with respect to each ERISA Plan
for the last three Plan years ending prior to the date of this Agreement
for which such a report was filed;
(iii) a copy of the actuarial report, if required under
ERISA, with respect to each ERISA Plan for the last three Plan years ending
prior to the date of this Agreement;
(iv) a copy of the most recent Summary Plan Description
("SPD"), together with all Summaries of Material Modification issued with
respect to such SPD, if required under ERISA, with respect to each ERISA
Plan, and all other material employee communications relating to each ERISA
Plan;
(v) if the Plan or any obligations thereunder are funded
through a trust or any other funding vehicle, the trust or other funding
agreement and the latest financial statements thereof;
(vi) all contracts relating to the Plans with respect to
which the Company, any of its Subsidiaries or any ERISA Affiliate may have
any
14
liability, including insurance contracts, investment management agreements,
subscription and participation agreements and record keeping agreements;
(vii) the most recent determination letter received from the
Internal Revenue Service with respect to each Plan intended to qualify
under section 401(a) of the Code; and
(viii) material communications that the Company or any of
its ERISA affiliates or Subsidiaries has received from or sent to the
Pension Benefit Guaranty Corporation, the Department of Labor, the Internal
Revenue Service or any comparable agency of any foreign Governmental Entity
concerning any termination of, withdrawal from or appointment of a trustee
to administer any plan or the failure or alleged failure to comply with any
provision of ERISA, the Code or comparable legislation of a foreign
jurisdiction with respect to any plan, including any existing written
description of any such oral communication.
(c) At no time within the past six (6) years has the Company, any
of its Subsidiaries or any ERISA Affiliate ever, maintained, established,
sponsored, participated in or contributed to any ERISA Plan that is subject to
Title IV of ERISA. Except as disclosed in Section 3.10(c) of the Disclosure
Letter, no ERISA Plan is a "multiemployer plan," as defined in section 3(37) of
ERISA, nor is any ERISA Plan a plan described in section 4063(a) of ERISA.
(d) None of the Company, any of its Subsidiaries, any ERISA
Affiliate, any of the ERISA Plans, any trust created thereunder, nor, to the
Knowledge of the Company, any trustee or administrator thereof has engaged in a
transaction or has taken or failed to take any action in connection with which
the Company, any of its Subsidiaries or any ERISA Affiliate could be subject to
any material liability for either a civil penalty assessed pursuant to Section
409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975(a) or (b), 4976
or 4980B of the Code.
(e) All contributions and premiums that the Company, any of its
Subsidiaries or any ERISA Affiliate is required to pay under the terms of each
of the ERISA Plans and Section 412 of the Code, have, to the extent due, been
paid in full or properly recorded on the financial statements or records of the
Company or its Subsidiaries. None of the ERISA Plans or any trust established
thereunder has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of
the last day of the most recent fiscal year of each of the ERISA Plans ended
prior to the date of this Agreement. No Lien has been imposed under Section
412(n) of the Code or Section 302(f) of ERISA on the Assets or any assets of an
ERISA Affiliate. No event or circumstance has occurred that is reasonably likely
to result in the imposition of any such Lien on any such assets on account of
any ERISA Plan.
15
(f) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including ERISA and the
Code.
(g) Each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified. The Company
has applied for and received a currently effective determination letter from the
IRS stating that it is so qualified, or is entitled to rely on an opinion letter
issued to a prototype plan sponsor regarding the qualified status of such plan,
and no event has occurred which would reasonably be expected to affect such
qualified status. Any fund established under an ERISA Plan that is intended to
satisfy the requirements of Section 501(c)(9) of the Code has so satisfied such
requirements.
(h) Except as disclosed in Section 3.10(h) of the Disclosure
Letter, no amounts payable under any of the Plans or any other contract,
agreement or arrangement with respect to which the Company or any of its
Subsidiaries may have any liability could fail to be deductible for federal
income tax purposes by virtue of Sections 280G or 162(m) of the Code.
(i) Except as disclosed in Section 3.10(i) of the Disclosure
Letter, no ERISA Plan that provides life or medical benefit coverage (whether or
not insured) provides such coverage after retirement or other termination of
service (other than coverage mandated by applicable laws).
(j) Except as disclosed in Section 3.10(j) of the Disclosure
Letter, the consummation of the transactions contemplated by this Agreement will
not, either alone or in combination with any other event, (i) entitle any
current or former employee, officer or director of the Company, any of its
Subsidiaries or any ERISA Affiliate to severance pay, unemployment compensation
or any other similar termination payment, or (ii) accelerate the time of payment
or vesting, or increase the amount of or otherwise enhance any benefit due any
such employee, officer or director.
(k) There are no pending or, to the Knowledge of the Company,
threatened claims by or on behalf of any Plan, by any employee or beneficiary
under any such Plan or otherwise involving any such Plan (other than routine
claims for benefits).
3.11 Litigation; Compliance with Law.
(a) Except as set forth in Section 3.11(a) of the Disclosure
Letter, there is no Litigation (other than workers compensation and auto
liability claims that have a reserve of, or are reasonably likely to be settled
for, $100,000 or less) pending or, to the Knowledge of the Company, threatened
against, relating to or naming as a party thereto the Company or any of its
Subsidiaries, any of their respective properties or assets or any of the
Company's officers or directors (in their capacities as such), (i) that if
16
determined in a manner adverse to the Company or its Subsidiaries would
reasonably be expected to have a Material Adverse Effect on the Company, or (ii)
seeking to restrain, enjoin, alter or delay the consummation of the Merger or
any of the other transactions contemplated by this Agreement. There is no
agreement, order, judgment, decree, injunction or award of any Governmental
Entity against or binding upon the Company, any of its Subsidiaries or any of
the Company's officers or directors (in their capacities as such) that would
prevent, enjoin, alter or delay the consummation of the Merger or any of the
other transactions contemplated by this Agreement or that would have a Material
Adverse Effect on the Company. There is no material Litigation that the Company
or any of its Subsidiaries has pending against other parties. "Litigation" means
any action, claim, suit, proceeding, citation, summons, subpoena, inquiry or
investigation of any nature, civil, criminal or regulatory, in law or in equity,
by or before any Governmental Entity or arbitrator (including worker's
compensation claims).
(b) Except as set forth in Section 3.11(b) of the Disclosure
Letter, each of the Company and its Subsidiaries has complied, and is in
compliance, in all material respects with all Laws and Permits which affect the
respective businesses of the Company or any of its Subsidiaries, the Real
Property or the Assets, and the Company and its Subsidiaries have not been and
are not in violation of any such Law or Permit except where the failure to so
comply would have a Material Adverse Effect on the Company; nor has any written
notice, charge, claim or action been received by the Company or any of its
Subsidiaries or been filed, commenced, or to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries alleging any material
violation of the foregoing.
(c) The Company and its Subsidiaries hold all material licenses,
permits, variances, consents, authorizations, waivers, grants, franchises,
concessions, exemptions, orders, registrations and approvals of Governmental
Entities or other Persons necessary for the ownership, leasing, operation,
occupancy and use of the Real Property, the Assets and the conduct of their
respective businesses as currently conducted ("Permits"). Neither the Company
nor any of its Subsidiaries has received written notice that any Permit will be
terminated or modified or cannot be renewed in the Ordinary Course of Business,
and the Company has no Knowledge of any reasonable basis for any such
termination, modification or nonrenewal. The execution, delivery and performance
of this Agreement and the consummation of the Merger or any other transactions
contemplated hereby do not and will not violate any Permit, or result in any
termination, modification or nonrenewals thereof.
3.12 Intellectual Property.
(a) The Company and its Subsidiaries own, or possess sufficient
and legally enforceable licenses or other sufficient and legally enforceable
rights to use, any and all United States and foreign patents, patent
applications, patent disclosures, mask works, computer software, trademarks,
trade dress, trade names, logos,
17
Internet domain names, copyrights and service marks, including applications to
register and registrations for any of the foregoing, as well as trade secrets,
know-how, data and other proprietary rights and information (all of the
foregoing, referred to as "Technology" and together with trademarks, trade names
and service marks, referred to as "Intellectual Property") necessary for the
conduct of, or otherwise material to, the business and operations of the Company
and its Subsidiaries as currently conducted, free and clear of any Liens (except
for any Permitted Liens except where the failure to own or possess such rights
would not have a Material Adverse Effect on the Company. Section 3.12(a) of the
Disclosure Letter lists as of the date hereof, (i) all material patents, patent
applications, patent disclosures, trademarks, trade dress, service marks, trade
names, logos, Internet domain names, copyrights, mask works, and any
applications or registrations of the foregoing, (ii) any material computer
software owned or used by the Company or any of its Subsidiaries, (iii) any
agreements to which the Company or any of its Subsidiaries are a party granting
or obtaining any right to use or practice any rights under any material
Intellectual Property or restricting the Company's or any of its Subsidiaries'
right to use any material Intellectual Property. The material Intellectual
Property owned by the Company or any of its Subsidiaries, and to the Knowledge
of the Company, used by the Company or any of its Subsidiaries, is valid and
enforceable, in full force and effect, and has not been cancelled, expired or
abandoned.
(b) Except as disclosed in Section 3.12(b) of the Disclosure
Letter, the conduct of the business of the Company and its Subsidiaries as
currently or previously conducted does not infringe, conflict with or otherwise
violate any Intellectual Property of any Person except for such conduct that
would not have a Material Adverse Effect on the Company, and none of the Company
or any of its Subsidiaries has received written notice or has Knowledge of any
such infringement, conflict or other violation.
(c) Except as set forth in Section 3.12(c) of the Disclosure
Letter, to the Knowledge of the Company, no Person is infringing, conflicting
with or otherwise violating any Intellectual Property owned or used by the
Company or any of its Subsidiaries, and no such claims, suits or other
proceedings have been brought or threatened against any Person by the Company or
any of its Subsidiaries, except for such conduct that would not have a Material
Adverse Effect on the Company. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not result in the
loss of, or any Lien on, the rights of the Company or any of its Subsidiaries
with respect to any material Intellectual Property owned or used by the Company
or any of its Subsidiaries.
3.13 Contracts.
(a) Except as set forth in Section 3.13(a) of the Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to or bound
by any contract, arrangement, commitment or understanding (whether written or
oral) that: (i) has been entered into with any officer, director of affiliate of
the Company or its
18
Subsidiaries, (ii) requires remaining payments by the Company or any of its
Subsidiaries in excess of $100,000 and is not terminable by the Company or its
Subsidiaries, as the case may be, on notice of three months or less without
penalty, (iii) which is a material contract (as defined in Item 601(b)(10) of
Regulation S-K of the SEC), (iv) restrains, limits or impedes the Company's or
any of its Subsidiaries', or will restrain, limit or impede the Surviving
Corporation's, ability to compete with or conduct any business or any line of
business, including geographic limitations on the Company's or any of its
Subsidiaries' or the Surviving Corporation's activities, (v) is a joint venture
agreement, partnership agreement, profit-sharing or similar agreement, (vi)
governs the terms of indebtedness or any other obligation of third parties owed
to the Company or any of its Subsidiaries, other than receivables arising from
the sale of goods or services by the Company or such Subsidiary in the Ordinary
Course of Business, (vii) governs the terms of indebtedness or any other
obligation of third parties owed by or guaranteed by the Company or any of its
Subsidiaries, other than with respect to any indebtedness of, or advances made
to, any owner-operator, or (viii) which is material to the Company and its
Subsidiaries taken as a whole. Each contract, arrangement, commitment or
understanding of the type described in this Section 3.13(a), whether or not set
forth in Section 3.13(a) of the Disclosure Letter, is referred to herein as a
"Material Contract." The Company has previously provided or made available to
Parent true, complete and correct copies of each Material Contract.
(b) Except as set forth in Section 3.13(b) of the Disclosure
Letter, each Material Contract is valid and binding and in full force and
effect, and the Company and each of its Subsidiaries has performed all material
obligations required to be performed by it to date under each Material Contract.
No event or condition exists which constitutes or, after notice or lapse of time
or both, would constitute, a material default on the part of the Company or any
of its Subsidiaries under any Material Contract and to the Knowledge of the
Company, no other party to any such Material Contract is in default in any
respect thereunder.
3.14 Taxes.
(a) Except as set forth in Section 3.14(a) of the Disclosure
Letter, (i) all Returns required to be filed with any taxing authority on or
before the Closing Date by, or with respect to, the Company and its Subsidiaries
have (or by the Closing Date shall have) been filed in accordance with all
applicable laws and all such returns are true, correct and complete in all
material respects; (ii) the Company and its Subsidiaries have timely paid all
Taxes shown as due and payable on the Returns referred to in clause (i) above;
(iii) the Company and its Subsidiaries have made provision in accordance with
GAAP in the Balance Sheet for all Taxes that are or may become payable by the
Company and its Subsidiaries relating to periods on or prior to the Closing Date
for which no Return has been filed; (iv) all material Employment and Withholding
Taxes have been either duly and timely paid to the proper governmental authority
or properly set aside in accounts for such purpose in accordance with applicable
Laws; (v)
19
the charges, accruals and reserves for Taxes with respect to the Company and its
Subsidiaries reflected in the Balance Sheet are adequate under GAAP to cover the
Tax liabilities accruing through the date thereof; (vi) no deficiencies for any
Taxes have been asserted or assessed, or, to the Knowledge of the Company,
proposed, against the Company or any of its Subsidiaries that are not subject to
adequate reserves in accordance with GAAP in the Balance Sheet; and (vii) as of
the Closing Date, there is no action, suit, proceeding, investigation, audit or
claim pending or, to the Knowledge of the Company, threatened, against or with
respect to the Company or any of its Subsidiaries in respect of any Tax.
(b) Neither the Company nor any of its Subsidiaries has been
included in any "consolidated," "unitary" or "combined" Return (other than
Returns which include only the Company and any Subsidiaries of the Company)
provided for under the laws of the United States, any foreign jurisdiction or
any state or locality for any taxable period for which the statute of
limitations has not expired.
(c) The Company is not, nor has it been within the most recent
five years, a "United States real property holding corporation" as defined in
Section 897 of the Code.
(d) There are no Tax sharing, allocation, indemnification or
similar agreements in effect as between the Company, any of its Subsidiaries or
any predecessor or affiliate of any of them and any other party under which the
Company or any of its Subsidiaries could be liable for any Taxes of any party
other than the Company or any Subsidiary of the Company.
(e) Neither the Company nor any of its Subsidiaries has entered
into an agreement or waiver extending any statute of limitations relating to the
payment or collection of Taxes of the Company or any of its Subsidiaries.
(f) There are no Liens for Taxes on any asset of the Company or
its Subsidiaries, except for Permitted Liens.
(g) Each of the Company and its Subsidiaries has disclosed on its
Returns all positions taken therein that could give rise to a substantial
understatement of Tax within the meaning of Section 6662 of the Code. Neither
the Company nor its Subsidiaries has entered into, has any liability in respect
of, or has any filing obligations with respect to, any "reportable
transactions," as defined in Section 1.6011-4(b)(1) of the Treasury Regulations.
(h) Neither the Company nor its Subsidiaries is the subject of or
bound by any private letter ruling, technical advice memorandum, closing
agreement or similar ruling, memorandum or agreement with any taxing authority.
20
(i) Neither the Company nor any of its Subsidiaries will be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date as a result of any (i) change in method of accounting for a
taxable period ending on or prior to the Closing Date under Section 481(c) of
the Code (or any corresponding or similar provision of state, local or foreign
tax law); (ii) "closing agreement" as described in Section 7121 of the Code (or
any corresponding or similar provision of state, local or foreign tax law)
executed on or prior to the Closing Date, and (iii) deferred intercompany gain
or excess loss account described in Treasury Regulations under Section 1502 of
the Code (or any corresponding or similar provision of state, local or foreign
tax law).
(j) Neither the Company nor any of its Subsidiaries has undergone
an "ownership change" as defined pursuant to Section 382(g) of the Code.
3.15 Environmental Matters.
(a) Except as disclosed in Section 3.15(a) of the Disclosure
Letter, the Company and its Subsidiaries have complied, and are in compliance,
in all material respects with all applicable Environmental Laws, which
compliance includes the possession of all Permits required under applicable
Environmental Laws and compliance in all material respects with the terms and
conditions thereof and the making and filing with all applicable Governmental
Entities of all material reports, forms and documents and the maintenance of all
records required to be made, filed or maintained by it under any Environmental
Law. Except as disclosed in Section 3.15(a) of the Disclosure Letter, neither
the Company nor any of its Subsidiaries has received any written notice from any
Person, whether a Governmental Entity, citizens group, employee or otherwise,
that alleges that the Company or any of its Subsidiaries are not in compliance
with Environmental Laws.
(b) Except as disclosed in Section 3.15(b) of the Disclosure
Letter, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including the release, emission, discharge,
presence or disposal of any Hazardous Substance, that would reasonably be
expected to form the basis of any material Environmental Claim against the
Company or any of its Subsidiaries, against any Person whose liability for any
Environmental Claim the Company or any of its Subsidiaries has retained or
assumed either contractually or by operation of law. There are no Environmental
Claims pending or, to the Knowledge of the Company, threatened, against the
Company or any of its Subsidiaries, or, to the Knowledge of the Company, against
any Person whose liability for any Environmental Claim the Company or any of its
Subsidiaries has retained or assumed either contractually or by operation of
law.
(c) Except as disclosed in Section 3.15(c) of the Disclosure
Letter, neither the Company nor any of its Subsidiaries is subject to any
material liability or obligation (accrued, contingent or otherwise), including
the obligation, liability or
21
commitment to cleanup, correct, xxxxx or to take any response, remedial or
corrective action under or pursuant to any Environmental Laws, relating to (i)
environmental conditions on, under, or about any of the properties or assets
owned, leased, operated or used by the Company or any of its Subsidiaries or any
predecessor thereto at the present time or in the past, including the air, soil,
surface water and groundwater conditions at, on, under, from or near such
properties, or (ii) the past or present use, management, handling, transport,
treatment, generation, storage, disposal or Release of any Hazardous Substances,
whether on-site at any Real Property, or at any off-site location. The Company
has made available to Parent all material information, including such studies,
analyses and test results, in the possession, custody or control of and of which
the Company has Knowledge relating to (1) the environmental conditions on, under
or about any of the properties or assets owned, leased, operated or used by any
of the Company and its Subsidiaries or any predecessor in interest thereto at
the present time or in the past, and (2) any Hazardous Substances used, managed,
handled, transported, treated, generated, stored or Released by any Person on,
under, about or from, or otherwise in connection with the use or operation of,
any of the properties, assets and businesses of the Company or any of its
Subsidiaries.
(d) Except as set forth in Section 3.15(d) of the Disclosure
Letter, to the Knowledge of the Company, (i) there are no underground storage
tanks located at any property owned, leased, operated or used by the Company or
any of its Subsidiaries currently or at any time since January 1, 1996, (ii)
there are no reports investigating whether asbestos is contained in or forming
part of any building, building component, structure or office space currently or
previously owned, leased, operated or used by the Company or any of its
Subsidiaries, which have not been previously provided to Parent.
(e) To the Knowledge of the Company, neither the Company nor any
of its Subsidiaries is required by virtue of the transactions contemplated by
this Agreement, or as a condition to the effectiveness of any transactions
contemplated by this Agreement, (i) to perform a site assessment for Hazardous
Substances, (ii) to remove or remediate any Hazardous Substances, (iii) to give
written notice to or receive approval from any Governmental Entity under any
Environmental Law, or (iv) to record or deliver to any Person any disclosure
document or statement pertaining to environmental matters.
3.16 Assets.
(a) The Company and its Subsidiaries own, or otherwise have
sufficient and legally enforceable rights to use, all of their respective
properties and assets (the "Assets"). The Company and its Subsidiaries have
valid title to, or in the case of leased property have valid leasehold interests
in, all such Assets, in each case, free and clear of any Lien, except Permitted
Liens. True, correct and complete copies of all appraisals of the tangible
properties and assets received by the Company or any of its Subsidiaries within
the last three years have been made available to Parent. The Assets
22
constitute all of the assets and rights necessary to operate the businesses of
the Company and its Subsidiaries in substantially the same manner that the
Company and its Subsidiaries have been operating their respective businesses
prior to the Closing.
(b) Except as set forth in Section 3.16(b)(1) of the Disclosure
Letter, all material tangible Assets of the Company and its Subsidiaries (other
than tractors and trailers) are in sufficient operating condition, ordinary wear
and tear excepted. Except as set forth in Section 3.16(b)(2) of the Disclosure
Letter, all tractors and substantially all trailers of the Company and its
Subsidiaries included in the Assets (i) are in sufficient operating condition,
ordinary wear and tear excepted, (ii) meet all operating and safety fitness
requirements of the Federal Motor Carrier Safety Administration, (iii) have been
maintained in material compliance with all applicable manufacturers' warranty
programs and requirements, and (iv) have been inspected and maintained, on a
routine basis, in accordance with the Company's internal policies.
3.17 Real Property.
(a) Section 3.17(a)(1) of the Disclosure Letter contains a
complete and correct list of all Owned Real Property setting forth information
sufficient to specifically identify such Owned Real Property and the legal owner
thereof. Except as disclosed in Section 3.17(a)(2) of the Disclosure Letter, the
Company and its Subsidiaries have good, valid and marketable fee simple title to
the Owned Real Property, free and clear of any Liens other than Permitted Liens.
There are no outstanding options or rights of first refusal to purchase the
Owned Real Property, or any material portion thereof or interest therein.
(b) Section 3.17(b) of the Disclosure Letter contains a complete
and correct list of all Leased Real Property setting forth information
sufficient to specifically identify such Leased Real Property and legal rights
of the lessee thereof. Each Lease grants the lessee thereunder the exclusive
right to use and occupy the premises. Each of the Company and its Subsidiaries
has good and valid title to the leasehold estate or other interest created under
its respective Leases free and clear of any Liens other than Permitted Liens.
Each of the Company and its Subsidiaries enjoys peaceful and undisturbed
possession under its respective Leases of its respective Leased Real Property.
(c) The Real Property constitutes all the fee, leasehold and
other interests in real property held by the Company and its Subsidiaries, and
constitutes all of the fee, leasehold and other interests in real property
necessary for the conduct of the business of the Company and its Subsidiaries as
it is currently conducted. The use and operation of the Real Property in the
conduct of the business of the Company and its Subsidiaries does not materially
violate any instrument of record or agreement affecting the Real Property. To
the Knowledge of the Company, no current use by the Company
23
and its Subsidiaries of the Real Property is dependent on a nonconforming use or
other Governmental Approval.
3.18 Customers and Suppliers.
(a) Section 3.18(a)(1) of the Disclosure Letters contains a
complete and correct list of the ten largest customers of the Company and its
Subsidiaries for each of the two most recent fiscal years and sets forth
opposite the name of each customer the percentage of net sales attributable to
such customer. Section 3.18(a)(2) of the Disclosure Letter also lists any
additional current customers that the Company anticipates shall be among the ten
largest customers for the current fiscal year.
(b) Section 3.18(b)(1) of the Disclosure Letters contains a
complete and correct list of the ten largest suppliers of the Company and its
Subsidiaries for each of the two most recent fiscal years and sets forth
opposite the name of each supplier the amount paid to such supplier. Section
3.18(b)(2) of the Disclosure Letter also lists any additional current suppliers
that the Company anticipates shall be among the ten largest suppliers for the
current fiscal year.
(c) Except as set forth in Section 3.18(c) of the Disclosure
Letter, to the Company's Knowledge, since December 31, 2005, no customer listed
in Section 3.18(a)(1) or Section 3.18(a)(2) of the Disclosure Letter has given
notice that it intends to stop, or decrease materially the rate of, buying
services from the Company or any of its Subsidiaries and no supplier of the
Company listed in Section 3.18(b)(1) or Section 3.18(b)(2) of the Disclosure
Letter has given notice that it intends to stop, or decrease materially the rate
of, supplying materials, products, or services to the Company or any of its
Subsidiaries.
3.19 Insurance. The Company has previously provided or made available
to Parent true, complete and correct copies of each insurance policy maintained
by or on behalf of any of the Company and its Subsidiaries. Such policies are in
full force and effect, and all premiums due thereon have been paid. The Company
and its Subsidiaries have complied in all material respects with the terms and
provisions of such policies. The insurance coverage provided by such policies is
suitable for the business and operations of the Company and its Subsidiaries.
3.20 Labor Matters.
(a) None of the Company or any of its Subsidiaries is a party to
or bound by a collective bargaining agreement with any labor union or labor
organization applicable to the employees of the Company or any of its
Subsidiaries, and no such agreement is currently being negotiated. Except as set
forth in Section 3.20(a) of the Disclosure Letter, no representation election
petition or application for certification has been filed by any employees of the
Company or any of its Subsidiaries, nor is such a
24
petition or application pending with the National Labor Relations Board or any
Governmental Entity, and no labor union is currently engaged in or, to the
Knowledge of the Company, threatening, organizational efforts with respect to
any employees of the Company or any of its Subsidiaries. Except as set forth in
Section 3.20(a) of the Disclosure Letter, no labor dispute, strike, slowdown,
picketing, work stoppage, lockout or other collective labor action involving the
employees of the Company or any of its Subsidiaries has occurred since January
1, 2004, or is in progress or, to the Knowledge of the Company, has been
threatened against the Company or any of its Subsidiaries.
(b) Except as set forth in Section 3.20(b) of the Disclosure
Letter, since January 1, 2000, neither the Company nor any of its Subsidiaries
has effectuated (i) a "plant closing" (as defined in the Worker Adjustment
Retraining and Notification (the "WARN Act"), affecting any site of employment
or one or more facilities or operating units within any site of employment or
facility of the Company or any of its Subsidiaries, or (ii) a "mass layoff" (as
defined in the WARN Act) affecting any site of employment or facility of the
Company or any of its Subsidiaries; nor has the Company or any of its
Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
state, local or foreign Law or regulation similar to the WARN Act. To the
Knowledge of the Company, neither the Company nor any of its Subsidiaries'
employees has suffered an "employment loss" (as defined in the WARN Act) in the
ninety (90) days prior to the date of this Agreement.
(c) Section 3.20(c) of the Disclosure Letter contains a true and
complete list of the names of all directors and officers of each of the Company
and its Subsidiaries.
3.21 Affiliate Transactions. Section 3.21 of the Disclosure Letter
contains a complete and correct list of all (i) transactions between the Company
or any of its Subsidiaries and any director, officer, employee or affiliate of
the Company or its Subsidiaries other than transactions between the Company and
its wholly owned Subsidiaries and compensation paid to directors, officers or
employees in the Ordinary Course of Business and (ii) agreements, arrangements
or understandings by the Company or any of its Subsidiaries, on the one hand,
and any of their respective affiliates on the other hand, that involve
continuing liabilities and obligations of the Company or its Subsidiaries.
3.22 Key Personnel. To the Knowledge of the Company, as of the date of
this Agreement none of the executive officers (other than Xxxxxx X. Xxxx) or
other key personnel of the Company and its Subsidiaries intends to terminate his
or her employment with the Company or such Subsidiary other than by retirement
in the ordinary course of such person's career.
25
3.23 Brokers. Except for Xxxxxx Xxxxxx & Company, Inc., no broker,
finder, investment banker or other person is entitled to any brokerage, finder's
or other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company or
any of its Subsidiaries, that is or will be payable by the Company or any of its
Subsidiaries. The Company has previously delivered to Parent true and correct
copies of the engagement letter of Xxxxxx Xxxxxx & Company, Inc.
3.24 Opinion of Financial Advisor. The Company has received an opinion
of Xxxxxx Xxxxxx & Company, Inc. to the effect that, as of the date of such
opinion (and any update or "bring down" thereof), the Merger Consideration to be
received by the stockholders of the Company in the Merger is fair, from a
financial point of view, to the stockholders of the Company. The Company has
delivered to Parent and the Bank a true and correct copy of such opinion
together with all attachments thereto, and the Company will deliver to Parent
and the Bank promptly upon its receipt thereof, a true and correct copy of all
amendments, supplements, attachments, updates, and bring downs thereto. To the
Company's Knowledge, such opinion remains in full force and effect. The Company
has received the approval of Xxxxxx Xxxxxx & Company, Inc. to permit the
inclusion of a copy of its written opinion in its entirety in the Proxy
Statement.
3.25 Company's Independent Investigation. The Company has undertaken
an independent investigation, examination, analysis and verification of the
Parent and the Purchaser and the Bank Commitment Letters (as defined below) and
the Financing (as defined below). The Company has had the opportunity to visit
with the Purchaser, Parent and the entities issuing the Bank Commitment Letters
and has met with its and their respective representatives to discuss the
foregoing matters. All materials and information requested by the Company have
been provided to the Company to its reasonable satisfaction. The Company has
undertaken the due diligence the Company deems adequate regarding all matters
relating to this Agreement and the transactions contemplated herein, including
that described above.
3.26 Assurance of Auditors. Section 3.26 of the Disclosure Letter
contains the engagement letter from KPMG LLP, the Company's independent
registered public accounting firm, to the Company. Pursuant to such engagement
letter, KPMG, LLP will consider executing and delivering, subject to customary
representation letters and fees, at such time or times as the Company shall
reasonably request, its consent to the inclusion or incorporation by reference
of its report as independent auditor, with respect to any financial statements
for which it served as the independent auditor, in any report, registration
statement or other filing to be made by Parent or an affiliate of Parent with
the Securities and Exchange Commission pursuant to the Securities Act or the
Exchange Act in which such financial statements and report thereon are required
to be included.
26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Except as is disclosed in the disclosure letter delivered to Company by
Parent on or prior to the date hereof (the "Purchaser Disclosure Letter") and
subject to Section 8.13, the Parent and the Purchaser represent and warrant to
the Company, as of the date hereof, as follows:
4.1 Organization.
(a) Parent and Purchaser are each corporations duly organized,
validly existing and in good standing under the Laws of the States of Tennessee
and Nevada respectively, and each of Parent and the Purchaser has all requisite
power and authority to own, lease, operate or use its properties and to carry on
its business as now being conducted. Except as set forth in Section 4.1 of the
Purchaser Disclosure Letter, each of Parent and the Purchaser is qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction in which such qualification or licensing is required except when
the failure to be so qualified would not be reasonably expected, either
individually or in the aggregate, to have a Material Adverse Effect on the
Parent or Purchaser. Each of Parent and the Purchaser has previously delivered
to the Company complete and correct copies of its organizational documents as
currently in effect.
4.2 Authorization; Validity of Agreement. Each of Parent and the
Purchaser has the requisite corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Parent and the Purchaser of this Agreement and the consummation by Parent and
the Purchaser of the transactions contemplated hereby have been duly authorized
by the board of directors of Parent and Purchaser and no other proceedings on
the part of Parent or the Purchaser are necessary to authorize the execution,
delivery and performance of this Agreement by Parent and the Purchaser and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and the Purchaser and, assuming due
authorization, execution and delivery of this Agreement by the Company, is a
valid and binding obligation of each of Parent and the Purchaser enforceable
against it in accordance with its terms except that such enforceability (i) may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity (regardless of
whether considered in a proceeding in equity or at law).
27
4.3 No Violations; Consents and Approvals.
(a) Neither the execution, delivery and performance of this
Agreement by Parent and the Purchaser nor the consummation by Parent and the
Purchaser of the transactions contemplated hereby will (i) violate any provision
of the organizational documents of Parent or the Purchaser, (ii) except as set
forth in Section 4.3(a) of the Purchaser Disclosure Letter, violate, conflict
with, result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination, cancellation or amendment under, accelerate the performance
required by, or result in the creation of any Lien upon any of the respective
properties or assets of Parent or the Purchaser under, or result in the
acceleration or trigger of any payment, time of payment, vesting or increase in
the amount of any compensation or benefit payable pursuant to, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, guarantee or
other evidence of indebtedness, lease, license, contract, agreement, plan or
other instrument or obligation to which Parent or the Purchaser is a party or by
which Parent or the Purchaser or any of their respective properties or assets
may be bound or affected or (iii) conflict with or violate any Law applicable to
Parent or the Purchaser or any of their respective properties or assets; except
in the case of clause (ii) or (iii) for such conflicts, violations, breaches,
defaults or Liens which have been waived or which, individually or in the
aggregate, would not have or result in a Material Adverse Effect on Parent or
the Purchaser.
(b) Assuming that the representations and warranties of the
Company set forth in Section 3.4(b) are true and correct, no filing or
registration with, declaration or notification to, or order, authorization,
consent or approval of, any Governmental Entity or any other Person is required
in connection with the execution, delivery and performance of this Agreement by
Parent and the Purchaser or the consummation by Parent and the Purchaser of the
transactions contemplated hereby, except (i) the filing of the Articles of
Merger with the Secretary of State such other consents, approvals, orders,
authorizations, notifications, registrations, declarations and filings the
failure of which to be obtained or made individually or in the aggregate would
not have or result in a Material Adverse Effect on Parent or the Purchaser.
4.4 Information in Proxy Statement; Merger Documents. The information
supplied by, and pertaining to, Parent and the Purchaser in writing for
inclusion in the Proxy Statement (including any amendments or supplements
thereto), or any other statement or schedule filed with the SEC by the Company,
Parent or the Purchaser at the date mailed to stockholders and at the time of
the Stockholders' Meeting, (i) will not make any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading and any statement or schedule filed by
Parent or the Purchaser and (ii) will comply in all material respects with the
applicable provisions of the Exchange Act and the rules and regulations
thereunder;
28
except that no representation is made by Parent or the Purchaser with respect to
statements made in such statement or schedule based on information supplied to
Parent and the Purchaser by the Company for inclusion in such statement or
schedule.
4.5 Broker. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or the Purchaser, that is or will be payable by the Company
or any of its Subsidiaries other than following the occurrence of the Effective
Time.
4.6 Financing Commitments. An executed commitment letter from JPMorgan
Chase Bank, N.A. and X.X. Xxxxxx Securities Inc. (together, the "Bank"), dated
as of March 22, 2007 (the "Bank Commitment Letters"), is included in Section
4.6(a) of the Purchaser Disclosure Letter. Pursuant to the Bank Commitment
Letters and subject to the terms and conditions contained therein, the Bank has
committed to provide financing sufficient to consummate the Merger (the
"Financing"). The obligations to fund the commitments under the Bank Commitment
Letters are not subject to any condition other than set forth in the Bank
Commitment Letters. Parent and the Purchaser have no actual knowledge of any
fact or occurrence existing on the date of this Agreement which in their good
faith judgment would reasonably be expected to (i) make the material assumptions
or statements set forth in the Bank Commitment Letters inaccurate, (ii) cause
the Bank Commitment Letters to be ineffective or (iii) preclude in any material
respect the satisfaction of the conditions set forth in the Bank Commitment
Letters. As of the date hereof, the Bank Commitment Letters are in full force
and effect and have not been amended in any material respect. To the knowledge
of Parent and the Purchaser, the funds contemplated to be received pursuant to
the Bank Commitment Letters, together with any additional funds from Parent, to
be deposited in trust with the Paying Agent for the benefit of holders of
Company Common Stock will be sufficient to consummate the Merger and to pay all
related fees and Expenses. The fees that are due and payable under the Bank
Commitment Letters (i) as of the date hereof have been paid in full and (ii) as
of the Closing will be paid in full. Parent and Purchaser have no actual
knowledge of any fact or occurrence existing on the date of this Agreement which
in their good faith judgment would reasonably be expected to indicate that, upon
consummation of the transactions contemplated by this Agreement, including the
Financing, Parent, the Surviving Corporation, and their Subsidiaries, taken as a
whole, will be insolvent, will be left with unreasonably small capital, will
have incurred debts beyond their ability to pay such debts as they mature, or
will have impaired capital.
4.7 Ownership or Control of Shares. Neither Parent nor the Purchaser,
individually or in association with others, has acquired Shares or taken any
other action that would subject them or any of them to the provisions of
Nevada's "Control Share Act", codified in NRS 78.378 to 78.3793. Neither Parent
nor the Purchaser, nor any affiliate or associate of either, is a beneficial
owner of Shares or has taken any other action that would cause either Parent or
the Purchaser (or both) to be an "interested
29
stockholder" under NRS 78.423 or to otherwise subject this Agreement or the
Merger to the provisions of Nevada's "Business Combination Act" codified in NRS
78.411 through 78.444.
4.8 Parent's and the Purchaser's Independent Investigation. Parent and
the Purchaser have undertaken an independent investigation, examination,
analysis and verification of the Company and its Subsidiaries, the Shares, the
Assets, and the business, assets, liabilities, obligations, operations,
financial condition and prospects of the Company and its Subsidiaries, including
Parent's and the Purchaser's own estimate of the value of the Company and its
Subsidiaries and the Assets. Parent and the Purchaser have had the opportunity
to visit with the Company and its Subsidiaries and meet with its and their
respective representatives to discuss the foregoing matters. All materials and
information requested by Parent and the Purchaser have been provided to Parent
and the Purchaser to its reasonable satisfaction. Parent and the Purchaser have
undertaken the due diligence Parent and the Purchaser deems adequate regarding
all matters relating to this Agreement and the transactions contemplated herein,
including that described above.
ARTICLE V
COVENANTS
5.1 Interim Operations of the Company. The Company covenants and
agrees that during the period from the date of this Agreement until the
Effective Time or the date, if any, on which this Agreement is earlier
terminated pursuant to Section 7.1, except as (y) expressly provided by this
Agreement or (z) agreed to in writing by Parent, after the date hereof and prior
to the Effective Time:
(a) the business of the Company and its Subsidiaries shall be
conducted only in the Ordinary Course of Business, and the Company shall use its
commercially reasonable efforts to preserve intact its business organization and
goodwill and the business organization and goodwill of its Subsidiaries and keep
available the services of their current officers and employees and preserve and
maintain existing relations with customers, suppliers, officers, employees and
creditors;
(b) the Company shall not, nor shall it permit any of its
Subsidiaries to, (i) enter into any new line of business or (ii) incur or commit
to any capital expenditures, or any obligations or liabilities in connection
with any capital expenditures, other than capital expenditures and obligations
or liabilities in such amounts not greater than one hundred ten percent (110%)
of the amount of such capital expenditures and obligations or liabilities set
forth in the Company's capital budget described in Section 5.1(b) of the
Disclosure Letter (the "Capital Budget");
30
(c) the Company shall not, nor shall it permit any of its
Subsidiaries to, amend its articles of incorporation or bylaws, except as
contemplated by the transactions contemplated hereby;
(d) the Company shall not, nor shall it permit any of its
Subsidiaries to, declare, set aside or pay any dividend or other distribution,
whether payable in cash, stock or any other property or right, with respect to
its capital stock; and the Company shall not, nor shall it permit any of it
Subsidiaries to, (i) adjust, split, combine or reclassify any capital stock or
issue, grant, sell, transfer, pledge, dispose of or encumber any additional
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
capital stock of any class or of any other such securities or agreements of the
Company or any of its Subsidiaries, other than issuances of shares of Company
Common Stock pursuant to securities, options, warrants, calls, commitments or
rights existing at the date hereof and previously disclosed to Parent in
writing; or (ii) redeem, purchase or otherwise acquire directly or indirectly
any of its capital stock or any other securities or agreements of the type
described in clause (i) of this Section 5.1(d);
(e) the Company shall not, nor shall it permit any of its
Subsidiaries to, (i) except for normal increases in the Ordinary Course of
Business with respect to non-officer employees, grant any increase in the
compensation or benefits payable or to become payable by the Company or any of
its Subsidiaries to any employee; (ii) adopt, enter into, amend or otherwise
increase, or accelerate the payment or vesting of the amounts, benefits or
rights payable or accrued or to become payable or accrued under any
compensation, severance, retention, other similar profit sharing, stock option
or equity-linked pension or retirement plan, program agreement or arrangement;
or (iii) enter into or amend any employment or severance agreement or, except in
accordance with existing contracts or agreements disclosed in Section 3.13 of
the Disclosure Letter, grant any severance or termination pay to any officer,
director or employee of the Company or any of its Subsidiaries;
(f) the Company shall not, nor shall it permit any of its
Subsidiaries to, change the accounting principles used by it unless required due
to changes in GAAP or by Regulation S-X under the Exchange Act;
(g) the Company shall not, nor shall it permit any of its
Subsidiaries to, make any acquisition, whether by purchase of stock or assets,
of any Person or any division or business of any Person;
(h) the Company shall not, nor shall it permit any of its
Subsidiaries to, sell, lease, exchange, transfer or otherwise dispose of, or
agree to sell, lease, exchange, transfer or otherwise dispose of, any of the
Assets, except (i) for tractors and trailers in accordance with the Capital
Budget or (ii) in the Ordinary Course of Business;
31
(i) the Company shall not, nor shall it permit any of its
Subsidiaries to, mortgage, pledge, hypothecate, grant any security interest in,
or otherwise subject to any other Lien other than Permitted Liens, any of the
Assets;
(j) the Company shall not, nor shall it permit any of its
Subsidiaries to, (i) pay, discharge or satisfy any material claims (including
claims of stockholders), liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise) where such payment, discharge or
satisfaction would require any material payment except for the payment,
discharge or satisfaction of liabilities or obligations in accordance with the
terms of Material Contracts as in effect on the date hereof, or (ii) compromise,
settle, grant any waiver or release relating to or otherwise adjust any material
Litigation (other than the settlement of any Litigation described in Section
5.1(j) of the Disclosure Letter) outside the limits of any reserves set aside
specifically for such settled Litigation;
(k) the Company shall not, nor shall it permit any of its
Subsidiaries to, engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any of the Company's
affiliates other than pursuant to agreements in force on the date of this
Agreement as set forth in Section 3.21 of the Disclosure Letter;
(l) the Company and its Subsidiaries shall not make or change any
Tax election, amend any Return or settle or compromise any Tax liability;
(m) the Company shall not, and shall not permit any of its
Subsidiaries to, take any action that would, or would reasonably be expected to,
result in (i) any of its representations and warranties set forth in this
Agreement becoming untrue in any respect, (ii) any of the conditions to the
Merger set forth in Article VI not being satisfied, or (iii) a Material Adverse
Effect on the Company;
(n) the Company shall not, and shall not permit any of its
Subsidiaries to, adopt or enter into a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (other than the Merger)
or any agreement relating to an Acquisition Proposal, except as provided for in
Section 5.2;
(o) the Company shall not, and shall not permit any of its
Subsidiaries to, (i) incur or assume any indebtedness or off-balance sheet
financing obligations; (ii) incur or modify any material indebtedness or other
liability; (iii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person; (iv) make any loans, advances or capital contributions to, or
investments in, any other Person (other than to wholly owned Subsidiaries of the
Company, or by such Subsidiaries to the Company, or customary loans or advances
to employees in accordance with past practice; or (v) enter
32
into any material commitment or transaction, except, in the case of clauses (i)
through (v), (x) in accordance with the Capital Budget, (y) in the Ordinary
Course of Business, or (z) if not covered in the Capital Budget, in amounts not
exceeding $100,000 individually or $1,000,000 in the aggregate;
(p) the Company shall not, and shall not permit any of its
Subsidiaries to, enter into any agreement, understanding or commitment that
materially restrains, limits or impedes the Company's or any of its
Subsidiaries' ability to compete with or conduct any business or line of
business, including geographic limitations on the Company's or any of its
Subsidiaries' activities;
(q) the Company shall not, and shall not permit any of its
Subsidiaries to, modify, amend or terminate any Material Contract or enter into
any contract that would be a Material Contract if entered into prior to the date
hereof, or waive or assign any of its rights or claims; and
(r) the Company shall not, nor shall it permit any of its
Subsidiaries to, enter into an agreement, contract, commitment or arrangement to
do any of the foregoing.
5.2 Acquisition Proposals.
(a) The Company agrees that, except as expressly contemplated by
this Agreement, neither it nor any of its Subsidiaries shall, and the Company
shall, and shall cause its Subsidiaries to, cause their respective officers,
directors, investment bankers, attorneys, accountants, financial advisors,
agents or other representatives not to (x) directly or indirectly initiate,
solicit, knowingly encourage or facilitate any inquiries or the making or
submission of any proposal that is reasonably likely to result in an Acquisition
Proposal, (y) participate or engage in discussions or negotiations with, or
disclose any non-public information or data relating to the Company or any of
its Subsidiaries or afford access to the properties, books or records of the
Company or any of its Subsidiaries to, any Person that has made an Acquisition
Proposal or to any Person in contemplation of an Acquisition Proposal, or (z)
accept an Acquisition Proposal or enter into any agreement, including any letter
of intent or agreement in principle (other than an Acceptable Confidentiality
Agreement in circumstances contemplated in the next sentence) providing for or
relating to an Acquisition Proposal (an "Alternative Definitive Agreement").
Notwithstanding the foregoing, the Company and the Board may take the actions
described in clause (y) and (z) of this Section 5.2(a) with respect to a third
party at any time prior to the holding of the vote of the Company's stockholders
to adopt the Merger Agreement if prior to such vote (A) the Company receives a
bona fide unsolicited written proposal from such third party, (B) the Board (or
a committee of the Board) determines in good faith that such proposal is
reasonably likely to result in a Superior Proposal, after consultation with its
financial advisors, (and such Acquisition Proposal was not solicited, knowingly
33
encouraged or facilitated by the Company or any of its Subsidiaries or any of
their respective officers, directors, investment bankers, attorneys,
accountants, financial advisors, agents or other representatives), (C) the Board
determines in good faith, after consultation with its outside counsel, that
participating in such negotiations or discussions or furnishing such information
or data to such third party is required by the Board's fiduciary duties,
provided that the Company shall not deliver any information to such third party
without entering into a confidentiality agreement on terms no less favorable to
the Company than the Confidentiality Agreement (an "Acceptable Confidentiality
Agreement"), (D) (i) the Board provides a written notice to Parent (a "Notice of
Superior Proposal") advising Parent that the Board or a committee thereof has
received a Superior Proposal, and specifying the material terms and conditions
of such Superior Proposal, identifying the Person or group making such Superior
Proposal, except if any confidentiality agreement in effect prior to the
execution of this Agreement precludes such identification, and (ii) the Company
and the Board do not take such actions described in clause (z) until the third
Business Day after receipt of a Notice of Superior Proposal by Parent, and (E)
in the case of clause (z) of this Section 5.2(a), the Company terminates this
Agreement pursuant to Section 7.1(f) and complies with its obligations under
Section 8.1, provided, however, the Company shall not be entitled to terminate
this Agreement pursuant to Section 7.1(f) unless and until the Company has paid
the Termination Fee and reimbursed Expenses pursuant to Section 8.1. Nothing
contained in this Section 5.2 shall prohibit the Company or the Board from
taking and disclosing to the Company's stockholders a position with respect to
an Acquisition Proposal pursuant to Rule 14d-9 or 14e-2(a) promulgated under the
Exchange Act or from making any similar disclosure, in either case to the extent
required by applicable Law, provided that such disclosure states that no action
will be taken by the Board or any committee thereof in violation of this Section
5.2.
(b) Neither the Board nor any committee thereof shall directly or
indirectly (i) (A) withdraw (or amend or modify in a manner adverse to Parent or
the Purchaser), or publicly propose to withdraw (or amend or modify in a manner
adverse to Parent or the Purchaser), the approval or recommendation by the Board
or any such committee thereof of this Agreement, the Merger or the other
transactions contemplated by this Agreement or (B) recommend, adopt or approve,
or propose publicly to recommend, adopt or approve, any Acquisition Proposal
(any action described in this clause (i) being referred to as an "Adverse
Recommendation Change"). Notwithstanding the foregoing, at any time prior to
obtaining the Required Vote, and subject to the Company's compliance at all
times with the provisions of this Section 5.2 and Section 5.6, the Board may
make an Adverse Recommendation Change after the Company has received an
unsolicited Acquisition Proposal that it determines in good faith is a Superior
Proposal and the Board (x) provides Notice of Superior Proposal advising Parent
that the Board or a committee thereof has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal,
identifying the Person or group making such Superior Proposal, except if any
confidentiality agreement in effect prior to the execution of this Agreement
precludes such identification, and (y) determines in good
34
faith (1), based on the advice of its financial advisors that any transaction
agreed to by Parent in writing received by the Company prior to the Adverse
Recommendation Change is not at least as favorable to the Company and its
stockholders from a financial point of view (taking into account, among other
things, all legal, financial, regulatory and other aspects of the proposal and
identity of the offeror and the financial capacity of the offeror to consummate
the transaction) as the Superior Proposal and (2), after consultation with its
outside counsel that making such Adverse Recommendation Change is required by
the fiduciary duties of the Board; provided, however, that (I) neither the Board
nor any committee thereof may make an Adverse Recommendation Change until the
third Business Day after receipt of a Notice of Superior Proposal by Parent,
(II) any change in the financial or other material terms of a Superior Proposal
shall require a new Notice of Superior Proposal and a new three Business Day
period under this Section 5.2(b), and (III) the Company shall not be entitled to
enter into an Alternative Definitive Agreement with respect to a Superior
Proposal at the time of termination pursuant to Section 7.1(e) or Section 7.1(f)
unless and until the Company has paid the Termination Fee and reimbursed
Expenses up to an amount not in excess of $750,000 to Parent pursuant to Section
8.1 and this Agreement is terminated by its terms pursuant to Section 7.1(e) or
Section 7.1(f).
(c) The Company agrees to advise Parent in writing promptly (but
in no event more than 24 hours) after receipt thereof of any request for
information or any Acquisition Proposal received from any Person, or any
communications with respect to any Acquisition Proposal, and the terms and
conditions of such request, Acquisition Proposal, or communications, and the
Company shall promptly provide to Parent copies of any written materials
received by the Company in connection with any of the foregoing, and the
identity of the Person or group making any such request, Acquisition Proposal or
communications, except if any confidentiality agreement in effect prior to the
execution of this Agreement precludes such identification. The Company agrees
that it shall simultaneously provide to Parent any non-public information
concerning the Company provided to any other Person or group in connection with
any Acquisition Proposal which was not previously provided to Parent. The
Company shall keep Parent fully informed of the status of any Acquisition
Proposals (including the identity of the parties, except if any confidentiality
agreement in effect prior to the execution of this Agreement precludes such
identification, and price involved and any changes to any terms and conditions
thereof). The Company agrees not to release any third party from, or waive any
provisions of, any confidentiality or standstill agreement to which the Company
is a party, except standstill provisions in any confidentiality agreements in
effect prior to the execution of this Agreement or any Acceptable
Confidentiality Agreements if the Company is otherwise permitted under Section
5.2(a) to take any actions described in Section 5.2(a)(y) or (z), and will use
its commercially reasonable efforts to enforce any such agreement at the request
of or on behalf of Parent, including initiating and prosecuting litigation
seeking appropriate equitable relief (where available) and, to the extent
applicable, damages.
35
(d) For purposes of this Agreement, "Acquisition Proposal" shall
mean any bona fide proposal made by a third party, whether or not in writing,
for the (i) direct or indirect acquisition or purchase of a business or assets
that constitutes 10% or more of the net revenues, net income or the assets
(based on the fair market value thereof) of the Company and its Subsidiaries,
taken as a whole, (ii) direct or indirect acquisition or purchase of 10% or more
of any class of equity securities or capital stock of the Company or any of its
Subsidiaries whose business constitutes 10% or more of the net revenues, net
income or assets of the Company and its Subsidiaries, taken as a whole, (iii)
merger, consolidation, restructuring, transfer of assets or other business
combination, sale of shares of capital stock, tender offer, exchange offer,
recapitalization, or other similar transaction that if consummated would result
in any Person or Persons beneficially owning 10% or more of any class of equity
securities of the Company or any of its Subsidiaries whose business constitutes
10% or more of the net revenues, net income or assets of the Company and its
Subsidiaries, taken as a whole, other than the transactions contemplated by this
Agreement. The term "Superior Proposal" shall mean any bona fide written
Acquisition Proposal (provided that for purposes of this definition, references
to "10% or more" in the definition of "Acquisition Proposal" shall instead be
deemed to be references to "at least a majority") that was not solicited by the
Company or any of its Subsidiaries or any of their respective officers,
directors, investment bankers, attorneys, accountants, financial advisors,
agents or other representatives, which a majority of the Board determines in
good faith after receiving the advice of its independent financial and legal
advisors, and after taking into account all terms and conditions of such
Acquisition Proposal, including all legal, financial, regulatory, timing and
other aspects of the Acquisition Proposal and the party making such Acquisition
Proposal (including the conditions precedent to (or other conditionality in
respect of) consummation of such Acquisition Proposal relative to those required
pursuant to this Agreement, to be superior to the Company and its stockholders
(in their capacity as stockholders) from a financial point of view as compared
to the transactions contemplated hereby and to any alternative transaction
agreed to by Parent in writing received by the Company prior to an Adverse
Recommendation Change pursuant to Section 5.2(b).
(e) Immediately after the execution and delivery of this
Agreement, the Company and its Subsidiaries will, and will instruct their
respective officers, directors, employees, investment bankers, attorneys,
accountants, financial advisors, and other agents and other representatives to,
cease and terminate any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any possible Acquisition
Proposal. The Company agrees that it shall (i) take the necessary steps to
promptly inform its officers, directors, investments bankers, attorneys,
accountants, financial advisors, agents or other representatives involved in the
transactions contemplated by this Agreement of the obligations undertaken in
Section 5.2(a) and (ii) request each Person who has heretofore executed a
confidentiality agreement on or after July 1, 2006, in connection with such
Person's consideration of acquiring the Company or any portion thereof to return
or destroy (which destruction
36
shall be certified in writing by an executive officer of such Person) all
confidential information heretofore furnished to such Person by or on its
behalf.
5.3 Takeover Statute. If any "moratorium," "control share," "fair
price," or other antitakeover laws shall become applicable to the Merger or any
of the other transactions contemplated by this Agreement, then the Board shall,
to the extent permitted or allowed by NRS, use its reasonable best efforts to
grant such approvals and to take such actions as necessary so that the Merger or
any of the other transactions contemplated by this Agreement may be consummated
as promptly as practicable on the terms contemplated by this Agreement and
otherwise to act to eliminate the effects of such laws on the transactions
contemplated by this Agreement.
5.4 Access to Information and Properties.
(a) From the date of this Agreement until the Effective Time, the
Company shall, and shall cause each of its Subsidiaries to, (i) afford to the
Purchaser and its authorized representatives, including consultants, advisors,
lenders and financing sources, reasonable access during normal business hours
upon reasonable prior written notice to all of its premises, properties
(including for purposes of environmental testing), contracts, commitments, data,
books and records and personnel and (ii) shall use its reasonable efforts to
cause its customers, suppliers, lenders and other creditors to be available to
the Purchaser, in order that the Purchaser may have an opportunity to make such
investigation as it shall reasonably deem necessary of the Company's and its
Subsidiaries' respective affairs; provided that such investigation shall not
affect the representations and warranties made by the Company in this Agreement.
In addition, during such period, the Company shall, and shall cause each of its
Subsidiaries to, furnish promptly to the Purchaser (y) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal or state securities
laws and (z) all other information concerning its business, properties and
personnel as the Purchaser may reasonably request. Until the Effective Time, the
Purchaser will hold any such information in accordance with the provisions of
the confidentiality agreement between the Company and the Parent (the
"Confidentiality Agreement").
(b) From the date of this Agreement until the Effective Time, the
Company shall use its reasonable efforts to keep the Parent and Purchaser
updated as to the status of the business of the Company and its Subsidiaries
taken as a whole and shall afford the Parent and the Purchaser reasonable access
to its management, attorneys, accountants, investment bankers, lenders and other
creditors in order to allow Parent and Purchaser to make such investigation as
it shall reasonably deem necessary of the Company's and its Subsidiaries'
respective affairs and provide any relevant information concerning the Company's
and its Subsidiaries' business, properties and personnel as the Parent may
reasonably request. In addition, the Company will use its commercially
reasonable efforts to facilitate contacts between the Parent and the lenders to
the
37
Company and its Subsidiaries for the purposes of attempting to obtain such
waivers or consents as may be required to prevent financing provided by such
lenders from being accelerated as a result of "change in control" or similar
provisions.
5.5 Further Action; Reasonable Efforts.
(a) Upon the terms and subject to the conditions herein provided,
each of the parties hereto agrees to use its 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 to consummate and make
effective the transactions contemplated by this Agreement, including using
reasonable efforts to satisfy the conditions precedent to the obligations of any
of the parties hereto, to obtain all necessary authorizations, consents and
approvals, and to effect all necessary registrations and filings and to assist
Parent and the Purchaser in obtaining financing. Each of the parties hereto will
furnish to the other parties such necessary information and reasonable
assistance as such other parties may reasonably request in connection with the
foregoing and will provide the other parties with copies of all filings made by
such party with any Governmental Entity or any other information supplied by
such party to a Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
(b) Parent shall use its commercially reasonable efforts to
finalize and consummate the Financing to consummate the Merger. Parent shall
keep the Company informed on a reasonably current basis in reasonable detail of
the status of its efforts to finalize and consummate the Financing and provide
copies of all documents related to the financing to the Company.
(c) The Company agrees to, and to cause its Subsidiaries and its
and their respective officers, employees, advisors and accountants to,
reasonably cooperate with Parent and its affiliates in connection with the
arrangement of all financing to be consummated prior to or contemporaneously
with the Closing in respect of the transactions contemplated by this Agreement,
including participation in meetings, due diligence sessions, road shows, the
preparation of offering memoranda, private placement memoranda, and similar
documents, and obtaining all such letters from legal, accounting, and financial
advisors as may be customary, all of such items as may be reasonably requested
by Parent. In conjunction with the obtaining of any such financing, the Company
agrees, at the reasonable request of Parent, to call for prepayment or
redemption, or to prepay or redeem, or to attempt to renegotiate the terms of,
any then existing indebtedness for borrowed money of the Company; provided,
however, that no such prepayment or redemption or call for prepayment or
redemption or renegotiated terms shall actually be made or become effective (nor
shall the Company be required to incur any liability in respect of any such
prepayment or redemption or call therefore or renegotiation thereof) prior to
the Effective Time.
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(d) In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers or directors of the Surviving Corporation shall take or
cause to be taken all such necessary action.
(e) Notwithstanding the foregoing provisions of this Section 5.5,
neither Parent nor the Purchaser shall be required to accept, as a condition to
obtaining any required approval or resolving any objection of any Governmental
Entity, any requirement to divest or hold separate or in trust (or the
imposition of any other condition or restriction with respect to) any assets or
operations of Parent, the Purchaser or any of their respective affiliates or any
of the respective businesses of the Company or any of its Subsidiaries, the
Assets or the Real Property.
5.6 Proxy Statement; Stockholders' Meeting.
(a) As soon as reasonably practicable following the date of this
Agreement the Company shall prepare and file with the SEC a proxy statement
(together with any amendments or supplements thereto, the "Proxy Statement") in
connection with the Merger, and the parties shall file, if necessary, any other
statement or schedule relating to this Agreement and the transactions
contemplated hereby; provided, however, that the Company shall not be in breach
of this Section 5.6 if Parent shall fail to provide any information reasonably
necessary for the preparation of the Proxy Statement. Each of the Company,
Parent and the Purchaser shall use their respective reasonable efforts to
furnish the information required to be included by the SEC in the Proxy
Statement and any such statement or schedule. After consultation with Parent,
the Company shall respond promptly to any comments made by the SEC with respect
to the Proxy Statement and cause a definitive Proxy Statement to be mailed to
its stockholders, and the parties shall respond promptly to any comments with
respect to any other statement or schedule filed by them. No filing of, or
amendment or supplement to, the Proxy Statement or any other statement or
schedule will be made by the Company without providing Parent a reasonable
opportunity to review and comment thereon, and no filing of any statement or
schedule will be made by Parent or the Purchaser without providing the Company a
reasonable opportunity to review and comment thereon. If at any time after the
date the Proxy Statement is mailed to the Company's stockholders and prior to
the Stockholders' Meeting any information relating to the Company, Parent, the
Purchaser or any of their respective affiliates, officers or directors, should
be discovered by the Company, Parent or the Purchaser which is required to be
set forth in an amendment or supplement to the Proxy Statement or any other
statement or schedule, so that none of the Proxy Statement and any such
statement or schedule will include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other parties and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by Law, disseminated to
the stockholders of the Company.
39
(b) Each of Parent and the Purchaser agrees that (i) it will
promptly provide the Company with all information concerning Parent and the
Purchaser necessary or reasonably appropriate to be included in the Proxy
Statement and (ii) at the Stockholders' Meeting, if held, or any postponement or
adjournment thereof (or at any other meeting at which the Merger or this
Agreement are considered by stockholders), it will vote, or cause to be voted,
all of the Shares over which it or any of its Subsidiaries has voting control,
if any, in favor of the approval and adoption of this Agreement and the
transactions contemplated hereby.
(c) The Company, acting through the Board, shall, in accordance
with its articles of incorporation and bylaws and with applicable Law, promptly
and duly call, give notice of, convene and hold, as soon as practicable
following the date upon which the Proxy Statement is cleared by the SEC, a
special or annual meeting of its stockholders for the purpose of considering and
taking action upon this Agreement (the "Stockholders' Meeting"), and shall
except as otherwise provided in Section 5.2(b), (i) recommend adoption of this
Agreement and include in the Proxy Statement such recommendation and (ii) use
its reasonable efforts to solicit and obtain such adoption. Notwithstanding any
withdrawal, amendment or modification by the Board or any committee thereof of
its recommendation of this Agreement in accordance with Section 5.2(b) or the
commencement, public proposal, public disclosure or communication to the Company
of any Acquisition Proposal, or any other fact or circumstance, this Agreement,
unless it shall have been terminated pursuant to Section 7.1(f) or otherwise,
shall be submitted to the stockholders of the Company at the Stockholders'
Meeting as promptly as practicable for the purpose of allowing the stockholders
to vote upon adoption of this Agreement.
(d) Anything to the contrary notwithstanding, no obligation of
the Company or the Board under Section 5.6(c) shall be imposed if inconsistent
with or in violation of NRS 92A.120(10) or Section 3.3(e).
(e) In accordance with NRS 92A.410, the notice of the
Stockholders' Meeting shall state that holders of Class B Stock may be entitled
to dissenters' rights under NRS 92A.300 through 92A.500, inclusive, and be
accompanied by a copy of those sections.
5.7 Notification of Certain Matters. The Company shall give prompt
notice to Parent of (i) any representation or warranty made by the Company
becoming untrue or inaccurate in such respect that the condition set forth in
Section 6.3(a) would not be satisfied or (ii) the failure by it to comply with
or satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
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5.8 Directors' and Officers' Indemnification and Insurance.
(a) After the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers, directors,
employees and agents of the Company and any of its Subsidiaries in such
capacities ("Indemnified Parties") to the fullest extent permitted by applicable
Law against any losses, damages, expenses or liabilities resulting from any
claim, liability, loss, damage, cost or expense, asserted against, or incurred
by, an Indemnified Party that is based on the fact that such Indemnified Party
is or was a director, officer, employee or agent of the Company or any of its
Subsidiaries and arising out of actions or omissions or alleged actions or
omissions occurring at or prior to the Effective Time.
(b) In the event any Indemnified Party becomes involved in any
capacity in any action, proceeding or investigation based in whole or in part
on, or arising in whole or in part out of, any matter, including the
transactions contemplated hereby, existing or occurring at or prior to the
Effective Time, for which the Indemnified Party intends to seek Indemnity from
the Surviving Corporation (i) the Surviving Corporation shall have the right to
assume the defense thereof and upon such assumption the Surviving Corporation
shall not be liable to such Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof, except that if the Surviving Corporation
elects not to assume such defense or counsel for such Indemnified Party
reasonably advises that there are issues that raise or may raise conflicts of
interest between the Surviving Corporation and such Indemnified Party, such
Indemnified Party may retain one counsel reasonably satisfactory to the
Surviving Corporation after consultation with the Surviving Corporation, and the
Surviving Corporation shall pay the reasonable fees and expenses of such counsel
for such Indemnified Party, (ii) the Surviving Corporation shall in all cases be
obligated pursuant to this Section 5.8(b) to pay for only one firm of counsel
for all Indemnified Parties, (iii) the Surviving Corporation shall not be liable
for any settlement effected without its prior written consent, which shall not
be unreasonably withheld, and (iv) the Surviving Corporation shall have no
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by applicable Law. Any
Indemnified Party wishing to claim Indemnification under this Section 5.8, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify promptly the Surviving Corporation thereof, provided that the failure to
so notify shall not affect the obligations of the Surviving Corporation under
this Section 5.8 except to the extent such failure to notify prejudices the
Surviving Corporation.
(c) Copies of all relevant policies, endorsements, and premium
notices relating to the Company's current directors' and officers' insurance
coverage ("D & O Coverage") have been provided to Parent. The Surviving
Corporation shall maintain
41
D & O Coverage for a period of six years after the Effective Time, covering the
directors and officers of the Company and its Subsidiaries who as of the
Effective Time are covered by the Company's existing D & O Coverage with respect
to claims arising from facts or events that occurred before the Effective Time,
on terms and conditions substantially similar to those in effect on the date
hereof; provided, however, that the aggregate annual premiums for such insurance
at any time during such period shall not exceed 200% of the per annum rate of
premium currently paid by the Company and its Subsidiaries under the D & O
Coverage, and in the event the premium exceeds such amount, the coverage may be
reduced to the amount obtainable within such maximum premium cost.
5.9 Publicity. Neither the Company, Parent, the Purchaser nor any of
their respective affiliates shall issue or cause the publication of any press
release or other announcement with respect to this Agreement, the Merger or the
other transactions contemplated by this Agreement without the prior consultation
of the other party, except to the extent required by applicable Law or rules of
the Nasdaq Stock Market.
5.10 Ownership or Control of Shares. Neither Parent nor the Purchaser,
individually or in association with others, shall acquire Shares or take any
other action that would subject them or any of them to the provisions of
Nevada's "Control Share Act", codified in NRS 78.378 to 78.3793. Neither Parent
nor the Purchaser, nor any affiliate or associate of either, shall take any
action prior to Closing that would make them a beneficial owner of Shares or
take any other action that would cause either Parent or the Purchaser (or both)
to be an "interested stockholder" under NRS 78.423 or to otherwise subject this
Agreement or the Merger to the provisions of Nevada's "Business Combination Act"
codified in NRS 78.411 through 78.444.
5.11 Waiver of Right to Repurchase and Refund Benefit. Other than with
respect to any employee who is not employed by the Company immediately prior to
the Effective Time, Parent and the Purchaser shall not enforce and hereby waive,
and shall cause the Surviving Corporation and its board of directors to refrain
from enforcing and to waive, any right in any Stock Option Plan to repurchase
any Stock Options or to demand the refund of any benefits received by any
employee, consultant or director of the Company after such person's exercise of
any Stock Option, including the rights of the Surviving Corporation and its
board of directors under Sections 13 and 14 of any stock option agreement made
pursuant to the Company Incentive Stock Plan, as amended, or the Company New
Employee Incentive Stock Plan, respectively. Any current or former holder of any
Stock Option under any Stock Option Plan is an express third party beneficiary
of all of the covenants and obligations of Parent and the Purchaser under this
Section 5.11, and shall have any independent right to assert a breach of this
Section 5.11.
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ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of each of the following conditions
(any or all of which may be waived by the parties hereto in writing as provided
in Section 8.2(b), in whole or in part, to the extent permitted by applicable
Law):
(a) No statute, rule, order, decree or regulation shall have been
enacted or promulgated, and no action shall have been taken, by any Governmental
Entity of competent jurisdiction which temporarily, preliminarily or permanently
restrains, precludes, enjoins or otherwise prohibits the consummation of the
Merger or makes the Merger illegal;
(b) This Agreement shall have been adopted by the Required Vote;
and
(c) Other than filing the Articles of Merger in accordance with
the NRS, all authorizations, consents and approvals of all Governmental Entities
required to be obtained prior to consummation of the Merger shall have been
obtained, except for such authorizations, consents, and approvals the failure of
which to be obtained, individually or in the aggregate, would not have or result
in a Material Adverse Effect on any party to this Agreement.
6.2 Conditions to the Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger is further subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions (any or all of which may be waived by the parties hereto in writing
as provided in Section 8.2(b), in whole or in part, to the extent permitted by
applicable Law):
(a) The representations and warranties of each of Parent and the
Purchaser contained in this Agreement shall be true and correct in all material
respects both when made and at and as of the Closing Date, as if made at and as
of such time (except to the extent expressly made as of an earlier date, in
which case as of such date) and the Company shall have received a certificate
signed on behalf of each of Parent and the Purchaser by the Chief Executive
Officer of each of Parent and the Purchaser to such effect; and
(b) Each of Parent and the Purchaser shall have performed in all
material respects its obligations under this Agreement required to be performed
by it at or prior to the Effective Time pursuant to the terms hereof, and the
Company shall
43
have received a certificate signed on behalf of each of Parent and the Purchaser
by the Chief Executive Officer of each of Parent and the Purchaser to such
effect.
6.3 Conditions to Obligations of Parent and the Purchaser to Effect
the Merger. The obligations of Parent and the Purchaser to effect the Merger are
further subject to the satisfaction or waiver at or prior to the Effective Time
of the following conditions (any or all of which may be waived by the parties
hereto in writing as provided in Section 8.2(b), in whole or in part, to the
extent permitted by applicable Law):
(a) (i) The representations and warranties of the Company set
forth in Sections 3.2 through 3.5 and 3.23 shall be true and correct in all
material respects both when made and at and as of the Closing Date, as if made
at and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such date); and (ii) the representations and
warranties of the Company set forth in this Agreement (other than the
representations and warranties set forth in Sections 3.2 through 3.5 and 3.23)
shall be true and correct (without giving effect to any limitation as to
"materiality" or "Material Adverse Effect" set forth therein) when made and as
of the Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"Material Adverse Effect" set forth therein) does not have, and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. The Purchaser shall have received a certificate
signed on behalf of the Company by the Chief Executive Officer and the Chief
Financial Officer of the Company to the foregoing effect;
(b) The Company shall have performed in all material respects
each of its obligations under this Agreement required to be performed by it at
or prior to the Effective Time pursuant to the terms hereof, and the Purchaser
shall have received a certificate signed on behalf of the Company by the Chief
Executive Officer to such effect;
(c) There shall not be pending any suit, action or proceeding (i)
seeking to prohibit or limit in any material respect the ownership or operation
by the Company, Parent, the Purchaser or any of their respective affiliates of a
substantial portion of the business or assets of the Company and its
Subsidiaries, taken as a whole, or to require any such Person to dispose of or
hold separate any material portion of the business or assets of the Company and
its Subsidiaries, taken as a whole, as a result of the Merger or any of the
other transactions contemplated by this Agreement, or (ii) seeking to restrain,
preclude, enjoin or prohibit the Merger or any of the other transactions
contemplated by this Agreement;
44
(d) All material consents and approvals of any Person necessary
to the consummation of the Merger and any other transactions contemplated by
this Agreement that are set forth in Section 6.3(d) of the Disclosure Letter;
(e) The Company shall have delivered to Parent the notices of
resignation of each of the then-current members of the Board, and each such
resignation shall be effective as of the Effective Time;
(f) There shall have been no event or series of events that have
had, or would reasonably be expected to have, a Material Adverse Effect on the
Company;
(g) All amounts owed to the Company or its Subsidiaries by any
Affiliate or family member thereof shall have been repaid in full; and
(h) No holder of Class B Stock shall have exercised, or given
notice of their intent to exercise, his, her, or its dissenters' rights.
ARTICLE VII
TERMINATION
7.1 Termination. Notwithstanding anything herein to the contrary, this
Agreement may be terminated and the Merger may be abandoned at any time prior to
the Effective Time, whether before or after stockholder adoption of this
Agreement:
(a) By the mutual consent of Parent and the Company in a written
instrument;
(b) By either the Company or Parent upon written notice to the
other party, if:
(i) the Merger shall not have been consummated on or before
the date 180 days after the date of this Agreement (the "Outside Date");
provided that the right to terminate this Agreement pursuant to this
Section 7.1(b)(i) shall not be available to a party whose failure to
fulfill any material obligation under this Agreement or other material
breach of this Agreement has been the cause of, or resulted in, the failure
of the Merger to have been consummated on or before such date;
(ii) any Governmental Entity shall have issued a statute,
rule, order, decree or regulation or taken any other action (which statute,
rule, order, decree, regulation or other action the parties hereto shall
have used their commercially reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting consummation of
the Merger or making the
45
Merger illegal and such statute, rule, order, decree, regulation or other
action shall have become final and non-appealable (provided that the
terminating party is not then in breach of Section 5.5); or
(iii) the stockholders of the Company fail to adopt this
Agreement by the Required Vote at the Stockholders' Meeting (including any
postponement or adjournment thereof); (provided that the Company shall not
be entitled to terminate this Agreement pursuant to this Section
7.1(b)(iii) if it has breached in any material respect any of its
obligations under Section 5.2 or Section 5.6);
(c) By Parent if there shall have been a material violation or
breach of or any inaccuracy in any of the representations, warranties, covenants
or agreements of the Company that (i) has rendered the satisfaction of any
condition to the obligations of the Parent impossible and such violation or
breach has not been waived by Parent and (ii) has not been cured within 30 days
following receipt by the Company of written notice of such breach from Parent,
or which breach, by its nature, cannot be cured prior to the Outside Date
(provided that Parent is not then in material breach of any representation,
warranty, covenant or other agreement contained herein);
(d) By the Company if there shall have been a material violation
or breach of or any inaccuracy in any of the representations, warranties,
covenants or agreements of Parent that (i) has rendered the satisfaction of any
condition to the obligations of the Company impossible and such violation or
breach has not been waived by the Company and (ii) has not been cured within 30
days following receipt by Parent of written notice of such breach from the
Company, or which breach, by its nature, cannot be cured prior to the Outside
Date (provided that the Company is not then in material breach of any
representation, warranty, covenant or other agreement contained herein);
(e) By Parent, upon written notice to the Company, if (i) the
Board or any committee thereof shall have made an Adverse Recommendation Change,
(ii) the Company shall have entered into an Alternative Definitive Agreement,
(iii) the Company shall have failed to hold the Stockholders Meeting at least
two (2) business days prior to the Outside Date or removed this Agreement from
consideration at the Stockholders Meeting in the absence of (i) or (ii) and in
reliance upon Section 5.6(d), or (iv) the Company or the Board or any committee
thereof shall have resolved to do any of the foregoing; or
(f) By Company, upon written notice to Parent, if the Board shall
resolve to enter into, subject to the terms of this Agreement, including
Sections 5.2 and 8.1, an Alternative Definitive Agreement; provided, that
Company shall not be permitted to terminate this Agreement pursuant to this
Section 7.1(f) unless Company shall have complied with its obligations under
Section 5.2 and shall have paid the
46
Termination Fee and the Expenses pursuant to Section 8.1, and the entering into
such other definitive agreement is otherwise permitted by Section 5.2.
7.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 7.1, written notice thereof shall forthwith be
given by the terminating party to the other parties specifying the provision
hereof pursuant to which such termination is made, and except as provided in
this Section 7.2, this Agreement shall forthwith become null and void after the
expiration of any applicable period following such notice. In the event of such
termination, there shall be no liability on the part of Parent, the Purchaser or
the Company, except as set forth in Section 8.1, and except with respect to the
requirement to comply with the Confidentiality Agreement; provided that nothing
herein shall relieve any party from any liability or obligation with respect to
any willful breach of this Agreement prior to its termination.
ARTICLE VIII
MISCELLANEOUS
8.1 Fees and Expenses.
(a) Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs or expenses,
except as provided in Sections 8.1(b), 8.1(c), and 8.1(e).
(b) If this Agreement is terminated by Parent pursuant to Section
7.1(e) or the Company pursuant to Section 7.1(f), then the Company shall (i)
reimburse Parent for all of the Expenses of Parent and the Purchaser up to an
amount not in excess of U.S. $750,000 and (ii) pay to Parent in immediately
available funds a termination fee in an amount equal to U.S. $1,500,000 (the
"Termination Fee"); provided, however, that the effectiveness of the Company's
termination of this Agreement pursuant to Section 7.1(f) shall be conditioned on
the Company reimbursing Parent for all of the Expenses of Parent and the
Purchaser up to an amount not in excess of U.S. $750,000 and paying the
Termination Fee.
(c) In the event that (i) an Acquisition Proposal has been
proposed by any Person (other than Parent and the Purchaser or any of their
respective affiliates) or any Person has announced its intention (whether or not
conditional) to make an Acquisition Proposal or an Acquisition Proposal or such
intention has otherwise become known to the Company's directors or officers, or
its stockholders generally and (ii) thereafter this Agreement is terminated (1)
by Parent pursuant to Section 7.1(b)(i) if at such time the Company had failed
to fulfill any material obligation under this Agreement or was in material
breach of this Agreement, (2) by the Company or Parent pursuant to Section
7.1(b)(iii), or (3) by Parent pursuant to Section 7.1(c), then the
47
Company shall reimburse Parent for all of the Expenses of Parent and the
Purchaser up to an amount not in excess of U.S. $750,000. Furthermore, if (x)
the events in clauses (i) and (ii) in the first sentence of this Section 8.1(c)
occur and (y) within 12 months after the termination of this Agreement the
Company or any of its Subsidiaries (1) enters into an Alternative Definitive
Agreement pursuant to which an Acquisition Proposal is consummated within or
after such 12-month period, or (2) consummates an Acquisition Proposal, then the
Company shall pay Parent the Termination Fee upon consummation of such
Acquisition Proposal and, in addition, if this Agreement was terminated by
Parent pursuant to Section 7.1(b)(i) but the Company did not reimburse Parent
for all of the expenses of Parent and the Purchaser (up to an amount not in
excess of U.S. $750,000) because at such time the Company had not failed to
fulfill any material obligation under this Agreement or was not in material
breach of this Agreement, then upon the consummation of such Acquisition
Proposal, the Company will also reimburse the Expenses of Parent and the
Purchaser up to an amount not in excess of U.S. $750,000. For purposes of this
Section 8.1(c) references to "10% or more" in the definition of "Acquisition
Proposal" shall instead be deemed to be references to "at least a majority".
(d) Any payment of the Expenses and the Termination Fee pursuant
to Section 8.1(b) shall be made within one Business Day after termination of
this Agreement by wire transfer of immediately available funds to an account
designated by Parent. Any payment of the Expenses pursuant to Section 8.1(c)
shall be made upon the termination of this Agreement, and any payment of the
Termination Fee pursuant to Section 8.1(c) shall be made upon consummation of
the Acquisition Proposal. In circumstances where Section 8.1 requires a
reimbursement of Expenses, the Company shall reimburse Parent for the Expenses
up to an amount not in excess of U.S. $750,000. The Company acknowledges that
the agreements contained in this Section 8.1 are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
neither Parent nor the Purchaser would enter into this Agreement; accordingly,
if the Company fails promptly to pay or cause to be paid the amounts due
pursuant to this Section 8.1, and, in order to obtain such payment, Parent or
the Purchaser commences a suit that results in a judgment against the Company
for the amounts set forth in this Section 8.1, the Company shall pay to Parent
and the Purchaser (as the case may be) its reasonable costs and expenses
(including attorneys' fees and expenses) in connection with such suit and any
appeal relating thereto, together with interest on the amounts set forth in this
Section 8.1 at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made. In no event shall more than one Termination Fee
be payable and if Parent is entitled to a Termination Fee, it may not exercise
any other remedy against the Company, at law or in equity or otherwise.
(e) If the conditions under Sections 6.1 and 6.3 (including
Section 6.3(f)) hereof shall have been satisfied or waived, and Parent has at
all times complied with Section 5.5(b) and is not otherwise in material breach
of this Agreement, and nonetheless the Merger shall not have been consummated on
or before the Outside Date in whole or in material part due to the failure of
the Financing to be consummated in
48
accordance with the Bank Commitment Letters, then Parent, upon Company's
rightful termination of this Agreement pursuant to Section 7.1(b)(i), shall pay
to the Company as a termination fee (the "Parent Termination Fee") and as the
sole remedy of the Company, its Subsidiaries, stockholders, and Affiliates, the
sum of $1,000,000. The payment pursuant to this Section 8.1(e) shall be made
within one Business Day after the date of Company's termination of this
Agreement by wire transfer of immediately available funds to an account
designated by the Company. The Parent acknowledges that the agreements contained
in this Section 8.1(e) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, the Company would not enter
into this Agreement; accordingly, if the Parent fails promptly to pay or cause
to be paid the amounts due pursuant to this Section 8.1(e), and, in order to
obtain such payment, the Company commences a suit that results in a judgment
against the Parent for the amounts set forth in this Section 8.1(e), Parent
shall pay to the Company its reasonable costs and expenses (including attorneys'
fees and expenses) in connection with such suit and any appeal relating thereto,
together with interest on the amounts set forth in this Section 8.1(e) at the
prime rate of Citibank, N.A. in effect on the date such payment was required to
be made. If Company is entitled to a Parent Termination Fee, then it may not
exercise any other remedy against the Parent or Purchaser, at law or in equity
or otherwise.
(f) This Section 8.1 shall survive any termination of this
Agreement.
8.2 Amendment; Waiver.
(a) This Agreement may be amended by the parties to this
Agreement, by action taken or authorized by their respective boards of
directors, at any time before or after approval by the stockholders of the
Company of the matters presented in connection with the Merger, but after any
such approval no amendment shall be made without the approval of the
stockholders of the Company if such amendment alters or changes (i) the Merger
Consideration, (ii) any term of the Articles of Incorporation or (iii) any terms
or conditions of this Agreement if such alteration or change would adversely
affect the holders of any shares of capital stock of the Company. This Agreement
may not be amended except by an instrument in writing signed by each of the
parties hereto.
(b) At any time prior to the Effective Time, the parties to this
Agreement may (i) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document, certificate or writing delivered pursuant hereto by the other party or
(iii) waive compliance with any of the agreements or conditions of the other
parties hereto contained herein. Any agreement on the part of any party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Any such waiver shall constitute a
49
waiver only with respect to the specific matter described in such writing and
shall in no way impair the rights of the party granting such waiver in any other
respect or at any other time. Neither the waiver by any of the parties hereto of
a breach of or a default under any of the provisions of this Agreement, nor the
failure by any of the parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or privilege hereunder,
shall be construed as a waiver of any other breach or default of a similar
nature, or as a waiver of any of such provisions, rights or privileges
hereunder. Except as provided in Section 7.2 and Section 8.1(d), the rights and
remedies herein provided are cumulative and none is exclusive of any other, or
of any rights or remedies that any party may otherwise have at Law or in equity.
8.3 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given upon (a) transmitter's confirmation of a
receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand, (c) the expiration of five Business
Days after the day when mailed in the United States by certified or registered
mail, postage prepaid, or (d) delivery in Person, addressed at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to the Company, to:
Smithway Motor Xpress Corp.
0000 Xxxxx Xxxxxx
Xxxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: G. Xxxxx Xxxxx
with a copy to:
Faegre & Xxxxxx LLP
2200 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Telephone: 000-000-0000
Facsimile: 612-766-1600
Attention: Xxxxx Xxxxxx
50
(b) if to Parent or the Purchaser, to:
Western Express, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Telephone: 000-000-0000 x000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxx
with a copy to:
Xxxxxxx Law Firm, P.C., L.L.O.
000 X 00xx Xxxxxx,
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxx Xxxxxxx
8.4 Interpretation; Definitions. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." Unless the context otherwise requires, the word
"or" when used in this Agreement will be deemed to have the inclusive meaning
represented by the phrase "and/or." The phrase "provided" when used in this
Agreement shall mean that the information referred to has been provided to the
party to whom such information is to be provided. The word "affiliates" when
used in this Agreement shall have the respective meanings ascribed to them in
Rule 12b-2 under the Exchange Act. The phrase "beneficial ownership" and words
of similar import when used in this Agreement shall have the meaning ascribed to
it in Rule 13d-3 under the Exchange Act.
The following terms have the following definitions:
(a) "Acceptable Confidentiality Agreement" shall have the meaning
set forth in Section 5.2(a).
(b) "Acquisition Proposal" shall have the meaning set forth in
Section 5.2(d).
(c) "Adverse Recommendation Change" shall have the meaning set
forth in Section 5.2(b).
51
(d) "Affiliate" shall mean, with respect to the Company,
directors and executive officers of the Company, and shareholders of the Company
owning more than 5% of the outstanding Shares of the Company.
(e) "Agreement" shall have the meaning set forth in the Preamble.
(f) "Alternative Definitive Agreement" shall have the meaning set
forth in Section 5.2(a).
(g) "Articles of Incorporation" shall have the meaning set forth
in Section 1.3.
(h) "Articles of Merger" shall have the meaning set forth in
Section 1.2.
(i) "Assets" shall have the meaning set forth in Section 3.16(a).
(j) "Balance Sheet" shall have the meaning set forth in Section
3.8.
(k) "Bank" shall have the meaning set forth in Section 4.6.
(l) "Bank Commitment Letters" shall have the meaning set forth in
Section 4.6.
(m) "Board" shall have the meaning set forth in the Recitals.
(n) "Business Day" means any day other than Saturday and Sunday
and any day on which banks are not required or authorized to close in the State
of New York.
(o) "Bylaws" shall have the meaning set forth in Section 1.3.
(p) "Capital Budget" shall have the meaning set forth in Section
5.1(b).
(q) "Certificates" shall have the meaning set forth in Section
2.2(b).
(r) "Class A Stock" shall have the meaning set forth in Section
3.2(a).
52
(s) "Class B Stock" shall have the meaning set forth in Section
3.2(a).
(t) "Closing" shall have the meaning set forth in Section 1.2.
(u) "Closing Date" shall have the meaning set forth in Section
1.2.
(v) "Code" means the Internal Revenue Code of 1986, as amended.
(w) "Company" shall have the meaning set forth in the Preamble.
(x) "Company Common Stock" shall have the meaning set forth in
Section 2.1.
(y) "Company SEC Documents" shall have the meaning set forth in
Section 3.5(a).
(z) "Confidentiality Agreement" shall have the meaning set forth
in Section 5.4(a).
(aa) "D & O Coverage" shall have the meaning set forth in Section
5.8(c).
(bb) "Disclosure Letter" shall have the meaning set forth in the
lead-in to Article III.
(cc) "Effective Time" shall have the meaning set forth in Section
1.2.
(dd) "Employment and Withholding Taxes" shall mean any federal,
state, local, foreign or other employment, unemployment, insurance, social
security, disability, workers' compensation, payroll, health care or other
similar tax, duty or other governmental charge or assessment or deficiencies
thereof and all taxes required to be withheld by or on behalf of each of the
Company or any of its Subsidiaries in connection with amounts paid or owing to
any employee, independent contractor, creditor or other party, in each case, on
or in respect of the business or assets thereof (including all interest and
penalties thereon and additions thereto whether disputed or not).
(ee) "Environmental Claim" shall mean any claim, demand, suit,
action, cause of action, proceeding, investigation or written notice to the
Company or any of its Subsidiaries by any Person or entity alleging any
potential liability
53
(including potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, personal injuries, or
penalties) arising out of, based on, or resulting from (A) the presence, or
Release into the environment, of any Hazardous Substance at any location,
whether or not owned, leased, operated or used by the Company or its
Subsidiaries, or (B) circumstances forming the basis of any violation, or
alleged violation, of any applicable Environmental Law.
(ff) "Environmental Laws" shall mean all Laws, including common
law, relating to pollution, cleanup, restoration or protection of the
environment (including ambient air, surface water, groundwater, land surface or
subsurface strata and natural resources) or to the protection of flora or fauna
or their habitat or to human or public health or safety, including (A) Laws
relating to emissions, discharges, Releases or threatened Releases of Hazardous
Substances, or otherwise relating to the manufacture, generation, processing,
distribution, use, sale, treatment, receipt, storage, disposal, transport or
handling of Hazardous Substances, including the Comprehensive Environmental
Response, Compensation, and Liability Act and the Resource Conservation and
Recovery Act, and (B) the Occupational Safety and Health Act.
(gg) "ERISA" shall have the meaning set forth in Section 3.10(a).
(hh) "ERISA Affiliate" shall have the meaning set forth in
Section 3.10(a).
(ii) "ERISA Plans" shall have the meaning set forth in Section
3.10(a).
(jj) "Exchange Act" shall have the meaning set forth in Section
3.5(a).
(kk) "Expenses" shall mean out-of-pocket fees and expenses
incurred or paid in connection with the negotiation of this Agreement or the
consummation of any of the transactions contemplated by this Agreement,
including all due diligence and financing costs, filing fees, printing fees and
fees and expenses of law firms, commercial banks, investment banking firms,
accountants, experts and consultants.
(ll) "Financing" shall have the meaning set forth in Section 4.6.
(mm) "GAAP" shall have the meaning set forth in Section 3.5(b).
(nn) "Governmental Entity" shall have the meaning set forth in
Section 3.4(b).
(oo) "Hazardous Substance" shall mean (A) chemicals, pollutants,
contaminants, wastes, toxic and hazardous substances, and oil and petroleum
54
products, (B) any substance that is or contains asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum or petroleum-derived substances
or wastes, radon gas or related materials, lead or lead-based paint or
materials, fungus or mold, (C) any substance that requires investigation,
removal or remediation under any Environmental Law, or is defined, listed or
identified as hazardous, toxic or otherwise actionable or dangerous under any
Environmental Laws, or (D) any substance that is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise
hazardous.
(pp) "Indemnified Parties" shall have the meaning set forth in
Section 5.8(a).
(qq) "Intellectual Property" shall have the meaning set forth in
Section 3.12(a).
(rr) "Knowledge of the Company" or words of similar import shall
mean that the Company's President, Senior Vice President of Sales and
Operations, Chief Financial Officer, or Vice President of Vehicle Operations:
(i) is actually aware of that fact or matter; or
(ii) would reasonably be expected to discover or become
aware of that fact or matter without investigation.
(ss) "Laws" shall have the meaning set forth in Section 3.4(a).
(tt) "Leased Real Property" shall mean all interests in real
property pursuant to the Leases.
(uu) "Leases" shall mean the real property leases, subleases,
licenses and use or occupancy agreements pursuant to which the Company or any of
its Subsidiaries is the lessee, sub lessee, licensee, user, operator or occupant
of real property, or interests therein.
(vv) "Liens" shall mean any mortgage, pledge, deed of trust,
hypothecation, right of others, claim, security interest, encumbrance, burden,
title defect, title retention agreement, lease, sublease, license, occupancy
agreement, easement, covenant, condition, encroachment, voting trust agreement,
interest, option, right of first offer, negotiation or refusal, proxy, lien,
charge or other restrictions or limitations of any nature whatsoever.
(ww) "Litigation" shall have the meaning set forth in Section
3.11(a).
55
(xx) "Material Adverse Effect" shall mean (a) with respect to the
Company (a "Material Adverse Effect on the Company"), any condition,
circumstance, event, change, occurrence, state of facts or effect which is
materially adverse to the business, financial condition, or results of
operations of the Company and its Subsidiaries taken as a whole, or (b) with
respect to Parent or the Purchaser, any condition, circumstance, event, change,
occurrence, state of facts or effect which materially impairs the ability of
Parent or the Purchaser to consummate the transactions contemplated hereby;
provided, however, that none of the following will be deemed to constitute, and
none of the following will be taken into account in determining whether there
has been or if there is reasonably likely to be, a Material Adverse Effect on
the Company, Purchaser, or Parent, as the case may be: (i) any event or
condition generally affecting any of the industries in which the Company or
Parent, as the case may be, and their respective Subsidiaries operate, the U.S.
economy as a whole or any foreign economy in any location where, or with respect
to which Company or Parent, as the case may be, and their respective
Subsidiaries have material operation, (ii) any material disruption of a major
U.S. financial, banking or securities market (including any decline in the
trading volume or price of any security or any market index), (iii) the
suspension of trading in securities generally on the New York Stock Exchange or
the Nasdaq Stock Market, (iv) any national or international political or social
event or condition, including the engagement by the United States in
hostilities, whether or not pursuant to the declaration of a national emergency
or war, or the occurrence of any military or terrorist attack upon the United
States or any of its territories, possessions or diplomatic or consular offices
or upon any military installation, equipment or personnel of the United States,
(v) any change, or effect resulting from any change, in any applicable Law, rule
or regulation or GAAP or official interpretation thereof or other accounting
requirement or principle after the date hereof, (vi) compliance with any term
of, or the taking of any action required by, this Agreement, (vii) any adverse
event or condition regarding the business of the Company or any of its
Subsidiaries that is cured before the earlier of (y) the Closing Date and (z)
the date on which this Agreement is terminated pursuant to Article VII, or
(viii) the reaction (including subsequent actions) of third parties to any
transaction contemplated herein, except, with respect to items (i) and (iv),
that any such events have a disproportionate effect on the Company or Parent
relative to other participants in the industry in which the Company and Parent
operate in which case such events will be taken into account in determining
whether there has been or if there is reasonably likely to be, a Material
Adverse Effect on the Company, Purchaser, or Parent, as the case may be.
(yy) "Material Contract" shall have the meaning set forth in
Section 3.13(a).
(zz) "Merger" shall have the meaning set forth in Section 1.1.
(aaa) "Merger Consideration" shall have the meaning set forth in
Section 2.1(a).
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(bbb) "Notice of Superior Proposal" shall have the meaning set
forth in Section 5.2(a).
(ccc) "NRS" shall have the meaning set forth in Section 1.1.
(ddd) "Ordinary Course of Business" shall apply to actions or
omissions by an entity. An action taken by an entity or a failure to act will be
deemed to have occurred in the "Ordinary Course of Business" only if such action
or omission is consistent with the past practices of such entity in the conduct
of its business and is consistent with the normal day-to-day operations of such
entity.
(eee) "Outside Date" shall have the meaning set forth in Section
7.1(b)(i).
(fff) "Owned Real Property" shall mean the real property, and
interests in real property, owned by the Company and its Subsidiaries.
(ggg) "Parent" shall have the meaning set forth in the Preamble.
(hhh) "Paying Agent" shall have the meaning set forth in Section
2.2(a).
(iii) "Permits" shall have the meaning set forth in Section
3.11(c).
(jjj) "Permitted Liens" shall mean (a) Liens specifically
identified in the Balance Sheet or in the notes thereto, (b) Liens for Taxes not
yet due and payable or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are reflected
on the Balance Sheet in accordance with GAAP, (c) immaterial Liens that,
individually or in the aggregate with all other Permitted Liens, do not and will
not materially interfere with the use or value of the properties or assets of
the Company and its Subsidiaries taken as a whole as currently used, and (d)
Liens described in Section 8.4(jjj) of the Disclosure Letter.
(kkk) "Person" shall mean any natural Person, firm, individual,
partnership, joint venture, business trust, trust, association, corporation,
company, unincorporated entity or Governmental Entity.
(lll) "Plans" shall have the meaning set forth in Section
3.10(a).
(mmm) "Proxy Statement" shall have the meaning set forth in
Section 5.6(a).
(nnn) "Purchaser" shall have the meaning set forth in the
Preamble.
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(ooo) "Purchaser Disclosure Letter" shall have the meaning set
forth in the lead-in to Article IV.
(ppp) "Purchaser Common Stock" shall have the meaning set forth
in Section 2.1.
(qqq) "Real Property" shall mean the Owned Real Property and the
Leased Real Property.
(rrr) "Release" shall mean any releasing, disposing, discharging,
injecting, spilling, leaking, pumping, dumping, emitting, escaping, emptying,
dispersal, leaching, migration, transporting, placing and the like, including
into or upon, any land, soil, surface water, ground water or air, or otherwise
entering into the environment.
(sss) "Required Vote" shall have the meaning set forth in Section
3.3(c).
(ttt) "Return" shall mean any return, report, declaration, form,
claim for refund or information statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof, that
relates to the business or assets of the Company and any of its Subsidiaries.
(uuu) "SEC" shall mean the Securities and Exchange Commission.
(vvv) "Secretary of State" shall have the meaning set forth in
Section 1.2.
(www) "Securities Act" shall have the meaning set forth in
Section 3.5(a).
(xxx) "Shares" shall have the meaning set forth in Section 2.1.
(yyy) "SPD" shall have the meaning set forth in Section
3.10(b)(iv).
(zzz) "Stockholders' Meeting" shall have the meaning set forth in
Section 5.6(c).
(aaaa) "Stock Option Plans" shall have the meaning set forth in
Section 2.4(a).
(bbbb) "Stock Options" shall have the meaning set forth in
Section 2.4(a).
58
(cccc) "Subsidiary" shall mean with respect to any Person, any
other Person of which 50% or more of the securities or other interests having by
their terms ordinary voting power for the election of directors or others
performing similar functions are directly or indirectly owned by such Person;
and in addition, with respect to any representation and warranty of the Company,
the term Subsidiary shall mean any such other Persons of which 50% or more of
such securities or other interests are or were at any time directly or
indirectly owned by the Company, provided that the Company's representation and
warranty with respect to such Subsidiary shall only relate to the period during
which the Company directly or indirectly owned such Subsidiary.
(dddd) "Superior Proposal" shall have the meaning set forth in
Section 5.2(d).
(eeee) "Surviving Corporation" shall have the meaning set forth
in Section 1.1.
(ffff) "Tax" shall mean any federal, state, local, foreign or
other income, alternative, minimum, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital, profits, windfall
profits, gross receipts, value added, sales, use, excise, custom duties,
transfer, conveyance, mortgage, registration, stamp, documentary, recording,
premium, severance, environmental, real and personal property, ad valorem,
intangibles, rent, occupancy, license, occupational, employment, unemployment
insurance, social security, disability, workers' compensation, payroll, health
care, withholding, estimated or other similar tax, duty or other governmental
charge or assessment or deficiencies thereof (including all interest and
penalties thereon and additions thereto).
(gggg) "Technology" shall have the meaning set forth in Section
3.12(a).
(hhhh) "Termination Fee" shall have the meaning set forth in
Section 8.1(b).
(iiii) "WARN Act" shall have the meaning set forth in Section
3.20(b).
8.5 Headings; Schedules. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Disclosure of any matter pursuant to any
Section to the Disclosure Letter shall not be deemed to be an admission or
representation as to the materiality of the item so disclosed.
8.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
be considered one and the same agreement.
59
8.7 Entire Agreement. This Agreement, including the Disclosure Letter
and the schedule attached hereto, and the Confidentiality Agreement constitute
the entire agreement, and supersedes all prior agreements and understandings
(written and oral), among the parties with respect to the subject matter hereof.
8.8 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, 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.
8.9 Governing Law. This Agreement shall be governed, construed and
enforced in accordance with the Laws of the State of Nevada without giving
effect to the principles of conflicts of law thereof.
8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of Law or otherwise) without the prior written
consent of the other parties; provided, that each of Parent and the Purchaser
may assign its rights under this Agreement to any Subsidiary of Parent, or to
any lender to each of Parent and the Purchaser or any Subsidiary or affiliate
thereof as security for obligations to such lender, and provided, further, that
no assignment to any such lender shall in any way affect Parent's obligations or
liabilities under this Agreement.
8.11 Parties in Interest. Except as otherwise provided in Section
5.11, this Agreement shall be binding upon and inure solely to the benefit of
each party to this Agreement and their permitted assignees, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
8.12 Specific Performance. The parties to this Agreement agree that
irreparable damage would occur if any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof in addition to any other
remedy at Law or equity; provided, however, that if Parent is not in material
breach of this Agreement, then the payment of the Parent Termination Fee by
Parent under Section 8.1(e) shall be the sole and exclusive remedy of the
Company and its stockholders and Affiliates with respect to any failure by
Parent and the Purchaser to consummate the Merger when such failure is due in
whole or in material part to failure of the Financing to be consummated in
accordance with the Bank Commitment Letters.
8.13 Incorporation of Disclosure Letters. The Disclosure Letter and
Purchaser Disclosure Letter are hereby incorporated into this Agreement and will
be deemed a part hereof. Certain information is contained in the Disclosure
Letter and
60
Purchaser Disclosure Letter solely for informational purposes, may not be
required to be disclosed pursuant to this Agreement and will not imply that such
information or any other information is required to be disclosed. Inclusion of
such information will not establish any level of materiality or similar
threshold or be an admission that such information is material to the business,
assets, liabilities, financial position, operations or results of operations of
any Person or otherwise material regarding such Person. Each matter contained in
(i) any section of the Disclosure Letter or Purchaser Disclosure Letter or (ii)
any representation or warranty, in a manner that makes its relevance to one or
more other sections of the Disclosure Letter or Purchaser Disclosure Letter,
representation or warranty, respectively, will be deemed to have been
appropriately included in each such other section of the Disclosure Letter or
Purchaser Disclosure Letter, representation or warranty, respectively
(notwithstanding the presence or absence of any cross-reference in (i) any
section of the Disclosure Letter or Purchaser Disclosure Letter or (ii) any
representation or warranty, or the presence or absence of a reference to a
section of the Disclosure Letter or Purchaser Disclosure Letter, any
representation or warranty, respectively).
******
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IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
SMITHWAY MOTOR XPRESS CORP.
By: /s/ G. Xxxxx Xxxxx
---------------------------------
Name: G. Xxxxx Xxxxx
Title: President
PARENT:
WESTERN EXPRESS, INC.
By: /s/ Xxxx Xxxxxxxx
---------------------------------
Name: Xxxx Xxxxxxxx
Title: Executive Vice President and
Chief Financial Officer
PURCHASER:
WESTERN EXPRESS ACQUISITION CORPORATION
By: /s/ Xxxx Xxxxxxxx
---------------------------------
Name: Xxxx Xxxxxxxx
Title: President
