Exhibit 2
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
SLH CORPORATION
AND
SYNTROLEUM CORPORATION
DATED AS OF MARCH 30, 1998
TABLE OF CONTENTS
ARTICLE I THE MERGER................................................. .....1
1.1 The Merger; Effective Time of the Merger.......................1
1.2 Closing........................................................1
1.3 Effects of the Merger..........................................2
(a) Surviving Corporation; Charter; Bylaws.................2
(b) Directors and Officers.................................2
(c) Other..................................................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES...............2
2.1 Effect of the Merger on Capital Stock..........................2
(a) Exchange Ratio for Syntroleum Common Stock.............2
(b) Assumption of Syntroleum Stock Options.................3
(c) Adjustment of SLH Stock Options........................3
(d) Termination of Syntroleum Shareholder Agreements.......4
2.2 Exchange of Certificates.......................................5
(a) Exchange Agent.........................................5
(b) Exchange Procedures....................................5
(c) Distributions with Respect to Unexchanged Shares.......6
(d) No Further Ownership Rights in Syntroleum Common Stock.6
(e) No Fractional Shares...................................6
(f) Termination of Exchange Fund...........................7
(g) No Liability...........................................7
2.3 Dissenting Shares..............................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES...................................8
3.1 Representations and Warranties of Syntroleum...................8
(a) Organization, Standing and Power.......................8
(b) Capital Structure......................................8
(c) Non-Subsidiaries Equity Investment.....................9
(d) Authority; No Violations; Consents and Approvals......10
(e) Financial Statements..................................11
(f) Information Supplied..................................11
(g) Absence of Certain Changes or Events..................12
(h) No Undisclosed Material Liabilities...................12
(i) Material Contracts; No Defaults.......................13
(j) Compliance with Applicable Laws.......................14
(k) Litigation............................................15
(l) Taxes.................................................15
(m) Pension and Benefit Plans; ERISA......................17
(n) Labor Matters.........................................19
(o) Intangible Property...................................19
(p) Environmental Matters.................................20
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(q) Opinion of Financial Advisor..........................22
(r) Vote Required.........................................22
(s) Insurance.............................................23
(t) Brokers...............................................23
(u) Tax Matters...........................................23
(v) Title.................................................23
(w) Books and Records.....................................23
(x) Certain Payments......................................24
(y) Transactions with Related Parties.....................24
(z) State Takeover Laws...................................24
(aa) Year 2000.............................................24
3.2 Representations and Warranties of SLH.........................24
(a) Organization, Standing and Power......................24
(b) Capital Structure.....................................25
(c) Non-Subsidiaries Equity Investment....................26
(d) Authority; No Violations; Consents and Approvals......26
(e) SEC Documents.........................................28
(f) Information Supplied..................................28
(g) Absence of Certain Changes or Events..................29
(h) No Undisclosed Material Liabilities...................29
(i) Material Contracts; No Defaults.......................29
(j) Compliance with Applicable Laws.......................30
(k) Litigation............................................30
(l) Taxes.................................................31
(m) Pension and Benefit Plans; ERISA......................32
(n) Labor Matters.........................................34
(o) Intangible Property...................................35
(p) Environmental Matters.................................35
(q) Opinion of Financial Advisor..........................36
(r) Vote Required.........................................37
(s) Insurance.............................................37
(t) Brokers...............................................37
(u) Tax Matters...........................................37
(v) Title.................................................37
(w) Books and Records.....................................37
(x) Certain Payments......................................38
(y) Transactions with Related Parties.....................38
(z) State Takeover Laws and SLH Rights Plan...............38
(aa) Year 2000.............................................38
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS.......................38
4.1 Conduct of Business by Syntroleum Pending the Merger..........38
(a) Ordinary Course.......................................39
(b) Dividends; Changes in Stock...........................39
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(c) Issuance of Securities................................39
(d) Governing Documents...................................39
(e) No Acquisitions.......................................39
(f) No Dispositions.......................................39
(g) No Dissolution, Etc...................................40
(h) Certain Employee Matters..............................40
(i) Indebtedness; Leases; Capital Expenditures............40
(j) No Solicitation.......................................40
4.2 Conduct of Business by SLH Pending the Merger.................41
(a) Ordinary Course.......................................41
(b) Dividends; Changes in Stock...........................42
(c) Issuance of Securities................................42
(d) Governing Documents...................................42
(e) No Acquisitions.......................................42
(f) No Dispositions.......................................42
(g) No Dissolution, Etc...................................43
(h) Certain Employee Matters..............................43
(i) Indebtedness; Leases; Capital Expenditures............43
(j) No Solicitation.......................................43
ARTICLE V ADDITIONAL AGREEMENTS...........................................44
5.1 Preparation of S-4 and the Proxy Statement....................44
5.2 Letter of Syntroleum's Accountants............................45
5.3 Letter of SLH's Accountants...................................45
5.4 Access to Information.........................................45
5.5 Stockholders Meetings.........................................45
5.6 Legal Conditions to Merger....................................46
5.7 Agreements of Others..........................................46
5.8 Listing.......................................................46
5.9 Board of Directors and Officers. ............................46
5.10 Stock Options; Reservation and Registration of Shares.........47
5.11 Indemnification; Directors' and Officers' Insurance...........47
5.12 Public Announcements..........................................48
5.13 Other Actions.................................................49
5.14 Advice of Changes; SEC Filings................................49
5.15 Reorganization................................................49
5.16 Termination of Certain SLH Employees..........................49
ARTICLE VI CONDITIONS PRECEDENT............................................49
6.1 Conditions to Each Party's Obligation to Effect the Merger....49
(a) Stockholder Approval..................................49
(b) Listing...............................................50
(c) Other Approvals.......................................50
(d) S-4...................................................50
(e) No Injunctions or Restraints..........................50
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(f) Dissenters............................................50
(g) Accounting Treatment..................................50
(h) Tax Opinion...........................................50
6.2 Conditions of Obligations of SLH..............................51
(a) Representations and Warranties........................51
(b) Performance of Obligations of Syntroleum..............51
(c) No Vesting of Syntroleum Stock Options................51
(d) Fairness Opinion......................................51
(e) Officers' Certificate.................................51
(f) Letters from Affiliates...............................51
(g) Opinion of Counsel to Syntroleum......................52
6.3 Conditions of Obligations of Syntroleum.......................52
(a) Representations and Warranties........................52
(b) Performance of Obligations of SLH.....................52
(c) Fairness Opinion......................................52
(d) Officers' Certificate.................................52
(e) Board of Directors and Officers at the Effective Time.52
(f) Opinion of Counsel to SLH.............................52
(g) Consents of Optionees.................................53
ARTICLE VII TERMINATION AND AMENDMENT.......................................53
7.1 Termination...................................................53
7.2 Effect of Termination.........................................54
7.3 Amendment.....................................................55
7.4 Extension; Waiver.............................................55
ARTICLE VIII GENERAL PROVISIONS..............................................55
8.1 Payment of Expenses...........................................55
8.2 Nonsurvival of Representations, Warranties and Agreements.....55
8.3 Notices.......................................................56
8.4 Interpretation................................................57
8.5 Counterparts..................................................57
8.6 Entire Agreement; No Third Party Beneficiaries................57
8.7 Governing Law.................................................58
8.8 Severability..................................................58
8.9 Assignment....................................................58
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EXHIBITS TO THE AGREEMENT AND PLAN OF MERGER
Exhibit Description
Exhibit A --Form of Certificate of Merger
Exhibit B --List of Directors and Officers of Surviving Corporation
Exhibit C --Tax Certificate
Exhibit D --Opinion of Counsel to Syntroleum
Exhibit E --Opinion of Counsel to SLH
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GLOSSARY OF DEFINED TERMS
Defined
Defined Term in Section
------------ --------------
Affiliates..................................................... 5.7
Agreement...................................................... Preamble
CERCLA......................................................... 3.1(p)(A)
Certificate of Merger.......................................... 1.1
Certificates................................................... 2.2(b)
Closing........................................................ 1.1
Closing Date................................................... 1.2
Code........................................................... Recitals
Confidentiality Agreements..................................... 5.4
Consultant Option.............................................. 3.1(b)
Constituent Corporations....................................... 1.3(a)
Contracts...................................................... 3.1(i)(ii)
Dissenting Shares.............................................. 2.3
Effective Time................................................. 1.1
Environmental Law.............................................. 3.1(p)(A)
ERISA.......................................................... 3.1(m)(i)(1)
Exchange Act................................................... 3.1(b)
Exchange Agent................................................. 2.2(a)
Exchange Fund.................................................. 2.2(a)
Exchange Ratio................................................. 2.1(a)
GAAP........................................................... 3.1(e)
Governmental Entity............................................ 3.1(d)(iii)
Hazardous Material............................................. 3.1(p)(B)
Indemnified Liabilities........................................ 5.11
Indemnified Parties............................................ 5.11
Injunction..................................................... 6.1(e)
IRS............................................................ 3.1(l)(ii)
Kansas Code.................................................... 1.1
Merger......................................................... Recitals
OSHA........................................................... 3.1(p)(A)
Oklahoma Act................................................... 1.1
Optionee....................................................... 2.1(c)
PBGC........................................................... 3.1(m)(ii)(5)
Proxy Statement................................................ 3.1(f)
Release........................................................ 3.1(p)(C)
Remedial Action................................................ 3.1(p)(D)
Returns........................................................ 3.1(l)(i)
S-4............................................................ 3.1(f)
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SEC............................................................ 3.1(f)
Securities Act................................................. 3.1(f)
Shares......................................................... 2.1(a)
SLH............................................................ Preamble
SLH Acquisition Proposal....................................... 4.2(j)
SLH Benefit Programs........................................... 3.2(m)(i)(2)
SLH Common Stock............................................... 2.1(a)
SLH Common Stock Market Value.................................. 2.1(a)
SLH Intangible Property........................................ 3.2(o)
SLH Junior Preferred Stock..................................... 2.1(a)
SLH Letter..................................................... 3.2(a)
SLH Litigation................................................. 3.2(k)
SLH Material Adverse Change.................................... 3.2(a)
SLH Material Adverse Effect.................................... 3.2(a)
SLH Order...................................................... 3.2(k)
SLH Permits.................................................... 3.2(j)
SLH Plans...................................................... 3.2(m)(i)(1)
SLH Preferred Stock............................................ 3.2(b)
SLH Representatives............................................ 4.2(j)
SLH Rights Agreement........................................... 2.1(a)
SLH SEC Documents.............................................. 3.2(e)
SLH Stock Option............................................... 2.1(c)
SLH Stock Option Plan.......................................... 2.1(c)
SLH Stock Purchase Rights...................................... 2.1(a)
SLH Stockholder Meeting........................................ 5.5
SLH Voting Debt................................................ 3.2(b)
Stockholder Meetings........................................... 5.5
Subsidiary..................................................... 3.1(a)
Surviving Corporation.......................................... 1.3(a)
Syntroleum..................................................... Preamble
Syntroleum Acquisition Proposal................................ 4.1(j)
Syntroleum Benefit Programs.................................... 3.1(m)(i)(2)
Syntroleum Common Stock........................................ 2.1(a)
Syntroleum Common Stock Market Value........................... 2.1(a)
Syntroleum Commonly Controlled Entity.......................... 3.1(m)(ii)(8)
Syntroleum Financial Statements................................ 3.1(e)
Syntroleum Intangible Property................................. 3.1(o)
Syntroleum Letter.............................................. 3.1(a)
Syntroleum Litigation.......................................... 3.1(k)
Syntroleum Material Adverse Change............................. 3.1(a)
Syntroleum Material Adverse Effect............................. 3.1(a)
Syntroleum Order............................................... 3.1(k)
Syntroleum Permits............................................. 3.1(j)
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Syntroleum Plans............................................... 3.1(m)(i)(1)
Syntroleum Preferred Stock..................................... 3.1(b)
Syntroleum Representatives..................................... 4.1(j)
Syntroleum Stock Option........................................ 5.10
Syntroleum Stock Option Plans.................................. 3.1(b)
Syntroleum Stockholder Meeting................................. 5.5
Syntroleum Voting Debt......................................... 3.1(b)
Taxes.......................................................... 3.1(l)
Trading Day.................................................... 2.1(a)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 30, 1998 (this
"Agreement"), by and between SLH Corporation, a Kansas corporation ("SLH"), and
Syntroleum Corporation, an Oklahoma corporation ("Syntroleum").
WHEREAS, the Boards of Directors of SLH and Syntroleum each have
determined that it is in furtherance of and consistent with their respective
long-term business strategies and is fair to and in the best interests of their
respective stockholders for Syntroleum to merge with and into SLH (the "Merger")
upon the terms and subject to the conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, SLH and Syntroleum desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger; Effective Time of the Merger. Upon the terms and
conditions of this Agreement and in accordance with the Oklahoma General
Corporation Act (the "Oklahoma Act") and the Kansas General Corporation Code
(the "Kansas Code"), Syntroleum shall be merged with and into SLH at the
Effective Time (as hereinafter defined). The Merger shall become effective as of
the date indicated in a certificate of merger (the "Certificate of Merger"),
prepared and executed in accordance with the relevant provisions of the Oklahoma
Act and the Kansas Code, that is filed with the Secretary of State of the States
of Oklahoma and Kansas pursuant to the Oklahoma Act and the Kansas Code (the
"Effective Time"). The filing of the Certificate of Merger shall be made upon,
or as soon as practicable after, the closing of the Merger (the "Closing"). The
Certificate of Merger shall be in substantially the form attached hereto as
Exhibit A.
1.2 Closing. The Closing shall take place at 10:00 a.m. on the first
business day after satisfaction (or waiver in accordance with this Agreement) of
the latest to occur of the conditions (other than deliveries of instruments to
be made at Closing) set forth in Article VI (the "Closing Date"), at the offices
of Xxxxx & Xxxxx, L.L.P., 000 Xxxxxxxxx, Xxxxxxx, Xxxxx 00000 unless another
date or place is agreed to in writing by the parties.
1
1.3 Effects of the Merger.
(a) Surviving Corporation; Charter; Bylaws. At the Effective Time: (i)
Syntroleum shall be merged with and into SLH, the separate existence of
Syntroleum shall cease and SLH shall continue as the surviving corporation (SLH
and Syntroleum are sometimes referred to herein as the "Constituent
Corporations" and the SLH is sometimes referred to herein as the "Surviving
Corporation"); (ii) the Articles of Incorporation of SLH as in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation; provided that, the Articles of Incorporation of
SLH shall be amended by the Certificate of Merger to (a) change the name of the
Surviving Corporation to "Syntroleum Corporation" and (b) increase the number of
authorized shares of SLH Common Stock (as defined below) to 150,000,000 and to
increase the number of authorized shares of SLH Preferred Stock (as defined
below) to 5,000,000 and (iii) the Bylaws of SLH as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation.
(b) Directors and Officers. The individuals listed on Exhibit B hereto
shall, from and after the Effective Time, be the directors and officers of the
Surviving Corporation and shall serve until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Articles of Incorporation
and Bylaws.
(c) Other. The Merger shall have such other effects as specified
in the Oklahoma Act and the Kansas Code.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect of the Merger on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the Constituent
Corporations or their respective stockholders:
(a) Exchange Ratio for Syntroleum Common Stock. Subject to the
provisions of Section 2.2(e) hereof, each share of common stock, par value
$0.001 per share, of Syntroleum ("Syntroleum Common Stock") issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares (as hereinafter defined)) shall be converted into a number of shares of
common stock, par value $0.01 per share, of SLH ("SLH Common Stock") equal to
the Exchange Ratio (as hereinafter defined) (such shares issuable upon such
conversion are referred to herein as the "Shares"), together with the
corresponding number of associated rights (the "SLH Stock Purchase Rights") to
purchase one-sixth of one one-hundredth of a share of junior participating
preferred stock, par value $0.01 per share ("SLH Junior Preferred Stock"), of
SLH pursuant to the Rights Agreement (the "SLH Rights Agreement") dated January
31, 1997 between SLH and American
2
Stock Transfer & Trust Company. All such shares of Syntroleum Common Stock, when
so converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the shares of SLH Common Stock and
associated SLH Stock Purchase Rights and cash in lieu of fractional shares of
SLH Common Stock as contemplated by Section 2.2(e), to be issued or paid in
consideration therefor upon the surrender of such certificate in accordance with
Section 2.2, without interest. "Exchange Ratio" shall mean the quotient
(calculated to the nearest five decimal places) obtained by dividing Syntroleum
Common Stock Market Value (as hereinafter defined) by the SLH Common Stock
Market Value (as hereinafter defined). "Syntroleum Common Stock Market Value"
shall mean the quotient obtained by dividing (i) the excess of (A) the product
of (1) the SLH Common Stock Market Value multiplied by (2) 10,519,121 (which
number reflects the sum of the number of shares of SLH Common Stock issued and
outstanding as of March 12, 1998 plus the number of shares of SLH Common Stock
issuable pursuant to SLH Stock Options (as hereinafter defined) which were
vested as of March 12, 1998 plus 250,000 shares of SLH Common Stock (which
reflects a portion of the number of shares of SLH Common Stock issuable pursuant
to SLH Stock Options which are not vested as of March 12, 1998)) over (B) the
total stockholders' equity of SLH reflected in the unaudited financial
statements of SLH as of March 31, 1998, minus the book value reflected therein
of the shares of Syntroleum Common Stock held by SLH by (ii) 5,950,000 (which
number reflects the number of shares of Syntroleum Common Stock held by SLH as
of the date hereof). "SLH Common Stock Market Value" shall mean the average
closing price of a share of SLH Common Stock during the five Trading Days (as
hereinafter defined) ending on the business day immediately preceding the date
of the SLH Stockholder Meeting (as hereinafter defined) or in case no such
reported sale takes place on such Trading Day the average of the reported
closing bid and asked prices of a share of SLH Common Stock on such Trading Day,
in either case on the Nasdaq National Market, or if the shares of SLH Common
Stock are not quoted on such Nasdaq National Market on such Trading Day, the
average of the closing bid and asked prices of a share of SLH Common Stock in
the over-the-counter market on such Trading Day as furnished by any New York
Stock Exchange member firm mutually selected by SLH and Syntroleum, or if such
closing bid and asked prices are not made available by any such New York Stock
Exchange member firm on such Trading Day, the market value of a share of SLH
Common Stock as mutually determined by SLH and Syntroleum. "Trading Day" shall
mean each weekday other than any day on which SLH Common Stock is not traded on
the Nasdaq National Market System or in the over-the-counter market.
(b) Assumption of Syntroleum Stock Options. Each outstanding
Syntroleum Stock Option (as defined in Section 5.10) shall be assumed by SLH as
provided in Section 5.10. No Syntroleum Stock Options shall vest as a result of
the Merger.
(c) Adjustment of SLH Stock Options. Each outstanding option ("SLH
Stock Option") to purchase shares of SLH Common Stock under the SLH's 1997 Stock
Incentive Plan (the "SLH Stock Option Plan") shall be adjusted at the Effective
Time in the following manner if such adjustment is consented to in writing by
the holder of the SLH Stock Option and the written consent
3
is delivered to SLH prior to the Effective Time (with any such consenting
optionee hereinafter referred to in this Section 2.1(b) as an "Optionee"):
(i) such SLH Stock Options shall not vest as a result of the
Merger, and the Merger shall not be deemed to involve any of the events
described in Section 9 of the SLH Stock Option Plan (so that the Merger
shall not trigger the immediate vesting of otherwise unvested SLH Stock
Options outstanding at the Effective Time as provided in such Section
9); and
(ii) the exercise provisions of all SLH Stock Options held by
an Optionee at the Effective Time shall be adjusted as follows:
(A) with respect to an Optionee who is a director of
SLH as of the date hereof and does not continue as a director
of SLH following the Effective Time and with respect to an
Optionee who is an employee (and not a director) of SLH as of
the date hereof and does not continue as an employee of SLH
following the Effective Time, (1) if he dies prior to the
fifth anniversary of the Effective Time, then the SLH Stock
Option may be exercised to the extent otherwise exercisable
within one year following the date of death; and (2) if he
does not die prior to the fifth anniversary of the Effective
Time, then the SLH Stock Option may be exercised at any time
prior to the fifth anniversary of the Effective Time but may
not be exercised after the fifth anniversary of the Effective
Time; and
(B) with respect to an Optionee who is a director of
SLH as of the date hereof and continues as a director of SLH
following the Effective Time, (1) if he dies prior to the
fifth anniversary of the Effective Time or prior to 90 days
after he ceases to be a director of Syntroleum, whichever last
occurs, then the SLH Stock Option may be exercised to the
extent otherwise exercisable within one year following the
date of death; and (2) if he does not die prior to the fifth
anniversary of the Effective Time, then the SLH Stock Option
may be exercised to the extent otherwise exercisable at any
time prior to the later of (a) the fifth anniversary of the
Effective Time or (b) 90 days following the date the Optionee
ceases to be a director of SLH; provided, that in no event may
the SLH Stock Option be exercised after March 3, 2007.
(iii) The foregoing shall be deemed to adjust and otherwise
supersede any conflicting provisions contained in the SLH Stock Option
Plan or the option agreements covering the SLH Stock Options, including
the provisions of Section 3 of each such option agreements.
(d) Termination of Syntroleum Shareholder Agreements. Upon
consummation of the Merger (which will constitute a public offering of
Syntroleum Common Stock as contemplated by
4
Syntroleum shareholder agreements), Syntroleum shareholder agreements shall
terminate and be of no further force or effect.
2.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, SLH shall deposit with
American Stock Transfer & Trust Company or such other bank or trust company
designated by SLH and reasonably acceptable to Syntroleum (the "Exchange
Agent"), for the benefit of the holders of shares of Syntroleum Common Stock,
for exchange in accordance with this Article II, through the Exchange Agent,
cash or SLH Common Stock (to be sold and converted into cash by the Exchange
Agent) in an amount sufficient to satisfy the obligations of SLH with respect to
payments for fractional shares pursuant to Section 2.2(e) hereof and
certificates representing the Shares (such cash and shares of SLH Common Stock,
together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the cash and Shares contemplated
to be issued pursuant to Sections 2.1 and 2.2(e) out of the Exchange Fund. The
Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which, immediately prior to the Effective Time,
represented outstanding shares of Syntroleum Common Stock (the "Certificates"),
which holder's shares of Syntroleum Common Stock were converted into the right
to receive shares of SLH Common Stock pursuant to Section 2.1: (i) a letter of
transmittal (which shall specify that delivery shall be effected and risk of
loss and title to the Certificates shall pass only upon delivery of the
Certificates to the Exchange Agent, and shall be in such form and have such
other provisions as SLH and Syntroleum may reasonably specify); and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of SLH Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by SLH, together with such letter of transmittal,
duly executed, and any other required documents, the holder of such Certificate
shall be entitled to receive in exchange therefor certificates representing that
number of whole Shares which such holder has the right to receive pursuant to
the provisions of this Article II and cash in lieu of fractional Shares as
contemplated by Section 2.2(e), and the Certificates so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Syntroleum
Common Stock which is not registered in the share transfer records of
Syntroleum, certificates representing the appropriate number of shares of SLH
Common Stock may be issued to a transferee if the Certificates representing such
Syntroleum Common Stock are presented to the Exchange Agent accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate (other than Certificates
representing Dissenting Shares) shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the certificates
representing shares of SLH Common Stock and cash in lieu of any fractional
shares of SLH Common Stock as contemplated by this Section 2.2. The Exchange
Agent shall not be entitled to vote or exercise any rights of ownership with
respect to the SLH Common Stock held by it from time
5
to time hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect thereto for the account of
persons entitled thereto.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to SLH Common Stock declared or made before or
after the Effective Time with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the right to
receive shares of SLH Common Stock represented thereby and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to Section
2.2(e) until the holder of such Certificate shall surrender such Certificate.
Subject to the effect of applicable laws, following surrender of any such
Certificate (other than Certificates representing Dissenting Shares), there
shall be paid to the holder thereof, without interest (in addition to
certificates representing that number of whole Shares which such holder has the
right to receive pursuant to the provisions of this Article II): (i) at the time
of such surrender, the amount of any cash payable in lieu of any fractional
share of SLH Common Stock to which such holder is entitled pursuant to Section
2.2(e) and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
SLH Common Stock; and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of SLH Common Stock.
(d) No Further Ownership Rights in Syntroleum Common Stock. All shares
of SLH Common Stock issued upon the surrender for exchange of shares of
Syntroleum Common Stock in accordance with the terms hereof (including any cash
paid pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Syntroleum
Common Stock, subject, however, to the Surviving Corporation's obligation to pay
any dividends or make any other distributions with a record date prior to the
Effective Time that may have been declared or made by Syntroleum on such shares
of Syntroleum Common Stock in accordance with the terms of this Agreement or
prior to the date hereof and which remain unpaid at the Effective Time, and
after the Effective Time there shall be no further registration of transfers on
the share transfer books of the Surviving Corporation of the shares of
Syntroleum Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article II.
(e) No Fractional Shares. No certificates or scrip representing
fractional shares of SLH Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article II, and, except as provided in
this Section 2.2(e), no dividend or other distribution, stock split or interest
shall relate to any such fractional security, and such fractional interests
shall not entitle the owner thereof to vote or to any rights of a security
holder of SLH. In lieu of any fractional share of SLH Common Stock, each holder
of shares of Syntroleum Common Stock who would otherwise have been entitled to a
fraction of a share of SLH Common Stock upon surrender of Certificates for
exchange pursuant to this Article II will be paid an amount in cash (without
interest) equal to the value of such fraction of a share based upon the closing
price of SLH Common Stock on the Nasdaq
6
Stock Market on the date on which the Effective Time shall occur (or if the SLH
Common Stock shall not trade on the Nasdaq Stock Market on such date, the first
day of that SLH Common Stock shall trade on the Nasdaq Stock Market thereafter).
All shares of Syntroleum Common Stock held by a record holder shall be
aggregated for purposes of computing the number of shares of SLH Common Stock to
be issued pursuant to this Section 2.2(e).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund and
any cash in lieu of fractional shares of SLH Common Stock made available to the
Exchange Agent that remain undistributed to the former stockholders of
Syntroleum on or after the one-hundred eightieth day following the Effective
Time shall be delivered to SLH, upon demand, and any stockholders of Syntroleum
who have not theretofore complied with this Article II shall thereafter look
only to SLH for payment of their claim for SLH Common Stock, any cash in lieu of
fractional shares of SLH Common Stock and any dividends or distributions with
respect to SLH Common Stock.
(g) No Liability. Neither SLH nor Syntroleum shall be liable to any
holder of shares of Syntroleum Common Stock or SLH Common Stock, as the case may
be, for such shares (or dividends or distributions with respect thereto) or cash
in lieu of fractional shares of SLH Common Stock delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. Any
amounts remaining unclaimed by holders of any such shares on the day immediately
preceding the day on which such amounts would otherwise escheat to or become
property of any governmental entity shall, to the extent permitted by applicable
law, become the property of SLH free and clear of any claims or interest of any
such holders or their successors, assigns or personal representatives previously
entitled thereto.
2.3 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Syntroleum Common Stock that are issued and outstanding
immediately prior to the Effective Time and which are held by stockholders who
have properly exercised appraisal rights with respect thereto under the Oklahoma
Act (the "Dissenting Shares") shall not be converted into or represent the right
to receive shares of SLH Common Stock as provided in Section 2.1(a), but the
holders of Dissenting Shares shall be entitled to receive such payment of the
appraised value of such shares held by them from the Surviving Corporation as
shall be determined pursuant to the Oklahoma Act; provided, however, that if any
such holder shall have failed to perfect or shall withdraw or lose the right to
appraisal and payment under the Oklahoma Act, each such holder's shares shall
thereupon be deemed to have been converted as of the Effective Time into the
right to receive shares of SLH Common Stock, without any interest thereon, as
provided in Section 2.1(a), and upon surrender in the manner provided in Section
2.2 of the Certificate(s) representing such shares, such shares shall no longer
be Dissenting Shares.
7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Syntroleum. Syntroleum
represents and warrants to SLH as follows:
(a) Organization, Standing and Power. Each of Syntroleum and its
Subsidiaries (as defined below) is a corporation, partnership or limited
liability company duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization, has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the business it is
conducting, or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure to
qualify would not have a Syntroleum Material Adverse Effect (as defined below).
Syntroleum has heretofore delivered to SLH complete and correct copies of its
Certificate of Incorporation and Bylaws and the organizational documents of each
of its Subsidiaries. All Subsidiaries of Syntroleum, the percentage of
Syntroleum's ownership of such Subsidiaries, the identity and percentage
ownership of all other persons with equity interests in such Subsidiaries and
their respective jurisdictions of incorporation or organization are identified
on Schedule 3.1(a) of the letter dated and delivered to SLH on the date hereof
(the "Syntroleum Letter"), which relates to this Agreement and is designated
therein as being Syntroleum Letter. As used in this Agreement, a "Syntroleum
Material Adverse Effect" or "Syntroleum Material Adverse Change" shall mean any
effect or change that is, individually or in the aggregate, materially adverse
to the business, operations, assets, condition (financial or otherwise) or
results of operation of Syntroleum and its Subsidiaries taken as a whole except
for general economic changes and changes that may affect the industries of
Syntroleum or any of its Subsidiaries generally. As used in this Agreement,
"Subsidiary" or "Subsidiaries" means, with respect to any party, any corporation
or other organization, whether incorporated or unincorporated, of which: (i)
such party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partner interests of which are held by such party or
any Subsidiary of such party that do not have a majority of the voting interest
in such partnership); or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization is, directly or indirectly, owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and any one or more of its Subsidiaries.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of Syntroleum consists of 50,000,000 shares of Syntroleum Common Stock and
1,000,000 shares of preferred stock, par value $0.01 per share ("Syntroleum
Preferred Stock"). At the close of business on the date hereof, (i) 18,993,950
shares of Syntroleum Common Stock are issued and outstanding, (ii) 2,000,000
shares of Syntroleum Common Stock are reserved for issuance pursuant to
Syntroleum's 1993 Stock Option and Incentive Plan and 189,939 shares of
Syntroleum Common Stock (one
8
percent of the number of shares of Syntroleum Common Stock outstanding on
January 1, 1998) are reserved for issuance pursuant to Syntroleum's Stock Option
Plan for Outside Directors (Syntroleum's 1993 Stock Option and Incentive Plan
and Syntroleum's Stock Option Plan for Outside Directors are collectively
referred to as the "Syntroleum Stock Option Plans"), (iii) 527,433 shares of
Syntroleum Common Stock are issuable pursuant to outstanding and unvested stock
options granted pursuant to Syntroleum Stock Option Plans, 200,001 shares of
Syntroleum Common Stock are issuable pursuant to outstanding and vested stock
options granted pursuant to Syntroleum Stock Option Plans and 20,000 shares of
Syntroleum Common Stock are issuable pursuant to an outstanding and unvested
stock option granted to a consultant to Syntroleum (the "Consultant Option");
(iv) no shares of Syntroleum Preferred Stock are issued and outstanding; and (v)
no bonds, debentures, notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote) on any matters on which
Syntroleum stockholders may vote ("Syntroleum Voting Debt") are issued or
outstanding. All outstanding shares of Syntroleum Common Stock have been duly
authorized, are validly issued, fully paid and nonassessable and are not subject
to preemptive rights. Except as set forth on Schedule 3.1(b) of Syntroleum
Letter, all outstanding shares of capital stock of the Subsidiaries of
Syntroleum are owned by Syntroleum, or a direct or indirect wholly owned
Subsidiary of Syntroleum, free and clear of all liens, charges, encumbrances,
claims and options of any nature. Except as set forth in this Section 3.1(b) or
on Schedule 3.1(b) of Syntroleum Letter and except for changes resulting from
the exercise of employee stock options outstanding on the date hereof granted
pursuant to Syntroleum Stock Option Plans, or as contemplated by this Agreement,
there are outstanding: (i) no shares of capital stock, Syntroleum Voting Debt or
other voting securities of Syntroleum; (ii) no securities of Syntroleum or any
Subsidiary of Syntroleum convertible into or exchangeable for shares of capital
stock, Syntroleum Voting Debt or other voting securities of Syntroleum or any
Subsidiary of Syntroleum; and (iii) no options, warrants, calls, rights
(including preemptive rights), commitments or agreements to which Syntroleum or
any Subsidiary of Syntroleum is a party or by which it is bound in any case
obligating Syntroleum or any Subsidiary of Syntroleum to issue, deliver, sell,
purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased,
redeemed or acquired, additional shares of capital stock or any Syntroleum
Voting Debt or other voting securities of Syntroleum or of any Subsidiary of
Syntroleum, or obligating Syntroleum or any Subsidiary of Syntroleum to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. Except as set forth on Schedule 3.1(b) of Syntroleum Letter, there
are no stockholder agreements, registration rights, voting trusts or other
similar agreements or understandings to which Syntroleum is a party or by which
it is bound. Except as set forth on Schedule 3.1(b) of Syntroleum Letter, there
are no restrictions on Syntroleum's ability to vote the stock held by Syntroleum
of any of its Subsidiaries. To the knowledge of Syntroleum, as of the date of
this Agreement, no stockholder of Syntroleum or "group" within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), will be immediately after the Effective Time the beneficial
owner of more than 25% of the then outstanding SLH Common Stock.
(c) Non-Subsidiaries Equity Investment. Schedule 3.1(c) of
Syntroleum Letter sets forth the book value of each investment by Syntroleum or
any of its Subsidiaries in the voting securities, partnership interests or other
equity interests of any corporation, partnership or other entity (other
9
than a Subsidiary of Syntroleum) and the nature and percentage of Syntroleum's
or its Subsidiaries' ownership interests in such investment. Except as set forth
in Schedule 3.1(c) of Syntroleum Letter, the voting securities, partnership
interests or other equity interests of Syntroleum or its Subsidiaries in such
investments are owned free and clear of all liens, charges and encumbrances.
(d) Authority; No Violations; Consents and Approvals.
(i) The Board of Directors of Syntroleum has approved the
Merger and this Agreement, by unanimous vote of the directors (except
for those directors who abstained), and declared the Merger and this
Agreement to be in the best interests of the stockholders of
Syntroleum. Syntroleum has all requisite corporate power and authority
to enter into this Agreement and, subject, with respect to consummation
of the Merger, to approval of this Agreement and the Merger by the
stockholders of Syntroleum in accordance with the Oklahoma Act, to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Syntroleum, subject, with respect to
consummation of the Merger, to approval of this Agreement and the
Merger by the stockholders of Syntroleum in accordance with the
Oklahoma Act. This Agreement has been duly executed and delivered by
Syntroleum and, subject, with respect to consummation of the Merger, to
approval of this Agreement and the Merger by the stockholders of
Syntroleum in accordance with the Oklahoma Act, and assuming this
Agreement constitutes the valid and binding obligation of SLH,
constitutes a valid and binding obligation of Syntroleum enforceable in
accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity.
(ii) Except as set forth on Schedule 3.1(d) of Syntroleum
Letter, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit
under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of Syntroleum or
any of its Subsidiaries under, any provision of (i) the Certificate of
Incorporation or Bylaws of Syntroleum or any provision of the
comparable charter or organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
or indenture applicable to Syntroleum or any of its Subsidiaries, (iii)
any other agreement, instrument, permit, concession, franchise or
license applicable to Syntroleum or any of its Subsidiaries or (iv)
assuming the consents, approvals, authorizations or permits and filings
or notifications referred to in Section 3.1(d)(iii) are duly and timely
obtained or made and the approval of the Merger and this Agreement by
the stockholders of Syntroleum has been obtained, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to
Syntroleum or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case
10
of clause (iii), any such conflicts, violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually
or in the aggregate, would not have a Syntroleum Material Adverse
Effect, materially impair the ability of Syntroleum to perform its
obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is
required by or with respect to Syntroleum or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by
Syntroleum or the consummation by Syntroleum of the transactions
contemplated hereby, as to which the failure to obtain or make would
have a Syntroleum Material Adverse Effect, except for: (A) the filing
of the Certificate of Merger with the Secretary of States of the State
of Oklahoma and Kansas; and (B) such filings and approvals as may be
required by any applicable state securities, "blue sky" or takeover
laws.
(e) Financial Statements. Syntroleum previously has delivered to SLH a
true and complete copy of the consolidated balance sheets of Syntroleum and its
consolidated Subsidiaries as of December 31, 1996 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the fiscal years then ended on such dates, together with the notes thereto, in
each case audited by and accompanied by the report of Xxxxxx Xxxxxxxx LLP,
independent accountants (all the foregoing financial statements, including the
notes thereto, being referred to herein collectively as the "Syntroleum
Financial Statements"). Syntroleum will deliver to SLH true and complete copies
of any quarterly financial statements (which will be prepared in the same manner
as Syntroleum Financial Statements) prepared after the date hereof. Syntroleum
Financial Statements are prepared in accordance with generally accepted
accounting principles in effect in the United States ("GAAP") applied on a
consistent basis during the periods involved (except (i) as may be indicated in
the notes thereto, (ii) in the case of the unaudited financial statements, such
differences in presentation or omissions as permitted by Rule 10-01 of
Regulation S-X of the SEC and (iii) the unaudited financial statements do not
contain all notes required by GAAP) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited financial
statements, to normal year-end adjustments on a basis comparable with past
periods) the consolidated financial position of Syntroleum and its consolidated
Subsidiaries as of their respective dates and the consolidated results of
operations and the consolidated cash flows of Syntroleum and its consolidated
Subsidiaries for the periods presented therein.
(f) Information Supplied. None of the information supplied or to be
supplied by Syntroleum for inclusion or incorporation by reference in SLH's 1997
Form 10-K or the Registration Statement on Form S-4 to be filed with the
Securities and Exchange Commission (the "SEC") by SLH in connection with the
issuance of shares of SLH Common Stock in the Merger (the "S-4") will, at the
time the S-4 becomes effective under the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations thereunder or at the Effective
Time (or in the case
11
of SLH's Form 10-K, upon filing thereof), contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and none of the
information supplied or to be supplied by Syntroleum and included or
incorporated by reference in the related proxy statement (the "Proxy Statement")
will, at the time of mailing thereof or at the time of the meetings of the
stockholders of SLH or Syntroleum to be held in connection with the Merger or at
the Effective Time, 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. If at any time prior to the Effective Time any event with
respect to Syntroleum or any of its Subsidiaries, or with respect to other
information supplied by Syntroleum for inclusion in the Proxy Statement or S-4,
shall occur which is required to be described in an amendment of, or a
supplement to, the Proxy Statement or the S-4, such event shall be so described,
and such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of SLH and Syntroleum. The S-4
and the Proxy Statement, insofar as they relate to Syntroleum or its
Subsidiaries or other information supplied by Syntroleum for inclusion therein,
will comply as to form in all material respects with the provisions of the
Securities Act and the Exchange Act, and the rules and regulations thereunder.
(g) Absence of Certain Changes or Events. Except as disclosed in
Schedule 3.1(g) of Syntroleum Letter, or except as contemplated by this
Agreement, since December 31, 1997, Syntroleum has in all material respects
conducted its business only in the ordinary course and there has not been: (i)
any declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Syntroleum's capital
stock; (ii) any amendment of any material term of any outstanding equity
security of Syntroleum or any Subsidiary; (iii) any repurchase, redemption or
other acquisition by Syntroleum or any Subsidiary of any outstanding shares of
capital stock or other equity securities of, or other ownership interests in,
Syntroleum or any Subsidiary; (iv) any material change in any method of
accounting or accounting practice, or in any tax method, principle, election or
practice by Syntroleum or any Subsidiary; (v) if the covenants and agreements
with respect to Syntroleum and its Subsidiaries set forth in Section 4.1 had
been applicable to Syntroleum and its Subsidiaries during the period from
December 31, 1997 to the date of this Agreement, any action, transaction,
commitment or failure to act that would cause Syntroleum or any such Subsidiary
to fail to comply with such covenants and agreements; or (vi) any other action,
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of business)
that has had, or may reasonably be expected to have, a Syntroleum Material
Adverse Effect.
(h) No Undisclosed Material Liabilities. Except as fully reflected or
reserved against in Syntroleum Financial Statements, or disclosed in the
footnotes thereto, or referred to in Schedule 3.1(h) or elsewhere in Syntroleum
Letter, as of the date hereof Syntroleum and its Subsidiaries have no
liabilities, absolute or contingent other than liabilities which, individually
or in the aggregate, are reasonably expected not to have a Syntroleum Material
Adverse Effect. Except as so reflected, reserved or disclosed, Syntroleum and
its Subsidiaries have no commitments which, individually or in the aggregate,
are reasonably expected to have a Syntroleum Material Adverse Effect.
12
(i) Material Contracts; No Defaults.
(i) Set forth in Schedule 3.1(i)(i) of Syntroleum Letter is
(A) a list of all loan or credit agreements, notes, bonds, mortgages,
indentures, financing leases or other debt instruments or agreements
pursuant to which, as of a date within 30 days of the date hereof, any
indebtedness (determined in accordance with GAAP) of Syntroleum or any
of its Subsidiaries in an aggregate principal amount in excess of
$1,000,000 is outstanding or may be incurred and (B) the respective
principal amounts outstanding thereunder as of the date of this
Agreement.
(ii) Schedule 3.1(i)(ii) of Syntroleum Letter contains a
listing of all other contracts, agreements, arrangements or
understandings to which Syntroleum or one of its Subsidiaries is a
party or by which any of them or any of their properties or assets is
bound (exclusive of any contracts, agreements, arrangements or
understandings that are immaterial as to amount and significance to the
operations to which they relate and are routinely entered into the
ordinary course of business) described in (A) through (I) below to
which Syntroleum or any of its Subsidiaries is a party (the items
referred to in clauses (i) and (ii) of this Section 3.1(i) being
collectively referred to herein as "Contracts").
(A) Each Contract involving Syntroleum
Intangible Property;
(B) Each Contract or guaranty of third party debt or
obligations not in the ordinary course of business involving
expenditures, commitments or receipts of Syntroleum or any of
its Subsidiaries;
(C) Each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Contract affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any real or
personal property (except real or personal property leases and
installment and conditional sales agreements having a value
per property or item or aggregate payments of less than
$50,000 and with terms of less than one year);
(D) Each Contract to or with any employee providing
for aggregate payments in excess of $50,000 per year or with
any labor union or other employee representative of a group of
employees relating to wages, hours and other conditions of
employment;
(E) Each joint venture contract, partnership
arrangement or other Contract (however named) involving a
sharing of profits, losses, costs or liabilities by Syntroleum
or any of its Subsidiaries with any other person;
13
(F) Each contract containing covenants which in any
way purport to limit the freedom of Syntroleum or any of its
Subsidiaries to engage in any line of business or engage in
business in any geographic area or to compete with any person;
(G) Each general power of attorney granting the
recipient the power to commit material resources of Syntroleum
or its Subsidiaries which is currently effective and
outstanding;
(H) Each contract for capital expenditures in
excess of $500,000; and
(I) Each amendment, supplement and modification
(whether written or oral) in respect of any of the foregoing.
(iii) Except as disclosed on Schedule 3.1(i)(iii) of
Syntroleum Letter (and, in the case of contracts and agreements arising
after the date hereof and prior to the Effective Time, which are not
prohibited by Section 4.1 of this Agreement and are disclosed in
writing to SLH), there is no contract or agreement that is material to
the business, financial condition or results of operations of
Syntroleum and its Subsidiaries taken as a whole. Neither Syntroleum,
nor any of its Subsidiaries is in default or violation (and no event
has occurred which, with notice or the lapse of time or both, would
constitute a default or violation) of any term, condition or provision
of (i) in the case of Syntroleum and its Subsidiaries, their respective
charter and bylaws or comparable organizational documents, (ii) except
as disclosed in Schedule 3.1(i) of Syntroleum Letter, any note, bond,
mortgage, indenture, license, agreement or other instrument or
obligation to which Syntroleum or any of its Subsidiaries is now a
party or by which Syntroleum or any of its Subsidiaries or any of their
respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, statute, rule or regulation applicable to
Syntroleum or any of its Subsidiaries, except in the case of (ii) and
(iii) for defaults or violations which in the aggregate would not have
a Syntroleum Material Adverse Effect. Except as disclosed on Schedule
3.1(i)(iii) of Syntroleum Letter, to the knowledge of Syntroleum, none
of the other parties to the Contracts are in violation of or in default
under (nor does there exist any condition which upon the passage of
time or the giving of notice would cause such a violation of or default
under) any Contract, other than such violations or defaults as would
not have a Syntroleum Material Adverse Effect.
(j) Compliance with Applicable Laws. Syntroleum and its Subsidiaries
hold all permits, licenses, variances, exemptions, orders, franchises and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Syntroleum Permits"), except where the failure so to
hold would not have a Syntroleum Material Adverse Effect. Syntroleum and its
Subsidiaries are in compliance with the terms of Syntroleum Permits, except
where the failure so to comply would not have a Syntroleum Material Adverse
Effect. Except as disclosed or as set forth on Schedule 3.1(j), 3.1(k), 3.1(l),
3.1(m), 3.1(n) or 3.1(o) of Syntroleum Letter, the businesses of Syntroleum and
its Subsidiaries are not being conducted in violation of any law, ordinance,
14
regulation, judgment or decree of any Governmental Entity, except for possible
violations which would not have a Syntroleum Material Adverse Effect. Except as
set forth on Schedule 3.1(j) of Syntroleum Letter, as of the date of this
Agreement, no investigation or review by any Governmental Entity with respect to
Syntroleum or any of its Subsidiaries is, to the best knowledge of Syntroleum,
pending or threatened, other than those the outcome of which would not have a
Syntroleum Material Adverse Effect.
(k) Litigation. Schedule 3.1(k) of Syntroleum Letter discloses all
suits, actions or proceedings pending, or, to, the best knowledge of Syntroleum,
threatened against Syntroleum or any Subsidiary of Syntroleum ("Syntroleum
Litigation") on the date of this Agreement and all judgments, decrees,
injunctions, rules or orders of any Governmental Entity or arbitrator
outstanding against Syntroleum or any Subsidiary of Syntroleum ("Syntroleum
Order") on the date of this Agreement, in each case in which the amount claimed
or that could be involved is in excess of $100,000. Except as disclosed on
Schedule 3.1(k) of Syntroleum Letter, there is no Syntroleum Litigation that,
individually or in the aggregate with all other Syntroleum Litigation, is
reasonably likely to have a Syntroleum Material Adverse Effect, nor is there any
Syntroleum Order that, individually or in the aggregate with all other
Syntroleum Litigation, is reasonably likely to have a Syntroleum Material
Adverse Effect or a material adverse effect on Syntroleum's ability to perform
its obligations hereunder or to consummate the transactions contemplated by this
Agreement.
(l) Taxes. Except as set forth on Schedule 3.1(l) of Syntroleum Letter
and except for exceptions to the following that would not, individually or in
the aggregate, have a Syntroleum Material Adverse Effect:
(i) Each of Syntroleum, each of its Subsidiaries and any
affiliated, consolidated, combined, unitary or similar group of which
any such corporation is or was a member has (A) duly and timely (taking
into account any extensions) filed all federal, state, local, foreign
and other returns, declarations, reports, estimates, information
returns and statements ("Returns") required to be filed or sent by or
with respect to it in respect of any Taxes (as hereinafter defined),
(B) duly paid or deposited on a timely basis all Taxes (including
estimated Taxes) that are due and payable (except for audit adjustments
not material in the aggregate or to the extent that liability therefor
is reserved for in Syntroleum's most recent audited financial
statements) for which Syntroleum or any of its Subsidiaries may be
liable, (C) established reserves that are adequate for the payment of
all Taxes not yet due and payable with respect to the results of
operations of Syntroleum and its Subsidiaries through the date hereof,
and (D) complied in all material respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes
and has in all material respects timely withheld from employee wages
and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over.
(ii) Schedule 3.1(l) of Syntroleum Letter sets forth (i) the
last taxable period through which the United States federal income Tax
Returns of Syntroleum and any of its Subsidiaries have been examined by
the Internal Revenue Service ("IRS") or otherwise
15
closed and (ii) any affiliated, consolidated, combined, unitary or
similar group Return in which Syntroleum or any of its Subsidiaries is
or has been a member or is or has joined in the filing. Except to the
extent being contested in good faith, all material deficiencies
asserted as a result of such examinations and any examination by any
applicable federal, state, local, foreign or other taxing authority
have been paid, fully settled or adequately provided for in
Syntroleum's most recent audited financial statements. Except as
adequately provided for in Syntroleum Financial Statements, no material
tax audits or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes for which Syntroleum or any
of its Subsidiaries would be liable, and no material deficiency for any
such Taxes has been proposed, asserted or assessed pursuant to such
examination against Syntroleum or any of its Subsidiaries by any
federal, state, local, foreign or other taxing authority with respect
to any period.
(iii) Neither Syntroleum nor any of its Subsidiaries has
executed or entered into with the IRS or any taxing authority (i) any
agreement or other document extending or having the effect of extending
the period for assessments or collection of any Taxes for which
Syntroleum or any of its Subsidiaries would be liable or (ii) a closing
agreement pursuant to Section 7121 of the Code, or any predecessor
provision thereof or any similar provision of federal, state, local,
foreign or other tax law that relates to the assets or operations of
Syntroleum or any of its Subsidiaries.
(iv) Neither Syntroleum nor any of its Subsidiaries is a party
to an agreement that provides for the payment of any amount that would
constitute a "parachute payment" within the meaning of Section 280G of
the Code.
(v) Neither Syntroleum nor any of its Subsidiaries has made an
election under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned
by Syntroleum or any of its Subsidiaries.
(vi) Neither Syntroleum nor any of its Subsidiaries is a party
to, is bound by or has any obligation under any tax sharing or
allocation agreement or similar agreement or arrangement.
For purposes of this Agreement, "Taxes" means all federal, state,
local, foreign and other taxes, charges, fees, levies, imposts, duties, licenses
or other governmental assessments, together with any interest, penalties,
additions to tax or additional amounts imposed by any taxing authority with
respect thereto.
16
(m) Pension and Benefit Plans; ERISA.
(i) Syntroleum has made available to SLH true, correct, and
complete copies of each of the following which is sponsored, maintained
or contributed to by Syntroleum or any of its Subsidiaries for the
benefit of the employees of Syntroleum or such Subsidiary:
(1) each "employee benefit plan," as such term is
defined in Section 3(3) of the United States Employee
Retirement Income Security Act of 1974, as amended ("ERISA")
(including, but not limited to, employee benefit plans, such
as foreign plans, which are not subject to the provisions of
ERISA) ("Syntroleum Plans"); and
(2) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy,
severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding
which is not described in Section 3.1(m)(i)(1) ("Syntroleum
Benefit Programs").
(ii) Except as disclosed in Schedule 3.1(m)(ii) of
Syntroleum Letter:
(1) Syntroleum and its Subsidiaries do not contribute
to or have an obligation to contribute to, and have not at any
time within six years prior to the Effective Time contributed
to or had an obligation to contribute to, a multiemployer plan
within the meaning of Section 3(37) of ERISA;
(2) Syntroleum and its Subsidiaries have
substantially performed all material obligations, whether
arising by operation of law or by contract, required to be
performed by them in connection with Syntroleum Plans and
Syntroleum Benefit Programs, and to the knowledge of
Syntroleum there have been no material defaults or violations
by any other party to Syntroleum Plans or Syntroleum Benefit
Programs;
(3) All reports and disclosures relating to
Syntroleum Plans required to be filed with or furnished to
governmental agencies, Syntroleum Plan participants or
beneficiaries have been filed or furnished substantially in
accordance with applicable law in a timely manner;
(4) Each Syntroleum Plan intended to be qualified
under Section 401 of the Code satisfies the requirements of
such Section and has received a favorable determination letter
from the Internal Revenue Service regarding such qualified
status and has not, since receipt of the most recent favorable
determination letter, been amended or, to the knowledge of
Syntroleum, operated in a way which would
17
adversely affect such qualified status. As to any Syntroleum
Plan intended to be qualified under Section 401 of the Code,
there has been no termination or partial termination of
Syntroleum Plan within the meaning of Section 411(d)(3) of the
Code;
(5) There are no actions, suits or claims pending
(other than routine claims for benefits) or, to the knowledge
of Syntroleum, threatened against, or with respect to, any of
Syntroleum Plans or Syntroleum Benefit Programs or their
assets. To the knowledge of Syntroleum, there is no matter
pending (other than routine qualification determination
filings) with respect to any of Syntroleum Plans before the
IRS, the United States Department of Labor or the Pension
Benefit Guaranty Corporation ("PBGC");
(6) As to any Syntroleum Plan subject to Title IV of
ERISA, there has been no event or condition which presents the
material risk of a Syntroleum Plan termination, no accumulated
funding deficiency, whether or not waived, within the meaning
of Section 302 of ERISA or Section 412 of the Code has been
incurred, no reportable event within the meaning of Section
4043 of ERISA (for which the disclosure requirements of
Regulation 2615.3 promulgated by the PBGC have not been
waived) has occurred, no notice of intent to terminate
Syntroleum Plan has been given under Section 4041(c) of ERISA,
no proceeding has been instituted under Section 4042 of ERISA
to terminate Syntroleum Plan, no liability to the PBGC has
been incurred;
(7) No act, omission or transaction has occurred
which would result in imposition on Syntroleum or any of its
Subsidiaries of (A) liability for a breach of fiduciary duty
under Section 409 of ERISA, (B) a civil penalty assessed
pursuant to subsection (c), (i) or (1) of Section 502 of ERISA
or (C) a tax imposed pursuant to Chapter 43 of Subtitle D of
the Code;
(8) With respect to any employee benefit plan, within
the meaning of Section 3(3) of ERISA, which is not a
Syntroleum Plan but which is sponsored, maintained or
contributed to, or has been sponsored, maintained or
contributed to within six years prior to the Effective Time,
by any corporation, trade, business or entity under common
control with Syntroleum, within the meaning of Section 414(b),
(c) or (m) of the Code or Section 4001 of ERISA ("Syntroleum
Commonly Controlled Entity"), (A) no withdrawal liability,
within the meaning of Section 4201 of ERISA, has been
incurred, which withdrawal liability has not been satisfied,
(B) no liability to the PBGC has been incurred by any
Syntroleum Commonly Controlled Entity, which liability has not
been satisfied, (C) no accumulated funding deficiency, whether
or not waived, within the meaning of Section 302 of ERISA or
Section 412 of the Code has been incurred, and (D) all
contributions (including installments) to such plan required
by Section 302 of ERISA and Section 412 of the Code have been
timely made; and
18
(9) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will
not (A) require Syntroleum or any of its Subsidiaries to make
a larger contribution to, or pay greater benefits under, any
Syntroleum Plan or Syntroleum Benefit Program than it
otherwise would or (B) create or give rise to any additional
vested rights or service credits under any Syntroleum Plan or
Syntroleum Benefit Program.
(iii) Except as disclosed on Schedule 3.1(m)(iii) of
Syntroleum Letter, there are no severance agreements or employment
agreements between Syntroleum or any of its Subsidiaries and any
employee of Syntroleum or such Subsidiary. True and correct copies of
all such severance and employment agreements have been provided to SLH.
Except as disclosed on Schedule 3.1(m)(iii) of Syntroleum Letter, (A)
neither Syntroleum nor any of its Subsidiaries has any consulting
agreement or arrangement with any person involving annual compensation
in excess of $100,000, except as are terminable without penalty upon
one month's notice or less, and (B) no stock or other security issued
by Syntroleum or any of its Subsidiaries forms or has formed a material
part of the assets of any Syntroleum Plan or Syntroleum Benefit
Program.
(n) Labor Matters.
(i) Except as set forth in Schedule 3.1(n)(i) of Syntroleum
Letter, as of the date of this Agreement, (1) no employees of
Syntroleum or any of its Subsidiaries are represented by any labor
organization; (2) no labor organization or group of employees of
Syntroleum or any of its Subsidiaries has made a pending demand for
recognition or certification, and there are no representation or
certification proceedings or petitions seeking a representation
proceeding presently pending or threatened in writing to be brought or
filed with the National Labor Relations Board or any other labor
relations tribunal or authority; and (3) to the knowledge of
Syntroleum, there are no organizing activities involving Syntroleum or
any of its Subsidiaries pending with any labor organization or group of
employees of Syntroleum or any of its Subsidiaries.
(ii) Except as set forth on Schedule 3.1(n)(ii) of Syntroleum
Letter, Syntroleum and each of its Subsidiaries is in compliance with
all laws and orders relating to the employment of labor, including all
such laws and orders relating to wages, hours, collective bargaining,
discrimination, civil rights, safety and health workers' compensation
and the collection and payment of withholding and/or Social Security
Taxes and similar Taxes, except where the failure to comply would not
have a Syntroleum Material Adverse Effect.
(o) Intangible Property. To Syntroleum's knowledge, Syntroleum and its
Subsidiaries possess or have adequate rights to use all material trademarks,
trade names, patents, service marks, brand marks, brand names, computer
programs, database, industrial designs, trade secrets, technology, and
copyrights necessary for the operation of the businesses of each of Syntroleum
and its Subsidiaries (collectively, the "Syntroleum Intangible Property"),
except where the failure to
19
possess or have adequate rights to use such properties would not reasonably be
expected to have a Syntroleum Material Adverse Effect. Schedule 3.1(o) of
Syntroleum Letter lists all patents and trademarks (and applications for patents
and trademarks) or licensing agreements with respect to any patent or trademark,
which in each case is applicable to a material portion of the business of
Syntroleum or its Subsidiaries. To the knowledge of Syntroleum, except as set
forth on Schedule 3.1(o) of Syntroleum Letter, all of Syntroleum Intangible
Property is owned or used by Syntroleum or its Subsidiaries free and clear of
any and all liens, claims or encumbrances, except those that are not reasonably
likely to have a Syntroleum Material Adverse Effect, and neither Syntroleum nor
any such Subsidiary has forfeited or otherwise relinquished any Syntroleum
Intangible Property which forfeiture would result in a Syntroleum Material
Adverse Effect. To the knowledge of Syntroleum, the use of Syntroleum Intangible
Property by Syntroleum or its Subsidiaries does not, in any material respect,
conflict with, infringe upon, violate or interfere with or constitute an
appropriation of any valid right, title, interest or goodwill, including,
without limitation, any intellectual property right, trademark, trade name,
patent, service xxxx, brand xxxx, brand name, computer program, database,
industrial design, copyright or any pending application therefor of any other
person and there have been no claims made, and neither Syntroleum nor any of its
Subsidiaries has received any notice of any claim or otherwise knows, that any
of Syntroleum Intangible Property is invalid or conflicts with the asserted
rights of any other person or has not been used or enforced or has been failed
to be used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of Syntroleum Intangible Property,
except for any such conflict, infringement, violation, interference, claim,
invalidity, abandonment, cancellation or unenforceability that would not
reasonably be expected to have a Syntroleum Material Adverse Effect.
(p) Environmental Matters.
For purposes of this Agreement:
(A) "Environmental Law" means any applicable law regulating or
prohibiting Releases into any part of the natural environment, or
pertaining to the protection of natural resources, the Environment and
public and employee health and safety including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability
Act ("CERCLA") (42 U.S.C. Section 9601 et seq.), the Hazardous
Materials Transportation Act (49 U. S. C. Section 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.), the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean
Air Act (33 U.S.C. Section 7401 et seq.), the Toxic Substances Control
Act (15 U.S.C. Section 7401 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.), and the
Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.)
("OSHA") and the regulations promulgated pursuant thereto, and any such
applicable state or local statutes, and the regulations promulgated
pursuant thereto, as such laws have been and may be amended or
supplemented through the Closing Date.
(B) "Hazardous Material" means any substance, material or
waste which is regulated, or which could be the subject of Remedial
Action, pursuant to any Environmental
20
Law by any public or governmental authority in the jurisdictions in
which the applicable party or its Subsidiaries conducts business, or
the United States, including, without limitation, any material or
substance which is defined as a "hazardous waste," "hazardous
material," "hazardous substance," ("extremely hazardous waste" or
"restricted hazardous waste," "pollutant," "contaminants," "toxic
waste" or "toxic substance" under any provision of Environmental Law;
(C) "Release" means any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment, or into
or out of any property owned, operated or leased by the applicable
party or its Subsidiaries; and
(D) "Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by a governmental entity
or required under any Environmental Law, or voluntarily undertaken to
(I) clean up, remove, treat, or in any other way ameliorate the Release
of any Hazardous Materials in the indoor or outdoor environment; (II)
prevent the Release or threat of Release, or minimize the further
Release of any Hazardous Material so it does not endanger or threaten
to endanger the public health or welfare of the indoor or outdoor
environment; (III) perform pre-remedial studies and investigations or
post-remedial monitoring and care pertaining or relating to a Release;
or (IV) bring the applicable party into compliance with any
Environmental Law.
(i) Except as disclosed on Schedule 3.1(p) of
Syntroleum Letter, the operations of Syntroleum and its
Subsidiaries have been and are currently in compliance with
all Environmental Laws, except where the failure to so comply
would not reasonably be expected to have a Syntroleum Material
Adverse Effect;
(ii) Except as disclosed on Schedule 3.1(p) of
Syntroleum Letter, Syntroleum and its Subsidiaries have
obtained and maintained all permits required under applicable
Environmental Laws for the continued operations of their
respective businesses, except such permits the lack of which
would not reasonably be expected to lead to a Syntroleum
Material Adverse Effect;
(iii) Except as disclosed on Schedule 3.1(p) of
Syntroleum Letter, as of the date hereof Syntroleum and its
Subsidiaries are not subject to any material (individually or
in the aggregate) outstanding written orders or material
contracts with any Governmental Entity or other person
respecting (A) Environmental Laws, (B) Remedial Action or (C)
any Release or threatened Release of a Hazardous Material;
(iv) Except as disclosed on Schedule 3.1(p) of
Syntroleum Letter, Syntroleum and its Subsidiaries have not
received any written communication alleging, with respect to
any such party, and has no knowledge of, or reasonable
21
reason to suspect the existence of, the violation of or
liability under any Environmental Law, which violation or
liability would reasonably be expected to have a Syntroleum
Material Adverse Effect;
(v) Except as disclosed on Schedule 3.1(p) of
Syntroleum Letter, neither Syntroleum nor any of its
Subsidiaries has any contingent liability in connection with
any Release of any Hazardous Material including, without
limitation, in connection with the exposure of any person or
property to Hazardous Material that would reasonably be
expected to lead to a Syntroleum Material Adverse Effect;
(vi) Except as disclosed on Schedule 3.1(p) of
Syntroleum Letter, the operations of Syntroleum or its
Subsidiaries involving the generation, transportation,
treatment, storage or disposal of hazardous waste, as defined
and regulated under 40 C.F.R. Parts 260-270 (in effect as of
the date of this Agreement) or any state equivalent, or any
other Hazardous Material are in compliance with applicable
Environmental Laws, except where the failure to so comply
would not reasonably be expected to have a Syntroleum Material
Adverse Effect; and
(vii) Except as disclosed on Schedule 3.1(p) of
Syntroleum Letter, to the knowledge of Syntroleum as of the
date hereof, there is not now on or in any property of
Syntroleum or its Subsidiaries any of the following: (A) any
underground storage tanks or surface impoundments, (B) any
asbestos-containing materials, or (C) any polychlorinated
biphenyls, any of which ((A), (B) or (C) preceding) could
reasonably be expected to have a Syntroleum Material Adverse
Effect. None of the properties owned or operated by Syntroleum
are restricted as to use or as to transfer of title, or the
subject of any special recorded notice, as a result of the
existence of Hazardous Substances thereon.
(viii) Syntroleum has made available to SLH for
review all written reports of environmental audits and
assessments prepared for Syntroleum or any of its Subsidiaries
within the last three years by third party consultants or
internal environmental, safety or health personnel which are
in the possession or control of Syntroleum and which relate to
the assets or operations of Syntroleum or any of its
Subsidiaries.
(q) Opinion of Financial Advisor. Syntroleum has received the
opinion of X.X. Xxxxxx Securities Inc. (a copy of which has been delivered to
SLH) to the effect that, as of the date hereof, the consideration to be received
by the holders of Syntroleum Common Stock pursuant to this Agreement is fair
from a financial point of view to such holders.
(r) Vote Required. The affirmative vote of the holders of a
majority of the shares of Syntroleum Common Stock outstanding is the only vote
of the holders of any class or series of
22
Syntroleum capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
(s) Insurance. Syntroleum has delivered to SLH an insurance schedule of
Syntroleum's and each of its Subsidiaries' directors' and officers' liability
insurance, primary and excess casualty insurance policies, providing coverage
for bodily injury and property damage to third parties, including products
liability and completed operations coverage, and worker's compensation, in
effect as of the date hereof. Syntroleum maintains insurance coverage reasonably
adequate for the operation of the business of Syntroleum and each of its
Subsidiaries (taking into account the cost and availability of such insurance),
and the transactions contemplated hereby will not materially adversely affect
such coverage.
(t) Brokers. Except as disclosed on Schedule 3.1(t) of Syntroleum
Letter, no broker, investment banker, or other person is entitled to any
broker's, finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Syntroleum.
(u) Tax Matters. As of the date hereof, the representations which
Syntroleum is to make pursuant to Exhibit C attached hereto (other than any
representation which refers to the Proxy Statement) are true and correct,
assuming for purposes of this representation and warranty that the Merger
referred to in such Exhibit C had been consummated on the date hereof. In
addition, the representations which are made by Syntroleum in the form of
Exhibit C hereof (with such variations therein as may be made) in connection
with the rendering of the tax opinion for which provision is made in Section
6.1(h) hereof will be true and correct at the time that the Merger occurs. Such
representations are for the benefit of the holders of Syntroleum Common Stock.
(v) Title. Except as disclosed in Syntroleum Financial Statements or on
Schedule 3.1(v) of Syntroleum Letter, Syntroleum and each of its Subsidiaries
have good and marketable title to all real property and good title to all
personal property owned by them, in each case free and clear of all liens,
pledges or encumbrances securing money borrowed, the deferred purchase price of
property in excess of $300,000 or capital leases and free and clear of all other
liens, pledges, encumbrances or defects that could affect the value or use
thereof except for any such other liens, pledges, encumbrances or defects that
would not have a Syntroleum Material Adverse Effect.
(w) Books and Records. Syntroleum and its Subsidiaries (i) make and
keep accurate books and records and (ii) maintain internal accounting controls
which provide reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions are recorded as
necessary to permit preparation of their financial statements and to maintain
accountability for their assets, (C) access to their assets is permitted only in
accordance with management's authorization and (D) the reported accountability
for their assets is compared with existing assets at reasonable intervals.
23
(x) Certain Payments. Neither Syntroleum nor any of its Subsidiaries,
nor any director, officer, agent, employee or other person associated with or
acting on behalf of the Syntroleum or any of its Subsidiaries, has used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic governmental official or employee
from corporate funds; violated or is in violation of any provision of the United
States Foreign Corrupt Practices Act of 1977; nor made any illegal bribe,
rebate, payoff, influence payment, kickback or other unlawful payment.
(y) Transactions with Related Parties. Except as set forth in Schedule
3.1(y) of Syntroleum Letter, there are no agreements, contracts or other
arrangements between (i) Syntroleum or any of its Subsidiaries, on the one hand,
and (ii) any Related Person (as defined below) of Syntroleum, on the other hand.
Except as set forth in Schedule 3.1(y) of Syntroleum Letter and except for the
ownership of the SLH Common Stock issued hereunder, after the Closing Date no
Related Person of Syntroleum and no present officer or director of any Related
Person of Syntroleum has any interest in any property (real or personal,
tangible or intangible) or contract used in or pertaining to the business of
Syntroleum and its Subsidiaries (or the Surviving Corporation and its
Subsidiaries) and no Related Person of Syntroleum has any direct or indirect
ownership interest (excluding immaterial passive investments) in any person
(other than through Syntroleum or any of its Subsidiaries) with which Syntroleum
or any of its Subsidiaries competes in any material respect or has a material
business relationship. Schedule 3.1(y) of Syntroleum letter sets forth as of the
date of this Agreement a description of all services provided by any Related
Person of Syntroleum or Syntroleum and any of its Subsidiaries. A "Related
Person" of any person shall mean any holder of in excess of 5% of the equity
securities of such person and any affiliates or associates (as defined in Rule
12b-2 under the Exchange Act) of such holder (other than such original person or
its Subsidiaries).
(z) State Takeover Laws. Syntroleum has taken all necessary action to
exempt the transactions contemplated by this Agreement from the provisions of
Section 1090.3 of the Oklahoma Act, the Oklahoma Takeover Disclosure Act of 1985
and the Oklahoma Control Shares Acquisition Act.
(aa) Year 2000. Syntroleum has taken all necessary action to enable its
computer software to process data attributable to the year 2000 and thereafter.
Syntroleum's operating and financial systems will be able to process such data
by the year 2000.
3.2 Representations and Warranties of SLH. SLH represents and
warrants to Syntroleum as follows:
(a) Organization, Standing and Power. Each of SLH and SLH's
Subsidiaries is a corporation, partnership or limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being
24
conducted, and is duly qualified and in good standing to do business in each
jurisdiction in which the business it is conducting, or the operation, ownership
or leasing of its properties, makes such qualification necessary, other than in
such jurisdictions where the failure to qualify would not have a SLH Material
Adverse Effect (as defined below). SLH has heretofore delivered to Syntroleum
complete and correct copies of SLH's Articles of Incorporation and Bylaws and
the organizational documents of each of SLH's Subsidiaries. All Subsidiaries of
SLH, the percentage of SLH's ownership of such Subsidiaries, the identity and
percentage ownership of all other persons with equity interests in such
Subsidiaries and their respective jurisdictions of incorporation or organization
are identified on Schedule 3.2(a) of the letter dated and delivered to
Syntroleum on the date hereof (the "SLH Letter"), which relates to this
Agreement and is designated therein as being the SLH Letter. As used in this
Agreement "SLH Material Adverse Effect" or "SLH Material Adverse Change" shall
mean any effect or change that is, individually or in the aggregate, materially
adverse to the business, operations, assets, condition (financial or otherwise)
or results of operation of SLH and its Subsidiaries taken as a whole except for
general economic changes and changes that may affect the industries of SLH or
any of its Subsidiaries generally.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of SLH consists of 30,000,000 shares of SLH Common Stock, par value $.01
per share, and 1,000,000 shares of preferred stock, par value $.01 per share
("SLH Preferred Stock"). At the close of business on March 12, 1998: (i)
10,074,721 shares of SLH Common Stock are issued and outstanding, an aggregate
of 974,400 shares of SLH Common Stock are reserved for issuance pursuant to the
SLH Stock Option Plan, 780,000 shares of SLH Common Stock are issuable pursuant
to outstanding and unvested stock options granted pursuant to the SLH Stock
Option Plan and 194,400 shares of SLH Common Stock are issuable pursuant to
outstanding and vested stock options granted pursuant to the SLH Stock Option
Plan; (ii) no shares of SLH Preferred Stock are issued and outstanding and
50,000 shares of SLH Junior Preferred Stock are reserved for issuance in
connection with the SLH Stock Purchase Rights; and (iii) no bonds, debentures,
notes or other indebtedness having the right to vote (or convertible into
securities having the right to vote) on any matters on which SLH stockholders
may vote ("SLH Voting Debt") are issued or outstanding. From March 12, 1998
until the Effective Time, no additional shares, options or similar rights will
be issued or authorized other than shares issued in connection with options
which were outstanding and vested (or which vest in accordance with their
original terms as in effect on the close of business on March 12, 1998) pursuant
to the SLH Stock Option Plan as in effect on the close of business on March 12,
1998. Assuming the Effective Date is prior to September 30, 1998, no options or
similar rights that were not vested at the close of business on March 12, 1998
will vest prior to the Effective Time (other than in the case of the death of a
holder of such option or a change of control of SLH as provided in the SLH Stock
Option Plan). All outstanding shares of SLH Common Stock have been duly
authorized, are validly issued, fully paid and nonassessable and are not subject
to preemptive rights, and, subject to the approval of this Agreement and the
Merger, all shares of SLH Common Stock issuable in the Merger will be duly
authorized and, when issued, will be validly issued, fully paid and
non-assessable and free of preemptive rights. Except as set forth on Schedule
3.2(b) of the SLH Letter, all outstanding shares of capital stock of the
Subsidiaries of SLH are owned by SLH, or a direct or indirect wholly owned
Subsidiary of SLH, free and clear of all liens, charges, encumbrances, claims
and options of any nature. Except as set forth in this Section 3.2(b) or on
Schedule 3.2(b) of the SLH Letter and except
25
for changes resulting from the exercise of employee stock options outstanding on
the date hereof granted pursuant to the SLH Stock Option Plan, or as
contemplated by this Agreement there are outstanding: (i) no shares of capital
stock, SLH Voting Debt or other voting securities of SLH; (ii) no securities of
SLH or any Subsidiary of SLH convertible into or exchangeable for shares of
capital stock, SLH Voting Debt or other voting securities of SLH or any
Subsidiary of SLH; and (iii) no options, warrants, calls, rights (including
preemptive rights), commitments or agreements to which SLH or any Subsidiary of
SLH is a party or by which it is bound in any case obligating SLH or any
Subsidiary of SLH to issue, deliver, sell, purchase, redeem or acquire, or cause
to be issued, delivered, sold, purchased, redeemed or acquired, additional
shares of capital stock or any SLH Voting Debt or other voting securities of SLH
or of any Subsidiary of SLH, or obligating SLH or any Subsidiary of SLH to
grant, extend or enter into any such option, warrant, call, right, commitment or
agreement. Except as set forth on Schedule 3.2(b) of the SLH Letter, there are
no stockholder agreements, registration rights, voting trusts or other similar
agreements or understandings to which SLH is a party or by which it is bound.
Except as set forth on Schedule 3.2(b) of the SLH Letter, there are no
restrictions on SLH's ability to vote the stock held by SLH or any of its
Subsidiaries. To the knowledge of SLH, as of the date of this Agreement, no
stockholder of SLH or "group" within the meaning of Section 13(d)(3) of the
Exchange Act will be immediately after the Effective Time the beneficial owner
of more than 25% of the then outstanding SLH Common Stock.
(c) Non-Subsidiaries Equity Investment. Schedule 3.2(c) of the SLH
Letter sets forth the book value of each investment by the SLH or any of its
Subsidiaries in the voting securities, partnership interests or other equity
interests of any corporation, partnership or other entity (other than a
Subsidiary of SLH) and the nature and percentage of SLH's or its Subsidiaries'
ownership interests in such investment. Except as set forth in Schedule 3.2(c)
of the SLH Letter, the voting securities, partnership interests or other equity
interests of SLH or its Subsidiaries in such investments are owned free and
clear of all liens, charges and encumbrances.
(d) Authority; No Violations; Consents and Approvals.
(i) The Board of Directors of SLH has, by unanimous vote of
the directors (except for those directors who abstained), approved and
declared to be in the best interests of the stockholders of SLH the
Merger, this Agreement and the amendments to the Articles of
Incorporation of SLH provided in the Certificate of Merger. SLH has all
requisite corporate power and authority to enter into this Agreement
and, subject, with respect to consummation of the Merger, to approval
of this Agreement and the Merger by the stockholders of SLH in
accordance with the Kansas Code, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of SLH,
subject, with respect to consummation of the Merger, to approval of
this Agreement and the Merger by the stockholders of SLH in accordance
with the Kansas Code. This Agreement has been duly executed and
delivered by SLH and, subject, with respect to consummation of the
Merger, to approval of this Agreement and the Merger by
26
the stockholders of SLH in accordance with the Kansas Code, and
assuming this Agreement constitutes the valid and binding obligation of
Syntroleum, constitutes a valid and binding obligation of SLH
enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general principles of equity.
(ii) Except as set forth on Schedule 3.2(d) of the SLH Letter,
the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit
under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of SLH or any of
its Subsidiaries under, any provision of (i) the Articles of
Incorporation or Bylaws of SLH or any provision of the comparable
charter or organizational documents of any of its Subsidiaries, (ii)
any loan or credit agreement, note, bond, mortgage, or indenture
applicable to SLH or any of its Subsidiaries, (iii) any other
agreement, instrument, permit, concession, franchise or license
applicable to SLH or any of its Subsidiaries or (iv) assuming the
consents, approvals, authorizations or permits and filings or
notifications referred to in Section 3.2(d)(iii) are duly and timely
obtained or made and the approval of this Agreement and the Merger by
the stockholders of SLH has been obtained, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to SLH or any of
its Subsidiaries or any of their respective properties or assets, other
than, in the case of clause (iii), any such conflicts, violations,
defaults, rights, liens, security interests, charges or encumbrances
that, individually or in the aggregate, would not have a SLH Material
Adverse Effect, materially impair the ability of SLH to perform its
obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any
Governmental Entity is required by or with respect to SLH or any of its
Subsidiaries in connection with the execution and delivery of this
Agreement by SLH or the consummation by SLH of the transactions
contemplated hereby, as to which the failure to obtain or make would
have a SLH Material Adverse Effect, except for: (A) the filing with the
SEC of a proxy statement in preliminary and definitive form relating to
the meeting of SLH's stockholders to be held in connection with the
approval of this Agreement and the Merger by stockholders of SLH, the
S-4, such reports under Section 13(a) of the Exchange Act and such
other compliance with the Securities Act and the Exchange Act and the
rules and regulations thereunder as may be required in connection with
this Agreement and the transactions contemplated hereby, and the
obtaining from the SEC of such orders as may be so required; (B)
filings with, and approval of, the Nasdaq Stock Market; (C) such
filings and approvals as may be required by any applicable state
securities, "blue sky" or takeover laws, or environmental laws; and (D)
the filing of the Certificate of Merger with the Secretary of State of
the States of Oklahoma and Kansas.
27
(e) SEC Documents. SLH has made available to Syntroleum a true and
complete copy of each quarterly, annual or current report on Form 10-Q, 10-K or
8-K, registration statement and definitive proxy statement filed by SLH with the
SEC prior to the date of this Agreement, which are all the documents (other than
preliminary material) that SLH was required to file with the SEC prior to the
date of this Agreement. SLH will make available to Syntroleum, a true and
complete copy of each quarterly, annual or current report on Form 10-Q, 10-K or
8-K, registration statement and definitive proxy statement filed by SLH with the
SEC subsequent to the date of this Agreement and prior to the Effective Time.
All of such reports and statements filed prior to the date of this Agreement and
the Form 10-K of the SLH are hereinafter referred to as the "SLH SEC Documents."
As of their respective filing dates, the SLH SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such SLH SEC Documents, and, assuming the accuracy of information
supplied by Syntroleum for inclusion therein, none of the SLH SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. As of
their respective filing dates, the financial statements of SLH included in the
SLH SEC Documents complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except (i) as may be indicated in the notes thereto, (ii) in the case
of the unaudited statements, such differences in presentation or omissions as
permitted by Rule 10-01 of Regulation S-X of the SEC and (iii) the unaudited
financial statements do not contain all notes required by GAAP) and fairly
presented in accordance with applicable requirements of GAAP (subject, in the
case of the unaudited statements, to normal year-end adjustments on a basis
comparable with past periods) the consolidated financial position of SLH and its
consolidated Subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of SLH and its
consolidated Subsidiaries for the periods presented therein.
(f) Information Supplied. Assuming the accuracy of information supplied
by Syntroleum for inclusion therein, none of the information supplied or to be
supplied by SLH for inclusion or incorporation by reference in the S-4 will, at
the time the S-4 becomes effective under the Securities Act or at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and none of the information supplied or to be supplied
by SLH and included or incorporated by reference in the Proxy Statement will, at
the time of mailing thereof or at the time of the meetings of the stockholders
of SLH or Syntroleum to be held in connection with the Merger or at the
Effective Time, 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. If at any time prior to the Effective Time any event with
respect to SLH or any of its Subsidiaries, or with respect to other information
supplied by SLH for inclusion in the Proxy Statement or S-4, shall occur which
is required to be
28
described in an amendment of, or a supplement to, the Proxy Statement or the
S-4, such event shall be so described, and such amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
stockholders of SLH and Syntroleum. The S-4 and the Proxy Statement, insofar as
they relate to SLH or its Subsidiaries or other information supplied by SLH for
inclusion therein, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
(g) Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the financial statements included in the SLH SEC Documents or on
Schedule 3.2(g) of the SLH Letter, or except as contemplated by this Agreement,
since December 31, 1997, SLH has, in all material respects, conducted its
business only in the ordinary course and there has not been: (i) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of SLH's capital stock
(other than a two for one stock split effected on February 9, 1998); (ii) any
amendment of any material term of any outstanding equity security of SLH or any
Subsidiary; (iii) any repurchase, redemption or other acquisition by SLH or any
Subsidiary of any outstanding shares of capital stock or other equity securities
of, or other ownership interests in, SLH or any Subsidiary, except as
contemplated by SLH Benefit Programs (as hereinafter defined); (iv) any material
change in any method of accounting or accounting practice, or in any tax method,
principle, election or practice by SLH or any Subsidiary; (v) if the covenants
and agreements with respect to the SLH and its Subsidiaries set forth in Section
4.2 had been applicable to SLH and its Subsidiaries during the period from
December 31, 1997 to the date of this Agreement, any action, transaction,
commitment or failure to act that would cause SLH or any such Subsidiary to fail
to comply with such covenants and agreements; or (vi) any other action,
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of business)
that has had, or may reasonably be expected to have, a SLH Material Adverse
Effect, except for general economic changes and changes that may affect the
industries of SLH or any of its Subsidiaries generally.
(h) No Undisclosed Material Liabilities. Except as fully reflected or
reserved against in the financial statements included in the SLH SEC Documents,
or disclosed in the footnotes thereto, or referred to in Schedule 3.2(h) or
elsewhere in the SLH Letter, as of the date hereof SLH and its Subsidiaries have
no liabilities, absolute or contingent other than liabilities which,
individually or in the aggregate, are reasonably expected not to have a SLH
Material Adverse Effect. Except as so reflected, reserved or disclosed, SLH and
its Subsidiaries have no commitments which, individually or in the aggregate,
are reasonably expected to have a SLH Material Adverse Effect.
(i) Material Contracts; No Defaults. All of the material contracts of
SLH and its Subsidiaries that are required to be described in the SLH SEC
Documents or to be filed as exhibits thereto, or that would be required to be
described or filed if a Form 10-K with respect to the SLH were required to be
filed on the date hereof, have been described or filed in the SLH SEC Documents
except as disclosed on Schedule 3.2(i) of the SLH Letter. Neither SLH nor any of
its Subsidiaries is in violation of or in default under (and no event has
occurred which, with notice or the lapse of time or both, would constitute a
default or violation) of any term, condition or provision of (i) in the
29
case of SLH and its Significant Subsidiaries, their respective charter and
bylaws or comparable organizational documents, (ii) except as disclosed in
Schedule 3.2(i) of the SLH Letter, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which SLH or any of its
Subsidiaries is now a party or by which SLH or any of its Subsidiaries or any of
their respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, statute, rule or regulation applicable to SLH or any of its
Subsidiaries, except in the case of (ii) and (iii) for defaults or violations
which in the aggregate would not have a SLH Material Adverse Effect. Schedule
3.2(i) of the SLH Letter lists each contract containing covenants which in any
way purport to limit the freedom of SLH or any of its Subsidiaries to engage in
any line of business or engage in business in any geographic area or to compete
with any person. Except as disclosed on Schedule 3.2(i) of the SLH Letter, to
the knowledge of SLH, none of the other parties to material contracts of SLH or
its Subsidiaries are in violation of or in default under (nor does there exist
any condition which upon the passage of time or the giving of notice would cause
such a violation of or default under) any contract, other than such violations
or defaults as would not have a SLH Material Adverse Effect.
(j) Compliance with Applicable Laws. SLH and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders, franchises and approvals of
all Governmental Entities necessary for the lawful conduct of their respective
businesses (the "SLH Permits"), except where the failure so to hold would not
have a SLH Material Adverse Effect. SLH and its Subsidiaries are in compliance
with the terms of the SLH Permits, except where the failure so to comply would
not have a SLH Material Adverse Effect. Except as disclosed or as set forth on
Schedule 3.2(j), 3.2(k), 3.2(l), 3.2(m), 3.2(n) or 3.2(p) of the SLH Letter the
businesses of SLH and its Subsidiaries are not being conducted in violation of
any law, ordinance, regulation, judgment or decree of any Governmental Entity,
except for possible violations which would not have a SLH Material Adverse
Effect. Except as set forth on Schedule 3.2(j) of the SLH Letter, as of the date
of this Agreement, no investigation or review by any Governmental Entity with
respect to SLH or any of its Subsidiaries is, to the best knowledge of SLH,
pending or threatened, other than those the outcome of which would not have a
SLH Material Adverse Effect.
(k) Litigation. Schedule 3.2(k) of the SLH Letter discloses all suits,
actions or proceedings pending, or, to, the best knowledge of SLH, threatened
against SLH or any Subsidiary of SLH ("SLH Litigation") on the date of this
Agreement and all judgments, decrees, injunctions, rules or orders of any
Governmental Entity or arbitrator outstanding against SLH or any Subsidiary of
SLH ("SLH Order") on the date of this Agreement, in each case in which the
amount claimed or that could be involved is in excess of $100,000. Except as
disclosed on Schedule 3.2(k) of the SLH Letter, there is no SLH Litigation that,
individually or in the aggregate with all other SLH Litigation, is reasonably
likely to have a SLH Material Adverse Effect, nor is there any SLH Order that,
individually or in the aggregate with all other SLH Litigation, is reasonably
likely to have a SLH Material Adverse Effect or a material adverse effect on
SLH's ability to perform its obligations hereunder or to consummate the
transactions contemplated by this Agreement.
30
(l) Taxes. Except as set forth on Schedule 3.2(1) of the SLH Letter and
except for exceptions to the following that would not, individually or in the
aggregate, have a SLH Material Adverse Effect:
(i) Each of SLH, each of its Subsidiaries and any affiliated,
consolidated, combined, unitary or similar group of which any such
corporation is or was a member has (A) duly and timely (taking into
account any extensions) filed all federal, state, local, foreign and
other Returns required to be filed or sent by or with respect to it in
respect of any Taxes, (B) duly paid or deposited on a timely basis all
Taxes (including estimated Taxes) that are due and payable (except for
audit adjustments not material in the aggregate or to the extent that
liability therefor is reserved for in SLH's most recent audited
financial statements) for which SLH or any of its Subsidiaries may be
liable, (C) established reserves that are adequate for the payment of
all Taxes not yet due and payable with respect to the results of
operations of SLH and its Subsidiaries through the date hereof, and (D)
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and has in
all material respects timely withheld from employee wages and paid over
to the proper governmental authorities all amounts required to be so
withheld and paid over.
(ii) Schedule 3.2(l) of the SLH Letter sets forth (i) the last
taxable period through which the United States federal income Tax
Returns of SLH and any of its Subsidiaries have been examined by the
IRS or otherwise closed and (ii) any affiliated, consolidated,
combined, unitary or similar group Return in which the SLH or any of
its Subsidiaries is or has been a member or is or has joined in the
filing. Except to the extent being contested in good faith, all
material deficiencies asserted as a result of such examinations and any
examination by any applicable federal, state, local, foreign or other
taxing authority have been paid, fully settled or adequately provided
for in SLH's most recent audited financial statements. Except as
adequately provided for in the financial statements included in the SLH
SEC Documents, no material tax audits or other administrative
proceedings or court proceedings are presently pending with regard to
any Taxes for which SLH or any of its Subsidiaries would be liable, and
no material deficiency for any such Taxes has been proposed, asserted
or assessed pursuant to such examination against SLH or any of its
Subsidiaries by any federal, state, local, foreign or other taxing
authority with respect to any period.
(iii) Neither SLH nor any of its Subsidiaries has executed or
entered into with the IRS or any taxing authority (i) any agreement or
other document extending or having the effect of extending the period
for assessments or collection of any Taxes for which SLH or any of its
Subsidiaries would be liable or (ii) a closing agreement pursuant to
Section 7121 of the Code, or any predecessor provision thereof or any
similar provision of federal, state, local, foreign or other tax law
that relates to the assets or operations of SLH or any of its
Subsidiaries.
31
(iv) Neither SLH nor any of its Subsidiaries is a party to an
agreement that provides for the payment of any amount that would
constitute a "parachute payment" within the meaning of Section 280G of
the Code.
(v) Neither SLH nor any of its Subsidiaries has made an
election under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned
by SLH or any of its Subsidiaries.
(vi) Neither SLH nor any of its Subsidiaries is a party to, is
bound by or has any obligation under any tax sharing or allocation
agreement or similar agreement or arrangement.
(m) Pension and Benefit Plans; ERISA.
(i) SLH has made available to Syntroleum true, correct, and
complete copies of each of the following which is sponsored, maintained
or contributed to by SLH or any of its Subsidiaries for the benefit of
the employees of SLH or such Subsidiary:
(1) each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, including, but not limited
to, employee benefit plans, such as foreign plans, which are
not subject to the provisions of ERISA ("SLH Plans"); and
(2) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or arrangement,
incentive award plan or arrangement, vacation policy,
severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding
which is not described in Section 3.2(m)(i)(l) ("SLH Benefit
Programs").
(ii) Except as disclosed in Schedule 3.2(m)(ii) of the SLH
Letter:
(1) SLH and its Subsidiaries do not contribute to or
have an obligation to contribute to, and have not at any time
within six years prior to the Effective Time contributed to or
had an obligation to contribute to, a multiemployer plan
within the meaning of Section 3(37) of ERISA;
(2) SLH and its Subsidiaries have substantially
performed all material obligations, whether arising by
operation of law or by contract, required to be performed by
them in connection with the SLH Plans and the SLH Benefit
Programs, and to the knowledge of SLH there have been no
material defaults or violations by any other party to the SLH
Plans or SLH Benefit Programs;
32
(3) All reports and disclosures relating to the SLH
Plans required to be filed with or furnished to governmental
agencies, SLH Plan participants or beneficiaries have been
filed or furnished substantially in accordance with applicable
law in a timely manner;
(4) Each SLH Plan intended to be qualified under
Section 401 of the Code satisfies the requirements of such
Section and has received a favorable determination letter from
the Internal Revenue Service regarding such qualified status
and has not, since receipt of the most recent favorable
determination letter, been amended or, to the knowledge of
SLH, operated in a way which would adversely affect such
qualified status. As to any SLH Plan intended to be qualified
under Section 401 of the Code, there has been no termination
or partial termination of the SLH Plan within the meaning of
Section 411(d)(3) of the Code;
(5) There are no actions, suits or claims pending
(other than routine claims for benefits) or, to the knowledge
of SLH, threatened against, or with respect to, any of the SLH
Plans or SLH Benefit Programs or their assets. To the
knowledge of SLH, there is no matter pending (other than
routine qualification determination filings) with respect to
any of the SLH Plans before the IRS, the United States
Department of Labor or the PBGC;
(6) As to any SLH Plan subject to Title IV of ERISA,
there has been no event or condition which presents the
material risk of a SLH Plan termination, no accumulated
funding deficiency, whether or not waived, within the meaning
of Section 302 of ERISA or Section 412 of the Code has been
incurred, no reportable event within the meaning of Section
4043 of ERISA (for which the disclosure requirements of
Regulation 2615.3 promulgated by the PBGC have not been
waived) has occurred, no notice of intent to terminate the SLH
Plain has been given under Section 4041(c) of ERISA, no
proceeding has been instituted under Section 4042 of ERISA to
terminate the SLH Plan, no liability to the PBGC has been
incurred;
(7) No act, omission or transaction has occurred
which would result in imposition on SLH or any of its
Subsidiaries of (A) liability for a breach of fiduciary duty
under Section 409 of ERISA, (B) a civil penalty assessed
pursuant to subsections (c), (i) or (1) of Section 502 of
ERISA or (C) a tax imposed pursuant to Chapter 43 of Subtitle
D of the Code;
(8) With respect to any employee benefit plan, within
the meaning of Section 3(3) of ERISA, which is not a SLH Plan
but which is sponsored, maintained or contributed to, or has
been sponsored, maintained or contributed to within six years
prior to the Effective Time, by any corporation, trade,
business or entity under common control with SLH, within the
meaning of Section 414(b), (c) or (m) of the Code or Section
4001 of ERISA ("SLH Commonly Controlled Entity"), (A) no
33
withdrawal liability, within the meaning of Section 4201 of
ERISA, has been incurred, which withdrawal liability has not
been satisfied, (B) no liability to the PBGC has been incurred
by any SLH Commonly Controlled Entity, which liability has not
been satisfied, (C) no accumulated funding deficiency, whether
or not waived, within the meaning of Section 302 of ERISA or
Section 412 of the Code has been incurred, and (D) all
contributions (including installments) to such plan required
by Section 302 of ERISA and Section 412 of the Code have been
timely made; and
(9) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will
not (A) require SLH or any of its Subsidiaries to make a
larger contribution to, or pay greater benefits under, any SLH
Plan or SLH Benefit Program than it otherwise would or (B)
create or give rise to any additional vested rights or service
credits under any SLH Plan or SLH Benefit Program.
(iii) Except as disclosed on Schedule 3.2(m)(iii) of the SLH
Letter, there are no severance agreements or employment agreements
between SLH or any of its Subsidiaries and any employee of SLH or such
Subsidiary. True and correct copies of all such severance and
employment agreements have been provided to Syntroleum. Except as
disclosed on Schedule 3.2(m)(iii) of the SLH Letter, (A) neither SLH
nor any of its Subsidiaries has any consulting agreement or arrangement
with any person involving annual compensation in excess of $100,000,
except as are terminable without penalty upon one month's notice or
less, and (B) no stock or other security issued by SLH or any of its
Subsidiaries forms or has formed a material part of the assets of any
SLH Plan or SLH Benefit Program.
(n) Labor Matters.
(i) Except as set forth in Schedule 3.2(n)(i) of the SLH
Letter, as of the date of this Agreement, (1) no employees of SLH or
any of its Subsidiaries are represented by any labor organization; (2)
no labor organization or group of employees of SLH or any of its
Subsidiaries has made a pending demand for recognition or
certification, and there are no representation or certification
proceedings or petitions seeking a representation proceeding presently
pending or threatened in writing to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority; and (3) to the knowledge of SLH, there are no organizing
activities involving SLH or any of its Subsidiaries pending with any
labor organization or group of employees of SLH or any of its
Subsidiaries.
(ii) Except as set forth on Schedule 3.2(n)(ii) of the SLH
Letter, SLH and each of its Subsidiaries is in compliance with all laws
and orders relating to the employment of labor, including all such laws
and orders relating to wages, hours, collective bargaining,
discrimination, civil rights, safety and health workers' compensation
and the collection and payment of withholding and/or Social Security
Taxes and similar Taxes, except where the failure to comply would not
have a SLH Material Adverse Effect.
34
(o) Intangible Property. SLH and its Subsidiaries possess or have
adequate rights to use all material trademarks, trade names, patents, service
marks, brand marks, brand names, computer programs, database, industrial designs
and copyrights necessary for the operation of the businesses of each of SLH and
its Subsidiaries (collectively, the "SLH Intangible Property"), except where the
failure to possess or have adequate rights to use such properties would not
reasonably be expected to have a SLH Material Adverse Effect. Schedule 3.2(o)
lists all patents and trademarks or licensing agreements with respect to any
patent or trademark, which in each case is applicable to a material portion of
the business of SLH or its Subsidiaries and the failure to possess would not
reasonably be expected to have a SLH Material Adverse Effect. To the knowledge
of SLH, except as set forth on Schedule 3.2(o) of the SLH Letter, all of the SLH
Intangible Property is owned by SLH or its Subsidiaries free and clear of any
and all liens, claims or encumbrances, except those that are not reasonably
likely to have a SLH Material Adverse Effect, and neither SLH nor any such
Subsidiary has forfeited or otherwise relinquished any SLH Intangible Property
which forfeiture would result in a SLH Material Adverse Effect. To the knowledge
of SLH, the use of SLH Intangible Property by SLH or its Subsidiaries does not,
in any material respect, conflict with, infringe upon, violate or interfere with
or constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, trademark, trade
name, patent, service xxxx, brand xxxx, brand name, computer program, database,
industrial design, copyright or any pending application therefor of any other
person and there have been no claims made and neither SLH nor any of its
Subsidiaries has received any notice of any claim or otherwise knows that any of
SLH Intangible Property is invalid or conflicts with the asserted rights of any
other person or has not been used or enforced or has been failed to be used or
enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any of SLH Intangible Property, except for any such
conflict, infringement, violation, interference, claim, invalidity, abandonment,
cancellation or unenforceability that would not reasonably be expected to have a
SLH Material Adverse Effect.
(p) Environmental Matters.
(i) Except as disclosed on Schedule 3.2(p) of the SLH Letter,
the operations of SLH and its Subsidiaries have been and are currently
in compliance with all Environmental Laws, except where the failure to
so comply would not reasonably be expected to have a SLH Material
Adverse Effect;
(ii) Except as disclosed on Schedule 3.2(p) of the SLH Letter,
SLH and its Subsidiaries have obtained and maintained all permits
required under applicable Environmental Laws for the continued
operations of their respective businesses, except such permits the lack
of which would not reasonably be expected to lead to a SLH Material
Adverse Effect;
(iii) Except as disclosed on Schedule 3.2(p) of the SLH
Letter, as of the date hereof SLH and its Subsidiaries are not subject
to any material (individually or in the aggregate) outstanding written
orders or material contracts with any Governmental Entity
35
or other person respecting (A) Environmental Laws, (B) Remedial Action
or (C) any Release or threatened Release of a Hazardous Material;
(iv) Except as disclosed on Schedule 3.2(p) of the SLH Letter,
SLH and its Subsidiaries have not received any written communication
alleging, with respect to any such party, and has no knowledge of, or
reasonable reason to suspect the existence of, the violation of or
liability under any Environmental Law, which violation or liability
would reasonably be expected to have a SLH Material Adverse Effect;
(v) Except as disclosed on Schedule 3.2(p) of the SLH Letter,
neither SLH nor any of its Subsidiaries has any contingent liability in
connection with any Release of any Hazardous Material including,
without limitation, in connection with the exposure of any person or
property to Hazardous Material that would reasonably be expected to
lead to a SLH Material Adverse Effect;
(vi) Except as disclosed on Schedule 3.2(p) of the SLH Letter,
the operations of SLH or its Subsidiaries involving the generation,
transportation, treatment, storage or disposal of hazardous waste, as
defined and regulated under 40 C.F.R. Parts 260-270 (in effect as of
the date of this Agreement) or any state equivalent, or any other
Hazardous Material are in compliance with applicable Environmental
Laws, except where the failure to so comply would not reasonably be
expected to have a SLH Material Adverse Effect; and
(vii) Except as disclosed on Schedule 3.2(p) of the SLH
Letter, to the knowledge of SLH as of the date hereof, there is not now
on or in any property of SLH or its Subsidiaries any of the following:
(A) any underground storage tanks or surface impoundments, (B) any
asbestos-containing materials, or (C) any polychlorinated biphenyls,
any of which ((A), (B) or (C) preceding) could reasonably be expected
to have a SLH Material Adverse Effect. None of the properties owned or
operated by SLH are restricted as to use or as to transfer of title, or
the subject of any special recorded notice, as a result of the
existence of Hazardous Substances thereon.
(viii) SLH has made available to Syntroleum for review all
written reports of environmental audits and assessments prepared for
SLH or any of its Subsidiaries within the last three years by third
party consultants or internal environmental, safety or health personnel
which are in the possession or control of SLH and which relate to the
assets or operations of SLH or any of its Subsidiaries.
(q) Opinion of Financial Advisor. SLH has received the opinion of
Xxxxxxx Xxxxx Xxxxxx (a copy of which has been delivered to Syntroleum) to the
effect that, as of the date hereof, the Exchange Ratio is fair to SLH from a
financial point of view.
36
(r) Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of SLH Common Stock is the only vote of the holders of
any class or series of SLH capital stock necessary to approve this Agreement and
the Merger and the transactions contemplated hereby.
(s) Insurance. SLH has delivered to Syntroleum an insurance schedule of
SLH's and each of its Subsidiaries' directors' and officers' liability
insurance, primary and excess casualty insurance policies, providing coverage
for bodily injury and property damage to third parties, including products
liability and completed operations coverage, and worker's compensation, in
effect as of the date hereof. SLH maintains insurance coverage reasonably
adequate for the operation of the business of SLH and each of its Subsidiaries
(taking into account the cost and availability of such insurance), and the
transactions contemplated hereby will not materially adversely affect such
coverage.
(t) Brokers. Except as disclosed on Schedule 3.2(t) of the SLH Letter,
no broker, investment banker, or other person is entitled to any broker's,
finder's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
SLH.
(u) Tax Matters. As of the date hereof, the representations which SLH
is to make pursuant to Exhibit C attached hereto (other than any representation
which refers to the Proxy Statement) are true and correct, assuming for purposes
of this representation and warranty that the Merger referred to in such Exhibit
C had been consummated on the date hereof. In addition, the representations
which are made by SLH in the form of Exhibit C hereof (with such variations
therein as may be made) in connection with the rendering of the tax opinion for
which provision is made in Section 6.1(h) hereof will be true and correct at the
time that the Merger occurs. Such representations are for the benefit of the
holders of Syntroleum Common Stock.
(v) Title. Except as disclosed in the SLH Financial Statements or on
Schedule 3.2(v) of the SLH Letter, the SLH and each of its Subsidiaries have
good and marketable title to all real property and good title to all personal
property owned by them, in each case free and clear of all liens, pledges or
encumbrances securing money borrowed, the deferred purchase price of property in
excess of $300,000 or capital leases and free and clear of all other liens,
pledges, encumbrances or defects that could affect the value or use thereof
except for any such other liens, pledges, encumbrances or defects that would not
have a SLH Material Adverse Effect.
(w) Books and Records. The SLH and its Subsidiaries (i) make and keep
accurate books and records and (ii) maintain internal accounting controls which
provide reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as necessary to
permit preparation of their financial statements and to maintain accountability
for their assets, (C) access to their assets is permitted only in accordance
with management's authorization and (D) the reported accountability for their
assets is compared with existing assets at reasonable intervals.
37
(x) Certain Payments. Neither the SLH nor any of its Subsidiaries, nor
any director, officer, agent, employee or other person associated with or acting
on behalf of the SLH or any of its Subsidiaries, has used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic governmental official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; nor made any illegal bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
(y) Transactions with Related Parties. Except as set forth in Schedule
3.2(y) of the SLH Letter or in the SLH SEC Documents, there are no agreements,
contracts or other arrangements between (i) SLH or any of its Subsidiaries, on
the one hand, and (ii) any Related Person of SLH, on the other hand. Except as
set forth in Schedule 3.2(y) of the SLH Letter, after the Closing Date no
Related Person of SLH and no present officer or director of any Related Person
of SLH has any interest in any property (real or personal, tangible or
intangible) or contract used in or pertaining to the business of the SLH and its
Subsidiaries (or the Surviving Corporation and its Subsidiaries) and no Related
Person of SLH has any direct or indirect ownership interest (excluding
immaterial passive investments) in any person (other than through SLH or any of
its Subsidiaries) with which SLH or any of its Subsidiaries competes in any
material respect or has a material business relationship. Other than those
services described in the SLH SEC Documents, Schedule 3.2(y) of the SLH Letter
sets forth as of the date of this Agreement a description of all services
provided by any Related Person of SLH to SLH and any of its Subsidiaries.
(z) State Takeover Laws and SLH Rights Plan. SLH has taken all
necessary action to exempt the transactions contemplated by this Agreement from
the provisions of Section 17.12.101 of the Kansas Code and Sections 1286 through
1298 of the Kansas Code. The transactions contemplated by this Agreement will
not cause the SLH Stock Purchase Rights to become exercisable.
(aa) Year 2000. SLH has taken all necessary action to enable its
computer software to process data attributable to the year 2000 and thereafter.
SLH's operating and financial systems will be able to process such data by the
year 2000.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Conduct of Business by Syntroleum Pending the Merger. During the
period from the date of this Agreement and continuing until the Effective Time,
Syntroleum agrees as to itself and its Subsidiaries that (except as expressly
contemplated or permitted by this Agreement, or to the extent that SLH shall
otherwise consent in writing):
38
(a) Ordinary Course. Except as provided on Schedule 4.1(a) of
Syntroleum Letter, each of Syntroleum and its Subsidiaries shall carry on its
businesses only in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted and shall use all commercially reasonable
efforts to preserve intact its present business organizations, keep available
the services of its current officers and employees, and endeavor to preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in
any material respect at the Effective Time.
(b) Dividends; Changes in Stock. Except as provided on Schedule 4.1(b)
of Syntroleum Letter, Syntroleum shall not and it shall not permit any of its
Subsidiaries to: (i) declare or pay any dividends on or make other distributions
in respect of any of its capital stock, except for the declaration and payment
of dividends from a Subsidiary of Syntroleum to Syntroleum or another Subsidiary
of Syntroleum and except for cash dividends or distributions paid on or with
respect to the capital stock of a Subsidiary of Syntroleum; (ii) split, combine
or reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; or (iii) repurchase, redeem or otherwise
acquire, or permit any of its Subsidiaries to purchase, redeem or otherwise
acquire, any shares of its capital stock, except as required by the terms of its
securities outstanding on the date hereof, as contemplated by any existing
employee benefit plan or program or pursuant to the terms of any existing
agreements with employees of Syntroleum and its Subsidiaries upon the
termination of employment of any such employee.
(c) Issuance of Securities. Except as provided on Schedule 4.1(c) of
Syntroleum Letter, Syntroleum shall not and it shall not permit any of its
Subsidiaries to, issue, deliver or sell, or authorize or propose to issue,
deliver or sell, any shares of its capital stock of any class, any Voting Debt
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, Voting Debt or convertible securities, other than: (i)
the issuance of Syntroleum Common Stock upon the exercise of stock options
granted under Syntroleum Stock Option Plans that are outstanding on the date
hereof, or in satisfaction of stock grants or stock based awards made prior to
the date hereof pursuant to Syntroleum Stock Option Plans; and (ii) issuances by
a wholly owned Subsidiary of its capital stock to its parent.
(d) Governing Documents. Except as contemplated hereby or in
connection herewith, Syntroleum shall not amend or propose to amend its
Certificate of Incorporation or Bylaws.
(e) No Acquisitions. Other than acquisitions listed on Schedule 4.1(e)
of Syntroleum Letter, Syntroleum shall not and it shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merging or, consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof.
(f) No Dispositions. Other than: (i) dispositions or proposed
dispositions listed on Schedule 4.1(f) of Syntroleum Letter; (ii) as may be
necessary or required by law to consummate
39
the transactions contemplated hereby; or (iii) dispositions of other assets that
are not material, individually or in the aggregate, to Syntroleum and its
Subsidiaries taken as a whole, Syntroleum shall not and it shall not permit any
of its Subsidiaries to sell, lease, encumber or otherwise dispose of, or agree
to sell, lease (whether such lease is an operating or capital lease), encumber
or otherwise dispose of, any of its assets. Notwithstanding the foregoing, none
of Syntroleum nor its Subsidiaries shall sell, lease, encumber or otherwise
dispose of, or agree to dispose of, any of its assets to any Related Person
other than in the ordinary course of business on an arms length basis.
(g) No Dissolution, Etc. Except as otherwise permitted or contemplated
by this Agreement, Syntroleum shall not authorize, recommend, propose or
announce an intention to adopt a plan of complete or partial liquidation or
dissolution of Syntroleum or any of its Significant Subsidiaries.
(h) Certain Employee Matters. Except as set forth on Schedule 4.1(h) of
Syntroleum Letter, Syntroleum shall not and it shall not permit any of its
Subsidiaries to: (i) grant any increases in the compensation of any of its
directors, officers or employees, except increases in the ordinary course of
business and in accordance with past practice; (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit not required or
contemplated by any of the existing Syntroleum Benefit Programs or Syntroleum
Plans as in effect on the date hereof to any such director, officer or employee,
whether past or present; (iii) enter into any new, or amend any existing,
employment or severance or termination agreement with any such director, officer
or key employee; or (iv) become obligated under any new Syntroleum Benefit
Program or Syntroleum Plan, which was not in existence or approved by the Board
of Directors of Syntroleum prior to or on the date hereof, or amend any such
plan or arrangement in existence on the date hereof if such amendment would have
the effect of materially enhancing any benefits thereunder.
(i) Indebtedness; Leases; Capital Expenditures. Except as set forth on
Schedule 4.1(i) of Syntroleum Letter, Syntroleum shall not, nor shall Syntroleum
permit any of its Subsidiaries to, (i) incur any indebtedness for borrowed money
or guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of such party or any of its
Subsidiaries or guarantee any debt securities of others, (ii) except in the
ordinary course of business, enter into any lease (whether such lease is an
operating or capital lease) or create any mortgages, liens, security interests
or other encumbrances on the property of Syntroleum or any of its Subsidiaries
in connection with any indebtedness thereof, except for those securing purchase
money indebtedness or (iii) commit to aggregate capital expenditures in excess
of $100,000 outside the capital budget, as approved by Syntroleum prior to the
date hereof and set forth on Schedule 4.1(i) of Syntroleum Letter.
(j) No Solicitation. From and after the date hereof, Syntroleum will
not, and will not authorize or permit any of its officers, directors, employees,
agents and other representatives or those of any of its Subsidiaries
(collectively, "Syntroleum Representatives") to, directly or indirectly, solicit
or initiate any prospective buyer or the making of any proposal that
constitutes, or may reasonably be expected to lead to, a Syntroleum Acquisition
Proposal (as defined herein) from any
40
person; provided, however, that, notwithstanding any other provision of this
Agreement, (i) Syntroleum may engage in discussions or negotiations with a third
party who (without any solicitation or initiation, directly or indirectly, by or
with Syntroleum or any Syntroleum Representatives after the date of this
Agreement) seeks to initiate such discussions or negotiations and may furnish
such third party information concerning Syntroleum and its business, properties
and assets, (ii) Syntroleum's Board of Directors may take and disclose to
Syntroleum's stockholders a position contemplated by Rule 14e-2(a) promulgated
under the Exchange Act and (iii) following receipt of a Syntroleum Acquisition
Proposal that is financially superior to the Merger and reasonably capable of
being financed (as determined in each case in good faith by Syntroleum's Board
of Directors after consultation with Syntroleum's financial advisors), the Board
of Directors of Syntroleum may withdraw, modify or not make its recommendation
referred to in Section 5.5 or terminate this Agreement in accordance with
Section 7.1(b), but in each case referred to in the foregoing clauses (i)
through (iii) only to the extent that the Board of Directors of Syntroleum shall
conclude in good faith that such action is necessary in order for the Board of
Directors of Syntroleum to act in a manner that is consistent with its fiduciary
obligations under applicable law. Syntroleum shall immediately cease and cause
to be terminated any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any parties conducted heretofore by Syntroleum or
any Syntroleum Representatives with respect to any Syntroleum Acquisition
Proposal existing on the date hereof. Syntroleum will promptly notify SLH of any
such requests for such information or the receipt of any Syntroleum Acquisition
Proposal, including the identity of the person or group engaging in such
discussions or negotiations, requesting such information or making such
Syntroleum Acquisition Proposal, and (unless the Board of Directors of
Syntroleum concludes such disclosure is inconsistent with its fiduciary
obligations under applicable law) the material terms and conditions of any
Syntroleum Acquisition Proposal. As used in this Agreement, "Syntroleum
Acquisition Proposal" shall mean any proposal or offer, other than a proposal or
offer by SLH or any of its affiliates, for a tender or exchange offer, a merger,
consolidation or other business combination involving Syntroleum or any
Subsidiary of Syntroleum or any proposal to acquire in any manner a substantial
equity interest in, or substantially all of the assets of, Syntroleum or any of
its Subsidiaries.
4.2 Conduct of Business by SLH Pending the Merger. During the period
from the date of this Agreement and continuing until the Effective Time, SLH
agrees as to itself and its Subsidiaries that (except as expressly contemplated
or permitted by this Agreement, or to the extent that Syntroleum shall otherwise
consent in writing):
(a) Ordinary Course. Except as provided on Schedule 4.2(a) of the SLH
Letter, except as contemplated by Section 5.16 hereof and except for the
execution prior to the Closing Date of a consulting and sublease agreement
between SLH and Lab Holdings, Inc. in form and substance reasonably satisfactory
to Syntroleum, each of SLH and its Subsidiaries shall carry on its businesses
only in the usual, regular and ordinary course in substantially the same manner
as heretofore conducted and shall use all commercially reasonable efforts to
preserve intact its present business organizations, keep available the services
of its current officers and employees, and endeavor to preserve its
relationships with customers, suppliers and others having business dealings with
it to
41
the end that its goodwill and ongoing business shall not be impaired in any
material respect at the Effective Time.
(b) Dividends; Changes in Stock. Except as provided on Schedule 4.2(b)
of the SLH Letter, SLH shall not and it shall not permit any of its Subsidiaries
to: (i) declare or pay any dividends on or make other distributions in respect
of any of its capital stock, except for the declaration and payment of dividends
from a Subsidiary of SLH to SLH or another Subsidiary of SLH and except for cash
dividends or distributions paid on or with respect to the capital stock of a
Subsidiary of SLH; (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock; or (iii)
repurchase, redeem or otherwise acquire, or permit any of its Subsidiaries to
purchase, redeem or otherwise acquire, any shares of its capital stock, except
as required by the terms of its securities outstanding on the date hereof, as
contemplated by any existing employee benefit plan or program or pursuant to the
terms of any existing agreements with employees of SLH and its Subsidiaries upon
the termination of employment of any such employee.
(c) Issuance of Securities. Except as provided on Schedule 4.2(c) of
the SLH Letter, SLH shall not and it shall not permit any of its Subsidiaries
to, issue, deliver or sell, or authorize or propose to issue, deliver or sell,
any shares of its capital stock of any class, any Voting Debt or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, Voting Debt or convertible securities, other than: (i) the issuance of
SLH Common Stock upon the exercise of stock options granted under SLH Stock
Option Plans that are outstanding on the date hereof, or in satisfaction of
stock grants or stock based awards made prior to the date hereof pursuant to SLH
Stock Option Plans; and (ii) issuances by a wholly owned Subsidiary of its
capital stock to its parent.
(d) Governing Documents. Except as contemplated hereby or in connection
herewith, SLH shall not amend or propose to amend its Articles of Incorporation
or Bylaws; provided that prior to the Effective Time, SLH shall increase the
number of authorized shares of SLH Junior Preferred Stock to 250,000.
(e) No Acquisitions. Other than acquisitions listed on Schedule 4.2(e)
of the SLH Letter, SLH shall not and it shall not permit any of its Subsidiaries
to, acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof.
(f) No Dispositions. Other than: (i) dispositions of real estate to
unaffiliated parties or dispositions of interests in entities, substantially all
of the assets of which consist of real estate, to unaffiliated parties or
proposed dispositions listed on Schedule 4.2(f) of the SLH Letter; (ii) as may
be necessary or required by law to consummate the transactions contemplated
hereby; or (iii) dispositions of other assets that are not material,
individually or in the aggregate, to SLH and its Subsidiaries taken as a whole,
SLH shall not and it shall not permit any of its Subsidiaries to sell, lease,
encumber or otherwise dispose of, or agree to sell, lease (whether such lease is
an operating
42
or capital lease), encumber or otherwise dispose of, any of its assets.
Notwithstanding the foregoing, none of SLH nor its Subsidiaries shall sell,
lease, encumber or otherwise dispose of, or agree to dispose of, (A) any of its
assets to any Related Person other than in the ordinary course of business on an
arms length basis or (B) any shares of Syntroleum Common Stock.
(g) No Dissolution, Etc. Except as otherwise permitted or contemplated
by this Agreement, SLH shall not authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation or dissolution of
SLH or any of its Significant Subsidiaries.
(h) Certain Employee Matters. Except as set forth on Schedule 4.2(h) of
the SLH Letter, SLH shall not and it shall not permit any of its Subsidiaries
to: (i) grant any increases in the compensation of any of its directors,
officers or employees, except increases in the ordinary course of business and
in accordance with past practice; (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit not required or contemplated by
any of the existing SLH Benefit Programs or SLH Plans as in effect on the date
hereof to any such director, officer or employee, whether past or present; (iii)
enter into any new, or amend any existing, employment or severance or
termination agreement with any such director, officer or key employee
(including, without limitation, with respect to the terminations contemplated by
Section 5.16 hereof); or (iv) become obligated under any new SLH Benefit Program
or SLH Plan, which was not in existence or approved by the Board of Directors of
SLH prior to or on the date hereof, or amend any such plan or arrangement in
existence on the date hereof if such amendment would have the effect of
materially enhancing any benefits thereunder.
(i) Indebtedness; Leases; Capital Expenditures. Except as set forth on
Schedule 4.2(i) of the SLH Letter, SLH shall not, nor shall SLH permit any of
its Subsidiaries to, (i) incur any indebtedness for borrowed money (except for
working capital under SLH's existing credit facilities, and refinancings of
existing debt that permit prepayment of such debt without penalty) or guarantee
any such indebtedness or issue or sell any debt securities or warrants or rights
to acquire any debt securities of such party or any of its Subsidiaries or
guarantee any debt securities of others, (ii) except in the ordinary course of
business, enter into any lease (whether such lease is an operating or capital
lease) or create any mortgages, liens, security interests or other encumbrances
on the property of SLH or any of its Subsidiaries in connection with any
indebtedness thereof, except for those securing purchase money indebtedness or
(iii) commit to aggregate capital expenditures in excess of $100,000 outside the
capital budget, as approved by SLH prior to the date hereof and set forth on
Schedule 4.2(i) of the SLH Letter.
(j) No Solicitation. From and after the date hereof, SLH will not, and
will not authorize or permit any of its officers, directors, employees, agents
and other representatives or those of any of its Subsidiaries (collectively,
"SLH Representatives") to, directly or indirectly, solicit or initiate any
prospective buyer or the making of any proposal that constitutes, or may
reasonably be expected to lead to, a SLH Acquisition Proposal (as defined
herein) from any person; provided, however, that, notwithstanding any other
provision of this Agreement, (i) SLH may engage in discussions or negotiations
with a third party who (without any solicitation or initiation, directly or
indirectly, by
43
or with SLH or any SLH Representatives after the date of this Agreement) seeks
to initiate such discussions or negotiations and may furnish such third party
information concerning SLH and its business, properties and assets, (ii) SLH's
Board of Directors may take and disclose to SLH's stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act and (iii)
following receipt of a SLH Acquisition Proposal that is financially superior to
the Merger and reasonably capable of being financed (as determined in each case
in good faith by SLH's Board of Directors after consultation with SLH's
financial advisors), the Board of Directors of SLH may withdraw, modify or not
make its recommendation referred to in Section 5.5 or terminate this Agreement
in accordance with Section 7.1(b), but in each case referred to in the foregoing
clauses (i) through (iii) only to the extent that the Board of Directors of SLH
shall conclude in good faith that such action is necessary in order for the
Board of Directors of SLH to act in a manner that is consistent with its
fiduciary obligations under applicable law. SLH shall immediately cease and
cause to be terminated any existing solicitation, initiation, encouragement,
activity, discussion or negotiation with any parties conducted heretofore by SLH
or any SLH representatives with respect to any SLH Acquisition Proposal existing
on the date hereof. SLH will promptly notify Syntroleum of any such requests for
such information or the receipt of any SLH Acquisition Proposal, including the
identity of the person or group engaging in such discussions or negotiations,
requesting such information or making such SLH Acquisition Proposal, and (unless
the Board of Directors of SLH concludes such disclosure is inconsistent with its
fiduciary obligations under applicable law) the material terms and conditions of
any SLH Acquisition Proposal. As used in this Agreement, "SLH Acquisition
Proposal" shall mean any proposal or offer, other than a proposal or offer by
Syntroleum or any of its affiliates, for a tender or exchange offer, a merger,
consolidation or other business combination involving SLH or any Subsidiary of
SLH or any proposal to acquire in any manner a substantial equity interest in,
or substantially all of the assets of, SLH or any of its Subsidiaries.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Proxy Statement. SLH shall promptly
prepare and file with the SEC the Proxy Statement and the S-4, in which the
Proxy Statement will be included as a prospectus. SLH shall use its commercially
reasonable efforts to have the S-4 declared effective under the Securities Act
as promptly as practicable after such filing. SLH shall use its commercially
reasonable efforts to cause the Proxy Statement to be mailed to stockholders of
SLH at the earliest practicable date. Syntroleum shall use its commercially
reasonable efforts to cause the Proxy Statement to be mailed to stockholders of
Syntroleum at the earliest practicable date. SLH shall use its commercially
reasonable efforts to obtain all necessary state securities laws or "blue sky"
permits, approvals and registrations in connection with the issuance of SLH
Common Stock in the Merger and upon the exercise of Syntroleum Stock Options (as
defined herein). Syntroleum shall furnish all information concerning Syntroleum
and the holders of Syntroleum Common Stock, including financial statements
required by Form S-4 and the proxy rules under the Exchange Act as may be
reasonably requested in connection with obtaining such permits, approvals and
registrations.
44
5.2 Letter of Syntroleum's Accountants. Syntroleum shall use its
commercially reasonable efforts to cause to be delivered to SLH a letter of
Xxxxxx Xxxxxxxx LLP, Syntroleum's independent public accountants, dated a date
within two business days before the date on which the S-4 shall become effective
and addressed to SLH and the individuals listed on Exhibit B, in form and
substance reasonably satisfactory to SLH and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the S-4.
5.3 Letter of SLH's Accountants. SLH shall use its commercially
reasonable efforts to cause a letter of KPMG Peat Marwick LLP, SLH's independent
public accountants, dated a date within two business days before the date on
which the S-4 shall become effective and addressed to SLH and the individuals
listed on Exhibit B, in form and substance reasonably satisfactory to SLH and
Syntroleum and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the S-4 to be delivered and addressed to such persons and entities as
is customary for similar letters.
5.4 Access to Information. Upon reasonable notice, Syntroleum and SLH
shall each (and shall cause each of their respective Subsidiaries to) afford to
the officers, employees, accountants, counsel and other representatives of the
other, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, each of Syntroleum and SLH shall (and shall cause each
of their respective Subsidiaries to) furnish promptly to the other (a) a copy of
each quarterly, annual or current report on Form 10-Q, 10-K or 8-K, schedule,
registration statement and other document filed or received by it during such
period pursuant to SEC requirements and (b) all other information concerning its
business, properties and personnel as such other party may reasonably request,
excluding, however, information covered by confidentiality agreements with third
parties. Each of Syntroleum and SLH agrees that it will not, and will cause its
respective representatives not to, use any information obtained pursuant to this
Section 5.4 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. The Confidentiality Agreements dated as of March
13, 1998 between SLH and Syntroleum (the "Confidentiality Agreements") shall
apply with respect to information furnished thereunder or hereunder and any
other activities contemplated thereby.
5.5 Stockholders Meetings. Syntroleum and SLH shall each call a meeting
of its stockholders (respectively, the "Syntroleum Stockholder Meeting" and the
"SLH Stockholder Meeting" and, collectively, the "Stockholder Meetings") to be
held as promptly as practicable after the date hereof for the purpose of voting
upon this Agreement and the Merger. Subject only to the proviso of the first
sentence of Section 4.1(j), Syntroleum will, through its Board of Directors,
recommend to its stockholders approval of such matters and not rescind such
recommendation and shall use its commercially reasonable efforts to obtain
approval and adoption of this Agreement and the Merger by its stockholders.
Subject only to the proviso of the first sentence of Section 4.2(j), SLH will,
through its Board of Directors, recommend to its stockholders approval of such
matters and not rescind such recommendation and shall use its commercially
reasonable efforts to obtain approval and adoption of this Agreement and the
Merger by its stockholders. Syntroleum and SLH
45
shall coordinate and cooperate with respect to the timing of such meetings and
shall use their commercially reasonable efforts to hold such meetings on the
same day.
5.6 Legal Conditions to Merger. Syntroleum and SLH will take all
reasonable actions necessary to comply promptly with all legal requirements that
may be imposed on such party with respect to the Merger (including, without
limitation, furnishing all information in connection with approvals of or
filings with any Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with the
Merger. Syntroleum and SLH will, and will cause its Subsidiaries to, take all
actions necessary to obtain (and will cooperate with each other in obtaining)
any consent, acquiescence, authorization, order or approval of, or any exemption
or nonopposition by, any Governmental Entity, court or other person or entity
required to be obtained or made by Syntroleum, SLH or any of their Subsidiaries
in connection with the Merger or the taking of any action contemplated thereby
or by this Agreement.
5.7 Agreements of Others. Prior to the Effective Time, Syntroleum shall
cause to be prepared and delivered to SLH a list identifying all persons who, at
the time of Syntroleum Stockholder Meeting may be deemed to be "affiliates" of
Syntroleum as that term is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act (the "Affiliates"). Syntroleum shall use its commercially
reasonable efforts to cause each person who is identified as an Affiliate in
such list to deliver to SLH, at or prior to the Effective Time, a written
agreement, in a form mutually agreeable to Syntroleum and SLH whereby each such
person acknowledges that such person is subject to the provisions of Rule 145(d)
promulgated under the Securities Act.
5.8 Listing. SLH shall use its commercially reasonable efforts to cause
the shares of SLH Common Stock to be issued in the Merger, the shares of SLH
Common Stock issuable upon exercise of Syntroleum Stock Options and issuable
under Syntroleum Stock Option Plans to be approved for trading on the Nasdaq
Stock Market, subject to official notice of issuance, prior to the Closing Date.
5.9 Board of Directors and Officers. SLH shall take all necessary
action so that as of the Effective Time the directors and officers of SLH shall
only be those individuals identified as directors and officers, on Exhibit B
hereto, except to the extent any such individual is unwilling or unable to serve
in such capacity. If prior to the Effective Time an individual identified on
Exhibit B hereto as a director or officer is unwilling or unable to serve in
such capacity, then unless such individual is Mr. P. Xxxxxxx Xxxxxx or Xx. Xxxxx
X. Xxxxxx the directors of SLH specified on Exhibit B that are willing and able
to serve shall fill any vacancies promptly after the Effective Time. If prior to
the Effective Time or thereafter at anytime prior to the 2001 Annual Meeting of
Stockholders of SLH either Mr. P. Xxxxxxx Xxxxxx or Xx. Xxxxx X. Xxxxxx is
unwilling or unable to serve as a director of SLH, then either Xx. Xxxxxx or Xx.
Xxxxxx (whichever continues to be willing and able to serve as a director of
SLH) shall be entitled to recommend to the Board of Directors of SLH an
individual to fill the vacancy and SLH shall support such recommendation.
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5.10 Stock Options; Reservation and Registration of Shares. (a) At the
Effective Time, each outstanding option to purchase Syntroleum Common Stock and
any stock appreciation rights related thereto that have been granted pursuant to
Syntroleum Stock Option Plans and the Consultant Option (a "Syntroleum Stock
Option"), whether vested or unvested, shall be assumed by SLH. Each such option
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Syntroleum Stock Option, a number of
shares of SLH Common Stock equal to the number of shares of Syntroleum Common
Stock purchasable pursuant to such Syntroleum Stock Option multiplied by the
Exchange Ratio, at a price per share of SLH Common Stock equal to the per- share
exercise price for the shares of Syntroleum Common Stock purchasable pursuant to
such Syntroleum Stock Option divided by the Exchange Ratio; provided, however,
that in the case of any option to which Section 421 of the Code applies by
reason of its qualification under any of Sections 422-424 of the Code, the
option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order to
comply with Section 424(a) of the Code; and provided further, that the number of
shares of SLH Common Stock that may be purchased upon exercise of such
Syntroleum Stock Option shall not include any fractional share and, upon
exercise of such Syntroleum Stock Option, a cash payment shall be made for any
fractional share based upon the closing price of a share of SLH Common Stock on
the Nasdaq Stock Market or, if then traded on an exchange, such exchange, on the
last trading day of the calendar month immediately preceding the date of
exercise.
(c) SLH shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of SLH Common Stock for delivery upon
exercise of Syntroleum Stock Options. As soon as practicable after the Effective
Time, SLH shall file with the SEC a registration statement on Form S-8 (or any
successor form) or another appropriate form with respect to the shares of SLH
Common Stock subject to Syntroleum Stock Options and shall use its efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as Syntroleum Stock Options remain outstanding.
5.11 Indemnification; Directors' and Officers' Insurance. (a) From and
after the Effective Time, the Surviving Corporation shall indemnify, defend and
hold harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, an officer or director of the
SLH or Syntroleum or any of their Subsidiaries or an employee of the SLH or
Syntroleum or any of their Subsidiaries who acts as a fiduciary under any of the
SLH Benefit Programs, the SLH Plans, Syntroleum Benefit Programs or Syntroleum
Plans (the "Indemnified Parties") against all losses, claims, damages, costs,
expenses (including attorneys' fees), liabilities or judgments or amounts that
are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of or in connection with any
threatened or actual claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer, or such employee of the SLH
47
or Syntroleum or any of their Subsidiaries whether pertaining to any matter
existing or occurring at or prior to the Effective Time and whether asserted or
claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), including all Indemnified Liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to this Agreement or
the transactions contemplated hereby, in each case to the fullest extent
permitted under applicable law (and the Surviving Corporation will pay expenses
in advance of the final disposition of any such action or proceedings to each
Indemnified Party to the fullest extent permitted by law). Without limiting the
foregoing, in the event any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Parties (whether arising before
or after the Effective Time), (i) the Indemnified Parties may retain counsel
satisfactory to them and the Surviving Corporation, and the Surviving
Corporation shall pay all fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; and (ii) the Surviving
Corporation will use all commercially reasonable efforts to assist in the
vigorous defense of any such matter, provided that the Surviving Corporation
shall not be liable for any settlement effected without its written consent,
which consent, however, shall not be unreasonably withheld. Any Indemnified
Party wishing to claim indemnification under this Section 5.11, upon learning of
any such claim, action, suit, proceeding or investigation, shall notify the
Surviving Corporation, but the failure so to notify shall not relieve a party
from any liability that it may have under this Section 5.11, except to the
extent such failure materially prejudices such party. The Indemnified Parties as
a group may retain only one law firm to represent them with respect to each such
matter unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties. Syntroleum and SLH agree that all rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action or suit, existing in favor of the Indemnified Parties
(including in the Articles of Incorporation or Bylaws or in the indemnification
agreements previously provided by SLH to Syntroleum) with respect to matters
occurring through the Effective Time, shall survive the Merger and shall
continue in full force and effect for a period of six years from the Effective
Time; provided, however, that all rights to indemnification in respect of any
Indemnified Liabilities asserted or made within such period shall continue until
the disposition of such Indemnified Liabilities.
(b) After the Effective Time SLH shall cause to be maintained in effect
the current policies of directors' and officers' liability insurance maintained
by SLH and Syntroleum and its Subsidiaries or other policies of comparable
coverage and amounts with respect to matters arising before the Effective Time
covering Indemnified Parties who are directors or officers of SLH and who cease
to be employed as a director or officer of the SLH within three years after the
Effective Time, such that if a claim is made against any such Indemnified Person
during the six years following the Effective Time with respect to occurrences
arising prior to the Effective Time, the Indemnified Person would be covered as
if (a) the Indemnified Person has not ceased to be so employed and (b) such
insurance was still in effect.
5.12 Public Announcements. SLH and Syntroleum will consult with each
other before issuing any press release or otherwise making any public statements
with respect to the transactions contemplated by this Agreement, and shall not
issue any such press release or make any such public
48
statement prior to such consultation, except as may be required by applicable
law or by obligations pursuant to any listing agreement with any national
securities exchange or transaction reporting system.
5.13 Other Actions. Except as contemplated by this Agreement, neither
SLH nor Syntroleum shall, and shall not permit any of its Subsidiaries to, take
or agree or commit to take any action that is reasonably likely to result in any
of its respective representations or warranties hereunder being untrue in any
material respect or in any of the conditions to the Merger set forth in Article
VI not being satisfied. Upon the terms and subject to the conditions set forth
in this Agreement, each of the parties hereto agrees to use its commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable, to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement.
5.14 Advice of Changes; SEC Filings. SLH and Syntroleum shall confer on
a regular basis with each other, report on operational matters and promptly
advise each other orally and in writing of any change or event having, or which,
insofar as can reasonably be foreseen, could have, a SLH Material Adverse Effect
or Syntroleum Material Adverse Effect. Syntroleum and SLH shall promptly provide
each other (or their respective counsel) copies of all filings made by such
party with the SEC or any other state or federal Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
5.15 Reorganization. It is the intention of SLH and Syntroleum that the
Merger will qualify as a reorganization described in Section 368(a) of the Code
(and any comparable provisions of applicable state or local law). Neither SLH
nor Syntroleum (nor any of their respective Subsidiaries) will take or omit to
take any action (whether before, on or after the Closing Date) that would cause
the Merger not to be so treated. The parties will characterize the Merger as
such a reorganization for purposes of all Returns and other filings.
5.16 Termination of Certain SLH Employees. Prior to the Closing Date,
SLH shall terminate the employment of all of its employees other than those
identified on Schedule 5.16 of the SLH Letter.
ARTICLE VI
CONDITIONS PRECEDENT
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 prior to the Closing Date of the following conditions:
49
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the affirmative vote of the holders of a majority of the
outstanding shares of Syntroleum Common Stock entitled to vote thereon at
Syntroleum Stockholder Meeting and shall have been approved and adopted by the
holders of a majority of the outstanding shares of SLH Common Stock entitled to
vote thereon at the SLH Stockholder Meeting.
(b) Listing. The shares of SLH Common Stock issuable to Syntroleum
stockholders pursuant to this Agreement and such other shares of SLH Common
Stock required to be reserved for issuance in connection with the Merger shall
have been authorized for trading on the Nasdaq Stock Market, upon official
notice of issuance.
(c) Other Approvals. All filings required to be made prior to the
Effective Time with, and all consents, approvals, permits and authorizations
required to be obtained prior to the Effective Time from any Governmental Entity
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Syntroleum and SLH shall
have been made or obtained (as the case may be), except where the failure to
obtain such consents, approvals, permits, and authorizations would not be
reasonably likely to result in a material adverse effect to the business,
operations, assets, condition (financial or otherwise) or results of operation
of SLH and its Subsidiaries taken as a whole (assuming the Merger has taken
place) or to materially adversely affect the consummation of the Merger.
(d) S-4. The S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a stop
order.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger shall be in effect.
(f) Dissenters. The aggregate number of shares held by holders of
Syntroleum Common Stock who have made demands for appraisal in accordance with
the Oklahoma Act shall not exceed 2.5% of the shares of Syntroleum Common Stock
outstanding and entitled to vote at Syntroleum Stockholders Meeting.
(g) Accounting Treatment. The historical or pro forma financial
statements included in the S-4 that is declared effective by the SEC and the
definitive preliminary proxy materials that are distributed to stockholders of
the parties shall not reflect fundamental and material variances from those
initially filed (which shall not be materially inconsistent with the accounting
treatment currently contemplated by the parties) that are not satisfactory to
the Board of Directors of both SLH and Syntroleum.
(h) Tax Opinion. Syntroleum and SLH shall have received an
opinion, reasonably satisfactory to both Syntroleum and SLH, dated on or about
the date that is two days prior to the date
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the Proxy Statement is first mailed to stockholders of the SLH, of Xxxxx &
Xxxxx, L.L.P., counsel to Syntroleum, to the effect that, if the Merger is
consummated in accordance with the terms of this Agreement, the Merger will be a
reorganization within the meaning of Section 368(a) of the Code, SLH and
Syntroleum will each be a party to that reorganization within the meaning of
Section 368(b) of the Code and no gain or loss will be recognized for United
States federal income tax purposes by SLH, Syntroleum or a stockholder of
Syntroleum as a result of the Merger or upon the conversion of shares of
Syntroleum Common Stock into shares of SLH Common Stock except with respect to
cash, if any, which is received in lieu of fractional shares of SLH Common
Stock. In rendering such opinion, such counsel may rely upon representations of
Syntroleum and SLH substantially in the form of Exhibit C attached hereto.
6.2 Conditions of Obligations of SLH. The obligations of SLH to effect
the Merger are subject to the satisfaction of the following conditions, any or
all of which may be waived in whole or in part by SLH.
(a) Representations and Warranties. Each of the representations and
warranties of Syntroleum set forth in this Agreement shall be true and correct
as of the date of this Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date except for such failures to be so true and
correct (without giving effect to the individual materiality thresholds
otherwise contained in Section 3.1 hereof) which would not, individually or in
the aggregate, reasonably be expected to have a Syntroleum Material Adverse
Effect or which were provided by, or in accordance with, this Agreement.
(b) Performance of Obligations of Syntroleum. Syntroleum shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) No Vesting of Syntroleum Stock Options. Syntroleum Stock
Options shall not vest as a result of the Merger and will maintain the same
vesting period as if the Merger had not occurred.
(d) Fairness Opinion. The opinion described in Section 3.2(q)
shall not have been withdrawn.
(e) Officers' Certificate. SLH shall have received (i) a certificate
dated as of the Closing Date and signed on behalf of Syntroleum by its chief
executive officer or president and by its chief financial officer, to the effect
that the conditions set forth in Section 6.1 hereof as they relate to Syntroleum
and in Section 6.2(a) and (b) have been satisfied and (ii) certified copies of
resolutions duly adopted by Syntroleum's Board of Directors and stockholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, all in such reasonable detail as SLH and
its counsel shall request.
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(f) Letters from Affiliates. SLH shall have received from each person
named in the letter referred to in Section 5.7 an executed copy of an agreement
as provided in Section 5.7.
(g) Opinion of Counsel to Syntroleum. Syntroleum shall deliver an
opinion from counsel to Syntroleum, in form and substance reasonably
satisfactory to SLH, covering the matters set forth on Exhibit D hereto.
6.3 Conditions of Obligations of Syntroleum. The obligation of
Syntroleum to effect the Merger is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by Syntroleum:
(a) Representations and Warranties. Each of the representations and
warranties of SLH set forth in this Agreement shall be true and correct as of
the date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date except for such failures to be so true and correct
which (without giving effect to the individual materiality thresholds otherwise
contained in Section 3.2 hereof) would not, individually or in the aggregate,
reasonably be expected to have a SLH Material Adverse Effect or which were
provided by or in accordance with this Agreement.
(b) Performance of Obligations of SLH. SLH shall have performed in all
material respects all obligations required to be performed by them under this
Agreement at or prior to the Closing Date.
(c) Fairness Opinion. The opinion described in Section 3.1(q)
shall not have been withdrawn.
(d) Officers' Certificate. Syntroleum shall have received (i) a
certificate dated as of the Closing Date and signed on behalf of SLH by its
chief executive officer and by its chief financial officer, to the effect that
the conditions set forth in Section 6.1 hereof as they relate to SLH and in
Section 6.3(a) and (b) have been satisfied and (ii) certified copies of
resolutions duly adopted by SLH's Board of Directors and stockholders evidencing
the taking of all corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, all in such reasonable detail as Syntroleum
and its counsel shall request.
(e) Board of Directors and Officers at the Effective Time. As of the
closing date, SLH shall have delivered to Syntroleum irrevocable letters of
resignation effective as of the Effective Time from all of the current directors
and officers of SLH other than individuals identified as directors on Exhibit B
hereto. The delivery of such resignations by officers of SLH shall be deemed to
be a termination without cause under their existing employment agreements.
52
(f) Opinion of Counsel to SLH. SLH shall deliver an opinion from
counsel to SLH in form and substance reasonably satisfactory to Syntroleum,
covering the matters set forth on Exhibit E hereto.
(g) Consents of Optionees. All holders of SLH Stock Options shall have
delivered written consents to the adjustments set forth in Section 2.1(b)
hereof.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of Syntroleum or SLH:
(a) by mutual written consent of Syntroleum and SLH, or by mutual
action of their respective Boards of Directors;
(b) by either Syntroleum or SLH if (i) the Merger shall not have been
consummated by September 30, 1998 (provided that the right to terminate this
Agreement under this clause (i) shall not be available to any party whose breach
of any representation or warranty or failure to fulfill any covenant or
agreement under this Agreement has been the cause of or resulted in the failure
of the Merger to occur on or before such date); (ii) any court of competent
jurisdiction, or some other governmental body or regulatory authority shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; (iii)
the stockholders of the SLH shall not approve this Agreement and the Merger at
the SLH Stockholder Meeting or at any adjournment thereof; (iv) the stockholders
of Syntroleum shall not approve this Agreement and the Merger at Syntroleum
Stockholders Meeting or at any adjournment thereof; (v) in the exercise of its
good faith judgment as to its fiduciary duties to its stockholders imposed by
law, as advised by outside counsel, the Board of Directors of SLH determines
that such termination is required by reason of a SLH Acquisition Proposal having
been made, provided that SLH may not terminate this Agreement pursuant to this
clause (v) unless five business days shall have elapsed after delivery to
Syntroleum of a written notification of SLH's intention to terminate this
Agreement and during such five business-day period SLH shall have fully
cooperated with Syntroleum; including, without limitation, informing Syntroleum
of the terms and conditions of such SLH Acquisition Proposal and the identity of
the person or group making such SLH Acquisition Proposal, with the intent of
enabling Syntroleum to agree to a modification of the terms and conditions of
this Agreement so that the transactions contemplated hereby may be effected; or
(vi) in the exercise of its good faith judgment as to its fiduciary duties to
its stockholders imposed by law, as advised by outside counsel, the Board of
Directors of Syntroleum determines that such termination is required by reason
of a Syntroleum Acquisition Proposal having been made, provided that Syntroleum
may not terminate
53
this Agreement pursuant to this clause (vi) unless five business days shall have
elapsed after delivery to SLH of a written notification of Syntroleum's
intention to terminate this Agreement and during such five business-day period
Syntroleum shall have fully cooperated with SLH; including, without limitation,
informing SLH of the terms and conditions of such Syntroleum Acquisition
Proposal and the identity of the person or group making such Syntroleum
Acquisition Proposal, with the intent of enabling SLH to agree to a modification
of the terms and conditions of this Agreement so that the transactions
contemplated hereby may be effected;
(c) by SLH if (i) Syntroleum shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by Syntroleum at or prior to such
date of termination (provided such breach has not been cured within 30 days
following receipt by Syntroleum of written notice from SLH of such breach and is
existing at the time of termination of this Agreement); (ii) any representation
or warranty of Syntroleum contained in this Agreement shall not be true in all
material respects when made (provided such breach has not been cured within 30
days following receipt by Syntroleum of written notice from SLH of such breach
and is existing at the time of termination of this Agreement) or on and as of
the Effective Time as if made on and as of the Effective Time (except to the
extent it relates to a particular date), except for such failures to be so true
and correct (without giving effect to the individual materiality thresholds
otherwise contained in Section 3.1 hereof) which would not individually or in
the aggregate, reasonably be expected to have a Syntroleum Material Adverse
Effect or which were provided by, or in accordance with, this Agreement or (iii)
the Board of Directors of Syntroleum withdraws, modifies or changes its
recommendation of this Agreement or the Merger in a manner adverse to SLH or
shall have resolved to do any of the foregoing; or
(d) by Syntroleum if (i) SLH shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by it at or prior to such date of
termination (provided such breach has not been cured within 30 days following
receipt by SLH of written notice from Syntroleum of such breach and is existing
at the time of termination of this Agreement); (ii) any representation or
warranty of SLH contained in this Agreement shall not be true in all material
respects when made (provided such breach has not been cured within 30 days
following receipt by SLH of written notice from Syntroleum of such breach and is
existing at the time of termination of this Agreement) or on and as of the
Effective Time as if made on and as of the Effective Time (except to the extent
it relates to a particular date), except for such failures to be so true and
correct (without giving effect to the individual materiality thresholds
otherwise contained in Section 3.2 hereof) which would not individually or in
the aggregate, reasonably be expected to have a SLH Material Adverse Effect or
which were provided by, or in accordance with, this Agreement or (iii) the Board
of Directors of SLH withdraws, modifies or changes its recommendation of this
Agreement or the Merger in a manner adverse to Syntroleum or shall have resolved
to do any of the foregoing.
7.2 Effect of Termination. (a) In the event of termination of this
Agreement by either Syntroleum or SLH as provided in Section 7.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of SLH or Syntroleum except (i) with respect to
54
this Section 7.2, the second and third sentences of Section 5.4 and Section 8.1,
and (ii) and such termination shall not relieve any party hereto for any
intentional breach prior to such termination by a party hereto of any of its
representations or warranties or of any of its covenants or agreements set forth
in this Agreement.
(b) If this Agreement is terminated by SLH pursuant to Section 7.1
(c)(i) or (ii), and if SLH is not in material breach of this Agreement at the
time of such termination, then Syntroleum shall pay the reasonable out-of-pocket
expenses incurred by SLH in connection with preparing for, entering into and
carrying out this Agreement and the consummation of the transactions
contemplated hereby. If this Agreement is terminated by Syntroleum pursuant to
Section 7.1(d)(i) or (ii) and if Syntroleum is not in material breach of this
Agreement at the time of such termination, then SLH shall pay the reasonable
out-of-pocket expenses incurred by Syntroleum in connection with preparing for,
entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
7.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Syntroleum or SLH, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto; and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses. Except as provided in Section 7.2, each party
hereto shall pay its own expenses incident to preparing for, entering into and
carrying out this Agreement and the consummation of the transactions
contemplated hereby, whether or not the Merger shall be consummated.
8.2 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time and any liability for breach or violation
55
thereof shall terminate absolutely and be of no further force and effect at and
as of the Effective Time, except for the agreements contained in Article II,
Sections 5.10 through 5.12 and Article VIII, the agreements delivered pursuant
to Section 5.7 and the representations, covenants and agreements contained in
Sections 3.1(u), 3.2(u) and 5.15. The Confidentiality Agreements shall survive
the execution and delivery of this Agreement, and the provisions of the
Confidentiality Agreements shall apply to all information and material delivered
hereunder.
8.3 Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, and shall
be deemed to be given, dated and received when so delivered personally,
telegraphed or telecopied or, if mailed, five business days after the date of
mailing to the following address or telecopy number, or to such other address or
addresses as such person may subsequently designate by notice given hereunder:
(a) if to SLH:
Xxxxx X. Xxxxxx
SLH Corporation
0000 Xxxx 00xx Xxxxxx
Xxxxx 000, X.X. Xxx 0000
Xxxxxxx Xxxxxxx, Xxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxx & Xxxx, X.X.
0000 Xxxxx Xxxx., Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
and (b) if to Syntroleum, to:
Xxxx X. Xxxx
Syntroleum Corporation
Syntroleum Plaza
0000 Xxxxx Xxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
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with a copy to:
Xxxx Xxxxxxxx
Syntroleum Corporation
Syntroleum Plaza
0000 Xxxxx Xxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
and with a copy to:
Xxxxx & Xxxxx, L.L.P.
Xxx Xxxxx Xxxxx
000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: R. Xxxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
8.4 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents, glossary of defined terms and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the word "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available. Unless the context otherwise requires, "or" is disjunctive
but not necessarily exclusive, and words in the singular include the plural and
in the plural include the singular. Any representations and warranties of
Syntroleum that are qualified by the phrase "to the knowledge of Syntroleum" or
phrases with similar wording shall be interpreted to refer to the actual
knowledge of the individuals set forth on Schedule 8.4 of Syntroleum Letter. Any
representations and warranties of SLH that are qualified by the phrase "to the
knowledge of SLH" or phrases with similar wording shall be interpreted to refer
to the actual knowledge of the individuals set forth on Schedule 8.4 of the SLH
Letter.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreements and any other documents and
instruments referred to herein) (a)
57
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereto and (b) except as provided in Sections 3.1(u), 3.2(u),
5.7, 5.11 and 5.15, is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
8.7 Governing Law. Except to the extent that the laws of the State of
Oklahoma are mandatorily applicable to the Merger or the internal affairs of any
of the parties, this Agreement shall be governed and construed in accordance
with the laws of the State of Kansas, without giving effect to the principles of
conflicts of law thereof.
8.8 Severability. Each party agrees that, should any court or other
competent authority hold any provision of this Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action inconsistent
herewith or not to take an action consistent herewith or required hereby, the
validity, legality and enforceability of the remaining provisions and
obligations contained or set forth herein shall not in any way be affected or
impaired thereby, unless the foregoing inconsistent action or the failure to
take an action constitutes a material breach of this Agreement or makes the
Agreement impossible to perform in which case this Agreement shall terminate as
if the parties mutually agreed under Section 7.1(a).
8.9 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. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
IN WITNESS WHEREOF, each party has caused this Agreement to be signed
by its respective officers thereunto duly authorized, all as of the date first
written above.
SLH CORPORATION
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President and Chief
Executive Officer
SYNTROLEUM CORPORATION
By: /s/ Xxxxxxx X. Xxxx
Name: Xxxxxxx X. Xxxx
Title: Chairman of the Board and
Chief Executive Officer
58
