General Statement of Beneficial Ownership — Schedule 13D
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13D SC 13D for M.S. Carriers, Inc. 8 35K
2: EX-1 Merger Agreement Dtd 12/11/2000 73 264K
3: EX-2 Voting Agreement Dtd 12/11/2000 4 17K
Exhibit 1
MERGER AGREEMENT
AMONG
SWIFT TRANSPORTATION CO., INC.,
a Nevada corporation
SUN MERGER, INC.,
a Tennessee corporation
AND
M. S. CARRIERS, INC.,
a Tennessee corporation
December 11, 2000
TABLE OF CONTENTS
Page
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1. Definitions............................................................... 1
2. Basic Transaction......................................................... 6
(a) The Merger........................................................... 7
(b) The Closing.......................................................... 7
(c) Actions at the Closing............................................... 7
(d) Effect of Merger..................................................... 7
(e) Procedure for Payment................................................ 10
3. Representations and Warranties of the Parent and the Merger Sub........... 12
(a) Organization, Qualification, and Corporate Power..................... 12
(b) Capitalization....................................................... 13
(c) Authorization of Transaction......................................... 15
(d) Noncontravention..................................................... 15
(e) Company Public Reports............................................... 15
(f) Financial Statements................................................. 16
(g) Events Subsequent to Most Recent Fiscal Quarter End.................. 16
(h) Undisclosed Liabilities.............................................. 16
(i) Brokers' Fees........................................................ 16
(j) Disclosure........................................................... 16
(k) Employee Benefit Plans............................................... 17
(l) Employment and Labor Matters......................................... 19
(m) Environmental Matters................................................ 20
(n) Takeover Statutes.................................................... 22
(o) Tax Matters.......................................................... 23
(p) Insurance Bonds...................................................... 24
(q) Compliance........................................................... 25
(r) Absence of Litigation................................................ 25
(s) Title to Assets...................................................... 25
(t) Pooling-Tax Matters.................................................. 25
(u) Opinion of Financial Advisor......................................... 26
(v) Material Agreements.................................................. 26
(w) Intellectual Property................................................ 27
4. Representations and Warranties of the Parent and the Merger Sub........... 27
(a) Organization, Qualification, and Corporate Power..................... 27
(b) Capitalization....................................................... 28
(c) Authorization of Transaction......................................... 30
(d) Noncontravention..................................................... 30
(e) Parent Public Reports................................................ 30
i
(f) Financial Statements................................................. 31
(g) Events Subsequent to Most Recent Fiscal Quarter End.................. 31
(h) Undisclosed Liabilities.............................................. 31
(i) Brokers' Fees........................................................ 31
(j) Disclosure........................................................... 31
(k) Employee Benefit Plans............................................... 32
(l) Employment and Labor Matters......................................... 34
(m) Environmental Matters................................................ 35
(n) Material Agreements.................................................. 37
(o) Tax Matters.......................................................... 37
(p) Insurance Bonds...................................................... 38
(q) Compliance........................................................... 39
(r) Absence of Litigation................................................ 39
(s) Title to Assets...................................................... 40
(t) Pooling-Tax Matters.................................................. 40
(u) Intellectual Property................................................ 40
5. Covenants................................................................. 41
(a) General.............................................................. 41
(b) Conduct of Business by the Parent Pending the Merger................. 41
(c) Conduct of Business by the Company Pending the Merger................ 44
(d) Registration Statement; Proxy Statement.............................. 46
(e) Shareholders Meeting................................................. 48
(f) Additional Shareholder Meeting Matters............................... 48
(g) Access to Information................................................ 48
(h) Other Offers......................................................... 49
(i) Pooling; Reorganization.............................................. 51
(j) Notification of Certain Matters...................................... 52
(k) Listing on the Nasdaq National Market................................ 53
(l) Public Announcements................................................. 53
(m) Takeover Laws........................................................ 53
(n) Accountant's Letters................................................. 53
(o) Additional Parent Directors.......................................... 54
(p) Hart-Scott-Rodino Act................................................ 54
(q) Company Stock Options and Company Stock Plans;
Outstanding Company Stock Options.................................. 54
(r) Insurance and Indemnification........................................ 56
6. Conditions to Obligation to Close......................................... 57
(a) Conditions to Obligation of the Parent and the Merger Sub............ 57
(b) Conditions to Obligation of the Company.............................. 59
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7. Termination............................................................... 61
(a) Termination of Agreement............................................. 63
(b) Effect of Termination................................................ 63
(c) Fees and Expenses.................................................... 63
8. Miscellaneous............................................................. 64
(a) Survival............................................................. 64
(b) Reserved............................................................. 64
(c) No Third-Party Beneficiaries......................................... 64
(d) Entire Agreement..................................................... 64
(e) Succession and Assignment............................................ 64
(f) Counterparts......................................................... 64
(g) Headings............................................................. 64
(h) Notices.............................................................. 64
(i) Governing Law........................................................ 65
(j) Amendments and Waivers............................................... 65
(k) Severability......................................................... 65
(l) Expenses............................................................. 67
(m) Incorporation of Exhibits and Schedules.............................. 67
Exhibit A-1 - Voting Agreement (Parent)
Exhibit A-2 - Voting Agreement (Company)
Exhibit B - Articles of Merger
Exhibit C - Company Disclosure Schedule
Exhibit D - Parent Disclosure Schedule
Exhibit E - Form of Affiliate Pooling Agreement
Exhibit F-1 - Employment Agreement
Exhibit F-2 - Employment Agreement
Exhibit F-3 - Employment Agreement
Exhibit F-4 - Employment Agreement
iii
THIS MERGER AGREEMENT (this "Agreement") is made and entered into as of
December 11, 2000, by and among Swift Transportation Co., Inc., a Nevada
corporation (the "Parent"), Sun Merger, Inc., a Tennessee corporation and a
wholly-owned Subsidiary of the Parent (the "Merger Sub"), and M. S. Carriers,
Inc., a Tennessee corporation (the "Company"). The Parent, the Merger Sub, and
the Company are referred to herein individually as a "Party" and collectively
herein as the "Parties."
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each determined that it is in the best interests of their respective
stockholders (the "Stockholders") for Parent to participate in the merger of
Merger Sub with and into the Company (the "Merger") upon the terms and subject
to the conditions set forth herein;
WHEREAS, in furtherance of the Merger, the Boards of Directors of Parent,
Merger Sub and the Company have each approved the Merger in accordance with the
Tennessee Business Corporation Act and subject to the conditions set forth
herein, which Merger will result in, among other things, the Company becoming a
wholly owned Subsidiary of Parent;
WHEREAS, as a condition to the willingness of, and an inducement to,
Parent, Merger Sub, and the Company to enter into this Agreement,
contemporaneously with the execution and delivery of this Agreement, certain
holders of Parent Shares and Company Shares are entering into agreements dated
as of the date hereof (the "Voting Agreements"), in the forms of Exhibits A-1
and A-2 attached hereto, respectively, providing for certain actions relating to
the transactions contemplated by this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a tax-free reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall
qualify for pooling-of-interests treatment.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS. For purposes of this Agreement, the following terms shall have
the meanings set forth below:
"Acquisition Proposal" has the meaning set forth in Section 5(h)(i) below.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Agreement" has the meaning set forth in the preface above.
"Alternative Transaction" has the meaning set forth in Section 5(h)(vi)
below.
"Articles of Merger" has the meaning set forth in Section 2(c) below.
"Authority" means each and every federal, state, local, and foreign
judicial, governmental, quasi-governmental, or regulatory agency, official, or
department; every arbitrator, mediator, and other similar official; and every
other entity to whose jurisdiction or decision making authority a Party has
submitted.
"Benefit Plan" means all contracts, plans, arrangements, policies, and
understandings providing for any compensation or benefit other than base wages
or salaries that are maintained by a Person or affect either its employees or
independent contractors, regardless of whether defined as an "employee benefit
plan" under ERISA or subject to any provision of ERISA, including, without
limitation: all pension, profit-sharing, retirement, thrift, 401(k), ESOP, and
other similar plans and arrangements (defined benefit and defined contribution);
all health and welfare, disability, insurance (including self-insurance),
workers' compensation, supplemental unemployment, severance, vacation, and
similar plans and arrangements; and all bonus, stock option, incentive
compensation, stock appreciation rights, phantom stock, overtime guaranty,
employment contract, employee handbook, and other similar plans or arrangements.
A "Company Benefit Plan" is a Benefit Plan that relates to the Company or the
employees and independent contractors of the Company and its Subsidiaries. A
"Parent Benefit Plan" is a Benefit Plan that relates to the Parent or the
employees and independent contractors of the Parent and its Subsidiaries.
"Certificates" has the meaning set forth in Section 2(e)(iii) below.
"Charter" means charter, articles of incorporation, certificate of
incorporation or similar documents.
"Claim" has the meaning set forth in Section 5(r)(ii) below.
"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b) below.
"Code" has the meaning set forth in the recitals.
"Company" has the meaning set forth in the preface above.
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"Company Affiliate Pooling Agreement" has the meaning set forth in Section
5(i)(iii) below.
"Company Base Year" has the meaning set forth in Section 3(p) below.
"Company Disclosure Schedule" has the meaning set forth in Section 3 below.
"Company Material Agreements" has the meaning set forth in Section 3(v)
below.
"Company Materially Adverse Effect" has the meaning set forth in Section
3(a) below.
"Company Public Reports" has the meaning set forth in Section 3(e) below.
"Company Share" means any share of the common stock, $.01 par value per
share, of the Company.
"Company Special Meeting" has the meaning set forth in Section 5(d)(i)
below.
"Company Stock Option Plans" has the meaning set forth in Section 3(b)(i)
below.
"Company Stockholder" means any Person who or which holds any Company
Shares.
"D&O Insurance" has the meaning set forth in Section 5(r)(iv) below.
"Definitive Proxy Materials" means the definitive proxy materials relating
to the Special Meetings.
"Disclosure Schedules" means the Company Disclosure Schedule and the Parent
Disclosure Schedule.
"Effective Time" has the meaning set forth in Section 2(d)(i) below.
"Employment Agreements" has the meaning set forth in Section 5(s) below.
"Environmental Laws" has the meaning set forth in Section 3(m) below.
"Environmental Permit" has the meaning set forth in Section 3(m) below.
"ERISA Affiliate" has the meaning set forth in Section 3(k)(v) below.
"Exchange Agent" has the meaning set forth in Section 2(e)(i) below.
"Fairness Opinion" has the meaning set forth in Section 3(i) below.
"Fiduciary Finding" has the meaning set forth in Section 5(h)(i) below.
3
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hazardous Materials" has the meaning set forth in Section 3(m) below.
"Indemnified Party" has the meaning set forth in Section 5(r)(ii) below.
"Intellectual Property" has the meaning set forth in Section 3(w) below.
"IRS" has the meaning set forth in Section 3(k) below.
"Joint Proxy Statement" has the meaning set forth in Section 5(d)(i) below.
"Knowledge," as to each of the Parent and the Company, means the actual
knowledge of such entity's executive officers after reasonable investigation.
"Law" means any constitution, statute, law, ordinance, rule, regulation,
Order, judgment, injunction, decree, ruling, or other pronouncement by any
Authority (including, without limitation, the following types: environmental,
energy, safety, health, zoning, anti-discrimination, antitrust, employment,
transportation, tax, and employee benefit (including ERISA)).
"Lien" means any mortgage, lien, pledge, security interest, mechanics' or
materialmens' or similar lien, conditional sale agreement, charge, claim, right,
condition, restriction, or other encumbrance or defect of title of any nature
whatsoever (including, without limitation, any assessment, charge, or other type
of notice which is levied or given by any Authority and for which a lien could
be filed).
"Litigation" means any claim, suit, action, arbitration, cause of action,
claim, complaint, criminal prosecution, investigation, demand letter, or
proceeding, whether at law or at equity, before or by any Authority.
"Merger" has the meaning set forth in the recitals.
"Merger Consideration" has the meaning set forth in Section 2(d)(v) below.
"Merger Sub" has the meaning set forth in the preface above.
"Most Recent Fiscal Quarter End" means at the given time, the most recent
of September 30, 2000, December 31, 2000, or March 31, 2001.
4
"Multiemployer Plan" has the meaning set forth in Section 3(k)(vi) below.
"Nevada General Corporation Law" means the Nevada General Corporation Law,
as amended.
"Order" means any judgment, order, writ, injunction, ruling or decree of,
or any settlement under the jurisdiction of, any Authority.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Outstanding Company Stock Options" has the meaning set forth in Section
3(b)(i) below.
"Outstanding Parent Stock Options" has the meaning set forth in Section
4(b)(i) below.
"Parent" has the meaning set forth in the preface above.
"Parent Base Year" has the meaning set forth in Section 4(p) below.
"Parent Disclosure Schedule" has the meaning set forth in Section 4 below.
"Parent Material Agreement" has the meaning set forth in Section 4(n)
below.
"Parent Materially Adverse Effect" has the meaning set forth in Section
4(a) below.
"Parent Public Reports" has the meaning set forth in Section 4(e) below.
"Parent Share" means any share of the common stock, $0.01 par value per
share, of the Parent.
"Parent Special Meeting" has the meaning set forth in Section 5(d)(i)
below.
"Parent Stock Option Plans" has the meaning set forth in Section 4(b)(i)
below.
"Parties" has the meaning set forth in the preface above.
"Party" has the meaning set forth in the preface above.
"Payment Event" has the meaning set forth in Section 5(h)(v) below.
"Person" means an individual, partnership, corporation, limited liability
company, association, joint stock company, trust, joint venture, unincorporated
organization, governmental body (or any department, agency, or political
subdivision thereof), or other entity.
5
"Pre-Merger Matters has the meaning set forth in Section 5(r)(ii) below.
"Registration Statement" has the meaning set forth in Section 5(d)(i)
below.
"Representatives" has the meaning set forth in Section 5(g) below.
"Requisite Stockholder Approval" means the affirmative vote of the holders
of a majority of the voting power of outstanding common stock of (i) the Parent
and (ii) the Company, in each case as applicable, in favor of the matters
submitted to the respective stockholders pursuant to the Definitive Proxy
Materials.
"Returns" the meaning set forth in Section 3(o)(i).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Special Meetings" means the Company Special Meeting together with the
Parent Special Meeting.
"Stockholders" has the meaning set forth in the recitals.
"Stockholders Agreements" has the meaning set forth in the recitals.
"Subsidiary" means any corporation or other business entity with respect to
which a specified Person (or a Subsidiary thereof) owns twenty percent (20%) or
more of the common stock or other equity interests or otherwise has the power to
vote or direct sufficient voting power to elect a majority of the directors or
other managers.
"Surviving Corporation" has the meaning set forth in Section 2(a) below.
"Taxes" or "Tax" shall mean all taxes, charges, fees, levies, or other
assessments of whatever kind or nature, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, transfer, fuel,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupancy, or property taxes, customs duties, fees,
assessments, or charges of any kind whatsoever (together with any interest and
any penalties, additions to tax, or additional amounts) imposed by any
Authority.
"Tennessee Business Combination Act" means the Tennessee Business
Combination Act, as amended.
"Tennessee Business Corporation Act" means the Tennessee Business
Corporation Act, as amended.
6
"Third Party" has the meaning set forth in Section 5(h)(vi) below.
2. BASIC TRANSACTION.
(a) THE MERGER. On and subject to the terms and conditions of this
Agreement, the Merger Sub will merge with and into the Company at the
Effective Time. The Company shall be the corporation surviving the
Merger (the "Surviving Corporation").
(b) THE CLOSING. Unless this Agreement shall have been terminated and the
transactions contemplated by this Agreement abandoned pursuant to the
provisions of Section 7 and subject to the provisions of Section 6,
the closing of the Merger (the "Closing") will take place at noon
(Eastern time) on a date (the "Closing Date") to be mutually agreed
upon by the Parties, which date shall be the third business day after
all the conditions set forth in Section 6 shall have been satisfied
(or waived in accordance with Section 6, to the extent the same may be
waived), unless another time and/or date is agreed by the Parties
hereto. The Closing shall take place at the offices of the Parent or
such other place as the Parties hereto otherwise agree.
(c) ACTIONS AT THE CLOSING. At the Closing, (i) the Company will deliver
to the Parent and the Merger Sub the various certificates,
instruments, and documents referred to in Section 6(a) below, (ii) the
Parent and the Merger Sub will deliver to the Company the various
certificates, instruments, and documents referred to in Section 6(b)
below, and (iii) the Company and the Merger Sub will file with the
Secretary of State of the State of Tennessee Articles of Merger in the
form attached hereto as Exhibit B (the "Articles of Merger").
(d) EFFECT OF MERGER.
(i) GENERAL. The Merger shall become effective at the time (the
"Effective Time") the Articles of Merger are validly filed with
the Secretary of State of the State of Tennessee by the Company
and the Merger Sub or at such later date and time as may be
specified in the Articles of Merger by mutual agreement of the
Company, the Parent, and the Merger Sub. The Merger shall have
the effect set forth in the Tennessee Business Corporation Act.
Without limiting the generality of the foregoing, at the
Effective Time, all of the assets, property, rights, privileges,
immunities, powers, and franchises of the Company and Merger Sub
shall vest in the Surviving Corporation, and all debts,
liabilities, duties, and obligations of the Company and Merger
Sub shall become the debts, liabilities, duties and obligations
of the Surviving Corporation. The Surviving Corporation may, at
any time after the Effective Time, take any action (including
executing and delivering any document) in the name and on behalf
of either the Company or the Merger Sub in order to carry out and
effectuate the transactions contemplated by this Agreement.
7
(ii) CERTIFICATE OF INCORPORATION. The Charter of the Surviving
Corporation shall be amended and restated at and as of the
Effective Time to read as did the Charter of the Merger Sub
immediately prior to the Effective Time (except that the name of
the Surviving Corporation will remain unchanged).
(iii) BYLAWS. The bylaws of the Surviving Corporation shall be amended
and restated at and as of the Effective Time to read as did the
bylaws of the Merger Sub immediately prior to the Effective Time
(except that the name of the Surviving Corporation will remain
unchanged).
(iv) DIRECTORS AND OFFICERS. The directors of the Merger Sub shall
become the directors of the Surviving Corporation at and as of
the Effective Time, and the officers of the Surviving Corporation
from and after the Effective Time shall be as set forth in
Section 2(d) of the Parent Disclosure Schedule.
(v) CONVERSION OF COMPANY SHARES.
(A) At and as of the Effective Time, and without any action on
the part of the Parties hereto or any holder of the Company
Shares, each Company Share issued and outstanding immediately
prior to the Effective Time, by virtue of this Merger, shall be
converted automatically into the right to receive one and seven
tenths (1.7) fully paid and nonassessable Parent Shares (the
"Merger Consideration") subject to the terms and provisions set
forth in this Section 2.
(B) Each Company Share issued and outstanding immediately prior
to the Effective Time shall automatically be redeemed and
canceled and shall cease to exist as of the Effective Time, and
each holder of a certificate representing any such Company Share
shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration and any cash in lieu of
fractional Parent Shares to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with
Section 2(d)(ix) hereof, without interest.
(C) Each Company Share held in the treasury of the Company, if
any, and each Company Share, if any, owned by Parent or Merger
Sub, in each case immediately prior to the Effective Time, shall
be canceled and extinguished without any conversion thereof and
no payment or distribution shall be made with respect thereto.
8
(vi) CONVERSION OF COMPANY STOCK OPTIONS.
(A) At and as of the Effective Time, and without any action on
the part of the holder thereof, each then outstanding option to
purchase Company Shares shall be converted into an option to
purchase Parent Shares in the manner set forth in Section 5(q);
provided, that in any event any such conversion shall be in
accordance with the terms and conditions of all applicable
Company Stock Option Plans, option agreements thereunder, and all
other relevant documentation immediately prior to the Effective
Time.
(B) The Company and its Board of Directors shall promptly take
all actions necessary to ensure that following the Effective Time
no holder of any options or other rights pursuant to, nor any
participant in or party to, the Company Stock Option Plans or any
other Benefit Plan or other plan, program, arrangement, agreement
or other commitment providing for the issuance or grant of any
interest in respect of the capital stock of the Company or any
Subsidiary of the Company will have any rights thereunder to
acquire equity securities, or any right to payment in respect of
the equity securities, of Parent, the Company, or the Surviving
Corporation or any of their Subsidiaries, except as provided
herein.
(vii) ADJUSTMENT OF MERGER CONSIDERATION. Without limiting any of the
provisions of this Agreement, the Merger Consideration shall be
adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of
securities convertible into Parent Shares or Company Shares),
reorganization, recapitalization or other like change with
respect to Parent Shares of Company Shares occurring after the
date hereof and prior to the Effective Time.
(viii) CONVERSION OF CAPITAL STOCK OF THE MERGER SUB. At and as of the
Effective Time, each share of common stock, $.01 par value per
share, of the Merger Sub shall be converted automatically into
one share of common stock, $.01 par value per share, of the
Surviving Corporation and shall thereafter constitute all of the
issued and outstanding capital stock of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing
ownership of any shares of Merger Sub common stock shall, after
the Effective Time, evidence ownership of such shares of capital
stock of the Surviving Corporation.
(ix) FRACTIONAL SHARES. No certificates or scrip representing
fractional Parent Shares shall be issued in connection with the
Merger, and such fractional interests will not entitle the owner
thereof to any rights of a stockholder of Parent. In lieu
thereof, each holder of Company Shares exchanged pursuant to
Section 2(d)(v) or of options or warrants exchanged pursuant to
9
Section 2(d)(vi) who would otherwise be entitled to a fraction of
a Parent Share (after aggregating all fractional Parent Shares to
have been otherwise received by such holder) shall receive from
Parent an amount of cash (rounded down to the nearest whole cent
and without interest) equal to the product of such fractional
part of a Parent Share multiplied by the average closing price
per Parent Share (rounded to the nearest cent) on the Nasdaq
National Market (as reported in the Wall Street Journal, or, if
not reported therein, any other authoritative source selected by
Parent) for the ten (10) trading days ending on the date two (2)
trading days immediately prior to (and excluding the date of) the
Effective Time.
(e) PROCEDURE FOR PAYMENT.
(i) EXCHANGE AGENT. Prior to the Effective Time, Parent shall
designate a bank or trust company to act as the Exchange Agent in
the Merger (the "Exchange Agent").
(ii) PARENT TO PROVIDE PARENT SHARES. When and as needed, Parent shall
make available to the Exchange Agent for exchange in accordance
with this Section 2, through such reasonable procedures as Parent
may adopt, sufficient Parent Shares to be exchanged pursuant to
Section 2(d).
(iii) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of
record of a certificate or certificates (the "Certificates") that
represented as of the Effective Time outstanding Company Shares
to be exchanged pursuant to Section 2, 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 Parent may reasonably
specify) and instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing Parent
Shares. Upon surrender of a Certificate to the Exchange Agent,
together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the
number of whole Parent Shares and payment in lieu of fractional
shares which such holder has the right to receive pursuant to
Sections 2(d)(v) and 2(d)(vi), after giving effect to any
required Taxes, and the Certificate so surrendered shall
forthwith be canceled. At any time following six (6) months after
the Effective Time, all or any number of Parent Shares (and any
or all cash payable in lieu of fractional Parent Shares)
deposited with or made available to the Exchange Agent which
remain undistributed to the holders of the Certificates
10
representing Company Shares, shall be delivered to Parent upon
demand, and thereafter such holders of unexchanged Company Shares
shall be entitled to look only to Parent (subject to abandoned
property, escheat or other similar Law) only as general creditors
thereof with respect to the Parent Shares for payment upon due
surrender of their Certificates.
(iv) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the Effective Time
with respect to Parent Shares with a record date after the
Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the whole Parent Shares represented
thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable Law, following
surrender of any such Certificate, there shall be paid to the
record holder of the certificates representing whole Parent
Shares issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions
with a record date after the Effective Time and payable between
the Effective Time and the time of such surrender with respect to
such whole Parent Shares.
(v) TRANSFERS OF OWNERSHIP. If any certificate for Parent Shares is
to be issued in a name other than the name in which the
Certificate surrendered in exchange therefor is registered, it
will be a condition of the issuance thereof that (A) the
Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the Person
requesting such exchange will have paid any transfer or other
Taxes required by reason of the issuance of a certificate for
Parent Shares in a name other than the name of the registered
holder of the Certificate surrendered or (B) established to the
satisfaction of Parent, or any agent designated by Parent, that
such Taxes have been paid or are not applicable.
(vi) NO LIABILITY. Notwithstanding anything to the contrary in this
Agreement, none of the Exchange Agent, Parent, or the Surviving
Corporation shall be liable to a holder of a Certificate for any
Parent Shares (and any cash payable for fractional Parent Shares
or any other amount due, if any) that was properly delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar Law.
(vii) WITHHOLDING OF TAX. Parent or the Exchange Agent will be
entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Company
Shares such amounts as Parent (or any Affiliate thereof) or the
Exchange Agent shall determine in good faith they are required to
deduct and withhold with respect to the making of such payment
under the Code, or any provision of federal, state, local or
foreign Law. To the extent that amounts are so withheld by Parent
or the Exchange Agent, such withheld amounts will be treated for
all purposes of this Agreement as having been paid to the holder
of the Company Shares in respect of whom such deduction and
withholding were made by Parent.
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(viii) NO FURTHER OWNERSHIP RIGHTS IN COMPANY SHARES. All Parent
Shares issued upon the surrender for exchange of Company Shares
in accordance with the terms of this Section 2 (including any
cash paid in respect thereof) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such Company
Shares. At the Effective Time, the stock transfer books of the
Company shall be closed, and thereafter there shall be no further
registration of transfers of Company Shares on the records of the
Surviving Corporation. From and after the Effective Time, the
holders of Certificates evidencing ownership of Company Shares
outstanding shall cease to have any rights with respect to such
Company Shares except as otherwise provided for herein. 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 Section 2.
(ix) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates evidencing Company Shares shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange
for such lost, stolen or destroyed Certificates, upon the making
of an affidavit of that fact by the holder thereof, such Parent
Shares and cash for fractional shares, if any, as may be required
pursuant to this Section 2; provided, however, that Parent may,
in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably
direct as indemnity against any claim that may be made against
Parent or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
(x) TAX CONSEQUENCES. For federal income tax purposes, the Parties
intend that the Merger be treated as a reorganization within the
meaning of Section 368(a) of the Code, and that this Agreement
shall be, and is hereby, adopted as a plan of reorganization for
purposes of Section 368 of the Code. The Parties shall not take a
position on any Returns inconsistent with this Section 2(e)(x).
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in the
disclosure schedule prepared by the Company and attached as Exhibit C (the
"Company Disclosure Schedule"), which is arranged to correspond to the
lettered and numbered paragraphs contained in the applicable sections of
this Agreement, the Company represents and warrants to the Parent and the
Merger Sub as follows:
12
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation. Section 3(a)
of the Company Disclosure Schedule sets forth, as of the date hereof,
a true and complete list of all of the Company's directly and
indirectly owned Subsidiaries, together with the jurisdiction of
incorporation or organization of each Subsidiary and the percentage of
each Subsidiary's outstanding capital stock or other equity or other
interest owned by the Company or another Subsidiary of the Company.
Except as set forth in Section 3(a) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries owns any
equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, directly or indirectly, any equity or
similar interest in, any Person. Each of the Company and its
Subsidiaries is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification
is required, except where the lack of such qualification would not
have a materially adverse effect on the business, financial condition,
operations, results of operations, or future prospects of the Company
and its Subsidiaries taken as a whole (a "Company Materially Adverse
Effect"). Each of the Company and all of its Subsidiaries has full
corporate power and authority to carry on the businesses in which it
is engaged and to own and use the properties owned and used by it. The
Company has heretofore furnished to Parent a true and complete copy of
each of its and each of its Subsidiaries' Charter and bylaws or
equivalent organizational documents, as amended or restated to the
date hereof. Such Charter and bylaws and equivalent organizational
documents of the Company and each of its Subsidiaries are in full
force and effect, and no other organizational documents are applicable
to or binding upon the Company or its Subsidiaries.
(b) CAPITALIZATION.
(i) The entire authorized capital stock of the Company consists of
20,000,000 Company Shares. As of the date hereof, (i) 11,150,001
Company Shares were issued and outstanding; (ii) no Company
Shares were held in the treasury of the Company; (iii) no Company
Shares were held by any Subsidiary of the Company; and (iv)
2,331,000 Company Shares were duly reserved for future issuance
pursuant to employee and director stock options granted pursuant
to the Company's four stock option plans (the "Company Stock
Option Plans"), of which 1,876,500 represented Company Shares
reserved for options that had been granted prior to the date
hereof (the "Outstanding Company Stock Options").
(ii) None of the outstanding Company Shares is subject to, nor was any
of them issued in violation of any, purchase option, call option,
right of first refusal, preemptive right, subscription right or
any similar right. Except as set forth above and in Section 3(b)
of the Company Disclosure Schedule, no shares of voting or
non-voting capital stock, other equity interests, or other voting
13
securities of the Company were issued, reserved for issuance or
outstanding. Except as described in Section 3(b) of the Company
Disclosure Schedule, all outstanding options to purchase Company
Shares were granted under Company Stock Option Plans. The Company
has delivered to Parent a true and complete list of all
outstanding options and similar rights to purchase Company
Shares, the record holder thereof and the exercise prices
thereof. All outstanding shares of capital stock of the Company
are, and all shares which may be issued upon the exercise of
stock options and similar purchase rights will be, when issued,
duly authorized, validly issued, fully paid and nonassessable and
not subject to any kind of preemptive (or similar) rights. There
are no bonds, debentures, notes or other indebtedness of the
Company with voting rights (or convertible into, or exchangeable
for, securities with voting rights) on any matters on which
stockholders of the Company may vote.
(iii) Section 3(b) of the Company Disclosure Schedule sets forth the
number of authorized and outstanding shares of capital stock, and
ownership thereof, of each of the Company's Subsidiaries. Except
as set forth in Section 3(h) of the Company Disclosure Schedule,
all of the outstanding shares of capital stock of each of the
Company's Subsidiaries have been duly authorized, validly issued,
fully paid and nonassessable, are not subject to, and were not
issued in violation of, any preemptive (or similar) rights, and
are owned, of record and beneficially, by the Company or one of
its direct or indirect Subsidiaries, free and clear of all Liens
whatsoever. Except as set forth in Section 3(b) of the Company
Disclosure Schedule, there are no restrictions of any kind which
prevent the payment of dividends by any of the Company's
Subsidiaries, and neither the Company nor any of its Subsidiaries
is subject to any obligation or requirement to provide funds for
or to make any investment (in the form of a loan or capital
contribution) to or in any Person.
(iv) Except as described in Section 3(b) of the Company Disclosure
Schedule, there are no outstanding securities, options, warrants,
calls, rights, convertible or exchangeable securities,
commitments, agreements, arrangements or undertakings of any kind
(contingent or otherwise) to which the Company or any of its
Subsidiaries is a party or by which any of them is bound
obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of
the Company or of any of its Subsidiaries or obligating the
Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no
outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock (or options or warrants to acquire any
such shares) of the Company or its Subsidiaries. Except as
14
described in Section 3(b) of the Company Disclosure Schedule, as
of the date hereof, there are no stock-appreciation rights,
stock-based performance units, "phantom" stock rights or other
agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any Person is or may
be entitled to receive any payment or other value based on the
revenues, earnings or financial performance, stock price
performance or other attribute of the Company or any of its
Subsidiaries or assets or calculated in accordance therewith
(other than ordinary course payments or commissions to sales
representatives of the Company based upon revenues generated by
them without augmentation as a result of the transactions
contemplated hereby) or to cause the Company or any of its
Subsidiaries to file a registration statement under the
Securities Act, or which otherwise relate to the registration of
any securities of the Company. Except as set forth in Section
3(b) of the Company Disclosure Schedule, there are no voting
trusts, proxies or other agreements, commitments or
understandings of any character to which the Company or any of
its Subsidiaries or, to the Knowledge (as defined herein) of the
Company, any of the Company's stockholders is a party or by which
any of them is bound with respect to the issuance, holding,
acquisition, voting or disposition of any shares of capital stock
of the Company or any of its Subsidiaries.
(c) AUTHORIZATION OF TRANSACTION. The Company has full power and authority
(including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder; provided,
however, that the Company cannot consummate the Merger unless and
until it receives the Requisite Stockholder Approval. This Agreement
constitutes the valid and legally binding obligation of the Company,
enforceable in accordance with its terms and conditions.
(d) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any Law or other restriction of any Authority
to which the Company or any of its Subsidiaries is subject or any
provision of the Charter or bylaws (or equivalent organizational
documents) of the Company or any of its Subsidiaries or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any Party the right to accelerate,
terminate, modify, or cancel, or require any notice or consent under
any agreement, contract, lease, license, instrument, or other
arrangement to which the Company or any of its Subsidiaries is a party
or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Lien upon any of its assets), except
in each case as set forth in Section 3(d) of the Company Disclosure
Schedule or as would not reasonably be expected, individually or in
the aggregate, to result in a Company Materially Adverse Effect
(including by reason of any cross-default). Other than in connection
with the provisions of the Hart-Scott-Rodino Act, the Tennessee
15
Business Corporation Act, the Tennessee Business Combination Act, the
Securities Exchange Act, the Securities Act, the state securities
laws, and the rules and regulations of The Nasdaq Stock Market,
neither the Company nor any of its Subsidiaries needs to give notice
to, make any filing with, or obtain any authorization, consent, or
approval of any Authority in order for the Parties to consummate the
transactions contemplated by this Agreement.
(e) COMPANY PUBLIC REPORTS. The Company has filed all forms, reports,
schedules, statements, and documents required to be filed by it with
the SEC since January 1, 1998 (collectively, the "Company Public
Reports"). Each of the Company Public Reports was filed on a timely
basis and complied with the Securities Act and the Securities Exchange
Act in all material respects. None of the Company Public Reports, as
of their respective dates, (or if amended or superseded, at the time
of such subsequent filing), contained any untrue statement of a
material fact or omitted to state a material fact necessary in order
to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The Company has delivered
to the Parent a correct and complete copy of each Company Public
Report (together with all exhibits and schedules thereto and as
amended to date).
(f) FINANCIAL STATEMENTS. Each of the audited and unaudited financial
statements included in or incorporated by reference into the Company
Public Reports (including the related notes and schedules) (i)
complied in all material respects with applicable requirements of the
SEC with respect thereto; (ii) have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered
thereby; and (iii) present fairly the financial condition of the
Company and its Subsidiaries as of the indicated dates and the results
of operations of the Company and its Subsidiaries for the indicated
periods, provided, however, that the interim statements are subject to
normal and recurring year-end adjustments that have not been and to
the Company's Knowledge will not be material.
(g) EVENTS SUBSEQUENT TO MOST RECENT FISCAL QUARTER END. Since the Most
Recent Fiscal Quarter End, there has not been any event, circumstance,
act, or omission that has resulted in, or reasonably would be expected
to result in, a Company Materially Adverse Effect.
(h) UNDISCLOSED LIABILITIES. Neither the Company nor any of its
Subsidiaries has liabilities or obligations of any nature, (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any
liability for Taxes, which individually or in the aggregate would
reasonably be expected to have a Company Materially Adverse Effect,
except for (i) liabilities or obligations set forth on the face of the
balance sheet dated as of the Most Recent Fiscal Quarter End (rather
than in any notes thereto) and filed in the Company Public Reports;
(ii) liabilities or obligations which have arisen after the Most
Recent Fiscal Quarter End in the Ordinary Course of Business (none of
which results from, arises out of, relates to, is in the nature of, or
16
was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of Law); and (iii) liabilities or
obligations set forth in Section 3(h) of the Company Disclosure
Schedule.
(i) BROKERS' FEES. Except for the fee payable to Merrill Lynch & Co. for
issuing its opinion as to the fairness of the Merger Consideration to
the holders of Company Shares from a financial point of view (the
"Fairness Opinion") and financial advisory services described in
Section 3(i) of the Company Disclosure Schedule, neither the Company
nor any of its Subsidiaries has liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(j) DISCLOSURE. None of the information supplied by the Company for
inclusion in the Registration Statement or any amendment or supplement
thereto, shall, at the time such document is filed, at the time
amended or supplemented and at the time the Registration Statement is
declared effective by the SEC, 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 were made, not misleading. None
of the information supplied by the Company for inclusion in the
Definitive Proxy Materials shall, on the date such materials are first
mailed to the stockholders of the Company and Parent, at the time of
the Special Meetings, and 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 false or misleading or omit to state any material fact
necessary to correct any statement in any earlier communication with
respect to the Special Meetings which has become false or misleading.
If at any time prior to the Effective Time any event relating to the
Company or any of its respective Affiliates, officers or directors
should be discovered by the Company which should be set forth in an
amendment or supplement to the Registration Statement or an amendment
or supplement to the Definitive Proxy Materials, the Company shall
promptly inform Parent and Merger Sub. The Definitive Proxy Materials
shall comply in all material respects as to form and substance with
the requirements of the Exchange Act and the regulations promulgated
thereunder. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by
the Company which is contained in the Registration Statement or
Definitive Proxy Materials.
(k) EMPLOYEE BENEFIT PLANS.
(i) Section 3(k) of the Company Disclosure Schedule includes a
complete list of all Company Benefit Plans.
(ii) With respect to each Company Benefit Plan, the Company has
provided to the Parent a true, correct and complete copy of: (i)
all plan documents, benefit schedules, trust agreements, and
insurance contracts and other funding vehicles; (ii) the most
recent Annual Report (Form 5500 Series) and accompanying
17
schedule, if any; (iii) the current summary plan description, if
any; (iv) the most recent annual financial report, if any; (v)
the most recent actuarial report, if any; and (vi) the most
recent determination letter from the Internal Revenue Service
(the "IRS"), if any.
(iii) The Company and each of its Subsidiaries has complied, and is
now in compliance in all material respects with, all provisions
of ERISA, the Code, and all Laws applicable to the Company
Benefit Plans. With respect to each Company Benefit Plan that is
intended to be a "qualified plan" within the meaning of Section
401(a) of the Code, the IRS has issued a favorable determination
letter, and to the Knowledge of the Company nothing has occurred
at the date hereof that reasonably would be expected to cause the
loss of such qualification.
(iv) All contributions required to be made to any Company Benefit Plan
by applicable Law or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to
insurance policies funding any Company Benefit Plan, for any
period through the date hereof have been timely made or paid in
full or, to the extent not required to be made or paid on or
before the date hereof, have been fully reflected in the
financial statements of the Company included in the Company
Public Reports to the extent required under GAAP.
(v) With respect to each Company Benefit Plan which is subject to
Title IV or Section 302 of ERISA or Section 412 of the Code
maintained or contributed to (or required to be contributed to)
by the Company, any of its Subsidiaries or any ERISA Affiliate,
(i) there does not now exist, nor do any circumstances exist that
could result in, any liability of the Company or any of its
Subsidiaries under Title IV of ERISA (other than for the payment
of premiums, all of which have been paid when due), (ii) neither
the Company nor any of its Subsidiaries has incurred any
accumulated funding deficiency within the meaning of Section 302
of ERISA or Section 412 of the Code (whether or not waived) and
there has been no waiver or application for a waiver of any
minimum funding standard or extension of any amortization period
under Section 412 of the Code or Part 3 of Subtitle B of Title I
of ERISA, (iii) no "reportable event" (as such term is defined in
Section 4043 of ERISA and the regulations thereunder) has
occurred or is expected to occur, (iv) no notice of intent to
terminate has been filed with the Pension Benefit Guaranty
Corporation, (v) the Pension Benefit Guaranty Corporation has not
instituted any proceedings to terminate the plan or to appoint a
trustee to administer the plan, and (vi) there has been no event
requiring disclosure under Section 4063(a) of ERISA. For purposes
of this Section 3(k), the term "ERISA Affiliate" shall mean any
business or entity (whether or not incorporated) which is a
member of the same "controlled group of corporations," under
"common control," or an "affiliated service group" with the
18
Company or any of its Subsidiaries within the meaning of Section
414(b), (c) or (m) of the Code, or is under "common control" with
the Company or any of its Subsidiaries within the meaning of
Section 4001(a)(14) of ERISA.
(vi) Neither the Company nor any of its Subsidiaries nor any ERISA
Affiliate has been required to contribute to, or incurred any
withdrawal liability (within the meaning of Section 4201 of
ERISA) with respect to any plan which is a multiemployer plan as
defined in Section 3(37) of ERISA (a "Multiemployer Plan").
Neither the Company nor any of its Subsidiaries nor any ERISA
Affiliate has completely or partially withdrawn from any
Multiemployer Plan. No Multiemployer Plan as to which the
Company, any of its Subsidiaries or any ERISA Affiliate is
required to contribute is in reorganization within the meaning of
Part 3 of Subtitle E of Title IV of ERISA. The Company shall
deliver to Parent, prior to the Closing, a schedule showing the
contributions of the Company, any of its Subsidiaries, and any
ERISA Affiliates to each of the Multiemployer Plans for the most
recent five plan years.
(vii) There are no pending actions, claims or lawsuits which have been
asserted, instituted or, to the Knowledge of the Company,
threatened in connection with any of the Company Benefit Plans
(other than routine claims for benefits) which would reasonably
be expected, individually or in the aggregate, to result in a
Company Materially Adverse Effect.
(viii) Neither the Company nor any of its Subsidiaries maintains or
contributes to any plan or arrangement which provides or has any
liability to provide life insurance or medical or other welfare
benefits to any employee, former employee, director or former
director upon his retirement or termination of service, and
neither the Company nor any of its Subsidiaries has ever
represented, promised, or contracted (whether in oral or written
form) to any employee, former employee, director or former
director that such benefits would be provided.
(ix) The Company and its Subsidiaries are in compliance in all
material respects with the continuation coverage provisions of
Section 601 et seq. of ERISA and Section 4980B of the Code.
(l) EMPLOYMENT AND LABOR MATTERS.
(i) Section 3(l) of the Company Disclosure Schedule identifies all
employees and consultants employed or engaged by the Company with
an annual base salary or compensation rate of $80,000 or higher
and sets forth each such individual's rate of pay or annual
compensation, job title and date of hire. Except as set forth in
Section 3(l) of the Company Disclosure Schedule, there are no
19
employment, consulting, collective bargaining, severance pay,
continuation pay, termination or indemnification agreements or
other similar contracts of any nature (whether in writing or not)
between the Company or any Subsidiary and any current or former
stockholder, officer, director, employee, consultant, labor
organization or other representative of any of the Company's or
Subsidiary's employees, nor is any such contract presently being
negotiated. Except as set forth in Section 3(l) of the Company
Disclosure Schedule, no individual will accrue or receive
additional benefits, service or accelerated rights to payments
under any Benefit Plan or any of the agreements set forth in
Section 3(l) of the Company Disclosure Schedule, including the
right to receive any parachute payment, as defined in Section
280G of the Code, or become entitled to severance, termination
allowance or similar payments as a result of the Merger that
could result in the payment of any such benefits or payments.
Neither the Company nor any Subsidiary is delinquent in payments
to any of its employees or consultants for any wages, salaries,
commissions, bonuses, benefits or other compensation for any
services or otherwise arising under any policy, practice,
agreement, plan, program or Law. Except as set forth in Section
3(l) of the Company Disclosure Schedule, neither the Company nor
any Subsidiary is liable for any severance pay or other payments
to any employee or former employee arising from the termination
of employment, nor will the Company or any Subsidiary have any
liability under any benefit or severance policy, practice,
agreement, plan, or program which exists or arises, or may be
deemed to exist or arise, under any applicable Law or otherwise,
as a result of or in connection with the transactions
contemplated hereunder or as a result of the termination by the
Company or any Subsidiary of any Persons employed by the Company
or any Subsidiary on or prior to the Effective Time.
(ii) Except as set forth in Section 3(l) of the Company Disclosure
Schedule, none of the Company's or any Subsidiary's employment
policies or practices is currently being audited or investigated
by any Authority. Except as set forth in Section 3(l) of the
Company Disclosure Schedule, there is no pending or, to the
Knowledge of the Company, threatened Litigation, unfair labor
practice charge, or other charge or inquiry against the Company
or any Subsidiary brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor
organization or other representative of the Company's or
Subsidiary's employee, or other individual or any Authority with
respect to employment practices brought by or before any
Authority. Except as set forth in Section 3(l) of the Company
Disclosure Schedule, there are no controversies pending or
threatened, between the Company or any of its Subsidiaries and
any of their respective employees; neither the Company nor any of
its Subsidiaries is a party to any collective bargaining
agreement or other labor union contract applicable to Persons
20
employed by the Company or its Subsidiaries nor are there any
activities or proceedings of any labor union to organize any such
employees of the Company or any of its Subsidiaries; during the
past five years there have been no strikes, slowdowns, work
stoppages, disputes, lockouts, or threats thereof, by or with
respect to any employees of the Company or any of its
Subsidiaries. Except as set forth in Section 3(l) of the Company
Disclosure Schedule, there are no grievances pending or, to the
Knowledge of the Company or any Subsidiary, threatened, which
could reasonably be expected to have a Company Materially Adverse
Effect. Neither the Company nor any Subsidiary is a party to, or
otherwise bound by, any consent decree with, or citation or other
Order by, any Authority relating to employees or employment
practices. The Company and each of its Subsidiaries are in
compliance in all material respects with all applicable Laws,
contracts, and policies relating to employment.
(m) ENVIRONMENTAL MATTERS. Except as set forth in Section 3(m) of the
Company Disclosure Schedule or except as would not reasonably be
expected, individually or in the aggregate, to have a Company
Materially Adverse Effect, (i) no Hazardous Materials are present at,
on or under any real property currently or, to the Company's
Knowledge, formerly owned, leased, or operated by the Company or any
of its Subsidiaries to an extent or in a manner or condition now
requiring investigation, response, corrective action, or other action,
or, to the Company's Knowledge, that could result in liability of, or
costs to, the Company or any of its Subsidiaries, under any
Environmental Law, (ii) there is currently no civil, criminal, or
administrative action, suit, demand, hearing, proceeding notice of
violation, investigation, notice or demand letter, or request for
information pending or to the knowledge of the Company, threatened,
under any Environmental Law against the Company or any of its
Subsidiaries, (iii) the Company and its Subsidiaries have not received
any claims or notices alleging liability under any Environmental Law,
and the Company has no knowledge of any circumstances that would
reasonably be expected to result in such claims or notices, (iv) the
Company and each of its Subsidiaries are currently in compliance, and
within the period of applicable statutes of limitation have complied,
with all, and, to the Company 's Knowledge, have no liability under
any, applicable Environmental Laws, (v) the Company has not been
notified about any property or facility currently or, to the Company's
Knowledge as of the date hereof, formerly owned, leased, or operated
by the Company or any of its Subsidiaries or any of their respective
predecessors-in-interest, or at which Hazardous Materials of the
Company or any of its Subsidiaries have been stored, treated, or
disposed of is listed or proposed for listing on the National
Priorities List or the Comprehensive Environmental Response,
Compensation and Liability Information System, both promulgated under
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, or on any comparable state or foreign list
established under any Environmental Law, (vi) the execution, delivery,
21
and performance of this Agreement and the consummation of the
transactions contemplated hereby will not affect the validity or
require the transfer of any Environmental Permits held by the Company
or any of its Subsidiaries, and will not require any notification,
disclosure, registration, reporting, filing, investigation,
remediation, or other action under any Environmental Law, (vii) no
friable asbestos is present in, on, or at any property, facility or
equipment of the Company or any of its Subsidiaries, (viii) there are
no past or present events, conditions, activities, or practices which
could reasonably be expected to prevent the Company and its
Subsidiaries' compliance with any Environmental Law, or which would
reasonably be expected to give rise to any liability of the Company or
any of its Subsidiaries under any Environmental Law, (ix) no Lien has
been asserted or recorded, or to the Knowledge of the Company and each
of its Subsidiaries threatened, under any Environmental Law with
respect to any assets, facility, inventory, or property currently
owned, leased or operated by the Company or any of its Subsidiaries,
(x) neither the Company nor any of its Subsidiaries has assumed by
contract or agreement any liabilities or obligations arising under any
Environmental Law including, without limitation, any such liabilities
or obligations with respect to formerly owned, leased or operated real
property or facilities, or former divisions or Subsidiaries, (xi)
neither the Company nor any of its Subsidiaries has entered into or
agreed to any Order by any judicial or administrative tribunal or
agency and neither the Company nor any of its Subsidiaries is subject
to any Order or agreement, in each case relating to compliance with
any Environmental Law or requiring the Company or any of its
Subsidiaries to conduct any investigation, response, corrective or
other action with respect to any Hazardous Materials under any
Environmental Law, and (xii) other than disclosed on Schedule 3(m) of
the Company Disclosure Schedule there are no underground storage tanks
or above-ground storage tanks or related piping at any real property
owned, operated, or leased by the Company or any of its Subsidiaries,
and any former such tanks and piping on any such property which have
been removed or closed, have been removed or closed in accordance with
applicable Environmental Laws.
For purposes of this Agreement, the term "Environmental Laws" means
the common law and all applicable federal, state, local, and foreign
Laws, rules, regulations, codes, or Orders issued, promulgated,
approved, or entered thereunder relating to pollution or protection of
human health and safety or the environment (including, without
limitation, ambient air, indoor air, surface water, ground water, land
surface, subsurface strata, and natural resources such as wetlands,
flora, fauna), including without limitation, Laws relating to
emissions, discharges, releases or threatened releases of Hazardous
Materials into the environment, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment,
storage, disposal, transport, or handling of Hazardous Materials. For
purposes of this Agreement, the term "Hazardous Materials" means any
pollutant, contaminant, toxic, hazardous or extremely hazardous
substance, constituent or waste, or any other constituent, waste,
22
chemical, compound, material or substance, including without
limitation, petroleum or any petroleum product, including crude oil or
any fraction thereof, subject to regulation by or that can give rise
to liability under any Environmental Law. For purposes of this
Agreement, the term "Environmental Permit" means any permit, license,
approval, consent, or other authorization provided or issued by any
government or regulatory Authority pursuant to an Environmental Law.
The Company has made available to the Parent all records and files,
including, but not limited to, all assessments, reports, studies,
audits, analyses, tests, and data in the possession or control of the
Company or any of its Subsidiaries relating to the existence of
Hazardous Materials at facilities or properties currently or formerly
owned, operated, leased or used by the Company or any of its
Subsidiaries or in any way concerning compliance by the Company and
any of its Subsidiaries with, or liability of any of them, under, any
Environmental Law.
(n) TAKEOVER STATUTES. The Board of Directors of the Company has taken all
appropriate and necessary actions such that Parent and the Merger Sub
will not be prohibited from entering into a "business combination"
with the Company as an "interested stockholder" (in each case as such
term is used in Section 48-103-205 of the Tennessee Business
Combination Act) as a result of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
No other "fair price," "moratorium," "control share acquisition," or
other similar anti-takeover statute or regulation as in effect on the
date hereof is applicable to the Company, the Company Shares, the
Merger, or the other transactions contemplated by this Agreement. No
takeover statute or similar Law and no provision of the Charter or
bylaws, or other organizational documents or governing instruments of
the Company or any of its Subsidiaries or any material agreement to
which any of them is a party (a) would or would purport to impose
restrictions which might adversely affect or delay the consummation of
the transactions contemplated by this Agreement, or (b) as a result of
the consummation of the transactions contemplated by this Agreement,
or the acquisition of securities of the Company or the Surviving
Corporation by Parent or Merger Sub (i) would or would purport to
restrict or impair the ability of Parent to vote or otherwise exercise
the rights of a Stockholder with respect to securities of the Company
or any of its Subsidiaries that may be acquired or controlled by
Parent or (ii) would or would purport to entitle any Person to acquire
securities of the Company or the Parent (except for the Parent Shares
issued as Merger Consideration in accordance with Section 2 hereof).
(o) TAX MATTERS. With respect to Taxes except as set forth in Section 3(o)
of the Company Disclosure Schedule:
(i) To the best Knowledge of the Company, the Company has filed,
within the time and in the manner prescribed by Law, all returns,
declarations, reports, estimates, information returns, and
23
statements (the "Returns") required to be filed under applicable
Law, and all such Returns are true, correct, and complete. The
Company has within the time and in the manner prescribed by Law,
paid all Taxes that are due and payable with respect to it and
its consolidated group. The Company has established on the
balance sheet dated as of the Most Recent Fiscal Quarter End
reserves, charges, and accruals that are adequate for the payment
of all Taxes not yet due and payable that are attributable to
periods ending on such date. There are no Liens for Taxes upon
the assets of the Company except for Liens for Taxes not yet
delinquent.
(ii) To the best Knowledge of the Company, no action, suit,
proceeding, investigation, claim or audit has formally commenced
and no written notice has been given that such audit or other
proceeding is pending or threatened with respect to the Company
or any of its Subsidiaries or any group of corporations of which
any of the Company and its Subsidiaries has been a member in
respect of any Taxes, and all deficiencies proposed as a result
of such actions, suits, proceedings, investigations, claims or
audits have been paid, reserved against or settled. There are no
outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Tax
or Return that have been requested or given by or that relate to
the Company.
(iii) The Company and, if applicable, its agents and contracted
service providers, have complied in all respects with all
applicable Laws relating to the payment and withholding of Taxes
and have, within the time and in the manner prescribed by
applicable Law, withheld, collected, and paid over to the proper
Authority all amounts required to be so withheld, collected, and
paid over under all applicable Laws.
(iv) The Company and its Subsidiaries have not made any payments, are
not obligated to make any payments, and are not a party to any
agreements that under any circumstances could obligate any of
them to make any payments, that will not be deductible under
Section 280G of the Code. Neither the Company nor any of its
Subsidiaries has made an election under Section 341(f) of the
Code. None of the Company and its Subsidiaries will be required
to include any material amount in taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a
result of a change in the method of accounting for a taxable
period ending prior to the Closing Date, any "closing agreement"
as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign Tax Laws) entered into prior
to the Closing Date, any sale reported on the installment method
that occurred prior to the Closing Date, or any taxable income
attributable to any amount that is economically accrued prior to
the Closing Date.
24
(p) INSURANCE; BONDS. Section 3(p) of the Company Disclosure Schedule
contains a list of, and the Parent has been furnished true and
complete copies of, all material insurance policies and fidelity bonds
covering the Company's assets, business, properties, operations,
employees, officers, and directors, and other matters for which the
Company carries insurance. Section 3(p) of the Company Disclosure
Schedule describes any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder, covering any
years in which there are outstanding claims (the earliest of such
years referred to as the "Company Base Year"). Except as set forth in
Section 3(p) of the Company Disclosure Schedule, there is no claim by
any insured pending under any of such policies or bonds as to which
coverage has been questioned, denied, or disputed by the underwriters
of such policies or bonds. All premiums payable under all such
policies and bonds have been paid, and the Company is otherwise in
full compliance with the terms and conditions of all such policies and
bonds. As to all claims that might be covered by such policies or
bonds, the Company has promptly and within any prescribed time period
notified the insuring or bonding party in the proper manner. Except
for claims listed on Section 3(p) of the Company Disclosure Schedule,
there have been no notices given to the insurer of any claims that may
be insured by insurer. Such policies of insurance and bonds (or other
policies and bonds providing substantially similar insurance coverage)
have been in effect continuously since the beginning of the Company
Base Year, and remain in full force and effect. Such policies of
insurance and bonds are of the type and in amounts customarily carried
by Persons conducting similar businesses and do not exclude coverage
for punitive damages. Except as set forth in Section 3(p) of the
Company Disclosure Schedule, there is no threatened termination of, or
premium increase with respect to, any of such policies or bonds.
(q) COMPLIANCE. The Company and each of its Subsidiaries are in compliance
with, and are not in default or violation of, (i) its Charter and
bylaws or the equivalent organizational documents of such Subsidiary,
(ii) any Law or Order by which any of their respective assets or
properties are bound or affected, and (iii) the terms of all notes,
bonds, mortgages, indentures, contracts, permits, franchises and other
instruments or obligations to which any of them is a party or by which
any of them or any of their respective assets or properties is bound
or affected, except, in the case of clauses (ii) and (iii), for any
such failures of compliance, defaults and violations which could not,
individually or in the aggregate, reasonably be expected to have a
Company Materially Adverse Effect. The Company and its Subsidiaries
are in compliance with the terms of all approvals of Authorities,
except where the failure to so comply could not, individually or in
the aggregate, reasonably be expected to have a Company Materially
Adverse Effect. Except as set forth in Section 3(q) of the Company
Disclosure Schedule or as could not, individually or in the aggregate,
reasonably be expected to have a Company Materially Adverse Effect,
neither the Company nor any of its Subsidiaries has received notice of
any revocation or modification of any license, permit, consent, or
approval of any Authority that is material to the Company or any of
its Subsidiaries.
25
(r) ABSENCE OF LITIGATION. Except as described in Section 3(r) of the
Company Disclosure Schedule or expressly described in the Company
Public Reports filed and publicly available prior to the date hereof,
there is no Litigation pending on behalf of or against or, to the
Knowledge of the Company, threatened against the Company, any of its
Subsidiaries, or any of their respective properties or rights, before
or subject to any court or governmental Authority which could,
individually or in the aggregate, reasonably be expected to have a
Company Materially Adverse Effect. Neither the Company nor any of its
Subsidiaries is subject to any outstanding Litigation or Order which,
individually or in the aggregate, has had or could reasonably be
expected to have a Company Materially Adverse Effect.
(s) TITLE TO ASSETS. Except as described in Section 3(s) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries has good
and marketable title to all of their real or personal properties
(whether owned or leased) and assets, free and clear of all Liens
other than Liens which are reflected on the Company's consolidated
balance sheet filed in its Form 10-Q for the Most Recent Fiscal
Quarter End.
(t) POOLING; TAX MATTERS.
(i) The Company intends that the Merger be accounted for under the
"pooling of interests" method under the requirements of Opinion
No. 16 (Business Combinations) of the Accounting Principles Board
of the American Institute of Certified Public Accountants, the
Financial Accounting Standards Board, and the regulations of the
SEC.
(ii) To the Knowledge of the Company, neither the Company nor any of
its Affiliates has taken or agreed to take any action, failed to
take any action or is aware of any fact or circumstance that
would prevent (i) the Merger from being treated for financial
accounting purposes as a "pooling of interests" in accordance
with GAAP and the regulations of the SEC; provided, that the sale
of Company Shares described in Section 5(i) are taken; or (ii)
the Merger from constituting a reorganization within the meaning
of Section 368(a) of the Code.
(iii) Assuming the issuance of Company Shares described in Section
5(i), the Company has no Knowledge of any reason why it may not
receive a letter from its independent accountants dated as of the
Closing Date and addressed to the Company in which such
accountants will concur with the Company's management's
conclusion that no conditions exist related to the Company that
would preclude Parent from accounting for the Merger as a
"pooling of interests."
26
(iv) Section 3(t) of the Company Disclosure Schedule contains a true
and complete list of all Persons who, to the Knowledge of the
Company, may be deemed to be Affiliates of the Company, excluding
all of its Subsidiaries but including all directors and executive
officers of the Company.
(u) OPINION OF FINANCIAL ADVISOR. The Company has no knowledge of any
reason why it may not receive the written opinion of Merrill Lynch &
Co. to the effect that, in its opinion, as of the date hereof, the
Merger Consideration is fair to the holders of the Company Shares from
a financial point of view. The aggregate fees and expenses paid or to
be paid to Merrill Lynch & Co. shall not exceed $500,000.
(v) MATERIAL AGREEMENTS. Except as described on Section 3(v) of the
Company Disclosure Schedule, there are no agreements of the Company or
its Subsidiaries (i) containing an unexpired covenant not to compete
or similar restriction applying to the Company or any of its
Subsidiaries; (ii) providing for interest rate, currency, or commodity
hedging, swap or similar derivative transactions to which the Company
or its Subsidiaries is a party; (iii) providing for payment based on
revenues, sales or profits; (iv) between the Company or any of its
Subsidiaries, on the one hand, and any Affiliate of the Company, on
the other hand; (v) which, if terminated by the Company upon not more
than 30 days' notice would result in liability to the Company of more
than $1 million; or (vi) that would be required to be filed and have
not been filed as an exhibit to a Form 10-K filed by the Company with
the SEC as of the date of this Agreement (collectively, the "Company
Material Agreements"). Assuming each Company Material Agreement
constitutes a valid and binding obligation of each other Party
thereto, each Company Material Agreement is a valid and binding
obligation of the Company or the applicable Subsidiary, as the case
may be. To the Company's Knowledge, each Company Material Agreement is
a valid and binding obligation of each other Party thereto, and each
such Company Material Agreement is in full force and effect. To the
Knowledge of the Company, there are no existing defaults (or
circumstances or events that, with the giving of notice or lapse of
time or both would become defaults) of the Company, any Subsidiary, or
any third party under any of the Company Material Agreements.
(w) INTELLECTUAL PROPERTY.
(i) Except as would not, individually and in the aggregate, have a
Company Materially Adverse Effect, (i) the Company and each of
its Subsidiaries owns, has the right to acquire or is licensed or
otherwise has the right to use (in each case, clear of any Liens
of any kind), all Intellectual Property used in or necessary for
the conduct of its business as currently conducted, (ii) no
claims are pending or, to the Knowledge of the Company,
27
threatened that the Company or any of its Subsidiaries is
infringing on or otherwise violating the rights of any Person
with regard to any Intellectual Property and (iii) to the
Knowledge of the Company, no Person is infringing on or otherwise
violating any right of the Company or any of its Subsidiaries
with respect to any Intellectual Property owned by and/or
licensed to the Company or its Subsidiaries.
(ii) Section 3(w) of the Company Disclosure Schedule sets forth, as of
the date hereof, a true and complete list of all Intellectual
Property of the Company and each of its Subsidiaries, the loss or
impairment of which would cause a Company Materially Adverse
Effect.
(iii) For purposes of this Agreement, "Intellectual Property" shall
mean patents, copyrights, trademarks (registered or
unregistered), service marks, brand names, trade dress, trade
names, computer software programs and applications (including
imbedded software), the goodwill associated with the foregoing
and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing; and trade secrets and
rights in any jurisdiction to limit the use or disclosure thereof
by any person.
4. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE MERGER SUB. Except as
set forth in the disclosure schedule prepared by the Parent and attached as
Exhibit I (the "Parent Disclosure Schedule"), which is arranged to
correspond to the numbered and lettered paragraphs contained in the
applicable sections of this Agreement, each of the Parent and the Merger
Sub represents and warrants to the Company as follows:
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of Parent and
Merger Sub is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation.
Section 4(a) of the Parent Disclosure Schedule sets forth, as of the
date hereof, a true and complete list of all of the Parent's directly
and indirectly owned Subsidiaries, together with the jurisdiction of
incorporation or organization of each Subsidiary and the percentage of
each Subsidiary's outstanding capital stock or other equity or other
interest owned by the Parent or another Subsidiary of the Parent.
Except as set forth in Section 4(a) of the Parent Disclosure Schedule,
neither the Parent nor any of its Subsidiaries owns any equity or
similar interest in, or any interest convertible into or exchangeable
or exercisable for, directly or indirectly, any equity or similar
interest in, any Person. Each of the Parent and its Subsidiaries is
duly authorized to conduct business and is in good standing under the
laws of each jurisdiction where such qualification is required, except
where the lack of such qualification would not have a materially
adverse effect on the business, financial condition, operations,
results of operations, or future prospects of the Parent and its
Subsidiaries taken as a whole (a "Parent Materially Adverse Effect").
Each of the Parent and all of its Subsidiaries has full corporate
power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Parent has
28
heretofore furnished to the Company a true and complete copy of each
of its and each of its Subsidiaries' Charter and bylaws or equivalent
organizational documents, as amended or restated to the date hereof.
Such Charter and bylaws and equivalent organizational documents of the
Parent and each of its Subsidiaries are in full force and effect, and
no other organizational documents are applicable to or binding upon
the Parent or its Subsidiaries.
(b) CAPITALIZATION.
(i) The entire authorized capital stock of the Parent consists of
150,000,000 Parent Shares and 1,000,000 shares of Parent's
preferred stock par value $.01 per share. As of the date hereof,
(i) 63,260,791 Parent Shares were issued and outstanding and zero
shares of Parent's preferred stock were issued and outstanding;
(ii) 2,917,850 Parent Shares were held in the treasury of Parent;
(iii) no Parent Shares were held by any Subsidiary of Parent; and
(iv) 5,341,652 Parent Shares were duly reserved for future
issuance pursuant to employee and director stock options granted
pursuant to the Parent's three stock option plans (the "Parent
Stock Option Plans"), of which 5,001,102 represented Parent
Shares reserved for options that had been granted prior to the
date hereof (the "Outstanding Parent Stock Options").
(ii) None of the outstanding Parent Shares are subject to, nor were
they issued in violation of any, purchase option, call option,
right of first refusal, preemptive right, subscription right or
any similar right. Except as set forth above and in Section 4(b)
of the Parent Disclosure Schedule, no shares of voting or
non-voting capital stock, other equity interests, or other voting
securities of the Parent were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of the
Parent are, and all shares which may be issued upon the exercise
of stock options and similar purchase rights will be, when
issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to any kind of preemptive (or
similar) rights. There are no bonds, debentures, notes or other
indebtedness of the Parent with voting rights (or convertible
into, or exchangeable for, securities with voting rights) on any
matters on which stockholders of the Parent may vote.
(iii) All of the outstanding shares of capital stock of each of the
Parent's Subsidiaries have been duly authorized, validly issued,
fully paid and nonassessable, are not subject to, and were not
issued in violation of, any preemptive (or similar) rights, and
are owned, of record and beneficially, by the Parent or one of
its direct or indirect Subsidiaries, free and clear of all Liens
whatsoever. Except as set forth in Section 4(b) of the Parent
Disclosure Schedule, there are no restrictions of any kind which
prevent the payment of dividends by any of the Parent 's
Subsidiaries, and neither the Parent nor any of its Subsidiaries
is subject to any obligation or requirement to provide funds for
or to make any investment (in the form of a loan or capital
contribution) to or in any Person.
29
(iv) Except as described in Section 4(b) of the Parent Disclosure
Schedule, there are no outstanding securities, options, warrants,
calls, rights, convertible or exchangeable securities,
commitments, agreements, arrangements or undertakings of any kind
(contingent or otherwise) to which the Parent or any of its
Subsidiaries is a party or by which any of them is bound
obligating the Parent or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of
the Parent or of any of its Subsidiaries or obligating the Parent
or any of its Subsidiaries to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. There are no outstanding
contractual obligations of the Parent or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital
stock (or options or warrants to acquire any such shares) of the
Parent or its Subsidiaries. Except as described in Section 4(b)
of the Parent Disclosure Schedule, as of the date hereof, there
are no stock-appreciation rights, stock-based performance units,
"phantom" stock rights or other agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant
to which any Person is or may be entitled to receive any payment
or other value based on the revenues, earnings or financial
performance, stock price performance or other attribute of the
Parent or any of its Subsidiaries or assets or calculated in
accordance therewith (other than ordinary course payments or
commissions to sales representatives of the Parent based upon
revenues generated by them without augmentation as a result of
the transactions contemplated hereby) or to cause the Parent or
any of its Subsidiaries to file a registration statement under
the Securities Act, or which otherwise relate to the registration
of any securities of the Parent. Except as set forth in Section
4(b) of the Parent Disclosure Schedule, there are no voting
trusts, proxies or other agreements, commitments or
understandings of any character to which the Parent or any of its
Subsidiaries or, to the Knowledge of the Parent, any of the
Parent 's stockholders is a party or by which any of them is
bound with respect to the issuance, holding, acquisition, voting
or disposition of any shares of capital stock of the Parent or
any of its Subsidiaries.
(c) AUTHORIZATION OF TRANSACTION. Each of the Parent and the Merger Sub
has full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform its
obligations hereunder; provided, however, that the Parent cannot
consummate the Merger unless and until it receives the Requisite
Stockholder Approval. This Agreement constitutes the valid and legally
binding obligation of each of the Parent and the Merger Sub,
enforceable in accordance with its terms and conditions.
30
(d) NONCONTRAVENTION. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any Law or other restriction of any Authority
to which either the Parent or the Merger Sub is subject or any
provision of the Charter or bylaws of either the Parent or the Merger
Sub or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any Party the right to
accelerate, terminate, modify, or cancel, or require any notice or
consent under any agreement, contract, lease, license, instrument, or
other arrangement to which either the Parent or the Merger Sub is a
party or by which either is bound or to which any of their assets is
subject (or result in the imposition of any Lien upon any of its
assets), except in each case as set forth in Section 4(d) of the
Parent Disclosure Schedule or as would not reasonably be expected,
individually or in the aggregate, to have a Parent Materially Adverse
Effect (including by reason of any cross-default). Other than in
connection with the provisions of the Hart-Scott-Rodino Act, the
Tennessee Business Corporation Act, the Tennessee Business Combination
Act, the Nevada General Corporation Law, the Securities Exchange Act,
the Securities Act, state securities laws, and the rules and
regulations of The Nasdaq Stock Market, neither the Parent nor any of
its Subsidiaries needs to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any Authority in
order for the Parties to consummate the transactions contemplated by
this Agreement.
(e) PARENT PUBLIC REPORTS. The Parent has filed all forms, reports,
schedules, statements, and documents required to be filed by it with
the SEC since January 1, 1998 (collectively, the "Parent Public
Reports"). Each of the Parent Public Reports has complied with the
Securities Act and the Securities Exchange Act in all material
respects. None of the Parent Public Reports, as of their respective
dates (or if amended or superseded, at the time of such subsequent
filing), contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were
made, not misleading. The Parent has delivered to the Company a
correct and complete copy of each Parent Public Report (together with
all exhibits and schedules thereto and as amended to date).
(f) FINANCIAL STATEMENTS. Each of the audited and unaudited financial
statements included in or incorporated by reference into the Parent
Public Reports (including the related notes and schedules) (i)
complied in all material respects with applicable requirements of the
SEC with respect thereto; (ii) have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered
thereby; and (iii) present fairly the financial condition of the
Parent and its Subsidiaries as of the indicated dates and the results
of operations of the Parent and its Subsidiaries for the indicated
periods, provided, however, that the interim statements are subject to
normal and recurring year-end adjustments that have not been and to
the Parent's Knowledge will not be material.
31
(g) EVENTS SUBSEQUENT TO MOST RECENT FISCAL QUARTER END. Since the Most
Recent Fiscal Quarter End, there has not been any event, circumstance,
act, or omission that has resulted in, or reasonably would be expected
to result in, a Parent Materially Adverse Effect.
(h) UNDISCLOSED LIABILITIES. Neither the Parent nor any of its
Subsidiaries has liabilities or obligations of any nature, (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any
liability for Taxes, which individually or in the aggregate would
reasonably be expected to have a Parent Materially Adverse Effect,
except for (i) liabilities set forth on the face of the balance sheet
dated as of the Most Recent Fiscal Quarter End (rather than in any
notes thereto) and filed in the Parent Public Reports; (ii)
liabilities or obligations which have arisen after the Most Recent
Fiscal Quarter End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort,
infringement, or violation of Law); and (iii) liabilities or
obligations set forth in Section 4(h) of the Parent Disclosure
Schedule.
(i) BROKERS' FEES. Neither the Parent nor any of its Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement for which the Company could become liable or obligated.
(j) DISCLOSURE. None of the information supplied by the Parent for
inclusion in the Registration Statement or any amendment or supplement
thereto, shall, at the time such document is filed, at the time
amended or supplemented and at the time the Registration Statement is
declared effective by the SEC, 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 were made, not misleading. None
of the information supplied by the Parent for inclusion in the
Definitive Proxy Materials shall, on the date such materials are first
mailed to the stockholders of the Company and Parent, at the time of
the Special Meetings, and 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 false or misleading or omit to state any material fact
necessary to correct any statement in any earlier communication with
respect to the Special Meetings which has become false or misleading.
If at any time prior to the Effective Time any event relating to the
Parent or any of its respective Affiliates, officers or directors
32
should be discovered by the Parent which should be set forth in an
amendment or supplement to the Registration Statement or an amendment
or supplement to the Definitive Proxy Materials, the Parent shall
promptly inform Company and Merger Sub. The Definitive Proxy Materials
shall comply in all material respects as to form and substance with
the requirements of the Exchange Act and the regulations promulgated
thereunder. Notwithstanding the foregoing, the Parent makes no
representation or warranty with respect to any information supplied by
Parent or Merger Sub which is contained in the Registration Statement
or Definitive Proxy Materials.
(k) EMPLOYEE BENEFIT PLANS.
(i) Section 4(k) of the Parent Disclosure Schedule includes a
complete list of all Parent Benefit Plans.
(ii) With respect to each Parent Benefit Plan, the Parent shall
provide prior to the Closing a true, correct and complete copy
of: (i) all plan documents, benefit schedules, trust agreements,
and insurance contracts and other funding vehicles; (ii) the most
recent Annual Report (Form 5500 Series) and accompanying
schedule, if any; (iii) the current summary plan description, if
any; (iv) the most recent annual financial report, if any; (v)
the most recent actuarial report, if any; and (vi) the most
recent determination letter from the IRS, if any.
(iii) The Parent and each of its Subsidiaries has complied, and is now
in compliance in all material respects with, all provisions of
ERISA, the Code, and all Laws applicable to the Parent Benefit
Plans. With respect to each Parent Benefit Plan that is intended
to be a "qualified plan" within the meaning of Section 401(a) of
the Code, the IRS has issued a favorable determination letter,
and to the Knowledge of the Parent nothing has occurred at the
date hereof that reasonably would be expected to cause the loss
of such qualification.
(iv) All contributions required to be made to any Parent Benefit Plan
by applicable Law or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to
insurance policies funding any Parent Benefit Plan, for any
period through the date hereof have been timely made or paid in
full or, to the extent not required to be made or paid on or
before the date hereof, have been fully reflected in the
financial statements of the Parent included in the Parent Public
Reports to the extent required under GAAP.
(v) With respect to each Parent Benefit Plan which is subject to
Title IV or Section 302 of ERISA or Section 412 of the Code
maintained or contributed to (or required to be contributed to)
by the Parent, any of its Subsidiaries or any ERISA Affiliate (as
hereinafter defined), (i) there does not now exist, nor do any
33
circumstances exist that could result in, any liability of the
Parent or any of its Subsidiaries under Title IV of ERISA (other
than for the payment of premiums, all of which have been paid
when due), (ii) neither the Parent nor any of its Subsidiaries
has incurred any accumulated funding deficiency within the
meaning of Section 302 of ERISA or Section 412 of the Code
(whether or not waived) and there has been no waiver or
application for a waiver of any minimum funding standard or
extension of any amortization period under Section 412 of the
Code or Part 3 of Subtitle B of Title I of ERISA, (iii) no
"reportable event" (as such term is defined in Section 4043 of
ERISA and the regulations thereunder) has occurred or is expected
to occur, (iv) no notice of intent to terminate has been filed
with the Pension Benefit Guaranty Corporation, (v) the Pension
Benefit Guaranty Corporation has not instituted any proceedings
to terminate the plan or to appoint a trustee to administer the
plan, and (vi) there has been no event requiring disclosure under
Section 4063(a) of ERISA. For purposes of this Section 4(k), the
term "ERISA Affiliate" shall mean any business or entity (whether
or not incorporated) which is a member of the same "controlled
group of corporations," under "common control," or an "affiliated
service group" with the Parent or any of its Subsidiaries within
the meaning of Section 414(b), (c) or (m) of the Code, or is
under "common control" with the Parent or any of its Subsidiaries
within the meaning of Section 4001(a)(14) of ERISA.
(vi) Neither the Parent nor any of its Subsidiaries nor any ERISA
Affiliate has been required to contribute to, or incurred any
withdrawal liability (within the meaning of Section 4201 of
ERISA) with respect to any plan which is a multiemployer plan as
defined in Section 3(37) of ERISA. Neither the Parent nor any of
its Subsidiaries nor any ERISA Affiliate has completely or
partially withdrawn from any Multiemployer Plan. No Multiemployer
Plan as to which the Parent, any of its Subsidiaries or any ERISA
Affiliate is required to contribute is in reorganization within
the meaning of Part 3 of Subtitle E of Title IV of ERISA. The
Parent shall deliver to the Company, prior to the Closing, a
schedule showing the contributions of the Parent, any of its
Subsidiaries, and any ERISA Affiliates to each of the
Multiemployer Plans for the most recent five plan years.
(vii) There are no pending actions, claims or lawsuits which have been
asserted, instituted or, to the Knowledge of the Parent,
threatened in connection with any of the Parent Benefit Plans
(other than routine claims for benefits) which reasonably would
be expected, individually or in the aggregate, to result in a
Parent Materially Adverse Effect.
(viii) Neither the Parent nor any of its Subsidiaries maintains or
contributes to any plan or arrangement which provides or has any
liability to provide life insurance or medical or other welfare
benefits to any employee, former employee, director or former
34
director upon his retirement or termination of service, and
neither the Parent nor any of its Subsidiaries has ever
represented, promised, or contracted (whether in oral or written
form) to any employee, former employee, director or former
director that such benefits would be provided.
(ix) The Parent and its Subsidiaries are in compliance in all material
respects with the continuation coverage provisions of Section 601
et seq. of ERISA and Section 4980B of the Code.
(l) EMPLOYMENT AND LABOR MATTERS.
(i) Except as set forth in Section 4(l) of the Parent Disclosure
Schedule, there are no employment, consulting, collective
bargaining, severance pay, continuation pay, termination or
indemnification agreements or other similar contracts of any
nature (whether in writing or not) between the Parent or any
Subsidiary and any current or former stockholder, officer,
director, employee, consultant, labor organization or other
representative of any of the Parent's or Subsidiary's employees,
nor is any such contract presently being negotiated. Except as
set forth in Section 4(l) of the Parent Disclosure Schedule, no
individual will accrue or receive additional benefits, service or
accelerated rights to payments under any Benefit Plan or any of
the agreements set forth in Section 4(l) of the Parent Disclosure
Schedule, including the right to receive any parachute payment,
as defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a result
of the Merger that could result in the payment of any such
benefits or payments. Neither the Parent nor any Subsidiary is
delinquent in payments to any of its employees or consultants for
any wages, salaries, commissions, bonuses, benefits or other
compensation for any services or otherwise arising under any
policy, practice, agreement, plan, program or Law. Except as set
forth in Section 4(l) of the Parent Disclosure Schedule, neither
the Parent nor any Subsidiary is liable for any severance pay or
other payments to any employee or former employee arising from
the termination of employment, nor will the Parent or any
Subsidiary have any liability under any benefit or severance
policy, practice, agreement, plan, or program which exists or
arises, or may be deemed to exist or arise, under any applicable
Law or otherwise, as a result of or in connection with the
transactions contemplated hereunder or as a result of the
termination by the Parent or any Subsidiary of any Persons
employed by the Parent or any Subsidiary on or prior to the
Effective Time.
(ii) Except as set forth in Section 4(l) of the Parent Disclosure
Schedule, none of the Parent's or any Subsidiary's employment
policies or practices is currently being audited or investigated
by any Authority. Except as set forth in Section 4(l) of the
Parent Disclosure Schedule, there is no pending or, to the
35
Knowledge of the Parent, threatened Litigation, unfair labor
practice charge, or other charge or inquiry against the Parent or
any Subsidiary brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor
organization or other representative of the Parent 's or
Subsidiary's employee, or other individual or any Authority with
respect to employment practices brought by or before any
Authority. Except as set forth in Section 4(l) of the Parent
Disclosure Schedule, there are no controversies pending or
threatened, between the Parent or any of its Subsidiaries and any
of their respective employees; neither the Parent nor any of its
Subsidiaries is a party to any collective bargaining agreement or
other labor union contract applicable to Persons employed by the
Parent or its Subsidiaries nor are there any activities or
proceedings of any labor union to organize any such employees of
the Parent or any of its Subsidiaries; during the past five years
there have been no strikes, slowdowns, work stoppages, disputes,
lockouts, or threats thereof, by or with respect to any employees
of the Parent or any of its Subsidiaries. Except as set forth in
Section 4(l) of the Parent Disclosure Schedule, there are no
grievances pending or, to the Knowledge of the Parent or any
Subsidiary, threatened, which could reasonably be expected to
have a Parent Materially Adverse Effect. Neither the Parent nor
any Subsidiary is a party to, or otherwise bound by, any consent
decree with, or citation or other Order by, any Authority
relating to employees or employment practices. The Parent and
each of its Subsidiaries are in compliance in all material
respects with all applicable Laws, contracts, and policies
relating to employment.
(m) ENVIRONMENTAL MATTERS. Except as set forth in Section 4(m) of the
Parent Disclosure Schedule or except as would not reasonably be
expected, individually or in the aggregate, to have a Parent
Materially Adverse Effect, (i) no Hazardous Materials are present at,
on or under any real property currently or, to the Parent's Knowledge,
formerly owned, leased, or operated by the Parent or any of its
Subsidiaries to an extent or in a manner or condition now requiring
investigation, response, corrective action, or other action, or, to
the Parent's Knowledge, that could result in liability of, or costs
to, the Parent or any of its Subsidiaries, under any Environmental
Law; (ii) there is currently no civil, criminal, or administrative
action, suit, demand, hearing, proceeding notice of violation,
investigation, notice or demand letter, or request for information
pending or to the Knowledge of the Parent, threatened, under any
Environmental Law against the Parent or any of its Subsidiaries, (iii)
the Parent and its Subsidiaries have not received any claims or
notices alleging liability under any Environmental Law, and the Parent
has no Knowledge of any circumstances that would reasonably be
expected to result in such claims or notices, (iv) the Parent and each
of its Subsidiaries are currently in compliance, and within the period
of applicable statutes of limitation have complied, with all, and, to
the Parent's Knowledge, have no liability under any, applicable
36
Environmental Laws, (v) the Parent has not been notified about any
property or facility currently or, to the Parent's Knowledge as of the
date hereof, formerly owned, leased, or operated by the Parent or any
of its Subsidiaries or any of their respective
predecessors-in-interest, or at which Hazardous Materials of the
Parent or any of its Subsidiaries have been stored, treated, or
disposed of is listed or proposed for listing on the National
Priorities List or the Comprehensive Environmental Response,
Compensation and Liability Information System, both promulgated under
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, or on any comparable state or foreign list
established under any Environmental Law, (vi) the execution, delivery,
and performance of this Agreement and the consummation of the
transactions contemplated hereby will not affect the validity or
require the transfer of any Environmental Permits held by the Parent
or any of its Subsidiaries, and will not require any notification,
disclosure, registration, reporting, filing, investigation,
remediation, or other action under any Environmental Law, (vii) no
friable asbestos is present in, on, or at any property, facility or
equipment of the Parent or any of its Subsidiaries, (viii) there are
no past or present events, conditions, activities, or practices which
could reasonably be expected to prevent the Parent and its
Subsidiaries' compliance with any Environmental Law, or which would
reasonably be expected to give rise to any liability of the Parent or
any of its Subsidiaries under any Environmental Law, (ix) no Lien has
been asserted or recorded, or to the Knowledge of the Parent and each
of its Subsidiaries threatened, under any Environmental Law with
respect to any assets, facility, inventory, or property currently
owned, leased or operated by the Parent or any of its Subsidiaries,
(x) neither the Parent nor any of its Subsidiaries has assumed by
contract or agreement any liabilities or obligations arising under any
Environmental Law including, without limitation, any such liabilities
or obligations with respect to formerly owned, leased or operated real
property or facilities, or former divisions or Subsidiaries, (xi)
neither the Parent nor any of its Subsidiaries has entered into or
agreed to any judgment, decree or Order by any judicial or
administrative tribunal or agency and neither the Parent nor any of
its Subsidiaries is subject to any judgment, decree, Order, or
agreement, in each case relating to compliance with any Environmental
Law or requiring the Parent or any of its Subsidiaries to conduct any
investigation, response, corrective or other action with respect to
any Hazardous Materials under any Environmental Law, and (xii) other
than disclosed on Schedule 4(m) of the Parent Disclosure Schedule
there are no underground storage tanks or above-ground storage tanks
or related piping at any real property owned, operated, or leased by
the Parent or any of its Subsidiaries, and any former such tanks and
piping on any such property which have been removed or closed, have
been removed or closed in accordance with applicable Environmental
Laws.
The Parent has made available to the Company all records and files,
including, but not limited to, all assessments, reports, studies,
audits, analyses, tests, and data in the possession or control of the
Parent or any of its Subsidiaries relating to the existence of
37
Hazardous Materials at facilities or properties currently or formerly
owned, operated, leased or used by the Parent or any of its
Subsidiaries or in any way concerning compliance by the Parent and any
of its Subsidiaries with, or liability of any of them, under, any
Environmental Law.
(n) MATERIAL AGREEMENTS. Except as described in Section 4(n) of the Parent
Disclosure Schedule, there are no agreements of the Parent or its
Subsidiaries (i) containing an unexpired covenant not to compete or
similar restriction applying to the Parent or any of its Subsidiaries;
(ii) providing for interest rate, currency, or commodity hedging, swap
or similar derivative transactions to which the Parent or its
Subsidiaries is a party; (iii) providing for payment based on
revenues, sales or profits; (iv) between the Parent or any of its
Subsidiaries, on the one hand, and any Affiliate of the Parent, on the
other hand; (v) which, if terminated by the Parent upon not more than
30 days' notice would result in liability to the Parent of more than
$1 million; or (vi) that would be required to be filed and have not
been filed as an exhibit to a Form 10-K filed by the Parent with the
SEC as of the date of this Agreement (collectively, the "Parent
Material Agreements"). Assuming each Parent Material Agreement
constitutes a valid and binding obligation of each other party
thereto, each Parent Material Agreement is a valid and binding
obligation of the Parent or the applicable Subsidiary, as the case may
be. To the Parent's Knowledge, each Parent Material Agreement is a
valid and binding obligation of each other party thereto, and each
such Parent Material Agreement is in full force and effect. To the
Knowledge of the Parent, there are no existing defaults (or
circumstances or events that, with the giving of notice or lapse of
time or both would become defaults) of the Parent, any Subsidiary, or
any third party under any of the Parent Material Agreements.
(O) TAX MATTERS. With respect to Taxes except as set forth in Section 4(o)
of the Parent Disclosure Schedule:
(i) To the best Knowledge of the Parent, the Parent has filed, within
the time and in the manner prescribed by Law, all Returns
required to be filed under applicable Law, and all such Returns
are true, correct, and complete. The Parent has within the time
and in the manner prescribed by Law, paid all Taxes that are due
and payable with respect to it and its consolidated group. The
Parent has established on the balance sheet dated as of the Most
Recent Fiscal Quarter End reserves, charges, and accruals that
are adequate for the payment of all Taxes not yet due and payable
that are attributable to periods ending on such date. There are
no Liens for Taxes upon the assets of the Parent or the Merger
Sub, except for Liens for Taxes not yet delinquent.
(ii) To the best Knowledge of the Parent, no action, suit, proceeding,
investigation, claim or audit has formally commenced and no
written notice has been given that such audit or other proceeding
is pending or threatened with respect to the Parent or any of its
38
Subsidiaries or any group of corporations of which any of the
Parent and its Subsidiaries has been a member in respect of any
Taxes, and all deficiencies proposed as a result of such actions,
suits, proceedings, investigations, claims or audits have been
paid, reserved against or settled. There are no outstanding
waivers or comparable consents regarding the application of the
statute of limitations with respect to any Tax or Return that
have been requested or given by or that relate to the Parent.
(iii) The Parent and, if applicable, its agents and contracted service
providers, have complied in all respects with all applicable Laws
relating to the payment and withholding of Taxes and have, within
the time and in the manner prescribed by applicable Law,
withheld, collected, and paid over to the proper Authority all
amounts required to be so withheld, collected, and paid over
under all applicable Laws.
(iv) The Parent and its Subsidiaries have not made any payments, are
not obligated to make any payments, and are not a party to any
agreements that under any circumstances could obligate any of
them to make any payments, that will not be deductible under
Section 280G of the Code. Neither the Parent nor any of its
Subsidiaries has made an election under Section 341(f) of the
Code. None of the Parent and its Subsidiaries will be required to
include any material amount in taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a
result of a change in the method of accounting for a taxable
period ending prior to the Closing Date, any "closing agreement"
as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign Tax Laws) entered into prior
to the Closing Date, any sale reported on the installment method
that occurred prior to the Closing Date, or any taxable income
attributable to any amount that is economically accrued prior to
the Closing Date.
(p) INSURANCE; BONDS. Section 4(p) of the Parent Disclosure Schedule
contains a list of, and the Company has been furnished true and
complete copies of, all material insurance policies and fidelity bonds
covering the Parent's assets, business, properties, operations,
employees, officers, and directors, and other matters for which the
Parent carries insurance. Section 4(p) of the Parent Disclosure
Schedule describes any self-insurance arrangement by or affecting the
Parent, including any reserves established thereunder, covering any
years in which there are outstanding claims (the earliest of such
years referred to as the "Parent Base Year"). Except as set forth in
Section 4(p) of the Parent Disclosure Schedule, there is no claim by
any insured pending under any of such policies or bonds as to which
coverage has been questioned, denied, or disputed by the underwriters
of such policies or bonds. All premiums payable under all such
policies and bonds have been paid, and the Parent is otherwise in full
compliance with the terms and conditions of all such policies and
bonds. As to all claims that might be covered by such policies or
39
bonds, the Parent has promptly and within any prescribed time period
notified the insuring or bonding party in the proper manner. Except
for claims listed on Section 4(p) of the Parent Disclosure Schedule,
there have been no notices given to the insurer of any claims that may
be insured by insurer. Such policies of insurance and bonds (or other
policies and bonds providing substantially similar insurance coverage)
have been in effect continuously since the beginning of the Parent
Base Year, and remain in full force and effect. Such policies of
insurance and bonds are of the type and in amounts customarily carried
by Persons conducting similar businesses and do not exclude coverage
for punitive damages. Except as set forth in Section 4(p) of the
Parent Disclosure Schedule, there is no threatened termination of, or
premium increase with respect to, any of such policies or bonds.
(q) COMPLIANCE. The Parent and each of its Subsidiaries are in compliance
with, and are not in default or violation of, (i) its Charter and
bylaws or the equivalent organizational documents of such Subsidiary,
(ii) any Law or Order by which any of their respective assets or
properties are bound or affected, and (iii) the terms of all notes,
bonds, mortgages, indentures, contracts, permits, franchises and other
instruments or obligations to which any of them is a party or by which
any of them or any of their respective assets or properties is bound
or affected, except, in the case of clauses (ii) and (iii), for any
such failures of compliance, defaults and violations which could not,
individually or in the aggregate, reasonably be expected to have a
Parent Materially Adverse Effect. The Parent and its Subsidiaries are
in compliance with the terms of all approvals of Authorities, except
where the failure to so comply could not, individually or in the
aggregate, reasonably be expected to have a Parent Materially Adverse
Effect. Except as set forth in Section 4(q) of the Parent Disclosure
Schedule or as could not, individually or in the aggregate, reasonably
be expected to have a Parent Materially Adverse Effect, neither the
Parent nor any of its Subsidiaries has received notice of any
revocation or modification of any license, permit, consent, or
approval of any Authority that is material to the Parent or any of its
Subsidiaries.
(r) ABSENCE OF LITIGATION. Except as described in Section 4(r) of the
Parent Disclosure Schedule or expressly described in the Parent Public
Reports filed and publicly available prior to the date hereof, there
is no Litigation pending on behalf of or against or, to the Knowledge
of the Parent, threatened against the Parent, any of its Subsidiaries,
or any of their respective properties or rights, before or subject to
any court or governmental Authority which could, individually or in
the aggregate, reasonably be expected to have a Parent Materially
Adverse Effect. Neither the Parent nor any of its Subsidiaries is
subject to any outstanding Litigation or Order which, individually or
in the aggregate, has had or could reasonably be expected to have a
Parent Materially Adverse Effect.
(s) TITLE TO ASSETS. Except as described in Section 4(s) of the Parent
Disclosure Schedule, the Parent and each of its Subsidiaries has good
and marketable title to all of their real or personal properties
40
(whether owned or leased) and assets, free and clear of all Liens
other than Liens which are reflected on the Parent's consolidated
balance sheet filed in its Form 10-Q for the Most Recent Fiscal
Quarter End.
(t) POOLING; TAX MATTERS.
(i) The Parent intends that the Merger be accounted for under the
"pooling of interests" method under the requirements of Opinion
No. 16 (Business Combinations) of the Accounting Principles Board
of the American Institute of Certified Public Accountants, the
Financial Accounting Standards Board, and the Regulations of the
SEC.
(ii) To the Knowledge of the Parent, neither the Parent nor any of its
Affiliates has taken or agreed to take any action, failed to take
any action or is aware of any fact or circumstance that would
prevent (i) the Merger from being treated for financial
accounting purposes as a "pooling of interests" in accordance
with GAAP and the regulations of the SEC; provided, that the sale
of Parent Shares described in Section 5(i) are taken; or (ii) the
Merger from constituting a reorganization within the meaning of
Section 368(a) of the Code.
(iii) Assuming the issuance of Parent Shares described in Section
5(i), the Parent has no Knowledge of any reason why it may not
receive a letter from its independent accountants dated as of the
Closing Date and addressed to the Parent in which such
accountants will concur with the Parent's management's conclusion
that no conditions exist related to the Parent that would
preclude Parent from accounting for the Merger as a "pooling of
interests."
(iv) Section 4(t) of the Parent Disclosure Schedule contains a true
and complete list of all Persons who, to the Knowledge of the
Parent, may be deemed to be Affiliates of the Parent, excluding
all of its Subsidiaries but including all directors and executive
officers of the Parent.
(u) INTELLECTUAL PROPERTY.
(i) Except as would not, individually and in the aggregate, have a
Parent Materially Adverse Effect, (i) the Parent and each of its
Subsidiaries owns, has the right to acquire or is licensed or
otherwise has the right to use (in each case, clear of any Liens
of any kind), all Intellectual Property (as defined below) used
in or necessary for the conduct of its business as currently
conducted, (ii) no claims are pending or, to the Knowledge of the
Parent, threatened that the Parent or any of its Subsidiaries is
infringing on or otherwise violating the rights of any Person
with regard to any Intellectual Property and (iii) to the
Knowledge of the Parent, no Person is infringing on or otherwise
41
violating any right of the Parent or any of its Subsidiaries with
respect to any Intellectual Property owned by and/or licensed to
the Parent or its Subsidiaries.
(ii) Section 4(u) of the Parent Disclosure Schedule sets forth, as of
the date hereof, a true and complete list of all Intellectual
Property of the Parent and each of its Subsidiaries, the loss or
impairment of which would cause a Parent Materially Adverse
Effect.
5. COVENANTS. The Parties agree as follows with respect to the period from and
after the execution of this Agreement.
(a) GENERAL. Each of the Parties will use its best efforts to take all
action and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the Closing
conditions set forth in Section 6 below).
(b) CONDUCT OF BUSINESS BY THE PARENT PENDING THE MERGER. The Parent
covenants and agrees that, between the date hereof and the Effective
Time, except as expressly required or permitted by this Agreement or
unless Company shall otherwise agree in writing in advance, the Parent
shall conduct and shall cause the businesses of each of its
Subsidiaries to be conducted only in, and the Parent and its
Subsidiaries shall not take any action except in, the Ordinary Course
of Business and in a manner consistent with past practice and in
compliance with applicable Law. The Parent shall use its reasonable
best efforts to preserve intact the business organization and assets
of the Parent and each of its Subsidiaries, and to operate, and cause
each of its Subsidiaries to operate, according to plans and budgets
provided to Company, to keep available the services of the present
officers, employees and consultants of the Parent and each of its
Subsidiaries, to maintain in effect material agreements and to
preserve the present relationships of the Parent and each of its
Subsidiaries with advertisers, sponsors, customers, licensees,
suppliers and other Persons with which the Parent or any of its
Subsidiaries has business relations. By way of amplification and not
limitation, neither the Parent nor any of its Subsidiaries shall,
between the date hereof and the Effective Time, directly or indirectly
do, or propose to do, any of the following without the prior written
consent of Company:
(i) amend or otherwise change the Charter or bylaws or equivalent
organizational document of the Parent or any of its Subsidiaries
or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or
ownership of the Parent or any of its Subsidiaries;
(ii) issue, grant, sell, transfer, deliver, pledge, promise, dispose
of or encumber, or authorize the issuance, grant, sale, transfer,
deliverance, pledge, promise, disposition or encumbrance of, any
shares of capital stock of any class (common or preferred), or
42
any options, warrants, convertible or exchangeable securities or
similar rights of any kind to acquire any shares of capital stock
or any other ownership interest or similar rights of the Parent
Shares or any of its Subsidiaries (except for the issuance of
Parent Shares issuable pursuant to the Outstanding Parent Stock
Options and the sale of approximately 2,000,000 Parent Shares to
the public as contemplated by Section 5(i)); adopt, ratify or
effectuate a stockholders' rights plan or agreement; or redeem,
purchase or otherwise acquire, directly or indirectly, any of the
capital stock of the Parent or interest in or securities of any
Subsidiary;
(iii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock (except that a wholly
owned Subsidiary of the Parent may declare and pay a dividend to
the Parent); split, combine or reclassify any of its capital
stock, or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for, shares of its
capital stock; or amend the terms of, repurchase, redeem or
otherwise acquire, or permit any Subsidiary to repurchase, redeem
or otherwise acquire, any of its securities or any securities of
its Subsidiaries; or propose to do any of the foregoing;
(iv) except as disclosed on Section 5(b) of the Parent Disclosure
Schedule, sell, transfer, deliver, lease, license, sublicense,
mortgage, pledge, encumber or otherwise dispose of (in whole or
in part), or create, incur, assume or subject any Lien on, any of
the assets of the Parent or any of its Subsidiaries (including
any Intellectual Property), except in connection with the
acquisition or disposition of assets in the Ordinary Course of
Business, and in a manner consistent with past practice;
(v) except as otherwise disclosed to the Company prior to the date
hereof, acquire (by merger, consolidation, acquisition of stock
or assets or otherwise) or organize any corporation, limited
liability Parent, partnership, joint venture, trust or other
entity or any business organization or division thereof;
(vi) other than in the Ordinary Course of Business, incur any
indebtedness for borrowed money or issue any debt securities or
any warrants or rights to acquire any debt security or assume,
guarantee or endorse or otherwise as an accommodation become
responsible for, the obligations of any Person, or make any
loans, advances or enter into any financial commitments; or
authorize or make any capital expenditures;
(vii) hire or terminate any employee or consultant, except in the
Ordinary Course of Business; increase the compensation or fringe
benefits (including, without limitation, bonus) payable or to
43
become payable to its officers or employees, except for increases
in salary or wages of employees of the Parent or its Subsidiaries
who are not officers of the Parent in the Ordinary Course of
Business; or loan or advance any money or other asset or property
to, or grant any bonus, severance or termination pay to, or enter
into any employment or severance agreement with, any director,
officer or other employee of the Parent or any of its
Subsidiaries, or establish, adopt, enter into, terminate or amend
any Benefit Plan or any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, stock purchase,
restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any current
or former directors, officers or employees;
(viii) change any accounting policies or procedures (including
procedures with respect to reserves, revenue recognition,
payments of accounts payable and collection of accounts
receivable) unless required by a change in Law or GAAP used by
it;
(ix) other than in the Ordinary Course of Business, enter into or
modify, amend, terminate, waive any rights under, or assign any
material agreement, including, but not limited to, any agreement
with or for the direct or indirect benefit of any Affiliate.
(x) except as disclosed on Section 5(b) of the Parent Disclosure
Schedule, make any material Tax election or settle or compromise
any Tax liability or agree to an extension of a statute of
limitations;
(xi) pay, discharge, satisfy or settle any Litigation or waive, assign
or release any material rights or claims except any settlements
of routine liability, workers' compensation, physical damage, and
cargo claims arising in the Ordinary Course of Business that
would not impose any injunctive or similar Order on the Parent or
any of its Subsidiaries or restrict in any way the business of
the Parent or any of its Subsidiaries;
(xii) fail to maintain in full force and effect all self-insurance and
insurance, as the case may be, currently in effect;
(xiii) take (or fail to take) any action that (without regard to any
action taken, or agreed to be taken, by Parent or any of its
Affiliates) would prevent (i) Parent from accounting for the
business combination to be effected by the Merger as a "pooling
of interests" or (ii) the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code;
or
44
(xiv) authorize, recommend, propose or announce an intention to do any
of the foregoing, or agree or enter into or amend any contract or
arrangement to do any of the foregoing.
(c) CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The Company
covenants and agrees that, between the date hereof and the Effective
Time, except as expressly required or permitted by this Agreement or
unless Parent shall otherwise agree in writing in advance, the Company
shall conduct and shall cause the businesses of each of its
Subsidiaries to be conducted only in, and the Company and its
Subsidiaries shall not take any action except in, the Ordinary Course
of Business and in a manner consistent with past practice and in
compliance with applicable Law. The Company shall use its reasonable
best efforts to preserve intact the business organization and assets
of the Company and each of its Subsidiaries, and to operate, and cause
each of its Subsidiaries to operate, according to plans and budgets
provided to Parent, to keep available the services of the present
officers, employees and consultants of the Company and each of its
Subsidiaries, to maintain in effect material agreements and to
preserve the present relationships of the Company and each of its
Subsidiaries with advertisers, sponsors, customers, licensees,
suppliers and other Persons with which the Company or any of its
Subsidiaries has business relations. By way of amplification and not
limitation, neither the Company nor any of its Subsidiaries shall,
between the date hereof and the Effective Time, directly or indirectly
do, or propose to do, any of the following without the prior written
consent of Parent:
(i) amend or otherwise change the Charter or bylaws or equivalent
organizational document of the Company or any of its Subsidiaries
or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or
ownership of the Company or any of its Subsidiaries;
(ii) issue, grant, sell, transfer, deliver, pledge, promise, dispose
of or encumber, or authorize the issuance, grant, sale, transfer,
deliverance, pledge, promise, disposition or encumbrance of, any
shares of capital stock of any class (common or preferred), or
any options, warrants, convertible or exchangeable securities or
similar rights of any kind to acquire any shares of capital stock
or any other ownership interest or similar rights of the Company
Shares or any of its Subsidiaries (except for the issuance of
Company Shares issuable pursuant to the Outstanding Company Stock
Options and the sale of approximately 300,000 Company Shares to
the public as contemplated by Section 5(i)); adopt, ratify or
effectuate a stockholders' rights plan or agreement; or redeem,
purchase or otherwise acquire, directly or indirectly, any of the
capital stock of the Company or interest in or securities of any
Subsidiary;
(iii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock (except that a wholly
45
owned Subsidiary of the Company may declare and pay a dividend to
the Company); split, combine or reclassify any of its capital
stock, or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for, shares of its
capital stock; or amend the terms of, repurchase, redeem or
otherwise acquire, or permit any Subsidiary to repurchase, redeem
or otherwise acquire, any of its securities or any securities of
its Subsidiaries; or propose to do any of the foregoing;
(iv) sell, transfer, deliver, lease, license, sublicense, mortgage,
pledge, encumber or otherwise dispose of (in whole or in part),
or create, incur, assume or subject any Lien on, any of the
assets of the Company or any of its Subsidiaries (including any
Intellectual Property), except in connection with the acquisition
or disposition of assets in the Ordinary Course of Business, and
in a manner consistent with past practice;
(v) acquire (by merger, consolidation, acquisition of stock or assets
or otherwise) or organize any corporation, limited liability
company, partnership, joint venture, trust or other entity or any
business organization or division thereof;
(vi) other than in the Ordinary Course of Business, incur any
indebtedness for borrowed money or issue any debt securities or
any warrants or rights to acquire any debt security or assume,
guarantee or endorse or otherwise as an accommodation become
responsible for, the obligations of any Person, or make any
loans, advances or enter into any financial commitments; or
authorize or make any capital expenditures;
(vii) hire or terminate any employee or consultant, except in the
Ordinary Course of Business; increase the compensation or fringe
benefits (including, without limitation, bonus) payable or to
become payable to its officers or employees, except for increases
in salary or wages of employees of the Company or its
Subsidiaries who are not officers of the Company in the Ordinary
Course of Business; or loan or advance any money or other asset
or property to, or grant any bonus, severance or termination pay
to, or enter into any employment or severance agreement with, any
director, officer or other employee of the Company or any of its
Subsidiaries, or establish, adopt, enter into, terminate or amend
any Benefit Plan or any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, stock purchase,
restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any current
or former directors, officers or employees;
(viii) change any accounting policies or procedures (including
procedures with respect to reserves, revenue recognition,
payments of accounts payable and collection of accounts
receivable) unless required by a change in Law or GAAP used by
it;
46
(ix) other than in the Ordinary Course of Business, enter into or
modify, amend, terminate, waive any rights under, or assign any
material agreement, including, but not limited to, any agreement
with or for the direct or indirect benefit of any Affiliate.
(x) make any material Tax election or settle or compromise any Tax
liability or agree to an extension of a statute of limitations;
(xi) pay, discharge, satisfy or settle any Litigation or waive, assign
or release any material rights or claims except any settlements
of routine liability, workers' compensation, physical damage, and
cargo claims arising in the Ordinary Course of Business that
would not impose any injunctive or similar Order on the Company
or any of its Subsidiaries or restrict in any way the business of
the Company or any of its Subsidiaries;
(xii) fail to maintain in full force and effect all self-insurance and
insurance, as the case may be, currently in effect;
(xiii) take (or fail to take) any action that (without regard to any
action taken, or agreed to be taken, by Parent or any of its
Affiliates) would prevent (i) Parent from accounting for the
business combination to be effected by the Merger as a "pooling
of interests" or (ii) the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code;
or
(xiv) authorize, recommend, propose or announce an intention to do any
of the foregoing, or agree or enter into or amend any contract or
arrangement to do any of the foregoing.
(d) REGISTRATION STATEMENT; PROXY STATEMENT.
(i) As promptly as practical after the execution of this Agreement,
the Company and Parent shall prepare and file with the SEC a
joint proxy statement/prospectus to be sent to the shareholders
of the Company and Parent in connection with the meeting of
Parent's shareholders (the "Parent Special Meeting") and the
Company's shareholders (the "Company Special Meeting") to
consider the Merger and the other matters to be approved as
contemplated herein (the "Joint Proxy Statement"), and Parent
shall prepare and file with the SEC a registration statement on
Form S-4 pursuant to which the Parent Shares to be issued as a
result of the Merger will be registered with the SEC (the
"Registration Statement"), in which the Joint Proxy Statement
will be included as a prospectus. Parent and the Company shall
use all reasonable efforts to cause the Registration Statement to
become effective as soon after such filing as practical. The
47
Joint Proxy Statement shall include the recommendation of the
Board of Directors of the Company in favor of this Agreement and
the Merger and the recommendation of the Board of Directors of
Parent in favor of the issuance of Parent Shares pursuant to the
Merger and the other matter required by this Agreement, provided
that the Board of Directors of the Company may withdraw such
recommendation if such Board of Directors has received an
Acquisition Proposal and as a result shall have determined in
good faith upon the written advice of its outside legal counsel,
that the withdrawal of such recommendation is necessary for the
Board of Directors to comply with its fiduciary duties under
applicable law. Parent and Company shall make all other necessary
filings with respect to the Merger under the Securities Act and
the Exchange Act and the rules and regulations thereunder.
(ii) The Company shall take such action as may be necessary to insure
that (A) the information to be supplied by the Company for
inclusion in the Registration Statement shall not at the time the
Registration Statement is declared effective by the SEC contain
any untrue statement of a material fact or omit to state any
material fact, required to be stated in the Registration
Statement or necessary in order to make the statements in the
Registration Statement, in light of the circumstances under which
they were made, not misleading, and (B) the information supplied
by the Company for inclusion in the Joint Proxy Statement shall
not, on the date the Joint Proxy Statement is first mailed to
shareholders of the Company or Parent, at the time of the Company
Special Meeting and the Parent Special Meeting, and at the
Effective Time, contain any statement which, at such time and in
light of the circumstances under which it shall be made, is false
or misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements made
in the Joint Proxy Statement not false or misleading, or omit to
state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies
for the Company Special Meeting or Parent Special Meeting which
has become false or misleading. If at any time prior to the
Effective Time any event relating to Parent or any of its
Affiliates, officers, or directors should be discovered by the
Company which should be set forth in as amendment to the
Registration Statement or a supplement to the Joint Proxy
Statement, the Company shall promptly so inform Parent.
(iii) Parent shall take such action as may be necessary to insure that
(A) the information supplied by Parent for inclusion in the
Registration Statement shall not at the time the Registration
Statement is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact,
required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in
light of the circumstances under which they were made, not
misleading, and (B) the information supplied by Parent for
inclusion in the Joint Proxy Statement shall not on the date the
48
Joint Proxy Statement is first mailed to shareholders of Parent
or the Company, at the time of the Parent Special Meeting and the
Company Special Meeting, and at the Effective Time, contain any
statement which, at such time and in light of the circumstances
under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact
necessary in order to make the statements made in the Joint Proxy
Statement not false or misleading, or omit to state any material
fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the
Parent Special Meeting or the Company Special Meeting which has
become false or misleading. If at any time prior to the Effective
Time any event relating to Parent or any of its Affiliates,
officers, or directors should be discovered by Parent which
should be set forth in an amendment to the Registration Statement
or a supplement to the Joint Proxy Statement, Parent shall
promptly so inform the Company.
(e) SHAREHOLDERS MEETING. Parent and the Company each shall call a meeting
of its respective shareholders to be held as promptly as practicable
for the purpose of voting, in the case of the Company, upon this
Agreement and the Merger and, in the case of Parent, upon the issuance
of shares of Parent Shares pursuant to the Merger and the other matter
required by this Agreement. Subject to Section 5(d) and (h), the
Company and Parent will, through their respective Boards of Directors,
recommend to their respective shareholders approval of such matters
and will coordinate and cooperate with respect to the timing of such
meetings and shall use their best efforts to hold such meetings on the
same day and as soon as practicable after the date hereof. Subject to
Section 5(d), each Party shall use all reasonable efforts to solicit
from its shareholders proxies in favor of such matters.
(f) ADDITIONAL SHAREHOLDER MEETING MATTERS. Each of the Parent and the
Company shall use all reasonable efforts to obtain the Requisite
Stockholder Approval of its stockholders. Once the Special Meetings
have been called and noticed, neither the Parent nor the Company,
respectively, shall postpone or adjourn (other than for the absence of
a quorum and then only to a future date mutually agreed by the other
Party) the applicable Special Meeting without the consent of the other
Party unless this Agreement has been terminated pursuant to Section 7.
(g) ACCESS TO INFORMATION. Upon reasonable notice, each of the Company and
the Parent shall (and shall cause each of its Subsidiaries to) afford
to the officers, employees, accountants, counsel and other
representatives and agents of the other Party (collectively
"Representatives"), reasonable access, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments
and records and, during such period, each of the Company and the
Parent shall (and shall cause each of its Subsidiaries to) furnish
promptly to the other all information concerning its business,
properties, books, contracts, commitments, record and personnel as the
other Party may reasonably request. Each of the Company and the Parent
49
shall (and shall cause each of its Subsidiaries to) make available to
the other Party the appropriate individuals for discussion of such
entity's business, properties and personnel as the other Party or its
Representatives may reasonably request. No investigation pursuant to
this Section 5(g) shall affect any representations or warranties of
the parties herein or the conditions to the obligations of the parties
hereto.
(h) OTHER OFFERS.
(i) The Company shall not, whether directly or indirectly through
advisors, agents, or other intermediaries, nor shall the Company
authorize or permit any of its officers, directors, agents,
representatives, or advisors to (A) solicit, initiate, or
encourage any inquiries or proposals that constitute a proposal
or offer for a merger, consolidation, recapitalization,
liquidation, dissolution, business combination, sale of
substantial assets, sale of shares of capital stock (including
without limitation by way of a tender offer or exchange offer),
or similar transaction involving the Company, other than the
transactions contemplated by this Agreement, or any other
transaction the consummation of which could reasonably be
expected to impede, interfere with, prevent, or materially delay
the Merger or which could reasonably be expected to materially
dilute the benefits to Parent of the transactions contemplated
hereby (each such transaction, inquiries, or proposals being
referred to in this Agreement as an "Acquisition Proposal"), (B)
engage in negotiations or discussions concerning, or provide any
non-public information to any person or entity relating to, any
Acquisition Proposal, or (C) agree to, approve, or recommend any
Acquisition Proposal; provided, however, that nothing contained
in this Agreement shall prevent the Company or its Board of
Directors from furnishing non-public information to, or entering
into discussions or negotiations with, any person or entity, or
taking any other action deemed necessary, in connection with an
unsolicited bona fide written Acquisition Proposal by such person
or entity or recommending an unsolicited bona fide written
Acquisition Proposal to the shareholders, if and only to the
extent that the Board of Directors determines in good faith upon
the written advice of outside legal counsel that such action is
necessary for it to comply with its fiduciary duties to
shareholders under applicable law (a "Fiduciary Finding");
(ii) The Company shall notify Parent promptly (and no later than 24
hours) after receipt by the Company (or its advisors), of any
Acquisition Proposal or any request for non-public information in
connection with an Acquisition Proposal or for access to the
properties, books, or records of the Company by any person or
entity that informs the Company that it is considering making, or
has made, an Acquisition Proposal. Such notice to Parent shall be
made orally and in writing and shall indicate in reasonable
detail the identity of the offeror and the terms and conditions
of such proposal, inquiry, or contact, including, specifically, a
copy of any written Acquisition Proposal;
50
(iii) The Board of Directors of the Company shall not take any of the
actions referred to in clause (C) first sentence of Section
5(h)(i) until after giving at least five (5) days' written notice
to Parent with respect to its intent to take such action and
providing Parent all of the information called for in this
Section 5(h). During the five-day notice period the Parent shall
have the opportunity to amend its offer to match or exceed the
Acquisition Proposal. If in the opinion of the Company's Board of
Directors the consideration offered by Parent represents
substantially equivalent or greater value than the Acquisition
Proposal, then this Agreement shall be amended to reflect such
revised consideration offered by Parent and in such event, this
Agreement shall continue in force, as so amended;
(iv) The Company shall immediately cease and cause its advisors,
agents, and other intermediaries to cease any and all existing
activities, discussions, or negotiations with any Parties
conducted heretofore with respect to any Acquisition Proposal;
(v) If a Payment Event occurs, the Company shall pay to Parent,
within one business day following such event, a fee of
$10,000,000 by wire transfer of immediately available funds. Such
fee obligation shall be in addition to any payment obligation of
the termination pursuant to Section 7(c). "Payment Event" means
this Agreement has been terminated pursuant to any of the
following events:
(A) the termination of this Agreement by Parent pursuant to
Section 7(a)(iv) or the Company pursuant to Section 7(a)(v) and
the Company shall have signed a definitive agreement for an
Alternative Transaction within twelve (12) months of the
termination of this Agreement;
(B) the termination of this Agreement by Parent pursuant to
Section 7(a)(viii) after a willful breach by the Company of this
Agreement; or
(C) the termination of this Agreement by Parent or the Company
pursuant to Section 7(a)(vi) as a result of the failure to
receive the Requisite Shareholder Approval of this Agreement and
the Merger by the shareholders of the Company at a duly held
meeting of the Company's Stockholders or any adjournment thereof
if, (I) at the time of such failure, there shall have been
announced an Alternative Transaction (as defined below) which
shall not have been absolutely and unconditionally withdrawn and
abandoned and (II) the Company shall have signed a definitive
agreement for such Alternative Transaction within twelve (12)
months of such failure.
51
(vi) As used in this Agreement, "Alternative Transaction" means a
merger, consolidation, recapitalization, liquidation,
dissolution, business combination, sale of substantial assets,
sale of shares of capital stock (including without limitation by
way of a tender offer or exchange offer), or similar transaction
involving the Company in which (A) any person (or group of
persons) other than Parent or its Affiliates (a "Third Party")
acquires more than 30% of the outstanding Company Shares or
equity interests of the entity surviving such transaction, (B)
any other transaction pursuant to which any Third Party acquires
control of assets of the Company having a fair market value equal
to more than 30% of the fair market value of all the assets of
the Company, and its Subsidiaries, taken as a whole, immediately
prior to such transaction, or (C) any public announcement of a
proposal, plan, or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
(vii) this Section 5(h) shall survive any termination of this
Agreement, however caused.
(i) POOLING; REORGANIZATION
(i) The Company shall take or cause to be taken all reasonable acts
(without breaching any obligation to any other Person) required
in order to permit the Company to be eligible to have the Merger
be accounted for as a pooling of interests, including but not
limited to, issuing approximately 300,000 Company Shares.
(ii) The Company shall not knowingly take, or knowingly permit any
controlled Affiliate of the Company to take, any action that
could prevent the Merger from being treated (A) for financial
accounting purposes as a "pooling of interests" under GAAP; it
being understood and agreed that if the Company's independent
accountants advise the Company in writing that such an action
would not prevent the Merger from being so treated, such action
will be conclusively deemed not to constitute a breach of this
Section 5(i) or (B) as a "reorganization" within the meaning of
Section 368 of the Code.
(iii) The Company shall use its reasonable best efforts to obtain an
executed affiliate pooling agreement substantially in the form
attached hereto as Exhibit E from each of the Persons identified
in Section 5(i) of the Company Disclosure Schedule concurrently
with the execution of this Agreement and thereafter from any
other person who may be deemed an affiliate of the Company
regarding compliance with Rule 145 under the Securities Act and
the requirements for accounting treatment of the Merger as a
"pooling of interests" (each such agreement, a "Company Affiliate
Pooling Agreement")
52
(iv) The Parent shall take or cause to be taken all reasonable acts
(without breaching any obligation to any other Person) required
in order to permit the Parent to be eligible to have the Merger
be accounted for as a pooling of interests, including but not
limited to, issuing approximately 2,000,000 Parent Shares
currently held in treasury.
(v) Parent shall not knowingly take or knowingly permit any
controlled Affiliate of Parent to take, any action that could
prevent the Merger from being treated (A) for financial
accounting purposes as a "pooling of interests" under GAAP; it
being understood and agreed that if Parent's independent
accountants advise Parent in writing that such an action would
not prevent the Merger from being so treated, such action will be
conclusively deemed not to constitute a breach of this Section
5(i); or (B) as a "reorganization" within the meaning of Section
368 of the Code.
(vi) Parent shall use its reasonable efforts to obtain an executed
affiliate pooling agreement in substantially the form of attached
Exhibit E from each of the Persons identified in Section 5(i) of
the Parent Disclosure Schedule regarding compliance with the
requirements for accounting treatment of the Merger as a "pooling
of interests" (each such agreement a "Parent Affiliate Pooling
Agreement").
(j) NOTIFICATION OF CERTAIN MATTERS.
(i) The Company shall give prompt notice to Parent, and Parent shall
give prompt notice to the Company, of the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence,
of which results in any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect
(or, in the case of any representation or warranty qualified by
its terms by materiality, Parent Materially Adverse Effect or
Company Materially Adverse Effect, then untrue or inaccurate in
any respect) and any failure of the Company, Parent or Merger
Sub, as the case may be, to comply with or satisfy in any
material respect any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5(j)
shall not limit or otherwise affect the remedies available
hereunder to the Party receiving such notice.
(ii) Each of the Company and Parent shall give prompt notice to the
other of (A) any notice or other communication from any Person
alleging that the approval of such Person is or may be required
in connection with the Merger and the transactions contemplated
hereby; (B) any notice or other communication from any Authority
in connection with the Merger and the transactions contemplated
hereby; (C) any Litigation, relating to or involving or otherwise
53
affecting the Company, Parent, or their respective Subsidiaries
that relates to the Merger and the transactions contemplated
hereby; or (D) the occurrence of a default or event that, with
notice or lapse of time or both, will become a default under any
Company Material Agreement or Parent Material Agreement; and (E)
any change that could reasonably be expected to have a Company
Materially Adverse Effect or Parent Materially Adverse Effect or
is likely to delay or impede the ability of either Parent or the
Company to consummate the transactions contemplated by this
Agreement or to fulfill their respective obligations set forth
herein.
(iii) Each of the Company and Parent shall give (or shall cause their
respective Subsidiaries to give) any notices to third Persons,
and use, and cause their respective Subsidiaries to use, its
reasonable best efforts to obtain any consents from third Persons
(A) necessary, proper or advisable to consummate the transactions
contemplated by this Agreement; (B) otherwise required under any
contracts in connection with the consummation of the transactions
contemplated hereby; or (C) required to prevent a Company
Materially Adverse Effect or Parent Materially Adverse Effect
from occurring. If any Party shall fail to obtain any such
consent from a third Person, such Party shall use its reasonable
best efforts, and will take any such actions reasonably requested
by the other Parties, to limit the adverse effect upon the
Company and Parent, their respective Subsidiaries, and their
respective businesses resulting, or which would result after the
Effective Time, from the failure to obtain such consent.
(k) LISTING ON THE NASDAQ NATIONAL MARKET. Parent shall use its reasonable
best efforts to cause the Parent Shares to be issued in the Merger and
pursuant to Parent's options to be issued pursuant to Section 5(q) to
be approved for listing on the Nasdaq National Market, subject to
official notice of issuance, prior to the Effective Time.
(l) PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult with and
obtain the approval of the other Party before issuing any press
release or other public announcement with respect to the Merger or
this Agreement and shall not issue any such press release prior to
such consultation and approval, except as may be required by Law or
any listing agreement related to the trading of the shares of either
Party on any national securities exchange or national automated
quotation system, in which case the Party proposing to issue such
press release or make such public announcement shall use its
reasonable best efforts to consult in good faith with the other Party
before issuing any such press release or making any such public
announcement.
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(m) TAKEOVER LAWS. If any form of anti-takeover Law, regulation, Charter
or bylaw provision, or contract is or shall become applicable to the
Merger or the transactions contemplated hereby, the Company and the
Board of Directors of the Company shall grant such approvals and take
such actions as are necessary under such Law, provisions, and
contracts so that the transactions contemplated hereby and thereby may
be consummated as promptly as practicable on the terms contemplated
hereby and otherwise act to eliminate or minimize the effects of such
Law, provision, or contract on the transactions contemplated hereby.
(n) ACCOUNTANT'S LETTERS.
(i) The Company shall use its reasonable best efforts to cause to be
delivered to Parent a "comfort" letter of the Company's
accountants, dated a date within two business days before the
date on which the Registration Statement shall become effective
and addressed to Parent and the Company, in form and substance
reasonably satisfactory and customary in scope and substance for
letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
(ii) Parent shall use its reasonable best efforts to cause to be
delivered to the Company a "comfort" letter of Parent's
accountants dated a date within two business days before the date
on which the Registration Statement shall become effective and
addressed to Parent and the Company, in form and substance
reasonably satisfactory and customary in scope and substance for
letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
(o) ADDITIONAL PARENT DIRECTORS. Immediately following the Effective Time,
Parent shall expand its Board of Directors and add as directors the
current CEO of the Company and one other person (who shall qualify as
an "independent director") designated by the current CEO of the
Company. The current CEO of the Company shall be designated a Class II
director and the other nominee shall be designated a Class I director
on Parent's Board of Directors. The Parent agrees to nominate the
Company's current CEO as part of its slate of directors for which the
Parent seeks proxies in connection with the election of directors next
following the Effective Time.
(p) HART-SCOTT-RODINO ACT. Each of the Parties will file any notification
and report forms and related material that it may be required to file
with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice under the Hart-Scott-Rodino Act,
will use its best efforts to obtain an early termination of the
applicable waiting period, will make any further filings pursuant
thereto that may be necessary, proper, or advisable, and will not
terminate or withdraw such application without the consent of the
other Parties. The Parent shall pay the filing fee associated with
such filings.
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(q) COMPANY STOCK OPTIONS AND COMPANY STOCK PLANS; OUTSTANDING COMPANY
STOCK OPTIONS.
(i) At the Effective Time, each Outstanding Company Stock Option,
whether vested or unvested, will be assumed by Parent
automatically and without further action in accordance with this
Agreement. Each such Outstanding Company Stock Option so assumed
by Parent under this Agreement shall continue to have, and be
subject to, the same terms and conditions set forth in the
Company Stock Option Plans, option agreements thereunder and
other relevant documentation immediately prior to the Effective
Time, except that such Outstanding Company Stock Option will be
exercisable solely for that number of whole Parent Shares equal
to the product of the number of Company Shares that were
purchasable under such Outstanding Company Stock Option
immediately prior to the Effective Time multiplied by 1.7,
rounded down to the nearest whole number of Parent Shares, and
the per-share exercise price for the Parent Shares issuable upon
exercise of such assumed Outstanding Company Stock Option will be
equal to the quotient determined by dividing the exercise price
per share of Company Shares at which such Outstanding Company
Stock Option was exercisable immediately prior to the Effective
Time by 1.7, and rounding the resulting exercise price up to the
nearest whole cent; provided, however, that in the case of any
option to which section 421 of the Code applies by reason of its
qualification under section 422 of the Code ("incentive stock
options"), 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 accordance with the method
set forth above unless use of such method will not preserve the
status of such options as incentive stock options, in which case
the manner of determination shall be adjusted in a manner that
both complies with Section 424(a) of the Code and results in the
smallest modification in the economic values that otherwise would
be achieved by the holder pursuant to the method set forth above;
and provided further, that notwithstanding any other provisions
of this Section 5(q), if use of the above methods would
disqualify the Merger as a "pooling of interests" for financial
accounting purposes, then such methods will be adjusted to the
extent necessary to preserve such accounting treatment.
(ii) Parent shall reserve for issuance a sufficient number of Parent
Shares for delivery upon exercise of Outstanding Company Stock
Options assumed by Parent under this Agreement. Parent shall file
as soon as practicable after the Effective Date a registration
statement on Form S-8 under the Securities Act covering the
Parent Shares issuable upon the exercise of the Outstanding
Company Stock Options assumed by Parent pursuant to this Section,
and shall use its reasonable efforts to cause such registration
56
statement to become effective as soon thereafter as practicable
and to maintain such registration in effect until the exercise or
expiration of such assumed Outstanding Company Stock Options.
(iii) The vesting of each Outstanding Company Stock Option shall not
accelerate as a result of, or in connection with, the
transactions contemplated hereby, except to the extent required
by the existing terms of the Company Stock Option Plans or the
option agreement pursuant to which it was granted. In addition,
the Company shall ensure that no discretion is exercised by the
Board of Directors or any committee thereof or any other body or
Person so as to cause the vesting of any Outstanding Company
Stock Option or any other warrant or right to acquire Company
Shares to accelerate.
(r) INSURANCE AND INDEMNIFICATION.
(i) The Parent will not take any action to alter or impair any
exculpatory or indemnification provisions now existing in the
Charter or bylaws of the Company for the benefit of any
individual who is serving or has served as a director or officer
of the Company or is or was otherwise entitled to indemnification
thereunder at any time prior to the Effective Time;
(ii) From and after the Effective Time, Parent shall indemnify, defend
and hold harmless any person who is on the date hereof, or has
been at any time prior to the date hereof, or who becomes prior
to the Effective Time, an officer, director, employee or agent
(the "Indemnified Party") of the Company or any of its
Subsidiaries against all losses, claims, damages, liabilities,
costs and expenses (including attorneys' fees and expenses),
judgments, fines, and amounts paid in settlement in connection
with any actual or threatened action, suit, claim, proceeding or
investigation (each, a "Claim") to the extent that any such Claim
is based on or arises out of, (A) the fact that any person is or
was a director, officer, employee or agent of the Company or any
of its Subsidiaries at any time prior to the Effective Time or is
or was serving at the request of the Company or any of its
Subsidiaries as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise at any time prior to the Effective Time, or (B) this
Agreement or any of the transactions contemplated hereby or
thereby in each case to the extent that any such Claim pertains
to any matter or fact arising, existing, or occurring prior to or
at the Effective Time, regardless of whether such Claim is
asserted or claimed prior to, at or after the Effective Time (the
matters described in clauses (A) and (B), the "Pre-Merger
Matters"), to the fullest extent indemnified under the Company's
Charter, bylaws or any indemnification agreements in effect as of
the date hereof, or under the Tennessee Business Corporation Act,
including in each case provisions relating to the advancement of
expenses incurred in the defense of any action or suit.
57
(iii) Parent agrees that all right to indemnification and all
limitations or exculpation of liabilities existing in favor of
any Indemnified Party as provided in the Company's Charter,
bylaws or the Tennessee Business Corporation Act as in effect as
of the Effective Time shall continue in full force and effect
with respect to Pre-Merger Matters, without any amendment
thereto, for a period of six years from the Effective Time to the
extent such rights are consistent with the Tennessee Business
Corporation Act, provided, that in the event any Claim or Claims
with respect to any such Pre-Merger Matters are asserted or made
within such six-year period, all rights to indemnification in
respect of any such Claim or Claims shall continue until
disposition of any such Claim or Claims; provided, however, that
any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth
under the Tennessee Business Corporation Act, the Company's
Charter or bylaws, as the case may be, shall be made by
independent legal counsel selected by the Indemnified Party and
reasonably acceptable to the Parent, retained at the Parent's
expense, and provided further that nothing in this Section shall
impair any rights or obligations of any present or former
directors or officers of the Company.
(iv) Parent shall maintain in effect the Company's directors' and
officers' liability insurance policy at the Effective Time ("D&O
Insurance") with respect to Pre-Merger Matters for a period of
not less than six years after the Effective Time, provided, that
the Parent may substitute therefor policies of substantially
similar coverage and amounts containing terms no less
advantageous to such former directors or officers.
(v) The provisions of this Section 5(o) are intended to be for the
benefit of, and shall be enforceable by, each Person entitled to
indemnification hereunder and the heirs and representatives of
such Person.
(s) ADDITIONAL AGREEMENTS. Each of the Parent and the Company shall use
its best efforts to cause (i) the Voting Agreements to be executed and
delivered contemporaneously herewith; (ii) each of the Persons
identified in Section 5(i) of the Company Disclosure Schedule to
execute and deliver a Company Affiliate Pooling Agreement as soon as
reasonably practicable after the date hereof; (iii) each of the
Persons identified in Section 5(i) of the Parent Disclosure Schedule
to execute and deliver a Parent Affiliate Pooling Agreement as soon as
reasonably practicable after the date hereof; and (iv) each of the
individuals listed in Section 5(s) of the Company Disclosure Schedule
to execute and deliver an Employment Agreement effective from and
after the Effective Time (the "Employment Agreements"), substantially
in the form attached hereto as Exhibit F-1, F-2, F-3, and F-4,
58
respectively. In addition, at the Effective Time and contemporaneously
with entering into the Employment Agreements, the Parent shall enter
into stock option agreements with the Executives entering into the
Employment Agreements in a form similar to those customarily used by
Parent for its executive officers and providing for a grant of an
option to purchase the number of Parent Shares set forth opposite the
name of each such executive in Section 5(s) of the Parent Disclosure
Schedule.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE PARENT AND THE MERGER SUB. The
obligation of each of the Parent and the Merger Sub to consummate the
transactions to be performed by it in connection with the Closing is
subject to satisfaction of the following conditions:
(i) the Company shall have received the Requisite Stockholder
Approval of this Agreement and the Merger at the Company Special
Meeting, and the Parent shall have received the Requisite
Stockholder Approval of the issuance of Parent Shares and the
other matters required to be submitted to the Parent's
stockholders in accordance with this Agreement;
(ii) the Company shall have procured all of the third party consents
specified in Section 3(d) of the Company Disclosure Schedule,
except where the failure to obtain such consents would not have a
Company Materially Adverse Effect;
(iii) the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of
the Effective Time, with the same force and effect as if made on
and as of the Effective Time (other than representations and
warranties which address matters only as of a particular date, in
which case such representations and warranties shall be true and
correct, on and as of such particular date) except where the
failure to be true and correct would not reasonably be expected
to result in a Company Materially Adverse Effect;
(iv) the Company shall have performed and complied with all of its
covenants and agreements hereunder in all material respects
through the Closing;
(v) no temporary restraining order, preliminary or permanent
injunction, or other Order of an Authority with competent
jurisdiction shall have been issued and shall be in effect at the
Effective Time which would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the
Parent to own the capital stock of the Surviving Corporation and
to control the Surviving Corporation, or (D) affect adversely the
right of the Surviving Corporation to own its assets and to
operate its businesses;
59
(vi) the Company shall have delivered to the Parent and the Merger Sub
a certificate to the effect that each of the conditions specified
above in Section 6(a)(i) through (v) is satisfied in all
respects;
(vii) the Registration Statement shall have become effective under the
Securities Act, no stop order suspending the effectiveness of the
Registration Statement or the use of the Joint Proxy Statement
shall have been issued by the SEC; and no proceedings for that
purpose shall have been initiated or, to the Knowledge of the
Parent or the Company, threatened by the SEC; and the Parent
Shares issuable hereunder shall have been approved for listing on
The Nasdaq National Market subject to official notice of
issuance;
(viii) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise
been terminated and the Parties shall have received all other
authorizations, consents, and approvals of Authorities referred
to in Section 3(d) and Section 4(d) above;
(ix) the Parent and the Merger Sub shall have received from counsel to
the Company an opinion in form and substance reasonably
satisfactory to the Parent, addressed to the Parent and the
Merger Sub, and dated as of the Closing Date;
(x) all actions to be taken by the Company in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Parent and the Merger
Sub;
(xi) each of the Employment Agreements, in form and substance shall
have been executed and delivered;
(xii) no Company Materially Adverse Effect shall have occurred;
(xiii) Parent shall have received a letter from its independent
accountants in form and substance reasonably satisfactory to
Parent, dated the Closing Date, concurring with management's
conclusions that the transactions contemplated by this Agreement,
including the Merger, will qualify as a "pooling of interests"
business combination in accordance with GAAP and the criteria of
Accounting Principles Board Opinion No. 16 and the regulations of
60
the SEC, such letter shall not have been revoked or modified in
any material respect, and Parent shall not have received any
indication from the SEC that the Merger may not so qualify;
(xiv) each of the Persons identified in Section 5(i) of the Company
Disclosure Schedule shall have executed and delivered a Company
Affiliate Pooling Agreement which shall be in full force and
effect.
The Parent and the Merger Sub may waive any condition specified in this
Section 6(a) if they execute a writing so stating at or prior to the
Closing.
(b) CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the Company
to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following
conditions:
(i) the Registration Statement shall have become effective under the
Securities Act, no stop order suspending the effectiveness of the
Registration Statement or the use of the Proxy Statement shall
have been issued by the SEC; no proceedings for that purpose
shall have been initiated or, to the Knowledge of the Parent or
the Company, threatened by the SEC; and the Parent Shares
issuable hereunder shall have been approved for listing on The
Nasdaq National Market subject to official notice of issuance;
(ii) the Parent shall have procured all of the third-party consents
specified in Section 4(d) of the Parent Disclosure Schedule,
except where the failure to obtain such consents would not have a
Parent Materially Adverse Effect;
(iii) the representations and warranties set forth in Section 4 above
shall be true and correct in all material respects at and as of
the Effective Time, with the same force and effect as if made on
and as of the Effective Time (other than representations and
warranties which address matters only as of a particular date, in
which case such representations and warranties shall be true and
correct, on and as of such particular date) except where the
failure to be true and correct would not reasonably be expected
to result in a Parent Materially Adverse Effect;
(iv) each of the Parent and the Merger Sub shall have performed and
complied with all of its covenants and agreements hereunder in
all material respects through the Closing;
(v) no temporary restraining order, preliminary of permanent
injunction, or other Order of an Authority with competent
jurisdiction shall have been issued and shall be in effect at the
Effective Time which would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded
61
following consummation, (C) affect adversely the right of the
Parent to own the capital stock of the Surviving Corporation and
to control the Surviving Corporation, or (D) affect adversely the
right of the Surviving Corporation to own its assets and to
operate its businesses;
(vi) each of the Parent and the Merger Sub shall have delivered to the
Company a certificate to the effect that each of the conditions
specified above in Section 6(b)(i) through (v) is satisfied in
all respects;
(vii) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise
been terminated and the Parties shall have received all other
authorizations, consents, and approvals of Authorities referred
to in Section 3(d) and Section 4(d) above;
(viii) the Company shall have received from counsel to the Parent and
the Merger Sub an opinion in form and substance reasonably
satisfactory to the Company, addressed to the Company, and dated
as of the Closing Date;
(ix) all actions to be taken by the Parent and the Merger Sub in
connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby
will be reasonably satisfactory in form and substance to the
Company;
(x) no Parent Materially Adverse Effect shall have occurred;
(xi) the Company shall have received a letter from its independent
accountants in form and substance reasonably satisfactory to the
Company, dated the Closing Date, concurring with management's
conclusions that the transactions contemplated by this Agreement,
including the Merger, will qualify as a "pooling of interests"
business combination in accordance with GAAP and the criteria of
Accounting Principles Board Opinion No. 16 and the Regulations of
the SEC; and the Company shall not have received any indication
from the SEC that the Merger may not so qualify;
(xii) each of the Persons identified in Section 5(i) of the Company
Disclosure Schedule shall have executed and delivered a Parent
Affiliate Pooling Agreement which shall be in full force and
effect;
62
(xiii) each of the persons listed on Section 5(s) of the Company
Disclosure Schedule shall have entered into an Employment
Agreement with the Company;
(xiv) the Fairness Opinion shall remain in full force and effect and
shall not have been revoked or modified in any material respect;
(xv) the Company shall have received the Requisite Stockholder
Approval of this Agreement and the Merger at the Company Special
Meeting; and
(xvi) the Company shall have received the opinion of its tax counsel,
in the form and substance reasonably satisfactory to the Company,
and dated as of the Effective Time, to the effect that the Merger
will constitute a transaction described in Section 368(a) of the
Code and neither the Company nor its shareholders shall recognize
gain or loss for federal income tax purposes as a result of the
Merger (other than with respect to cash paid in lieu of
fractional shares).
The Company may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
7. Termination.
(a) TERMINATION. This Agreement may be terminated prior to the Effective
Time as follows (notwithstanding any approval of the Merger by the
stockholders of the Parent, Merger Sub, and the Company):
(i) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company at any time;
(ii) by Parent or Company if the Closing shall not have occurred on or
before September 30, 2001; provided that such right shall not be
available to any Party whose willful failure to fulfill any
material obligation under this Agreement has been the cause of,
or has resulted in, the failure of the Merger to be consummated
on or before such date;
(iii) by the Parent if there shall be any Law that makes consummation
of the Merger illegal or otherwise prohibited; or if any Order
enjoining Parent or the Company from consummating the Merger is
entered and such Order shall become final and non-appealable;
(iv) by Parent, if (A) the Board of Directors of the Company shall
have withdrawn or modified its recommendation of this Agreement
or the Merger in a manner adverse to Parent or shall have
resolved to do any of the foregoing; (B) the Board of Directors
of the Company shall have recommended to the shareholders of the
63
Company an Alternative Transaction; or (C) a tender offer or
exchange offer for 30% or more of the outstanding Company Shares
is commenced and the Board of Directors of the Company fails to
timely recommend that the shareholders of the Company not tender
their shares in such tender or exchange offer;
(v) by the Company if prior to the Effective Time, in good faith, the
Board of Directors of the Company shall have made a Fiduciary
Finding and have withdrawn or modified or amended, in a manner
adverse to Parent, its approval or recommendation of this
Agreement and the Merger or its recommendation that stockholders
of the Company adopt and approve this Agreement and the Merger in
order to permit the Company to execute a definitive agreement
providing for the acquisition of the Company or in order to
approve a tender or exchange offer for any or all of the Company
Shares; provided that the Company shall be in compliance with
Section 5(h);
(vi) by either the Company or Parent if, at a duly held stockholders
meeting of the Company or any adjournment thereof at which this
Agreement and the Merger is voted upon, the Requisite Stockholder
Approval shall not have been obtained;
(vii) by either the Company or Parent if, at a duly held stockholders
meeting of the Parent or any adjournment thereof at which
issuance of Parent Shares as required under Section 2 is voted
upon, the Requisite Stockholder Approval shall not have been
obtained;
(viii) by Parent, if neither Parent nor Merger Sub is in material
breach of its obligations under this Agreement, and if (A) at any
time that any of the representations and warranties of the
Company herein become untrue or inaccurate such that Section
6(a)(iii) would not be satisfied (treating such time as if it
were the Effective Time for purposes of this Section 7(a)(viii))
or (B) there has been a breach on the part of the Company of any
of its covenants or agreements contained in this Agreement such
that Section 6(a)(iv) would not be satisfied (treating such time
as if it were the Effective Time for purposes of this Section
7(a)(viii)), and, in both case (A) and case (B), such breach (if
curable) has not been cured within 30 days after notice to the
Company;
(ix) by the Company, if it is not in material breach of its
obligations under this Agreement, and if (A) at any time that any
of the representations and warranties of Parent or Merger Sub
herein become untrue or inaccurate such that Section 6(b)(iii)
would not be satisfied (treating such time as if it were the
Effective Time for purposes of this Section 7(a)(ix)) or (B)
there has been a breach on the part of Parent or Merger Sub of
64
any of their respective covenants or agreements contained in this
Agreement such that Section 6(b)(iv) would not be satisfied
(treating such time as if it were the Effective Time for purposes
of this Section 7(a)(ix)), and such breach (if curable) has not
been cured within 30 days after notice to Parent; or
(x) by the Company, if the Board of Directors of Parent shall have
withdrawn or modified its recommendation in favor of the issuance
of Parent Shares pursuant to the Merger in a manner adverse to
the Company or shall have resolved to do any of the foregoing.
The Party desiring to terminate this Agreement pursuant to Section 7(a)(ii)
through (x) shall give written notice of such termination to the other
Party in accordance with Section 8(h).
(b) EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 7(a), this Agreement shall immediately become
void and there shall be no liability or obligation on the part of
Parent, Merger Sub, the Company or their respective officers,
directors, shareholders, or Affiliates, except as set forth in Section
5(h) and Section 7(c) and such Section 5(h) and Section 7(c) of this
Agreement shall remain in full force and effect and survive any
termination of this Agreement.
(c) FEES AND EXPENSES.
(i) Except as set forth in this Section 7(c), all fees and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party incurring such
expenses, regardless of whether the Merger is consummated;
provided, however, that Parent and the Company shall share
equally all fees and expenses, other than attorneys' fees,
incurred in relation to the printing and filing of the Joint
Proxy Statement (including any related preliminary materials) and
the Registration Statement (including financial statements and
exhibits).
(ii) Company shall pay Parent a termination fee equal to $1,000,000
plus the aggregate amount of Parent's documented expenses not to
exceed $1,000,000, upon the earliest to occur of the following
events:
(A) the termination of this Agreement by Parent pursuant to
Section 7(a)(iv) or the Company pursuant to Section 7(a)(v);
(B) the termination of this Agreement by Parent pursuant to
Section 7(a)(viii) after a willful breach by the Company; or
(C) the termination of this Agreement by Parent or the Company
pursuant to Section 7(a)(vi) as a result of the failure to
receive the requisite vote for approval of this Agreement and the
Merger by the shareholders of the Company at the Company's
Special Meeting if, (I) at the time of such failure, there shall
65
have been announced an Alternative Transaction which shall not
have been absolutely and unconditionally withdrawn and abandoned
and (II) the Company shall have signed a definitive agreement for
such Alternative Transaction within twelve (12) months of such
failure.
(iii) Parent shall pay the Company a termination fee equal to
$1,000,000 plus the aggregate amount of the Company's documented
expenses not to exceed $1,000,000, upon the earliest to occur of
the following events:
(A) the termination of this Agreement by the Company pursuant to
Section 7(a)(x); or
(B) the termination of this Agreement by the Company pursuant to
Section 7(a)(ix) after a willful breach by Parent of this
Agreement.
(iv) The expenses and fees, if applicable, payable pursuant to this
Section 7 shall be paid within thirty (30) days after submission
by Parent or the Company, as the case may be.
8. Miscellaneous.
(a) SURVIVAL. None of the representations and warranties of the Parties
will survive the Effective Time.
(b) Reserved.
(c) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; provided, however, that
(i) the provisions in Section 2 above concerning payment of the Merger
Consideration are intended for the benefit of the Company Stockholders
and (ii) the provisions in Section 5(r) above concerning insurance and
indemnification are intended for the benefit of the individuals
specified therein and their respective legal representatives.
(d) ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by
or among the Parties, written or oral, to the extent they related in
any way to the subject matter hereof.
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Parties.
66
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(h) NOTICES. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be
in writing and shall be deemed given only if delivered personally
(including by nationally recognized overnight courier service) or sent
by telegram or by certified mail, postage prepaid, and sent by
telecopier as follows:
If to Parent or the Merger Sub, to: Swift Transportation Co., Inc.
2200 South 75th Avenue
Phoenix, Arizona 85043
(623) 269-9700 Telephone
(623) 907-7503 Fax
Attn: William F. Riley, III
With a required copy to: Mark A. Scudder
Scudder Law Firm, P.C.
411 S. 13th Street, Suite 200
Lincoln, Nebraska 68508
(402) 435-3223 Telephone
(402) 435-4239 Fax
If to the Company, to: M. S. Carriers, Inc.
3171 Directors Row
Memphis, Tennessee 38131
(901) 332-2500 Telephone
(901) 344-4607 Fax
Attn: M. J. Barrow
67
With a required copy to: Robert E. Orians
Martin, Tate, Morrow & Marston, P.C.
22 N. Front Street, Suite 1100
Memphis, Tennessee 38103
(901) 522-9000 Telephone
(901) 527-3746 Fax
or to such other address as the addressee shall have specified in a
notice duly given to the sender as provided herein. Such notice,
request, demand, waiver, consent, approval, or other communication
shall be deemed to have been given as of the date so personally
delivered, telegraphed, or deposited in the mail and telecopied.
(i) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Tennessee without
giving effect to any choice or conflict of law provision or rule
(whether of the State of Tennessee or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than
the State of Tennessee.
(j) AMENDMENTS AND WAIVERS. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; provided,
however, that any amendment effected subsequent to stockholder
approval will be subject to the restrictions contained in the
Tennessee Business Corporation Act. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and
signed by all of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
(l) EXPENSES. Each of the Parties shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(m) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Disclosure
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
68
(n) ENFORCEMENT OF AGREEMENT. The Parties agree that irreparable damage
would occur if any provision of this Agreement were not performed in
accordance with its specific terms or were otherwise breached.
Accordingly, the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition
to any other remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed and delivered by their duly authorized representative as of the date
first above written.
Swift Transportation Co., Inc.,
a Nevada corporation
By: /s/ Jerry Moyes
---------------------------------------
Jerry Moyes, Chairman, President and
Chief Executive Officer
Sun Merger, Inc.,
a Tennessee Corporation
By: /s/ Jerry Moyes
---------------------------------------
Jerry Moyes, President
M. S. Carriers, Inc.
a Tennessee Corporation
By: /s/ Michael S. Starnes
---------------------------------------
Michael S. Starnes, Chariman, President
and Chief Executive Officer
69
Dates Referenced Herein and Documents Incorporated by Reference
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