EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INSURANCE AUTO AUCTIONS, INC.
AXLE HOLDINGS, INC.
AND
AXLE MERGER SUB, INC.
DATED AS OF FEBRUARY 22, 2005
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TABLE OF CONTENTS
PAGE
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ARTICLE I
THE MERGER
1.1 The Merger............................................................2
1.2 Closing; Effective Time: Filing of Articles of Merger.................2
1.3 Effect of the Merger..................................................2
1.4 Additional Actions....................................................2
ARTICLE II
THE SURVIVING CORPORATION
2.1 Name of Surviving Corporation.........................................3
2.2 Articles of Incorporation.............................................3
2.3 By-Laws...............................................................3
2.4 Directors and Officers................................................3
ARTICLE III
CONVERSION AND CANCELLATION OF SECURITIES;
MERGER CONSIDERATION
3.1 Conversion of Axle Common Stock.......................................3
3.2 Payment for the Axle Common Stock.....................................4
3.3 Stock Transfer Books..................................................5
3.4 Dissenting Shares.....................................................5
3.5 Disposition of Axle Options and ESPP Purchase Rights..................5
3.6 Escheatment of Funds..................................................6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF AXLE
4.1 Organization and Qualification........................................7
4.2 Authorization; Enforceability.........................................7
4.3 Required Vote of Axle Shareholders....................................7
4.4 State Takeover Statutes...............................................8
4.5 Organizational Documents..............................................8
4.6 Capitalization; Subsidiaries..........................................8
4.7 Options...............................................................9
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4.8 SEC Filings; Financial Statements.....................................9
4.9 Proxy Statement......................................................11
4.10 Taxes................................................................11
4.11 Material Contracts...................................................12
4.12 Real Property........................................................13
4.13 Litigation...........................................................14
4.14 Compliance with Applicable Laws......................................14
4.15 No Violation.........................................................15
4.16 Intellectual Property................................................15
4.17 Absence of Certain Changes...........................................16
4.18 Insurance Policies...................................................16
4.19 Licenses and Permits.................................................16
4.20 Employee Benefit Plans...............................................17
4.21 Environmental, Health and Safety Matters.............................18
4.22 Labor Matters........................................................19
4.23 Opinion of Financial Advisor.........................................19
4.24 Brokers..............................................................19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE BUYER PARENT
5.1 Organization and Standing............................................19
5.2 Authorization; Enforceability........................................19
5.3 No Violation.........................................................20
5.4 Financing............................................................20
5.5 Litigation...........................................................20
5.6 Governmental Approvals and Filings...................................21
5.7 Brokers..............................................................21
ARTICLE VI
COVENANTS OF AXLE
6.1 Conduct of Business..................................................21
6.2 Proxy Statement......................................................23
6.3 Axle Shareholders' Meeting...........................................24
6.4 Filings; Consents; Etc...............................................24
6.5 No Solicitation......................................................24
6.6 Schedules Update; Certain Notices....................................25
6.7 Financial Statements.................................................26
6.8 Regulatory Filings...................................................26
6.9 Certain Real Estate Matters..........................................27
6.10 Financing Cooperation................................................27
6.11 Access to Information................................................27
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ARTICLE VII
COVENANTS OF THE BUYER AND THE BUYER PARENT
7.1 Filings; Consents; Etc...............................................28
7.2 Director and Officer Liability and Indemnification...................28
7.3 Regulatory Filing....................................................29
7.4 Financing............................................................29
ARTICLE VIII
CONDITIONS PRECEDENT TO THE CLOSING
8.1 Conditions Precedent to Each Party's Obligations.....................31
8.2 Conditions Precedent to Obligations of the Buyer and the Buyer
Parent...............................................................31
8.3 Conditions Precedent to Obligations of Axle..........................32
ARTICLE IX
CLOSING
9.1 Deliveries by Axle...................................................33
9.2 Deliveries by the Buyer and the Buyer Parent.........................33
ARTICLE X
TERMINATION
10.1 Termination..........................................................34
10.2 Effect of Termination................................................35
10.3 Termination Payments.................................................35
ARTICLE XI
MISCELLANEOUS
11.1 Notices, Consents, etc...............................................37
11.2 Severability.........................................................38
11.3 Assignment; Successors...............................................38
11.4 Counterparts; Facsimile Signatures...................................39
11.5 Expenses; Transfer Taxes.............................................39
11.6 Governing Law........................................................39
11.7 Table of Contents and Headings.......................................39
11.8 Definitions..........................................................39
11.9 Entire Agreement.....................................................45
11.10 No Survival of Representations, Warranties, Covenants and
Agreements...........................................................45
11.11 Third Parties........................................................45
11.12 Disclosure Generally.................................................46
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11.13 Acknowledgment by the Buyer and the Buyer Parent.....................46
11.14 Interpretive Matters.................................................46
11.15 Amendments, Modification and Waiver..................................47
11.16 Submission to Jurisdiction...........................................47
11.17 Waiver of Jury Trial.................................................47
11.18 Specific Performance.................................................47
11.19 Public Announcements.................................................47
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GLOSSARY OF DEFINED TERMS
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1991 Plan......................................................................5
2003 Plan......................................................................5
Acquired Companies............................................................39
Acquired Companies' Knowledge.................................................39
Acquisition Proposal..........................................................40
Acquisition Transaction.......................................................40
Actions.......................................................................14
Affiliate.....................................................................40
Aggregate ESPP Redemption Amount..............................................40
Aggregate Merger Consideration................................................40
Agreement......................................................................1
Announcement Date.............................................................40
Articles of Merger.............................................................2
Axle...........................................................................1
Axle Board.....................................................................1
Axle Common Stock.............................................................40
Axle Indemnified Parties......................................................28
Axle Option....................................................................5
Axle Preferred Stock..........................................................40
Axle SEC Documents.............................................................9
Axle Shareholder Approval......................................................8
Axle Shareholders.............................................................40
Axle Shareholders' Meeting....................................................11
Axle Subsidiaries.............................................................40
Business......................................................................41
Business Day..................................................................41
Buyer..........................................................................1
Buyer Parent...................................................................1
Buyer Parent Common Stock......................................................6
Buyer's Representatives.......................................................27
Certificates...................................................................4
Change in Recommendation......................................................25
Closing........................................................................2
Closing Date...................................................................2
Code..........................................................................41
Company Licensed Intellectual Property........................................15
Company Owned Intellectual Property...........................................15
Confidentiality Agreement.....................................................41
Consent.......................................................................41
Contract......................................................................41
Disclosure Schedule............................................................7
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Dissenting Shares..............................................................5
Draft Financial Statements....................................................11
Effective Time.................................................................2
Employee Plan.................................................................41
Environmental Claim...........................................................41
Environmental Health and Safety Requirements..................................41
Equity Commitment Letter......................................................20
ERISA.........................................................................42
Escrow Breakage Amount........................................................30
Escrow Breakage Cap...........................................................42
Escrow Closing................................................................30
EscrowCo......................................................................30
EscrowCo Debt.................................................................30
ESPP...........................................................................6
ESPP Notice....................................................................6
ESPP Purchase Period..........................................................42
ESPP Purchase Price...........................................................42
ESPP Purchase Right...........................................................42
ESPP Redemption Amount........................................................42
Exchange Act..................................................................42
Expiration Date...............................................................42
Financing.....................................................................20
Financing Letters.............................................................20
First Person..................................................................44
FTC...........................................................................26
GAAP..........................................................................42
Governmental Authority........................................................42
Governmental Order............................................................42
HSR Act.......................................................................42
Illinois Law..................................................................42
Indebtedness Commitment Letters...............................................20
Insurance Policies............................................................16
Intellectual Property.........................................................43
Last ESPP Issuance Date........................................................9
Law...........................................................................43
Lease.........................................................................14
Leased Property...............................................................14
Lenders.......................................................................20
Letter of Transmittal..........................................................4
Liability.....................................................................43
Licenses and Permits..........................................................43
Lien..........................................................................43
Material Adverse Effect.......................................................43
Material Contracts............................................................12
Material of Environmental Concern.............................................43
Merger.........................................................................1
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Merger Consideration...........................................................3
Option Amount.................................................................44
Option Consent.................................................................6
Option Notice..................................................................5
Option Payment Amount.........................................................44
Option Price..................................................................44
Organizational Documents......................................................44
Outside Date..................................................................34
Owned Property................................................................13
Parties........................................................................1
Party..........................................................................1
Paying Agent...................................................................4
PBGC..........................................................................18
Permitted Liens...............................................................44
Person........................................................................44
Plan Affiliate................................................................44
Proxy Statement...............................................................11
Real Property.................................................................14
Reasonable Efforts............................................................44
Required Cash Amount..........................................................20
SEC...........................................................................44
Securities Act................................................................44
Senior Debt Letter............................................................20
Stock Option Plan..............................................................5
Subordinated Debt Letter......................................................20
Substitute Debt Financing.....................................................29
Superior Proposal.............................................................44
Supplemental Plan..............................................................5
Surviving Corporation..........................................................2
Tax Return....................................................................45
Taxes.........................................................................45
Threatened....................................................................45
Title IV Plan.................................................................17
Transaction Expenses..........................................................45
Updated Financial Statements..................................................26
Voting Agreement...............................................................1
Voting Group...................................................................1
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EXHIBITS
EXHIBITS:
Exhibit 1.2 - Articles of Merger
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of February 22, 2005, by and among Axle Holdings, Inc., a
Delaware corporation (the "Buyer Parent"), Axle Merger Sub, Inc., an Illinois
corporation and wholly owned subsidiary of the Buyer Parent (the "Buyer") and
Insurance Auto Auctions, Inc., an Illinois corporation ("Axle"). Each of the
parties named above may be referred to as a "Party" and collectively as the
"Parties." Capitalized terms used, but not otherwise defined, herein shall have
the meanings set forth in Section 11.8.
RECITALS
A. The Parties hereto desire to enter into this Agreement and, subject
to the conditions hereof and in accordance with the provisions of Illinois Law,
consummate the transactions contemplated hereby pursuant to which the Buyer
Parent will acquire all of the capital stock of Axle through a merger of the
Buyer with and into Axle (the "Merger"), following which Axle shall continue as
the surviving corporation.
B. The Board of Directors of Axle (the "Axle Board") has approved and
adopted the terms and conditions of this Agreement and the consummation of the
transactions contemplated hereby, including the Merger, and has determined to
submit the execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby to the Axle Shareholders for their approval and
adoption by the consents required under Illinois Law and Axle's Articles of
Incorporation.
C. The Axle Board has determined that the terms and conditions of this
Agreement and the consummation of the transactions contemplated hereby,
including the Merger, are fair to and in the best interests of, and are
advisable to, Axle and the Axle Shareholders, and the Axle Board recommends that
the Axle Shareholders vote to approve and adopt the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby.
D. Axle, on the one hand, and the Buyer and the Buyer Parent, on the
other hand, desire to make certain representations, warranties, covenants and
agreements in connection with the Merger and also prescribe various conditions
to the Merger.
E. Concurrently with the execution of this Agreement, ValueAct Capital
Partners, L.P. and certain of its affiliated entities (collectively, the "Voting
Group") are entering into a Voting Agreement (the "Voting Agreement") with the
Buyer Parent providing, among other things, that, subject to the terms and
conditions thereof, each of the members of the Voting Group will vote its shares
of Axle Common Stock (as hereinafter defined) in favor of the Merger and the
approval and adoption of this Agreement.
AGREEMENT
In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the satisfaction of the
conditions set forth in this Agreement and in accordance with Illinois Law, at
the Effective Time (as defined below), the Buyer shall be merged with and into
Axle and as a result of the Merger, the separate corporate existence of the
Buyer shall cease and Axle shall continue as the surviving corporation (in such
capacity, the "Surviving Corporation") of the Merger.
1.2 Closing; Effective Time: Filing of Articles of Merger. Subject to
the fulfillment or waiver of each of the conditions contained in Article VIII,
as soon as it is reasonably practicable on or after the later of May 2, 2005 or
three (3) Business Days following the satisfaction or waiver of all of the
conditions contained in Article VIII, other than those conditions which by their
terms are to be satisfied or waived at Closing (but subject to the satisfaction
or waiver of such conditions), a closing (the "Closing") shall take place at the
offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 4 Times Square, New York,
New York (or such other place as the Parties may agree). The "Closing Date"
shall be the date on which the Closing shall actually occur. Subject to the
terms of this Agreement, the Parties shall, on the Closing Date, cause the
Merger to be consummated by filing a properly executed articles of merger, in
the form attached hereto as Exhibit 1.2, or other appropriate documents (the
"Articles of Merger"), with the Secretary of State of the State of Illinois in
accordance with the provisions of Illinois Law. When used herein, the term
"Effective Time" shall mean the date and time when the Articles of Merger have
been accepted for filing by the Secretary of the State of Illinois or on such
date and time as otherwise specified in the Articles of Merger.
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the Articles of Merger and as provided by the
applicable provisions of Illinois Law. Without limiting the generality of the
foregoing, and subject thereto, upon and following consummation of the Merger,
all of the property, rights, privileges, powers and franchises of Axle and the
Buyer shall vest in the Surviving Corporation, and all of the debts,
liabilities, obligations, restrictions and duties of Axle and the Buyer shall
become the debts, liabilities, obligations, restrictions and duties of the
Surviving Corporation.
1.4 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that consistent with the
terms of this Agreement any further assignments or assurances in Law or any
other acts are necessary or desirable (a) to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation, title to and possession of any
property or right of either of Axle or the Buyer acquired or to be acquired by
reason of, or as a result of, the Merger, or (b) otherwise to carry out the
purposes of this Agreement, then, subject to the terms and conditions of this
Agreement, each of Axle or the Buyer and its officers and directors shall be
deemed to have granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such deeds, assignments and assurances in
Law and to do all acts necessary or proper to vest, perfect or confirm title to
and possession of such property or rights in the Surviving Corporation and
otherwise to carry out the purposes of this Agreement; and the officers and
directors of the Surviving Corporation are fully authorized in the name of
either of Axle or the Buyer to take any and all such action.
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ARTICLE II
THE SURVIVING CORPORATION
2.1 Name of Surviving Corporation. The name of the Surviving Corporation
shall be Axle, Inc.
2.2 Articles of Incorporation. The Articles of Merger shall include such
amendments, schedules or supplements as may be required under Illinois Law to
provide that the Articles of Incorporation of the Surviving Corporation from and
after the Effective Time shall be, or be the same as, the Articles of
Incorporation of the Buyer as in effect immediately prior to the Effective Time,
until thereafter changed or amended as provided therein or by applicable Law.
2.3 By-Laws. The By-Laws of the Buyer as in effect immediately prior to
the Effective Time shall be the By-Laws of the Surviving Corporation from and
after the Effective Time, until thereafter changed or amended as provided
therein or by applicable Law.
2.4 Directors and Officers. The board of directors of the Buyer
immediately prior to the Effective Time shall be the initial board of directors
of the Surviving Corporation, and the officers of Axle immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified. If, at the Effective Time, a vacancy shall exist on the board of
directors of the Surviving Corporation or in any office of the Surviving
Corporation, such vacancy may thereafter be filled in the manner provided by
Law.
ARTICLE III
CONVERSION AND CANCELLATION OF SECURITIES;
MERGER CONSIDERATION
3.1 Conversion of Axle Common Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the Parties:
(a) Each share of Axle Common Stock issued and outstanding
immediately prior to the Effective Time shall be cancelled and extinguished and
converted into the right to receive an amount of cash equal to $28.25 per Share
(the "Merger Consideration").
(b) Each issued and outstanding share of Axle Common Stock that
is held in Axle's treasury or in the treasury of any subsidiary of Axle
immediately prior to the Effective Time, if any, shall be cancelled and
extinguished without the payment of any consideration therefor.
(c) Each share of capital stock of the Buyer issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and non-assessable share of common stock,
par value $.01, of the Surviving Corporation.
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3.2 Payment for the Axle Common Stock.
(a) The Buyer, with the consent of Axle (which consent shall
not be unreasonably withheld), shall select an entity to act as paying agent
(the "Paying Agent") in effecting the payment of the Aggregate Merger
Consideration in respect of (i) stock certificates (the "Certificates") that,
prior to the Effective Time, represented Axle Common Stock and exercised Axle
Options, and (ii) ESPP Purchase Rights remaining in effect as of the Effective
Time, entitled to payment of the Aggregate Merger Consideration. At the
Effective Time, the Buyer Parent shall deposit, or cause to be deposited, with
the Paying Agent the Aggregate Merger Consideration. The expenses of and any
indemnification obligations to the Paying Agent shall be the sole responsibility
of the Buyer Parent and the Surviving Corporation. On or simultaneously with the
Closing Date, Axle, the Buyer, the Buyer Parent and the Paying Agent shall enter
into a paying agent agreement, on terms and conditions that are reasonably
satisfactory to the parties thereto.
(b) Within a reasonable period prior to the Effective Time,
Axle shall provide to the Paying Agent a form of letter of transmittal in a
customary form mutually agreed upon by the Parties (the "Letter of Transmittal")
which shall, among other things, specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Paying Agent, and instructions for surrendering such
Certificates and receiving the Merger Consideration in respect thereof. The
Surviving Corporation shall cause the Paying Agent to mail, as soon as
reasonably practicable after the Effective Time, the Letter of Transmittal to
each Axle Shareholder of record at the Effective Time. Upon the surrender of
each such Certificate for cancellation, together with such Letter of
Transmittal, duly completed and validly executed, the Paying Agent shall, as
promptly as practicable, (x) pay to the holder of such Certificate an aggregate
amount equal to (i) the Merger Consideration multiplied by (ii) the number of
shares of Axle Common Stock formerly represented by such Certificate, in
consideration therefor, and such Certificate representing the Axle Common Stock
shall forthwith be cancelled. Until so surrendered, each such Certificate (other
than Certificates representing Axle Common Stock held by Axle or held in the
treasury of Axle) shall represent solely the right to receive the Merger
Consideration multiplied by the number of shares of Axle Common Stock
represented thereby. No interest or dividends shall be paid or accrued on the
Merger Consideration. If the Merger Consideration (or any portion thereof) is to
be delivered to any Person other than the Person in whose name the Certificate
formerly representing Axle Common Stock surrendered thereof is registered, it
shall be a condition to such right to receive payment of such Merger
Consideration that the Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
payment shall pay to the Paying Agent the transfer or other similar Taxes
required by reason of payment of the Merger Consideration to a Person other than
the registered holder of the Certificate so surrendered, or shall establish to
the satisfaction of the Paying Agent that such Tax has been paid or is not
applicable. The Paying Agent shall withhold or deduct for Taxes as required
under applicable Law.
(c) In the event that any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount, and otherwise in such substance and form, as the Surviving
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Corporation may reasonably direct, as indemnity against any claim that may be
made against the Surviving Corporation, the Buyer Parent and the Paying Agent
with respect to such Certificate, the Paying Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration to which
such Person is entitled pursuant to this Article III.
3.3 Stock Transfer Books. After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of any shares
of Axle Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates formerly representing shares of
Axle Common Stock are presented to the Surviving Corporation or the Paying
Agent, they shall be surrendered and cancelled in return for the payment of the
Merger Consideration.
3.4 Dissenting Shares. Notwithstanding any provision of this Agreement
to the contrary, shares of Axle Common Stock that are outstanding immediately
prior to the Effective Time and which are held by Axle Shareholders who shall
not have voted in favor of the Merger or consented thereto in writing and who
shall have properly exercised dissenters' rights or rights of appraisal for such
shares of Axle Common Stock in accordance with Illinois Law and who, as of the
Effective Time, have not effectively withdrawn or lost such dissenters' rights
(collectively, the "Dissenting Shares"), shall not be converted into or
represent the right to receive any portion of the amounts to be paid pursuant to
Section 3.1, but the holders thereof shall only be entitled to such rights as
are granted by Illinois Law. All Dissenting Shares held by Axle Shareholders who
shall have failed to perfect or who effectively shall have withdrawn or lost
their dissenters' rights shall thereupon be deemed to have been converted into,
and to have become exchangeable for, as of the later of the Effective Time or
the occurrence of such event, the right to receive the Merger Consideration to
be paid pursuant to this Article III, without any interest thereon, upon
surrender, in the manner provided in Section 3.2, for the Certificates that
formerly evidenced such shares. Axle shall not take any action relating to the
Dissenting Shares prior to the Effective Time without the consent of the Buyer
Parent, which consent shall not be unreasonably withheld or delayed.
3.5 Disposition of Axle Options and ESPP Purchase Rights.
(a) Except as set forth below, the Buyer Parent shall not
assume any options to purchase shares of Axle Common Stock (except for any ESPP
Purchase Right, each an "Axle Option") issued under Axle's 1991 Stock Option
Plan, as amended (the "1991 Plan"), Axle's Supplemental Stock Option Plan, as
amended (the "Supplemental Plan"), and Axle's 2003 Stock Incentive Plan, as
amended (the "2003 Plan," and together with the 1991 Plan and the Supplemental
Plan, collectively, the "Stock Option Plan"), or any other options, warrants or
other rights to acquire Axle Common Stock and as of the Effective Time all
outstanding Axle Options shall terminate, unless validly exercised prior
thereto. Except as set forth below, no less than twenty (20) days prior to the
Effective Time, Axle shall notify each holder of an Axle Option in writing (the
"Option Notice") of the terms of the Merger and that all Axle Options shall be
immediately and fully vested and exercisable, and that (i) all outstanding
unexercised Axle Options granted under the 1991 Plan and the Supplemental Plan
shall terminate as of the Effective Time, unless validly exercised prior
thereto, and (ii) all outstanding unexercised Axle Options granted under the
2003 Plan shall be cancelled as of the Effective Time in exchange for a cash
payment equal to, with respect to each such Axle Option, the excess of the
Merger
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Consideration, if any, over the Option Price. The Axle Shareholders who have
elected to exercise their Axle Options prior to the Expiration Date shall have
the option to either (i) deliver the Option Amount to the Paying Agent pursuant
to the terms of the Option Notice, or (ii) receive an amount equal to the Option
Payment Amount from the Paying Agent, so long as the Merger Consideration is
greater than the Option Price. Notwithstanding the foregoing, upon the Merger,
each Axle Option set forth on Schedule 3.5(a) of the Disclosure Schedule shall
be converted into an option to acquire common stock, par value $0.01 per share
of the Buyer Parent ("Buyer Parent Common Stock") upon substantially the same
terms and conditions (including per share exercise price) as were in effect
immediately prior to the Merger, provided such option holder executes a Consent
to such conversion (the "Option Consent") in a form satisfactory to the Buyer
Parent.
(b) As of the Announcement Date, the Axle Board shall cause
Axle's Employee Stock Purchase Plan, as amended and restated as of June 16, 2004
(the "ESPP"), to be amended to provide that no future contributions to the ESPP
shall be allowed following such date. At such time, Axle shall cause
contributions to the ESPP to be discontinued and shall notify each participant
in the ESPP of such discontinuation. To the extent any ESPP Purchase Right
exists for any participant in the ESPP as of the Effective Time, then, in lieu
of such participant receiving Axle Common Stock pursuant to the exercise of an
ESPP Purchase Right, such ESPP Purchase Right shall be purchased from such
participant (through a payment from the Paying Agent) in an amount equal to the
ESPP Redemption Amount. Within a reasonable period prior to the Effective Time,
Axle shall provide to the Paying Agent a form of letter of transmittal in a
customary form mutually agreed upon by the Parties (the "ESPP Notice") which
shall, among other things, notify each participant who has an ESPP Purchase
Right of the terms of the Merger, and of such participant's ESPP Redemption
Amount. The Buyer Parent shall cause the Paying Agent to mail on or immediately
following the Effective Time the ESPP Notice and the ESPP Redemption Amount to
each participant who has an ESPP Purchase Right. As of the Effective Time, the
ESPP shall be terminated by the Surviving Corporation. Notwithstanding anything
to the contrary in this Section 3.5(b), to the extent this Agreement is
terminated and the Merger is not consummated pursuant to the terms set forth
herein, Axle, shall have the right, in its sole discretion, to reinstate or
terminate the ESPP.
(c) Axle shall use Reasonable Efforts to obtain all Consents
required from any third party or option holder and take, or cause to be done,
all things necessary and proper or advisable in compliance with the terms and
conditions of the Stock Option Plan and the ESPP (including obtaining the Option
Consents referred to in Section 3.5(a) and the Consents of holders of Axle
Options under the 2003 Plan to the treatment described in Section 3.5(a)) to
consummate and make effective, as soon as practicable, the transactions
contemplated by Sections 3.5(a) and 3.5(b) hereof.
3.6 Escheatment of Funds. None of the Parties nor any other Person shall
be liable to any former Axle Shareholder for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
Laws. Any such amounts remaining unclaimed by any Axle Shareholder immediately
prior to such time when such amounts would otherwise escheat to or become the
property of any Governmental Authority, shall, to the extent permitted by
applicable Laws, become the property of the Buyer Parent, free and clear of all
claims or interest of any Person previously entitled thereto.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF AXLE
Except as set forth in the corresponding numbered sections of Axle's
disclosure schedule delivered concurrently with the delivery of this Agreement,
after giving effect to Section 11.12 (the "Disclosure Schedule"), Axle hereby
represents and warrants to the Buyer and the Buyer Parent with respect to the
matters specified in this Article IV as follows:
4.1 Organization and Qualification. Each of the Acquired Companies is an
entity duly organized, validly existing and in good standing under the Laws of
its jurisdiction of formation. Each of the Acquired Companies has the requisite
entity power and authority to carry on its business as it is now being
conducted. Each of the Acquired Companies is duly qualified to conduct business
as a foreign entity and is in good standing under the Laws of each jurisdiction
where the nature of its business or the ownership or leasing of its property
requires such qualification, except for such jurisdictions where the failure to
be qualified would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
4.2 Authorization; Enforceability.
(a) Axle has the requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations under this
Agreement and to consummate the transactions contemplated by this Agreement;
provided, that, the Axle Shareholder Approval is required for Axle to consummate
the Merger. The execution and delivery of this Agreement and the performance of
Axle's obligations hereunder have been duly and validly authorized by all
necessary corporate action on the part of Axle, and no other corporate
proceedings on the part of Axle are necessary to authorize the execution,
delivery and performance of this Agreement (subject to, in the case of the
Merger, obtaining the Axle Shareholder Approval). This Agreement has been duly
executed and delivered by Axle and, assuming the due authorization, execution
and delivery in each case by the other Parties hereto, will constitute, upon
such execution and delivery, legal, valid and binding obligations of Axle,
enforceable against Axle in accordance with its terms and conditions, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting the enforcement of
creditors rights generally, and general principles of equity (regardless of
whether such enforceability is considered in a proceeding in Law or equity).
(b) The Axle Board, at a meeting duly called and held, and not
rescinded or modified in any way, has by unanimous vote of all its members
(other than any recused members) duly (i) approved this Agreement and determined
that this Agreement and the transactions contemplated hereby, including the
Merger, are advisable in the best interests of, the holders of Axle Common
Stock, and (ii) resolved to recommend that the holders of Axle Common Stock vote
for approval and adoption of this Agreement.
4.3 Required Vote of Axle Shareholders. The affirmative vote of
two-thirds (2/3) of the votes of the shares of the Axle Common Stock entitled to
vote thereon is the only vote of any
7
class or series of capital stock of Axle required by Illinois Law or Axle's
Organizational Documents to adopt this Agreement (the "Axle Shareholder
Approval").
4.4 State Takeover Statutes. The Axle Board has taken all actions
necessary so that the restrictions contained in Section 7.85 and Section 11.75
of the Illinois Law applicable to a business combination (as defined in Section
11.75 thereof) will not apply to the execution, delivery or performance of this
Agreement or the Voting Agreement, the consummation of the Merger or other
transactions contemplated by this Agreement or the Voting Agreement. True,
correct and complete copies of all resolutions of the Axle Board reflecting such
actions have been provided to the Buyer Parent. No other state takeover statute
or similar statue or regulation is applicable to or purports to be applicable to
the Merger or any of the transactions contemplated by this Agreement.
4.5 Organizational Documents. Axle has made available to the Buyer
Parent copies of each of the Acquired Companies respective Organizational
Documents as currently in effect, and such copies are true and complete as of
the date hereof.
4.6 Capitalization; Subsidiaries.
(a) The authorized capital stock of Axle consists of 20,000,000
shares of Axle Common Stock and 5,000,000 shares of Axle Preferred Stock. As of
the close of business on February 18, 2005, (a) 11,850,796 shares of Axle Common
Stock were issued and outstanding, all of which are validly issued, fully paid
and nonassessable; (b) no shares of Axle Preferred Stock were issued or
outstanding; (c) 906,514 shares of Axle Common Stock were held in the treasury
of Axle; (d) 484,846 shares of Axle Common Stock were reserved for issuance upon
the exercise of outstanding options to purchase Axle Common Stock under the 2003
Plan; (e) 1,216,410 shares of Axle Common Stock were reserved for issuance upon
the exercise of outstanding options to purchase Axle Common Stock under the 1991
Plan; (f) 7,000 shares of Axle Common Stock were reserved for issuance upon the
exercise of outstanding options to purchase Axle Common Stock under the
Supplemental Plan; (g) 133,007 shares of Axle Common Stock were available for
future grant under the 2003 Plan; (h) no shares of Axle Common Stock were
available for future grant under the 1991 Plan; (i) 39,390 shares of Axle Common
Stock were available for future grant under the Supplemental Plan; and (j)
83,524 shares of Axle Common Stock were available for future purchase under the
ESPP. All of the outstanding shares of Axle Common Stock are, and all of the
shares of Axle Common Stock issuable pursuant to the exercise of outstanding
Axle Options and ESPP Purchase Rights will be, when issued in accordance with
the respective terms thereof, issued and granted in compliance with all
applicable securities laws and other applicable Laws, and are, or will be, duly
authorized, validly issued, fully paid and nonassessable and free and clear of
any and all Liens. Except as set expressly forth in this Section 4.6(a), there
are no other shares of common stock or equity interests or other ownership
interests of any class of Axle or any Axle Subsidiary, or any security
exchangeable into or exercisable for such equity securities or other ownership
interests, issued, reserved for issuance or outstanding. Since February 18,
2005, no shares of Axle Common Stock have been issued or agreed to have been
issued by any Acquired Company, except (A) upon the exercise of Axle Options
issued and outstanding as of the close of business on February 18, 2005 or (B)
if the Effective Time occurs on or after July 1, 2005, as a result of the
exercise of ESPP Purchase Rights outstanding on the Announcement Date in a
manner
8
consistent with past operation of the ESPP. The weighted average exercise price
of all Axle Options set forth on Schedule 4.6 of the Disclosure Schedule is
$13.5235. As of the date hereof, $75,878.94 has been contributed to the ESPP
since the last bi-annual date that shares of Axle Common Stock were issued
pursuant to the ESPP (the "Last ESPP Issuance Date") and following the Last ESPP
Issuance Date no funds remained in the ESPP with respect to contributions prior
to the Last ESPP Issuance Date. Assuming that the fair market value of Axle
Common Stock at the end of the ESPP purchase period in which this Agreement has
been executed is greater than the fair market value of Axle Common Stock at the
beginning of such purchase period, no more than 4,076 shares of Axle Common
Stock will be issuable under the ESPP in respect of funds contributed to the
ESPP if the Effective Time were to occur on or after July 1, 2005, and the
aggregate ESPP Redemption Amount (with respect to all ESPP Purchase Rights),
pursuant to Section 3.5(b), shall not exceed $39,275. Except as set forth on
Schedule 4.6 of the Disclosure Schedule, Axle has no subsidiaries and owns no
equity securities or other ownership interest of any other corporation,
partnership or other entity. Axle is not a participant in any joint venture or
similar arrangement. Schedule 4.6(a)(ii) of the Disclosure Schedule is a true
and complete schedule of Axle's outstanding indebtedness (including letters of
credit, capitalized leases and maximum amounts payable pursuant to earnout
obligations) as of the close of business on February 18, 2005.
(b) Exhibit 21.1 to Axle's Annual Report on Form 10-K for the
fiscal year ended December 28, 2003 sets forth a list of all of the Axle
Subsidiaries and their respective jurisdictions of incorporation. All of the
issued and outstanding shares of capital stock or other equity interests of each
Axle Subsidiary are validly issued, fully paid and non-assessable, are owned by
Axle or one or more Axle Subsidiaries, free and clear of any and all Liens.
4.7 Options. Except as set forth on Schedule 4.6 of the Disclosure
Schedule, there are no outstanding options, rights (preemptive or otherwise), or
warrants to acquire capital stock from any of the Acquired Companies, and no
calls, convertible or exchangeable securities, commitments, subscriptions or
other rights or any other arrangements to which any of the Acquired Companies is
a party requiring the issuance, sale or transfer of any equity securities of
such entities, voting securities or any securities convertible directly or
indirectly into equity securities or exchangeable for capital stock of any of
such entities, or evidencing the right to subscribe for any equity securities of
any of the Acquired Companies, or giving any Person (other than the Buyer Parent
and the Buyer) any rights with respect to any equity securities of any of the
Acquired Companies.
4.8 SEC Filings; Financial Statements.
(a) Axle has timely filed with the SEC all forms, reports,
schedules, statements and other documents required to be filed by it since
January 1, 2002 under the Exchange Act or the Securities Act (as such documents
have been amended since the time of their filing and all documents incorporated
by reference therein, collectively, the "Axle SEC Documents"). No Axle
Subsidiary is required to file any form, report, schedule, statement or other
document with the SEC. As of their respective dates and if amended prior to the
date hereof, as of the date of the last such amendment, the Axle SEC Documents
including, without limitation, any financial statements or schedules included
therein (i) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
9
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (ii) complied in
all material respects with the applicable requirements of the Exchange Act and
the Securities Act, as the case may be, at such time of filing.
(b) Axle and each of its officers and directors are in
compliance with, and have complied, in all material respects with (i) the
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 and the related rules
and regulations promulgated thereunder, and (ii) the applicable listing and
corporate governance rules and regulations of NASDAQ. The management of Axle has
(i) implemented disclosure controls and procedures (as defined in Rule 13a-15(e)
of the Exchange Act) to ensure that material information relating to the
Acquired Companies is made known to the management of Axle by others within
those entities, and (ii) disclosed, based on its most recent evaluation, to
Axle's outside auditors, the audit committee of the Axle Board and the Buyer
Parent (A) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting (as defined in Rule
13a-15(f) of the Exchange Act) that are reasonably likely to materially affect
Axle's ability to record, process, summarize and report financial data, and (B)
any fraud, whether or not material, known to management that involves management
or other employees who, in each case, have a significant role in Axle's internal
control over financial reporting. There have been no material changes since
December 26, 2004 in Axle's internal controls or in other factors that could
significantly affect Axle's internal controls, or any significant deficiencies
or material weaknesses in such internal controls requiring corrective actions.
Axle has delivered to the Buyer Parent complete and accurate copies of notices
received from its independent auditor prior to the date hereof of any
significant deficiencies or material weaknesses in Axle's internal control over
financial reporting since December 28, 2003 and any other management letter or
similar correspondence from any independent auditor of Axle or any Axle
Subsidiary received since December 28, 2003. Axle is implementing such programs
and is taking such steps as it believes are necessary to effect compliance (not
later than the relevant statutory and regulatory deadline therefor) with all
provisions of Section 404 of the Xxxxxxxx-Xxxxx Act that will become applicable
to Axle and has not received, orally or in writing, any notification that its
independent auditor (i) believes that Axle will not be able to complete its
assessment before the reporting deadline, or, if completed, that it will not be
completed in sufficient time for the independent auditor to complete its
assessment, or (ii) will not be able to issue unqualified attestation reports
with respect thereto. As of December 26, 2004, there were not, and as of the
date hereof there are not, any significant deficiencies or material weaknesses
(as such terms are defined in PCAOB Audit Standard No.2) in Axle's internal
controls with respect to financial reporting requiring corrective action, and
neither Axle's independent auditor nor any accounting firm, if any, which have
reviewed Axle's internal controls have indicated to Axle that such auditor or
firm believes any significant deficiencies or material weaknesses in internal
controls with respect to financial reporting exist.
(c) Each set of consolidated financial statements (including in
each case, any related notes thereto), contained in the Axle SEC Documents (i)
was prepared from the books and records of Axle and the Axle Subsidiaries, (ii)
was prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated therein or in the notes thereto
or, in the case of unaudited statements, do not contain footnotes as permitted
by Form 10-Q of the Exchange Act), (iii) complied in all material respects with
all applicable accounting requirements and with the published rules and
regulations of the SEC with
10
respect thereto as in effect on the date of filing, (iv) except with respect to
the unaudited financial statements contained in the Axle SEC Documents filed on
form 10-Q of the Exchange Act, was accompanied by unqualified reports from the
independent auditor opining on the same as to the financial statements contained
therein and (v) fairly presents, in all material respects, the consolidated
financial position of Axle and the consolidated Axle Subsidiaries as of their
respective dates and the consolidated results of their respective operations and
cash flows for the periods indicated therein, except that the unaudited interim
financial statements were or are subject to normal year end adjustments which
were not or are not expected to be material in amount.
(d) Prior to the date hereof, Axle has delivered to the Buyer
Parent a draft consolidated balance sheet of Axle and the Axle Subsidiaries as
of December 26, 2004 and drafts of the consolidated income statement and
statement of cash flows for the year ended December 26, 2004 (collectively, the
"Draft Financial Statements"). The Draft Financial Statements were prepared from
the books and records of Axle and the Axle Subsidiaries, and fairly present, in
all material respects, the consolidated financial position of Axle and the
consolidated Axle Subsidiaries as of date indicated therein and the consolidated
results of their respective operations and cash flows for the period then ended,
subject to any audit by Axle's auditor.
(e) Except (i) as reserved against in the consolidated balance
sheet (including the notes thereto) of Axle included in its Annual Report on
Form 10-K for the fiscal year ended December 28, 2003, and (ii) for Liabilities
incurred since December 28, 2003 in the ordinary course of business consistent
with past practice, to the Acquired Companies' Knowledge, neither Axle nor any
of the Axle Subsidiaries have any Liabilities of any nature (whether or not
required by GAAP to be reflected in the audited financial statements of Axle and
the Axle Subsidiaries) except for such Liabilities which would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
4.9 Proxy Statement. The proxy statement or information statement to be
sent to the Axle Shareholders in connection with the meeting of Axle
Shareholders to consider the adoption of this Agreement, including any
adjournment or postponement thereof (the "Axle Shareholders' Meeting") (such
proxy statement or information statement, as amended or supplemented, is herein
referred to as the "Proxy Statement"), on the date first mailed to the Axle
Shareholders, at the time of any amendment or supplement thereto and at the time
of Axle Shareholders' Meeting, will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Proxy Statement will, when filed by Axle with the SEC,
comply in all material respects with the applicable provisions of the Exchange
Act, and the rules and regulations thereunder. Notwithstanding the foregoing,
Axle makes no representation or warranty with respect to information supplied by
or on behalf of the Buyer Parent or the Buyer specifically for inclusion in the
Proxy Statement or any amendment or supplement thereto.
4.10 Taxes. Except where the failure to do so would not have or result
in a Material Adverse Effect or except as set forth on Schedule 4.10 of the
Disclosure Schedule:
(a) The Acquired Companies have timely filed, or have timely
filed for extensions to file, all Federal income and other material Tax Returns
required to be filed by them
11
through the date hereof. Such Tax Returns are true, correct and complete in all
material respects. The Acquired Companies have timely paid and discharged all
Taxes due and payable by them (whether or not shown on such Tax Returns). The
Acquired Companies have withheld, collected and paid over to the appropriate
Governmental Authorities or are properly holding for such payment all Taxes
required by Law to be withheld or collected.
(b) None of the Acquired Companies is a party to any Tax
allocation or sharing agreement.
(c) None of the Acquired Companies is a member of an affiliated
group within the meaning of Section 1504(a) of the Code (or any similar group
defined under a similar provision of state, local, or foreign Law) filing a
consolidated Federal income Tax Return or has any Liability for the Taxes of any
Person (other than any of the Acquired Companies) under Treasury Regulation
Section 1.1502-6 or any analogous or similar provision of Law (other than the
affiliated group of which Axle is the common parent).
(d) There are not being conducted or Threatened any material
audits, examinations, investigations, litigation or other proceedings in respect
of Taxes of the Acquired Companies.
(e) No Acquired Company has consented to extend the time in
which any Tax may be assessed or collected by any taxing authority.
4.11 Material Contracts. Except as filed as exhibits to the Axle SEC
Documents filed prior to the date hereof or as listed or described on Schedule
4.11 of the Disclosure Schedule, as of the date hereof, none of the Acquired
Companies is a party to or bound by (i) any "material contract" (as such term is
defined in Item 601(b)(10) of Regulation S-K) or (ii) any Contract of the type
described below (such Contracts of the type described in (i) and (ii), are
herein referred to as the "Material Contracts"):
(a) any consulting agreement or employment agreement that
provides for annual compensation exceeding $150,000 per year and which cannot be
terminated by the Acquired Companies without penalty on notice of thirty (30)
days or less, and any collective bargaining arrangement with any labor union and
any such agreements currently in negotiation or proposed;
(b) any Contract for capital expenditures or the acquisition of
fixed assets in excess of $500,000;
(c) any Contract for the purchase, maintenance or acquisition,
or the sale or furnishing of materials, supplies, merchandise, equipment, parts
or other property or services requiring remaining aggregate future payments in
excess of $250,000;
(d) any Contract that restricts or purports to restrict the
right of any Acquired Company, or, to Acquired Companies' Knowledge, any officer
or key executive of any of the Acquired Companies, to engage in any line of
business or in any geographic area, compete with any Person or sell any product;
12
(e) any Contract relating to the acquisition or disposition of
any material assets or Real Property;
(f) any Contract relating to the borrowing of money, or the
guaranty of another Person's borrowing of money or other obligation, including,
without limitation, all notes, mortgages, indentures and other obligations,
guarantees of performance, agreements and instruments for or relating to any
lending or borrowing, including assumed indebtedness;
(g) any Contract granting any Person a material Lien on all or
any part of the material assets of the Acquired Companies, taken as a whole,
other than Liens which will be released at the Closing;
(h) any Contract between Axle and any of the Axle Subsidiaries,
on the one hand, and any of their respective officers or directors (or
Affiliates) on the other hand, except for such Contracts that are made in the
ordinary course of business or that are de minims in value or effect;
(i) any voting or other Contract governing how any shares of
Axle Common Stock shall be voted; or
(j) any Contract under which any of the Acquired Companies (i)
has granted or received a material license or sublicense, (ii) under which it is
obligated to pay or has the right to receive a royalty, license fee or similar
payment in an amount in excess of $250,000, other than licenses for commercially
available prepackaged software, or (iii) restricting the Acquired Companies
rights to use or register any intellectual property owned or purported to be
owned by the Acquired Companies.
The Acquired Companies have made available to the Buyer Parent a true
and complete copy of each written Material Contract. Except as set forth on
Schedule 4.11 of the Disclosure Schedule, each Material Contract is in full
force and effect, represents a valid and binding obligation of the applicable
Acquired Company, and, to Acquired Companies' Knowledge, a valid and binding
obligation of each other party thereto, and is enforceable against each party
thereto in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar Laws affecting the enforcement of creditors rights generally, and
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in Law or equity). Each of the Acquired Companies has
performed in all material respects all obligations required to be performed by
it under each Material Contract, and to Acquired Companies' Knowledge, each
other party to each Material Contract has performed in all material respects all
obligations required to be performed by it under such Material Contract.
4.12 Real Property
(a) Schedule 4.12 of the Disclosure Schedule sets forth a true
and complete list of all real estate (i) in which any of the Acquired Companies
have an ownership interest (such real estate owned by the Acquired Companies is
herein referred to as the "Owned Property") and (ii) all real property leased or
subleased by any of the Acquired Companies (such real property leased or
subleased by any of the Acquired Companies is herein referred to as the
13
"Leased Property"; the Owned Property and the Leased Property being referred to
collectively herein as the "Real Property"). Each Acquired Company has good,
valid and marketable fee simple title to each parcel of Owned Property owned by
such Acquired Company, free and clear of all Liens except for Permitted Liens.
Each Acquired Company has a valid unencumbered leasehold interest in the Leased
Property leased or subleased by such Acquired Company, in each case free and
clear of all Liens, except for (i) Liens listed or described on Schedule 4.12 of
the Disclosure Schedule, or (ii) Permitted Liens. Except as set forth on
Schedule 4.12 of the Disclosure Schedule, the Real Property constitutes all real
properties currently used or occupied by the Acquired Companies in connection
with the Business.
(b) The Acquired Companies have made available to the Buyer Parent true and
complete copies of each underlying lease or sublease with respect to each Leased
Property (each, a "Lease") and all other material agreements pertaining to the
Real Property. With respect to each of the Leases: (i) there are no existing
monetary defaults or material non-monetary defaults under any Lease by any
Acquired Company or, to Acquired Companies' Knowledge, the lessor thereof; (ii)
to Acquired Companies' Knowledge, no event has occurred which (with notice,
lapse of time or both) would constitute a monetary breach or default or material
non-monetary breach or default under any Lease by any party; (iii) each Acquired
Company's possession and quiet enjoyment of any Leased Property under such Lease
has not been disturbed in any material respect; and (iv) except as set forth on
Schedule 4.12 of the Disclosure Schedule, no Acquired Company has assigned its
interest under any Lease or sublet any part of the premises covered thereby or
exercised any right or option thereunder.
4.13 Litigation.
(a) Except as disclosed in the Axle SEC Documents filed prior to the
date hereof or as set forth on Schedule 4.13(a) of the Disclosure Schedule, (i)
there are no suits, actions, proceedings, investigations, claims or orders
(collectively, "Actions") pending or, to Acquired Companies' Knowledge,
Threatened, against, the Acquired Companies or any of their respective
properties, officers or directors, or for which any of the Acquired Companies is
obligated to indemnify a third party, before any court or Governmental
Authority, agency or official, which, if the relief request is granted, would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, and (ii) no Acquired Company is subject to any Governmental
Order.
(b) Except as set forth on Schedule 4.13(b) of the Disclosure Schedule
(which shall be updated prior to Closing as required by Section 6.6(a)), there
are no Actions pending or, to Acquired Companies' Knowledge, Threatened, against
or otherwise affecting Axle or any of the Axle Subsidiaries relating to "clean
title" matters (including the types of claims which are the subject of dispute
in the matter captioned Xxxxxxx v. State Farm Automobile Insurance Company) or
any claim or Action brought under the Racketeer Influenced and Corrupt
Organizations Act.
4.14 Compliance with Applicable Laws. Except as disclosed in the Axle SEC
Documents filed prior to the date hereof or as set forth or referred to on
Schedule 4.14 of the Disclosure Schedule and except where any such violation or
failure to comply would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, since January 1, 2002, each of the
Acquired Companies has complied in all material respects with all
14
Laws applicable to it or to the operation of the Business, or by which any
property or asset of any of the Acquired Companies is bound or affected.
4.15 No Violation.
(a) Except as set forth on Schedule 4.15 of the Disclosure Schedule,
neither the execution and delivery of this Agreement, nor the performance by
Axle of the transactions contemplated hereby will (i) constitute a default
under, or violate any provision of, the Organizational Documents of any of the
Acquired Companies, (ii) result in a default (or an event which with notice or
lapse of time or both would become a default) or breach, or give rise to any
right of termination, cancellation or acceleration, or require any Consent
under, or result in the creation of a Lien on any property or asset of any of
the Acquired Companies pursuant to the terms, conditions or provisions of any
Contract or other instrument or obligation to which an Acquired Company is a
party, or (iii) conflict with or violate any Laws applicable to an Acquired
Company or by which any of its respective properties or assets is bound, except
with respect to clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not, individually or in the
aggregate, reasonably be expected to (x) have a Material Adverse Effect or (y)
prevent or materially delay the performance of this Agreement by Axle or the
ability of Axle to take any action necessary to consummate the Merger.
(b) The execution and delivery of this Agreement by Axle does not, and
the performance of this Agreement by Axle will not, require any Consent or
permit of, or filing with, or notification to, any Governmental Authority or any
other Person (assuming the Axle Shareholder Approval is obtained), except (i)
under the Exchange Act, the Securities Act, any applicable blue sky laws, or the
rules and regulations of NASDAQ, (ii) under the HSR Act, (iii) the filing and
recordation of the Articles of Merger as required under Illinois Law and (iv)
for such other Consents, filings or notifications, the failure of which to make
or obtain, would not, individually or in the aggregate, reasonably be expected
to (x) have a Material Adverse Effect or (y) prevent or materially delay the
performance of this Agreement by Axle or the ability of Axle to take any action
necessary to consummate the Merger.
4.16 Intellectual Property.
(a) Schedule 4.16(a) of the Disclosure Schedule sets forth a list of
all (i) trademark and service xxxx registrations and pending registration
applications, trade names, Acquired Companies names, and domain names, (ii)
patents and pending patent applications, (iii) copyright registrations and
registration applications, and (iv) computer software (other than commercially
available prepackaged computer software generally available to the public
pursuant to non-exclusive end-user licenses with an acquisition price of less
than $10,000), which are, in each case, either (x) owned or purported to be
owned by one or more of the Acquired Companies (the "Company Owned Intellectual
Property") or (y) material to the operation of the Business and are owned by
third parties and used or held for use pursuant to a valid license by one or
more of the Acquired Companies (the "Company Licensed Intellectual Property").
Schedule 4.16 of the Disclosure Schedule additionally sets forth a list of all
material license agreements and arrangements with respect to any of the
Intellectual Property to which any of the Acquired Companies is a party, whether
as licensee, licensor or otherwise (other than non-exclusive end-user licenses
for commercially available prepackaged computer software
15
generally available to the public). The Acquired Companies are the sole and
exclusive owners of all Company Owned Intellectual Property.
(b) Except as set forth on Schedule 4.16(b) of the Disclosure Schedule,
and except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect (i) to Acquired Companies' Knowledge,
none of the Acquired Companies has infringed or misappropriated, or is now
infringing or misappropriating, the intellectual property rights of any third
parties, (ii) there is no, nor has there been in the past three (3) years, any
claim pending or, to Acquired Companies' Knowledge, Threatened, against any of
the Acquired Companies with respect to the alleged infringement or
misappropriation by the Acquired Companies of any intellectual property rights
of others, and (iii) to Acquired Companies' Knowledge, no third party is
infringing or misappropriating the Intellectual Property and no claim against a
third party with respect to the alleged infringement or misappropriation of the
Intellectual Property is currently, nor in the past three (3) years has been,
pending or Threatened.
(c) The consummation of the transactions contemplated by this Agreement
will not result in the material loss or impairment of or payment of any
additional material amounts with respect to, nor require the consent of any
other Person in respect of, the Acquired Companies' right to own, use, or hold
for use any of the Company Owned Intellectual Property or Company Licensed
Intellectual Property.
4.17 Absence of Certain Changes. Since September 30, 2004, except as set
forth in the Axle SEC Documents filed prior to the date hereof, or as set forth
on Schedule 4.17 of the Disclosure Schedule and except as specifically
contemplated by this Agreement, (a) the Acquired Companies have conducted their
respective operations only in the ordinary course of business consistent with
past practices, (b) there has not been a Material Adverse Effect, and (c) none
of the Acquired Companies has taken any action that, if taken during the period
between the date of this Agreement through the Effective Time, would constitute
a violation of Section 6.1.
4.18 Insurance Policies. The Acquired Companies have made available to the
Buyer Parent correct and complete copies of all material insurance policies,
including without limitation, general liability policies, product liability,
comprehensive general liability and umbrella insurance policies maintained as of
the date hereof by the Acquired Companies (the "Insurance Policies"), together
with descriptions of "self-insurance" programs. All Insurance Policies are valid
and in full force and effect and none of the Acquired Companies are in material
default under any of the Insurance Policies. Schedule 4.18 of the Disclosure
Schedule lists each material claim made under an Insurance Policy at any time
during the one year period prior to the date hereof. None of the Acquired
Companies has received written notice under any Insurance Policy denying or
disputing any claim (or coverage with respect thereto) made by an Acquired
Company or regarding the termination, cancellation or material amendment of, or
material premium increase with respect to, any Insurance Policy, in each case,
at any time during the two year period prior to the date hereof.
4.19 Licenses and Permits. The Acquired Companies possess, and at all times
since January 1, 2003 have possessed, all Licenses and Permits necessary for the
conduct of the Business as currently conducted by the Acquired Companies, except
where the failure to hold
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such Licenses and Permits, individually or in the aggregate, would not
reasonably be expected to have or result in a Material Adverse Effect. The
Acquired Companies are, and at all times since January 1, 2003, have been, in
compliance with the terms and conditions of the Licenses and Permits, and none
of the Acquired Companies has received written notice that any such Acquired
Company is in violation of any of the terms or conditions of the Licenses and
Permits, or alleging the failure to hold or obtain any Licenses and Permits
required to lawfully conduct the Business, except violations or failures that
would not, individually or in the aggregate, reasonably be expected to have or
result in a Material Adverse Effect. None of the Acquired Companies has received
written notice that any of the Licenses and Permits will not be renewed, and
there are no Actions pending to revoke or withdraw any such Licenses and
Permits, except for such non-renewals, revocations or withdrawals as,
individually or in the aggregate, would not reasonably be expected to have or
result in a Material Adverse Effect.
4.20 Employee Benefit Plans.
(a) Schedule 4.20 of the Disclosure Schedule contains a list of each
material Employee Plan. Axle has made available to the Buyer Parent: (i) a
complete copy of each Employee Plan and any amendments thereto (or if the
Employee Plan is not a written Employee Plan, a description thereof) as in
effect on the date hereof; (ii) a copy of each trust agreement or other funding
vehicle with respect to each such plan; (iii) a copy of the most recently
received determination letter, if any, and any and all rulings or notices issued
by a Governmental Authority, with respect to each such plan; and (iv) a copy of
the Form 5500 Annual Report, if any, for the two most recent plan years for such
plan.
(b) Except as could not give rise to any material Liability, whether
direct or indirect, to the Acquired Companies, each Employee Plan (i) has been
operated and administered in compliance with its terms (except as otherwise
required by Law) and all applicable requirements of ERISA and the Code and with
any applicable reporting and disclosure requirements, including but not limited
to the requirement of Part 6 of Subtitle B of Title I of ERISA and Section 4980B
of the Code; and (ii) with respect to each Employee Plan intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service and, to the Acquired
Companies' Knowledge no event has occurred since the date of such determination
letter that would reasonably be expected to affect the tax qualification of such
Employee Plan. Except as could not give rise to material Liability to the
Acquired Companies, with respect to each Employee Plan, no Person has entered
into any nonexempt "prohibited transaction," as such term is defined in Section
406 of ERISA or Section 4975 of the Code.
(c) Except as set forth on Schedule 4.20 of the Disclosure Schedule,
none of the Acquired Companies nor any Plan Affiliate maintains or is required
to contribute to any employee benefit plan which (i) is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA, (ii) is a "multiple employer plan"
within the meaning of Code Section 413(c), (iii) is a "multiple employer welfare
arrangement" within the meaning of Section 3(40) of ERISA, (iv) is subject to
the funding requirements of Section 412 of the Code or Title IV of ERISA (a
"Title IV Plan"), or (v) provides for post-retirement medical, life insurance or
other welfare-type benefits (other than as required by Part 6 of Subtitle B of
Title I of ERISA or Section 4980B of the Code or under a similar state law).
17
(d) No Liability or contingent Liability under Title IV or Section 302
of ERISA has been incurred by the Acquired Companies, or any Plan Affiliate
thereof, that has not been satisfied in full, and no condition exists that
presents a material risk to the Buyer, the Buyer Parent or any Plan Affiliate
thereof, of incurring any such Liability or contingent Liability, other than
Liability for premiums due the Pension Benefit Guaranty Corporation ("PBGC")
(which premiums have been paid when due). Insofar as the representation made in
this Section 4.20(d) applies to sections 4064, 4069 or 4204 of Title IV of
ERISA, it is made not only with respect to each Title IV Plan but also with
respect to any employee benefit plan, program, agreement or arrangement subject
to Title IV of ERISA to which the Acquired Companies, or any Plan Affiliate
thereof, made, or was required to make, contributions during the five (5)-year
period ending on the last day of the most recent plan year ended prior to the
Closing Date.
(e) Except as set forth on Schedule 4.20 of the Disclosure Schedule, no
amounts payable under the Employee Plans will fail to be deductible for federal
income tax purposes by virtue of section 280G of the Code.
(f) Except as set forth on Schedule 4.20 of the Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement will not,
either alone or in combination with another event, (i) entitle any current or
former employee or officer of the Acquired Companies to severance pay,
unemployment compensation or any other payment, except as expressly provided in
this Agreement, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer.
(g) To the Acquired Companies' Knowledge, there are no pending,
Threatened or anticipated claims by or on behalf of any Employee Plan, by any
employee or beneficiary covered under any such Employee Plan, or otherwise
involving any such Employee Plan (other than routine claims for benefits).
4.21 Environmental, Health and Safety Matters.
(a) The Acquired Companies are in compliance, in all material respects,
with all Environmental, Health and Safety Requirements.
(b) The Acquired Companies have not, since January 1, 2002 or to
Acquired Companies' Knowledge prior thereto, received any notice of any material
Environmental Claim or to Acquired Companies' Knowledge are the subject of any
material investigation or inquiry arising under Environmental, Health and Safety
Requirements, including any investigatory, remedial or corrective obligation,
relating to the Acquired Companies or the Real Property.
(c) There is no material Environmental Claim pending or Threatened
against any of the Acquired Companies.
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Material of Environmental
Concern that could form the basis of any material Environmental Claim against
any of the Acquired Companies.
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(e) Notwithstanding any other representations made by the Acquired
Companies in this Agreement (other than those set forth in Section 4.8 hereof),
this Section 4.21 constitutes the sole and exclusive representations and
warranties of the Acquired Companies with respect to any environmental, health
and safety matters, including without limitation any arising under
Environmental, Health and Safety Requirements.
4.22 Labor Matters. To Acquired Companies' Knowledge, no current senior
executive officer of any of the Acquired Companies has provided written notice
of termination of employment with any of the Acquired Companies. Except as set
forth on Schedule 4.22 of the Disclosure Schedule, there is no, and within the
one year period prior to the date hereof, none of the Acquired Companies has
experienced any material labor dispute, strike, slowdown, stoppage, lockout,
allegation, charge, grievance or complaint of unfair labor practice, employment
discrimination or, to Acquired Companies' Knowledge, union organizational
activity; nor to Acquired Companies' Knowledge, is any such action Threatened
against any of the Acquired Companies. None of the Acquired Companies is a party
to any collective bargaining agreement or similar agreement with any labor
organization and there is no organizational effort presently being made on
behalf of any labor union with respect to the Business.
4.23 Opinion of Financial Advisor. Xxxxxxx Xxxxx & Company, L.L.C. has
rendered an opinion to the Axle Board, dated the date of this Agreement, to the
effect that, as of such date, the Merger Consideration is fair from a financial
point of view to the Axle Shareholders.
4.24 Brokers. Except for any fees to be paid to Xxxxxxx Xxxxx & Company,
L.L.C., no broker, finder, financial advisor or other intermediary or agent is
entitled to any brokerage fees, finder's fees or other fees or commissions in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Acquired Companies.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE BUYER PARENT
The Buyer and the Buyer Parent hereby, jointly and severally, represent
and warrant to Axle as follows:
5.1 Organization and Standing. The Buyer is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Illinois.
The Buyer Parent is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Delaware.
5.2 Authorization; Enforceability. Each of the Buyer and the Buyer Parent
has the requisite entity power and authority to execute and deliver this
Agreement, to perform their respective obligations under this Agreement, and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the performance of the obligations hereunder have
been duly and validly authorized by all necessary corporate action on the part
of the Buyer and the Buyer Parent, and no other corporate proceedings on the
part of the Buyer and the Buyer Parent are necessary to authorize the execution,
delivery and performance
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of this Agreement. This Agreement has been duly and validly executed and
delivered by each of the Buyer and the Buyer Parent, and, assuming the due
authorization, execution and delivery by the other Parties hereto, will
constitute, upon such execution and delivery in each case thereof, legal, valid
and binding obligations of each of the Buyer and the Buyer Parent, enforceable
against each of the Buyer and the Buyer Parent in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar Laws affecting the
enforcement of creditors rights generally, and general principles of equity
(regardless of whether such enforceability is considered in a proceeding in Law
or equity).
5.3 No Violation. Neither the execution and delivery of this Agreement, nor
the performance by it of the transactions contemplated hereby will (a)
constitute a default under the Organizational Documents of either of the Buyer
or the Buyer Parent, or (b) result in a default, give rise to any right of
termination, cancellation or acceleration, or require any Consent under any of
the terms, conditions or provisions of any material mortgage, loan, license,
agreement, lease or other instrument or obligation to which either the Buyer or
the Buyer Parent is a party, or (c) conflict with or violate any Laws applicable
to the Buyer or the Buyer Parent or by which any of their respective properties
is bound, except with respect to clauses (b) and (c), for any such defaults,
violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Buyer and the Buyer Parent to perform their
respective obligations hereunder. No representation is made with respect to the
foregoing matters insofar as they relate to, or are required by reason of, the
legal or regulatory status of, the activities of, or facts specifically
pertaining to, the Acquired Companies.
5.4 Financing. The Buyer Parent and the Buyer have previously delivered to
Axle the following: (i) commitment letters from Bear, Xxxxxxx & Co. Inc. and
Deutsche Bank Securities Inc. (collectively, the "Lenders"), providing the terms
and conditions upon which the Lenders have committed to provide the Buyer Parent
and the Buyer with senior debt financing in an aggregate amount equal to
$165,000,000 (the commitment letter with respect to the senior debt financing,
the "Senior Debt Letter") and subordinated debt financing in an aggregate amount
equal to $150,000,000 (the commitment letter with respect to the subordinated
debt financing, the "Subordinated Debt Letter", and together with the Senior
Debt Letter, the "Indebtedness Commitment Letters") and (ii) a fully executed
letter (the "Equity Commitment Letter"), pursuant to which Xxxxx & Company, L.P.
has committed to provide or cause to be provided equity financing to the Buyer
Parent and the Buyer in an aggregate amount of $148,700,000 (the Equity
Commitment Letter, together with the Indebtedness Commitment Letters, the
"Financing Letters"). The financing contemplated by the Financing Letters (the
"Financing"), together with the excess Axle cash and option proceeds referred to
therein, are sufficient to pay the Aggregate Merger Consideration and pay all
fees and expenses to be paid by the Buyer Parent, the Buyer or any of their
respective Affiliates related to the transactions contemplated hereby (the sum
total of the foregoing amounts, the "Required Cash Amount").
5.5 Litigation. As of the date hereof, there are no Actions pending, or to
the Buyer or the Buyer Parent's knowledge, Threatened, against either of the
Buyer or the Buyer Parent, nor is either of the Buyer or the Buyer Parent
subject to any judgment, order or decree of any court or
20
Governmental Authority which would seek to prevent any of the transactions
contemplated by this Agreement.
5.6 Governmental Approvals and Filings. Except as required by the HSR Act
and applicable requirements, if any, of the Exchange Act, the Securities Act,
Illinois Law, or blue sky laws, and except for filings required in connection
with the Financing (or any Substitute Debt Financing or replacement financing)
or with any secretary of state or related Governmental Authority in connection
with any amendment of any organizational document of such party, no material
Consent with, or notice to, or filing with, any Governmental Authority is
required to be obtained or delivered by either of the Buyer or the Buyer Parent
in connection with the execution, delivery and performance of this Agreement by
either of the Buyer or the Buyer Parent. No representation is made with respect
to the foregoing matters insofar as they relate to, or are required by reason
of, the legal or regulatory status of, the activities of, or facts specifically
pertaining to, the Acquired Companies.
5.7 Brokers. Except as set forth on Schedule 5.7 of the Disclosure Schedule,
no broker, finder, financial advisor or other intermediary or agent is entitled
to any brokerage fees, finder's fees or other fees or commissions in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of either of the Buyer or the Buyer Parent.
ARTICLE VI
COVENANTS OF AXLE
6.1 Conduct of Business. Except as specifically permitted by this Agreement,
as set forth on Schedule 6.1 of the Disclosure Schedule or as otherwise
consented to in writing by the Buyer Parent or the Buyer (which such consent may
not be unreasonably withheld, conditioned or delayed), from the date hereof
through the Closing, Axle covenants and agrees (as to itself and it agrees to
cause each of the Axle Subsidiaries to comply with the restrictions set forth in
this Section 6.1) that:
(a) Except for salary increases or the introduction of new or
modifications to employee benefit arrangements in the ordinary course of
business consistent with past practices, the Acquired Companies shall not (i)
increase in any manner the base compensation of, or enter into any new bonus or
incentive agreement or arrangement with, any of its employees, (ii) enter into
any new employment, severance, consulting, or other compensation agreement with
any of its existing employees, (iii) amend or enter into a new Employee Plan
(except as required by Law), (iv) make or agree to make any bonus or profit
sharing payments to any employee, (v) pay any severance or termination pay other
than severance or termination pay that is required to be paid pursuant to the
terms of an existing Employee Plan, or (vi) make any contribution to any
Employee Plan other than regularly scheduled contributions and contributions
required pursuant to the terms of such Employee Plan.
(b) Subject to the terms and conditions of this Agreement, the Acquired
Companies shall use Reasonable Efforts to keep available the services of its
present employees
21
and preserve the goodwill, reputation and present relationships of the Business
with suppliers, customers, licensors and others having business relations with
them.
(c) The Acquired Companies shall conduct the Business in all material
respects according to its ordinary course of business in substantially the same
manner as heretofore conducted, consistent with past practices.
(d) The Acquired Companies shall not issue, deliver, pledge, transfer,
encumber or sell, or authorize or propose the issuance, delivery, pledge,
transfer, encumbrance or sale of (i) any equity interests, (ii) any securities
convertible into or exchangeable or exercisable for equity interests, or (iii)
any rights, warrants, calls, subscriptions or options to acquire equity
interests.
(e) The Acquired Companies shall not (i) amend any of their respective
Organizational Documents, (ii) reclassify, combine, split, subdivide or amend
the terms of any of their capital stock, or (iii) amend any material term of any
outstanding security issued by any of them.
(f) The Acquired Companies shall not (i) sell, lease, license, encumber
or otherwise dispose of, or agree to sell, lease, license, encumber or otherwise
dispose of, any of its material assets, properties or rights other than in the
ordinary course of business consistent with past practices, or (ii) acquire, or
agree to acquire, any business or Person or any assets, stock or operations of
any Person, other than in the ordinary course of business consistent with past
practices.
(g) The Acquired Companies shall not (i) incur any indebtedness
(including letters of credit, capitalized leases and earnout obligations) except
in the ordinary course of business in an amount not to exceed $2,000,000
(exclusive of letters of credit in connection with workmen's compensation
arrangements and indebtedness incurred to pay expenses pursuant to Section
7.4(c)); provided that in no event shall the Acquired Companies' aggregate
indebtedness (including letters of credit, capitalized leases and earnout
obligations) exceed the amount of aggregate indebtedness set forth on Schedule
4.6(a)(ii) of the Disclosure Schedule, or guarantee any such indebtedness or
issue or sell any debt securities or warrants or rights to acquire any debt
securities of such party or guarantee any debt securities of others; or (ii)
make any loans or advances to any person except in the ordinary course of
business in an aggregate principal amount not to exceed $100,000 at any time
outstanding.
(h) The Acquired Companies shall not create, assume or otherwise incur
any material Lien on any asset or property, other than Permitted Liens.
(i) The Acquired Companies shall not (i) relinquish, waive, release or
permit to lapse (other than by its terms) any material Contractual or other
material right or claim or (ii) settle or compromise any material Action.
(j) The Acquired Companies shall not make or change any election
relating to Taxes, change any accounting method relating to Taxes unless
required by GAAP, file an amended Tax Return, enter into any closing agreement
relating to Taxes, settle any claim or assessment relating to Taxes or waive any
statute of limitation for any such claim or assessment.
22
(k) The Acquired Companies shall not enter into, terminate or amend any
Material Contract except in the ordinary course of business consistent with past
practices.
(l) The Acquired Companies shall not adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such a
liquidation or a dissolution, consolidation, recapitalization or bankruptcy
reorganization.
(m) The Acquired Companies shall not (i) other than as contemplated
under any option agreement, redeem, purchase or otherwise acquire, directly or
indirectly, any capital stock or other securities of itself or any other
Acquired Company, or (ii) declare, set aside, make or pay any dividend or other
distribution or stock split with respect to any of its capital stock.
(n) The Acquired Companies shall not make capital expenditures in
excess of the applicable amounts set forth in Axle's quarterly budget with
respect to any monthly or quarterly capex.
(o) The Acquired Companies shall not take, or agree to or commit to
take, any action that is intended or would reasonably be expected to result in
any of the conditions to the Closing set forth in Article VIII not being
satisfied.
(p) The Acquired Companies shall not agree, propose, authorize or enter
into any commitment to take any action described in the foregoing subsections
(a)-(o) of this Section 6.1, except as otherwise permitted by this Agreement.
6.2 Proxy Statement. As promptly as practicable after the date of this
Agreement, Axle shall prepare and file with the SEC, use all Reasonable Efforts
to have cleared by the SEC, and promptly thereafter mail or caused to be mailed
to the Axle Shareholders, the Proxy Statement. The Buyer Parent and the Buyer
agree to cooperate with Axle in the preparation of the Proxy Statement and other
solicitation materials of Axle. Axle shall consult with the Buyer Parent, and
the Buyer Parent and its counsel shall be given reasonable opportunity to review
and comment on the draft Proxy Statement each time before it is filed with the
SEC. The Proxy Statement shall contain the recommendation of the Axle Board that
Axle's Shareholders approve and adopt this Agreement, and such recommendation
shall not be withdrawn, modified or amended, subject to any withdrawal,
modification or amendment permitted by Section 6.5(c) of this Agreement. Axle
shall provide the Buyer Parent and its counsel in writing with any written
comments (and orally, any oral comments) Axle or its counsel may receive from
the SEC or its staff with respect to the Proxy Statement promptly after receipt
of those comments and shall consult with the Buyer Parent and its counsel prior
to responding to such comments and shall give due regard to any comments made by
such Persons. If at any time prior to the Axle Shareholder Meeting any event
should occur which is required by applicable Law to be set forth in an amendment
of, or a supplement to, the Proxy Statement, Axle will prepare and mail such
amendment or supplement as promptly as practicable; provided, however, that
prior to such mailing, Axle shall consult with the Buyer Parent and its counsel
with respect to such amendment or supplement and shall afford the Buyer Parent
and its counsel reasonable opportunity to comment thereon and shall give due
regard to any comments made by such Persons.
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6.3 Axle Shareholders' Meeting. As promptly as practicable after the date of
this Agreement and clearance by the SEC of the Proxy Statement, Axle shall take
all action necessary in accordance with Illinois Law and its Organizational
Documents to duly call and convene the Axle Shareholders' Meeting. Axle shall,
subject to the applicable fiduciary duties of Axle's Board, as determined by
such directors in good faith with the advice of its outside corporate counsel,
use Reasonable Efforts to solicit from the Axle Shareholders proxies in favor of
the adoption of this Agreement.
6.4 Filings; Consents; Etc. Axle shall use Reasonable Efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable in compliance with applicable Laws to consummate
and make effective, as soon as reasonably practicable, the transactions
contemplated hereby. Without limiting the generality of the foregoing, Axle
shall give all notices, make all required filings with or applications to
Governmental Authorities, and use Reasonable Efforts to obtain all Consents of
all third parties, including Governmental Authorities, necessary for the Parties
to consummate the transactions contemplated hereby. In addition, Axle agrees to
use Reasonable Efforts to (a) oppose, lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the Parties
to consummate the transactions contemplated hereby, and (b) cause the conditions
set forth in Section 8.1 and Section 8.2 to be satisfied and to consummate the
transactions contemplated hereby.
6.5 No Solicitation.
(a) From and after the date of this Agreement until the earlier of the
termination of this Agreement or the Effective Time, Axle will not, and will not
permit its directors, officers, investment bankers, attorneys and accountants
to, and will use its Reasonable Efforts to cause its employees, Affiliates,
representatives and other agents not to, directly or indirectly, (i) solicit,
initiate, facilitate or encourage any inquiries or the making or submission of
any proposal that constitutes, or could reasonably be expected to lead to, an
Acquisition Proposal, (ii) engage in negotiations or discussions concerning, or
provide any non-public information (or otherwise afford access to the
properties, books or records of Axle or any Axle Subsidiary) to any Person or
entity in connection with, any Acquisition Proposal, (iii) agree to, enter into
any letter of intent or similar agreement in principle with respect to, approve,
recommend or otherwise endorse or support any Acquisition Proposal, or (iv)
grant any waiver or release under any standstill or similar agreement to which
Axle is a party (including any agreement entered into in connection with the
solicitation of proposals by Xxxxxxx Xxxxx & Company, L.L.C.) to any Person who
has made, or who has disclosed to Axle that it is considering making, an
Acquisition Proposal. Upon execution of this Agreement, Axle shall, and shall
cause the Axle Subsidiaries and their respective representatives and agents to
cease immediately and cause to be terminated any and all existing discussions,
conversations, negotiations and other communications with any Person conducted
heretofore with respect to (other than as required to terminate such
discussions, arrangements or agreements), or that could reasonably be expected
to lead to, an Acquisition Proposal.
(b) Notwithstanding the provisions of Section 6.5(a), prior to
obtaining Axle Shareholder Approval, nothing contained in this Agreement shall
prevent Axle or the Axle Board, directly or through representatives or agents on
behalf of the Axle Board, from (i)
24
furnishing non-public information to, or entering into discussions or
negotiations with, any Person in connection with an unsolicited bona fide
Acquisition Proposal by such Person, if (A) such Acquisition Proposal would, if
consummated, result in a transaction that, in the reasonable judgment of the
Axle Board, would be a Superior Proposal, (B) the Axle Board believes (after
consulting with outside corporate counsel), that the failure to take such action
presents a reasonable risk of constituting a breach of the fiduciary duties of
the Axle Board under Illinois Law, (C) Axle has provided the Buyer Parent two
(2) Business Days' notice of such determination and (D) prior to furnishing such
non-public information to, or entering into discussions or negotiations with,
such Person, Axle's Board receives from such Person an executed confidentiality
agreement on terms no less favorable to Axle than the Confidentiality Agreement,
or (ii) complying with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange
Act or other applicable Law with regard to an Acquisition Proposal.
(c) In the event Axle receives a Superior Proposal prior to
obtaining Axle Shareholder Approval, nothing contained in this Agreement shall
prevent the Axle Board from recommending such Superior Proposal to the Axle
Shareholders, if the Axle Board believes (after consulting with outside
corporate counsel), that the failure to take such action presents a reasonable
risk of constituting a breach of the fiduciary duties of the Axle Board to the
Axle Shareholders under Illinois Law; in such case, the Axle Board may amend,
withhold or withdraw its recommendation of the Merger (a "Change in
Recommendation"). Subject to the right of termination set forth in Section 10.1,
except to the extent expressly set forth in this Section 6.5, nothing shall
relieve Axle from complying with all other terms of this Agreement.
(d) Axle shall promptly notify the Buyer Parent of Axle's
receipt of any Acquisition Proposal (or any inquiry that could reasonably be
expected to lead to an Acquisition Proposal) and shall inform the Buyer Parent
of the terms and conditions thereof and the identity of the party making such
Acquisition Proposal or inquiry. Axle shall promptly inform the Buyer Parent of
any changes to the terms and conditions of any Acquisition Proposal and shall
keep the Buyer Parent updated as to the general status of any ongoing
discussions or negotiations regarding or relating to any Acquisition Proposal.
6.6 Schedules Update; Certain Notices.
(a) Prior to the Closing, Axle shall supplement or amend the
Disclosure Schedules if it becomes aware of any matter heretofore existing or
hereafter arising which, if existing, occurring or known at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedules or which is otherwise necessary to correct any information
in such Disclosures Schedules which has been rendered inaccurate thereby. For
purposes of determining satisfaction of the conditions set forth in Section
8.2(a), the Disclosure Schedules delivered by Axle shall be deemed to include
only that information contained therein on the date of this Agreement and shall
be deemed to exclude any information contained in any subsequent supplement or
amendment thereto.
(b) From and after the date of this Agreement until the
Closing, Axle shall promptly notify the Buyer Parent of (a) the occurrence, or
non-occurrence, of any event that would be likely to cause any of the conditions
set forth in Article VIII of this Agreement not to be satisfied or (b) the
failure of Axle to comply with or satisfy any covenant, condition or
25
agreement to be complied with or satisfied by it pursuant to this Agreement
which would reasonably be expected to result in any condition set forth in
Article VIII of this Agreement not to be satisfied; provided, however, that the
delivery of any notice pursuant to this Section 6.6 shall not cure any breach of
any representation or warranty requiring disclosure of such matter prior to the
date of this Agreement or otherwise limit or affect the remedies available
hereunder to the Buyer or the Buyer Parent.
(c) Axle shall comply with Schedule 6.6(c).
6.7 Financial Statements.
(a) Axle shall use Reasonable Efforts to deliver to the Buyer
Parent (i) as soon as practicable after the date hereof, audited consolidated
balance sheets for Axle and the Axle Subsidiaries as of December 26, 2004 and
December 28, 2003, and audited consolidated statements of earnings and cash
flows for Axle and the Axle Subsidiaries for the years ended December 26, 2004,
December 28, 2003 and December 29, 2002, accompanied by an unqualified report
from Axle's independent auditors (the "Updated Financial Statements"), (ii) as
soon as practicable following March 27, 2005, an unaudited consolidated balance
sheet for Axle and the Axle Subsidiaries as of March 27, 2005 and unaudited
consolidated statements of earnings and cash flows for Axle and the Axle
Subsidiaries for the three-month period then ended; and (iii) in the event that
the Closing has not occurred by the end of any subsequent fiscal quarter of Axle
and the Axle Subsidiaries, as soon as practicable after the end of each such
fiscal quarter, an unaudited consolidated balance and unaudited statements of
earnings and cash flows as of and for the periods then ended.
(b) In addition to and without limiting the foregoing, from
the date hereof until the Effective Time, Axle shall furnish to the Buyer
Parent, within fifteen (15) Business Days after the end of each month, the
standard monthly reporting package set forth in Schedule 6.7(b) of the
Disclosure Schedule.
(c) Following the date hereof, Axle shall inform the Buyer
Parent if Axle's independent auditor or any accounting firm, if any, which has
reviewed Axle's internal controls with respect to financial reporting indicates
to Axle that any significant deficiencies or material weaknesses in such
internal controls exist.
6.8 Regulatory Filings. Axle shall (a) make any filings required of it
or its Affiliates under the HSR Act and other antitrust Laws applicable to the
transactions contemplated hereby as promptly as practicable following the date
hereof, (b) comply at the earliest reasonable practicable date with any request
under the HSR Act or other antitrust Laws for additional information, documents,
or other materials received by each of them or any of their respective
Affiliates from the Federal Trade Commission (the "FTC"), or any other
Governmental Authority in respect of such filings or such transactions, and (c)
cooperate with the Buyer and the Buyer Parent in connection with any such filing
(including, to the extent permitted by applicable Law, providing copies of all
such documents to the non-filing parties prior to filing and considering all
reasonable additions, deletions or changes suggested in connection therewith)
and in connection with resolving any investigation or other inquiry of any of
the FTC, or other Governmental Authority under any antitrust Laws with respect
to any such filing or any such
26
transaction. Axle shall promptly inform the Buyer Parent of any oral
communication with, and provide copies of written communications with, any
Governmental Authority regarding any such filings or any such transaction.
6.9 Certain Real Estate Matters. Axle shall use Reasonable Efforts to
obtain an estoppel certificate from the landlord under each Lease, which
estoppel certificate shall be substantially in the form required under such
Lease. Axle shall (and shall cause each Axle Subsidiary to) cooperate with the
Buyer Parent in connection with the obtaining at the Closing by the Buyer Parent
of policies of title insurance with respect to the Real Property. Such
cooperation shall include, without limitation, (a) the execution and delivery by
Axle and each Axle Subsidiary at the Closing of any affidavits, indemnities
and/or certifications reasonably required by the title company issuing such
title policy in connection therewith and (b) the elimination prior to Closing of
those exceptions to title insurance that could materially impair the use of any
property of the Company that the Buyer Parent is not required to accept under
the terms of this Agreement.
6.10 Financing Cooperation. From the date of this Agreement until the
Effective Time, Axle agrees to provide, and shall cause the Axle Subsidiaries to
provide, and will use its Reasonable Efforts to cause their respective
representatives and agents to provide, all cooperation reasonably requested by
the Buyer Parent in connection with the arrangement of the Financing (and any
substitutions, replacements or refinancing thereof), including using Reasonable
Efforts to (i) cause appropriate officers and employees to be available, on a
customary basis and upon reasonable notice, to meet with prospective lenders and
investors in presentations, meetings, road shows and due diligence sessions,
(ii) assist with the preparation of disclosure documents in connection
therewith, (iii) execute and deliver any pledge and security documents or other
definitive financing documents as may be reasonably requested by the Buyer
Parent, (iv) cause (A) its independent accountants and counsel to provide
assistance to the Buyer Parent, including providing consent to the Buyer Parent
to prepare and use their audit reports and SAS 100 reviews relating to Axle and
the Axle Subsidiaries and, at the cost of the Buyer Parent, to provide any
necessary "comfort letters" in connection with the Financing and (B) appropriate
officers to sign any customary management representation letters to its
independent accountants and (v) solicit and cause to be delivered such
certificates, affidavits and instruments (including affidavits of title, survey
affidavits, estoppel certificates and lien waivers), legal opinions and
documents as may be reasonably requested by the Buyer Parent or reasonably
required by any Lender or title insurance company.
6.11 Access to Information. Upon reasonable advance notice, between the
date of this Agreement and the Closing Date, the Acquired Companies shall (a)
give the Buyer Parent, its potential financing sources and its and their
respective counsel, financial advisors, auditors and other authorized
representatives (collectively, "Buyer's Representatives") reasonable access
during normal business hours to the offices, properties, books and records
(including all Tax Returns and other Tax-related information) of the Acquired
Companies, (b) furnish to Buyer's Representatives such financial and operating
data and other information (including all Tax Returns and other Tax-related
information) relating to the Acquired Companies' respective operations as such
Persons may reasonably request, and (c) instruct the employees, counsel and
financial advisors of the Acquired Companies to cooperate with the Buyer, the
Buyer Parent or Buyer's Representatives in their investigation of the business
of the Acquired Companies.
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ARTICLE VII
COVENANTS OF THE BUYER AND THE BUYER PARENT
7.1 Filings; Consents; Etc. Each of the Buyer and the Buyer Parent shall
use Reasonable Efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable in compliance with
applicable Laws to consummate and make effective, as soon as reasonably
practicable, the transactions contemplated hereby. Without limiting the
generality of the foregoing, each of the Buyer and the Buyer Parent shall give
all notices, make all material required filings with or applications to
Governmental Authorities, and use Reasonable Efforts to obtain all material
Consents of all third parties, including Governmental Authorities, necessary for
the Parties to consummate the transactions contemplated herein. In addition,
each of the Buyer and the Buyer Parent agrees to use Reasonable Efforts to
cooperate with Axle in connection with the foregoing, including using Reasonable
Efforts to (a) oppose, lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the Parties to consummate the
transactions contemplated hereby, and (b) cause the conditions set forth in
Section 8.1 and Section 8.3 to be satisfied and to consummate the transactions
contemplated herein.
7.2 Director and Officer Liability and Indemnification.
(a) The Buyer Parent will, and will cause the Surviving
Corporation to, fulfill and honor in all respects the obligations of Axle with
respect to any indemnification provision with respect to indemnification and
exculpation from Liability for acts and omissions occurring prior to the
Effective Time under the Organizational Documents of Axle as in effect on the
date of this Agreement and the indemnification agreements listed on Schedule 7.2
of the Disclosure Schedule (the persons to be indemnified pursuant to the
agreements and provisions referred above shall be referred to as, collectively
the "Axle Indemnified Parties"). Organizational Documents of the Surviving
Corporation shall contain provisions with respect to indemnification and
exculpation from liability for acts and omissions occurring prior to the
Effective Time substantially similar to those set forth in the Organization
Documents of Axle as in effect on the date of this Agreement, which provisions
shall not be amended, repealed or otherwise modified, except to the extent
required by applicable Law, for a period of six (6) years after the Effective
Time in any manner that would materially adversely affect the rights thereunder
of any Axle Indemnified Party; provided, however, that, in the event any claim
or claims are asserted or made within such six-year period, all rights to
indemnification or exculpation in respect of any such claim or claims shall
continue until the final disposition of any and all such claims.
(b) For a period of six (6) years after the Closing, the Buyer
Parent shall, or shall cause the Surviving Corporation and its subsidiaries to,
maintain director and officer liability insurance which insurance shall provide
coverage for the individuals who were officers and directors of the Acquired
Companies prior to the Closing comparable to the policy or policies maintained
by the Acquired Companies immediately prior to the Closing, and with comparable
insurance companies, for the benefit of such individuals. Immediately prior to
the Closing, Axle shall purchase, at the Buyer's sole cost and expense, such
director and officer liability insurance as a lump sum payment, provided that,
unless the Buyer Parent shall otherwise
28
consent (which consent shall not be unreasonably withheld), the total cost of
such policy shall not exceed $1,150,000.
(c) This Section 7.2 is intended to survive the consummation
of the Merger and the Effective Time, and is intended to be for the benefit of,
and shall be enforceable by the Axle Indemnified Parties and their heirs and
personal representatives and shall be binding on the Buyer Parent and Surviving
Corporation and their successors and assigns. In the event the Buyer Parent,
Surviving Corporation or their successors or assigns (i) consolidates with or
merges into any other Person and shall not be the continuing or surviving
corporation or entity in such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any Person, then, and in each
case, proper provision shall be made so that the successor and assign of the
Surviving Corporation or the Buyer Parent honor the indemnification obligations
set forth in this Section 7.2.
7.3 Regulatory Filing. The Buyer and the Buyer Parent shall (a) make any
filings required by any of the Buyer, the Buyer Parent or their respective
Affiliates under the HSR Act and other antitrust Laws applicable to the
transactions contemplated hereby as promptly as practicable following the date
hereof, (b) comply at the earliest reasonable practicable date with any request
under the HSR Act or other antitrust Laws for additional information, documents,
or other materials received by the Buyer or the Buyer Parent from the FTC, or
any other Governmental Authority in respect of such filings or such
transactions, and (c) cooperate with Axle in connection with any such filing
(including, to the extent permitted by applicable Law, providing copies of all
such documents to the non-filing parties prior to filing and considering all
reasonable additions, deletions or changes suggested in connection therewith)
and in connection with resolving any investigation or other inquiry of any of
the FTC or other Governmental Authority under any antitrust Laws with respect to
any such filing or any such transaction. Each of the Buyer and the Buyer Parent
shall (i) use Reasonable Efforts to furnish to Axle all information required for
any application or other filing to be made pursuant to any applicable Law in
connection with the transactions contemplated by this Agreement, and (ii)
promptly inform Axle of any oral communication with, and provide copies of
written communications with, any Governmental Authority regarding any such
filings or any such transaction.
7.4 Financing.
(a) The Buyer Parent and the Buyer shall use their Reasonable
Efforts to obtain the Financing as set forth in the Financing Letters; provided,
however, that notwithstanding anything in this Agreement to the contrary, the
Buyer Parent and the Buyer shall be entitled to obtain, in their sole
discretion, substitute debt financing ("Substitute Debt Financing") if, and only
if, such Substitute Debt Financing would not delay the consummation of the
Merger past August 22, 2005. For purposes of this Agreement, the term
"Substitute Debt Financing" shall also include substitute debt financing in an
aggregate amount greater than the amount set forth in the Indebtedness
Commitment Letters, with or without a corresponding reduction in the committed
equity.
(b) The Buyer Parent shall provide prompt notice to Axle of
the Lenders' refusal or stated intent to refuse to provide the financing
described in the Senior Debt Letter, and/or any other Lender's stated intent to
refuse to provide the financing contemplated by any
29
Substitute Debt Financing. In any such event, the Buyer Parent shall use its
Reasonable Efforts to obtain alternative financing in an amount which, when
taken together with the available equity financing (and excess Axle cash and
option proceeds), will be at least equal to the Required Cash Amount (it being
understood that such Reasonable Efforts would not require the Buyer Parent to
obtain financing that is, (x) with respect to the economic terms thereof, on
terms less favorable to the Buyer Parent, taken as a whole, thereunder than
those set forth in the Financing Letters or the financing arrangements relating
thereto, as the case may be or (y) with respect to the non-economic terms
thereof, on terms that are not substantially similar to those set forth in the
Financing Letters or the financing arrangements relating thereto, as the case
may be).
(c) At any time prior to the consummation of the Merger, the
proceeds of the subordinated debt financing contemplated by the Indebtedness
Commitment Letters may be closed into escrow pending consummation of the Merger,
such that such proceeds are received by the Buyer or a newly formed corporation
(the "EscrowCo," which such term shall also refer to the Buyer in the event that
the Buyer receives such proceeds) formed at the direction of the Buyer Parent
(such closing, an "Escrow Closing"). Such proceeds shall be held by EscrowCo or,
at the direction of the Buyer Parent, an escrow agent. At or immediately prior
to the such Escrow Closing, the Buyer Parent (or an Affiliate of the Buyer
Parent) and Axle shall each pay to EscrowCo one-half of an amount (the "Escrow
Breakage Amount") sufficient to cover (i) accrued interest on the EscrowCo Debt
from the Escrow Closing to and including the Outside Date (as defined in Section
10.1(b)), net of any income anticipated to be earned by EscrowCo from investing
the proceeds of the subordinated debt financing as permitted by the terms of any
escrow agreement entered into in connection with the incurrence of the EscrowCo
Debt (to be reasonably estimated jointly by Axle and the Buyer Parent prior to
the deposit of the Escrow Breakage Amount with EscrowCo), and (ii) any repayment
premium applicable thereto in the event this Agreement is terminated by the
Parties in accordance with its terms or the Merger is not consummated by the
date specified by the terms of the EscrowCo Debt. At or immediately prior to the
Effective Time and subject to consummation of the Merger, (i) the Surviving
Corporation shall assume (by operation of law (in the event the Buyer is serving
as EscrowCo) or contractually) the indebtedness of EscrowCo plus any accrued and
unpaid interest thereon (the "EscrowCo Debt") and receive the proceeds held by
EscrowCo and (ii) EscrowCo (if other than the Buyer) shall be released from all
obligations with respect thereto. In the event that this Agreement is terminated
by the Parties in accordance with its terms, or the Merger is not consummated by
the date specified by the terms of the EscrowCo Debt, any EscrowCo Debt (plus
any applicable repayment premium) shall be repaid in full by EscrowCo and any
amount held by EscrowCo after the repayment of any EscrowCo Debt in accordance
with this sentence shall be distributed in equal parts to the Buyer Parent (or,
at its direction, one or more of its Affiliates) and Axle. The Parties hereto
agree that (i) any applicable repayment premium shall in no event exceed 1% of
the principal amount of the EscrowCo Debt, (ii) placement agent fees or
discounts or commitments shall be payable with respect to the EscrowCo Debt only
at the Effective Time, and (iii) EscrowCo shall invest the proceeds of its
borrowings only as permitted by the terms of any escrow agreement entered into
in connection with the incurrence of the EscrowCo Debt. In the event that (A)
the proceeds of the subordinated debt financing together with the Escrow
Breakage Amount plus (B) the income earned thereon are not enough to repay in
full the EscrowCo Debt (plus any applicable repayment premium), Axle and the
Buyer Parent (or an Affiliate of the Buyer Parent) shall each pay one-half of
such shortfall to EscrowCo to enable it to repay such amount to the applicable
debtholders.
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ARTICLE VIII
CONDITIONS PRECEDENT TO THE CLOSING
8.1 Conditions Precedent to Each Party's Obligations. The respective
obligations of each Party to consummate the transactions contemplated hereby
will be subject to the satisfaction, at or prior to the Closing, of all of the
following conditions, any one or more of which may be waived (to the extent
permitted by Applicable Law) in writing by all Parties hereto:
(a) No Legal Prohibition. No statute, rule, regulation,
ruling, consent, decree, judgment, injunction (whether temporary, permanent or
preliminary) or order shall have been enacted, promulgated, entered or enforced
by any court or Governmental Authority, and shall be in effect, which would
prohibit the consummation by such Party of the transactions contemplated hereby.
(b) No Injunction. Such Party shall not be prohibited by any
order, ruling, consent, decree, judgment or injunction (whether temporary,
permanent or preliminary) of a court or regulatory agency of competent
jurisdiction from consummating the transactions contemplated hereby.
(c) HSR Act. All applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or otherwise been
terminated.
(d) Axle Shareholder Approval. The Axle Shareholder Approval
shall have been obtained.
8.2 Conditions Precedent to Obligations of the Buyer and the Buyer
Parent. The obligations of the Buyer and the Buyer Parent under this Agreement
to consummate the transactions contemplated hereby will be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which may be waived in writing at the option of the Buyer and
the Buyer Parent:
(a) Accuracy of Representations and Warranties; Performance of
Covenants. Except as set forth in the following sentence, the representations
and warranties of Axle contained in Article IV shall be true and correct
(without giving effect to any "materiality" or "Material Adverse Effect"
qualifiers set forth therein, other than for purposes of Section 4.17(b)) as of
the date of this Agreement and as of the Closing with the same force and effect
as though such representations and warranties were made on and as of the Closing
(other than those representations and warranties that address matters only as of
a particular date or only with respect to a specific period of time, which need
only be accurate as of such date or with respect to such period), except where
the failure of such representations and warranties to be so true and correct
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The representations and
31
warranties of Axle set forth in Section 4.1 (Organization and Qualification),
Section 4.2 (Authorization; Enforceability), Section 4.6(a) (Capitalization),
Section 4.17(b) (Absence of Certain Changes) and Section 4.24 (Brokers) shall be
true and correct in all respects as of the Effective Time, as though such
representations and warranties were made on and as of such time (except for
those representations and warranties which expressly relate to an earlier date,
in which case such representations and warranties shall have been true and
correct in all respects as of such earlier date). Axle shall have performed and
complied with, in all material respects, all covenants and agreements required
by this Agreement to be performed or complied with by it on or prior to the
Closing. The Buyer or the Buyer Parent shall receive at the Closing a
certificate, dated as of the Closing Date and executed by an executive officer
of Axle, certifying the fulfillment of the conditions set forth in this Section
8.2(a).
(b) No Material Adverse Effect. No change, event, occurrence,
state of facts or development shall have occurred since the date of this
Agreement which has had, or would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
(c) FIRPTA Certificates. Axle shall have delivered to the
Buyer Parent a duly executed certificate in a form and manner that complies with
Section 1445 of the Code and the Treasury regulations promulgated thereunder.
(d) Financing. Substantially concurrently with the Closing,
the Buyer Parent or the Surviving Corporation shall have received the proceeds
of the debt financing on the terms and conditions set forth in the Indebtedness
Commitment Letters (and, with respect to terms and conditions not so set forth,
on terms and conditions reasonably acceptable to the Buyer Parent), or the
proceeds of any Substitute Debt Financing or alternative financing as provided
in Section 7.4.
(e) Option Consents. Axle shall have received and delivered to
the Buyer and the Buyer Parent an executed copy of all Consents listed on
Schedule 3.5(c) of the Disclosure Schedule, and each such Consent shall be in
full force and effect.
(f) Consents. Axle shall have received and delivered to the
Buyer Parent and the Buyer an executed copy of all Consents listed on Schedule
8.2(f) of the Disclosure Schedule which are necessary for the consummation of
the transactions contemplated by this Agreement which, if not obtained, would
result in a material violation of any material Law or any material Liability to
any of the Acquired Companies.
(g) Dissenting Shares. The total number of potential
Dissenting Shares shall not exceed 15% of the issued and outstanding shares of
Axle Common Stock as of the Effective Time.
(h) Financial Statements. The Updated Financial Statements
shall have been received by the Buyer Parent no later than the later to occur of
(i) March 11, 2005, or (ii) any extended filing deadline pursuant to the
Exchange Act with respect to Axle's filing of its Form 10-K for the year ended
December 26, 2004, shall be accompanied by an unqualified opinion from Axle's
independent auditors and such Updated Financial Statements (other than the notes
thereto) shall be in substantial conformance to the Draft Financial Statements
previously delivered to the Buyer Parent.
8.3 Conditions Precedent to Obligations of Axle. The obligations of Axle
under this Agreement to consummate the transactions contemplated hereby will be
subject to the
32
satisfaction, at or prior to the Closing, of all the following conditions, any
one or more of which may be waived in writing at the option of Axle:
(a) Accuracy of Representations and Warranties; Performance of
Covenants. The representations and warranties of the Buyer and the Buyer Parent
contained in Article V shall be true and correct (without giving effect to any
"materiality" qualifiers set forth therein) as of the date of this Agreement and
as of the Closing, with the same force and effect as though such representations
and warranties were made on and as of the Closing (other than those
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time, which need only be accurate
as of such date or with respect to such period), except where the failure of
such representations and warranties to be so true and correct would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Buyer and the Buyer Parent to perform their
respective obligations under this Agreement. Each of the Buyer and the Buyer
Parent shall have performed and complied with, in all material respects, all
covenants and agreements required by this Agreement to be performed or complied
with by such Party on or prior to the Closing. Axle shall receive at the Closing
a certificate, dated as of the Closing Date and executed by an executive officer
of each of the Buyer and the Buyer Parent, certifying the fulfillment of the
conditions set forth in this Section 8.3(a) with respect to such Party.
ARTICLE IX
CLOSING
9.1 Deliveries by Axle. At the Closing, Axle shall deliver or cause to
be delivered to the Buyer or the Buyer Parent:
(a) Axle Certificate. The certificate required by
Section 8.2(a);
(b) Good Standing Certificates. Certificates of good standing
with respect to each of the Acquired Companies, issued by the Secretary of State
of the jurisdiction of formation of such Acquired Company, as applicable; and
(c) Other Documents. Such other documents and instruments as
the Buyer Parent or its counsel shall deem reasonably necessary to consummate
the transactions contemplated hereby.
9.2 Deliveries by the Buyer and the Buyer Parent. The Buyer and the
Buyer Parent will deliver or cause to be delivered to Axle or the Paying Agent,
as applicable:
(a) Payment. Payment of the Aggregate Merger Consideration as
provided in Section 3.2;
(b) Buyer and Buyer Parent Certificate. The certificate
required by Section 8.3(a);
33
(c) Good Standing Certificates. Certificates of good standing
with respect to each of the Buyer and the Buyer Parent, issued by the Secretary
of State of the jurisdiction of formation of each of the Buyer and the Buyer
Parent; and
(d) Other Documents. Such other documents and instruments as
Axle or its counsel shall deem reasonably necessary to consummate the
transactions contemplated hereby.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time notwithstanding any requisite
approval and adoption of this Agreement and the transactions contemplated by the
Axle Shareholders:
(a) by mutual written consent duly executed by each of Axle
and the Buyer Parent;
(b) by the Buyer Parent in writing (provided neither the Buyer
nor the Buyer Parent is otherwise in material default or in material breach of
this Agreement), if the Closing shall not have occurred on or before August 22,
2005 (the "Outside Date.");
(c) by Axle in writing (provided Axle is not otherwise in
material default or in material breach of this Agreement), if the Closing has
not occurred on or before the Outside Date;
(d) by the Buyer Parent in writing, if any of the conditions
in Section 8.1 or Section 8.2 is or becomes impossible (other than through
failure of either the Buyer or the Buyer Parent to comply with its obligations
under this Agreement) and the Buyer Parent has not waived in writing such
condition on or before the Closing;
(e) by Axle in writing, if any of the conditions in
Section 8.1 or Section 8.3 is or becomes impossible (other than through failure
of Axle to comply with its obligations under this Agreement) and Axle has not
waived in writing such condition on or before the Closing;
(f) by either of Axle or the Buyer Parent if (i) the Axle
Shareholders' Meeting (including any adjournments and postponements thereof)
shall have been duly held and completed and the Axle Shareholders shall have
voted on a proposal to adopt this Agreement, and (ii) the Axle Shareholder
Approval shall not have been obtained at such Axle Shareholders' Meeting (or at
any adjournments or postponements thereof);
(g) by Axle, if the Axle Board determines that an Acquisition
Proposal constitutes a Superior Proposal and determines to enter into a
definitive agreement with respect to such Superior Proposal if (i) Axle shall
have complied in all material respects with the provisions of Section 6.5, (ii)
Axle shall have given the Buyer Parent five (5) Business Days' prior written
notice of its intention to terminate this Agreement pursuant to this Section
10.1(g), it being understood and agreed that any amendment to the financial or
other material terms of such Superior Proposal prior to such termination shall
require a new five (5) Business Day
34
period to afford the Buyer Parent the opportunity to negotiate with Axle as
contemplated below, (iii) Axle and the Axle Board shall have cooperated in good
faith with the Buyer Parent to make such adjustments in the terms and conditions
of this Agreement with a view toward causing such terms to be at least as
favorable to the Axle Stockholders as the terms of such Superior Proposal, and
(iv) the Buyer Parent shall not have, within five (5) Business Days of Parent's
receipt of the notice described in clause (ii) above, made an offer that the
Axle Board determines in good faith (after consultation with its outside legal
counsel and Xxxxxxx Xxxxx & Company, L.L.C. or another financial advisor of
nationally recognized reputation) to be at least as favorable to the Axle
Shareholders as the terms of such Superior Proposal; or
(h) by the Buyer or the Buyer Parent, if the Axle Board (or
any committee thereof) shall have (i) made a Change in Recommendation or failed
to solicit proxies in favor of adoption of this Agreement, (ii) approved or
recommended an Acquisition Proposal or determined that an Acquisition Proposal
constitutes a Superior Proposal, (iii) provided notice to the Buyer Parent that
Axle is entering into a letter of intent, agreement in principle, acquisition
agreement or other Contract related to a Superior Proposal, (iv) failed to
recommend against a publicly announced Acquisition Proposal or any Acquisition
Proposal communicated to Axle which is the subject of public rumor or
speculation, in either case, within five (5) Business Days of being requested to
do so by the Buyer Parent, or (v) resolved or otherwise determined to take, or
announced an intention to take, any of the foregoing.
10.2 Effect of Termination. In the event of termination of this
Agreement pursuant to Section 10.1, all obligations under this Agreement (other
than those provisions set forth in Section 7.4(c), Section 10.2, Section 10.3
and Article XI) shall terminate and shall be of no further force or effect;
provided, however, except as set forth in Section 10.3, (a) no termination of
this Agreement shall release, or be construed as releasing, any party from any
liability to any other party which may have arisen under this Agreement by
reason of any willful or intentional breach thereof, and (b) in the event of a
breach of this Agreement by a Party prior to the Effective Time, the other
Parties shall be entitled to the remedy of specific performance, without the
posting of bond or other security. Except as set forth in Section 10.3, a
Party's right to terminate this Agreement is in addition to, and not in lieu of,
any other legal or equitable rights or remedies which such Party may have.
10.3 Termination Payments.
(a) In the event this Agreement is terminated (i) by Axle
pursuant to Section 10.1(g) or (ii) by the Buyer Parent or the Buyer pursuant to
Section 10.1(h), then in any such case (A) Axle shall pay to the Buyer Parent
(or its designee) (I) the Transaction Expenses, up to a maximum of $4,000,000,
and (II) any amounts paid or payable by the Buyer Parent (or its designated
Affiliates) pursuant to Section 7.4(c), up to a maximum amount equal to the
Escrow Breakage Cap, and (B) in the event that, within 12 months after such date
of termination, Axle consummates a transaction that would constitute an
Acquisition Transaction, Axle shall pay to the Buyer Parent (or its designee) an
additional fee in the amount of $12,000,000.
35
(b) In the event this Agreement is terminated by the Buyer
Parent pursuant to Section 10.1(d) (but only by virtue of Axle having materially
breached its obligations under Section 6.5), then Axle shall, (i) pay to the
Buyer Parent (or its designee) an amount equal to $2,000,000 and (ii) reimburse
the Buyer Parent for (A) the Transaction Expenses, up to a maximum of $4,000,000
and (B) any amounts paid or payable by the Buyer Parent (or its designated
Affiliates) pursuant to Section 7.4(c), up to a maximum amount equal to the
Escrow Breakage Cap, and (iii) in the event that, within 12 months after such
date of termination, Axle consummates a transaction that would constitute an
Acquisition Transaction, pay to the Buyer Parent (or its designee) an additional
fee in the amount of $10,000,000.
(c) In the event this Agreement is terminated by the Buyer
Parent pursuant to Section 10.1(d) (other than by due to a failure to satisfy
the conditions set forth in Section 8.1(d)), and at any time after the date of
this Agreement and before such termination, an Acquisition Proposal with respect
to Axle shall have been publicly announced, disclosed or otherwise communicated
to the Axle Board, then Axle shall, (y) reimburse the Buyer Parent for (A) the
Transaction Expenses, up to a maximum of $4,000,000 and (B) any amounts paid or
payable by the Buyer Parent (or its designated Affiliates) pursuant to Section
7.4(c), up to a maximum amount equal to the Escrow Breakage Cap, and (ii) in the
event that, within 12 months after such date of termination, Axle consummates a
transaction that would constitute an Acquisition Transaction, pay to the Buyer
Parent (or its designee) a fee in the amount of $12,000,000.
(d) In the event this Agreement is terminated by either Axle
or the Buyer Parent (as applicable) pursuant to Section 10.1(f), then Axle shall
(i) reimburse the Buyer Parent for the Transaction Expenses, up to a maximum of
$4,000,000 and (ii) any amounts paid or payable by the Buyer Parent (or its
designated Affiliates) pursuant to Section 7.4(c), up to a maximum amount equal
to the Escrow Breakage Cap.
(e) In the event that neither Section 10.3(a) nor Section
10.3(b) applies and this Agreement is terminated (i) by the Buyer Parent
pursuant to Section 10.1(d) (by virtue of the impossibility of the satisfaction
of the condition set forth in Section 8.2(a) or 8.2(b) before the Outside Date),
or (ii) by the Buyer Parent pursuant to Section 10.1(b) or by Axle pursuant to
Section 10.1(c) (but only if, in either case, the condition set forth in Section
8.2(a) or 8.2(b) shall not have been fulfilled or satisfied at or as of the
Outside Date), then in the case of clauses (i) and (ii), Axle shall reimburse
the Buyer Parent for any amounts paid or payable by the Buyer Parent (or its
designated Affiliates) pursuant to Section 7.4(c), up to a maximum of
$3,000,000.
(f) In the event this Agreement is terminated (i) by Axle
pursuant to Section 10.1(e) (by virtue of the impossibility of the satisfaction
of the condition set forth in Section 8.3(a) before the Outside Date) or (ii) by
the Buyer Parent pursuant to Section 10.1(b) or by Axle pursuant to Section
10.1(c) (but only if, in either case, at the time of termination on the Outside
Date, the Buyer shall be in material breach of its obligations under this
Agreement), then in the case of clauses (i) and (ii), the Buyer Parent shall
reimburse Axle for (A) its reasonable and documented out of pocket expenses
incurred in connection with the execution, delivery and performance of this
Agreement, up to a maximum amount of $2,000,000 and (B) any amounts paid or
payable by Axle pursuant to Section 7.4(c).
36
(g) Notwithstanding anything to the contrary, no fee shall be
payable to the Buyer Parent or the Buyer under Section 10.3(a) or Section
10.3(b) if at the time of termination either Lender shall have refused or stated
its intention to refuse (and such refusal shall be continuing at the time of
termination) to provide the financing described in the Senior Debt Letter or,
unless the Escrow Closing shall have occurred, the Subordinated Debt Letter;
provided, however, the foregoing limitations on the payment of a fee shall be
inapplicable if, prior to such termination, commitment letters with respect to
alternative debt financing (as contemplated by the second sentence of Section
7.4(b)) have been obtained and at the time of termination shall have been in
full force and effect.
(h) Any payment required to be made pursuant to Section
10.3(a), 10.3(b), 10.3(c) or 10.3(d) hereof shall be paid by wire transfer of
immediately available funds to an account designated by the recipient no later
than two (2) Business Days after the event giving rise to such payment;
provided, any payment required to be made pursuant to Section 10.3(a)(i) (with
respect to clause (x)) shall be payable concurrently with such termination or
closing of such transaction (as applicable), and provided further that any
payment of Transaction Expenses required pursuant to Section 10.3(a) or 10.3(b)
shall be made within five (5) Business Days after the Buyer Parent provides Axle
a notice requesting reimbursement, together with reasonable documentation of
such Transaction Expenses.
(i) If this Agreement is terminated pursuant to Section
10.1(b), Section 10.1(c), Section 10.1(d), Section 10.1(f), Section 10.1(g) or
Section 10.1(h) and the Buyer Parent or the Buyer is entitled to receive any
payment described in this Section 10.3, then the Buyer and the Buyer Parent
shall not be entitled to pursue any other legal remedy and the receipt of the
payments made hereunder shall be the Buyer's and the Buyer Parent's sole and
exclusive remedy for such termination. If this Agreement is terminated pursuant
to Section 10.1(e) and Axle is entitled to receive any payment described in
Section 10.3(f), then Axle shall not be entitled to pursue any other legal
remedy and the receipt of the payments made hereunder shall by Axle's sole and
exclusive remedy for such termination.
ARTICLE XI
MISCELLANEOUS
11.1 Notices, Consents, etc. Any notices, consents or other
communications required to be sent or given hereunder by any of the Parties
shall in every case be in writing and shall be deemed properly served if and
when (a) delivered by hand, (b) transmitted by facsimile with confirmation of
transmission, or (c) delivered by Federal Express or other express overnight
delivery service, or registered or certified mail, return receipt requested, in
either such case, to the Parties at the addresses as set forth below or at such
other addresses as may be furnished in writing:
37
(i) If to Axle (prior to the Closing):
Insurance Auto Auctions, Inc.
0 Xxxxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx: Xxx X'Xxxxx
Xxxxxx Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to (which copy shall not constitute notice):
Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
(ii) If to either the Buyer or the Buyer Parent:
c/o Kelso & Company
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, XX
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to (which copy shall not constitute notice):
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Date of service of such notice shall be (A) the date such notice is delivered by
hand, (B) one Business Day following the delivery by facsimile or by express
overnight delivery service, or (C) three days after the date of mailing if sent
by certified or registered mail.
11.2 Severability. The unenforceability or invalidity of any provision
of this Agreement shall not affect the enforceability or validity of any other
provision.
11.3 Assignment; Successors. Neither this Agreement, nor any rights,
obligations or interests hereunder, may be assigned by any Party hereto, except
with the prior written consent of the other Parties hereto. Subject to the
preceding sentence, this Agreement shall be binding
38
upon, and shall inure to the benefit of, the Parties hereto and their respective
successors and assigns.
11.4 Counterparts; Facsimile Signatures. This Agreement may be executed
simultaneously in two (2) or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
This Agreement, any and all agreements and instruments executed and delivered in
accordance herewith, along with any amendments hereto or thereto, to the extent
signed and delivered by means of a facsimile machine or other means of
electronic transmission, shall be treated in all manner and respects and for all
purposes as an original signature, agreement or instrument and shall be
considered to have the same binding legal effect as if it were the original
signed version thereof delivered in person.
11.5 Expenses; Transfer Taxes. Axle shall pay for all costs and
expenses incurred or to be incurred by the Acquired Companies through Closing,
in negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement, including, without limitation, the
fees owed by the Acquired Companies to Xxxxxxx Xxxxx & Company, L.L.C. pursuant
to the terms of a letter agreement, dated August 20, 2004. The Buyer and the
Buyer Parent shall pay for all costs and expenses incurred or to be incurred by
(a) the Buyer and the Buyer Parent through and after the Closing in negotiating
and preparing this Agreement and in closing and carrying out the transactions
contemplated by this Agreement, and (b) the Surviving Corporation and its
subsidiaries on and after the Closing in carrying out the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, all transfer, documentary, sales, use, stamp, registration and other
such Taxes, and all conveyance fees, recording charges and other fees and
charges (including any penalties and interest) incurred in connection with the
consummation of the transactions contemplated by this Agreement shall be paid by
the Buyer or the Buyer Parent when due, and the Buyer and the Buyer Parent
shall, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes, fees and charges, and, if required
by applicable Law, the Parties will, and will cause their Affiliates to, join in
the execution of any such Tax Returns and other documentation.
11.6 Governing Law. This Agreement shall be construed and governed in
accordance with the Laws of the State of Illinois, without regard to its Laws
regarding conflicts of Law.
11.7 Table of Contents and Headings. The table of contents and section
headings of this Agreement are included for reference purposes only and shall
not affect the construction or interpretation of any of the provisions of this
Agreement.
11.8 Definitions. As used in this Agreement:
"Acquired Companies" means, collectively, Axle and the Axle
Subsidiaries.
"Acquired Companies' Knowledge" means the actual knowledge after due
inquiry of the persons listed on Schedule 11.8 of the Disclosure Schedule.
39
"Acquisition Proposal" means any offer or proposal (other than an offer
or proposal from the Buyer Parent or the Buyer), whether or not in writing,
contemplating or otherwise relating to any Acquisition Transaction.
"Acquisition Transaction" means (a) any transaction or series of
transactions involving any merger, consolidation, recapitalization, share
exchange, liquidation, dissolution or similar transaction involving any of the
Acquired Companies, (b) any transaction pursuant to which any third party or
group acquires or would acquire (whether through sale, lease or other
disposition), directly or indirectly, by merger, consolidation, share exchange
or otherwise, any assets of the Acquired Companies representing, in the
aggregate, thirty percent (30%) or more of the assets of Axle on a consolidated
basis, (c) any issuance, sale or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase or securities convertible into, such
securities) representing fifteen percent (15%) or more of the votes attached to
the outstanding securities of Axle, (d) any tender offer or exchange offer that,
if consummated, would result in any third party or group beneficially owning
fifteen percent (15%) or more of any class of equity securities of Axle or any
of the Axle Subsidiaries, or (e) any transaction which is similar in form,
substance or purpose to any of the foregoing transactions, or any combination of
the foregoing.
"Affiliate" shall have the meaning given for that term in Rule 405
under the Securities Act, as amended, and shall include each past and present
Affiliate of a Person and the members of such Affiliate's immediate family or
their spouses or children and any trust the beneficiaries of which are such
individuals or relatives.
"Aggregate ESPP Redemption Amount" means an amount equal to the
aggregate of all ESPP Redemption Amounts payable pursuant Section 3.5(b) to all
of the participants in the ESPP.
"Aggregate Merger Consideration" means an amount equal to (a) the
Merger Consideration multiplied by the number of shares of Axle Common Stock
outstanding as of the Effective Time, and (b) the Aggregate ESPP Purchase
Amount.
"Announcement Date" means the date on which Axle publicly announces the
proposed Merger.
"Axle Common Stock" means Axle's common stock, no par value per share.
"Axle Preferred Stock" means Axle's preferred stock, no par value per
share.
"Axle Shareholders" means (a) the holders of record of the Axle Common
Stock, (b) the holders of any Axle Options who elect to exercise such options
pursuant to Section 3.5(a), and (c) the participants in the ESPP who have ESPP
Purchase Rights, in each case immediately prior to the Effective Time.
"Axle Subsidiaries" means any Person more than fifty percent (50%) of
the outstanding voting or equity securities of which, or any partnership, joint
venture or other entity more than fifty percent (50%) of the total equity or
other economic interest of which, is directly or indirectly owned by Axle.
40
"Business" means the business of towing, processing, appraising,
auctioning and selling, and processing claims with respect to damaged,
abandoned, repossessed, total loss, used and recovered theft vehicles.
"Business Day" means any day that is not a Saturday or a Sunday or a
day on which banks located in Chicago, Illinois are authorized or required to be
closed.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means the confidentiality agreement, dated
as of December 3, 2004, by and between Axle and Xxxxx & Company, L.P.
"Consent" means any approval, consent, ratification, waiver, or other
authorization.
"Contract" means any written or oral agreement, arrangement, note,
mortgage, bond, guarantee, lease, sublease, license, indenture, lease, deed of
trust, license, plan, instrument or other contract, in each case, including any
amendments or modifications thereto and restatements thereof.
"Environmental Claim" means any Action or notice (written or oral) by
any Person or entity alleging potential Liability (including, without
limitation, potential Liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from (a)
the presence, or release into the environment, of any Material of Environmental
Concern at any location, whether or not owned or operated by any of the Acquired
Companies or (b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Health and Safety Requirements.
"Environmental Health and Safety Requirements" means all federal,
interstate, state, local and foreign Laws relating to pollution or protection of
human health, safety, or the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata), including,
without limitation, Laws relating to emissions, discharges, releases or
Threatened releases of Materials of Environmental Concern, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
"Employee Plan" means an "employee benefit plan" (as defined in Section
3(3) of ERISA), a "pension plan" (as defined in Section 3(2) of ERISA), a
"welfare plan" (as defined in Section 3(1) of ERISA), or any employee benefit,
employment, bonus, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
equity compensation, vacation, termination, severance, change in control, death
benefit, insurance or other plan, agreement, fund, arrangement or understanding,
in each case established, sponsored, maintained or contributed to, or required
to be contributed to, by Acquired Companies (or with respect to any Title IV
Plan, a Plan Affiliate of the Acquired Companies),, or to which the Acquired
Companies (or with respect to any Title IV Plan, a Plan Affiliate of the
Acquired Companies) is party, whether written or oral, for the benefit of any
employee, director or independent contractor or former employee, director or
independent contractor of the Acquired Companies with respect to such
individuals' employment or other similar affiliation
41
with the Acquired Companies; provided, however, a contract for services between
the Acquired Companies and a non-employee shall not be considered an "Employee
Plan" hereunder if such contract provides for cash payment in exchange for such
services.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Breakage Cap" means (i) $3,000,000 plus (ii) the positive
difference, if any, between $4,000,000 and the amount of Transaction Expenses
reimbursed pursuant to Section 10.3(a)(A)(I), Section 10.3(b)(ii)(A) or Section
10.3(d)(i), as applicable.
"ESPP Purchase Period" means each successive period beginning on the
day after the last Business Day concurrent with or preceding each June 30 and
December 31.
"ESPP Purchase Price" means an amount equal to eighty-five percent
(85%) of the lower of (a) the fair market value per share of Axle Common Stock
on the start date of the ESPP Purchase Period, or (b) the fair market value per
share of Axle Common Stock on the date of the Effective Time.
"ESPP Purchase Right" means the right granted to each eligible employee
who participates in the ESPP for a particular ESPP Purchase Period to purchase
Axle Common Stock upon the terms and conditions set forth in the ESPP.
"ESPP Redemption Amount" means, with respect to any participant in the
ESPP, the product of (a) the excess, if any, of the Merger Consideration over
the ESPP Purchase Price, and (b) the number of shares subject to an ESPP
Purchase Right with respect to such participant in the ESPP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" means the fifteenth (15th) day following the date of
the Option Notice.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Governmental Authority" means the United States or any state,
provincial, local or foreign government, or any subdivision, agency, court or
authority of any thereof having jurisdiction over any of the Acquired Companies,
the Buyer, the Buyer Parent or the transactions contemplated by this Agreement,
as applicable.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stay, stipulation, determination or award entered by or with any
Governmental Authority.
"HSR Act" means collectively, if and as applicable, Section 7A of the
Xxxxxxx Act (Title II of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended and the rules and regulations promulgated thereunder).
"Illinois Law" means the Illinois Business Corporations Act of 1983, as
amended.
42
"Intellectual Property" means all Company Licensed Intellectual
Property, unregistered trademarks and service marks, inventions, unregistered
copyrights, know how, trade secrets, manufacturing processes, formulae,
technical information, specifications, data, technology, plans and drawings, and
other intellectual property owned, or used under a valid license, by the
Acquired Companies.
"Law" means each provision of any currently implemented Federal, state,
local or foreign law, statute, ordinance, decree, injunction, judgment, order,
code, rule or regulation, promulgated or issued by any Governmental Authority.
"Liability" means all debts, obligations and other liabilities of a
Person (whether absolute, accrued, contingent, unliquidated, fixed or otherwise,
or whether due or to become due), including those arising under any Law and
those arising under any Contract.
"Licenses and Permits" means any licenses, permits, certificates,
notifications, exemptions, classifications, registrations, franchises,
approvals, orders or similar authorizations, or any waivers of the foregoing,
issued by any Governmental Authority or private accrediting agency.
"Lien" means any mortgage, pledge, hypothecation, right of others,
claim, security interest, encumbrance, lease, sublease, license, occupancy
agreement, adverse claim or interest, easement, covenant, encroachment, burden,
title defect, title retention agreement, voting trust agreement, interest,
equity, option, lien, right of first refusal, charge or other restrictions or
limitations of any nature whatsoever, other than restrictions on the offer and
sale of securities under Federal and state securities Laws.
"Material Adverse Effect" means any change, effect, event, occurrence,
state of facts or development that, individually or in the aggregate with other
changes, effects, events, occurrences, states of facts or developments, is, or
is reasonably expected to be, directly or indirectly, materially adverse to the
business, assets, financial condition or results of operations of the Acquired
Companies taken as a whole; provided, however, that none of the following shall
be deemed in itself, or in any combination, to constitute, and none of the
following shall be taken into account in determining whether there has been or
will be, a Material Adverse Effect or Material Adverse Change: (a) any adverse
change, effect, event, occurrence, state of facts or development attributable to
conditions affecting the industry in which the Acquired Companies participate,
the United States economy as a whole or the capital markets in general (provided
that such changes do not disproportionately affect the Acquired Companies
relative to the other participants in its industry); (b) any adverse change,
effect, event, occurrence, state of facts or development attributable to changes
in Law, rules, regulations, orders, or other binding directives issued by any
Governmental Authority; or (c) any adverse change, effect, event, occurrence,
state of facts or development arising from or relating to the commencement,
continuation or escalation of a war, material armed hostilities or other
material international or national calamity or act of terrorism directly or
indirectly involving the United States of America.
"Material of Environmental Concern" means chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, radioactive
materials, asbestos, petroleum and petroleum products.
43
"Option Amount" means an amount equal to the product of (a) the Option
Price as set forth in the applicable stock option agreement relating to an
applicable Stock Option Plan, and (b) the number of shares of Axle Common Stock
subject thereto.
"Option Payment Amount" means an amount equal to the product of (a) the
excess, if any, of the Merger Consideration over the applicable Option Price
thereof, and (b) the number of shares of Axle Common Stock subject thereto.
"Option Price" means the option price per share as set forth in the
applicable stock option agreement relating to an applicable Stock Option Plan.
"Organizational Documents" means (a) with respect to a corporation, the
certificate or articles of incorporation and bylaws; (b) with respect to any
other entity, any charter or similar document adopted or filed in connection
with the creation, formation or organization of a Person; and (c) any amendment
to any of the foregoing.
"Permitted Liens" means (a) Liens for taxes not yet due and payable,
(b) statutory Liens of landlords for amounts not yet due and payable, (c) Liens
of carriers, warehousemen, mechanics and materialmen incurred in the ordinary
course of business for amounts not yet due and payable, (d) Liens attaching to
inventory held by consignees in the ordinary course of business, and (e) any
easement, covenant, encroachment, burden, title defect, title retention
agreement or other exception to title to any of the Real Property (other than as
set forth in clauses (a) through (d) above), which does not materially adversely
affect the current use of the applicable Real Property.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated association, corporation, limited liability
company, entity or government (whether Federal, state, county, city or
otherwise, including, without limitation; any instrumentality, division, agency
or department thereof).
"Plan Affiliate" with respect to any Person ("First Person") means any
other Person who, together with the First Person, constitutes all or part of a
controlled group, or which would be treated with the First Person as under
common control or whose employees would be treated as employed by the First
Person, under Section 414 of the Code or Section 4001(b) of ERISA and any
regulations, administrative rulings and case Law interpreting the foregoing.
"Reasonable Efforts" means the good faith efforts that a reasonably
prudent Person desirous of achieving a result would use in similar circumstances
to ensure that such result is achieved as reasonably expeditiously as possible.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
including the rules and regulations promulgated thereunder.
"Superior Proposal" means any bona fide proposal made by a third party
to enter into an Acquisition Transaction (provided, that for purposes of this
definition, the applicable percentages in clauses (b), (c) and (d) of the
definition of Acquisition Transaction shall be 50% as opposed to
44
30% or 15%, as applicable) that, in the reasonable good faith judgment of the
Axle Board (after consultation with its outside legal counsel and Xxxxxxx Xxxxx
& Company, L.L.C. or another financial advisor of nationally recognized
reputation, and taking into account all of the terms of conditions of the
proposal and this Agreement) (i) would, if consummated, result in a transaction
that is more favorable from a financial point of view to the Axle Shareholders
than the Merger and the transactions contemplated by this Agreement and (ii) is
reasonably capable of being completed and completed on a timely basis.
"Tax Return" means any report, declaration, statement, return or other
information filed in respect of Taxes, and any claims for refund of Taxes,
including any amendments or supplements to any of the foregoing, with any taxing
authority with respect to Taxes imposed upon or attributable to the operation of
the Business.
"Taxes" shall include all taxes, charges, withholdings, fees,
penalties, additions, interest or other assessments imposed by any United States
Federal, state, local and foreign or other taxing authority, and including, but
not limited to, those related to income, gross receipts, gross income, payroll,
sales, use, excise, services, valuation, transfer or franchise.
"Threatened" means a claim, proceeding, dispute, action or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made in writing or any notice of commencement of an action or suit has been
given in writing.
"Transaction Expenses" means the reasonable and documented
out-of-pocket expenses incurred by the Buyer Parent, the Buyer and its
Affiliates (which shall include, but shall not be limited to, fees and expenses
of financial advisors, outside legal counsel, financing sources and accountants)
in connection with this Agreement and the transactions contemplated hereby,
including fees and expenses incurred in connection with the financing thereof,
other than Buyer Parent's (or its designated Affiliate's) portion of the Escrow
Breakage Amount.
11.9 Entire Agreement. This Agreement, the Recitals, the Schedules and
the Exhibits attached hereto (all of which shall be deemed incorporated in this
Agreement and made a part hereof), and the Confidentiality Agreement set forth
the entire understanding of the parties with respect to the transactions
contemplated hereby, supercede all prior discussions, understandings, agreements
and representations and shall not be modified or affected by any offer,
proposal, statement or representation, oral or written, made by or for any Party
in connection with the negotiation of the terms hereof. This Agreement may be
modified only by subsequent instruments signed by the Parties hereto.
11.10 No Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements made in
this Agreement shall not survive beyond the Effective Time. Notwithstanding the
foregoing, the covenants and agreements set forth in Section 7.2 and Article XI
shall survive the Effective Time indefinitely (except to the extent a shorter
period of time is explicitly specified therein).
11.11 Third Parties. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any Person, other than the Parties
to this Agreement any rights or remedies under or by reason of this Agreement.
45
11.12 Disclosure Generally. All of the Disclosure Schedules are
incorporated herein and expressly made a part of this Agreement as though
completely set forth herein. All references to this Agreement herein or in any
of the Disclosure Schedules shall be deemed to refer to this entire Agreement,
including all Disclosure Schedules; provided, however, that information
furnished in any particular Disclosure Schedule shall be deemed to be included
in another Disclosure Schedule to the extent a matter in such section of the
Disclosure Schedule is disclosed in such a way as to make its relevance to the
information called for by such other section of this Agreement reasonably
apparent on its face.
11.13 Acknowledgment by the Buyer and the Buyer Parent. Each of the
Buyer and the Buyer Parent acknowledges that, except as set forth herein, no
promise or inducement for this Agreement was offered Axle or any of its
representatives or relied upon by the Buyer or the Buyer Parent. SUCH
REPRESENTATIONS AND WARRANTIES BY AXLE CONSTITUTE THE SOLE AND EXCLUSIVE
REPRESENTATIONS AND WARRANTIES OF AXLE TO THE BUYER AND THE BUYER PARENT IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, AND THE BUYER AND THE
BUYER PARENT UNDERSTAND, ACKNOWLEDGE AND AGREE THAT ALL OTHER REPRESENTATIONS
AND WARRANTIES OF ANY KIND OR NATURE EXPRESS OR IMPLIED (INCLUDING, BUT NOT
LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION,
RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OR PROSPECTS OF ANY OF THE ACQUIRED
COMPANIES) ARE SPECIFICALLY DISCLAIMED BY THE ACQUIRED COMPANIES. EACH OF THE
BUYER AND THE BUYER PARENT ACKNOWLEDGES THAT IT DID NOT RELY ON ANY
REPRESENTATION OR WARRANTY NOT CONTAINED IN THIS AGREEMENT WHEN MAKING ITS
DECISION TO ENTER INTO THIS AGREEMENT AND WILL NOT RELY ON ANY SUCH
REPRESENTATION OR WARRANTY IN DECIDING TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. With respect to all materials that are described
as having been made available or delivered to the Buyer or the Buyer Parent,
such materials shall be deemed to have been delivered or made available to the
Buyer or the Buyer Parent if the Buyer, the Buyer Parent or any of their
representatives or agents have been granted access to a dataroom, electronic
dataroom or website in which such materials are available or by transmitting
such materials to the Buyer, the Buyer Parent or their representatives or agents
by any other electronic means.
11.14 Interpretive Matters. Unless the context otherwise requires, (a)
all references to articles, sections, schedules or exhibits are to Articles,
Sections, Schedules or Exhibits in this Agreement, (b) each accounting term not
otherwise defined in this Agreement has the meaning assigned for it in
accordance with GAAP, (c) words in the singular or plural include the singular
and plural, and pronouns stated in either the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter, and (d) the term
"including" shall mean by way of example and not by way of limitation. The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent arises, this
Agreement shall be construed as if drafted jointly by the Parties, and no
presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this Agreement.
46
11.15 Amendments, Modification and Waiver.
(a) This Agreement may be amended by the Parties hereto at any
time prior to the Effective Time by action take by or on behalf of each of the
Board of Directors of the Buyer Parent, on the one hand, and the Axle Board, on
the other hand; provided, however, that after obtaining the Axle Shareholder
Approval, no amendment may be made which by Law requires further approval by the
Axle Stockholders without first obtaining such further approval. This Agreement
may not be amended except by an instrument in writing signed by the Parties
hereto.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
11.16 Submission to Jurisdiction. Each of the Parties submits to the
exclusive jurisdiction of any state or federal court sitting in Chicago,
Illinois, in any action or proceeding arising out of, or relating to, this
Agreement, agrees that all claims in respect of the action or proceeding may be
heard and determined in any such court and agrees not to bring any action or
proceeding arising out of, or relating to, this Agreement in any other court.
Each of the Parties waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other Party with respect thereto. Each
Party agrees that service of summons and complaint or any other process that
might be served in any action or proceeding may be made on such Party by sending
or delivering a copy of the process to the Party to be served at the address of
the Party and in the manner provided for the giving of notices in Section 11.1.
Nothing in this Section, however, shall affect the right of any Party to serve
legal process in any other manner permitted by Law. Each Party agrees that a
final judgment in any action or proceeding so brought shall be conclusive and
may be enforced by suit on the judgment or in any other manner provided by Law.
11.17 Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT
OF, OR RELATING TO, THIS AGREEMENT.
11.18 Specific Performance. The Parties agree that if any provision of
this Agreement is not performed in accordance with its terms or is otherwise
breached, irreparable harm would occur, no adequate remedy at Law would exist,
and damages would be difficult to determine, and the Party or Parties not in
breach shall be entitled to the remedy of specific performance in addition to
any other remedies that may be available at Law or in equity by reason of such
breach.
11.19 Public Announcements. Prior to the Closing, the Parties will not
issue or cause the publication of any press release or other public announcement
with respect to this Agreement or the transactions contemplated hereby, except
that the Buyer and the Buyer Parent, on the one hand, and Axle, on the other
hand, may issue a joint press release if mutually considered appropriate;
provided, however, that nothing herein shall prohibit any Party from issuing or
causing publication of any such press release or public announcement to the
extent that such
47
party determines such action to be required by Law, in which case the Party
making such determination will, if practicable in the circumstances, use
Reasonable Efforts to allow the other Parties reasonable time to comment on such
release or announcement in advance of its issuance. To the extent feasible, all
press releases or other announcements or notices regarding the transactions
contemplated by this Agreement shall be made jointly by the Parties.
[Signature Pages Follow.]
48
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
date first written above.
AXLE:
INSURANCE AUTO AUCTIONS, INC.
By: /s/ Xxxxxx X. X'Xxxxx
---------------------------------
Name: Xxxxxx X. X'Xxxxx
Title: President & CEO
BUYER PARENT:
AXLE HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: VP & Secretary
BUYER:
AXLE MERGER SUB, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President and Treasurer
