================================================================================
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 4, 1998
BY AND AMONG
BUDGET GROUP, INC.,
BDG CORPORATION,
RYDER TRS, INC.,
AND
CERTAIN OTHER PARTIES
================================================================================
TABLE OF CONTENTS
ARTICLE I. The Transactions..................................................1
Section 1.1. The Transactions...................................1
Section 1.2. The Merger .......................................2
Section 1.3. Effects of Merger..................................2
ARTICLE II. The Surviving Corporation........................................2
Section 2.1. Certificate of Incorporation.......................2
Section 2.2. By-Laws ...........................................3
Section 2.3. Officers and Directors.............................3
ARTICLE III. Determination of Merger Consideration;Conversion
of Shares; Etc................................................3
Section 3.1. Determination of Merger Consideration..............3
Section 3.2. Conversion of Shares in the Merger.................4
Section 3.3. Adjustment to Merger Shares........................5
Section 3.4. Contingent Additional Consideration................6
Section 3.5. Warrants ..........................................9
Section 3.6. Escrow Holdback Shares............................10
Section 3.7. Stock Options ....................................11
Section 3.8. Appraisal Rights..................................12
Section 3.9. Buyer to Make Certificates Available..............13
Section 3.10. Dividends; Transfer Taxes........................14
Section 3.11. No Fractional Securities.........................15
Section 3.12. Closing of Company Transfer Books................15
Section 3.13. Legends and Transfer Restrictions................15
Section 3.14. Exemptions from Registration and Qualification...16
Section 3.15. Registration Rights..............................16
Section 3.16. Business Combinations............................17
ARTICLE IV. Representations and Warranties of the Company...................18
Section 4.1. Corporate Organization and Authorization..........18
Section 4.2. Capitalization....................................20
Section 4.3. Noncontravention..................................21
Section 4.4. SEC Filings.......................................21
Section 4.5. Financial Statements..............................22
Section 4.6. Legal Proceedings.................................23
Section 4.7. Employee Plans ...................................23
Section 4.8. Intellectual Property.............................25
Section 4.9. Events Subsequent to September 30, 1997...........26
Section 4.10. Compliance with Laws.............................26
Section 4.11. Registration Statement............................27
Section 4.12. Properties; Leases...............................27
Section 4.13. Tax Matters......................................28
Section 4.14. Brokerage .......................................30
Section 4.15. Insurance; Protection Products...................30
Section 4.16. Contracts ......................................30
Section 4.17. Transactions with Affiliates.....................31
i
Section 4.18. Voting Requirements; Dissenters' Rights..........32
Section 4.19. Labor Matters ...................................32
Section 4.20. Quantity and Maintenance of Trucks...............32
Section 4.21. Accounts Receivable..............................32
Section 4.22. Licenses, Permits, etc...........................32
Section 4.23. Disclosure ......................................33
ARTICLE V. Representations and Warranties of Buyer..........................33
Section 5.1. Corporate Organization and Authorization..........33
Section 5.2. Capitalization ...................................34
Section 5.3. Noncontravention..................................35
Section 5.4. SEC Filings.......................................35
Section 5.5. Financial Statements..............................36
Section 5.6. Legal Proceedings.................................36
Section 5.7. Events Subsequent to September 30, 1997...........36
Section 5.8. Compliance with Laws..............................37
Section 5.9. Registration Statement............................37
Section 5.10. Properties; Insurance............................37
Section 5.11. Financing .......................................37
Section 5.12. Brokerage. ......................................38
Article VI. Covenants and Agreements........................................38
Section 6.1. Conduct of the Company Prior to the
Effective Time....................................38
Section 6.2. Conduct of Buyer Prior to the Effective Time......41
Section 6.3. Other Offers for the Company; Sale of
Common Stock by Significant Stockholders..........42
Section 6.4. Continued Effectiveness of Representations
and Warranties of the Parties.....................43
Section 6.5. Corporate Examinations and Investigations.........44
Section 6.6. Buyer Approvals...................................44
Section 6.7. Company Approvals.................................44
Section 6.8. Letter of Credit..................................44
Section 6.9. Further Assurances................................45
Section 6.10. Buyer Board of Directors.........................46
Section 6.11. Indemnification of Company Officers
and Directors; Insurance.........................46
Section 6.12. Confidentiality..................................47
Section 6.13. Certificates, Opinions, Etc......................47
Section 6.14. Interim Financials...............................47
Section 6.15. Communications...................................47
Section 6.16. Releases.........................................47
Section 6.17. Transfer Taxes...................................48
Section 6.18. Standstill.......................................48
Section 6.19. Buyer's Stockholders' Meeting....................48
Section 6.20. Stock Purchases, Repurchases and Sales;
Registration Rights...............................49
Section 6.21. Listing..........................................49
ii
Section 6.22. Registration Rights..............................49
Section 6.23. Buyer Review of Disclosure Schedules.............50
ARTICLE VII. Conditions Precedent To Merger.................................50
ARTICLE VIII. Closing.......................................................51
ARTICLE IX. Representations and Warranties as of the Closing
Date; Survival; Material Breaches...............................51
Section 9.1. Representations and Warranties as
of the Closing Date...............................51
Section 9.2. Survival..........................................52
Section 9.3. Certain Material Breaches.........................52
ARTICLE X. Termination of Agreement.........................................53
Section 10.1. Termination......................................53
Section 10.2. Effect of Termination............................54
Section 10.3. Amounts Payable in Connection with Termination....54
ARTICLE XI. Definitions.....................................................55
Section 11.1. Definitions......................................55
ARTICLE XII. Miscellaneous..................................................64
Section 12.1. Publicity........................................64
Section 12.2. Notices..........................................64
Section 12.3. Entire Agreement.................................66
Section 12.4. Waivers and Amendments; Non Contractual
Remedies; Preservation of Remedies; Liability....66
Section 12.5. Governing Law ...................................66
Section 12.6. Binding Effect; No Assignment....................67
Section 12.7. Third Party Beneficiaries........................67
Section 12.8. Counterparts.....................................67
Section 12.9. Exhibits, Schedules and Annexes..................67
Section 12.10. Headings........................................67
Section 12.11. Submission to Jurisdiction; Venue...............68
Section 12.12. Severability ...................................68
iii
ANNEX
Annex I Restricted Persons
Annex II Buyer Opinion Matters
Annex III Company Opinion Matters
EXHIBIT INDEX
Exhibit A Warrant Assumptions
Exhibit B Form of Holdback Escrow Agreement
Exhibit C Letter of Credit
Exhibit D Press Release
Exhibit E Rights and Obligations with respect to Registrable
Securities
SCHEDULES
iv
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as
of March 4, 1998, is made by and among Budget Group, Inc., a Delaware
corporation ("Buyer"), BDG Corporation, a Delaware corporation and a direct or
indirect wholly owned subsidiary of Buyer ("Sub"), Ryder TRS, Inc., a Delaware
corporation (the "Company"), and Questor Partners Fund, L.P., a Delaware limited
partnership, Questor Side-by-Side Partners, L.P., a Delaware limited
partnership, and Madison Dearborn Capital Partners, L.P., a Delaware limited
partnership (each a "Significant Stockholder" and collectively, the "Significant
Stockholders"). Certain terms used in this Agreement are defined in Article XI.
W I T N E S S E T H:
WHEREAS, Buyer, Sub and the Company desire to effect a
business combination by means of the merger of Sub with and into the Company;
WHEREAS, the Board of Directors of Buyer and the Board of
Directors and stockholder of Sub and the Board of Directors and the Significant
Stockholders of the Company have approved the merger of Sub with and into the
Company (the "Merger"), upon the terms and subject to the conditions set forth
herein; and
WHEREAS, the parties hereto also desire to agree on certain
other terms and conditions.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I.
The Transactions
Section 1.1. The Transactions.
On the terms and subject to the conditions set forth in this
Agreement, Buyer shall acquire all the Outstanding Company Shares by means of
the Merger. Subject to Article III, the total consideration to be received by
the holders of the Outstanding Company Shares shall consist of a combination of
the following:
(a) an aggregate amount payable in cash to all such holders
equal to a minimum of $125,000,000 (less any cash payable with respect to the
Options pursuant to Section 3.7) and a maximum of $200,000,000 (less any cash
payable with respect to
1
the Options pursuant to Section 3.7), with the precise amount thereof determined
as set forth in Section 3.1;
(b) an aggregate number of shares of Buyer Class A Common
Stock issuable to all such holders equal to a minimum of 1,363,822 shares (the
"Minimum Merger Shares") and a maximum of 3,636,860 shares (the "Maximum Merger
Shares") (in each case less any shares of Buyer Class A Common Stock issued to
the holders of Options pursuant to Section 3.7), with the precise number thereof
determined as set forth in Section 3.1 and subject to adjustment as provided in
Article III;
(c) Warrants to purchase initially an aggregate of 1,000,000
shares of Buyer Class A Common Stock as provided in Section 3.5; and
(d) the right to receive the Contingent Additional
Consideration, if any, as provided in Section 3.4.
Section 1.2. The Merger.
(a) Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with the applicable provisions of the Delaware
General Corporation Law (the "Delaware Corporation Law"), Sub shall be merged
with and into the Company and the separate existence of Sub shall thereupon
cease. The Company shall be the surviving corporation in the Merger (the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Delaware, and the separate corporate existence of the Company with all
its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger.
(b) Effective Time of the Merger. The Merger shall become
effective at such time as a properly executed Certificate of Merger is duly
filed with the Secretary of State of Delaware, which filing shall be made as
soon as practicable following fulfillment or waiver of the conditions set forth
in Article VII hereof or such later time as is specified in such filing (the
"Effective Time").
Section 1.3. Effects of Merger. The Merger shall have the
effects set forth in Section 259 of the Delaware Corporation Law.
ARTICLE II.
The Surviving Corporation
Section 2.1. Certificate of Incorporation.
Subject to Section 6.11, at the Effective Time the Certificate
of Incorporation of the Surviving Corporation shall be amended so as to be
identical to the Certificate of Incorporation of Sub, other than such Article
relating to the company name of Sub and such Article relating to the identity of
2
the incorporator of Sub, and thereafter may be amended in accordance with its
terms and as provided by the Delaware Corporation Law.
Section 2.2. By-Laws.
Subject to Section 6.11, at the Effective Time the by-laws of
the Surviving Corporation shall be amended so as to be identical to the by-laws
of Sub, and thereafter may be amended in accordance with their terms and as
provided by the Delaware Corporation Law.
Section 2.3. Officers and Directors.
The officers of Sub and the directors of Sub immediately prior
to the Effective Time shall be the officers and directors, respectively, of the
Surviving Corporation after the Effective Time, in each case until their
respective successors are duly elected and qualified.
ARTICLE III.
Determination of Merger Consideration;
Conversion of Shares; Etc.
Section 3.1. Determination of Merger Consideration.
(a) Buyer shall issue shares of Buyer Class A Common Stock in
the Merger to the holders of the Outstanding Company Shares and the holders of
Options as follows:
(i) (x) if the approval by the stockholders of Buyer
contemplated in Section 6.19 hereof for the authorization of the
increase in the capital stock of Buyer to permit Buyer to issue the
Maximum Merger Shares is obtained, then at the time of the Closing
Buyer shall issue a number of shares of Buyer Class A Common Stock
equal to the number of Maximum Merger Shares or (y) if such approval by
the stockholders of Buyer is not obtained, then at the time of the
Closing Buyer shall issue a number of shares of Buyer Class A Common
Stock equal to the number of Minimum Merger Shares; and
(ii) within one (1) Business Day after the date of
the meeting contemplated in Section 6.19 hereof, Buyer shall notify the
Company in writing of the outcome of such stockholders' vote.
As used herein, the "Aggregate Merger Shares" shall be the
Maximum Merger Shares, if issued, or the Minimum Merger Shares, if issued.
3
(b) The total amount of cash to be paid in the Merger to the
holders of the Outstanding Company Shares under Section 3.2(a) (the "Aggregate
Cash Consideration") shall be (i) if the Maximum Merger Shares are issued,
$125,000,000 minus any cash payable with respect to the Options pursuant to
Section 3.7, or (ii) if the Minimum Merger Shares are issued, $200,000,000 minus
any cash payable with respect to the Options pursuant to Section 3.7.
Section 3.2. Conversion of Shares in the Merger.
(a) Company Common Stock. Subject to Article III hereof, at
the Effective Time, by virtue of the Merger and without any action on the part
of any holder of any capital stock of the Company (each, a "Company Stockholder"
or collectively, the "Company Stockholders"), each Outstanding Company Share
shall be converted into (A) that number of fully paid and nonassessable shares
of Buyer Class A Common Stock equal to the quotient obtained by dividing the
Aggregate Merger Shares (less any shares of Buyer Class A Common Stock issued to
the holders of Options pursuant to Section 3.7) by the Outstanding Company
Shares, plus (B) an amount in cash equal to the quotient obtained by dividing
the Aggregate Cash Consideration by the Outstanding Company Shares, plus (C)
Warrants to purchase initially the number of shares of Buyer Class A Common
Stock determined by dividing 1,000,000 by the number of Outstanding Company
Shares, plus (D) the right to receive a portion of the Contingent Additional
Consideration provided in Section 3.4, determined by dividing such aggregate
Contingent Additional Consideration by the number of Outstanding Company Shares
(the consideration per share of Company Common Stock as determined herein, the
"Merger Consideration"). If between the date hereof and the Effective Time, the
outstanding shares of Buyer Class A Common Stock shall be changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or if a stock dividend thereon shall be declared with a record
date within such period, the calculations of Minimum Merger Shares, Maximum
Merger Shares and Aggregate Merger Shares shall be correspondingly adjusted.
(b)......Cancellation of Company Treasury Stock. At the
--------------------------------------
Effective Time by virtue of the Merger, all shares of Company
Common Stock which are held in the treasury of the Company or which are owned by
any wholly owned Subsidiary of the Company shall be canceled and shall cease to
exist.
(c)......Sub Shares. At the Effective Time by virtue of the
Merger, each issued and outstanding share of capital stock of Sub shall be
converted into one validly issued, fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
4
Section 3.3. Adjustment to Merger Shares.
(a)......Adjustment Events. The number of Aggregate Merger
Shares shall be adjusted downwards if (i) it shall have been determined that (A)
one or more of the representations and warranties of the Company contained
herein (without giving effect to any qualifications contained in any
representation and warranty set forth in Article IV hereof with respect to any
Material Adverse Effect on the Company) fails to be true and correct (i) as of
the date hereof or, if any representation and warranty speaks as of a specified
date, then as of such date or (ii) in the case of representations and warranties
that do not speak of a specified date, then as of the Closing Date, or (B) one
or more of the covenants of the Company or any Significant Stockholder set forth
in this Agreement hereof fails to be performed on or prior to the Closing Date,
but only to the extent the aggregate value reduction to Buyer as a result of all
the foregoing (as determined under Section 9.3) exceeds $5,000,000 (the
"Materiality Threshold"), or (ii) the Fees are in excess of $10,000,000, which
downward adjustment, in the case of this clause (ii), shall be made only to the
extent of the amount by which the Fees exceed $10,000,000, as provided in
Section 3.3(b), and which adjustment shall be made without giving effect to the
Materiality Threshold. The value reduction associated with the failure of
representations and warranties of the Company to be true and correct or the
failure of covenants of the Company or the Significant Stockholders to be
performed shall mean the actual damages (without duplication) sustained as a
result thereof (without giving effect to any qualifications contained in any
representation and warranty set forth in Article IV hereof with respect to any
Material Adverse Effect on the Company), taking into account any insurance
recovery that is available to Buyer or Sub (exclusive of any self insurance),
any insurance proceeds received by the Company and the present economic value of
any tax benefits to be realized by Buyer, the Company or any of their respective
controlled Affiliates as a result of such damages.
(b)......Share Reduction. The number of Aggregate Merger Shares
shall be reduced by an amount equal to the sum of (i) the amount, if any, of the
value reduction in excess of the Materiality Threshold resulting from the
failure of any representation and warranty made by the Company to be true and
correct or the failure of the Company or any Significant Stockholder to perform
its respective covenants plus (ii) the amount by which the Fees exceed
$10,000,000 (such sum, the "Reduction Amount"), in each case as determined in
accordance with Section 3.3(a) (with each share of Buyer Class A Common Stock
for purposes of calculating such deduction, being deemed to have a value equal
to the Transaction Price). Upon a final determination that any such reduction is
required, the number of shares of Buyer Class A Common Stock issued in the
Merger to each Original Holder shall be reduced by an amount representing such
holder's pro rata share of the Reduction Amount based on the
5
percentage of the Aggregate Merger Shares received by such holder. Section 3.4.
Contingent Additional Consideration.
Section 3.4. Contingent Additional Consideration
(a) Determination as to Whether Contingent Additional
Consideration is Payable. In addition to the Merger Consideration payable
pursuant to Sections 3.2 and 3.5 and the consideration payable to holders of
Options pursuant to Section 3.7, each holder of shares of Company Common Stock
and Options immediately prior to the Effective Time which receives shares of
Buyer Class A Common Stock in the Merger (any such holder and its Permitted
Transferees, an "Original Holder", and any such shares, the "Original Shares")
shall be entitled to receive from Buyer an additional amount of cash or shares
of Buyer Class A Common Stock as, but only to the extent, provided herein (the
"Contingent Additional Consideration").
(b) Annual Measurement Date. As promptly as possible following
the date which is the first year anniversary of the Closing Date (the "Annual
Measurement Date"), and subject to receipt by Buyer from the applicable Original
Holder of a certificate certifying as to whether such person or any of its
Permitted Transferees has disposed of any Original Shares and containing all
other information regarding such holder necessary to make the computations
referred to in this Section 3.4(b) (the delivery of which certificate shall be a
condition of such person's ability to receive payment under this Section
3.4(b)), Buyer shall compute, with respect to each Original Holder, (i) the
"Total Value" of 50% of the aggregate number of Original Shares acquired by such
Original Holder (or its Permitted Transferees) in the Merger (such 50% being
referred to as the "Annual Shares") and (ii) the "Annual Make-Whole Amount" (as
defined below). For purposes of this paragraph, the "Total Value" of the Annual
Shares of an Original Holder (and its Permitted Transferees) shall be (A) with
respect to any Annual Shares held by such holder as of the Annual Measurement
Date (the "Remaining Annual Shares"), an amount equal to the Market Value per
share of Buyer Class A Common Stock as of the Annual
6
Measurement Date multiplied by the number of Remaining Annual
Shares (it being agreed that sales by such holder or any of its Permitted
Transferees prior to the Annual Measurement Date of any Original Shares, up to
the total of Annual Shares, shall be deemed to be sales of Annual Shares) (the
"Total Remaining Annual Value") and (B) if such holder or any of its Permitted
Transferees shall have sold Annual Shares after the Closing Date and prior to
the Annual Measurement Date (it being agreed that sales of any Original Shares
by such holder, up to the total number of Annual Shares, shall be deemed to be
sales of Annual Shares) (each a "Disposed Annual Share" and collectively, the
"Disposed Annual Shares"), an amount equal to the sum of each "Disposed Annual
Value" (such sum, the "Total Disposed Annual Value"). With respect to each sale
of Disposed Annual Shares, the "Disposed Annual Value" shall be determined on
the Annual Measurement Date and shall be an amount equal to the Transaction
Price minus the higher of the Market Value per share of the Buyer Class A Common
Stock on the Annual Measurement Date and the price at which such Disposed Annual
Shares were sold (such higher value, the "Annual Disposition Price") multiplied
by the number of Disposed Annual Shares so sold; provided, however, that if the
Annual Disposition Price is higher than the Transaction Price, the Disposed
Annual Value shall be deemed to be zero. The "Annual Make-Whole Amount" with
respect to an Original Holder (and its Permitted Transferees) shall mean the sum
of (1) the amount, but only if positive, equal to (a) the Transaction Price
multiplied by the number of Remaining Annual Shares owned by such Original
Holder or its Permitted Transferees on the Annual Measurement Date minus (b) the
Total Remaining Annual Value as of the Annual Measurement Date of the Remaining
Annual Shares held by such Original Holder or its Permitted Transferees and (2)
the Total Disposed Annual Value as of the Annual Measurement Date of the
Disposed Annual Shares of such Original Holder or its Permitted Transferees.
(c) Final Measurement Date. As promptly as possible following
the date which is the twentieth monthly anniversary of the Closing Date (the
"Final Measurement Date"), and subject to receipt by Buyer from the applicable
Original Holder of a certificate certifying as to whether such person or any of
its Permitted Transferees has disposed of any Original Shares and containing all
information regarding such holder necessary to make the computations referred to
in this Section 3.4(c) (the delivery of which certificate shall be a condition
of such person's ability to receive payment under this Section 3.4(c)), Buyer
shall compute, with respect to each Original Holder, (i) the "Total Value" of
the Original Shares acquired by such Original Holder (and its Permitted
Transferees) in the Merger which are not Annual Shares (the "Final Shares") and
(ii) the "Final Make-Whole Amount" (as defined below). For purposes of this
paragraph, the "Total Value" of the Final Shares of an Original Holder (and its
Permitted Transferees) shall be (A) with respect to any Final Shares held by
such holder as of the Final Measurement Date (the "Remaining Final Shares"), an
amount equal to the Market Value per share of Buyer Class A Common Stock as of
the Final Measurement Date multiplied by the number of Remaining Final Shares
(the "Total Remaining Final Value") and (B) if such holder or its Permitted
Transferees shall have sold Final Shares after the Closing Date and prior to the
Final Measurement Date (each a "Disposed Final Share" and collectively, the
"Disposed Final Shares"), an amount equal to the sum of each "Disposed Final
Value" (such sum, the "Total Disposed Final Value"). With respect to each sale
of Disposed Final Shares, the "Disposed Final Value" shall be determined on the
Final Measurement Date and shall be an amount equal to the Transaction Price
minus the higher of the Market Value per share of the Buyer Class A Common Stock
on the Final Measurement Date and the price at which such Disposed Final Shares
were sold (such higher value, the "Final Disposition Price") multiplied by the
number of Disposed Final
7
Shares so sold; provided, however, that if the Final Disposition Price is higher
than the Transaction Price, the Disposed Final Value shall be deemed to be zero.
The "Final Make-Whole Amount" with respect to an Original Holder (and its
Permitted Transferees) shall mean the sum of (1) the amount, but only if
positive, equal to (a) the sum of the Transaction Price multiplied by the number
of Remaining Final Shares held by such Original Holder or its Permitted
Transferees on the Final Measurement Date minus (b) the Total Remaining Final
Value as of the Final Measurement Date of the Remaining Final Shares of such
Original Holder or its Permitted Transferees and (2) the Total Disposed Final
Value as of the Final Measurement Date of the Disposed Final Shares of such
Original Holder or its Permitted Transferees.
(d) Payment of Make-Whole Amount. If the Annual Make-Whole
Amount or the Final Make-Whole Amount is more than zero with respect to any
Original Holder, then, within 20 calendar days after the determination of the
applicable Make-Whole Amount, Buyer shall pay in immediately available funds to
each such Original Holder an amount equal to the applicable Make-Whole Amount;
provided, however, that except as provided below, Buyer may, in its sole
discretion, make all or any portion of any such payment by delivering to any
such Original Holder fully paid and non-assessable shares of Buyer Class A
Common Stock with a Market Value as of the Annual Measurement Date or the Final
Measurement Date, as the case may be, equal to the applicable Make-Whole Amount
(any such shares being referred to as "Make-Whole Shares"); and provided,
further, that Buyer shall not have the option set forth in the preceding proviso
if Buyer Class A Common Stock is no longer listed on the NYSE or another
national securities exchange or automated quotation system.
(e) Separate Agreements with Holders. At the request of any
holder of shares of Company Common Stock (or, after the Effective Time, any
Original Holder), Buyer will enter into a separate agreement with such holder to
evidence the obligations of Buyer under this Section 3.4.
(f) Adjustments for Reclassifications, Etc. If after the date
hereof and before the determination set forth in this Section 3.4, the
outstanding shares of Buyer Class A Common Stock shall be changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or if a stock dividend thereon shall be declared with a record
date within such period, the calculations set forth in this Section 3.4 shall be
correspondingly adjusted.
Section 3.5. Warrants.
(a) Issuance and Exercise of Warrants. Buyer shall issue to
the Original Holders at the Effective Time warrants to purchase initially an
aggregate of 1,000,000 shares of Buyer
8
Class A Common Stock, such Warrants to be substantially in the form to be
negotiated between the Buyer and the Company as promptly as practicable
following the date hereof (herein called the "Warrants" and individually called
a "Warrant") and containing terms consistent with this Section 3.5 and the
Warrant Assumptions set forth in Exhibit A attached hereto (it being understood
that upon negotiation of such form of Warrants, the agreed upon form shall be
deemed to become Exhibit A attached hereto). Within five (5) Business Days
following the Final Measurement Date, and subject to receipt by Buyer from the
applicable Original Holder of a certificate certifying as to whether such person
or any of its Permitted Transferees has disposed of any Original Shares and
containing all other information regarding such holder reasonably necessary to
make the computations referred to in this Section 3.5(a) (the delivery of which
certificate shall be a condition of such person's ability to receive amounts
under this Section 3.5(a)), Buyer shall compute, with respect to each Original
Holder and each Permitted Transferee of such Original Holder, the "Total Warrant
Value" for such Original Holder and its Permitted Transferees. The "Total
Warrant Value" for any Original Holder and its Permitted Transferees shall be
(i) the Warrant Value Amount (as defined below) multiplied by (ii)(x) the number
of Original Shares issued to such Original Holder in the Merger and held by such
Original Holder and its Permitted Transferees on the Final Measurement Date
divided by (y) the number of Original Shares issued to all Original Holders in
the Merger. The "Warrant Value Amount" shall be the lesser of (i) $20 million or
(ii)(x)(A) the Transaction Price multiplied by the aggregate number of Original
Shares issued in the Merger plus (B) $20 million minus (y) the Market Value of a
share of Buyer Class A Common Stock on the Final Measurement Date multiplied by
the aggregate number of Original Shares issued in the Merger.
If the Total Warrant Value for any Original Holder and its
Permitted Transferees is positive, then such Original Holder and its Permitted
Transferees shall be entitled, for a period of five years beginning on the
thirtieth day after the Final Measurement Date (the "Warrant Measurement Date"),
to exercise their Warrants to purchase shares of Buyer Class A Common Stock.
Buyer shall have the right to buy the Warrant held by each Warrant holder, in
whole and not in part, by paying the Warrant Value Amount on the Warrant
Measurement Date to the holder thereof either in immediately available funds or,
except as provided below, in shares of Buyer Class A Common Stock valued at the
Market Value per share of Buyer Class A Common Stock as of the Warrant
Measurement Date (but not in a combination of both); provided, however, that
Buyer shall not have the option set forth above and Buyer shall pay the Warrant
Value Amount in immediately available funds to each Warrant holder, if Buyer
Class A Common Stock is no longer listed on the NYSE or another national
securities exchange or automated quotation system.
9
(b) Determination of Exercise Price. Prior to the Final
Measurement Date, a majority in interest of the Original Holders shall retain,
at Buyer's expense, a nationally recognized investment banking firm with
significant experience in the equity derivatives market (reasonably acceptable
to Buyer) to determine the revised aggregate number of shares issuable upon
exercise of the Warrants such that, in the written opinion of such investment
banking firm rendered within 15 days after the Final Measurement Date, on the
Final Measurement Date, the Warrants issued to the Original Holders and their
Permitted Transferees would have an aggregate value, based upon the assumptions
set forth on Exhibit A, equal to the Warrant Value Amount. Within two (2)
Business Days after the determination of the Warrant Value Amount, Buyer shall
notify each Warrant holder of the Warrant Value Amount and such holder of its
Total Warrant Value and contemporaneously, such investment bank shall provide to
Buyer and holder a copy of its opinion and of its standing bid, each as
described in Exhibit A.
(c) Separate Agreements with Holders. At the request of any
holder of shares of Company Common Stock (or, after the Effective Time, any
Original Holder), Buyer will enter into a separate agreement with such holder to
evidence the obligations of Buyer under this Section 3.5.
(d) Adjustments for Reclassifications, Etc. If after the date
hereof the outstanding shares of Buyer Class A Common Stock shall be changed
into a different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or if a stock dividend thereon shall be declared with a record
date within such period, the aggregate number of Warrants and calculations set
forth in this Section 3.5 shall be correspondingly adjusted.
Section 3.6. Escrow Holdback Shares.
(a) At the Effective Time, 1,818,430 shares of Buyer Class A
Common Stock (if the Maximum Merger Shares are issued), or 1,363,822 shares of
Buyer Class A Common Stock (if the Minimum Merger Shares are issued) (as the
case may be, the "Escrow Holdback Shares") shall be deposited in escrow with an
escrow agent mutually agreed upon by Buyer and the Company prior to the Closing
(the "Holdback Escrow Agent"), to be held and administered in accordance with
the terms and conditions of a Holdback Escrow Agreement, substantially in the
form attached hereto as Exhibit B (the "Holdback Escrow Agreement"), against
which Escrow Holdback Shares Buyer shall be entitled, in accordance with the
terms of the Holdback Escrow Agreement, to recover Damages (as defined in the
Holdback Escrow Agreement) that may be suffered by Buyer and that are
indemnifiable in accordance with the terms of the Holdback Escrow Agreement (an
"Escrow Claim Event").
10
(b) Claims in respect of Escrow Claim Events shall be made,
and may be disputed, in accordance with the terms and conditions of the Holdback
Escrow Agreement. Upon the occurrence of certain events, the number of Escrow
Holdback Shares shall be released to Buyer to satisfy such claims as determined
in accordance with the terms of the Holdback Escrow Agreement. Upon termination
of the escrow, all shares of Buyer Class A Common Stock remaining in escrow
shall be released in accordance with the terms of the Holdback Escrow Agreement.
(c)......The holder of any shares of Buyer Class A Common
Stock received in the Merger, by acceptance thereof, agrees to the terms set
forth in Section 3.6 of this Agreement and in Exhibit E and to the appointment
of the Indemnification Representative named in the notice and transmittal form
provided by the Exchange Agent pursuant to Section 3.9 of this Agreement.
Section 3.7. Stock Options.
(a)......The Company shall take all actions necessary to
provide that all outstanding options to acquire shares of Company Common Stock
("Options") granted under any stock option plan, program or similar arrangement
of the Company or any of its Subsidiaries, each as amended (the "Stock Option
Plans"), shall become fully exercisable and vested immediately prior to the
Effective Time whether or not otherwise exercisable and vested. The Company
shall comply with the terms of the Stock Option Plans, as applicable, and, to
the extent required thereunder, provide written notice to the holders of Options
that such Options shall be treated as set forth herein. All Options which are
outstanding immediately prior to the Effective Time shall be canceled and become
null and void and the holders thereof shall be entitled to elect (1) to receive
from the Company at the same times and in the same manner as the Company
Stockholders pursuant to this Article III, for each Option to acquire one share
of Company Common Stock, (A) an amount in cash equal to (x) the cash payable to
the holder of one share of Company Common Stock pursuant to Section 3.2 assuming
all Options had been exercised prior to the Effective Time minus (y) the
exercise price per share of such Option (the "Exercise Difference"), plus (B)
certificates representing that number of shares of Buyer Class A Common Stock
which the holder of one share of Company Common Stock would have the right to
receive pursuant to Sections 3.1 and 3.2 as adjusted as set forth in Section 3.3
hereof assuming all Options had been exercised prior to the Effective Time, plus
(C) Warrants in an amount issued to the holder of one share of Company Common
Stock pursuant to Section 3.5, plus (D) the right to receive the Contingent
Additional Consideration that may be payable to the holder of one share of
Company Common Stock pursuant to Section 3.4, or (2) if the Exercise Difference
is negative, as a condition for receiving the Buyer Class A Common Stock, the
Warrants and the right to receive the Contingent Additional Consideration under
clause (1) above, to pay such difference in cash to the Company on or before the
Closing Date.
11
All applicable withholding taxes attributable to the payments made hereunder or
to distributions contemplated hereby shall be deducted from the amounts payable
under clause (A) above or by payment of cash by the Option holder if amounts
payable under clause (A) are insufficient.
(b)......The Stock Option Plans shall terminate immediately
prior to the Effective Time.
Section 3.8. Appraisal Rights.
(a) Notwithstanding anything in this Agreement to the
contrary, but only in the circumstances and to the extent provided by the
Delaware Corporation Law, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and that are held by Company
Stockholders who were entitled to but did not vote such shares in favor of the
Merger (or who did not provide written consent to the Merger if approval was
effected through written consent) and who shall have properly and timely
delivered to the Company a written demand for appraisal of their shares of
Company Common Stock in accordance with Section 262 of the Delaware Corporation
Law ("Dissenting Shares") shall not be converted into the right to receive, or
be exchangeable for, the Merger Consideration. Instead, the holders thereof
shall be entitled to payment of the fair value of such shares in accordance with
the provisions of Section 262 of the Delaware Corporation Law; provided,
however, that (i) if any holder of Dissenting Shares shall subsequently withdraw
its demand for payment of the fair value of such Dissenting Shares or (ii) if
any holder fails to establish and perfect its entitlement to the relief provided
in Section 262 of the Delaware Corporation Law, the rights and obligations of
such holder to receive such fair value shall terminate, and such Dissenting
Shares shall thereupon be deemed to have been converted into the right to
receive, and to have become exchangeable for, as of the Effective Time, the
Merger Consideration in accordance with Section 3.2(a) hereof.
(b) Within three (3) days prior to the Effective Time, the
Company shall give Buyer written notice of any demands received by the Company
for appraisal of Dissenting Shares. Prior to the Closing, the Company shall
control all negotiations and proceedings with respect to such demands and on and
after the Closing, Questor shall exercise such control. The Surviving
Corporation shall promptly pay to any holder of Dissenting Shares any and all
amounts due and owing to such holder as a result of any settlement or
determination by the Court of Chancery of the State of Delaware with respect to
such demands. If, as a result of any such settlement or determination (i) any
Company Stockholder is entitled to receive as payment for its Dissenting Shares
an amount per share that exceeds the amount of the Merger Consideration (such
excess over the amount of the Merger Consideration, the "Appraisal Reduction
Amount"), then the number of Aggregate Merger Shares shall be reduced by an
amount equal to
12
such Appraisal Reduction Amount (with each share of Buyer Class A Common Stock
having a value equal to the amount of the Merger Consideration for purposes of
this Section 3.8), and each Original Holder shall surrender to Buyer shares of
Buyer Class A Common Stock for cancellation, in each case representing such
holder's pro rata share of the Appraisal Reduction Amount based on the
percentage of the Aggregate Merger Shares received by such holder, or if such
Original Holder has transferred any of its Original Shares, then such Original
Holder shall pay in immediately available funds an amount equal to such holder's
pro rata share of the Appraisal Reduction Amount, or (ii) any Company
Stockholder is entitled to receive an amount per share that is less than the
amount of the Merger Consideration (such decrease under the amount of the Merger
Consideration, the "Appraisal Addition Amount"), then Buyer shall promptly pay
to the Original Holders pro rata in cash an amount equal to the Appraisal
Addition Amount multiplied by the aggregate number of Dissenting Shares subject
to such Appraisal Addition Amount. The Company shall comply with the notice
provisions of Section 262 of the Delaware Corporation Law.
Section 3.9. Buyer to Make Certificates Available.
(a) Prior to the Closing, Buyer shall select a person or
persons to act as exchange agent for the Merger (the "Exchange Agent"), which
person or persons shall be reasonably acceptable to the Company. On the Closing
Date, Buyer shall deliver to the Exchange Agent, in trust for the benefit of the
Company Stockholders (other than Company Stockholders who hold Dissenting
Shares), cash in the amount sufficient to pay the aggregate cash portion of the
Merger Consideration, certificates representing Buyer Class A Common Stock
sufficient to pay the aggregate stock portion of the Merger Consideration (less
the Escrow Holdback Shares delivered to the Holdback Escrow Agent in accordance
with Section 3.6) and Warrants sufficient to pay the aggregate warrant portion
of the Merger Consideration. As soon as reasonably practicable after the
Effective Time but in no event more than ten (10) Business Days after the
Effective Time, Buyer shall cause the Exchange Agent to send a notice and a
transmittal form to each Company Stockholder advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Exchange
Agent for cancellation such holder's certificates representing Company Common
Stock ("Certificates") in exchange for the Merger Consideration. Each Company
Stockholder will be entitled to receive, upon surrender to the Exchange Agent
for cancellation of one or more Certificates and compliance with this Article
III, a certified or bank cashier's check in the amount equal to the cash which
such holder has the right to receive pursuant to the provisions of this Article
III (including any cash in lieu of fractional shares of Buyer Class A Common
Stock), shares of Buyer Class A Common Stock and Warrants which such holder has
the right to receive pursuant to the provisions of this Article III, and the
Certificates so surrendered shall forthwith be canceled; provided, however, that
any Company
13
Stockholder in attendance or represented at the Closing which surrenders for
cancellation Certificates at such time will receive such cash, shares and
Warrants as set forth above at the Closing with respect to the shares of Company
Common Stock represented by such Certificates. The cash paid, the shares of
Buyer Class A Common Stock and the Warrants issued upon the surrender of
Certificates in accordance with the terms hereof shall be deemed to have been
paid and issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock (except with respect to the right to receive the Contingent
Additional Consideration, if any, as provided in Section 3.4).
(b) Any Company Stockholder who has not exchanged its
Certificates for the Merger Consideration in accordance with subsection (a)
within six months after the Effective Time shall have no further claim upon the
Exchange Agent, and shall thereafter look only to Buyer and the Surviving
Corporation for payment in respect of its shares of Company Common Stock. Until
so surrendered, Certificates shall represent solely the right to receive the
Merger Consideration, subject to the holdback contemplated by Section 3.6 of
this Agreement. If any Certificates entitled to payment pursuant to Section 3.2
shall not have been surrendered for such payment prior to such date on which any
payment in respect thereof would otherwise escheat to or become the property of
any Governmental Entity, the shares of Company Common Stock represented thereby
shall, to the extent permitted by applicable law, be deemed to be canceled and
no money or other property will be due to the holder thereof.
Section 3.10. Dividends; Transfer Taxes.
No Distributions that are declared or made with respect to
Buyer Class A Common Stock will be paid to persons entitled to receive
certificates representing Buyer Class A Common Stock pursuant to this Agreement
until such persons properly surrender their Certificates. Upon such surrender,
there shall be paid to the person in whose name the certificates representing
such Buyer Class A Common Stock shall be issued any Distributions which shall
have become payable with respect to such Buyer Class A Common Stock in respect
of a record date after the Effective Time and before the time of surrender. In
no event shall the person entitled to receive such Distributions be entitled to
receive interest on such Distributions. In the event that any certificates for
any shares of Buyer Class A Common Stock are to be issued in a name other than
that in which the Certificates surrendered in exchange therefor are registered,
it shall be a condition of such exchange that the Certificate or Certificates so
surrendered shall be properly endorsed or be otherwise in proper form for
transfer and that the person requesting such exchange shall pay to the Exchange
Agent any transfer or other taxes required by reason of the issuance of
certificates for such shares of Buyer Class A Common Stock in a name other than
that of the registered holder of the Certificate surrendered, or shall establish
to the satisfaction of the Exchange Agent that such tax
14
has been paid or is not applicable. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of shares of
Company Common Stock for any shares of Buyer Class A Common Stock or dividends
thereon delivered to a public official pursuant to any applicable escheat,
abandoned property or similar laws.
Section 3.11. No Fractional Securities.
Notwithstanding any other provision of this Agreement, no
certificates or scrip for shares of common stock representing less than one
share of Buyer Class A Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article III and no Distribution that
is declared or made with respect to Buyer Class A Common Stock, stock split or
interest shall relate to any fractional security, and such fractional interests
shall not entitle the owner thereof to vote or to any rights of a security
holder. Each holder of shares of Company Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of Buyer Class A Common Stock (after taking into account all Certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Buyer Class A
Common Stock multiplied by the Transaction Price.
Section 3.12. Closing of Company Transfer Books.
Immediately prior to the Effective Time, the Company Common
Stock transfer books shall be closed and no transfer of Company Common Stock
shall thereafter be made.
Section 3.13. Legends and Transfer Restrictions.
(a) Unless the shares of Buyer Class A Common Stock issued in
the Merger or pursuant to Section 3.4 or pursuant to the exercise of the
Warrants issued pursuant to Section 3.5 or pursuant to Section 3.7 shall have
been registered prior to their respective issuance dates under the provisions of
the Securities Act, each certificate representing such shares of Buyer Class A
Common Stock may contain one or more of the following legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold, pledged, hypothecated, exchanged,
transferred or otherwise disposed of unless (A) registered
under such Act and any applicable state securities and "blue
sky" laws or (B) an opinion of counsel satisfactory to Buyer
and its counsel that such registration is not necessary has
been delivered to Buyer"; and
15
any legend required by the securities or blue sky laws of any state where a
holder of Buyer Class A Common Stock resides, including any legend necessitated
by any other agreement to which such holder is or may become a party arising out
of this Agreement.
(b) The holder of any shares of Buyer Class A Common Stock, by
acceptance thereof, agrees, so long as the legend described in this Section 3.13
shall remain on the certificate evidencing such shares, prior to any transfer
(including any pledge, sale, assignment, hypothecation, gift or other transfer)
of any of the same, to comply in all respects with the legend requirements of
this Section 3.13. Each certificate evidencing the shares issued upon any such
transfer shall bear the same legends as set forth in this Section 3.13 unless,
immediately following such transfer, such shares are no longer subject to any
restriction on transfer under any applicable agreement or under applicable
federal or state securities laws.
Section 3.14. Exemptions from Registration and Qualification.
At Buyer's option, the shares of Buyer Class A Common Stock to
be issued in connection with the Merger will be issued either (a) in a
transaction exempt from registration under the Securities Act by reason of
Section 4(2) thereof and Rule 506 of Regulation D promulgated thereunder, and
will be exempt from registration or qualification under state securities and
"blue sky" laws or (b) pursuant to a Registration Statement on Form S-4 (the
"S-4").
Section 3.15. Registration Rights.
The holders of shares of Buyer Class A Common Stock issued
pursuant to Section 3.2, 3.4 or 3.7 or issuable upon exercise of, or issued in
exchange for, the Warrants issued pursuant to Section 3.5 shall have, subject to
compliance with the obligations contained therein, the registration rights set
forth in Exhibit E hereto, and Buyer shall take such actions to register shares
of Buyer Class A Common Stock issuable thereunder as provided therein.
Section 3.16. Business Combinations.
If, on or prior to the later of (i) the Final Measurement
Date, (ii) the Warrant Measurement Date, or (iii) the date on which no Warrants
are outstanding, Buyer shall consolidate or merge in a transaction in which
Buyer is not the Surviving Person (as defined below), merge into any other
person or convey, transfer or lease its properties and assets substantially as
an entirety to any person in one or a series of transactions (a "Business
Combination"), the provisions of Section 3.16(b) are applicable unless:
16
(a) (1) the person formed by such consolidation or into
which Buyer is merged or the person which acquires by conveyance or transfer, or
which leases, the properties and assets of Buyer substantially as an entirety
(the "Surviving Person") is a corporation, partnership or limited liability
company, (2) the consideration payable to holders of Buyer Class A Common Stock
consists solely of stock of the Surviving Person or its parent that is listed on
a national securities exchange or automated quotation system (other than cash
paid in lieu of fractional shares and cash paid for Dissenting Shares), and (3)
the Surviving Person or, if the Surviving Person is a wholly-owned subsidiary
and the consideration payable consists of stock of the parent of such Surviving
Person, such Surviving Person's parent, expressly assumes payment of all amounts
due as Contingent Additional Consideration and delivery of shares upon exercise
of
the Warrants (in each case appropriately adjusting such payment or delivery
obligation to reflect the exchange ratio and the other terms of the Business
Combination) and the performance of every covenant of this Agreement on the part
of Buyer to be performed or observed;
(2) Buyer shall deliver to each holder of Company Common Stock
immediately prior to the Effective Time or each Original Holder at or after the
Effective Time, as the case may be, an officer's certificate, stating that such
Business Combination complies with this Section 3.16 and that all conditions
precedent herein provided relating to such transaction have been complied with;
and
(3) The Surviving Person shall succeed to, and be substituted
for, and may exercise every right and power of, Buyer under this Agreement with
the same effect as if the Surviving Person had been named as Buyer herein, and
thereafter.
(b) In case of a Business Combination in which all of the
criteria contained in clause (a)(1) herein are not met with respect to the
Surviving Person or its parent, as applicable, or at Buyer's option in the case
of any Business Combination, the Annual Measurement Date, the Final Measurement
Date and the Warrant Measurement Date shall be deemed to be the date of
consummation of the Business Combination unless such date has already occurred
and Buyer shall pay on or prior to the date of such Business Combination to each
person entitled thereto in immediately available funds (i) all amounts remaining
to be payable pursuant to Section 3.4(d) and (ii) the Warrant Value Amount,
assuming the applicable payment dates therein are the dates of such Business
Combination.
17
ARTICLE IV.
Representations and Warranties of the Company
The Company represents and warrants to Buyer that:
Section 4.1. Corporate Organization and Authorization.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby.
(b) The Company has all requisite corporate power and
authority to carry on its business as presently conducted. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of the activities conducted by it makes such qualification necessary,
except where the failure to so qualify or to maintain such good standing (either
in one jurisdiction or in the aggregate) would not have a Material Adverse
Effect on the Company. As used in this Agreement, the term "Material Adverse
Effect" means with respect to any person, any change or effect that is (i)
materially adverse to the condition (financial or otherwise), business
operations, assets or results of operations of such person and its Subsidiaries,
taken as a whole or (ii) has a material adverse effect on the ability of such
person to enter into this Agreement or consummate the transactions contemplated
hereby.
(c) As of the date hereof, each Subsidiary of the Company is
identified in the Company's quarterly report on Form 10-Q for the quarter ended
June 30, 1997. Except for the Subsidiaries of the Company listed in such
quarterly report, there is no corporation, association, subsidiary, partnership,
limited liability company or other entity of which the Company owns or controls,
directly or indirectly, more than 10% of the outstanding equity interests.
(d) Each Subsidiary of the Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority and, except as set forth on Schedule 4.1(d), all governmental
authorizations, certificates, permits, licenses, consents and approvals required
to carry on its business as presently conducted, except where the failure to
possess such authorizations, certificates, licenses, consents and approvals
(either individually or in the aggregate) would not have, individually or in the
aggregate, a Material Adverse Effect on the Company. Each Subsidiary of the
Company is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned or
18
leased by it or the nature of the activities conducted by it makes such
qualification necessary, except where the failure to so qualify or to maintain
such good standing (either in one jurisdiction or in the aggregate) would not
have, individually or in the aggregate, a Material Adverse Effect on the
Company. Except as set forth on Schedule 4.1(d), there are no voting trusts or
other agreements or understandings with respect to the voting of capital stock
or other equity interests of the Company or any Subsidiary of the Company to
which the Company or any Subsidiary of the Company is a party.
(e) Except as set forth on Schedule 4.1(e), all of the
outstanding capital stock of each Subsidiary of the Company (i)
has been validly issued, is fully paid and nonassessable and is not subject to
preemptive or similar rights and (ii) is owned by the Company, directly or
indirectly, free and clear of any lien or other encumbrance. There are no
outstanding (i) securities of any Subsidiary of the Company convertible into or
exchangeable for shares of capital stock or other voting securities or ownership
interests in any Subsidiary of the Company or (ii) options or other rights to
acquire from the Company or any Subsidiary of the Company, and no other
obligation of the Company or any Subsidiary of the Company to issue, any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable for, any capital stock, voting securities or
ownership interests in such Subsidiary (items in clauses (i) and (ii) being
referred to collectively as the "Company Subsidiary Securities"). There are no
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any outstanding Company Subsidiary Securities.
(f) This Agreement has been duly executed and delivered by the
Company and, except for obtaining the approval to the Merger of (i) a majority
of holders of the Company Common Stock and (ii) the Board of Directors of the
Company, each of which approval has been obtained prior to the execution hereof,
no corporate authorization on the part of the Company is necessary to consummate
the transactions contemplated by this Agreement.
(g) This Agreement constitutes a valid and binding agreement
of the Company and is enforceable against the Company in accordance with its
terms, except to the extent enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law).
(h) The copies of the respective Certificates of Incorporation
and By-Laws, and all amendments thereto to the date of this Agreement, of the
Company and its Subsidiaries heretofore delivered to Buyer are complete and true
copies of such documents as in effect on the date hereof.
19
Section 4.2. Capitalization.
(a) As of the date hereof, the authorized stock of the Company
consists of Two Hundred Seventy Five Thousand (275,000) shares of Common Stock,
par value $0.01 per share ("Company Common Stock"), of which (i) Two Hundred
Twenty Five Thousand (225,000) shares have been designated Class A Common Stock,
(ii) Twenty Five Thousand (25,000) shares have been designated Class B Common
Stock and (iii) Twenty Five Thousand (25,000) shares have been designated Class
C Common Stock.
(b) As of the date hereof, (i) One Hundred Nine Thousand
Ninety (109,090) shares of Class A Common Stock are outstanding, (ii) Thirteen
Thousand Nine Hundred Ten (13,910) shares of Class B Common Stock are
outstanding and (iii) no more than Eighteen Hundred (1,800) shares of Class C
Common Stock are outstanding. All of such issued and outstanding shares of
Company Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable and, except as set forth on Schedule 4.2(b) hereto, not
subject to preemptive or similar rights. All holders of Class A and B Company
Common Stock are Accredited Investors. Schedule 4.2(b) hereto sets forth the
name of each holder of Class A, Class B and Class C Company Common Stock as of
March 2, 1998 and the number of shares owned by each such holder on such date.
(c) Schedule 4.2(c) hereto sets forth, as of the date hereof,
the name of each holder of Options, together with the number of options to
purchase Company Common Stock held by each such holder. Except as set forth in
this Section 4.2(c) and on Schedule 4.2(c), there are (i) as of the date hereof,
no outstanding shares of capital stock or other equity securities of the Company
and no outstanding options, warrants or rights to purchase or acquire from the
Company any capital stock of the Company or other equity securities, (ii) no
existing registration covenants with the Company with respect to Outstanding
Company Shares, and (iii) as of the date hereof, no convertible securities or
other contracts, commitments, agreements, understandings, arrangements or
restrictions by which the Company is bound to issue any additional shares of its
capital stock or other equity securities. Except as set forth in Schedule
4.2(c), there are no outstanding obligations of the Company to repurchase,
redeem or otherwise acquire any outstanding shares of capital stock or other
equity securities of the Company.
Section 4.3. Noncontravention.
Subject to the expiration or termination of the applicable
waiting period required by the H-S-R Act, except as disclosed in Schedule 4.3
hereto, neither the execution, delivery or performance of this Agreement nor the
consummation of the transactions contemplated hereby:
20
(i) violates, or conflicts with, or constitutes a
default under, the certificate or articles of incorporation or by-laws,
as amended, of any of the Company or any of its Subsidiaries, or
(ii) violates or will violate any statute or law or
any rule, regulation, order, judgment or decree of any court or
governmental authority to which the Company or any of its Subsidiaries
or any of their properties or assets is subject, except where the
existence of such violation would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, or
(iii) (with or without notice or lapse of time or
both), constitutes a default under any contract or agreement of any
kind to which the Company or any of its Subsidiaries is a party or by
which any of them is bound, except where the existence of such defaults
would not, individually or in the aggregate, be material to the Company
and its Subsidiaries, taken as a whole, or
(iv) requires that the Company obtain any consents or
approvals of third parties, except where the failure to obtain such
consents or approvals would not, individually or in the aggregate, be
material to the Company and its Subsidiaries, taken as a whole.
Section 4.4. SEC Filings. The Company has timely made all
filings with the SEC that it has been required to make under the Securities Act
or the Exchange Act (collectively, the "Company Public Reports"). Each of the
Company Public Reports has complied with the Securities Act and the Exchange Act
in all material respects. None of the Company Public Reports, as of its
respective date, contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. Included
in such Company Public Reports are (i) the unaudited consolidated statements of
operations (x) for the Company, for the three months ended September 30, 1997
and the nine months ended September 30, 1997 and (y) for the Company's
predecessor, the three months ended September 30, 1996 and the nine months ended
September 30, 1996, (ii) the audited consolidated balance sheets of the Company
and its Subsidiaries at December 31, 1996 and the notes thereto, (iii) for the
period from September 5, 1996 to December 31, 1996 the audited consolidated
statement of operations, changes in shareholders' equity and cash flows of the
Company and the notes thereto, (iv) the unaudited consolidated balance sheet of
the Company and its Subsidiaries at September 30, 1997 (the "Interim Balance
Sheet"), (v) the unaudited consolidated statements of cash flows (x) for the
Company's predecessor, for the nine months ended September 30, 1996 and (y) for
the Company, for the nine months ended September 30, 1997 and the notes thereto
and (vi) for the Company's
21
predecessor the other financial statements contained in the Company Public
Reports (collectively, the "Interim Financial Statements").
Section 4.5. Financial Statements; Stockholders' Equity.
(a)......Except as set forth in Schedule 4.5, all of the
financial statements included in the Company Public Reports, and the audited
financial statements of the Company for the year ended December 31, 1997 to be
delivered prior to the Closing complied (or will comply) as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, were prepared (or will be prepared) in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present (or
will fairly present) in accordance with applicable requirements of GAAP
(subject, in the case of unaudited statements, to normal recurring adjustments,
none of which were or are expected, individually or in the aggregate, to be
material in amount) the consolidated financial position of the Company and its
consolidated Subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of the Company and its
consolidated Subsidiaries for the periods presented therein. Except as set forth
in the Company Public Reports and except as incurred or accrued in the ordinary
course of business consistent with prior practice subsequent to September 30,
1997, neither the Company nor any Subsidiary of the Company has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) required by GAAP to be set forth on a consolidated balance sheet of
the Company and its consolidated Subsidiaries or in the notes thereto, other
than liabilities or obligations which individually or in the aggregate, do not
have, and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(b)......The total stockholders' equity of the Company, on a
consolidated basis, as of December 31, 1997, determined in accordance with GAAP,
is at least $101,500,000.
Section 4.6. Legal Proceedings. Except as disclosed in the
Company Public Reports or as set forth on Schedule 4.6 hereto, as of the date
hereof there are no (and, except as arising in the normal course of business
from the date hereof through the Closing Date or relating to breaches or
liabilities disclosed in the Disclosure Schedules as of the date hereof, as of
the Closing Date there will be no) claims, actions, suits, proceedings or
investigations pending or, to the Company's Knowledge, threatened by or against
or involving, the Company or any of its Subsidiaries (a) seeking to enjoin,
prohibit, restrain or otherwise prevent the transactions contemplated hereby or
(b) which, if determined adversely to the Company, would,
22
individually or in the aggregate, result in a Material Adverse Effect on the
Company. Except as disclosed in the Company Public Reports, as of the date
hereof there are no (and, except as arising in the normal course of business
from the date hereof through the Closing Date or relating to breaches or
liabilities disclosed in the Disclosure Schedule as of the date hereof, as of
the Closing Date there will be no) judgments, decrees or orders issued by any
court, board or other governmental or administrative agency presently
outstanding and unsatisfied against the Company or any Subsidiary of the Company
or any of their respective assets, except where the existence of such judgment,
decree or order would not have, individually or in the aggregate, a Material
Adverse Effect on the Company.
Section 4.7. Employee Plans.
(a) None of the Employee Benefit Plans is a "multiemployer
plan", as defined in Section 4001(a)(3) of ERISA ("Multiemployer Plan"). Neither
the Company nor any Subsidiary of the Company has withdrawn in a complete or
partial withdrawal from any Multiemployer Plan, nor has any of them incurred any
liability due to the termination or reorganization of a Multiemployer Plan.
"Employee Benefit Plans" means "employee benefit plans", as defined in Section
3(3) of ERISA, and all other employee benefit arrangements, employment
agreements, or payroll practices, including, without limitation, any such
arrangements or payroll practices providing severance pay, sick leave, vacation
pay, salary continuation for disability, retirement benefits, deferred
compensation, bonus pay, incentive pay, stock options (including those held by
directors, employees, and consultants), hospitalization insurance, medical
insurance, life insurance, scholarships or tuition reimbursements, that are
maintained by the Company or any of its Subsidiaries or to which the Company or
any of its Subsidiaries is obligated to contribute thereunder for current or
former employees of the Company or any Subsidiary of the Company.
(b) None of the Employee Benefit Plans is a "single employer
plan", as defined in Section 4001(a)(15) of ERISA, that is subject to Title IV
of ERISA. Neither the Company nor any Subsidiary of the Company has incurred any
outstanding material liability under Section 4062 of ERISA to the PBGC or to a
trustee appointed under Section 4042 of ERISA. Neither the Company nor any ERISA
Affiliate has engaged in any transaction described in Section 4069 of ERISA.
(c) To the Company's Knowledge, each Employee Benefit Plan
that is intended to qualify under Section 401 of the Code, and each trust
maintained pursuant thereto, has been determined to be exempt from federal
income taxation under Section 501 of the Code by the IRS, and, to the Company's
Knowledge, nothing has occurred with respect to the operation of any such
Employee Benefit Plan that would cause the loss of such qualification or
23
exemption or the imposition of any material liability, penalty or tax under
ERISA or the Code.
(d) There has been no material violation of ERISA or the Code
with respect to the filing of applicable reports, documents and notices
regarding the Employee Benefit Plans with the Secretary of the Department of
Labor or the Secretary of the Department of Treasury or the furnishing of
required reports, documents or notices to the participants or beneficiaries of
the Employee Benefit Plans.
(e) To the Company's Knowledge, there are no pending audits,
investigations, actions, claims or lawsuits which have been asserted, instituted
or, to the Company's Knowledge, threatened, against the Employee Benefit Plans,
the assets of any of the trusts under such plans or the plan sponsor or the plan
administrator, or against any fiduciary of the Employee Benefit Plans with
respect to the operation of such plans (other than routine benefit claims).
(f) To the Company's Knowledge, the Employee Benefit Plans
have been maintained, in all material respects, in accordance with their terms
and with all provisions of ERISA and the Code (including rules and regulations
thereunder) and other applicable federal and state laws and regulations.
(g) Except as set forth on Schedule 4.7(g), no payment
required to be made to any employee associated with the Company or any
Subsidiary of the Company as a result of the transactions contemplated hereby
under any contract or otherwise will, if made, constitute an "excess parachute
payment" within the meaning of Section 280G of the Code.
(h) To the Company's Knowledge, except as provided in Section
4.7 or set forth on Schedule 4.7(h), the consummation of the transactions
contemplated hereby will not accelerate the vesting or payment of any benefit
under any Employee Benefit Plan.
(i) For purposes of this Section 4.7, the term "Subsidiaries"
(or "Subsidiary" as the context may require) means any entity treated as a
single employer with the Company under Section 414(b), (c), (m) or (o) of the
Code.
Section 4.8. Intellectual Property. Except as set forth on
Schedule 4.8, the Company and its Subsidiaries own, free and clear of any liens,
or are licensed or otherwise have the right to use all (i) Transferred
Intellectual Property as set forth on Schedule 4.8 and (ii) the intellectual
property licensed to the Company under the Copyright License Agreement, the
Software License Agreement and the Trademark License Agreement (such agreements,
together with the Transferred Intellectual Property, the "Company Intellectual
Property"). Except as set forth on Schedule 4.8, the Company Intellectual
Property includes
24
all the intellectual property which is material to the business, financial
condition or results of operations of the Company and its Subsidiaries taken as
a whole. Except for any of the following that would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company, and except as set forth on Schedule 4.8:
(a) no proceedings have been instituted or are pending or, to
the Company's Knowledge, are threatened, which challenge any rights in respect
of the validity of the Company Intellectual Property;
(b) to the Company's Knowledge, none of the Company
Intellectual Property infringes upon or otherwise violates the rights of others
or is being infringed upon by others, and none is subject to any outstanding
order, decree, judgment, stipulation or charge;
(c) with the exception of the Patent License Agreement, no
licenses, sublicenses or agreements granting rights in any of the Company
Intellectual Property have been granted or entered into by the Company, which in
each case remain in effect; and
(d) the Company has not received any notice of interference or
infringement of any of the Company Intellectual Property.
Neither the Company nor any of its Subsidiaries is obligated to pay any
royalties or make similar payments in respect of the Company Intellectual
Property.
Section 4.9. Events Subsequent to September 30, 1997. Except
as set forth on Schedule 4.9 hereto or as disclosed in the Company Public
Reports, since September 30, 1997, the Company has conducted its business in the
ordinary course and there has not been (a) any material adverse change in the
condition (financial or otherwise), business, operations, assets or results of
operations of the Company and its Subsidiaries, (b) any declaration, setting
aside or payment of any dividend or any other distribution with respect to any
of the capital stock or other equity interests of the Company, or (c) any
material change by the Company in accounting principles.
Section 4.10. Compliance with Laws.
(a) Except for such non-compliance as would not, individually
or in the aggregate, have a Material Adverse Effect on the Company and, except
as disclosed on Schedule 4.10(a), the conduct of the Company and its
Subsidiaries complies in all material respects with all statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable
thereto, except for violations or failures to so comply, if any, that are
consistent with the relevant industry standard. No
25
action or proceeding relating to any such statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees is pending or, to the Company's
Knowledge, threatened, except for such actions and proceedings as would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
(b) Schedule 4.10(b) sets forth information as to any
violation or alleged violation, with respect to any real property leased by the
Company or any of its Subsidiaries, of any existing federal, state, local or
foreign law or regulation (or order, permit, plan or compliance schedule)
pertaining to environmental protection, including without limitation the
discharge or disposal of air or water pollutants, poisoned waste xxxxx, or the
storage, treatment or disposal of solid or hazardous or toxic substances
(collectively, "Environmental Law") of which the Company or any of its
Subsidiaries has received notice which would have, individually or in the
aggregate, a Material Adverse Effect on the Company. Except as disclosed in
Schedule 4.10(b), neither the Company nor any of its Subsidiaries is currently,
and to the Company's Knowledge has not been, in material violation of any such
Environmental Law, and, except as set forth in Schedule 4.10(b), neither the
Company nor any of its Subsidiaries is currently required to incur any material
expenditures for purposes of compliance therewith, except for such violations,
expenditures, or noncompliance, as would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. The Company has furnished Buyer
with copies of all internally prepared or commissioned environmental studies,
assessments or reports in the Company's possession or control that are specific
to the properties subject to the Disclosed Leases.
(c) Except as disclosed in Schedule 4.10(c), to the Company's
Knowledge, there are no underground storage tanks or regulated above ground
storage tanks located at any real property subject to the Leases, nor has the
Company used any such property or permitted any such property to be used for the
maintenance and servicing of vehicles.
(d) Except as disclosed in Schedule 4.10(d), to the Company's
Knowledge, no asbestos or asbestos containing material is present at any real
property subject to the Leases.
(e) Except as disclosed in Schedule 4.10(e), to the Company's
Knowledge, no hazardous substance, pollutant or contaminant, as defined in any
Environmental Law, and no oil, as defined in the Oil Pollution Act of 1990, 33
U.S.C. ss.2730, was released at any real property subject to the Leases at any
time when the Company used or occupied such property except for such presence
which would not now or with the passage of time require any remediation,
removal, corrective action, investigation or monitoring under any Environmental
Law.
Section 4.11. Registration Statement. The information with
respect to the Company or any Subsidiary of the Company that
26
the Company furnishes to Buyer in writing specifically for use in (a) the S-4
and the Registration Statement on Form S-3 (the "S-3") will not contain at the
time any such Registration Statement becomes effective, any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements made therein not misleading and (b)
the Proxy Statement relating to the stockholders' meeting referred to in Section
6.19 (the "Proxy Statement") will not contain at the time such Proxy Statement
is mailed and the date of the stockholders' meeting, any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein not misleading.
Section 4.12. Properties; Leases. Except as disclosed in the
Company Public Reports or as set forth on Schedule 4.12 and except for Permitted
Liens,
(a) the Company or one of its Subsidiaries has good and
marketable title, free and clear of all liens and encumbrances, to the trucks
and the other assets of the Company and its Subsidiaries that are reflected in
the financial statements included in the Company's Form 10-Q for the quarter
ended September 30, 1997, except where such failure to hold such title would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The Company owns or holds under valid and existing lease or license
each piece of real or personal property included in or capitalized on the
Interim Financial Statements;
(b) neither the Company nor any of its Subsidiaries owns any
real property. Schedule 4.12 sets forth a complete and correct list of the
leases (i) for the Company's headquarters and (ii) for the locations in which
the Company has significant office operations (the "Disclosed Leases"). Except
for any of the following that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company, (i) to
the Company's Knowledge, neither the whole nor any portion of any property on
which the Company or any of its Subsidiaries has a leasehold interest (the
"Leases") has been condemned, requisitioned or otherwise taken by any public
authority, and no notice of any such condemnation, requisition or taking has
been received or is threatened, (ii) to the Company's Knowledge, the Leases are
in full force and effect and are valid, binding and enforceable in accordance
with their respective terms against the parties thereto, except to the extent
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting creditors' rights generally or
by general equitable principles, (iii) no amount payable under any Lease is past
due, (iv) the Company, and to the Company's Knowledge each other party thereto,
has complied with all material commitments and obligations on its part to be
performed or observed under each Lease, and (v) the Company has not received any
notice of a default (which has not
27
been cured), offset or counterclaim under any Lease, or any other communication
calling upon the Company to comply with any provision of any Lease or asserting
non-compliance (which has not been cured), and no event or condition has
happened or presently exists which constitutes a material default or, after
notice or lapse of time or both, would constitute a material default under any
Lease; and
(c) the Company has not mortgaged, pledged or otherwise
encumbered its interest in any premises covered by the Leases, nor has it
assigned its interest under any Lease or sublet all or any portion of any real
property which it leases nor has it granted to any person any rights to any of
the premises covered by any Lease or in and to any Lease, other than the right
of any dealer to occupy any part of the premises covered by the Leases for the
purpose of operating a store for the business of the Company or any of its
Subsidiaries.
Section 4.13. Tax Matters.
(a) Except as otherwise disclosed in Schedule 4.13(a): (i) all
Tax returns required to be filed by each of the Company and its Subsidiaries
have been filed and each has paid (or the Company has paid on its Subsidiary's
behalf), or has set up an adequate reserve for the payment of, all material
Taxes required to be paid in respect of the periods covered by such returns;
(ii) neither the Company nor any of its Subsidiaries is delinquent in the
payment of any material tax, assessment or governmental charge; (iii) except for
Permitted Liens, there are no Tax liens upon the assets of the Company or any of
its Subsidiaries except liens for Taxes not yet due or being contested in good
faith through appropriate proceedings; and (iv) no material deficiency for any
Taxes has been proposed, asserted or assessed against the Company or any of its
Subsidiaries that has not been resolved, reserved against or paid in full.
(b) Except as otherwise disclosed in Schedule 4.13(b): (i) all
Taxes, deposits or other payments for which the Company or any of its
Subsidiaries is liable through the date hereof either have been paid or accrued
in full on the books and records of the Company or its Subsidiaries, as
applicable, except for such Taxes as are not required by GAAP to be accrued or
are immaterial in amount; (ii) there are not now any extensions of time in
effect with respect to the dates on which any returns or reports with respect to
any Taxes were or are due to be filed; (iii) no audit or investigation of any
return or report of Taxes is currently underway, pending or, to the Company's
knowledge, threatened; and (iv) there are no outstanding waivers or agreements
by the Company or any Subsidiary of the Company for the extension of time for
the assessment of any material Taxes or deficiency thereof, nor are there any
requests for rulings, outstanding subpoenas or requests for information or any
other matter pending between the Company or any of its Subsidiaries and any
taxing authority.
28
(c) The Company has delivered to Buyer true and complete
copies of all federal and state income tax returns (together with any Revenue
Agent's Reports) relating to the operations of the Company and the Subsidiaries
of the Company for the taxable years ended since 1996.
(d) None of the Company or any of its Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code. None of the Company, any of its
Subsidiaries or any predecessor in interest of such party, has filed, or may be
deemed to have filed, any election under Section 338 of the Code.
(e) Except as set forth on Schedule 4.13(e), neither the
Company nor any of its Subsidiaries has made any payment which constitutes an
"excess parachute payment" within the meaning of Section 280G of the Code, and
no payment by the Company or any of its Subsidiaries required to be made under
any contract will, if made, constitute an "excess parachute payment" within the
meaning of Section 280G of the Code.
(f) Except as set forth in Schedule 4.13(f), neither the
Company nor any of its Subsidiaries is a party to any tax allocation or tax
sharing agreement.
(g) None of the Company or any of its Subsidiaries has been a
member of an affiliated group (within the meaning of Section 1504(a) of the
Code) filing a consolidated federal income tax return (other than a group the
common parent of which was the Company).
Section 4.14. Brokerage. Except for Questor Management
Company, no broker, agent, finder or financial advisor has acted, directly or
indirectly, for the Company, and with such exception, the Company has not
incurred any obligation to pay any brokerage fee, agent's commission, finder's
fee, financial advisory fee or other commission in connection with the
transactions contemplated by this Agreement.
Section 4.15. Insurance; Protection Products.
(a) Schedule 4.15(a) lists insurance policies owned or held by
the Company or any of its Subsidiaries as of February 28, 1998, which may cover
the Company or any of its assets. As of the date hereof, all such policies are
in full force and effect, all premiums with respect thereto covering all periods
up to and including the date hereof have been paid to the extent due, and no
notice of cancellation or termination has been received with respect to any such
policy. To the best of the Company's Knowledge, the insurance maintained by the
Company and its Subsidiaries is customary in the industry and complies with
applicable material governmental regulations.
29
(b) Schedule 4.15(b) lists all protection products offered as
of the date hereof by the Company and its Subsidiaries in connection with the
rental of trucks by the Company.
Section 4.16. Contracts. Schedule 4.16 sets forth a complete
and correct list of (i) all material contracts between Ryder Truck Rental, Inc.
and/or Ryder System Inc. and the Company or any of its Subsidiaries and (ii) all
contracts entered into by the Company or any of its Subsidiaries since September
30, 1997 and on or prior to the date hereof that would be required to be filed
as an exhibit to any Form 10-K or 10-Q filed by the Company. The Company has
delivered to the Buyer or its representatives true and complete originals or
copies of all contracts set forth in clauses (i) and (ii). Except as disclosed
in Schedule 4.16, to the Company's Knowledge, all material contracts entered
into by the Company or any of its Subsidiaries by which such parties are bound
including the contracts disclosed in clauses (i) and (ii) above and the
contracts filed as exhibits to the Company Public Reports (the "Contracts") are
valid and binding and enforceable against the Company or its Subsidiaries, as
the case may be, and against the other parties thereto, except to the extent
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting creditors' rights generally or
by general equitable principles, the Company is not, and to the Company's
knowledge, the other parties thereto are not, as of the date hereof, in material
breach of any Contract or material default thereunder, and there does not exist
under any provision thereof, to the Company's Knowledge, as of the date hereof,
any event that, with the giving of notice or the lapse of time or both, would
constitute such a breach or default, except for such failures to be valid and
binding and such breaches, defaults and events as to which requisite waivers or
consents have been or are obtained or which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Except as disclosed on
Schedule 4.16, as of the date hereof no indemnification claim has been made by
Ryder Truck Rental, Inc. and/or Ryder System Inc. with respect to any contracts
between Ryder Truck Rental, Inc. and/or Ryder System Inc. and the Company or its
Subsidiaries, as the case may be. To the Company's Knowledge, no material
indemnification claims exist under any of the Contracts set forth in clause (i)
above. Except as set forth in Schedule 4.16, no contract to which the Company or
any of its Subsidiaries, contains any provision which creates, or purports to
create, or subjects the Company or any of its Affiliates to, any material
restriction on any business activity that may be conducted by the Company or any
of its Affiliates through non-competes.
Section 4.17. Transactions with Affiliates.
(a) Except as set forth in Schedule 4.17(a), no director, no
shareholder and no persons controlled by any director or shareholder of the
Company or any of its Subsidiaries or any entity in which any such director or
other affiliate or
30
associate, owns any beneficial interest (other than a publicly held corporation
whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by any such person) has any interest in: (i) any contract, arrangement or
understanding with, or relating to, the business or operations of the Company or
any of its Subsidiaries; (ii) any loan, arrangement, understanding, agreement or
contract for or relating to indebtedness of the Company or any of its
Subsidiaries; or (iii) any property (real, personal or mixed), tangible, or
intangible, used or currently intended to be used in, the business or operations
of the Company or any of its Subsidiaries.
(b) Except as set forth on Schedule 4.17(b), no officer of the
Company or any of its Subsidiaries has sold or transferred any property or
assets to or purchased or acquired any property or assets from, or otherwise
engaged in any other transactions with the Company or any of its Subsidiaries,
except that the Company and any of its Subsidiaries may have engaged in any of
the foregoing transactions in the ordinary course of business at prices and on
terms and conditions no less favorable to the Company or such Subsidiary than
could have been obtained in an arm's-length basis from unrelated third parties.
Section 4.18. Voting Requirements; Dissenters' Rights. The
affirmative vote of the holders of a majority of the Outstanding Company Shares
with respect to this Agreement and the Merger was the only vote of the holders
of any class or series of the Company's capital stock necessary to approve this
Agreement, the Merger and the transactions contemplated by this Agreement and
the Merger.
Section 4.19. Labor Matters. As of the date hereof, there are
no collective bargaining agreements with labor unions or associations
representing employees of the Company or any Subsidiary of the Company. Since
October 17, 1996, there has been no material work stoppage against the Company
or any of its Subsidiaries by any employees of the Company or any of its
Subsidiaries nor, to the Company's Knowledge, is any such stoppage threatened.
Neither the Company nor any of its Subsidiaries has been involved in or, to the
Company's Knowledge, threatened with, any collective bargaining dispute,
arbitration, lawsuit or administrative proceeding relating to a collective
bargaining matter involving the employees of the Company or any of its
Subsidiaries (excluding routine workers' compensation claims) that would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
Section 4.20. Quantity and Maintenance of Trucks. As of
January 31, 1998, the Company owned at least 29,000 trucks. Since such date, the
Company has maintained the trucks in accordance with its ordinary course of
business consistent with past practice, unless and until sold to third parties
in the ordinary course of business.
31
Section 4.21. Accounts Receivable. All accounts receivable of
the Company and its Subsidiaries which are reflected on the Interim Balance
Sheet are fairly presented thereon in accordance with GAAP.
Section 4.22. Licenses, Permits, etc. Except as disclosed on
Schedule 4.22, each of the Company and its Subsidiaries have all material
licenses, permits, certificates, franchises, consents, approvals and other
authorizations of any Governmental Entity required to carry on their business as
presently conducted (the "Licenses"). All Licenses have been validly obtained
and are in full force and effect except for those whose failure to be in full
force and effect would not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect on the Company. Except as disclosed on
Schedule 4.22, as of the date hereof, no proceeding is pending or, to the
Company's Knowledge, threatened seeking the revocation or limitation of any such
License that, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect on the Company. The businesses of the Company and
its Subsidiaries are presently being conducted in a manner that does not violate
in any material respect any of the terms or conditions under which any License
was granted.
Section 4.23. Disclosure. None of the representations and
warranties by the Company in this Agreement and no statement on the part of the
Company contained in any of the Schedules hereto contains or will contain as to
the applicable representation and warranty any untrue statement of a material
fact or omits or will at the Closing omit to state any material fact necessary
in order to make any of the statements herein or therein, in light of the
circumstances under which it was made, not misleading.
ARTICLE V.
Representations and Warranties of Buyer
Buyer represents and warrants to the Company that:
Section 5.1. Corporate Organization and Authorization.
(a) Each of Buyer and Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to enter into this Agreement
and to carry out the transactions contemplated hereby.
(b) Buyer has all requisite corporate power and authority and,
except as set forth on Schedule 5.1(b), all governmental authorizations,
permits, certificates, licenses, consents and approvals required to carry on its
business as presently conducted, except where the failure to possess such
32
authorizations, permits, certificates, licenses, consents and approvals (either
individually or in the aggregate) would not have a Material Adverse Effect on
Buyer. Buyer is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of the property owned or
leased by it or the nature of the activities conducted by it makes such
qualification necessary, except where the failure to so qualify or to maintain
such good standing (either in one jurisdiction or in the aggregate) would not
have, individually or in the aggregate, a Material Adverse Effect on Buyer.
(c) This Agreement has been duly executed and delivered by
Buyer and Sub and, except for approval of this Agreement by Buyer's and Sub's
Board of Directors and by a majority of holders of Sub's common stock, which
approval has been obtained prior to the execution hereof, no corporate
authorization on the part of Buyer or Sub is necessary to consummate the
transactions contemplated by this Agreement. No approval by the shareholders of
Buyer is required by law, charter or by-laws of Buyer, listing agreement with,
or policy of the NYSE or otherwise for the consummation of this Agreement, it
being understood, however, that in order for Buyer to issue a number of shares
in excess of the Minimum Merger Shares, it must obtain shareholder approval to
amend its Certificate of Incorporation to increase the number of shares of
authorized common stock (and the failure of Buyer to obtain such approval shall
give rise to Buyer's obligation to issue the Minimum Merger Shares and the
Aggregate Cash Consideration deliverable pursuant to Section 3.1(b) hereof when
the Minimum Merger Shares are issued pursuant to Section 3.1(a) hereof).
(d) This Agreement constitutes a valid and binding agreement
of Buyer and Sub and is enforceable against Buyer and Sub in accordance with its
terms, except to the extent enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law).
(e) The copies of the Certificate of Incorporation and
By-Laws, and all amendments thereto to the date of this Agreement, of Buyer and
Sub heretofore delivered to the Company are complete and true copies of such
documents as in effect on the date hereof.
Section 5.2. Capitalization.
(a) As of the date hereof, the authorized capital stock of
Buyer consists of: (i) Thirty Seven Million Five Hundred Thousand (37,500,000)
shares of Common Stock, par value $0.01 per share ("Buyer Common Stock"), of
which (x) Thirty Five Million (35,000,000) shares of Common Stock have been
designated Class A Common Stock, par value $0.01 per share ("Buyer Class A
Common
33
Stock") and (y) Two Million Five Hundred Thousand (2,500,000) shares of
Common Stock have been designated Class B Common Stock, par value $.01 per share
("Buyer Class B Common Stock"), and (ii) Two Hundred Fifty Thousand (250,000)
shares of Preferred Stock, par value $0.01 per share.
(b) As of March 3, 1998, (i) Twenty Five Million Six Hundred
Sixty Two Thousand Eight Hundred Fifty Seven (25,662,857) shares of Buyer Class
A Common Stock, and (ii) One Million Nine Hundred Thirty Six Thousand Six
Hundred (1,936,600) shares of Buyer Class B Common Stock are issued and
outstanding. All of such issued and outstanding shares of Buyer Common Stock are
validly issued, fully paid and nonassessable. Except as set forth in Schedule
5.2(b) hereto, as of March 3, 1998, Buyer has no other outstanding capital
securities or securities convertible into or exchangeable for any shares of its
capital stock or any preemptive or other rights to subscribe for or to purchase,
or any options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, any calls, commitments or claims of any character
relating to, any shares of its capital stock or any securities convertible into
or exchangeable for any shares of its capital stock.
(c) Buyer has a sufficient number of shares of Buyer Class A
Common Stock authorized and reserved for issuance to the holders of the
Outstanding Company Shares and holders of Options to issue the Minimum Merger
Shares in accordance with Section 3.1(a)(i)(y) of this Agreement.
Section 5.3. Noncontravention.
Subject to the expiration or termination of the applicable
waiting period required by the H-S-R Act, except as disclosed in Schedule 5.3
hereto, neither the execution, delivery or performance of this Agreement nor the
consummation of the transactions contemplated hereby:
(i) violates, or conflicts with, or constitutes a
default under, the certificate or articles of incorporation or by-laws,
as amended, of any of Buyer or any of its Subsidiaries, or
(ii) violates or will violate any statute or law or
any rule, regulation, order, judgment or decree of any court or
governmental authority to which Buyer or any of its Subsidiaries or any
of their properties or assets are subject, except where the existence
of such violation would not, individually or in the aggregate, have a
Material Adverse Effect on Buyer, or
(iii) (with or without notice or lapse of time or
both), constitutes a default under any contract or agreement of any
kind to which Buyer or any of its Subsidiaries is a party or by which
either of them is bound, except where the
34
existence of such default would not, individually or in the aggregate,
have a Material Adverse Effect on Buyer, or
(iv) except as disclosed on Schedule 5.3, requires
that Buyer obtain any consents or approvals of third parties, except
where the failure to obtain such consent or approval would not,
individually or in the aggregate, have a Material Adverse Effect on
Buyer.
Section 5.4. SEC Filings. Since January 1, 1995, Buyer has
made all filings with the SEC that it has been required to make under the
Securities Act or the Exchange Act (collectively, the "Buyer Public Reports").
Each of the Buyer Public Reports has complied with the Securities Act and the
Exchange Act in all material respects. None of the Buyer Public Reports, as of
their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
Section 5.5. Financial Statements. All of the financial
statements included in the Buyer Public Reports complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP applied on a consistent
basis during the
period involved (except as may be indicated in the notes thereto or, in the case
of unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the
SEC) and fairly present in accordance with applicable requirements of GAAP
(subject, in the case of unaudited statements, to normal recurring adjustments,
none of which were or are expected, individually or in the aggregate, to be
material in amount) the consolidated financial position of Buyer and its
consolidated Subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of Buyer and its
consolidated Subsidiaries for the periods presented therein. Except as set forth
in the Buyer Public Reports, neither the Buyer nor any of its Subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of the Company and its consolidated Subsidiaries or in the notes
thereto, other than liabilities or obligations which, individually or in the
aggregate, do not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Buyer.
Section 5.6. Legal Proceedings. Except as disclosed in the
Buyer Public Reports or as set forth on Schedule 5.6 hereto, there are no
claims, actions, suits, proceedings or investigations pending or, to Buyer's
knowledge, threatened by or against or involving, Buyer or any Subsidiary of
Buyer (a) seeking to enjoin, prohibit, restrain or otherwise prevent the
transactions contemplated hereby or (b) which, if determined adversely to Buyer
would, individually or in the aggregate,
35
result in a Material Adverse Effect on Buyer. Except as disclosed in Buyer
Public Reports, there are no judgments, decrees or orders issued by any court,
board or other governmental or administrative agency presently outstanding and
unsatisfied against Buyer or any Subsidiary of Buyer, except where the existence
of such judgment, decree or order would not, individually or in the aggregate,
have a Material Adverse Effect on Buyer.
Section 5.7. Events Subsequent to September 30, 1997. Except
as set forth on Schedule 5.7 hereto or as disclosed in the Buyer Public Reports,
since September 30, 1997, there has not been (a) any effect or change which
would have, individually or in the aggregate, a Material Adverse Effect on
Buyer, (b) any declaration, setting aside or payment of any dividend or any
other distribution with respect to any of the capital stock or other equity
interests of Buyer, or (c) any material change by Buyer in accounting
principles.
Section 5.8. Compliance with Laws. Except for such
non-compliance as would not, individually or in the aggregate, have a Material
Adverse Effect on Buyer and, except as disclosed in the Buyer Public Reports, to
the best of Buyer's knowledge, the conduct of Buyer complies in all material
respects with all environmental and other statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto, except for
violations or failures so to comply, if any, that are consistent with the
relevant industry standard. To the best of Buyer's knowledge, no action or
proceeding relating to any such statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees is pending or threatened, except for such actions
and proceedings as would not, individually or in the aggregate, have a Material
Adverse Effect on Buyer.
Section 5.9. Registration Statement. The information with
respect to Buyer or any Subsidiary of Buyer included in (a) the S-4 and the S-3
will not contain at the time any such Registration Statement becomes effective,
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein not misleading and (b) the Proxy Statement will not contain at the time
such Proxy Statement is mailed and the date of the stockholders' meeting
referred to in Section 6.19, any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein not misleading.
Section 5.10. Properties; Insurance. Except as disclosed in
Schedule 5.10 and except for Permitted Liens, Buyer or a Subsidiary of Buyer has
good and marketable title to its material assets and the material assets of its
Subsidiaries, free and clear of all liens and encumbrances, except where such
failure to hold such title would not, individually or in the aggregate, have a
Material Adverse Effect on Buyer.
36
Section 5.11. Financing. Buyer has previously delivered to the
Company a complete and correct copy of a "highly confident" letter from Credit
Suisse First Boston in form and substance satisfactory to the Company, and such
letter is in full force and effect and has not been amended or otherwise
modified.
Section 5.12. Brokerage. Except for Credit Suisse First
Boston, no broker, agent, finder or financial advisor has acted, directly or
indirectly, for Buyer, nor has Buyer incurred any obligation to pay any
brokerage fee, agent's commission, finder's fee, financial advisory fee or other
commission in connection with the transactions contemplated by this Agreement.
Article VI.
Covenants and Agreements
Section 6.1. Conduct of the Company Prior to the Effective
Time.
(a) The Company shall, and shall cause its Subsidiaries (and
Questor shall cause the Company and its Subsidiaries) (i) to carry on their
respective businesses in the usual, regular and ordinary course of business in
substantially the same manner as heretofore conducted, (ii) not to engage at any
time in any business or business activity other than the business currently
conducted by them and business activities reasonably incidental thereto and
(iii) use commercially reasonable efforts to preserve intact their present
business organizations, keep available the services of their present officers
and employees and preserve their relationships with customers, suppliers,
dealers, agents and others having business dealings with them to the end that
their goodwill and on-going businesses shall be unimpaired at the Effective
Time, except such impairment as would not have a Material Adverse Effect on the
Company. The Company shall, and shall cause its Subsidiaries to (i) maintain
insurance coverages in the usual manner consistent with prior practices, (ii)
maintain its books, accounts and records in the usual manner consistent with
prior practices, (iii) comply in all material respects with all laws, ordinances
and regulations of governmental entities applicable to the Company and its
Subsidiaries, (iv) maintain and keep its properties and equipment in good
repair, working order and condition, ordinary wear and tear excepted, and (v)
perform in all material respects its obligations under all contracts and
commitments to which it is a party or by which it is bound, in each case, except
for clauses (i) and (v), other than where the failure to so maintain, comply or
perform, would, individually or in the aggregate, not result in a Material
Adverse Effect on the Company;
(b) Except as required or permitted by this Agreement, neither
the Company nor any of its Subsidiaries shall nor shall
37
they propose to (and Questor shall not permit the Company or any of its
Subsidiaries to) (i) sell or agree to sell any capital stock owned by it in any
of its Subsidiaries, (ii) amend its Certificate of Incorporation or By-laws,
(iii) split, combine or reclassify its outstanding capital stock or declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property, or (iv) directly or indirectly redeem, purchase or otherwise acquire
or agree to redeem, purchase or otherwise acquire any Company Class C Common
Stock except for repurchases of Company Common Class C Stock from employees,
officers, consultants or directors in the ordinary course of business;
(c) Except as set forth on Schedule 6.1(c), the Company shall
not, nor shall it permit any of its Subsidiaries (and Questor shall not permit
the Company or any of its Subsidiaries) to:
(i) except for the issuance of shares pursuant to
Options outstanding as of the date hereof and except as required or
permitted by this Agreement, issue, deliver or sell or agree to issue,
deliver or sell any additional shares of, or rights of any kind to
acquire any shares of, its capital stock of any class, except for
issuances, deliveries or sales to employees, officers, consultants or
directors of not more than 2,000 shares of Class C Common Stock;
(ii) acquire, lease or dispose or agree to acquire,
lease or dispose of any capital assets or any other assets other than
in the ordinary course of business and consistent with past practice;
(iii) incur additional indebtedness in excess, in the
aggregate, of $25,000,000, or encumber or grant a security interest in
any asset to secure indebtedness, in the aggregate, in excess of
$25,000,000 or enter into any other material transaction other than, in
each case, in the ordinary course of business, it being understood that
it is within the ordinary course of business of the Company and its
Subsidiaries to issue indebtedness within the limits of existing credit
facilities;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, in each
case in this clause (iv) which are material, individually or in the
aggregate, to the Company and its Subsidiaries taken as a whole, except
that the Company may create new wholly owned subsidiaries in the
ordinary course of business;
(v) fail to comply in all material respects with the
applicable provisions of ERISA, the Code and the
38
regulations and published interpretations thereunder with respect
to Employee Benefit Plans;
(vi) sell or transfer any material properties or
assets to, or purchase or acquire any material property or assets from,
or otherwise engage in any other transactions with, any of its
Affiliates, except that the Company or any of its Subsidiaries may
engage in any of the foregoing transactions (A) pursuant to existing
arrangements disclosed on Schedule 4.17, or (B) except for transactions
with Significant Stockholders, in the ordinary course of business at
prices and on terms and conditions no less favorable to the Company or
any of its Subsidiaries than could be obtained on an arm's-length basis
from unrelated third parties;
(vii) without Buyer's consent, which consent shall
not be unreasonably withheld or delayed, make any material tax election
under the Code (other than in the ordinary course of business
consistent with past practice) or settle or compromise any tax
liability involving amounts in excess of $1,000,000 in the aggregate;
(viii) pay, discharge, settle or satisfy any claims,
litigation, liabilities or obligations (whether absolute, accrued,
asserted or unasserted, contingent or otherwise) involving amounts in
excess of $1,000,000 in the aggregate, other than the payment,
discharge or satisfaction of liabilities (x) reflected or reserved
against in, or contemplated by, the financial statements (or the notes
thereto) of the Company included in the Company Public Reports or (y)
in the ordinary course of business consistent with past practice;
(ix) fail to use all commercially reasonable efforts
to keep its insurable properties adequately insured at all times by
financially sound and reputable insurers, maintain such other
insurance, to such extent and against such risks, including fire and
other risks insured against by extended coverage, as is customary with
companies in the same or similar businesses operating in the same or
similar locations, including public liability insurance against claims
for personal injury or death or property damage occurring upon, in,
about or in connection with the use of any properties owned, occupied
or controlled by it, fail to maintain such other insurance as may be
required by law, provided, however, that notwithstanding anything to
the contrary contained herein, the Company may continue its current
insurance practices;
(x) fail to maintain in full force and effect
insurance that, to the best of the Company's Knowledge, is customary in
the industry and complies with applicable material governmental
regulations, provided, however, that
39
notwithstanding anything to the contrary contained herein, the Company
may continue its current insurance practices;
(xi) with respect to its fleet of trucks, fail to
perform maintenance (routine or unscheduled) and repairs, fail to keep
its fleet, in all material respects, in good working order and
condition, or fail to maintain its fleet as required in order to keep
the manufacturer's warranty, in all material respects, if any, in
force;
(xii) fail to use all commercially reasonable efforts
to continue to collect its accounts receivable in the ordinary course
of business and consistent with past practice;
(xiii) fail to prepare and file all material federal,
state, local and foreign returns for Taxes and other material Tax
reports, filings and amendments thereto required to be filed by it, or
fail to allow Buyer, at its request, to review all such returns,
reports, filings and amendments prior to the filing thereof, which
review shall not interfere with the timely filing of such returns;
(xiv) increase by more than 10% the base salary of
any of its employees whose base salary is in excess of $100,000 as of
the date hereof, except consistent with past practice or enter into a
new material Employee Benefit Plan;
(xv) except as may be required by applicable law (in
which case Buyer shall have the option to participate in such
negotiation), enter into any negotiation with respect to any collective
bargaining agreement;
(xvi) make any loans to any third party in excess of
$1,000,000 in the aggregate except in the ordinary course of business;
(xvii) without Buyer's consent which may not be
unreasonably withheld or delayed amend or cancel or agree to the
material amendment or cancellation of any contract filed as an exhibit
to the Company Public Reports or enter into any new contract required
to be filed as such an exhibit;
(xviii) without Buyer's consent which may not be
unreasonably withheld or delayed make any change in any accounting
methods, except as may be required by GAAP or as appropriate to conform
to changes in GAAP; or
(xix) enter into any contract, agreement commitment
or arrangement to take any of the actions described in Section 6.1(b)
or elsewhere in this Section 6.1(c).
40
Section 6.2. Conduct of Buyer Prior to the Effective Time.
Buyer shall not, and shall cause its Subsidiaries not to, engage in any
transaction which has the effect of, individually or in the aggregate,
materially restricting, or in any way materially delaying, preventing or
prohibiting the Merger or the consummation of the transactions contemplated by
this Agreement; provided, however, that Buyer shall comply with Section 3.16.
Buyer shall not reserve for any other purpose or issue to any person or persons
(other than the Company Stockholders pursuant to Article III of this Agreement)
any shares of Buyer Class A Common Stock that it has reserved for issuance of
the Minimum Merger Shares in accordance with Section 3.1(a) of this Agreement.
Section 6.3. Other Offers for the Company; Sale of Common
Stock by Significant Stockholders.
(a) From the date hereof until the termination of this
Agreement or the Effective Time, whichever first occurs, the Company shall not,
nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit
any officer, director or employee of, or any investment banker, attorney or
other advisor or representative or agent of, the Company or any of its
Subsidiaries (and Questor shall not permit the Company or any of its
Subsidiaries) to, directly or indirectly, (i) solicit, initiate or encourage the
submission of any Acquisition Proposal (as hereinafter defined) or (ii) enter
into or encourage any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to encourage or
facilitate any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any Acquisition Proposal. Notwithstanding
anything in this Agreement to the contrary, the Company shall promptly advise
Buyer in writing of (i) the receipt by it (or any of the other entities or
persons referred to above) after the date hereof of any Acquisition Proposal, or
any inquiry which could reasonably be expected to lead to any Acquisition
Proposal, (ii) the identity of the person making any such Acquisition Proposal
or inquiry and (iii) the terms and conditions of such Acquisition Proposal or
inquiry. For purposes of this Agreement, "Acquisition Proposal" means any bona
fide proposal with respect to a merger, consolidation, share exchange, business
combination or similar transaction involving the Company or any Subsidiary of
the Company, or any purchase of all or any significant portion of the assets or
stock of the Company or any Subsidiary of the Company.
(b) From the date hereof until the termination of this
Agreement or the Effective Time, whichever first occurs, in addition to being
bound by the terms of Section 6.3(a), the Significant Stockholders shall not
offer for sale, sell, distribute or otherwise dispose of any of their Company
Common Stock.
41
Section 6.4. Continued Effectiveness of Representations and
Warranties of the Parties. From the date hereof through
the Effective Time,
(a) the Company shall use (and Questor shall cause the
Company to use) all commercially reasonable efforts to conduct its affairs in
such a manner so that, except as otherwise contemplated or permitted by this
Agreement, the representations and warranties of the Company contained in
Article IV shall continue to be true and correct in all material respects on and
as of the Closing Date as if made on and as of the Closing Date, (i) except that
any such representations and warranties that are given as of a particular date
shall be true and correct in all material respects as of such date, and (ii) in
the case of Section 4.9 (Events Subsequent to September 30, 1997) only, except
for such changes with respect thereto (x) which are contemplated by this
Agreement or (y) which are attributable to the execution of this Agreement, or
the announcement or contemplation of the transactions proposed herein;
(b) Buyer shall use its reasonable efforts to conduct its
affairs in such a manner so that, except as otherwise contemplated or permitted
by this Agreement, the representations and warranties contained in Article V
shall continue to be true and correct in all material respects on and as of the
Closing Date as if made on and as of the Closing Date, (i) except that any such
representations and warranties that are given as of a particular date shall be
true and correct in all material respects as of such date, and (ii) in the case
of Section 5.7 (Events Subsequent to September 30, 1997) only, except for such
changes with respect thereto (x) which are contemplated by this Agreement or (y)
which are attributable to the execution of this Agreement, or the announcement
or contemplation of the transactions proposed herein;
(c) the Company shall promptly notify Buyer of any event,
condition or circumstance occurring from the date hereof through the Closing
Date of which the Company becomes aware that would cause any material revisions
to any Schedule provided by the Company pursuant to this Agreement, or that
would constitute a violation or breach of this Agreement by the Company; and
(d) Buyer and Sub shall promptly notify the Company of any
event, condition or circumstance occurring from the date hereof through the
Closing Date of which they become aware that would cause any material revisions
to any Schedule provided by Buyer pursuant to this Agreement, or that would
constitute a violation or breach of this Agreement by Buyer. No such
notification shall be deemed an amendment to any Schedule to this Agreement.
Section 6.5. Corporate Examinations and Investigations. Prior
to the Closing Date, each of Buyer and the Company, as the case may be, shall be
entitled, at its cost and
42
expense, through its employees and representatives, to make such investigation
of the assets, liabilities, business and operations of the other party, and such
examination of the books, records and financial condition of the other party,
upon prior notice and during normal business hours. Any such investigation and
examination shall be conducted at reasonable times and under reasonable
circumstances and the applicable party and its respective employees and
representatives, including, without limitation, its counsel and independent
public accountants, shall cooperate with such representatives in connection with
such review and examination. In furtherance of the foregoing, the Company will
provide Buyer with regular updates concerning the preparation of the Audited
Financial Statements and will cause its accountants to give reasonable access to
Buyer's accountants during the course of the audit of the Audited Financial
Statements and to discuss such draft Audited Financial Statements with Buyer's
accountants.
Section 6.6. Buyer Approvals. Buyer shall use all reasonable
efforts to obtain as promptly as practicable all necessary approvals,
authorizations and consents of any person or Governmental Entity required to be
obtained by Buyer to consummate the transactions contemplated hereby ("Buyer
Approvals"), and will cooperate with the Company in seeking to obtain all such
approvals, authorizations and consents; provided, however, that neither Buyer
nor any of its Subsidiaries shall be required to take any action to obtain such
approvals, authorizations and consents if such action, either alone or together
with another action, would result in the divestiture of assets by Buyer or the
Company that would directly result in the loss of more than 30% of the Company's
revenues (as of the date hereof). Buyer shall use all reasonable efforts to
provide such information to such persons, bodies and authorities as such
persons, bodies or authorities or the Company may reasonably request.
Section 6.7. Company Approvals. The Company shall use all
reasonable efforts to obtain as promptly as practicable all necessary approvals,
authorizations and consents of any person or Governmental Entity required to be
obtained by the Company to consummate the transactions contemplated hereby
("Company Approvals"), and will cooperate with the Buyer in seeking to obtain
all such approvals, authorizations and consents. The Company shall use all
reasonable efforts to provide such information to such persons, bodies and
authorities as such persons, bodies and authorities or Buyer may reasonably
request.
Section 6.8. Letter of Credit. Buyer has obtained and
delivered to the Company on or before the date hereof a Letter of Credit naming
the Company as beneficiary thereof in the amount of $20,000,000 and in
substantially the form attached hereto as Exhibit C (the "Letter of Credit")
which will remain in full force and effect until December 15, 1998 or as
otherwise provided therein; provided, however, that if the Company exercises its
43
option to extend the Termination Date pursuant to the proviso of Section
10.1(a), Buyer shall cause the Letter of Credit to remain in full force and
effect or a substitute letter of credit containing substantially identical terms
to remain in full force and effect until March 15, 1999 or as otherwise provided
therein; and provided, further, that if the Closing Date is extended beyond
November 30, 1998, solely as a result of clause (a)(v) of the definition of
Closing Date, Buyer shall cause the Letter of Credit to remain in full force and
effect or a substitute letter of credit containing substantially identical terms
to remain in full force and effect until March 15, 1999 or as otherwise provided
therein. The Company agrees with Buyer that it shall not draw upon, or exercise
any rights with respect to, the Letter of Credit unless and only to the extent
the Company is permitted to do so under Article X of this Agreement. In
addition, the Company agrees with Buyer that within one (1) Business Day
following the earlier of (x) the Closing Date, and (y) the date on which this
Agreement is terminated in a manner which does not give rise to a right on the
part of the Company to draw on the Letter of Credit pursuant to Section 10.3,
the Company shall instruct the bank issuing the Letter of Credit to terminate
the Letter of Credit by giving the notice described in clause (ii) of paragraph
5 of the Letter of Credit and shall surrender the Letter of Credit to such bank
for cancellation.
Section 6.9. Further Assurances.
(a) Each of Buyer, Sub and the Company shall execute such
documents and other papers and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby. Each of Buyer, Sub and the Company shall use all reasonable
efforts to cause all actions to effectuate the Merger for which such party is
responsible under this Agreement to be taken as promptly as practicable,
including using all reasonable efforts to obtain all necessary waivers, consents
and approvals (including, but not limited to, filings under the H-S-R Act) and
to lift any injunction or other legal bar to the Merger (and, in each case, to
proceed with the Merger as expeditiously as possible). Notwithstanding the
foregoing, there shall be no action required to be taken and no action will be
taken in order to consummate and make effective the transactions contemplated by
this Agreement if such action, either alone or together with another action,
would result in the divestiture of assets by Buyer or the Company that would
directly result in the loss of more than 30% of the Company's revenues (as of
the date hereof).
(b) In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and/or directors of Buyer, the Company, Questor and the
Surviving Corporation shall take all such necessary action.
44
Section 6.10. Buyer Board of Directors. As of the Effective
Time, Buyer's Board of Directors shall cause at least one person designated on
Schedule 6.10 (the "Designee") to be nominated to Buyer's Board of Directors and
shall use its commercially reasonable efforts to cause such Designee to be
elected to Buyer's Board of Directors until the earliest to occur of (a) the
third anniversary of the Closing Date, (b) the disposition by Questor of 75% of
the shares of Buyer Class A Common Stock acquired by Questor pursuant to Article
III hereof, or (c) the acquisition by Questor of a Controlling Interest in any
person listed on Annex I attached hereto. In furtherance of its obligations
under this Section 6.10, Buyer, among other things, shall no later than the
Effective Time increase the number of directors on its Board of Directors by one
and elect the initial Designee set forth on Schedule 6.10 to the Buyer's Board
of Directors.
Section 6.11. Indemnification of Company Officers and
Directors; Insurance.
(a) Buyer agrees, for a period of six years following the
Effective Time, not to amend the indemnification provisions set forth in the
Certificate of Incorporation or By-laws of the Surviving Corporation in a manner
that would adversely affect the rights of the Company's officers, directors and
employees to indemnification and advancement of expenses thereunder and agrees
to cause the Surviving Corporation to fulfill and honor such obligations to the
maximum extent permitted by law; provided, however, that nothing in this Section
6.11 shall prevent Buyer from effecting any merger, reorganization or
consolidation of the Surviving Corporation.
(b) Buyer shall cause to be maintained in effect for a period
of six years after the Effective Time the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
the Company with respect to matters occurring prior to the Effective Time;
provided, however, that (i) Buyer may substitute therefor policies of
substantially the same coverage containing terms and conditions that are
substantially the same for the indemnified parties to the extent reasonably
available and (ii) Buyer shall not be required to pay an annual premium for such
insurance in excess of one hundred and fifty percent (150%) of the last annual
premium paid prior to the date of this Agreement, but in such case shall
purchase the maximum amount of coverage possible for such premium.
(c) This Section 6.11 is intended to be for the benefit of,
and shall be enforceable by, the indemnified parties referred to herein, their
heirs and personal representatives and shall be binding on Buyer, Sub and the
Surviving Corporation and their respective successors and assigns.
Section 6.12. Confidentiality. Questor and Buyer reaffirm
their obligations to comply with the provisions set
45
forth in the Confidentiality Agreement and agree that such obligations shall
survive the termination of this Agreement. The Significant Stockholders and the
Company agree to keep confidential all nonpublic information relating to Buyer
received in connection with the transactions contemplated by this Agreement.
Section 6.13. Certificates, Opinions, Etc. At the Closing,
each of Buyer, Sub and the Company shall deliver such opinions (covering the
matters listed on Annexes II and III hereto) and certificates as are reasonably
required by the other parties.
Section 6.14. Interim Financials. As promptly as practicable
after each monthly accounting period subsequent to the date of this Agreement
and prior to the Effective Time, the Company will cause to be delivered to Buyer
periodic financial reports relating to the Company and its Subsidiaries in the
form in which the Company customarily prepares such reports for its internal
purposes, including, without limitation, a monthly interim unaudited balance
sheet and income statement. The Company covenants that such interim statements
will be prepared on a basis consistent with prior interim periods.
Section 6.15. Communications. In connection with the continued
operation of the business of the Company and its Subsidiaries subsequent to the
date of this Agreement and prior to the Effective Time, the Company shall
promptly respond in good faith to any reasonable inquiries from representatives
of Buyer with respect to the ongoing operations of the Company and its
Subsidiaries. The Company acknowledges that Buyer does not and will not waive
any rights it may have under this Agreement as a result of such communications.
Section 6.16. Releases. If the Closing occurs, then the
Company hereby unconditionally, absolutely and irrevocably releases each
Significant Stockholder and each Significant Stockholder hereby unconditionally,
absolutely and irrevocably releases the Company from any and all claims, rights
and causes of action which such releasing person may have or may have had
against the released party, prior to, or arising with respect to any acts or
omissions occurring or facts or circumstances existing prior to, the Closing;
provided, however, that nothing in this Section 6.16 shall release any rights
which any of these parties may have under this Agreement.
Section 6.17. Transfer Taxes. Buyer and the Company shall
cooperate in the preparation, execution and filing of all returns, applications
or other documents regarding any real property transfer, stamp, recording,
documentary of other taxes (including, without limitation, any New York State
Real Estate Transfer Tax) and any other fees and similar taxes which become
payable in connection with the Merger (collectively, "Transfer Taxes"). From and
after the Effective Date, Buyer shall pay or
46
cause to be paid, without deduction or withholding from any amounts payable to
the holders of the Outstanding Company Shares, all Transfer Taxes.
Section 6.18. Standstill. If the Closing occurs, each of
Questor and Madison Dearborn agrees that thereafter, unless it shall have been
specifically invited in writing by the Board of Directors of Buyer, it will not,
directly or indirectly (a) acquire any securities that would result in the
beneficial ownership of Buyer Class A Common Stock by it in an amount equal to
the sum of (x) the amount of Buyer Class A Common Stock received by it under the
terms of this Agreement, multiplied by (y) 2 (two) (subject to a corresponding
adjustment in the event the outstanding shares of Buyer Class A Common Stock
shall be changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, stock dividend, etc.), or (b)
cause or participate in the making directly or indirectly of any proxy contest
or any tender or exchange offer for securities of Buyer, or (c) take any actions
to seek to obtain control of the Board of Directors of Buyer. This Section 6.18,
and the obligations of Questor and Madison Dearborn hereunder, shall terminate
upon the earliest to occur of (a) the twenty-fourth monthly anniversary of the
date hereof, (b) a Buyer Change of Control Event or (c) the date upon which
Xxxxxxx Xxxxxx ceases to be, or gives or receives notice with respect to
terminating his role as, Chief Executive Officer of Buyer.
Section 6.19. Buyer's Stockholders' Meeting. Buyer shall use
all commercially reasonable efforts to have occur as promptly as practicable a
meeting of Buyer's stockholders to vote upon a proposed increase in the
authorized capital stock of Buyer to permit Buyer to issue the Maximum Merger
Shares. Each party hereto shall promptly furnish all information concerning it
as any other party hereto may reasonably request in connection with the Proxy
Statement, the Registration Statement on Form S-3, or the Registration Statement
on Form S-4 or in connection with compliance with any state blue sky or
securities laws.
Section 6.20. Stock Purchases, Repurchases and Sales;
Registration Rights.
If the Closing occurs:
(a) Buyer will not, and will not permit any of its
Subsidiaries or controlled Affiliates to, purchase any shares of Buyer Common
Stock in open market, privately negotiated transactions or otherwise, on any day
during the period commencing 30 trading days before the Annual Measurement Date,
Final Measurement Date and Warrant Measurement Date, as the case may be, and
ending on the Annual Measurement Date, Final Measurement Date and Warrant
Measurement Date, as the case may be (the "Blackout Period"). In addition, Buyer
will not, and will not permit any of its Subsidiaries or controlled Affiliates
to, make any announcement with respect to any upcoming or future
00
xxxxxxxx, xxxxxxxxxx, buy-back or similar transaction involving any shares of
Buyer Common Stock during the Blackout Period or within thirty (30) days prior
thereto.
(b) Each of Questor and Madison Dearborn will not, and will
not permit any of their Subsidiaries or controlled Affiliates to, sell any
shares of Buyer Common Stock in open market, privately negotiated transactions
or otherwise, on any day during the Blackout Period. In addition, Questor and
Madison Dearborn will not, and will not permit any of their Subsidiaries or
controlled Affiliates to, make any announcement with respect to any upcoming or
future sale or similar transaction involving any shares of Buyer Common Stock
during the Blackout Period or within thirty (30) days prior thereto.
(c) Sections 6.20(a) and 6.20(b) shall terminate upon the
Warrant Measurement Date.
(d) Each Significant Stockholder agrees to comply with its
obligations as a Holder under the registration rights provisions set forth in
Exhibit E hereto.
Section 6.21. Listing. Prior to issuance, Buyer shall use its
commercially reasonable efforts to cause to be approved for listing on the NYSE,
subject to official notice of issuance, all shares of Buyer Class A Common Stock
to be issued pursuant to Sections 3.2, 3.4 and 3.7 hereof and to be issued upon
exercise of, or in exchange for, the Warrants granted pursuant to Section 3.5
hereof on the NYSE.
Section 6.22. Registration Rights. Buyer shall take such
actions as are necessary to provide the registration rights set forth in Exhibit
E hereto to the holders of shares of Buyer Class A Common Stock issued pursuant
to Section 3.2, 3.4 or 3.7 or issuable upon exercise of, or issued in exchange
for, the Warrants granted pursuant to Section 3.5, and Buyer shall take
such actions to register shares of Buyer Class A Common Stock issuable
thereunder as provided therein. This Section 6.22 shall survive and be in full
force and effect until the Termination Date (as defined in Exhibit E hereto).
Section 6.23. Buyer Review of Disclosure Schedules.
Simultaneously with the execution and delivery of this Agreement, the Company
shall deliver to Buyer all Schedules required to be provided by the Company
under this Agreement (the "Disclosure Schedules"). The Company shall afford such
access to management as Buyer and its representatives may reasonably require in
their review of such Disclosure Schedules. The Company shall have the right to
supplement the Disclosure Schedules prior to 5 P.M., E.S.T., Friday, March 6,
1998; provided, however, that the Buyer shall have a reasonable opportunity to
review such supplemented schedules prior to 5 P.M., E.S.T., Friday, March 6,
1998. If Buyer notifies the Company in writing prior to 5 P.M., E.S.T., Friday,
March 6, 1998, that such Disclosure Schedules are not
48
reasonably satisfactory to it, Buyer shall have the right to terminate this
Agreement. Such Disclosure Schedules so supplemented shall be deemed delivered
on the date hereof.
ARTICLE VII.
Conditions Precedent To Merger
The respective obligations of each party to effect the Merger
shall be subject to the satisfaction on or prior to the Closing Date of each of
the following conditions:
(a) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental authority or other regulatory
body, as may be required to be obtained by the Company or Buyer in connection
with the performance of this Agreement have been received; provided, however,
that such condition shall not be deemed satisfied if such consents,
authorizations, orders or approvals are conditioned upon the divestiture of
assets by the Buyer or the Company that would directly result in the loss of
more than 30% of the Company's revenues (as of the date hereof).
(b) Early termination shall have been granted or applicable
waiting periods shall have expired under the H-S-R Act in connection with the
transactions contemplated hereby.
(c) No governmental authority or other regulatory body
(including any court of competent jurisdiction ) shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of making illegal, or in any way
prohibiting the Merger (the Company and Buyer agreeing to use their commercially
reasonable efforts to have any such injunction lifted).
(d) No governmental authority or other regulatory body shall
have commenced any action, suit or proceeding seeking to enjoin or otherwise
prohibit the transactions contemplated hereby, nor shall there be a substantial
likelihood that any governmental authority or other regulatory body will seek to
commence any such action, suit or proceeding.
ARTICLE VIII.
Closing
The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place at the offices of Xxxxxxx Xxxx & Xxxxxxxxx,
000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00 a.m. local time on the
Closing Date or at such other time and place as the parties may mutually agree.
49
ARTICLE IX.
Representations and Warranties as of the Closing Date; Survival;
Material Breaches
Section 9.1. Representations and Warranties as of the Closing
Date.
(a) The representations and warranties of Buyer and the
Company shall be deemed to be reaffirmed in all material respects at and as of
Closing Date as though made at and as of the Closing Date, except to the extent
contemplated by this Agreement, and except to the extent such representations
and warranties (i) speak as of the date hereof or a specified date (which
representations and warranties shall be deemed to be reaffirmed in all material
respects solely as of such date) or (ii) are already qualified by materiality,
in which event such representations and warranties shall be deemed to be
reaffirmed as of the appropriate date in all respects.
(b) On the Closing Date, each of the Company and the Buyer
shall deliver a certificate of an appropriate senior officer as to compliance
with Section 9.1(a).
(c) Not later than five (5) Business Days prior to the
Closing, the Company and Buyer will each supplement or amend the Schedules
relating to their respective representations and warranties in this Agreement in
order to make such representations true and correct as of the Closing Date. Such
supplemented or updated schedules shall not be deemed to cure (or affect the
rights of any party with respect to) any breach of any representation or
warranty made on the date hereof.
Section 9.2. Survival. The representations and warranties made
by Buyer, Sub or the Company and the covenants made by the Company or the
Significant Stockholders shall survive the execution and delivery of this
Agreement for a period ending 120 days after the Closing Date, and shall
terminate and have no further force or effect thereafter, except that the
covenants made by the Significant Stockholders in Sections 6.16, 6.18 and 6.20
shall survive until their expiration or termination in accordance with the terms
thereof, and except as set forth in Section 9.3 hereof. The covenants made by
Buyer and Sub shall survive the Closing except in accordance with the terms
thereof.
Section 9.3. Certain Material Breaches.
(a) If the Closing occurs, the sole and exclusive remedy of Buyer and
Sub in the event that any of the representations and warranties of the Company
(without giving effect to any qualifications contained in any representation and
warranty set forth in Article IV hereof with respect to any Material Adverse
Effect on the Company) fails to be true and correct (i) as of the date hereof
or, if any representation and warranty speaks as of a
50
specified date, then as of such date or (ii) in the case of representations and
warranties that do not speak of a specified date then as of the Closing Date or
one or more of the covenants of the Company or the Significant Stockholders set
forth in this Agreement hereof fails to be performed on or prior to the Closing
Date is to cause the Aggregate Merger Shares to be adjusted to the extent
provided in Section 3.3. Each of Buyer and Sub, on the one hand, and the Company
and each Significant Stockholder, on the other hand, shall notify the other in
writing of each event or circumstance known to it that it discovers after the
date hereof constituting or causing a failure of any representation or warranty
to be true and correct as of the applicable date or a covenant made or agreed to
by the Company or any Significant Stockholder promptly after such event or
circumstance becomes known to it, but in any event no later than five (5)
Business Days prior to the Closing Date, or if Buyer or Sub obtains such
knowledge thereafter, Buyer shall notify the Indemnified Representative (as
defined in the Holdback Escrow Agreement)) in writing promptly after obtaining
such knowledge; provided, however, that in no event shall any notice given after
the Cut-off Date (as defined in the Holdback Escrow Agreement) result in Buyer
or Sub having any right to any adjustment in accordance with Section 3.3 or any
other remedy. Within two (2) Business Days after receiving any such notice from
the Company or a Significant Stockholder, Buyer shall inform the Company and the
Significant Stockholders in writing of Buyer's good faith estimate of the value
of any such failures of the representations and warranties (without giving
effect to any qualifiers as to Material Adverse Effect on the Company) to be
true and correct or such failures of covenants to be performed. If prior to the
Closing Date Buyer notifies the Company and the Significant Stockholders in
writing that (i) Buyer estimates that the value (determined in accordance with
Section 3.3(a)) of any such failures, individually or in the aggregate, exceeds
$75,000,000, (ii) such value is in excess of $75,000,000 and (iii) as a result
of such failures, Buyer is unable, after having used its good faith efforts, to
obtain the financing necessary to pay the Aggregate Cash Consideration, then
Buyer shall have the right to terminate this Agreement pursuant to Section
10.1(d) if there is a determination in accordance with the procedures set forth
below that the value reduction of such failures, individually or in the
aggregate, as calculated pursuant to Section 3.3(a) exceeds $75,000,000. Buyer
shall provide the Company and each Significant Stockholder with all information
reasonably requested in order to make a determination with respect to the value
reduction associated with any such failure or alleged failure. The parties
hereto shall negotiate in good faith to agree upon any such value reduction. If
such an agreement cannot be reached, then such value reduction shall be
determined pursuant to the dispute mechanisms set forth in Section 2.2(f) of the
Holdback Escrow Agreement (the date of final resolution shall be the
"Determination Date").
51
(b) Breaches of the representations, warranties and covenants
of Buyer or Sub contained in this Agreement shall not give the Company a right
to terminate this Agreement, but shall instead entitle the holders of
Outstanding Company Shares immediately prior to the Effective Time to seek
damages in respect thereof. Each of Buyer and Sub, on the one hand, and the
Company, on the other hand, shall notify the other in writing of each event or
circumstance known to it that it discovers after the date hereof constituting or
causing a breach of any of the representations, warranties and covenants made by
Buyer or Sub promptly after such event or circumstance becomes known to it, but
in any event no later than five (5) Business Days prior to the Closing Date, or
if thereafter, then promptly after obtaining such knowledge.
ARTICLE X.
Termination of Agreement
Section 10.1. Termination. This Agreement may be terminated
prior to the Closing as follows:
(a) by either Buyer or the Company if the conditions specified
in Article VII have not been satisfied by November 30, 1998 (the "Termination
Date"); provided, however, that if the condition described in paragraph (d) of
Article VII is not satisfied prior to the Termination Date, no later than such
Termination Date, the Company may at its option given in writing to Buyer extend
the Termination Date to February 28, 1999;
(b) by either Buyer or the Company if a final and no longer
appealable permanent injunction (but not any temporary restraining order or
preliminary injunction) has been issued by final order of any federal or state
court in the United States which prevents the consummation of the Merger;
(c) by the Company if Buyer or Sub shall have breached any of
their respective obligations under Article VI of this Agreement in any material
respect and such breach continues for a period of ten days after the receipt of
notice of the breach from the Company;
(d) by Buyer pursuant to Section 6.23 or if the Company or any
Significant Stockholder shall have breached any of its representations,
warranties or covenants under the circumstances set forth in the fourth sentence
of Section 9.3(a) that give rise to Buyer's right to terminate this Agreement;
or
(e) at any time on or prior to the Closing Date, by mutual
written consent of Buyer and the Company.
Section 10.2. Effect of Termination. If this Agreement is
terminated and the transactions contemplated hereby are not consummated as
described above, this Agreement shall
52
become void and be of no further force and effect, except for the provisions of
this Agreement relating to the obligations of parties under Sections 6.8 (Letter
of Credit), 6.12 (Confidentiality), 10.2 (Effect of Termination) and 10.3
(Amounts Payable in Connection with Termination). None of the parties hereto
shall have any liability in respect of a termination of this Agreement prior to
Closing, except to the extent set forth in Section 10.3 and except to the extent
that termination results from the intentional, willful or knowing violation of
the representations, warranties, covenants or agreements of such party under
this Agreement; provided, however, that notwithstanding anything to the contrary
contained herein, in the event of any such termination, Questor shall have no
liability for breach of any covenant contained herein.
Section 10.3. Amounts Payable in Connection with
Termination.
(a) If this Agreement is terminated pursuant to Section
10.1(a) or Section 10.1(b) (but only with respect to such Section 10.1(b) if
such permanent injunction relates to antitrust matters), the Company, upon
providing or receiving notice of such termination, shall have the right to
immediately draw the Letter of Credit in an amount equal to $7,500,000 as agreed
liquidated damages.
(b) If this Agreement is terminated for any reason, except
pursuant to Section 10.1(a), 10.1(b) (under the circumstances described in
Section 10.3(a)) or 10.1(d), the Company, upon providing or receiving notice of
such termination, shall have the right to immediately draw the Letter of Credit
in the full amount of $20,000,000 as agreed partial liquidated damages;
provided, however, that the Company shall be entitled to recovery from Buyer for
any damages suffered by it as a result of such termination up to an amount equal
to $75,000,000 (including the amount drawn under the Letter of Credit); and
provided, further, that the Company shall have no obligation to accept
liquidated damages and at its option shall have the right to seek specific
performance.
ARTICLE XI.
Definitions
Section 11.1. Definitions. The following terms when used in
this Agreement shall have the following meanings:
"Accredited Investor" shall have the meaning specified in
Regulation D promulgated under the Securities Act.
"Acquisition Proposal" has the meaning set forth in
Section 6.3(a).
53
"Affiliate" (or "affiliates" as the context may require), with
respect to any person, means any other person controlling, controlled by or
under common control with such person.
"Aggregate Cash Consideration" has the meaning set forth in
Section 3.1(b).
"Aggregate Merger Shares" has the meaning set forth in Section
3.1(a).
"Agreement" has the meaning set forth in the preamble hereof.
"Annual Disposition Price" has the meaning set forth in
Section 3.4(b).
"Annual Make-Whole Amount" has the meaning set forth in
Section 3.4(b).
"Annual Measurement Date" has the meaning set forth in
Section 3.4(b).
"Annual Shares" has the meaning set forth in Section 3.4(b).
"Appraisal Addition Amount" has the meaning set forth in
Section 3.8(b).
"Appraisal Reduction Amount" has the meaning set forth in
Section 3.8(b).
"Audited Financial Statements" means the consolidated
statements of income, changes in stockholders' equity and cash flow of the
Company and its Subsidiaries for the fiscal year ended December 31, 1997, and a
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such year, in each case audited by Coopers & Xxxxxxx.
"Blackout Period" has the meaning set forth in Section 6.20.
"Business Combination" has the meaning set forth in
Section 3.16.
"Business Day" means any day other than a Saturday or a
Sunday, or a day on which banking institutions in the State of New York are
obligated by law or executive order to close.
"Buyer" has the meaning set forth in the preamble hereof.
"Buyer Approvals" has the meaning set forth in Section 6.6.
54
"Buyer Change of Control Event" shall mean a transaction or
series of related transactions in which (i) a person or group acquires shares of
Buyer which represent a majority of the outstanding voting shares after giving
effect to such transaction or (ii) the members of the Board of Directors of
Buyer immediately prior to such transaction(s) no longer constitute a majority
of the Board of Directors of Buyer or any successor thereto immediately
following such transaction(s).
"Buyer Class A Common Stock" has the meaning set forth in
Section 5.2(a).
"Buyer Class B Common Stock" has the meaning set forth in
Section 5.2(a).
"Buyer Common Stock" has the meaning set forth in
Section 5.2(a).
"Buyer Public Reports" has the meaning set forth in
Section 5.4.
"Certificates" has the meaning set forth in Section 3.9(a).
"Closing" has the meaning set forth in Article VIII.
"Closing Date" means (a) the later of (i) the second Business
Day following the day on which the conditions to the consummation of the Merger
specified in Article VII have been satisfied or waived, (ii) Xxxxx 00, 0000,
(xxx) the date that is thirty (30) days after the meeting of Buyer's
stockholders contemplated in Section 6.19 hereof, (iv) the date that is thirty
(30) days after the earliest to occur of receipt of (A) a grant of early
termination, and (B) the expiration of all applicable waiting periods (including
extensions thereof), in each case under the H-S-R Act, in connection with the
transactions contemplated hereby, and (v) if a notice has been given by Buyer
under the fourth sentence of Section 9.3(a), the date that is fifteen (15) days
after the Determination Date or (b) such other date as the parties hereto agree
in writing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preamble hereof.
"Company Approvals" has the meaning set forth in Section 6.7.
"Company Common Stock" has the meaning set forth in
Section 4.2(a).
55
"Company Intellectual Property" has the meaning set forth in
Section 4.8.
"Company's Knowledge" or similar language means the actual
knowledge of the Company's Chief Executive Officer, President, Chief Financial
Officer and General Counsel and such knowledge which each such person should be
reasonably expected to have in such capacity.
"Company Public Reports" has the meaning set forth in
Section 4.4.
"Company Stockholders" (or "Company Stockholder" as the
context may require) has the meaning set forth in Section 3.2(a).
"Company Subsidiary Securities" has the meaning set forth in
Section 4.1(e).
"Confidentiality Agreement" has the meaning set forth in
Section 12.3.
"Contingent Additional Consideration" has the meaning set
forth in Section 3.4(a).
"Contracts" has the meaning set forth in Section 4.16.
"Controlling Interest", with respect to any person, shall mean
the ownership of shares which represent 40% of the outstanding voting stock of
such person.
"Copyright License Agreement" shall mean the copyright
agreement, dated October 17, 1996, by and between Ryder Truck Rental, Inc., a
Florida corporation and the Company.
"Delaware Corporation Law" has the meaning set forth in
Section 1.2(a).
"Designee" has the meaning set forth in Section 6.10.
"Determination Date" has the meaning set forth in
Section 9.3(b).
"Disclosed Leases" has the meaning set forth in
Section 4.12(b).
"Disclosure Schedule" has the meaning set forth in
Section 6.23.
"Disposed Annual Share" (or "Disposed Annual Shares" as the
context may require) has the meaning set forth in Section 3.4(b).
"Disposed Annual Value" has the meaning set forth in
Section 3.4(b).
56
"Disposed Final Shares" has the meaning set forth in
Section 3.4(c).
"Disposed Final Value" has the meaning set forth in
Section 3.4(c).
"Dissenting Shares" has the meaning set forth in
Section 3.8.
"Distribution" (or "Distributions" as the context may require)
means any distribution of cash, securities or property on or in respect of the
Company Common Stock or Buyer Common Stock, as the case may be, whether as a
dividend or otherwise.
"Effective Time" has the meaning set forth in Section 1.2(b).
"Employee Benefit Plans" has the meaning set forth in
Section 4.7(a).
"Environmental Law" has the meaning set forth in
Section 4.10(b).
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Company, is treated as a single employer
under Section 414(b) or (c) of the Code, or solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Claim Event" has the meaning set forth in
Section 3.6(a).
"Escrow Holdback Shares" has the meaning set forth in
Section 3.6(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the regulations and rulings issued thereunder.
"Exchange Agent" has the meaning set forth in Section 3.9(a).
"Exercise Difference" has the meaning set forth in
Section 3.7(a).
"Fees" means the fees of Questor Management Company and
Xxxxxxx Xxxx & Xxxxxxxxx incurred in connection with this Agreement and other
fees payable by the Company to third parties as a result of the execution,
delivery and performance of this Agreement.
57
"Final Disposition Price" has the meaning set forth in
Section 3.4(c).
"Final Make-Whole Amount" has the meaning set forth in
Section 3.4(c).
"Final Measurement Date" has the meaning set forth in
Section 3.4(c).
"Final Shares" has the meaning set forth in Section 3.4(c).
"GAAP" means generally accepted accounting principles in the
United States of America from time to time in effect.
"Governmental Entity" (or "Governmental Entities" as the
context may require) means (a) any international, foreign, federal, state,
county, local or municipal government or administrative agency or political
subdivision thereof, (b) any governmental agency, authority, board, bureau,
commission, department or instrumentality, (c) any court or administrative
tribunal, (d) any non-governmental agency, tribunal or entity that is vested by
a governmental agency with applicable jurisdiction, or (e) any arbitration
tribunal or other non-governmental authority with applicable jurisdiction.
"H-S-R Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Holdback Escrow Agent" has the meaning set forth in
Section 3.6(a).
"Holdback Escrow Agreement" has the meaning set forth in
Section 3.6(a).
"Interim Balance Sheet" has the meaning set forth in
Section 4.4.
"Interim Financial Statements" has the meaning set forth in
Section 4.4.
"IRS" means the Internal Revenue Service or any successor
agency or department.
"Lease" (or "Leases" as the context may require) has the
meaning set forth in Section 4.12(b).
"Letter of Credit" has the meaning set forth in Section 6.8.
"License" has the meaning set forth in Section 4.22.
58
"lien or other encumbrance" (or "liens or other encumbrances"
or "liens or other encumbrance" or "lien or other encumbrances" or similar
language as the context may require or any similar formulation) means any lien,
claim, pledge, mortgage, assessment, security interest, charge, option, right of
first refusal, easement, servitude, adverse claim, transfer restriction under
any stockholder or similar agreement or other encumbrance of any kind.
"Madison Dearborn" means Madison Dearborn Capital Partners,
L.P., a Delaware limited partnership.
"Make-Whole Shares" has the meaning set forth in
Section 3.4(d).
"Market Value" of any share of capital stock as of a specific
date means the volume-weighted average closing prices on the NYSE (or, if such
security is not listed on the NYSE, such other principal exchange or
over-the-counter market on which such security is listed) for the 30 consecutive
days on which trading of such security occurs ending at the close of trading on
such date (or the last trading day prior to such date).
"Material Adverse Effect" has the meaning set forth in
Section 4.1(b).
"Materiality Threshold" has the meaning set forth in
Section 3.3(a).
"Maximum Merger Shares" has the meaning set forth in
Section 1.1(b).
"Merger" has the meaning set forth in the recitals.
"Merger Consideration" has the meaning set forth in
Section 3.2(a).
"Minimum Merger Shares" has the meaning set forth in
Section 1.1(b)
"Multiemployer Plan" has the meaning set forth in
Section 4.7(a).
"NYSE" means the New York Stock Exchange, Inc.
"Options" has the meaning set forth in Section 3.7(a).
"Original Holder" has the meaning set forth in Section 3.4(a).
"Original Shares" has the meaning set forth in Section 3.4(a).
59
"Outstanding Company Shares" means the total number of shares
of Company Common Stock outstanding immediately prior to the Effective Time,
excluding any treasury shares.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency or department.
"Permitted Liens" means (1) statutory liens for Taxes not yet
due and payable, (2) imperfections of title with respect to any Company asset,
and statutory liens or other similar liens arising in the ordinary course of
business with respect to any Company asset, in each case, that do not have a
material adverse effect on the value or use of such asset, (3) mechanics liens
for work performed on any Company asset for which payment therefor is not in
default and (4) those liens or other encumbrances disclosed in Schedule 4.12.
"Permitted Transferee", with respect to any person, means a
transferee (i) that controls, is controlled by, or is under common control with
the transferor, (ii) who is a spouse, child, parent or sibling of the
transferor, or (iii) with respect to a partnership, that is a limited or general
partner of such partnership. For purposes of this definition the word "control"
means with respect to any person, ownership of equity interests representing 50%
or more of the voting interest of such person and the words "controlling" and
"controlled" have correlative meanings.
"person" (or "persons" as the context may require) means any
individual, corporation, partnership, firm, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization,
Governmental Entity or other entity.
"property" (or "properties" as the context may require) means
real, personal or mixed property, tangible or intangible.
"Proxy Statement" has the meaning set forth in Section 4.11.
"Questor" means, collectively, Questor Partners Fund, L.P., a
Delaware limited partnership and Questor Side-by-Side Partners, L.P., a Delaware
limited partnership.
"Receiving Party" has the meaning set forth in Section 12.1.
"Reduction Amount" has the meaning set forth in
Section 3.3(b).
"Releasing Party" has the meaning set forth in Section 12.1.
60
"Remaining Annual Shares" has the meaning set forth in
Section 3.4(b).
"Remaining Final Shares" has the meaning set forth in
Section 3.4(c).
"S-3" has the meaning set forth in Section 4.11.
"S-4" has the meaning set forth in Section 3.14.
"SEC" means the Securities and Exchange Commission or any
successor agency or department.
"Securities Act" means the Securities Act of 1933, as amended,
and the regulations and rulings issued thereunder.
"Significant Stockholders" (or "Significant Stockholder" as
the context may require) has the meaning set forth in the preamble hereof.
"Software License Agreement" means the software license
agreement, dated October 17, 1996, by and between Ryder Truck Rental, Inc., a
Florida corporation, and the Company.
"Special Covenants" has the meaning set forth in Section 12.7.
"Stock Option Plans" has the meaning set forth in
Section 3.7(a).
"Sub" has the meaning set forth in the preamble hereof.
"Subsidiaries" (or "Subsidiary" as the context may require),
means each entity as to which a person, directly or indirectly, owns or has the
power to vote, or to exercise a controlling influence with respect to, 50% or
more of the securities of any class of such entity, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the election
of directors (or persons performing similar functions) of such entity.
"Surviving Corporation" has the meaning set forth in
Section 1.2(a).
"Surviving Person" has the meaning set forth in Section 3.16.
"Taxes" means all taxes, assessments, charges, duties, fees,
levies or other governmental charges (including interest, penalties or additions
associated therewith) including federal, state, city, county, foreign or other
income, franchise, capital stock, real property, personal property, tangible,
withholding, FICA, unemployment compensation, disability, transfer, sales, use,
excise, gross receipts and all other taxes of any kind for
61
which the Company or any Subsidiary of the Company is liable imposed by the
United States or any state, county, city, country or foreign government or
subdivision or agency thereof.
"Tax Return" means a report, return or other information
required to be supplied to a governmental entity with respect to Taxes
including, where permitted or required, combined or consolidated returns for a
group of entities.
"Termination Date" has the meaning set forth in
Section 10.1(a).
"Total Disposed Annual Value" has the meaning set forth in
Section 3.4(b).
"Total Disposed Final Value" has the meaning set forth in
Section 3.4(c).
"Total Remaining Annual Value" has the meaning set forth in
Section 3.4(b).
"Total Remaining Final Value" has the meaning set forth in
Section 3.4(c).
"Total Warrant Value" has the meaning set forth in
Section 3.5(a).
"Trademark License Agreement" means the trademark license
agreement, dated as of October 17, 1996, between Ryder System, Inc., a Florida
corporation and the Company.
"Transaction Price" means $32.9955 per share of Buyer Class A
Common Stock.
"Transfer Tax" (or "Transfer Taxes" as the context may
require) has the meaning set forth in Section 6.17.
"Transferred Intellectual Property" means transferred patents,
transferred software and transferred trademarks as set forth on Schedule 4.8.
"Warrants" (or "Warrant" as the context may require) has the
meaning set forth in Section
-------- -------
3.5(a).
"Warrant Measurement Date" has the meaning set forth in
Section 3.5(a).
"Warrant Value Amount" has the meaning set forth in
Section 3.5(a).
62
ARTICLE XII.
Miscellaneous
Section 12.1. Publicity. So long as this Agreement is in
effect, except as may otherwise be required by law or stock exchange
regulations, prior to making a press release that any party (a "Releasing
Party") may determine to issue in connection with the transactions contemplated
by this Agreement, the Releasing Party will, to the extent possible, promptly
notify the other party of such conclusion and provide to the other party (the
"Receiving Party") a draft of such press release. If the Receiving Party
disagrees with any statement made by the Releasing Party in such press release,
as issued, the Receiving Party shall be entitled to issue its own press release
regarding the matters covered in the press release issued by the Releasing
Party. Buyer and the Company shall jointly distribute a press release in the
form attached hereto as Exhibit D announcing the Merger and related
transactions.
Section 12.2. Notices. Any notice or other communication
required or permitted hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed, sent by facsimile transmission or sent by
certified, registered, express mail or nationally recognized courier service,
postage prepaid. Any such notice shall be deemed given when so delivered
personally or by courier or successfully telegraphed, telexed or sent by
facsimile transmission or, if mailed, five days after the date of deposit in the
United States mails, as follows:
(i) if to Buyer or Sub to:
Budget Group, Inc.
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxx 00000
Attn: Chief Executive Officer
Telecopy No.: (000) 000-0000
with a concurrent copy to:
Budget Group, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxx, Xxxxxxxx 00000-0000
Attn: General Counsel
Telecopy No.: (000) 000-0000
and an additional concurrent copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attn: C. Xxxxxxx Xxxxxx, Esq.
Telecopy No.: 000-000-0000
63
(ii) if to the Company to:
Ryder TRS, Inc.
One Civic Center
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxxx
Telecopy No.: (000) 000-0000
with a concurrent copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
One Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
and an additional concurrent copy to:
Questor Management Company
0000 Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
Any party may by notice given in accordance with this Section
12.2 to the other parties designate another address or person for receipt of
notices hereunder.
Section 12.3. Entire Agreement. This Agreement (including the
Exhibits, Annexes and Schedules hereto) and the agreements contemplated hereby
contain the entire agreement among the parties with respect to the subject
matter hereof, and supersede all prior agreements, written or oral, with respect
thereto. Notwithstanding the execution of this Agreement, the confidentiality
letter by and between Buyer and Questor, as the same may be amended, modified or
supplemented from time to time (the "Confidentiality Agreement"), shall remain
in full force and effect and shall not be superseded by this Agreement.
Section 12.4. Waivers and Amendments; Non Contractual
Remedies; Preservation of Remedies; Liability. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by each of the parties or, in the case of
waiver, by the party waiving compliance. After the Closing Date, no amendment or
modification may be made (i) to the definition of Special Covenants or to any
other provision of this Agreement that affects any of the rights of the Original
Holders with respect to the Special Covenants without the written consent of 51%
of the
64
Original Holders or (ii) to Section 6.11 that adversely affects the rights of
the indemnified parties referred to thereunder. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof. Nor shall any waiver on the part of any party of any such right,
power or privilege, nor any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies of any party based upon,
arising out of or otherwise in respect of any inaccuracy in or breach of any
representation, warranty, covenant or agreement contained in this Agreement
shall in no way be limited by the fact that the act, omission, occurrence or
other state of facts upon which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other representation, warranty,
covenant or agreement contained in this Agreement (or in any other agreement
between the parties) as to which there is no inaccuracy or breach. The
limitations on claims set forth in this Section 12.4 and elsewhere in this
Agreement (including Article X) shall not apply in the case of fraud on the part
of the Company, the Significant Stockholders or Buyer, as the case may be.
Section 12.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 12.6. Binding Effect; No Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns and heirs and legal representatives. Neither
this Agreement, nor any right hereunder, may be assigned by any party without
the prior written consent of the other party hereto, provided however, that
Buyer may assign this Agreement or any of its rights hereunder to one or more of
its Subsidiaries so long as Buyer remains obligated hereunder, and provided
further, that notwithstanding anything in this Section 12.6, Buyer shall not be
released from its obligations under Article III of this Agreement.
Section 12.7. Third Party Beneficiaries. Except for Article
III, Sections 6.10 (Buyer Board of Directors), 6.17 (Transfer Taxes), 6.20
(Buyer Stock Purchases and Repurchases), 6.21 (Listing), 6.22 (Registration
Rights), 9.3 (Certain Material Breaches) and 10.3 (Fees and Expenses), this
Section 12.7 and Exhibit E (collectively, the "Special Covenants"), nothing in
this Agreement is intended or shall be construed to give any person, other than
the parties hereto, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein. On and after the
Closing Date, each of the holders of Original Shares shall be deemed to be third
party beneficiaries with respect to the Special Covenants, and each shall be
entitled to enforce such provisions directly against Buyer or the Surviving
Corporation, as applicable, to the same extent as if such person were a party
hereto. In addition,
65
each of the indemnified parties referred to in Section 6.11
shall be entitled to enforce the provisions thereof directly against Buyer or
the Surviving Corporation, as applicable, to the same extent as if such
indemnified person were a party hereto.
Section 12.8. Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
Section 12.9. Exhibits, Schedules and Annexes. The Exhibits,
Schedules and Annexes are a part of this Agreement as if fully set forth herein.
All references herein to Articles, Sections, subsections, clauses, Exhibits,
Annexes and Schedules shall be deemed references to such parts of this
Agreement, unless the context shall otherwise require.
Section 12.10. Headings. The headings in this Agreement are
for reference only, and shall not affect the interpretation of this Agreement.
Section 12.11. Submission to Jurisdiction; Venue. Any action
or proceeding against any party hereto with respect to this Agreement, except
for (a) any action, proceeding or other dispute with respect to any calculations
made under Section 3.5 (which shall be resolved in the manner set forth in
Section 3.5(c)), and (b) any action, proceeding or dispute with respect to any
adjustment to the Aggregate Merger Shares (which shall be resolved in accordance
with Sections 3.3 and 9.3 of this Agreement and in accordance with Section 2.1
of the Holdback Escrow Agreement), shall be brought in the Court of Chancery of
the State of Delaware or if (but only if) such court does not have subject
matter jurisdiction over such action or proceedings, in the courts of the state
of Delaware and, by execution and delivery of this Agreement, each party hereto
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. Each party hereto
irrevocably consents to the service of process at any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such party at its address set
forth in Section 12.2, such service to become effective thirty days after such
mailing. Nothing herein shall affect the right of any party hereto to serve
process on any other party hereto in any other manner permitted by law. Each
party hereto irrevocably waives any objection which it may now have or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement brought in the courts
referred to above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that
66
any such action or proceeding brought in any such court has been brought in an
inconvenient forum.
Section 12.12. Severability. If any court of competent
jurisdiction determines that any provision of this Agreement is not enforceable
in accordance with its terms, then such provision shall be deemed to be modified
so as to apply such provision, as modified, to the protection of the legitimate
interests of the parties hereto to the fullest extent legally permissible and
shall not affect the validity or enforceability of the remaining provisions of
this Agreement.
67
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
BUDGET GROUP, INC.
By: /s/ XXXXXXX XXXXXX
Xxxxxxx Xxxxxx
Chief Executive Officer
BDG CORPORATION
By: /s/ XXXXX XXXXX
Xxxxx Xxxxx
President
RYDER TRS, INC.
By: /s/ XXX XXXX
Xxx Xxxx
Chairman of the Board and
Chief Executive Officer
68
With respect to Sections 3.4(g),
6.1, 6.3, 6.4(a), 6.9(b), 6.12,
6.18 and 6.20 hereof
QUESTOR PARTNERS FUND, L.P.,
By: Questor General Partner,
L.P., its general partner
By: Questor Principals, Inc.,
its general partner
By: /s/ XXX XXXX
Xxx Xxxx
Managing Principal
QUESTOR SIDE-BY-SIDE PARTNERS,L.P.,
By: Questor Principals, Inc.,
its general partner
By: /s/ XXX XXXX
Xxx Xxxx
Managing Principal
69
With respect to Sections 6.3(b),
6.18 and 6.20 hereof
MADISON DEARBORN CAPITAL PARTNERS,
L.P.
By: Madison Dearborn Partners,
L.P., its general partner
By: Madison Dearborn Partners,
Inc., its general partner
By: /s/ XXXXXX X. XXXXXXX
Xxxxxx X. Xxxxxxx
Vice President
70
EXHIBIT A
Warrant Assumptions
A nationally recognized investment banking firm with significant experience in
the equity derivatives market selected by a majority in interest of the Original
Holders and reasonably satisfactory to Buyer shall determine the aggregate
number of shares issuable upon exercise of the Warrants.
The term of the Warrants will be fixed at five years after the Warrant
Measurement Date.
The exercise price will be 25% above the Market Value as of the Final
Measurement Date.
The valuation methodology for the Warrant will be the then applicable valuation
methodology employed in the dealer market. Concurrently with delivering its
opinion on the determination to the holders and Buyer, the dealer will also
deliver to Buyer and to holders a standing bid at a value price equal to the
Warrant Value Amount for 30 days.
EXHIBIT B
HOLDBACK ESCROW AGREEMENT
THIS AGREEMENT is made and entered into on this day of
________ 1998 by and among Budget Group, Inc., a Delaware corporation ("Buyer"),
Ryder TRS, Inc., a Delaware corporation (the "Company"), [ ], as Escrow Holdback
Agent (the "Escrow Holdback Agent"), and [ ], as representative (the
"Indemnification Representative") of each of the Company's stockholders listed
on Schedule I hereto (the "Original Holders"). Unless otherwise indicated, all
capitalized terms herein shall have the meaning ascribed to such terms in the
Merger Agreement (as defined below). This Agreement shall become effective at
the Effective Time.
RECITALS
WHEREAS, Buyer and its wholly-owned subsidiary, BDG
Corporation, a Delaware corporation ("Sub"), have entered into an Agreement and
Plan of Merger with the Company (the "Merger Agreement"), dated as of March 4,
1998, providing for the merger of Sub with and into the Company (the "Merger");
WHEREAS, the Merger Agreement provides that, at the Effective
Time, certain shares of Buyer Class A Common Stock to be issued pursuant to the
Merger Agreement to the Original Holders will be deposited in escrow pursuant to
this Agreement; and
WHEREAS, pursuant to the terms of the Merger Agreement, the
Original Holders have appointed the Indemnification Representative to act on
their behalf in connection with their rights and obligations hereunder.
NOW, THEREFORE, in consideration of the premises and the
mutual promises and covenants contained in the Merger Agreement and herein, the
parties agree as follows:
1
ARTICLE I
ESCROW AND ESCROW HOLDBACK SHARES
1.1 Deposit of Escrow Holdback Shares. At the Effective Time,
Buyer shall deposit into an escrow account (the "Escrow Account") with the
Escrow Holdback Agent stock certificates representing that number of shares of
Buyer Class A Common Stock (the "Escrow Holdback Shares") equal to
[______________________]. Certificates representing the Escrow Holdback Shares
shall be registered in the name of [ ], as Escrow Holdback Agent. The Escrow
Holdback Shares shall be available to satisfy claims for Damages (as defined
below) and shall be held and distributed by the Escrow Holdback Agent in
accordance with the terms and conditions of this Agreement and the Merger
Agreement.
1.2 Pro Rata Portion. For purposes of this Agreement, "Pro
Rata Portion", with respect to any Original Holder, shall mean that Original
Holder's pro rata portion of the total number of Escrow Holdback Shares based on
the total number of shares of Buyer Class A Common Stock issued to such Original
Holder at the Effective Time pursuant to Sections 3.1 and 3.7 of the Merger
Agreement and the total number of shares of Buyer Class A Common Stock issuable
to all Original Holders at the Effective Time pursuant to Sections 3.1 and 3.7
of the Merger Agreement.
ARTICLE II
APPLICATION OF ESCROW
2.1 Indemnification Obligations.
(a) From and after the Effective Time and subject to the other
provisions of this Agreement and the Merger Agreement, pursuant to and in
accordance with Section 3.3 and Article IX of the Merger Agreement if Buyer
becomes entitled upon the occurrence of certain adjustment events set forth in
Section 3.3 that result in a value reduction to Buyer in accordance with Section
3.3 (the "Damages"), to an adjustment pursuant to Section 3.3, it shall be
entitled to receive Escrow Holdback Shares from each Original Holder based upon
such Original Holder's Pro Rata Portion; provided, however, that such return of
the Escrow Holdback Shares shall be made only to the extent provided in Section
3.3 of the Merger Agreement; and provided, further, that the foregoing deduction
shall not apply to Damages with respect to which Buyer failed to notify the
Indemnification Representative within 120 days after the Closing Date (the
"Cut-off Date").
(b) The obligations of the Original Holders under this Section
2.1 with respect to Damages under the Merger Agreement shall not continue beyond
the Cut-off Date unless, prior to such date, Buyer shall have given to the
Indemnification Representative, with a copy to the Escrow Holdback Agent, a
2
notice of its claim (a "Notice of Claim") for indemnification hereunder, which
Notice of Claim shall be in writing, shall specify in reasonable detail the
basis for such claim, shall be based upon Buyer's good faith belief and shall
specify the amount of Damages (the "Claimed Amount").
(c) Notwithstanding the foregoing, if the Closing occurs,
Buyer's sole remedy with respect to any Damages shall be to make claims against
the Escrow Holdback Shares under this Agreement, except that any failure of any
Significant Stockholder to perform any covenant on or prior to the date hereof
contained in Sections 6.16, 6.18 and 6.20 of the Merger Agreement shall entitle
the party or parties to whom such covenant runs to seek damages from the
breaching party thereto.
(d) For all purposes of this Agreement, the deemed value per
Escrow Holdback Share for purposes of determining the amount of any compensation
payable hereunder shall be the Transaction Price.
(e) The amount of any Damages incurred by Buyer shall be
reduced by the net amount that Buyer, the Company or any of their affiliates
actually recovers in respect of insurance recoveries and insurance proceeds
(exclusive of self insurance), and shall be adjusted to reflect the present
economic value of any tax benefits recognized by Buyer, the Company or any of
their controlled affiliates as a result of such Damages.
2.2 Indemnification Procedures. (a) Upon the commencement of
any action, suit or proceeding relating to a third party claim for which
indemnification may be sought hereunder, Buyer shall promptly give the
Indemnification Representative a Notice of Claim; provided, however, that such
action, suit or proceeding is instituted prior to the Cut-off Date. Within 20
calendar days after delivery of a Notice of Claim, the Indemnification
Representative may, upon written notice thereof to Buyer, assume control of the
defense of such action, suit or proceeding with counsel reasonably satisfactory
to Buyer. If the Indemnification Representative does not so assume control of
such defense, Buyer shall control such defense. The party not controlling such
defense may participate therein at its own expense; provided that, if the
Indemnification Representative assumes control of such defense and Buyer
reasonably believes it is advisable for it to be represented by separate counsel
because there exists a conflict of interest between its interests and those of
the Indemnification Representative with respect to such claim, or there exist
defenses available to Buyer which may not be available to the Indemnification
Representative, or if the Indemnification Representative shall fail to assume
responsibility for such defense, Buyer may retain counsel satisfactory to it and
the reasonable fees and expenses of counsel to Buyer shall be considered
"Damages" for purposes of this Agreement. The party
3
controlling such defense shall keep the other party advised of the status of
such action, suit or proceeding and the defense thereof and shall consider in
good faith recommendations made by the other party with respect thereto.
(b) Buyer shall not agree to any settlement of any action,
suit or proceeding without the prior written consent of the Indemnification
Representative, which consent shall not be unreasonably withheld or delayed. The
Indemnification Representative shall not, without the consent of Buyer, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to Buyer
of a full and unconditional release from all liability in respect to such claim
or litigation or which requires action other than the payment of money by the
Indemnification Representative. Upon the settlement or the entry of a judgment
with respect to a third party claim, Buyer and the Indemnification
Representative shall notify the Escrow Holdback Agent of the amount of Damages
with respect thereto and the number of Escrow Holdback Shares that are payable
hereunder.
(c) For indemnification claims not involving any claim or
legal proceeding by a third party, the procedures in this subsection (c) shall
apply. Within 30 calendar days after delivery of a Notice of Claim, provided
that the Notice of Claim was received prior to the Cut-off Date, the
Indemnification Representative shall provide to Buyer, with a copy to the Escrow
Holdback Agent, a written response (the "Response Notice") in which the
Indemnification Representative shall: (i) agree that some or all of the Escrow
Holdback Shares having a value (as computed pursuant to Section 2.1(d)) equal to
the full Claimed Amount may be released to Buyer, (ii) agree that some of the
Escrow Holdback Shares having a value equal to part, but not all, of the Claimed
Amount (the "Agreed Amount") may be released to Buyer, or (iii) contest that any
of the Escrow Holdback Shares may be released to Buyer or Sub. The
Indemnification Representative may contest the release of the Escrow Holdback
Shares having a value equal to all or a portion of the Claimed Amount only based
upon a good faith belief that all or such portion of the Claimed Amount does not
constitute Damages for which Buyer or Sub is entitled to indemnification
hereunder. If no Response Notice is delivered by the Indemnification
Representative within such 30-day period, the Indemnification Representative
shall be deemed to have agreed that some or all of the Escrow Holdback Shares
having a value equal to all of the Claimed Amount may be released to Buyer, and
the Escrow Holdback Agent shall not be required to obtain the consent of the
Indemnification Representative prior to the distribution of such Escrow Holdback
Shares.
(d) If the Indemnification Representative in the Response
Notice agrees (or is deemed to have agreed) that some or all of the Escrow
Holdback Shares having a value (as computed
4
pursuant to Section 2.1(d)) equal to some or all of the Claimed Amount may be
released to Buyer, the Escrow Holdback Agent shall, promptly following the
earlier of the required delivery date for the Response Notice or the delivery of
the Response Notice, transfer, deliver and assign to Buyer such amount of Escrow
Holdback Shares which have a value equal to the portion of the Claimed Amount
not contested by the Indemnification Representative (or such lesser amount of
Escrow Holdback Shares as is then held).
(e) If the Indemnification Representative in the Response
Notice contests the release of Escrow Holdback Shares having a value equal to
all or part of the Claimed Amount (the "Contested Amount"), the Indemnification
Representative and Buyer shall attempt promptly and in good faith to agree upon
the rights of the parties with respect to the Contested Amount. If the
Indemnification Representative and Buyer should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties and, if such
agreement provides that all or a portion of the Contested Amount is to be paid
to Buyer, the Escrow Holdback Agent shall transfer, assign and deliver to Buyer
a number of Escrow Holdback Shares which have a value (as computed pursuant to
Section 2.1(d)) equal to the amount so agreed. If no such agreement can be
reached after good faith negotiation within 30 calendar days of the delivery of
the Indemnification Representative's Response Notice (or such longer period as
Buyer and the Indemnification Representative may mutually agree), the matter
shall be settled by binding arbitration in Wilmington, Delaware.
(f) All claims shall be settled by a single arbitrator
mutually agreeable to Buyer and the Indemnification Representative, or if they
cannot agree on a single arbitrator within ten calendar days after commencement
of the arbitration, by three arbitrators, in accordance with the Commercial
Arbitration Rules then in effect of the American Arbitration Association (the
"AAA Rules"). If a single arbitrator has not been mutually agreed upon, the
Indemnification Representative and Buyer shall each designate one arbitrator
within five (5) calendar days of the commencement of the arbitration. The
Indemnification Representative and Buyer shall cause such designated arbitrators
mutually to agree upon and designate a third arbitrator; provided, however, that
(i) failing such agreement within ten (10) calendar days of the commencement of
the arbitration, the third arbitrator shall be appointed in accordance with the
AAA Rules, and (ii) if either the Indemnification Representative or Buyer fails
to timely designate an arbitrator, the dispute shall be resolved by the one
arbitrator timely designated. The Original Holders and Buyer shall pay the fees
and expenses of their respectively designated arbitrators and shall bear equally
the fees and expenses of the third arbitrator (or of the sole arbitrator, in the
event a single arbitrator decides the matter). The arbitrators' decision
5
shall relate solely to whether Buyer is entitled to receive the Contested Amount
(or a portion thereof) pursuant to the applicable terms of the Merger Agreement
and this Agreement. The final decision of the arbitrator, or the majority of the
arbitrators in the case of three arbitrators, shall be furnished to the
Indemnification Representative, Buyer or Sub and the Escrow Holdback Agent in
writing no later than 30 calendar days after appointment of the sole arbitrator
(or third arbitrator in cases where there are three arbitrators) and shall
constitute a conclusive determination of the issue in question, binding upon the
Indemnification Representative, the Original Holders or Buyer and the Escrow
Holdback Agent, and shall not be contested by any of them. Such decision may be
used in a court of law only for the purpose of seeking enforcement of the
arbitrators' award. The Escrow Holdback Shares will be distributed in accordance
with the final decision of the arbitrator.
(g) In the event the arbitrator, or the majority of
arbitrators, decide Buyer is entitled to receive the Contested Amount (or a
portion thereof) pursuant to the applicable terms of the Merger Agreement and
this Agreement, within 10 days upon receipt of written notification of such
decision from the arbitrator(s), the Escrow Holdback Agent shall release to
Buyer some or all of the Escrow Holdback Shares having a value (as computed
pursuant to Section 2.1(d)) equal to the Claimed Amount (or portion thereof) as
set forth in the notice from the arbitrator(s).
(h) Any and all claims for indemnification shall be asserted
in writing before the Cut-off Date.
2.3 Distribution of Escrow Holdback Shares.
(a) The Escrow Holdback Shares not returned to Buyer shall be
held by the Escrow Holdback Agent until the 120th day after the Closing Date
(such date, the "Termination Date"), at which time the Escrow Holdback Agent
shall distribute to Original Holders the Escrow Holdback Shares set forth
opposite such Original Holder's name on Schedule I hereto, less (i) a number of
Escrow Holdback Shares sufficient to satisfy any pending claims, and (ii) the
number of shares retained by the Indemnification Representative to cover the
reasonable expenses incurred by the Indemnification Representative hereunder.
(b) Buyer and the Indemnification Representative shall jointly
notify the Escrow Holdback Agent of the number of Escrow Holdback Shares to be
distributed to each Original Holder no later than six Business Days after the
Termination Date. In the event either Buyer or the Indemnification
Representative fails to so notify the Escrow Holdback Agent within six (6)
Business Days after the Termination Date, the Escrow Holdback Agent may act on
the instruction of the more diligent party giving notice to the Escrow Holdback
Agent.
The Escrow Holdback Shares in the Escrow
6
Account not so distributed shall be retained by the Escrow Holdback Agent until
all pending claims are resolved.
2.4 Ownership of Escrow Holdback Shares; Voting Rights. Each
Original Holder shall have all indicia of ownership of the Escrow Holdback
Shares while they are held in escrow, including, without limitation, the rights
to vote such shares and receive distributions thereon and the obligations to pay
all taxes, assessments and charges with respect thereto; provided, however, that
any distribution (other than ordinary distributions of cash paid as a dividend
by Buyer), on or with respect to such Escrow Holdback Shares, and any other
shares or securities into which such Escrow Holdback Shares may be changed or
for which they may be exchanged pursuant to corporate action of Buyer affecting
holders of Buyer's capital stock generally, shall be delivered to and held by
the Escrow Holdback Agent in escrow and shall be subject to the provisions of
this Agreement. Any distribution with respect to an Escrow Holdback Share which
is delivered to and held in Escrow hereunder shall be either distributed to the
Original Holders or returned to Buyer in the same manner as the Escrow Holdback
Shares to which such distribution relates.
ARTICLE III
MISCELLANEOUS
3.1 Notices. Any notice or other communication required or
permitted to be given by one of the parties hereto to the other under this
Agreement shall be considered as properly given if duly reduced to writing and
(i) delivered in person, or (ii) mailed by first class mail, registered or
certified, with return receipt requested and postage prepaid, or (iii)
transported by official carrier (with notice of receipt requested and postage
prepaid) to the party entitled thereto and if mailed or transported, addressed
to the respective addresses set forth below (or such other address as may have
been prior thereto specified by notice given as contemplated by this section)
and, if to the Original Holders, to the address of such stockholder as set forth
in the stock record books of the Company, and:
(a) If to the Indemnification Representative:
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
7
(b) If to Buyer:
Budget Group, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxx, Xxxxxxxx 00000-0000
Attention: General Counsel
Telecopy No.: (000) 000-0000
with a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Attn: C. Xxxxxxx Xxxxxx, Esq.
Telecopy: (000) 000-0000
(c) If to the Escrow Holdback Agent:
----------------------
----------------------
----------------------
----------------------
3.2 Termination. This Agreement will terminate when all of the
Escrow Holdback Shares in the Escrow Account have been distributed according to
its terms, except Section 3.9, which shall remain in full force and effect for
so long as the Escrow Holdback Agent may have any liability hereunder.
3.3 Entire Agreement. This Agreement represents the entire
agreement by and among Buyer, the Company, the Original Holders, the
Indemnification Representative and the Escrow Holdback Agent with respect to the
subject matter hereof and supersedes any prior written or oral agreements
concerning the same. This Agreement does not affect the Merger Agreement or any
agreement entered into contemporaneously therewith and herewith.
3.4 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware without giving effect to
conflicts of laws principles.
3.5 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provisions shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.6 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the parties and
their respective successors and permitted assigns.
8
3.7 Amendment. This Agreement may not be amended, and no terms
of this Agreement may be waived, without the specific written consent of the
parties that are signatories to this Agreement, and no waiver shall constitute a
waiver of any subsequent events.
3.8 Counterparts. This Agreement may be signed in
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.
3.9 Escrow Holdback Agent.
(a) The Escrow Holdback Agent shall have no responsibility or
obligation of any kind in connection with the Escrow Holdback Shares, and shall
not be required to deliver the same or any part thereof or take any action with
respect to any matters that might arise in connection therewith, other than to
receive, hold and make delivery of the Escrow Holdback Shares as herein provided
or by reason of a judgment or order of a court of competent jurisdiction or
arbitrator's award.
(b) The Escrow Holdback Agent shall not be bound by any
agreement between any of the other parties hereto, irrespective of whether the
Escrow Holdback Agent has knowledge of the existence of any such agreement or
terms and provisions thereof, the Escrow Holdback Agent's only duty, liability
and responsibility being to receive, hold and deliver the Escrow Holdback Shares
as herein provided. The Escrow Holdback Agent shall not be required in any way
to determine the validity or sufficiency, whether in form or substance, of the
Escrow Holdback Shares or of any instrument, document, certificate, statement or
notice referred to in this Agreement or contemplated hereby, or the identity or
authority of the persons executing the same, and it shall be sufficient if any
writing purporting to be such instrument, document, certificate, statement or
notice that is delivered to the Escrow Holdback Agent purports on its face to be
correct in form and signed or otherwise executed by the party or parties
required to sign or execute the same under this Agreement.
(c) Should any controversy arise between Buyer and the
Indemnification Representative, or any other person, firm or entity, with
respect to this Agreement, the Escrow Holdback Shares, or any part thereof, or
the right of any party or other person to receive the Escrow Holdback Shares, or
should Buyer or the Indemnification Representative fail to designate another
Escrow Holdback Agent as provided below in paragraph (i), or if the Escrow
Holdback Agent should be in doubt as to what action to take, the Escrow Holdback
Agent shall have the right (but not the obligation) to (i) withhold delivery of
the Escrow Holdback Shares until the controversy is resolved, the conflicting
demands are withdrawn or its doubt is resolved, and/or (ii) institute a xxxx of
interpleader in any court of competent jurisdiction to determine the rights of
the parties hereto (the right of the
9
Escrow Holdback Agent to institute such xxxx of interpleader shall not, however,
be deemed to modify the manner in which the Escrow Holdback Agent is entitled to
make disbursements of the Escrow Holdback Shares as hereinabove set forth other
than to tender the Escrow Holdback Shares into the registry of such court).
Should a xxxx of interpleader be instituted, or should the Escrow Holdback Agent
be threatened with litigation or become involved in litigation in any manner
whatsoever on account of this Agreement or the Escrow Holdback Shares, then as
between themselves and the Escrow Holdback Agent, Buyer hereby binds itself and
its successors and assigns to pay the Escrow Holdback Agent its attorney's fees
and any and all other disbursements, expenses, losses, costs and damages of the
Escrow Holdback Agent in connection with or resulting from such threatened or
actual litigation, provided that the Escrow Holdback Agent has given Buyer
prompt notice of any such litigation.
(d) Without in any way limiting any other provisions of this
Agreement, it is expressly understood and agreed that the Escrow Holdback Agent
shall be under no duty or obligations to give any notice, or to do or to omit
the doing of any action or anything with respect to the Escrow Holdback Shares,
except to make disbursements in accordance with the terms of this Agreement. The
Escrow Holdback Agent shall not be liable for any error in judgment or any act
or steps taken or permitted to be taken in good faith, or for any mistake of law
or fact, or for anything it may do or refrain from doing in connection herewith,
except for its own willful misconduct or gross negligence.
(e) Buyer agrees to indemnify the Escrow Holdback Agent
against and hold the Escrow Holdback Agent harmless from any and all losses,
costs, damages, expenses, claims and attorney's fees suffered or incurred by the
Escrow Holdback Agent as a result of, in connection with or arising from or out
of the acts or omissions of Escrow Holdback Agent in the performance of or
pursuant to this Agreement, except such acts or omission as may result from the
Escrow Holdback Agent's willful misconduct or gross negligence.
(f) The Escrow Holdback Agent may consult with its counsel or
other counsel satisfactory to it in respect to any question relating to its
duties or responsibilities hereunder or otherwise in connection herewith and
shall not be liable for any action taken, suffered or omitted by it in good
faith upon the advice of such counsel. The Escrow Holdback Agent may act through
its officers, employees, agents and attorneys.
(g) All of the Escrow Holdback Agent's rights hereunder are
cumulative of any other rights it may have by law or otherwise.
(h) The Escrow Holdback Agent shall be entitled to
reimbursement from Buyer for one-half, and from the Original Holders for
one-half, of its aggregate costs and expenses,
10
including fees and expenses of legal counsel, incurred by it in connection with
the preparation, operation, administration and enforcement of this Agreement.
(i) The Escrow Holdback Agent may resign upon 10 days prior
written notice to Buyer and the Indemnification Representative and, upon joint
instructions of Buyer and the Indemnification Representative, shall deliver the
Escrow Holdback Shares to any designated substitute Escrow Holdback Agent
selected by Buyer and the Indemnification Representative. If such parties fail
to designate a substitute Escrow Holdback Agent within 10 days, the Escrow
Holdback Agent may, in its sole discretion and its sole option, institute a xxxx
of interpleader as contemplated by paragraph (c) above.
(j) Each of Buyer and the Original Holders agree to pay
one-half of the aggregate the amounts payable to the Escrow Holdback Agent as
set forth in the fee schedule in Schedule II hereto in connection with the
services rendered hereunder.
(k) In the event of a dispute between the Escrow Holdback
Agent and Buyer hereunder, such dispute shall be resolved by the parties
pursuant to binding arbitration, in the manner set forth in Section 2.2(f)
hereto.
3.10 Indemnification Representative. The Indemnification
Representative is acting as the agent of the Original Holders. In the event the
Indemnification Representative incurs any expenses in exercising his and the
Original Holders' rights hereunder, he shall be entitled to receive from time to
time (prior to any distribution of Escrow Holdback Shares to the Original
Holders) Escrow Holdback Shares from the Escrow Account to pay any expenses
incurred by him hereunder or to contribution from each Original Holder based
upon such Original Holder's Pro Rata Portion.
3.11 Fractional Shares. Buyer shall not be obligated to
deliver any fractional shares of stock under this Escrow Agreement. In the event
that at any time the number of shares to be delivered would otherwise include a
fraction, Buyer shall redeem such fractional share at a price equal to such
fraction multiplied by the Transaction Price.
3.12 Incapacity of Indemnification Representative. In the
event of the incapacity of the Indemnification Representative, a new
Indemnification Representative shall be appointed by the holders of a majority
of the Escrow Holdback Shares which remain subject to this Agreement, which
appointment shall be promptly notified to the Escrow Holdback Agent and Buyer.
[Signature pages follow]
11
IN WITNESS WHEREOF, the parties to this Agreement have duly
executed the same on the day and year first above written.
BUYER
By:
-----------------------
Name:
Title:
INDEMNIFICATION REPRESENTATIVE:
-----------------------,
as Escrow Holdback Agent
By:
Institutional Trust Officer
12
SCHEDULE I
Company Stockholder Escrow Holdback Shares
------------------- -----------------------
SCHEDULE II
Fee Schedule
------------
EXHIBIT C
[LETTERHEAD OF CREDIT SUISSE/FIRST BOSTON]
IRREVOCABLE STANDBY
LETTER OF CREDIT NO. ___________ March 4, 1998
Ryder TRS, Inc.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Dear Sir or Madam:
1. We hereby establish in your favor our Irrevocable Letter of Credit
No.___________ (this "Letter of Credit"), which shall be effective immediately
and expire as set forth herein, wherein you are hereby irrevocably authorized to
draw on this Letter of Credit for the account of our customer Budget Rent A Car
Corporation (the "Account Party"), in an aggregate amount not exceeding TWENTY
MILLION UNITED STATES DOLLARS (US$20,000,000) (the "Stated Amount"), available
by your sight drafts upon the terms and conditions hereinafter set forth. This
Letter of Credit is delivered pursuant to Section 6.8 of that certain Agreement
and Plan of Merger, dated as of March 4, 1998 (such Agreement and Plan of
Merger, as amended or otherwise modified from time to time, being hereinafter
referred to as the "Merger Agreement"), among Budget Group, Inc., BDG
Corporation, Ryder TRS, Inc. and certain other parties named therein.
2. We hereby irrevocably authorize you to draw on us in an aggregate amount not
to exceed the Stated Amount or such lesser amount in accordance with and subject
to the terms and conditions hereinafter set forth (i) in a single drawing by
your draft referring thereon to the number of this Letter of Credit, payable at
sight on a Business Day (as hereinafter defined) and accompanied by your written
and completed certificate signed by you in substantially the form of Attachment
I attached hereto (such draft, together with such certificate, being your
"Non-Regulatory Termination Draft"), an amount not exceeding the Stated Amount
of this Letter of Credit or (ii) in a single drawing by your draft referring
thereon to the number of this Letter of Credit, payable at sight on a Business
Day and accompanied by your written and completed certificate signed by you in
substantially the form of Attachment II attached hereto (such draft, together
with such certificate, being your "Regulatory Termination Draft", and together
with the Non-Regulatory Termination Draft, the "Drafts") an amount not exceeding
$7,500,000. Drafts presented hereunder shall be dated the date of presentation
and shall be presented with this Letter of Credit at our office at 0 Xxxxx Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, Attention: Xxxxxx Xxxxxxxxxx
(212-322-0046), or at such other office as we may designate by written notice to
1
you. Presentation of the Drafts shall be made by physical presentation of the
Drafts. As used herein, "Business Day" shall mean a day on which banks in New
York City are not required or authorized by law or executive order to remain
closed.
3. We hereby agree that a Draft drawn under and in compliance with the terms of
this Letter of Credit will be duly honored by us if presented as specified on or
before the Termination Date (as defined below). We will honor such Draft without
any inquiry or question whatsoever, including inquiry or question as to the
rights between you and the Account Party. If a presentation in respect of
payment is made by you hereunder at or prior to 11:00 A.M. (New York City time)
on a Business Day on or prior to the Termination Date in strict conformity with
the terms and conditions hereof, payment shall be made to you or your designee
of the amount specified, in immediately available funds, not later than 5:00
P.M. (New York City time) on such Business Day. If a presentation in respect of
payment is made by you hereunder after 11:00 A.M. (New York City time) on a
Business Day on or prior to the Termination Date in strict conformity with the
terms and conditions hereof, payment shall be made to you or your designee of
the amount specified, in immediately available funds, not later than 5:00 P.M.
(New York City time) on the next succeeding Business Day (notwithstanding that
such Business Day may be after the Termination Date).
4. Upon the payment to you or to your designee of the amount specified in a
Draft drawn hereunder, we shall be fully discharged of our obligation under this
Letter of Credit, and we will not thereafter be obligated to make any further
payments under this Letter of Credit to you or any other person.
5. Unless extended in writing by us, this Letter of Credit shall expire on the
date earliest to occur (such earliest date being the "Termination Date") of (i)
December 15, 1998 (such date, as it may be extended in writing by us, the
"Stated Termination Date"), (ii) the date we shall have received notice from the
Account Party and you that the Merger Agreement has terminated in a manner not
permitting the Beneficiary to make a drawing pursuant to the terms of the Merger
Agreement or that the Merger (as defined in the Merger Agreement) has been
consummated, (iii) the date you surrender this Letter of Credit for
cancellation, and (iv) the date we have made payment to you or your designee of
the amount specified in a Draft drawn hereunder. In no event shall any drawing
hereunder be presented after the then-effective Stated Termination Date.
Promptly following the Termination Date, you shall surrender this Letter of
Credit to us for cancellation, if you have not previously done so.
6. This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500 (as the same may be amended and supplemented from time to
time, the "Uniform
2
Customs"), and, to the extent not inconsistent therewith, the laws of the State
of New York, United States of America. All actions arising out of this Letter of
Credit or the enforcement thereof shall be decided by any court of the State of
New York or any U.S. Federal court sitting in the State of New York.
7. This Letter of Credit, or any right hereunder, may not be transferred.
8. Communications (other than drawings) with respect to this Letter of Credit
shall be in writing and shall be addressed to us at 5 World Trade Center, 8th
Floor, Trade Services Department, New York, New York 10048-0928, Attention:
Xxxxxx Xxxxxxxxxx, ((000) 000-0000) or at such other office as we may designate
by written notice to you, or by facsimile transmission received by us at: (212)
803-2080 or at such other number as we may designate by written notice to you,
in each case specifically referring to the number of this Letter of Credit.
9. This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein, except
only a Draft presented hereunder; and any such reference shall not be deemed to
incorporate herein by reference any document, instrument or agreement except as
set forth above.
Very truly yours,
CREDIT SUISSE FIRST BOSTON
NEW YORK BRANCH
By:
Name:
Title: Vice President
By:
Name:
Title: Assistant Vice
President
3
ATTACHMENT I
THIS ATTACHMENT IS AN INTEGRAL PART OF
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH'S
LETTER OF CREDIT NO. _____________
DATED MARCH 4, 1998
[DATE]
Credit Suisse First Boston, New York Branch
0 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx Xxxxxxxxxx
Re: Certificate for Payment under Letter of Credit/
Non-Regulatory Termination Draft
Gentlemen:
We refer to Irrevocable Letter of Credit No. ___________ of Credit
Suisse First Boston, New York Branch (the "Letter of Credit"). Any term that is
defined in the Letter of Credit shall have the same meaning when used herein as
in the Letter of Credit. The undersigned, being a duly authorized officer of
Ryder TRS, Inc. (the "Beneficiary"), does hereby certify to you that:
1. I am the ___________________ of the Beneficiary, for whose benefit the
Letter of Credit was issued and I am authorized to make this
certification to you.
2. The Merger Agreement has terminated in a manner giving rise to the
payment contemplated by Section 10.3(b) thereof.
3. We demand payment in the amount of Twenty Million United States Dollars
(US$20,000,000).
IN WITNESS WHEREOF, this Certificate has been executed and delivered by
the Beneficiary on the ___ day of ____________ 199_.
Ryder TRS, Inc.
By:
Name:
Title:
ATTACHMENT II
THIS ATTACHMENT IS AN INTEGRAL PART OF
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH'S
LETTER OF CREDIT NO. ___________
DATED MARCH 4, 1998
[DATE]
Credit Suisse First Boston, New York Branch
0 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx Xxxxxxxxxx
Re: Certificate for Payment under Letter of Credit/
Regulatory Termination Draft
Gentlemen:
We refer to Irrevocable Letter of Credit No. ___________ of Credit
Suisse First Boston, New York Branch (the "Letter of Credit"). Any term that is
defined in the Letter of Credit shall have the same meaning when used herein as
in the Letter of Credit. The undersigned, being a duly authorized officer of
Ryder TRS, Inc. (the "Beneficiary"), does hereby certify to you that:
1. I am the ________________ of the Beneficiary, for whose benefit the
Letter of Credit was issued and I am authorized to make this
certification to you.
2. The Merger Agreement has terminated in a manner giving rise to the
payment contemplated by Section 10.3(a) thereof.
3. We demand payment in the amount of Seven Million Five Hundred Thousand
United States Dollars (US$7,500,000).
IN WITNESS WHEREOF, this Certificate has been executed and delivered by
the Beneficiary on the ___ day of ____________ 199_.
Ryder TRS, Inc.
By:
Name:
Title:
EXHIBIT D
NEWS RELEASE
BUDGET GROUP TO ACQUIRE RYDER TRS THROUGH MERGER AGREEMENT WITH QUESTOR PARTNERS
-- Nation's No. 2 Consumer Truck Rental Company to Strengthen Budget Group's
Growing Transportation-Related Companies Network--
DAYTONA BEACH, Fla, March 4, 1998
Budget Group, Inc. (NYSE:BD) today announced the signing of a merger
agreement to acquire Ryder TRS, Inc. from an investment group led by Questor
Partners Fund, X.X. Xxxxx TRS is the nation's second-largest consumer truck
rental company. Budget Group, through subsidiary companies and their
franchisees, operates Budget Car and Truck Rental, the third largest car and
truck rental system in the world.
Under the terms of the agreement, Ryder TRS will continue to operate
from its Denver headquarters as a wholly owned subsidiary of Budget Group. Ryder
TRS shareholders will receive up to $265 million comprised of $125 million in
cash, $120 million in Budget Group Class A common stock and up to $20 million of
contingent additional consideration in return for 100 percent of the outstanding
Ryder TRS stock. The stock portion of the agreement represents about 10 percent
of Budget Group's outstanding common stock, or approximately 3.6 million shares.
Budget Group will assume the Ryder TRS fleet debt of $266 million as well as
public notes of $175 million.
Budget Group expects the transaction to be slightly accretive to 1998
earnings and further accretive thereafter.
Ryder TRS has annual revenues of $545 million and a fleet of
approximately 30,000 trucks and vans available for local and one-way rentals
from 4,000 locations across the U.S. "The Ryder TRS transaction is consistent
with our strategy to build a synergistic network of transportation-related
companies," said Xxxxx Xxxxxx, chairman and CEO of Budget Group. "Budget and
Ryder TRS are two of the most distinguished and trusted brand names in the
vehicle rental industry. Ryder TRS fits well with Budget Group's portfolio of
car, truck, van and recreational vehicle rental and sales holdings," Xxxxxx
noted.
Budget Group will align its current Budget Truck Rental operations,
recently acquired Cruise America (a leading RV rental and sales company in North
America), and the Ryder TRS company under a newly established truck rental
division.
Commenting on the benefits of the merger, Xxxxxx stated, "With these
three separate entities under the same division, we
1
will gain significant economies of scale in fleet purchasing and management,
vehicle maintenance, and in the costs of parts, supplies and equipment. In
addition, this union creates opportunities to consolidate key administrative
functions, such as fleet and yield management systems. Ryder TRS' strong,
effective dealer network combined with the continuing successful performance of
the Budget truck rental business, which has recently experienced record growth
in revenue and earnings, creates extensive opportunities to strengthen and grow
the one-way and local truck rental operations throughout North America and
internationally."
"In the 17 months since its separation from Ryder Systems Inc., we have
transformed Ryder TRS into an aggressive stand-alone company with excellent
financial, marketing and general management expertise. Our dealer network is the
envy of the industry," said Xxx Xxxx, managing principal of Questor and chairman
of Ryder TRS. "Ryder TRS is becoming stronger than ever in the truck rental
business, but the global trend toward consolidation in the vehicle rental
industry is inevitable, with strategic mergers providing the most cost
efficiencies and greater access to the capital markets needed to build stronger
operating and financial performance. The shareholders of Ryder TRS look forward
to being shareholders of Budget Group."
The transaction has Ryder TRS shareholder approval and the approval of
the Budget Group board of directors. No further board or shareholder approvals
are required. Closing is expected to occur in the second quarter of 1998
following a vote by Budget Group's shareholders to increase the number of
authorized Class A common shares. As a result of the merger, Xxx Xxxx will be
elected to the board of directors of Budget Group. Alix was a past CEO and
president of National Car Rental, a former unit of General Motors now owned by
Republic Industries. In addition, the transaction is subject to the receipt of
any necessary government approvals.
Shareholders of Ryder TRS are an investment group headed by Questor
Partners Fund, L.P. The group, which also includes Madison Dearborn Capital
Partners and Societe General, purchased the consumer truck rental business of
Ryder Systems Inc. in October 1996 in a $575 million transaction comprised of
$125 million in equity and the balance financed with debt. These operations were
then renamed Ryder TRS.
Questor Management Company, Southfield, MI, manages Questor Partners
Fund, which was established to acquire "special situation" companies, including
the non-core divisions or subsidiaries of Fortune 1000 corporations. Its
principals include Alix, who is the founding partner of Xxx Xxxx & Associates, a
corporate restructuring and turnaround consulting firm; Xxx Xxxxxx, co-founder
of Xxxxxxxxx, Xxxxxx & Xxxxxxxx; Xxxxxx X. Xxxxxx, former president of
Transamerica Corporation; and Xxxxxx X. Xxxxx, an attorney and a former
executive at
2
Xxxxxxxxx, Xxxxxx & Xxxxxxxx. In addition to Ryder TRS, Questor Partners Fund's
portfolio includes Schwinn Cycling & Fitness, Boulder, CO, AP Automotive
Systems, Toledo, OH, and Channel Master, Smithfield, NC.
Budget Group, Inc., through subsidiary companies and their franchisees,
operates Budget Car and Truck Rental, the third largest worldwide car and truck
rental system, with over 3,200 airport and local market locations in more than
120 countries and territories. In addition, the Company owns Premier Car Rental,
which serves the insurance replacement market through a network of 150 locations
in 17 major U.S. markets. Budget Car Sales is one of the largest independent
retailers of late model vehicles in the United States, operating 26 retail car
sales facilities. The Company also operates airport parking facilities at
certain locations and through Van Pool Services leases 3,500 vans for van
pooling operations in 60 urban areas. On January 28, 1998, Budget Group acquired
Cruise America, one of North America's largest recreational vehicle rental and
sales companies, with a network of 91 locations and a fleet of more than 4,300
recreational vehicles, including motorhomes, truck campers and motorcycles.
Certain items in this press release may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and as such may involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of
Budget or Ryder TRS to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such forward-looking statements speak only as of the date of this
press release. Budget and Ryder TRS expressly disclaim any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in Budget's or Ryder TRS'
expectations with regard thereto or any change in events, conditions or
circumstances on which any statement is based.
This press release does not constitute "proxy solicitation material"
within the meaning of Regulation 14A and Schedule 14A of the Securities Exchange
Act of 1934, as amended. In addition, this press release shall not constitute an
offer to sell or the solicitation of an offer to buy Budget Class A common stock
nor shall there be any sale of these securities in any state in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
Note to Editors: FPS digital photo available via the Newscom bulletin board
system (BBS) and website (xxxx://xxx.xxxxxxx.xxx). Publications that are not
NewsCom subscribers can receive a free account for either delivery service.
Media can call for a
3
temporary password at (800) 601-NEWS. Outside U.S., call
(000) 000-0000 or send an e-mail request to: xxxxxx@xxxxxxxxxxxx.xxx
For queries directly related to Questor Partners Fund, contact:
Xxxxx Xxxxxx at Xxx Xxxxxxx Tel: 000-000-0000
CONTACT: Xxxxx Xxxxx
Director, Public Relations
Budget Group, Inc.
000-000-0000
or
Xxxxx Xxxxx
Executive Vice President
Corporate Development and Investor Relations
Budget Group, Inc.
000-000-0000
4
EXHIBIT E
Rights and Obligations with respect to
Registrable Securities
The holders of Warrants granted pursuant to Section 3.5 of the
Agreement and Plan of Merger (the "Merger Agreement") and the Buyer Class A
Common Stock issued pursuant to Sections 3.2, 3.4 and 3.7 of the Merger
Agreement and issued upon exercise of, or in exchange for, any Warrants shall
have the following rights and obligations with respect to such shares:
1. Definitions. Capitalized terms used herein without
definition shall have the respective meanings set forth in the Merger Agreement.
As used in this Exhibit E, unless the context otherwise requires, the following
terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such successor federal statute.
"Majority Holders" means stockholders owning a majority of the
Registrable Securities outstanding at the time of determination.
"Registrable Securities" means (i) shares of Buyer Class A
Common Stock received in the Merger by the Original Holders (such Original
Holders and their transferees, the "Holders", and each such Original Holder and
any transferee a "Holder") at the Effective Time by virtue of the Merger, (ii)
Make-Whole Shares received by the Holders pursuant to Section 3.4 of the Merger
Agreement and their transferees, (iii) shares of Buyer Class A Common Stock
received by the Holders upon exercise of any Warrants issued pursuant to Section
3.5 of the Merger Agreement and their transferees, (iv) shares of Buyer Class A
Common Stock received upon exercise of any Options pursuant to Section 3.7 of
the Merger Agreement and their transferees and (v) any Related Registrable
Securities and their transferees. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance
1
with such registration statement, (b) they shall have been otherwise
transferred, and new certificates for them not bearing a legend restricting
further transfer shall have been delivered by Buyer and subsequent public
distribution of them shall not, in the opinion of counsel to the holders, which
counsel shall be reasonably acceptable to Buyer, require registration of them
under the Securities Act, or (c) they shall have ceased to be outstanding.
"Registration Expenses" means all costs, fees and expenses
incident to Buyer's performance of or compliance with Section 2, including,
without limitation, all registration, filing and NASD fees, all fees and
expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses and the fees
and disbursements of counsel for Buyer and of its independent public accountants
and of a single counsel for the Holders, but excluding any underwriting fees,
expenses, discounts or other costs payable to any underwriter, broker or dealer.
"Registration Statement" has the meaning set forth in Section
2.1.
"Related Registrable Securities" means any securities of Buyer
issued or issuable with respect to the shares of Buyer Class A Common Stock
received by the Holders in connection with the Transactions by way of a dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise.
"Representative" has the meaning set forth in Section 2.3.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the Securities Act shall include a
reference to the comparable section, if any, of any such successor federal
statute.
"Seller Indemnified Parties" has the meaning set forth in
Section 2.4(a).
"Shares" means the shares of Buyer Class A Common Stock to be
received by the Holders in the Transactions.
"Target Date" means 60 days after the Effective Time, 1998.
"Termination Date" means the first date on which all of the
Registrable Securities (including all shares of Buyer Class A Common Stock
issuable upon exercise of the Warrants) may be
2
distributed to the public by each Holder pursuant to Rule 144(k) (or any similar
successor provision) under the Securities Act.
"Transactions" means the transactions described in clauses (i)
through (iv) of the definition of "Registrable Securities".
2. Registration Under Securities Act, etc.
2.1 Filing of Registration Statement. (a) As soon as
practicable, but in any event no later than 15 days after the Effective Time,
Buyer shall file a "shelf" registration statement pursuant to Rule 415 under the
Securities Act (the "Registration Statement") with respect to the Registrable
Securities to be issued to the Holders pursuant to the Merger Agreement. Buyer
agrees that the Registration Statement will cover, in the event the Minimum
Merger Shares are issued in the Merger, 1,363,822 shares of Buyer Class A Common
Stock or, in the event the Maximum Merger Shares are issued in the Merger,
3,636,860 shares of Buyer Class A Common Stock. In the event that the number of
shares of Buyer Class A Common Stock that are covered by the Registration
Statement is less than the number of Registrable Securities, Buyer shall, as
promptly as practicable after the issuance of Registrable Securities not covered
by the Registration Statement, file an additional "shelf" registration statement
and Buyer shall comply with all of its obligations set forth in this Exhibit E
with respect to such additional registration statement to the same extent as if
such registration statement were the Registration Statement. Buyer shall use its
commercially reasonable efforts to (i) have the Registration Statement declared
effective on or before the Target Date, and (ii) keep the Registration Statement
continuously effective from the date such Registration Statement is declared
effective until the Termination Date.
(b) Subject to Section 9 hereof, Buyer shall promptly
supplement or amend, if necessary, the Registration Statement as required by the
registration form utilized by Buyer or by the instructions applicable to such
registration form or by the Securities Act and, in each case, Buyer shall
furnish to the holders of the Registrable Securities to which the Registration
Statement relates and the managing underwriters, if any, copies of any such
supplement or amendment prior to its being used and/or filed with the
Commission. Buyer shall pay all Registration Expenses incurred in connection
with the Registration Statement and any supplements or amendments thereto,
whether or not it becomes effective, and whether all, none or some of the
Registrable Securities are sold pursuant to the Registration Statement.
2.2 Registration Procedures. (a) In connection with any
registration statement filed pursuant to Section 2.1, Buyer will, as
expeditiously as possible:
3
(i) subject to Section 9 hereof, prepare and file
with the Commission such registration statement and such amendments and
supplements to such registration statement and the prospectus used in
connection therewith continuously as may be necessary to keep such
registration statement effective and to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement or as may be
reasonably requested by the Majority Holders, until such time as all of
such Registrable Securities have been disposed of in accordance with
the intended methods of disposition (including methods described in any
amendment or supplement referred to in (ii) below) by the seller or
sellers thereof set forth in such registration statement (without
limiting the generality of the foregoing, Buyer will prepare and file
such amendments and supplements as may be required to permit the
distributees of any Registrable Securities held by a partnership or
other entity or the donees of any Registrable Securities held by any
stockholder to sell such shares pursuant to the registration
statement);
(ii) if requested by the managing underwriter or
underwriters or the Majority Holders of the Registrable Securities
being sold in connection with an underwritten offering, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriters or such holders request should
be included therein relating to the plan of distribution with respect
to such Registrable Securities being sold to such underwriters, the
purchase price being paid therefor by such underwriters and with
respect to any other terms of the underwritten (or best efforts
underwritten) offering of the Registrable Securities to be sold in such
offering; and make all required filings of such prospectus supplement
or post-effective amendment as soon as practicable after receiving
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(iii) furnish to each seller of Registrable
Securities covered by such registration statement and the managing
underwriters, if any, without charge, one original and as many
conformed copies of such registration statement and of each such
amendment thereto as reasonably requested by such seller or underwriter
(including, in the case of the original copy, all exhibits) and such
number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents,
as such seller or underwriter may reasonably request;
4
(iv) use its commercially reasonable efforts (x) to
register or qualify all Registrable Securities and other securities
covered by such registration statement and the managing underwriters,
if any, under such other securities or blue sky laws of such States of
the United States of America where an exemption is not available and as
the sellers of Registrable Securities covered by such registration
statement and the managing underwriter, if any, shall reasonably
request, (y) to keep such registrations and qualifications, in effect
for so long as such registration statement remains in effect, and (z)
to take any other action which may be necessary or advisable to enable
such sellers or managing underwriters to consummate the disposition in
such jurisdictions of the securities to be sold by such sellers or
managing underwriters, provided that in connection therewith Buyer
shall not be required to qualify as a foreign corporation or as a
dealer in securities or to file a general consent to service of process
or to subject itself to taxation in any jurisdiction;
(v) use its commercially reasonable efforts to cause
all Registrable Securities covered by such registration statement to be
registered with or approved by such other federal or state governmental
agencies or authorities or self regulatory organizations as may be
necessary, in the opinion of counsel to Buyer or to the managing
underwriters, to enable the seller or sellers thereof or the managing
underwriters, if any, to consummate the disposition of such Registrable
Securities;
(vi) promptly notify each seller of Registrable
Securities covered by such registration statement and the managing
underwriters, if any, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that,
or upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, in the light of the circumstances under which
they were made, and, subject to Section 9 hereof, at the request of any
such seller, and the managing underwriters, if any, promptly prepare
and furnish to each prospective seller a reasonable number of copies of
a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances under which they were made;
5
(vii) in connection with any underwritten offering
of Registrable Securities pursuant to the Registration Statement, enter
into an underwriting agreement in form, scope and substance as is
customary in underwritten offerings and take all such other actions as
are reasonably requested by the managing underwriter in order to
expedite or facilitate the disposition of such Registrable Securities
and in connection therewith (a) make such representations and
warranties to the underwriters in form, substance and scope as are
customarily made by issuers to underwriters in primary underwritten
offerings with respect to the business of Buyer and the Registration
Statement; (b) obtain opinions of counsel to Buyer and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, shall be
addressed to the underwriters and shall cover the matters customarily
covered in opinions requested in underwritten offerings and such other
matters as may be reasonably requested by underwriters); (c) obtain
"cold comfort" letters and updates thereof from Buyer's independent
certified public accountants addressed to the underwriters, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in
connection with primary underwritten offerings; (d) if any underwriting
agreement is entered into, the same shall set forth in full the
indemnification provisions and procedures of Section 2.4 hereof with
respect to all parties to be indemnified pursuant to said Section; and
(e) Buyer shall deliver such documents and certificates as may be
requested by the managing underwriters to evidence compliance with
clause (iv) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by Buyer. The
above shall be done at each closing under such underwriting or similar
agreement as and to the extent required thereunder, and if at any time
the representations and warranties of Buyer contemplated in clause
(vii)(a) above cease to be true and correct, Buyer shall so advise the
underwriter(s), if any, and each seller promptly and, if requested by
such seller, shall confirm such advice in writing;
(viii) make appropriate representatives of its
management available, upon the reasonable request of the Majority
Holders of Registrable Securities, but in no event upon less than 15
days' notice, for a reasonable period for a road show in connection
with the underwritten offering of the Registrable Securities by an
underwriter. Buyer will also make representatives of management
reasonably available for conference calls in connection with any public
offering upon reasonable advance notice; and
(ix) to maintain on file with the NYSE and each
other exchange on which Buyer Class A Common Stock is listed
6
a copy of the most recent prospectus and otherwise use its commercially
reasonable efforts to allow the sellers to satisfy the prospectus
delivery requirements of the Securities Act in a manner not requiring
physical delivery of a prospectus.
(b) Buyer may require each holder of Registrable Securities as
to which any registration is being effected to (i) furnish Buyer such
information regarding such holder and the distribution of such securities as
Buyer may from time to time reasonably request in writing and (ii) otherwise
agree to comply with the Securities Act and the Exchange Act in connection with
the registration and distribution of the Registrable Securities.
(c) As a condition to including shares in any registration
statement, Buyer may require any holder of Registrable Securities to agree that,
upon receipt of any notice from Buyer of the happening of any event of the kind
described in (i) subdivision (vi) of Section 2.2(a) or (ii) Section 9, such
holder will forthwith discontinue such holder's disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until (x) in the case of a notice under clause (i) above, such
holder's receipt of the copies of the supplemented or amended prospectus
contemplated by subdivision (vi) of Section 2.2(a), or until it is advised in
writing by Buyer that the use of the applicable prospectus may be resumed, and,
if so directed by Buyer, such holder will promptly deliver to Buyer (at Buyer's
expense) all copies, other than permanent file copies, then in such holder's
possession of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice or (y) in the case of a notice under clause
(ii) above, until expiration of the 30th day following the date of such notice
or of any subsequent notice given in accordance with Section 8 hereof.
(d) If Buyer suspends a registration statement or requires
stockholders to cease sales of Registrable Securities pursuant to this section,
Buyer shall, as promptly as practicable following the termination of the
circumstances which entitled Buyer to do so, take such actions as may be
necessary to reinstate the effectiveness of such registration statement and/or
give written notice to all sellers of Registrable Securities authorizing them to
resume sales pursuant to such registration statement.
2.3 Preparation; Reasonable Investigation. In connection with
the preparation and filing of the registration statement under the Securities
Act pursuant to this Exhibit E, Buyer (i) shall give a representative holder
designated in writing to Buyer by the Majority Holders (the "Representative"),
any underwriter participating in any disposition of Registrable Securities, and
counsel and accountants designated by the Representative and such underwriters
the opportunity to
7
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, (ii) shall give each of them such reasonable access to its
books and records and such opportunities to discuss the business of Buyer with
its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of the Representative
and any underwriter participating in any disposition of Registrable Securities,
and such counsel or accountants, to conduct a reasonable investigation within
the meaning of the Securities Act, subject to each such person agreeing to treat
confidentially any non-public information disclosed to them as a result of such
investigation and (iii) shall promptly notify the Representative and any
underwriter participating in any disposition of Registrable Securities, and
their counsel of any stop order issued or threatened by the Commission and
promptly take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
2.4 Indemnification.
(a) Indemnification by Buyer. Buyer shall indemnify and hold
harmless, in the case of any registration statement filed pursuant to Section
2.1, each seller of any Registrable Securities covered by such registration
statement, each other Person, if any, who controls such seller within the
meaning of the Securities Act, each broker, dealer or underwriter acting on
behalf of such seller and their respective directors, officers, partners,
shareholders, employees and affiliates ("Seller Indemnified Parties") against
any losses, claims, expenses, damages or liabilities (or actions or proceedings,
whether commenced or threatened, or inquiries or investigations, in respect
thereof), joint or several, to which such Seller Indemnified Parties may become
subject under the Securities Act or otherwise, including, without limitation,
the reasonable fees and expenses of legal counsel, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, or inquiries or investigations, in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by Buyer of the Securities Act, and Buyer will reimburse each
such Seller Indemnified Parties for any reasonable legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, expense, damage, liability, action or proceeding, inquiry or
investigation; provided, that Buyer shall not be liable in any
8
such case to the extent that any such loss, claim, damage, liability (or action,
proceeding, inquiry or investigation in respect thereof) or expense arises out
of or is based upon (i) an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to Buyer through an instrument duly executed by or on behalf of such seller
specifically stating that it is for use in the preparation thereof or (ii) the
sale of Registrable Securities pursuant to the registration statement to any
person, if such seller (x) failed to send or give a copy of the prospectus, as
the same may be then supplemented or amended, to such person within the time
required by the Securities Act and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in such
prospectus was corrected in the prospectus, as amended or (y) engaged in such
sale in breach of its agreements pursuant to Section 2.2(c). Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of any such Seller Indemnified Parties and shall survive the transfer
of such securities by such seller.
(b) Indemnification by the Sellers. As a condition to
including any Registrable Securities in any registration statement, each
prospective seller shall agree to indemnify and hold harmless severally and not
jointly (in the same manner and to the same extent as set forth in Section
2.4(a)) Buyer, and each director, officer, employee and shareholder of Buyer and
each other Person, if any, who participates or may be considered as an
underwriter in the offering or sale of such securities and each other Person who
controls Buyer within the meaning of the Securities Act ("Buyer Indemnified
Parties") with respect to (i) any untrue statement or alleged untrue statement
of a material fact contained in or any omission or alleged omission to state
therein a material fact in any such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer through an instrument
duly executed by or on behalf of such seller specifically stating that it is for
use in the preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement (provided that the
liability of such indemnifying party under this clause (i) shall be limited to
the amount of net proceeds received by such indemnifying party in the offering
giving rise to such liability), or (ii) any sale of any Registrable Securities
by such seller under the circumstances described in clause (ii) of the proviso
to Section 2.4(a). Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of Buyer Indemnified
9
Parties and shall survive the transfer of such securities by
such seller.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action, proceeding,
investigation or inquiry involving a claim referred to in the preceding
subparagraphs of this Section 2.4, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of such commencement; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subparagraphs of this
Section 2.4, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action, proceeding,
claim, liability, investigation or inquiry is brought against an indemnified
party, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that if the indemnified party reasonably believes it is advisable for it to be
represented by separate counsel because there exists a conflict of interest
between its interests and those of the indemnifying party with respect to such
claim, or there exist defenses available to such indemnified party which may not
be available to the indemnifying party, or if the indemnifying party shall fail
to assume responsibility for such defense, the indemnified party may retain
counsel satisfactory to it and the indemnifying party shall pay all fees and
expenses of one such counsel, provided that in no event shall Buyer be required
to pay the expenses of more than one such counsel. No indemnifying party shall
be liable for any settlement of any action or proceeding effected without its
written consent, which consent shall not be unreasonably withheld or delayed. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim,
proceeding, inquiry, investigation or litigation or which requires action other
than the payment of money by the indemnifying party. Each indemnified party
shall furnish such information regarding itself or the claim in question as an
indemnifying party may reasonably request in writing and as shall be reasonably
requested in connection with the defense of such claim and litigation resulting
therefrom.
10
(d) Contribution. If the indemnification provided for in this
Section 2.4 shall for any reason be held by a court of competent jurisdiction to
be unavailable to an indemnified party under subparagraph (a) or (b) hereof in
respect of any loss, claim, damage, liability, inquiry or investigation or any
action or proceeding in respect thereof, then, in lieu of the amount paid or
payable under subparagraph (a) or (b) hereof, the indemnified party and the
indemnifying party under subparagraph (a) or (b) hereof shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of Buyer and the
sellers of Registrable Securities covered by the registration statement in
connection with the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations (the relative fault of Buyer and such sellers to be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by Buyer or such sellers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission) or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
Buyer and such sellers from the offering of the securities covered by such
registration statement. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. Such sellers' obligations to contribute as provided in this
subparagraph (d) are several in proportion to the relative value of their
respective Registrable Securities covered by such registration statement and not
joint and no seller shall be liable under this subparagraph (d) for any amount
in excess of the proceeds received by the seller in the offering giving rise to
the liability hereunder. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such Person's consent, which consent shall not be unreasonably
withheld or delayed.
(e) Other Indemnification. Indemnification and contribution
similar to that specified in the preceding subparagraphs of this Section 2.4
(with appropriate modifications) shall be given by Buyer and each seller of
Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law, rule or regulation
of any governmental authority other than the Securities Act.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 2.4 shall be made by prompt
11
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred.
3. Rule 144 and Rule 144A. Buyer shall take all actions
reasonably necessary to enable holders of Registrable Securities to sell such
securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 under the Securities Act, as such
Rule may be amended from time to time or (b) Rule 144A under the Securities Act,
as such Rule may be amended from time to time, including, without limiting the
generality of the foregoing, filing on a timely basis all reports required to be
filed by the Exchange Act. Upon the request of any holder of Registrable
Securities or holder of rights to acquire Registrable Securities, Buyer will
deliver to such holder a written statement as to whether it has complied with
such requirements.
4. Participation in Underwritten Registrations.
(a) If any of the Registrable Securities covered by the
Registration Statement are to be sold in an underwritten offering, the
investment bank or investment bankers and manager or managers that will
administer the offering will be selected by the Buyer and shall be reasonably
satisfactory to the Majority Holders of the Registrable Securities included in
such offering.
(b) In the event any holder proposes to sell Registrable
Securities covered by the Registration Statement in an underwritten offering, it
will so notify Buyer and provide Buyer with the information to be included in
the notice to be given by Buyer hereinafter set forth. Promptly (and in any
event within ten (10) Business Days) after receipt of such notice, Buyer will
give written notice to each other holder of Registrable Securities of (i) the
name of the proposing holder, (ii) the number of Registrable Securities proposed
to be sold by such proposing holder, and (iii) the right of each other holder to
elect to have all or a portion of the Registrable Securities owned by such
holder included in such underwritten offering by notifying Buyer and the
proposing holder of such election (and specifying the number of Registrable
Securities to be so included) within ten (10) Business Days after receipt of
such notice from Buyer. A holder making such an election on a timely basis shall
be entitled to have the number of Registrable Securities specified in such
election included in the underwritten offering; provided, however, that, if the
managing underwriter advises the participating holders in writing that marketing
factors require a limitation of the number of Registrable Securities to be
underwritten, the amount of Registrable Securities that may be included in the
underwriting shall be so limited and shall be allocated among the participating
holders pro rata in accordance with the number of Registrable Securities
proposed to be included in the underwritten offering by the participating
holders.
12
(c) No holder may participate in any underwritten registration
hereunder unless such holder (x) agrees to sell such holder's securities on the
basis provided in any underwriting arrangements approved by the holders entitled
hereunder to approve such arrangements and (y) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
Nothing in this Section 4 shall be construed to create any additional rights
regarding the registration of Registrable Securities in any holder otherwise
than as set forth herein.
5. Amendments. This Exhibit E may be amended only upon the
prior written consent of Buyer and the Majority Holders. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by
any consent authorized by this Section 5, whether or not such Registrable
Securities shall have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election in writing delivered to Buyer,
be treated as the holder of such Registrable Securities for purposes of any
request, consent, waiver or other action by any holder or holders of Registrable
Securities pursuant to this Exhibit E or any determination of any number or
percentage of shares of Registrable Securities held by any holder or holders of
Registrable Securities contemplated by this Exhibit E. If the beneficial owner
of any Registrable Securities so elects, Buyer may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
7. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in the manner provided in the
Merger Agreement, and, in the case of the Holders, shall be addressed in the
manner set forth in the stock record books of Buyer.
8. Assignment. This Exhibit E shall be binding upon and inure
to the benefit of and shall be enforceable by the Original Holders, by virtue of
the approval of the Merger and such stockholder's receipt of Buyer Class A
Common Stock pursuant to the Merger Agreement, and by Buyer and its respective
successors and assigns and, with respect to any Company Stockholder, any
Original Holder of any Registrable Securities and their transferees and assigns,
provided that, with respect to a transferee or assignee of shares of Registrable
Securities, (i) such transfer is effected in accordance with applicable
securities law, (ii) Buyer is given written notice of such assignment
contemporaneous with such assignment or promptly thereafter, and (iii) the
transferee or assignee by written agreement acknowledges that he is bound by the
terms of this Exhibit E.
13
9. Holdback Agreements. Notwithstanding anything in this
Exhibit E to the contrary, if (a)(i) Buyer is in possession of material
non-public information, (ii) the Board of Directors of Buyer determines that
disclosure of such material non-public information would not be in the best
interests of Buyer and its stockholders and (iii) the Board of Directors or
Chief Executive Officer of Buyer determines that suspension of the rights of the
Holders to make sales pursuant to the Registration Statement is necessary in
order to avoid a requirement to disclose such material, non-public information,
(b) the Buyer has made a public announcement relating to an acquisition or
business combination including Buyer or a subsidiary of Buyer, or (c) the Board
of Directors of Buyer determines in good faith that it is in the best interests
of Buyer and its stockholders not to disclose the existence of facts surrounding
any proposed or pending corporate transaction involving Buyer, then Buyer may
notify the Holders that it elects to suspend the rights of the Holders to make
sales pursuant to the Registration Statement for a period of time not to exceed
30 days from the date of such notice, provided that, Buyer may exercise its
rights under this Section 9 no more than one time during any period of 180
consecutive days.
10. No Inconsistent Agreements. Buyer will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Exhibit E.
11. Remedies. Each holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
hereunder. Buyer agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this
Exhibit E and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
12. Separate Agreements with Holders. As promptly as
practicable after the execution of the Merger Agreement, Buyer will enter into a
separate agreement with each Company Stockholder (and, after the Effective Time,
each Holder) to evidence the obligations of Buyer and each Company Stockholder,
or, if after the Effective Time, each Holder under this Exhibit E.
13. Dispositions by Holders. Each Holder agrees not to sell or
offer to sell less than 100,000 shares of Registrable Securities in any single
offering pursuant to the Registration Statement, except that, if such Holder is
an Original Holder and immediately after the Effective Time beneficially owns an
aggregate of less than 100,000 shares of Registrable Securities, such Holder may
sell or offer to sell such shares of Buyer Class A Common Stock in an offering
being made with one or more Holders covering an aggregate of at least 100,000
shares of Registrable Securities.
14
14. Lockup. Each Significant Stockholder and any transferee of
a Significant Stockholder represents, warrants, covenants and agrees that from
the Effective Time until the expiration of ninety (90) days following the
Effective Time, such Significant Stockholder or transferee will not, without the
prior written consent of Buyer, offer, sell, contract to sell, or otherwise
dispose of, directly or indirectly, any shares of Buyer Class A Common Stock or
other instrument which by its terms is convertible into, exercisable or
exchangeable for, any shares of Buyer Class A Common Stock of which such
Significant Stockholder or transferee is at the Effective Time, or may in the
future become, the beneficial owner (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended).
15
