EXHIBIT 2.2
MERGER AGREEMENT
AMONG
STATESRAIL, INC.,
RAILAMERICA, INC.,
STATESRAIL ACQUISITION CORP.
AND
THE STOCKHOLDERS OF STATESRAIL, INC.
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DATED AS OF OCTOBER 12, 2001
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TABLE OF CONTENTS
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ARTICLE I
AGREEMENT OF MERGER
1.01. The Merger...............................................................................................1
1.02. Closing..................................................................................................2
1.03. Effective Time and Effect of the Merger..................................................................2
1.04. Certificate of Incorporation and Bylaws..................................................................2
1.05. Directors................................................................................................2
1.06. Officers.................................................................................................2
1.07. Supplementary Action.....................................................................................2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
2.01. Effect on Capital Stock..................................................................................3
2.02. Closing Procedures.......................................................................................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
3.01. Due Organization.........................................................................................5
3.02. Due Authorization........................................................................................5
3.03. Brokers, Finders and Financial Advisors..................................................................6
3.04. Investment Intent........................................................................................6
3.05. Buyer Shares.............................................................................................6
3.06. Buyer Information........................................................................................6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF KAURI AND THE COMPANY
4.01. Capitalization...........................................................................................7
4.02. Other Rights to Acquire Capital Stock....................................................................7
4.03. Due Organization.........................................................................................7
4.04. Subsidiaries.............................................................................................7
4.05. Due Authorization........................................................................................8
4.06. Financial Statements.....................................................................................9
4.07. Conduct of Business; Certain Actions.....................................................................9
4.08. Ownership of Properties.................................................................................10
4.09. Environmental Matters...................................................................................11
4.10. Licenses and Permits....................................................................................11
4.11. Intellectual Rights.....................................................................................12
4.12. Compliance with Laws....................................................................................13
(i)
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4.13. Insurance...............................................................................................13
4.14. ERISA Compliance........................................................................................13
4.15. Contracts and Agreements................................................................................14
4.16. Claims and Proceedings..................................................................................14
4.17. Taxes...................................................................................................15
4.18. Personnel...............................................................................................18
4.19. Business Relations......................................................................................18
4.20. Accounts Receivable.....................................................................................18
4.21. Bank Accounts...........................................................................................18
4.22. Agents..................................................................................................19
4.23. Indebtedness To and From Officers, Directors, Shareholders and Employees................................19
4.24. Certain Consents........................................................................................19
4.25. Brokers.................................................................................................19
4.26. Interest in Competitors, Suppliers and Customers........................................................19
4.27. Inventory...............................................................................................20
4.28. Transactions With Affiliates............................................................................20
4.29. Absence of Certain Payments.............................................................................20
4.30. Equipment...............................................................................................20
4.31. Current Assets..........................................................................................21
ARTICLE V
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SELLERS
5.01. Ownership of Shares/No Liens............................................................................21
5.02. Other Rights to Acquire Capital Stock...................................................................21
5.03. Due Authorization.......................................................................................21
5.04. Brokers.................................................................................................22
5.05. Purchase of Buyer Shares for Investment.................................................................22
5.06. Tax Status of Such Seller...............................................................................22
ARTICLE VI
COVENANTS
6.01. Inspection..............................................................................................22
6.02. Compliance by the Company and Sellers...................................................................23
6.03. Satisfaction of All Conditions Precedent to the Obligations of Buyer....................................23
6.04. No Solicitation.........................................................................................23
6.05. Notice of Developments..................................................................................23
6.06. Notice of Breach........................................................................................24
6.07. Notice of Litigation....................................................................................24
6.08. Continuation of Insurance Coverage......................................................................24
6.09. Maintenance of Credit Terms.............................................................................24
6.10. Updating Information....................................................................................24
6.11. Financial Statements....................................................................................24
6.12. Interim Operations of the Company.......................................................................25
6.13. Surface Transportation Board............................................................................26
(ii)
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6.14. Resignations of Directors and Officers..................................................................26
6.15. Compliance by Buyer and Sub.............................................................................26
6.16. Satisfaction of All Conditions Precedent to the Obligations of Sellers and the Company..................26
6.17. Notice by Buyer and Sub of Breach.......................................................................26
6.18. Notice by Buyer and Sub of Litigation...................................................................27
6.19. Termination of Employees................................................................................27
6.20. Filing of Tax Returns...................................................................................27
6.21. Delivery of Schedules...................................................................................28
ARTICLE VII
CONDITIONS TO CLOSING
7.01. Conditions to Obligations of Buyer and Sub..............................................................28
7.02. Conditions to Obligations of Sellers and the Company....................................................30
ARTICLE VIII
TERMINATION
8.01. Termination.............................................................................................31
8.02. Effect of Termination...................................................................................32
8.03. Waiver..................................................................................................32
ARTICLE IX
MISCELLANEOUS
9.01. Collateral Agreements, Amendments and Waivers...........................................................32
9.02. Interpretation and Certain Definitions..................................................................33
9.03. Successors and Assigns..................................................................................33
9.04. Expenses................................................................................................33
9.05. Invalid Provisions......................................................................................34
9.06. Information and Confidentiality.........................................................................34
9.07. Waiver..................................................................................................34
9.08. Notices.................................................................................................34
9.09. Public Announcement.....................................................................................35
9.10. Waiver of Certain Rights................................................................................35
9.11. Further Assurances......................................................................................36
9.12. No Third-Party Beneficiaries............................................................................36
9.13. Governing Law...........................................................................................36
9.14. Prevailing Party........................................................................................36
9.15. Counterparts............................................................................................36
9.16. Dispute Resolution......................................................................................36
9.17. Remedies in Indemnification Agreement Control...........................................................37
(iii)
SCHEDULES
3.02 No Conflicts
4.03 Foreign Qualification of the Company
4.04 Subsidiaries and Foreign Qualification Thereof
4.06(b) Undisclosed Liabilities
4.07 Conduct of Business
4.07(c) Capital Expenditures
4.08 Real and Personal Properties
4.09 Environmental Matters
4.10 Licenses and Permits
4.11 Intellectual Rights
4.12 Compliance With Laws
4.13 Insurance
4.14 ERISA
4.15 Contracts and Agreements
4.16 Claims and Proceedings
4.17 Taxes
4.18 Personnel
4.19 Business Relations
4.20 Accounts Receivable
4.21 Bank Accounts
4.22 Agents
4.23 Indebtedness to and from Officers, Directors, Shareholders and
Employees
4.24 Required Consents
4.25 Brokers
4.26 Interest in Competitors, Suppliers and Customers
4.27 Inventory
4.28 Transactions with Affiliates
4.30 Equipment
5.01 List of Sellers
6.19 Corporate Employees
9.02 Directors, officers and General Managers
EXHIBITS
A - Form of Escrow Agreement
B - Legal Opinion Matters of Fish & ▇▇▇▇▇▇▇▇▇▇ P.C., counsel for the Company
and the Sellers
C - Legal Opinion Matters of ▇▇▇▇▇▇▇▇▇ Traurig, P.A., counsel for Buyer
D - Form of Registration Rights Agreement
E - Form of Indemnification Agreement
(iv)
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "AGREEMENT") is entered into as of October
12, 2001, among RailAmerica, Inc., a Delaware corporation ("BUYER"), StatesRail
Acquisition Corp., a Delaware corporation ("SUB"), StatesRail, Inc., a Delaware
corporation (the "COMPANY"), and all of the stockholders of the Company (the
"SELLERS"), all of whom are identified on SCHEDULE 5.01 attached hereto.
WHEREAS, the Sellers are all of the stockholders of the Company as of
the date hereof;
WHEREAS, the Sellers and the respective Boards of Directors of Buyer
and the Company have each determined that it is in the best interests of their
respective companies and stockholders that Buyer acquire the business of the
Company pursuant to the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, the Sellers and the respective Boards of Directors of Buyer,
Sub and the Company have each approved the merger of the Company into Sub (the
"MERGER"), upon the terms and subject to the conditions set forth in this
Agreement whereby each outstanding share of the Company (including the Class A
Shares, Class B Shares and the Preferred Shares, all as defined herein) (each a
"COMPANY SHARE") of capital stock of the Company ("COMPANY CAPITAL STOCK"),
other than those shares of Company Capital Stock held as treasury stock by the
Company, will be converted into the right to receive cash and shares of common
stock, par value $.001, of Buyer (each whole share a "BUYER SHARE"), as set
forth in this Agreement;
WHEREAS, the Sellers and the respective Boards of Directors of the
Company and Buyer have each determined that the Merger is fair to, and in the
best interests of, their respective companies and stockholders, and have
approved the Merger; and
WHEREAS, the Sellers, the Buyer, Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Sellers, Buyer, Sub and the Company hereby agree as follows:
ARTICLE I
AGREEMENT OF MERGER
1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DELAWARE CORPORATION LAW"), the Company shall be merged with and into
the Sub at the Effective Time (as defined in Section 1.03). Following the
Effective Time, the separate corporate existence of the Company shall cease and
the Sub shall continue as the surviving corporation (the "SURVIVING
CORPORATION") and shall succeed to and assume all the rights and obligations of
the Company in accordance with the Delaware Corporation Law.
1.02. CLOSING. The closing (the "CLOSING") of the Merger will take
place at 1:00 p.m. (E.S.T.) on a date to be specified by Buyer and Kauri (as
defined in Section 2.02(b)), which shall be no later than the last day of the
month in which satisfaction or waiver of the conditions set forth in Article VII
shall have occurred, but in any event not later than the Termination Date (as
defined in Section 8.01) (the "CLOSING DATE"), at the offices of ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, P.A., counsel to Buyer, unless another date, time or place is agreed to
in writing by the parties hereto.
1.03. EFFECTIVE TIME AND EFFECT OF THE MERGER. Subject to the
provisions of this Agreement, as soon as practicable on or after the Closing
Date, the parties shall file a certificate of merger or other appropriate
documents (in any such case, the "CERTIFICATE OF MERGER") executed in accordance
with the relevant provisions of the Delaware Corporation Law and shall make all
other filings or recordings required under the Delaware Corporation Law. The
Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Delaware Secretary of State, or at such later time as Sub and the
Company shall agree and as is specified in the Certificate of Merger (the time
the Merger becomes effective being hereinafter referred to as the "EFFECTIVE
TIME"). The Merger shall have the effects set forth in the applicable provisions
of the Delaware Corporation Law.
1.04. CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) The Certificate of Incorporation of the Surviving
Corporation shall be the same as the Certificate of Incorporation of Sub as in
effect immediately prior to the Effective Time until thereafter changed or
amended as provided therein or by applicable law; provided that Article I
thereof shall be amended to provide that the corporate name of the Surviving
Corporation is "StatesRail, Inc."
(b) The bylaws of Sub as in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
1.05. DIRECTORS. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
1.06. OFFICERS. The officers of Sub immediately prior to the Effective
Time or such other persons as Buyer shall designate shall be the officers of the
Surviving Corporation until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.
1.07. SUPPLEMENTARY ACTION. If at any time after the Effective Time,
any further assignments or assurances are necessary or desirable to vest or to
perfect or confirm of record in the Surviving Corporation the title to any
property or rights of the Company or Sub, or otherwise to carry out the
provisions of this Agreement, the officers and directors of the Surviving
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Corporation are hereby authorized and empowered in the name of and on behalf of
the Company and the Sub to execute and deliver any and all things necessary or
proper to vest or to perfect or confirm title to such property or rights in the
Surviving Corporation, and otherwise to carry out the purposes and provisions of
this Agreement.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
2.01. EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any Company
Shares or any shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the Surviving
Corporation.
(b) CANCELLATION OF COMPANY OWNED STOCK. All Company Shares
(if any) that are held in the treasury of the Company shall be canceled and no
consideration shall be delivered in exchange therefor.
(c) AGGREGATE CONSIDERATION. The Sellers shall receive, in
consideration of the Company Shares, according to the terms and conditions set
forth in this Agreement and the Letter Agreement, dated as of the date hereof
(the "LETTER AGREEMENT"), by and among Buyer, Sub, the Sellers, West Texas and
Lubbock Railroad Company, Inc., a Texas corporation ("WEST TEXAS"), New
StatesRail Holdings, Inc., a Delaware corporation ("NEW STATESRAIL"), StatesRail
L.L.C., a Delaware limited liability company ("STATESRAIL LLC") and the members
of StatesRail LLC (the "MEMBERS"), total consideration of $51,186,000, subject
to the adjustments set forth in the Letter Agreement (the "MERGER
CONSIDERATION"). The Merger Consideration shall be paid in a combination of cash
(the "CASH CONSIDERATION") and Buyer Shares (the "STOCK CONSIDERATION") valued
as provided in the Letter Agreement.
(d) CONVERSION OF COMPANY CAPITAL STOCK. At the Effective
Time, each Company Share shall be converted into the right to receive that
portion of the Merger Consideration determined in accordance with the Allocation
Schedule (as defined in Section 2.02(b)). As of the Effective Time, all such
Company Shares shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such Company Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration in accordance with
this Section. If subsequent to the date of this Agreement but prior to the
Effective Time, Buyer should split or combine the Buyer Shares or pay a stock
dividend or other stock distribution in Buyer Shares, then the number of Buyer
Shares issuable as Stock Consideration shall be appropriately adjusted to
reflect such split, combination, dividend or other distribution.
(e) STOCK OPTIONS. The Company shall take all actions
necessary to cause or to provide that all outstanding options to acquire shares
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of Company Capital Stock granted under any stock option plan, program or similar
arrangement of the Company to be exercised no later than five days prior to the
Closing Date and, to the extent not so exercised, canceled as of the Closing
Date.
2.02. CLOSING PROCEDURES.
(a) ESCROW. On the Closing Date, the Buyer shall deposit with
▇▇▇▇▇▇▇▇▇ Traurig, P.A., as escrow agent (the "ESCROW AGENT"), a portion of the
Cash Consideration, as set forth in the Letter Agreement (the "ESCROW AMOUNT"),
for the purpose of securing (but not limiting) the obligations of the Sellers
hereunder (the "ESCROW").
The Escrow shall be subject to the terms and conditions of the Escrow Agreement
in the form attached hereto as EXHIBIT A (the "ESCROW AGREEMENT").
(b) ALLOCATION AMONG SELLERS/CERTIFICATE DELIVERY. No later
than three (3) business days prior to the Closing Date, Kauri Inc., a Delaware
corporation ("KAURI"), shall deliver to Buyer a schedule which shall indicate
the amount of the Cash Consideration, if any, and the amount of the Stock
Consideration, if any, to be received by each of the Sellers (the "ALLOCATION
SCHEDULE"). At the Closing, each Seller shall deliver to Buyer a certificate or
certificates which prior to the Effective Time represented Company Shares (other
than Company Shares to be cancelled in accordance with Section 2.01(b)) (the
"CERTIFICATES"), endorsed in blank together with duly executed stock powers
transferring the Company Shares represented by such Certificates to Buyer. Upon
surrender of such Certificates to Buyer, the holder of such Certificates shall
be entitled to receive in exchange therefor the Cash Consideration and Stock
Consideration into which the Company Shares theretofore represented by such
Certificates shall have been converted pursuant to Section 2.01 in accordance
with this Section 2.02(b), and the Certificates so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of Company Shares that is
not registered in the transfer records of the Company, payment may be made to a
person other than the person in whose name the Certificates so surrendered is
registered, if such Certificates shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of such Certificates or establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.02, each such Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the Merger Consideration, without interest. No
interest will be paid or will accrue on the cash payable upon the surrender of
any Certificate. In the event any Certificate shall have been lost, stolen or
destroyed, Buyer may, in its discretion and as a condition precedent to the
payment of the Merger Consideration in respect of the shares represented by such
Certificates, require the owner of such lost, stolen or destroyed Certificates
to deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Buyer or the Surviving Corporation.
(c) DIVIDENDS. No dividends that are declared on Buyer Shares
will be paid to persons entitled to receive certificates representing Buyer
Shares until such persons surrender their Certificates representing Company
Shares. Upon such surrender, there shall be paid to the person in whose name the
4
certificates representing such Buyer Shares shall be issued any dividends which
shall have become payable with respect to such Buyer Shares between the
Effective Time and the time of such surrender.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. The
Cash Consideration paid and Stock Consideration issuable upon the surrender of
Certificates in accordance with the terms of this Article II shall be deemed to
have been paid and issued in full satisfaction of all rights pertaining to the
Company Shares theretofore represented by such Certificates. At the Effective
Time, the stock transfer books of the Company shall be closed, and there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the Company Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article II.
(e) NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional Buyer Shares shall be issued in connection with the
Merger, and such fractional interest shall not entitle the owner thereof to vote
or to any rights of a stockholder. In lieu of any such fractional shares, each
holder of Company Shares who would otherwise have been entitled to a fraction of
a Buyer Share upon surrender of Certificates for exchange pursuant to this
Article II shall be paid cash upon such surrender in an amount equal to the
product of such fraction multiplied by Buyer Stock Value (as defined in the
Letter Agreement).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and Sub jointly and severally represent and warrant to Sellers
and the Company as follows (with the understanding that Sellers and the Company
are relying materially on such representations and warranties in entering into
and performing this Agreement):
3.01. DUE ORGANIZATION. Each of Buyer and Sub is a corporation, validly
existing and in good standing under the laws of the State of Delaware, and has
full corporate power and authority to enter into and perform this Agreement and
each other instrument, agreement and document to be executed by it in connection
herewith.
3.02. DUE AUTHORIZATION. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement (as defined below), and such
other agreements, instruments and documents to be executed in connection
herewith by Buyer and Sub have been duly authorized by the Board of Directors of
Buyer and Sub. This Agreement has been duly and validly authorized, executed and
delivered by each of Buyer and Sub and, assuming this Agreement constitutes a
valid and binding obligation of the Company and Sellers, constitutes a valid and
binding obligation of Buyer and Sub enforceable against Buyer and Sub in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally and the application of general principles of
equity. Upon its execution in accordance with this Agreement, the Registration
Rights Agreement will have been duly and validly executed and delivered by Buyer
and, assuming the Registration Rights Agreement constitutes a valid and binding
5
obligation of the Sellers who are parties thereto, will constitute a valid and
binding obligation of Buyer enforceable against Buyer in accordance with its
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and the application of general principles of equity. Assuming the
accuracy of the representations and warranties made by the Sellers in this
Agreement, the execution, delivery and performance of this Agreement by Buyer
and Sub and of the Registration Rights Agreement by Buyer will not, except as
set forth on SCHEDULE 3.02, (a) violate any federal, state, county or local law,
rule or regulation applicable to Buyer, Sub or their respective property, (b)
violate or conflict with, or permit the cancellation of, any agreement to which
Buyer or Sub is a party or by which either of them or any of its property is
bound (other than such violations or conflicts as shall have been waived in
writing by the Company and Sellers at or prior to Closing), (c) permit the
acceleration of the maturity of any indebtedness of, or any indebtedness secured
by the property of, Buyer or Sub (except as shall have been waived in writing by
the Company and Sellers at or prior to Closing), or (d) violate or conflict with
any provision of Buyer's or Sub's certificate of incorporation or by-laws.
Assuming the accuracy of the representations and warranties made by the Sellers
in this Agreement, no action, consent or approval of or filing with any federal,
state, county or local governmental authority is required in connection with the
execution, delivery or performance of this Agreement (or any agreement or other
document executed in connection herewith by Buyer or Sub, including the
Registration Rights Agreement to be executed by Buyer and certain of the Sellers
in connection with the Closing (the "REGISTRATION RIGHTS AGREEMENT")) by Buyer
or Sub, except for (i) the filings described in Section 6.13 hereof, and (ii)
the filings and approvals contemplated by the Registration Rights Agreement.
3.03. BROKERS, FINDERS AND FINANCIAL ADVISORS. Neither Buyer nor Sub
has engaged, or caused to be incurred any liability to, any finder, broker or
sales agent in connection with the execution, delivery or performance of this
Agreement or the transactions contemplated hereby.
3.04. INVESTMENT INTENT. Buyer is acquiring the Company Shares for its
own account for investment and not with a view toward resale or redistribution
in a manner which would require registration under the Securities Act of 1933,
as amended (the "SECURITIES ACT"). Buyer has not offered or sold the Company
Shares or any part thereof or interest therein, and has no present intention of
dividing the Company Shares with others or of reselling or otherwise disposing
of the Company Shares or any part thereof or interest therein either currently
or after the passage of a fixed or determinable period of time or upon the
occurrence or nonoccurrence of any predetermined event or circumstance.
3.05. BUYER SHARES. The Buyer Shares, when issued and delivered in
accordance with the terms of this Agreement, will be duly authorized, validly
issued, fully paid and non-assessable.
3.06. BUYER INFORMATION. Buyer has delivered to each Seller true and
correct copies of Buyer's most recent Annual Report on Form 10-K and Quarterly
Report on Form 10-Q and, as of the date thereof, each such document did not
contain any untrue statement of a material fact or omit any material fact
necessary to make the statements therein, in light of the circumstance at such
time, not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF KAURI AND THE COMPANY
The Company and Kauri jointly and severally represent and warrant to
Buyer and Sub as follows (with the understanding that Buyer and Sub are relying
materially on each such representation and warranty in entering into and
performing this Agreement):
4.01. CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 170,000 shares of common stock, par value $.01 per share (the
"COMMON SHARES"), 135,000 of which have been designated as "Class A Common
Stock" (the "CLASS A SHARES") and 35,000 of which have been designated as "Class
B Common Stock" (the "CLASS B SHARES"), and (b) 53,440 shares of preferred
stock, par value $.01 per share, all of which have been designated "Series A
Preferred Stock" (the "PREFERRED SHARES"). There are currently issued and
outstanding 100,000 Class A Shares, 31,579 Class B Shares and 53,440 Preferred
Shares. All of the issued and outstanding Common Shares and Preferred Shares are
duly authorized, validly issued, fully paid and nonassessable.
4.02. OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. There are no authorized or
outstanding warrants, options or rights of any kind to acquire from the Company
or from the Sellers any equity or debt securities of the Company or securities
convertible into or exchangeable for equity or debt securities of the Company.
4.03. DUE ORGANIZATION. The Company is a corporation, validly existing
and in good standing under the laws of the State of Delaware and has full power
and authority to carry on its business as now conducted. Complete and accurate
copies of the certificate of incorporation, by-laws (together with any and all
amendments to both) and the corporate records of the Company have been delivered
to Buyer and have been certified by the Secretary of the Company. The Company is
qualified to do business and is in good standing in the jurisdictions set forth
on SCHEDULE 4.03 attached hereto, which jurisdictions represent every
jurisdiction where such qualification is required except where failure to be so
qualified would not have a material adverse effect (as defined in Section 9.02)
on the Company.
4.04. SUBSIDIARIES. All of the subsidiaries, direct and indirect, of
the Company are listed on SCHEDULE 4.04 attached hereto (the "SUBSIDIARIES").
Except as set forth on SCHEDULE 4.04 attached hereto, the Company does not
directly or indirectly have (or possess any options or other rights to acquire)
any subsidiaries or any direct or indirect ownership interests in any person,
business, corporation, partnership, association, joint venture, trust or other
entity. Except as set forth on SCHEDULE 4.04 attached hereto, the Company is the
true and lawful owner, of record and beneficially, of all of the outstanding
capital stock of each Subsidiary, free and clear of any liens, restrictions,
security interests, claims, rights of another or encumbrances. Each Subsidiary
is a corporation, validly existing and in good standing under the laws of the
State of its organization and has full power and authority to carry on its
business as now conducted. Complete and correct copies of the articles or
certificate of incorporation and by-laws of each of the Subsidiaries and all
amendments thereto have been delivered to Buyer and have been certified by the
Secretary of each Subsidiary. Each Subsidiary is qualified to do business and is
7
in good standing in the jurisdictions set forth on SCHEDULE 4.04 attached
hereto, which jurisdictions represent every jurisdiction where such
qualification is required except where failure to be so qualified would not have
a material adverse effect on such Subsidiary. There are no authorized or
outstanding warrants, options or rights of any kind to acquire from the Company
or any Subsidiary any equity or debt securities of any Subsidiary or securities
convertible into or exchangeable for equity or debt securities of any
Subsidiary.
4.05. DUE AUTHORIZATION.
(a) The Company has full corporate power and authority to
enter into and perform this Agreement and each other agreement, instrument and
document required to be executed by it in connection herewith (the "ANCILLARY
AGREEMENTS"). The execution, delivery and performance of this Agreement and the
Ancillary Agreements have been duly authorized by the Sellers and the Board of
Directors of the Company.
(b) This Agreement has been duly and validly executed and
delivered by the Company and, assuming this Agreement constitutes a valid and
binding obligation of Buyer and Sub, constitutes a valid and binding obligation
of the Company enforceable against it in accordance with its terms, except as
the same may be limited by applicable bankruptcy, insolvency, reorganization or
other laws affecting the enforcement of creditors' rights generally and the
application of general principles of equity.
(c) Upon its execution in accordance with this Agreement, each
Ancillary Agreement to which the Company is a party shall have been duly and
validly executed and delivered by the Company and, assuming such Ancillary
Agreement constitutes a valid and binding obligation of Buyer and Sub, shall
constitute a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally and the application of general
principles of equity.
(d) Assuming the accuracy of the representations and
warranties made by Buyer and Sub in this Agreement, neither the execution,
delivery and performance of this Agreement by the Company and the Sellers, nor
the execution, delivery and performance of any Ancillary Agreement by the
Company and/or any Seller, shall (i) violate any federal, state, county or local
law, rule or regulation applicable to the Company, any Subsidiary, any Seller,
or their respective properties, (ii) violate or conflict with, or permit the
cancellation of, any agreement to which the Company, any Subsidiary or any
Seller is a party, or by which any of them or any of their respective properties
is bound (other than such violations or conflicts as shall have been waived in
writing by Buyer and Sub at or prior to Closing), or result in the creation of
any lien, security interest, charge or encumbrance upon any of such properties,
(iii) permit the acceleration of the maturity of any indebtedness of, or
indebtedness secured by the property of, the Company, any Subsidiary or any
Seller (except for indebtedness outstanding under the Company's senior credit
facilities and except as shall have been waived in writing by Buyer and Sub at
or prior to Closing), or (iv) violate or conflict with any provision of the
articles or certificate of incorporation or by-laws of the Company, any Seller
or any Subsidiary.
(e) No action, consent or approval of or filing with any
federal, state, county or local governmental authority is required in connection
with the execution, delivery or performance of this Agreement or any Ancillary
8
Agreement by the Company or any Seller, except for the filings described in
Section 6.13 hereof.
4.06. FINANCIAL STATEMENTS. The following Financial Statements (herein
so called) of the Company have been delivered to Buyer by the Company:
(a) Audited consolidated balance sheets, and related
consolidated statements of operations, cash flows, and stockholders equity of
the Company as of and for the years ended December 31, 2000 and December 31,
1999, and together with notes thereto and the report of Deloitte & Touche LLP
with respect thereto (collectively, the "AUDITED FINANCIAL STATEMENTS"); and
(b) An unaudited consolidated balance sheet and an unaudited
consolidated income statement of the Company as of and for the seven months
ended July 31, 2001 (collectively, the "INTERIM FINANCIAL STATEMENTS").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated and present fairly the consolidated financial position,
results of operations and changes in financial position of the Company, and the
consolidating results of operations of the Company, as of the indicated dates
and for the indicated periods (except, in the case of the Interim Financial
Statements, for the absence of notes thereto and subject to normal year-end
audit adjustments and accruals required to be made in the ordinary course of
business which are not materially adverse and are consistent with past
practices). Except as disclosed in SCHEDULE 4.06(B) or to the extent reflected,
disclosed or provided for in the balance sheet included in the Interim Financial
Statements, to the knowledge of the Company and Kauri, the Company and the
Subsidiaries have no liabilities or obligations (whether absolute, contingent or
otherwise), which are material either individually or in the aggregate, other
than current liabilities incurred in the ordinary course of business consistent
with past practices subsequent to July 31, 2001 and neither the Company nor
Kauri has knowledge of any basis for the assertion of any such liability or
obligation. For purposes of the preceding sentence, "knowledge" shall mean the
actual knowledge and the constructive knowledge of the Sellers and of the
directors, officers and general managers named on SCHEDULE 9.02 herein. Since
July 31, 2001, there has been no material adverse change (as defined in Section
9.02) with respect to the Company (including, for purposes of this
representation only, StatesRail L.L.C., a Delaware limited liability company,
and its direct and indirect majority owned subsidiaries listed on SCHEDULE 4.04
hereto (collectively, the "STATESRAIL L.L.C. ENTITIES")). To the knowledge of
the Company and Kauri, there are no pending or proposed statutes, rules or
regulations nor any current or pending developments or circumstances, which
would have a material adverse effect on the Company (including, for purposes of
this representation only, the StatesRail L.L.C. Entities).
4.07. CONDUCT OF BUSINESS; CERTAIN ACTIONS. Except as set forth on
SCHEDULE 4.07 attached hereto, since July 31, 2001, the Company and the
Subsidiaries have conducted their business and operations in the ordinary course
and consistent with their past practices and have not (a) paid or declared any
dividend or distribution or purchased, retired or redeemed any capital stock
from any shareholder, (b) except for severance payments to be made to certain
employees as contemplated by Section
9
6.19, increased the compensation of any of the directors, officers or key
employees of, or consultants to, the Company or the Subsidiaries or, except for
wage and salary increases made in the ordinary course of business and consistent
with past practices, increased the compensation of any other employees of the
Company or the Subsidiaries, (c) made any capital expenditures (other than those
described on SCHEDULE 4.07(C) attached hereto) exceeding $25,000 individually or
$50,000 in the aggregate, (d) sold any asset essential to the Company's or any
Subsidiary's railroad operations (or any group of related assets) in any
transaction (or series of related transactions) in which the purchase price for
such asset (or group of related assets) exceeded $100,000 (other than sales of
inventory in the ordinary course of business and sales of surplus or
non-essential assets), (e) discharged or satisfied any lien or encumbrance or
paid any obligation or liability, absolute or contingent, other than (i) current
liabilities incurred and paid in the ordinary course of business, and (ii)
payments of third-party interest bearing indebtedness, which indebtedness is
listed on SCHEDULE 4.07 (including that outstanding under the Company's senior
credit facilities), (f) made or guaranteed any loans or advances to any third
party whatsoever, (g) suffered or permitted any lien, security interest, claim,
charge or other encumbrance to arise or be granted or created against or upon
any of the assets of the Company or the Subsidiaries, real or personal, tangible
or intangible, (h) canceled, waived or released any of the Company's or any
Subsidiary's debts, rights or claims against third parties, other than in the
ordinary course of business consistent with past practices, (i) amended the
articles or certificate of incorporation or by-laws of the Company or any
Subsidiary, (j) made any change in the method of accounting of the Company or
any Subsidiary, (k) made any investment or commitment therefor in any person,
business, corporation, association, partnership, joint venture, trust or other
entity, (l) except as contemplated by Section 6.19, made, entered into, amended
or terminated any written or oral consulting contract, created, made, amended or
terminated any bonus, stock option, pension, retirement, profit sharing or other
employee benefit plan or arrangement or withdrawn from any "multi-employer plan"
(as defined in Section 414(f) of the Internal Revenue Code of 1986, as amended
(the "CODE")) so as to create any liability under Article IV of ERISA (as
hereinafter defined) to any entity, (m) amended or experienced a termination of
any material contract, agreement, lease, franchise or license to which the
Company or any Subsidiary is a party, except in the ordinary course of business,
(n) entered into any other material transactions except in the ordinary course
of business, (o) entered into any contract, commitment, agreement or
understanding to do any acts described in the foregoing clauses (a)-(n) of this
Section 4.07, (p) suffered any material damage, destruction or loss (whether or
not covered by insurance) to any assets, (q) experienced any strike, slowdown or
demand for recognition by a labor organization by or with respect to any of the
employees of the Company or the Subsidiaries, (r) experienced or effected any
shutdown, slow-down or cessation of any operations conducted by, or constituting
part of, the Company or the Subsidiaries, or (s) made or changed any election
relating to any Tax.
4.08. OWNERSHIP OF PROPERTIES. Attached hereto as SCHEDULE 4.08 is an
asset list of all real and personal properties (excluding, in the case of
personal properties, any asset having a net book value of less than $25,000 as
of July 31, 2001) owned or leased by the Company or any Subsidiary as of July
31, 2001 (collectively, the "COMPANY PROPERTIES"). Except as set forth on
SCHEDULE 4.08 attached hereto, (a) the real and personal properties of the
Company and the Subsidiaries are free and clear of all liens, security
interests, claims, options, rights of another and encumbrances, (b) the Company
or each Subsidiary, as the case may be, has full and unrestricted legal and
10
equitable title to, or a valid leasehold interest in, all such properties, and
(c) the operation of the properties and business of the Company and the
Subsidiaries in the manner in which they are now and have been operated by the
Company and the Subsidiaries (and, to the knowledge of the Company and Kauri, by
the Company's and each Subsidiary's respective predecessors in interest) does
not violate in any respect any zoning ordinances, municipal regulations or other
rules, regulations or laws, the violation of which could have a material adverse
effect on the Company (including, for purposes of this representation only, the
StatesRail L.L.C. Entities). No covenants, easements, rights-of-way or
regulations of record impair in any material respect the uses of the respective
properties of the Company and the Subsidiaries for the purposes for which they
are now operated.
4.09. ENVIRONMENTAL MATTERS.
(a) To the knowledge of the Company and Kauri, except as set
forth on SCHEDULE 4.09, the Company and each of the Subsidiaries (i) have
obtained all applicable permits, licenses and other authorizations, which are
required to be obtained under all Environmental Laws (as defined below)
applicable to the Company or any of the Subsidiaries; (ii) are in compliance in
all material respects with all terms and conditions of such required permits,
licenses and authorizations, and also are in compliance with all other
applicable limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (iii) as of the date hereof, are not aware of nor have
received notice of any uncured past or present violations of Environmental Laws
or any event, condition, circumstance, activity, practice, incident, action or
plan which is reasonably likely to interfere with or prevent continued
compliance with Environmental Laws or which could give rise to any material
capital expenditure or common law or statutory liability, or otherwise form the
basis of any claim, action, suit or proceeding against the Company or any of the
Subsidiaries under any Environmental Law or otherwise based on or resulting from
the Management of any Substance; (iv) have taken all actions necessary under
applicable Environmental Laws to register any products or materials required to
be registered by the Company or any of the Subsidiaries thereunder; (v) have not
entered into any agreement to undertake or pay for any response action of any
kind or nature or to pay any damages (including punitive damages), costs, fines
or penalties associated with any release or threatened release of any Substance,
at any location; and (vi) have disclosed on SCHEDULE 4.09 all Environmental
Company Property (as defined below) known to be contaminated with Substances.
(b) As used in this Section: "ENVIRONMENTAL COMPANY PROPERTY"
means any real property owned or operated by the Company since its inception;
"ENVIRONMENTAL LAW" means any federal, state or local law or any applicable
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder relating to pollution or protection
of the environment or the Management of Substances, each as in effect on the
Closing Date; "MANAGEMENT", with respect to any material, means the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
handling, or the emission, discharge or release into the environment; and
"SUBSTANCE" means any pollutant, petroleum, waste, contaminant, hazardous or
toxic material, or any other material the Management of which is regulated by
Environmental Law.
4.10. LICENSES AND PERMITS. Attached hereto as SCHEDULE 4.10 is a list
of all federal, state, county and local governmental licenses, certificates and
permits held or applied for by the Company or the Subsidiaries. Except as set
forth on SCHEDULE 4.10 attached hereto, the Company and the Subsidiaries have
complied in all material respects, and are in compliance in all material
respects, with the terms and conditions of all such licenses, certificates and
permits and no violation of any such licenses, certificates or permits or the
11
laws or rules governing the issuance or continued validity thereof has occurred,
the violation of which could have a material adverse effect on the Company
(including, for purposes of this representation only, the StatesRail L.L.C.
Entities). Except as set forth on SCHEDULE 4.10 attached hereto, no additional
license, certificate or permit is required from any federal, state, county or
local governmental agency or body thereof in connection with the conduct of the
business of the Company or the Subsidiaries which, if not obtained, would have a
material adverse effect on the Company (including, for purposes of this
representation only, the StatesRail L.L.C. Entities). Except as set forth on
SCHEDULE 4.10 attached hereto, no claim has been made by any governmental
authority (and, to the knowledge of the Company and Kauri, no such claim is
anticipated) to the effect that a license, permit or order is necessary in
respect of the business conducted by the Company or any Subsidiary.
4.11. INTELLECTUAL RIGHTS.
(a) Except as set forth on SCHEDULE 4.11:
(i) the Company and each of the Subsidiaries owns,
clear of any liens or encumbrances of any kind, or is licensed or
otherwise has the legally enforceable right to use, all Intellectual
Property (as hereinafter defined) used in or necessary for the conduct
of its business as currently conducted;
(ii) no claims are pending or, to the knowledge of
the Company and Kauri, threatened that the Company or any of the
Subsidiaries is infringing on or otherwise violating the rights of any
person with regard to any Intellectual Property used by, owned by
and/or licensed to the Company or any of the Subsidiaries and, to the
knowledge of the Company and Kauri, there are no valid grounds for any
such claims;
(iii) to the knowledge of the Company and Kauri, no
person is infringing on or otherwise violating any right of the Company
or any of the Subsidiaries with respect to any Intellectual Property
owned by and/or licensed to the Company or any of the Subsidiaries;
(iv) to the knowledge of the Company and Kauri, there
are no valid grounds for any claim challenging the ownership or
validity of any Intellectual Property owned by the Company or any of
the Subsidiaries or challenging the Company's or any of the
Subsidiaries' license or legally enforceable right to use any
Intellectual Property licensed by it; and
(v) to the knowledge of the Company and Kauri, all
patents, registered trademarks, service marks and copyrights held by
the Company and each of the Subsidiaries are valid and subsisting.
(b) For purposes of this Agreement, "INTELLECTUAL PROPERTY"
means trademarks (registered or unregistered), service marks, brand names,
certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
12
such registration or application; inventions, discoveries and ideas, whether
patented, patentable or not in any jurisdiction; trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works of authorship, whether
copyrighted, copyrightable or not in any jurisdiction; registration or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; any similar intellectual property or proprietary
rights and computer programs and software (including source code, object code
and data); licenses, immunities, covenants not to ▇▇▇ and the like relating to
the foregoing; and any claims or causes of action arising out of or related to
any infringement or misappropriation of any of the foregoing.
4.12. COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.12
attached hereto, the Company and the Subsidiaries have complied in all material
respects, and are in compliance in all material respects, with all federal,
foreign, state, county and local laws, regulations and orders applicable to
their respective businesses and have filed with the proper authorities all
statements and reports required by the laws, regulations and orders to which the
Company, the Subsidiaries or any of their respective properties or operations
are subject. No claim has been made by any governmental authority (and, to the
knowledge of the Company and Kauri, no such claim is anticipated) to the effect
that the business conducted by the Company or any Subsidiary fails to comply, in
any respect, with any law, rule, regulation or ordinance.
4.13. INSURANCE. Attached hereto as SCHEDULE 4.13 is a list of all
policies of fire, liability, business interruption and other forms of insurance
and all fidelity bonds held by or applicable to the Company or the Subsidiaries
at any time within the past three years, which schedule sets forth in respect of
each such policy the policy name, policy number, carrier, term, type of
coverage, deductible amount or self-insured retention amount, limits of coverage
and annual premium. Except as disclosed on SCHEDULE 4.13 attached hereto, there
has been no material change in the type of insurance coverage maintained by the
Company or the Subsidiaries during the past three years that has resulted in any
period during which the Company or the Subsidiaries had no insurance coverage.
Excluding insurance policies which have expired and been replaced, no insurance
policy of the Company or the Subsidiaries has been canceled within the last
three years and, to the knowledge of the Company and Kauri, no threat has been
made to cancel any insurance policy of the Company or the Subsidiaries within
such period.
4.14. ERISA COMPLIANCE. Except as set forth in SCHEDULE 4.14 attached
hereto, neither the Company nor any Subsidiary maintains or contributes to any
"employee pension benefit plans" ("PENSION PLANS"), as such term is defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Except as set forth in SCHEDULE 4.14 attached hereto, neither the
Company nor any Subsidiary is subject to liability for any obligation of any
Pension Plan which the Company or any Subsidiary formerly maintained or to which
the Company or any Subsidiary formerly was required to contribute. None of the
Company, any Subsidiary, any officer of the Company or any Subsidiary or any of
the Pension Plans of the Company or any Subsidiary which are subject to ERISA,
or any trusts created thereunder, or any trustee or administrator thereof, has
engaged in, or permitted the assets of any such plan or trust to be involved in,
a "prohibited transaction", as such term is defined in Section 4975 of the Code
or Sections 406 and 407 of ERISA, which could subject the Company, any
13
Subsidiary, any officer of the Company or any Subsidiary, any of such plans or
any trust to any material tax or penalty on prohibited transactions imposed by
Section 4975 of the Code or which would have a material adverse effect on the
Company (including, for purposes of this representation only, the StatesRail
L.L.C. Entities). Except as set forth in SCHEDULE 4.14 attached hereto, neither
the Company nor any Subsidiary is obligated to provide any benefit under any
"employee welfare benefit plans", as such term is defined in Section 3(1) of
ERISA, which the Company or any Subsidiary maintains ("WELFARE PLANS"), or to
which the Company or any Subsidiary is obligated to contribute, to any retiree
from the Company or any Subsidiary, except to the extent that such benefits may
be required by the continuation coverage provisions of Part 6 of Title I of
ERISA and Section 4980B of the Code. Each Welfare Plan subject to such
continuation coverage requirements has complied in all material respects with
such continuation coverage requirements. Except as set forth in SCHEDULE 4.14
attached hereto, neither the Company nor any Subsidiary is, or has been, a
contributing employer to any "multiemployer plan" (without regard to whether it
was a Pension Plan or a Welfare Plan) as such term is defined in Section 3(37)
or Section 4001(a)(3) of ERISA, or to any "multiple employer plan" within the
meaning of Section 413(c) of the Code. Neither the Company nor any Subsidiary
has withdrawn from such a plan, and neither is subject to any withdrawal
liability with respect to any such plan. All Welfare Plans, Pension Plans and
the Company and the Subsidiaries have timely complied with the requirements of
Part I of Title I of ERISA and currently comply and have complied in the past,
both as to form and operation, with ERISA, the Code and all other applicable
laws, and with all applicable Statements of Financial Accounting Standards,
including Statements 87 and 106.
4.15. CONTRACTS AND AGREEMENTS. Attached hereto as SCHEDULE 4.15 is a
list of all written and oral contracts, commitments, leases and other agreements
(including, without limitation, promissory notes, loan agreements and other
evidences of indebtedness) to which the Company or any Subsidiary is a party or
by which the Company, the Subsidiaries or their respective properties are bound,
pursuant to which the obligations thereunder of either party thereto are, or are
contemplated as being, in respect of any such individual contracts, commitments,
leases or other agreements during the term thereof, $100,000 or greater or which
are otherwise material to the business of the Company or any Subsidiary
(including, without limitation, all mortgages, deeds of trust, security
agreements, pledge agreements and similar agreements and instruments and all
confidentiality agreements). Except as set forth on SCHEDULE 4.15 attached
hereto, neither the Company nor any Subsidiary, and, to the knowledge of the
Company and Kauri, no other party thereto, is in default (and no event has
occurred which, with the passage of time or the giving of notice or both, would
constitute a default) under any such contracts, commitments, leases or other
agreements, and neither the Company nor any Subsidiary has waived any right
under any such contracts, commitments, leases or other agreements. Except as set
forth on SCHEDULE 4.15 attached hereto, neither the Company nor any Subsidiary
has guaranteed any obligations of any other person nor entered into any contract
or agreement, contingent or otherwise, relating to any right to lease, operate,
use, supply or purchase any material Company asset.
4.16. CLAIMS AND PROCEEDINGS. Attached hereto as SCHEDULE 4.16 is a
list and brief description of all claims, actions, suits, proceedings and
investigations pending or, to the knowledge of the Company and Kauri, threatened
against the Company, any Subsidiary or any of their respective properties or
assets, at law or in equity, or before or by any court, municipal or other
governmental department, commission, board, agency or instrumentality. Except as
set forth on SCHEDULE 4.16 attached hereto, neither the Company nor any
Subsidiary is now subject to any order, judgment, decree, stipulation or consent
of any court, governmental body or agency. No inquiry, action or proceeding has
been asserted, instituted or, to the knowledge of the Company and Kauri,
14
threatened to restrain or prohibit the carrying out of the transactions
contemplated by this Agreement or to challenge the validity of such transactions
or any part thereof or seeking damages on account thereof. To the knowledge of
the Company and Kauri, there is no basis for any claim or action which would
have a material adverse effect on the Company (including, for purposes of this
representation only, the StatesRail L.L.C. Entities), or result in a material
liability of the Company or the Subsidiaries.
4.17. TAXES.
(a) The Company and each of its Subsidiaries has filed all Tax
Returns (as defined below) that it was required to file. All such Tax Returns
were correct and complete in all respects. All Taxes (as defined below) owed by
the Company or any of its Subsidiaries (whether or not shown on any Tax Return
and whether or not any Tax Return was required) have been paid. Except as set
forth on SCHEDULE 4.17 attached hereto, neither the Company nor any of its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Tax Return or has entered into any closing agreement with any
federal, state, local or foreign taxing authority. No claim has ever been made
by any authority in a jurisdiction where the Company or any of its Subsidiaries
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no liens on any of the assets of the Company or any of
its Subsidiaries that arose in connection with any failure (or alleged failure)
to pay any Tax, except for liens for Taxes not yet due.
(b) Each of the Company and its Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(c) No director or officer (or employee responsible for Tax
matters) of the Company or any of its Subsidiaries expects any authority to
assess any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax liability of the Company
or any of its Subsidiaries either (i) claimed or raised by any authority in
writing or (ii) as to which any of the directors and officers (and employees
responsible for Tax matters) of the Company or any of its Subsidiaries has
actual knowledge. SCHEDULE 4.17 attached hereto lists all federal, state, local
and foreign income Tax Returns filed with respect to the Company or any of its
Subsidiaries for taxable periods ended on or after December 31, 1996, indicates
those Tax Returns that have been audited and indicates those Tax Returns that
currently are the subject of audit or in respect of which any written or
unwritten notice of any audit or examination has been received by the Company or
any of its Subsidiaries. Except as set forth in SCHEDULE 4.17, no issue relating
to Taxes has been raised in writing by an authority during any pending audit or
examination, and no issue relating to Taxes was raised in writing by an
authority in any completed audit or examination, that reasonably can be expected
15
to recur in a later taxable period. The Company has made available to the Buyer
correct and complete copies of all Federal income Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by any of
the Company or any of its Subsidiaries since January 1, 1996.
(d) Neither the Company nor any of its Subsidiaries has waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
(e) Neither the Company nor any of its Subsidiaries has filed
a consent under Section 341(f) of the Code concerning collapsible corporations.
Neither the Company nor any of its Subsidiaries has made any payments, is
obligated to make any payments or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Code Section 280G. None of the Sellers is a foreign person within the
meaning of Section 1445(a) of the Code. The Company and each of its Subsidiaries
has disclosed on its Federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of Federal income Tax within the
meaning of Section 6662 of the Code. Except for, or in connection with or as
contemplated by, the Tax Allocation Agreement dated as of May 14, 1987 among
Onyx Holdings, Inc., a Delaware corporation ("ONYX") and its direct and indirect
subsidiaries (including the Company) (the "TAX ALLOCATION AGREEMENT"), neither
the Company nor any of its Subsidiaries (i) is a party to any Tax allocation or
sharing agreement, (ii) has been a member of an Affiliated Group (as defined
below) filing a consolidated Federal income Tax Return (other than a group the
common parent of which was the Company), or (iii) has any liability for the
Taxes of any Person (as defined below) (other than the Company and its
Subsidiaries) under Treasury regulation section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
(f) SCHEDULE 4.17 sets forth the following information with
respect to the Company and each of its Subsidiaries (or, in the case of clause
(ii) below, with respect to each of the Subsidiaries) as of the most recent
practicable date (as well as on an estimated pro forma basis as of the Closing
giving effect to the consummation of the transactions contemplated hereby): (i)
the amount of any net operating loss, net capital loss, unused investment or
other credit, unused foreign tax or excess charitable contribution allocable to
the Company or any Subsidiary; and (ii) the amount of any deferred gain or loss
allocable to the Company or any Subsidiary arising out of any deferred
intercompany transaction (within the meaning of Treasury regulation Section
1.1502-13).
(g) The unpaid Taxes of the Company and its Subsidiaries (i)
did not, as of the most recent fiscal month end, exceed the reserve for Tax
liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
balance sheet included in the Interim Financial Statements (rather than in any
notes thereto) and (ii) do not exceed that reserve as adjusted for the passage
of time through the Closing Date in accordance with the past custom and practice
of the Company and its Subsidiaries in filing their Tax Returns.
(h) Except as set forth on SCHEDULE 4.17, neither the Company
nor any of its Subsidiaries shall be required to include in a taxable period
ending after the Effective Time taxable income attributable to income that
accrued in a prior taxable period but was not recognized in any prior taxable
16
period as a result of the installment method of accounting, the completed
contract method of accounting, the long-term contract method of accounting, the
cash method of accounting or Section 481 of the Code or any comparable provision
of state, local or foreign Tax law.
(i) Except as set forth in SCHEDULE 4.17, neither the Company
nor any of its Subsidiaries is a party to any joint venture, partnership or
other arrangement or contract that could be treated as a partnership for Federal
income Tax purposes.
(j) Except as set forth in SCHEDULE 4.17, neither the Company
nor any of its Subsidiaries has entered into any sale leaseback or leveraged
lease transaction that fails to satisfy the requirements of Revenue Procedure
75-21 or Revenue Procedure 2001-28 (or similar provisions of foreign law) or any
safe harbor lease transaction. None of the property of the Company or any of its
Subsidiaries is tax-exempt use property within the meaning of Section 168(h) of
the Code.
(k) To the knowledge of the Company and Kauri, neither the
Company nor any of its Subsidiaries has ever been an S corporation (within the
meaning of Section 1361(a)(1) of the Code) or a qualified subchapter S
subsidiary within the meaning of Section 1361(b)(3) of the Code.
(l) All material elections with respect to Taxes affecting the
Company or any Subsidiary have been disclosed or attached to the Tax Returns of
the Company or such Subsidiary, respectively.
(m) All private letter rulings issued by the Internal Revenue
Service to the Company or any of its Subsidiaries (and any corresponding ruling
or determination of any state, local or foreign authority) have been disclosed
in SCHEDULE 4.17, and there are no pending requests for any such rulings (or
corresponding determinations).
(n) Neither the Company nor any of the Subsidiaries is a
controlled corporation or a distributing corporation in respect of a
distribution to which Section 355(e) of the Code would apply by reason of the
acquisition of the Company Shares pursuant to this Agreement.
(o) As of the Closing Date, the Company will hold at least 90
percent of the fair market value of the net assets and at least 70 percent of
the fair market value of the gross assets that the Company held immediately
prior to the Merger. For purposes of this representation, Company assets used to
pay its reorganization expenses and any transfer taxes, amounts paid by the
Company to shareholders who receive cash or other property, and all dispositions
and all redemptions and distributions in respect of Company stock or rights to
acquire Company stock (including payments so treated for tax purposes) that are
made by the Company (other than dividends made in the ordinary course of
business) immediately preceding, or in contemplation of, the Merger (including,
without limitation, any asset disposed of by the Company, other than in the
ordinary course of business, during the period beginning with the commencement
of negotiations (whether formal or informal) between the Buyer and the Company
regarding an acquisition of the Company by the Buyer and ending at the Effective
Time) will be included as assets of the Company immediately prior to the Merger.
There will be no dissenters. The liabilities of the Company and each of its
17
Subsidiaries, and the liabilities to which the transferred assets of the Company
and each of its Subsidiaries are subject, were incurred by the Company or the
Subsidiary, as the case may be, in the ordinary course of its business. The
Company and the Sellers will pay their respective expenses, if any, incurred in
connection with the transactions contemplated by this Agreement.
(p) As used in this Agreement, "AFFILIATED GROUP" means any
affiliated group within the meaning of Section 1504(a) of the Code or any
similar group defined under a similar provision of state, local or foreign law;
"CODE" means the Internal Revenue Code of 1986, as amended; "PERSON" means an
individual, a partnership, a corporation, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization or a governmental
entity (or any department, agency or political subdivision thereof); "TAX" means
any Federal, state, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs, duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated or
other tax of any kind whatsoever, including taxes relating to the Railroad
Retirement Act or the Railroad Retirement Board regulations and requirements,
including any interest, penalty or addition thereto, whether disputed or not;
and "TAX RETURN" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto and including any amendment thereof.
4.18. PERSONNEL. Attached hereto as SCHEDULE 4.18 is a list of the
names and current rates of compensation of the directors and officers of the
Company and the Subsidiaries and of the employees of the Company and the
Subsidiaries. SCHEDULE 4.18 attached hereto also summarizes the bonus, profit
sharing, percentage compensation, company automobile, club membership and other
like benefits, if any, paid or payable to such directors, officers and employees
during the Company's 2000 fiscal year and to the date hereof and/or under which
such directors, officers and employees are entitled to receive benefits. The
employee relations of the Company and the Subsidiaries are good and there is no
pending or, to the knowledge of the Company and Kauri, threatened labor dispute.
Except as set forth on SCHEDULE 4.18 attached hereto, none of the employees of
the Company or the Subsidiaries are represented by any labor union or
organization. The Company and the Subsidiaries are in compliance in all material
respects with all federal and state laws respecting employment and employment
practices, terms and conditions of employment and wages and hours and are not
engaged in any unfair labor practices. Except as set forth on SCHEDULE 4.18
attached hereto, there is no claim against the Company or the Subsidiaries
before the National Mediation Board, the Public Law Board or any similar body,
or any strike, labor dispute, work slowdown or work stoppage pending or, to the
knowledge of the Company and Kauri, threatened against or involving the Company
or the Subsidiaries.
4.19. BUSINESS RELATIONS. Except as set forth in SCHEDULE 4.19, neither
the Company nor Kauri has knowledge that any customer or supplier of the Company
or the Subsidiaries will, as a result of the transactions contemplated hereby or
otherwise, cease to do business with the Company or the Subsidiaries or the
Surviving Corporation after the consummation of the transactions contemplated
hereby in the same manner as previously conducted with the Company or the
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Subsidiaries. Neither the Company nor any Subsidiary has received any notice of
any disruption (including delayed deliveries or allocations by suppliers) in the
availability of the materials or products used by the Company or such
Subsidiary.
4.20. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 4.20
attached hereto, all of the accounts, notes and loans receivable (net of
reserves, which reserves are adequate under generally accepted accounting
principles) that have been recorded on the books of the Company and the
Subsidiaries are bona fide and represent amounts validly due. All of such
accounts, notes and loans receivable are pledged to the Company's senior bank
lenders to secure the payment of indebtedness outstanding under the Company's
senior credit facilities.
4.21. BANK ACCOUNTS. Attached hereto as SCHEDULE 4.21 is a list of all
banks or other financial institutions with which the Company or any Subsidiary
has an account or maintains a safe deposit box, showing the type and account
number of each such account and safe deposit box and the names of the persons
authorized as signatories thereon or to act or deal in connection therewith.
4.22. AGENTS. Except as set forth on SCHEDULE 4.22 attached hereto,
neither the Company nor any Subsidiary has designated or appointed any person or
other entity to act for it or on its behalf pursuant to any power of attorney or
any agency which is presently in effect.
4.23. INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS AND
EMPLOYEES. Except as set forth on SCHEDULE 4.23 attached hereto, neither the
Company nor any Subsidiary owes any indebtedness to any of its officers,
directors, shareholders or employees (other than accrued salaries, benefits or
expenses payable in the ordinary course of business) or has indebtedness owed to
it from any of its officers, directors, shareholders or employees, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of business of the Company or such
Subsidiary and consistent with the Company's past practices.
4.24. CERTAIN CONSENTS. Except as set forth on SCHEDULE 4.24 attached
hereto and except in connection with the filings to be made with the Surface
Transportation Board (the "STB"), there are no consents, waivers or approvals
required to be executed and/or obtained from third parties in connection with
the execution, delivery and performance by the Company or the Sellers of this
Agreement, the Ancillary Agreements, and the transactions contemplated hereby or
thereby.
4.25. BROKERS. Except as set forth on SCHEDULE 4.25 attached hereto,
none of the Sellers, the Company or any Subsidiary has engaged, or caused any
liability to be incurred to, any finder, broker or sales agent in connection
with the execution, delivery or performance of this Agreement or the
transactions contemplated hereby.
4.26. INTEREST IN COMPETITORS, SUPPLIERS AND CUSTOMERS. Except as set
forth on SCHEDULE 4.26 attached hereto and except for the ownership, as a
passive investment, of less than one percent of the outstanding shares of
capital stock of any corporation or other entity listed on a national securities
exchange in the United States or publicly traded in the over-the-counter market
19
in the United States, no officer or director of the Company or any Subsidiary or
any affiliate of any such officer or director has any ownership interest in any
competitor, supplier or customer of the Company or the Subsidiaries or any
property used in the operation of the business of the Company or the
Subsidiaries.
4.27. INVENTORY. Except as set forth on SCHEDULE 4.27 attached hereto,
the inventories shown on the balance sheet (inclusive of allowances) contained
in the Interim Financial Statements consist of (and the inventories of the
Company and the Subsidiaries on the Closing Date shall consist of) items of a
quality and quantity usable in the ordinary course of business by the Company
and the Subsidiaries.
4.28. TRANSACTIONS WITH AFFILIATES. Except for (a) those transactions
set forth on SCHEDULE 4.28, (b) normal advances to employees consistent with
past practices, (c) payment of compensation for employment to employees
consistent with past practices, (d) inter-company transactions in the ordinary
course with the StatesRail L.L.C. Entities, and (e) participation in scheduled
Pension Plans, Welfare Plans, employment agreements and employee benefit plans,
the Company has not, since December 31, 1999, purchased, acquired or leased any
property or services from, or sold, transferred or leased any property or
services to, or loaned or advanced any money to, or borrowed any money from, or
entered into or been subject to any management, consulting or similar agreement
with, or engaged in any other significant transaction with any officer, director
or shareholder of the Company or any of their respective affiliates. None of the
Sellers nor any other affiliate of the Company is indebted to the Company for
money borrowed or other loans or advances, and the Company is not indebted to
any such affiliate.
4.29. ABSENCE OF CERTAIN PAYMENTS. None of the Company, the Sellers,
any of the Subsidiaries or any of their respective affiliates, officers,
directors, employees or agent or other people acting on behalf of any of them
have (a) engaged in any activity prohibited by the United States Foreign Corrupt
Practices Act of 1977 or any other similar law, regulation, decree, directive or
order of any other country, and (b) without limiting the generality of the
preceding clause (a), used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others.
None of the Company, any of the Subsidiaries or any of their respective
affiliates, directors, officers, employees or agents of other persons acting on
behalf of any of them, has accepted or received any unlawful contributions,
payments, gifts or expenditures.
4.30. EQUIPMENT. Except as otherwise set forth on SCHEDULE 4.30, (i)
the Company's track and bridge infrastructure has been maintained to a condition
that meets the Federal Railroad Administration's Class of standards for current
speeds, as shown in time tables in effect for each railroad as of August 15,
2001, including both permanent and temporary speed restrictions in effect from
time to time either before or after August 15, 2001, (ii) the number of the
Company's and the StatesRail L.L.C. Entities' (on a collective basis)
locomotives, both leased and owned, that were in service without bad orders as
of August 15, 2001 was 88, (iii) the number of the Company's and the StatesRail
L.L.C. Entities' (on a collective basis) locomotives, both leased and owned,
that are in service without bad orders as of the date of this Agreement is 88,
and (iv) such number that will be in service without bad orders as of the
Closing Date will not be less than 88.
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4.31. CURRENT ASSETS. As of the Closing Date, the Company shall have
current assets, determined in accordance with generally accepted accounting
principles consistently applied, of not less than One Dollar ($1.00).
ARTICLE V
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller hereby severally (but not jointly) represents and warrants
to Buyer as follows with respect to itself and the Company Shares owned by such
Seller (with the understanding that Buyer is relying materially on each such
representation and warranty in entering into and performing this Agreement):
5.01. OWNERSHIP OF SHARES/NO LIENS. Such Seller owns of record and
beneficially the Company Shares as set forth on SCHEDULE 5.01 attached hereto.
None of the Company Shares was issued or will be transferred under this
Agreement in violation of any preemptive or preferential rights of any person.
Except as set forth on SCHEDULE 5.01 attached hereto and except (a) as provided
in that certain Stockholders' Agreement dated January 14, 1997, among the
Company and the Sellers, (b) for restrictions on transfer imposed by federal and
state securities laws, and (c) for security interests created in favor of the
Company's senior bank lenders as a result of the pledge of the Company Shares to
such lenders, such Seller is the true and lawful owner, of record and
beneficially, of his or its Company Shares, free and clear of any liens,
restrictions, security interests, claims, rights of another or encumbrances;
none of the Company Shares owned by such Seller are subject to any outstanding
options, warrants, calls or similar rights of any other person to acquire the
same; none of the Company Shares owned by such Seller is subject to any
restrictions on transfer thereof; and such Seller has the full power and
authority to convey, and will convey to Buyer at Closing, good and marketable
title to his or its Company Shares, free and clear of any liens, restrictions,
security interests, claims, rights of another or encumbrances.
5.02. OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. There are no authorized or
outstanding warrants, options or rights of any kind to acquire from such Seller
any equity or debt securities of the Company or securities convertible into or
exchangeable for equity or debt securities of the Company.
5.03. DUE AUTHORIZATION.
(a) This Agreement has been duly and validly executed and
delivered by such Seller and, assuming this Agreement constitutes a valid and
binding obligation of Buyer and Sub, constitutes a valid and binding obligation
of such Seller enforceable against such Seller in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and the application of general principles of equity.
(b) Assuming the accuracy of the representations and
warranties made by Buyer and Sub in this Agreement, the execution, delivery and
performance of this Agreement by such Seller shall not (i) violate any federal,
state, county or local law, rule or regulation applicable to such Seller or his
properties, (ii) violate or conflict with, or permit the cancellation of, any
agreement to which such Seller is a party, or by which he or it or any of his or
21
its properties is bound (other than such violations or conflicts as shall have
been waived in writing by Buyer and Sub at or prior to Closing), or result in
the creation of any lien, security interest, charge or encumbrance upon any of
such properties, or (iii) permit the acceleration of the maturity of any
indebtedness of, or indebtedness secured by the property of, such Seller.
(c) No action, consent or approval of, or filing with, any
governmental authority is required in connection with the execution, delivery or
performance of this Agreement (or any agreement or other document executed in
connection herewith by such Seller) by such Seller.
5.04. BROKERS. Such Seller has not engaged, or caused any liability to
be incurred to, any finder, broker or sales agent in connection with the
execution, delivery or performance of this Agreement or the transactions
contemplated hereby.
5.05. PURCHASE OF BUYER SHARES FOR INVESTMENT. If such Seller is
acquiring Buyer Shares hereunder, then such Seller (a) is acquiring such shares
for his or its own account for investment with no present intention of, or view
to, distribution of such shares or any part thereof, (b) is an "accredited
investor" as such term is defined in Rule 501(a) of Regulation D promulgated by
the Securities and Exchange Commission pursuant to the Securities Act, (c) has
been provided with all information requested by such Seller regarding Buyer and
its subsidiaries and their business and operations, and has had the opportunity
to ask questions of Buyer's management regarding any issues such Seller
considered relevant to his or its decision to acquire the Buyer Shares, and (d)
understands and agrees that the certificates representing the Buyer Shares
acquired by such Seller pursuant to this Agreement will bear a legend in form
and substance similar to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and,
accordingly, may not be offered for sale, sold or otherwise
transferred except (i) upon effective registration of the
securities represented by the certificate under the Securities
Act of 1933, as amended, or (ii) upon receipt by the issuer of
(A) an opinion of counsel, in such form and by such counsel as
shall be reasonably satisfactory to the issuer, or (B) other
documentation as shall be reasonably satisfactory to counsel
for the issuer that such registration is not required."
5.06. TAX STATUS OF SUCH SELLER. Such Seller is not a foreign person
and no Tax is required to be withheld from such Seller pursuant to Section 1445
of the Code as a result of the transfers contemplated by this Agreement.
ARTICLE VI
COVENANTS
6.01. INSPECTION. From the date hereof to the Closing, Kauri shall give
and cause the Company and the Subsidiaries to give to Buyer and its officers,
attorneys, accountants and representatives free, full and complete access during
reasonable business hours to all books, records, Tax Returns, files,
correspondence, personnel, facilities and properties of the Company and the
22
Subsidiaries; provide Buyer and its officers, attorneys, accountants and
representatives with reasonable access to all information and material
pertaining to the business and affairs of the Company and the Subsidiaries as
Buyer may deem necessary or appropriate; and use their reasonable best efforts
to afford Buyer and its officers, attorneys, accountants and representatives the
opportunity to meet with the customers and suppliers of the Company and the
Subsidiaries to discuss the business, condition (financial or otherwise),
operations and prospects of the Company and the Subsidiaries; PROVIDED, HOWEVER,
that neither Buyer nor any of its representatives shall contact any customer or
supplier of the Company or the Subsidiaries without the prior approval of the
Company. At the Closing, the Company shall deliver to Buyer the originals of all
minute books and stock transfer records of the Company and the Subsidiaries. Any
investigation by Buyer or its officers, attorneys, accountants or
representatives shall not in any manner affect the representations and
warranties of Sellers and the Company contained herein. Buyer shall inform
Sellers and the Company within five business days after becoming aware of any
breach by Sellers or the Company of any of their covenants, agreements,
representations or warranties contained or referred to herein or in any document
delivered in accordance with the terms hereof.
6.02. COMPLIANCE BY THE COMPANY AND SELLERS. From the date hereof to
the Closing, neither any Seller nor the Company shall take or fail to take any
action which action or failure to take such action shall cause the
representations and warranties made by Sellers and/or the Company herein to be
untrue or incorrect as of the Closing.
6.03. SATISFACTION OF ALL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
BUYER. From the date hereof to the Closing, each Seller and the Company shall
use his or its commercially reasonable efforts to cause all conditions precedent
to the obligations of Buyer hereunder to be satisfied by the Closing.
6.04. NO SOLICITATION. From the date hereof to the Closing, neither the
Company nor any Seller shall, or cause any agent on its behalf to, offer any of
the Company Shares, the Common Shares, the Preferred Shares, the Company (or a
material part of its assets in one transaction or a series of transactions) or
any Subsidiary (or a material part of its assets or securities in one
transaction or a series of transactions) for sale or lease, or solicit offers to
buy or lease the Company Shares, the Common Shares, the Preferred Shares, the
Company (or a material part of its assets in one transaction or in a series of
related transactions) or any Subsidiary (or a material part of its assets or
securities in one transaction or a series of related transactions), or hold
discussions with any party (other than Buyer) looking toward such an offer or
solicitation or toward a merger, share exchange or consolidation of the Company
or any Subsidiary with or into another entity or any similar transaction. From
the date hereof to the Closing, Sellers, directly or indirectly, shall not, and
shall not allow the Company or the Subsidiaries to, enter into any agreement
with any party other than Buyer with respect to the sale, lease or other
disposition of either the capital stock or the assets of the Company or any
Subsidiary (except for surplus or non-essential assets disposed of for fair
market value in the ordinary course of the Company's operations consistent with
past practices) or with respect to any merger, share exchange, consolidation or
similar transaction involving the Company or any Subsidiary.
23
6.05. NOTICE OF DEVELOPMENTS. From the date hereof to the Closing,
Sellers and the Company shall notify Buyer of any material problems, changes or
developments with respect to the business, operations or prospects of the
Company or the Subsidiaries (whether or not a breach of a representation or
warranty) which come to the knowledge of Sellers or the Company.
6.06. NOTICE OF BREACH. From the date hereof to the Closing, Sellers
and the Company shall, promptly upon becoming aware thereof, give detailed
written notice to Buyer of the occurrence of, or the impending or threatened
occurrence of, any event which would cause or constitute a breach, or would have
caused or constituted a breach had such event occurred or been known to any
Seller or the Company prior to the date of this Agreement, of any of their
covenants, agreements, representations or warranties contained or referred to
herein or in any document delivered in accordance with the terms hereof.
6.07. NOTICE OF LITIGATION. From the date hereof to the Closing,
promptly upon becoming aware thereof, Sellers and the Company shall notify Buyer
of (a) any suit, action or proceeding (including, without limitation, any Tax
action or any proceeding involving a labor dispute or grievance or union
recognition) to which the Company or any Subsidiary becomes a party or which is
threatened against the Company or any Subsidiary, (b) any order or decree or any
complaint praying for an order or decree restraining or enjoining the
consummation of this Agreement or the transactions contemplated hereby, or (c)
any notice from any tribunal of its intention to institute an investigation
into, or to institute a suit or proceeding to restrain or enjoin the
consummation of, this Agreement or the transactions contemplated hereby or to
nullify or render ineffective this Agreement or such transactions if
consummated.
6.08. CONTINUATION OF INSURANCE COVERAGE. From the date hereof to the
Closing, Sellers shall cause the Company and the Subsidiaries to keep in full
force and effect insurance coverage for the Company, the Subsidiaries and their
respective assets and operations comparable in amount and scope to the coverage
now maintained covering the Company, the Subsidiaries and their respective
assets and operations.
6.09. MAINTENANCE OF CREDIT TERMS. From the date hereof to the Closing,
Sellers shall cause the Company and the Subsidiaries to continue to effect sales
of their products and services only on the terms that have historically been
offered by the Company and the Subsidiaries or on such other terms as market
conditions may dictate consistent with sound business practices.
6.10. UPDATING INFORMATION. Prior to the Closing, the Sellers may
update any schedules or exhibits to this Agreement; PROVIDED, HOWEVER, that
except as provided in the last sentence of Section 7.01, any such update shall
not cure any breach of any representation or warranty contained herein made by
the Company, Kauri or any Seller, as the case may be, nor shall it constitute a
waiver by Buyer of any of its rights or remedies with respect to such breach.
6.11. FINANCIAL STATEMENTS. Until the Closing, as soon as available,
and in any event within 35 days after the end of each calendar month after July
31, 2001 (other than the month of August, which shall be within 45 days after
August 31, 2001), the Company shall furnish to Buyer an unaudited consolidated
balance sheet as of the last day of such month, and an unaudited consolidated
income statement of the Company for such month, prepared in accordance with the
generally accepted accounting principles applied in the preparation of the
24
Audited Financial Statements (except for the absence of notes to such financial
statements and subject to normal year-end adjustments and accruals required to
be made in the ordinary course of business which are not materially adverse and
are consistent with past practices). Such financial statements shall fairly
present the consolidated financial position, results of operations and changes
in financial position of the Company, and the consolidated results of operations
of the Company, as of the indicated dates and for the indicated periods.
6.12. INTERIM OPERATIONS OF THE COMPANY.
(a) From the date hereof to the Closing, Sellers shall cause
the Company and the Subsidiaries to conduct their respective businesses only in
the ordinary course consistent with past practices and pay or cause to be paid
their respective obligations in a timely fashion in accordance with their
respective terms and neither the Company nor any Subsidiary shall, unless Buyer
gives its prior written approval (which approval shall not be unreasonably
withheld, conditioned or delayed), (i) amend or otherwise change its articles or
certificate of incorporation or by-laws, as each such document is in effect on
the date hereof, (ii) issue or sell, or authorize for issuance or sale,
additional shares of any class of capital stock or issue, grant or enter into
any subscription, option, warrant, right, convertible security or other
agreement or commitment of any character obligating the Company or the
Subsidiaries to issue securities, (iii) in the case of the Company, declare, set
aside, make or pay any dividend or other distribution with respect to its
capital stock, (iv) redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock, (v) authorize any capital expenditure in
excess of $50,000 (other than the capital expenditures described on SCHEDULE
4.07(C) attached hereto, which Buyer hereby consents to) or sell, pledge,
dispose of or encumber, or agree to sell, pledge, dispose of or encumber, any
assets of the Company or the Subsidiaries, except for sales of assets in the
ordinary course of business and sales of surplus or non-essential assets
disposed of for fair market value in the ordinary course of the Company's
operations consistent with past practices, (vi) acquire (by merger, share
exchange, consolidation, acquisition of stock or assets, or otherwise) any
corporation, partnership or other business organization or division thereof or
enter into any contract, agreement, commitment or arrangement with respect to
any of the foregoing, (vii) incur any indebtedness for borrowed money (other
than pursuant to credit, loan or other financing agreements or arrangements as
in effect on the date hereof), issue any debt securities or enter into or modify
any contract, agreement, commitment or arrangement with respect thereto, (viii)
enter into, amend or terminate any employment or consulting agreement with any
director, officer, consultant or key employee of the Company or the
Subsidiaries, enter into, amend or terminate any employment agreement with any
other person otherwise than in the ordinary course of business or take any
action with respect to the grant or payment of any severance or termination pay,
other than pursuant to policies or agreements of the Company or the Subsidiaries
in effect on the date hereof or as contemplated by Section 6.19, (ix) enter
into, extend or renew any lease for office or manufacturing space, (x) except as
required by law, adopt, amend or terminate any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or arrangement
for the benefit or welfare of any officer or employee of the Company or the
25
Subsidiaries or withdraw from any multi-employer plan so as to create any
liability under Article IV of ERISA to any entity, (xi) grant any increase in
compensation, or grant or make any bonus or other compensatory payments, to any
director, officer, consultant or key employee of the Company or the
Subsidiaries, except (A) pursuant to agreements entered into prior to August 9,
2001, (B) in the ordinary course of business consistent with past practices, or
(C) as contemplated by Section 6.19, (xii) grant any increase in compensation to
any other employee of the Company or the Subsidiaries except in the ordinary
course of business consistent with past practice, or (xiii) make or change any
election relating to Taxes.
(b) From the date hereof to the Closing, Sellers shall cause
the Company and the Subsidiaries to use their commercially reasonable efforts to
preserve intact the business organization of the Company and the Subsidiaries,
to keep available in all material respects the services of their present
officers, consultants and key employees, to preserve intact their banking
relationships and credit facilities, to preserve intact their relationships with
their customers, suppliers and distributors, to preserve the goodwill of those
having business relationships with them and to comply with all applicable laws.
6.13. SURFACE TRANSPORTATION BOARD. Each party hereto shall make such
filings with the STB required of such party by the STB and/or by the rules and
regulations promulgated or governed thereby in connection with the transactions
contemplated hereby. Each party hereto required to make such a filing shall use
its reasonable best efforts to make such filing (and any responses to requests
for additional information in respect of such filing) so as to permit the
closing of the transactions contemplated by this Agreement at the Closing Date.
Buyer shall pay all filing fees required in connection with any such filing made
under this Section 6.13.
6.14. RESIGNATIONS OF DIRECTORS AND OFFICERS. Sellers shall cause all
directors of the Company and the Subsidiaries (and, if requested by Buyer, all
officers of the Company and the Subsidiaries) to deliver their written
resignations to Buyer, which resignations shall be effective at or before the
Closing and shall be in form and substance reasonably satisfactory to Buyer.
6.15. COMPLIANCE BY BUYER AND SUB. From the date hereof to the Closing,
neither Buyer nor Sub shall take or fail to take any action which action or
failure to take such action shall cause the representations and warranties made
by Buyer or Sub herein to be untrue or incorrect as of the Closing.
6.16. SATISFACTION OF ALL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
SELLERS AND THE COMPANY. From the date hereof to the Closing, each of Buyer and
Sub shall use its commercially reasonable efforts to cause all conditions
precedent to the obligations of Sellers and the Company hereunder to be
satisfied by the Closing.
6.17. NOTICE BY BUYER AND SUB OF BREACH. From the date hereof to the
Closing, each of Buyer and Sub shall, promptly upon becoming aware thereof, give
detailed written notice to Kauri and the Company of the occurrence of, or the
impending or threatened occurrence of, any event which would cause or constitute
a breach, or would have caused or constituted a breach had such event occurred
or been known to Buyer or Sub prior to the date of this Agreement, of any of its
covenants, agreements, representations or warranties contained or referred to
herein or in any document delivered in accordance with the terms hereof.
26
6.18. NOTICE BY BUYER AND SUB OF LITIGATION. From the date hereof to
the Closing, promptly upon becoming aware thereof, each of Buyer and Sub shall
notify Sellers and the Company of (a) any order or decree or any complaint
praying for an order or decree restraining or enjoining the consummation of this
Agreement or the transactions contemplated hereby, or (b) any notice from any
tribunal of its intention to institute an investigation into, or to institute a
suit or proceeding to restrain or enjoin the consummation of, this Agreement or
the transactions contemplated hereby or to nullify or render ineffective this
Agreement or such transactions if consummated.
6.19. TERMINATION OF EMPLOYEES. SCHEDULE 6.19 lists all corporate
general and administrative employees of the Company (the "CORPORATE EMPLOYEES")
and describes all severance arrangements made with each Corporate Employee prior
to the Closing. At least five (5) days prior to Closing, upon written notice,
Buyer may provide a list to the Company of Corporate Employees whose employment
the Buyer wishes to terminate. Any severance, termination, or other payments to
be made to such terminated Corporate Employees shall be paid by Buyer or by the
Company on or after the Closing Date (and not by the Sellers); provided that the
amount of any such payments is to be deducted from the net consideration to be
paid by Buyer for the Company Shares, as contemplated by the Letter Agreement.
For purposes of this Section, Buyer may notify Seller of a termination of a
Corporate Employee for a date following the Closing of up to two months
subsequent thereto, to provide for a smooth transition after Closing. It shall
be the responsibility of Buyer and the Company to pay all wages of the Corporate
Employees after Closing until the effective termination date.
6.20. FILING OF TAX RETURNS; TRANSFER TAXES.
(a) Sellers shall prepare and timely file each Tax Return with
respect to the Company in respect of periods that end on or before the Closing
Date that are required to be filed after the Closing Date. Sellers shall provide
a copy of each such Tax Return to Buyer at least ten (10) days prior to the
filing thereof in order to give Buyer the opportunity to comment thereon.
Sellers shall make all changes thereto reasonably requested by Buyer Company and
shall not file any such Tax Return to which Buyer reasonably objects. Sellers
shall timely pay all Taxes payable with respect to each such Tax Return in
excess of the reserves for such Taxes reflected on the balance sheet of the
Company as of the last day of the calendar month immediately preceding the
Closing Date, or the Closing Date if the Closing is on the last day of a
calendar month (excluding in each case any reserve for deferred Taxes
established to reflect timing differences between book and Tax income), on or
prior to the date such Taxes are due.
(b) Buyer shall prepare and file all Tax Returns with respect
to the Company that covers a taxable period beginning on or before the Closing
Date and ending after the Closing Date that is required to be filed after the
Closing Date (a "STRADDLE PERIOD RETURN"). Sellers shall pay to Buyer at least
five days prior to the due date for the filing of any Straddle Period Return an
amount equal to the portion of the Taxes, in excess of the reserves for such
Taxes reflected on the balance sheet of the Company as of the last day of the
calendar month immediately preceding the Closing Date, or the Closing Date if
the Closing is on the last day of a calendar month (excluding in each case any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income), shown on such return which relate to the portion of such
27
taxable period ending on the Closing Date (the "PRE-CLOSING STRADDLE PERIOD").
The portion of a Straddle Period Tax that relates to the Pre-Closing Straddle
Period shall be based on an interim closing of the books on the Closing Date
(except with respect to ad valorem taxes, which shall be prorated).
6.21. DELIVERY OF SCHEDULES. The Company and the Sellers shall deliver
to Buyer the Schedules referred to in Article IV, Article V, Article VI and
Article IX not later than the 15th day after the date hereof. Such Schedules
shall be deemed to have been a part of this Agreement since the date hereof
unless the Schedule Non-Acceptance Notice (as defined in Section 7.01(r)) shall
be timely given by Buyer.
ARTICLE VII
CONDITIONS TO CLOSING
7.01. CONDITIONS TO OBLIGATIONS OF BUYER AND SUB. The obligations of
Buyer and Sub to consummate the transactions contemplated by this Agreement are
subject to the fulfillment of each of the following conditions:
(a) The representations and warranties of Sellers and the
Company contained in this Agreement not qualified by materiality shall be true
and correct in all material respects and the representations and warranties of
such parties contained in this Agreement containing qualifications as to
materiality shall be true and correct, in both cases, as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of the Closing Date; Sellers and the Company shall have performed and
complied with all agreements required by this Agreement to be performed or
complied with by Sellers and the Company at or prior to the Closing Date; and
Buyer shall have received a certificate, dated as of the Closing Date, signed by
the Sellers and the Chief Executive Officer of the Company to the foregoing
effects;
(b) No action or proceeding shall have been instituted or
threatened for the purpose or with the probable or reasonably likely effect of
enjoining or preventing the consummation of this Agreement or seeking damages on
account thereof;
(c) Buyer shall have received an opinion of Fish & ▇▇▇▇▇▇▇▇▇▇
P.C., counsel for the Company and Sellers, dated as of the Closing Date, in a
form reasonably acceptable to Buyer, with respect to the matters listed on
EXHIBIT B;
(d) Since July 31, 2001, there shall have been no material
adverse change with respect to the Company (including, for purposes of this
condition only, the StatesRail L.L.C. Entities); and the business of the Company
and the Subsidiaries shall have been conducted in accordance with this
Agreement;
(e) Buyer shall have received the minute books and stock
transfer records contemplated by Section 6.01 hereof and the resignations
contemplated by Section 6.14 hereof;
(f) All consents and approvals (if any) required in connection
with the execution, delivery and performance of this Agreement shall have been
obtained and, if applicable, the STB shall have approved the transactions
contemplated hereby;
28
(g) All necessary action (corporate or otherwise) shall have
been taken by Sellers and the Company to authorize, approve and adopt this
Agreement and the consummation and performance of the transactions contemplated
hereby, and Buyer shall have received a certificate, dated as of the Closing
Date, of the Sellers and the Chief Executive Officer of the Company to the
foregoing effect;
(h) Buyer shall have received from each Seller or his duly
appointed agent and attorney-in-fact the stock certificate or certificates
representing all of the Company Shares owned by such Seller duly endorsed for
transfer or accompanied by stock powers duly executed in blank;
(i) The transactions contemplated by that certain Stock
Purchase Agreement of even date herewith between Buyer, West Texas, New
StatesRail, StatesRail LLC and the Members (the "STOCK PURCHASE AGREEMENT")
shall have been consummated;
(j) Each of the Sellers party thereto shall have executed and
delivered the Registration Rights Agreement;
(k) Buyer shall have satisfactorily completed its due
diligence investigation of the Company and shall be satisfied with the results
of such investigation in its sole discretion, it being understood that this
condition shall be deemed satisfied unless, on or prior to the 30th day after
the date hereof (the "DUE DILIGENCE NOTICE DATE"), Buyer gives notice of its
intention to terminate this Agreement because it shall have determined that the
results of such investigation were not satisfactory (the "DUE DILIGENCE
NOTICE");
(l) Each of the Sellers and the Company shall have delivered
such good standing certificates, officers' certificates and similar documents
and certificates as counsel for Buyer shall have reasonably requested prior to
the Closing Date;
(m) Kauri and Onyx shall have executed and delivered the
Indemnification Agreement by and among Buyer, Sub, Kauri, West Texas and Onyx,
in the form attached hereto as EXHIBIT E (the "INDEMNIFICATION AGREEMENT");
(n) Each of the Sellers shall have executed and delivered the
Escrow Agreement;
(o) Buyer shall have received an opinion from ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, P.A., counsel to Buyer, dated as of the Closing Date, to the effect
that the Merger will qualify as a reorganization within the meaning of Section
368(a) of the Code and the Company will not recognize any gain or loss for
federal income tax purposes as a result of the Merger. In rendering that
opinion, ▇▇▇▇▇▇▇▇▇ Traurig, P.A. shall be entitled to rely upon customary
representations reasonably requested by it and made by Buyer, Sub, the Company
and the Sellers;
(p) The fair market value of the Stock Consideration,
determined as of the Closing Date, shall be equal to at least forty percent
(40%) of the sum of (i) such fair market value of the Stock Consideration, (ii)
the Cash Consideration and (iii) the Escrow Amount;
29
(q) The Tax Allocation Agreement shall have been terminated
with respect to the Company effective as of the Closing Date; and
(r) The Schedules referred to in Article IV, Article V,
Article VI and Article IX to be delivered to Buyer by the Company and the
Sellers shall have been delivered to Buyer not later than the 15th day after the
date hereof and Buyer shall have deemed such Schedules to be satisfactory, in
its sole discretion, it being understood that this condition shall be deemed
satisfied unless, not later than the 30th day after the date hereof (the
"SCHEDULE NOTICE DATE"), Buyer shall have given written notice of its
determination that the Schedules were not satisfactory (the "SCHEDULE
NON-ACCEPTANCE NOTICE").
The decision of Buyer to consummate the transactions contemplated by this
Agreement without the satisfaction of any of the preceding conditions shall not
constitute a waiver of any of Sellers' and/or the Company's representations,
warranties, covenants or indemnities herein, other than the failure of a
representation or warranty made in Article IV or Article V hereof to be true and
correct if the matter or circumstance causing such failure was set forth in an
amended schedule pursuant to Section 6.10 hereof.
7.02. CONDITIONS TO OBLIGATIONS OF SELLERS AND THE COMPANY. The
respective obligations of Sellers and the Company to consummate the transactions
contemplated by this Agreement are subject to the fulfillment of the following
conditions:
(a) Buyer's and Sub's representations and warranties contained
in this Agreement not qualified by materiality shall be true and correct in all
material respects and the representations and warranties of such parties
contained in this Agreement containing qualifications as to materiality shall be
true and correct, in both cases, at and as of the Closing Date with the same
effect as though such representations and warranties had been made as of the
Closing Date; Buyer and Sub shall have performed and complied with all
agreements required by this Agreement to be performed or complied with by Buyer
and Sub at or prior to the Closing Date; and Sellers and the Company shall have
received a certificate, dated as of the Closing Date, signed by the President,
the Chief Financial Officer or any Vice President of Buyer and Sub to the
foregoing effects;
(b) No action or proceeding shall have been instituted or
threatened for the purpose or with the probable or reasonably likely effect of
enjoining or preventing the consummation of this Agreement or seeking damages on
account thereof;
(c) Sellers shall have received an opinion of ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, P.A., counsel to Buyer and Sub, dated as of the Closing Date, in a form
reasonably acceptable to Sellers, with respect to the matters listed on EXHIBIT
C;
(d) Buyer shall have delivered to Sellers the Merger
Consideration for the Company Shares in accordance with Article II hereof and
the Letter Agreement;
(e) Buyer shall have executed and delivered the Registration
Rights Agreement;
30
(f) All necessary action (corporate or otherwise) shall have
been taken by Buyer and Sub to authorize, approve and adopt this Agreement and
the consummation and performance of the transactions contemplated hereby, and
Sellers shall have received a certificate, dated as of the Closing Date, signed
by the President, the Chief Financial Officer or any Vice President of Buyer and
Sub to the foregoing effect;
(g) All consents and approvals (if any) required in connection
with the execution, delivery and performance of this Agreement shall have been
obtained and, if applicable, the STB shall have approved the transactions
contemplated hereby;
(h) The transactions contemplated by the Stock Purchase
Agreement shall have been consummated;
(i) Buyer and Sub shall have delivered to Sellers such good
standing certificates, officers' certificates and similar documents and
certificates as counsel for Sellers shall have reasonably requested prior to the
Closing Date;
(j) Buyer and Sub shall have executed and delivered the
Indemnification Agreement and the Escrow Agreement;
(k) The Sellers shall have received an opinion from Fish &
▇▇▇▇▇▇▇▇▇▇ P.C., counsel to the Sellers, dated as of the Closing Date, to the
effect that the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code and the Company will not recognize any gain or loss
for federal income tax purposes as a result of the Merger. In rendering that
opinion, Fish & ▇▇▇▇▇▇▇▇▇▇ P.C. shall be entitled to rely upon customary
representations reasonably requested by it and made by Buyer, Sub, the Company
and the Sellers; and
(l) The fair market value of the Stock Consideration,
determined as of the Closing Date, shall be equal to at least forty percent
(40%) of the sum of (i) such fair market value of the Stock Consideration, (ii)
the Cash Consideration and (iii) the Escrow Amount.
The decision of the Sellers to consummate the transactions contemplated by this
Agreement without the satisfaction of any of the preceding conditions shall not
constitute a waiver of any of Buyer's and/or the Sub's representations,
warranties, covenants or indemnities herein.
ARTICLE VIII
TERMINATION
8.01. TERMINATION. This Agreement may be terminated prior to the
Closing by (a) the mutual consent of Buyer and the Company, (b) the Company upon
the failure of Buyer and Sub to perform or comply with any of their covenants or
agreements contained herein prior to the Closing or if the representations and
warranties not qualified by materiality of Buyer and Sub hereunder shall not
have been true and correct in all material respects or if the representations
and warranties of such parties qualified by materiality shall not have been true
and correct, in both cases as of the time at which such were made, (c) Buyer
upon the failure of the Company or any Seller to perform or comply with any of
its or his covenants or agreements contained herein prior to the Closing or if
the representations and warranties not qualified by materiality of Sellers and
the Company hereunder shall not have been true and correct in all material
respects or if the representations and warranties of such parties qualified by
31
materiality shall not have been true and correct, in both cases as of the time
at which such were made, (d) either the Company or Buyer if the Closing does not
occur by January 4, 2002 (the "TERMINATION DATE"), (e) Buyer, if satisfactory
Schedules have not been delivered on or prior to the Schedule Notice Date, or if
it shall have determined that its due diligence was not satisfactory on or prior
to the Due Diligence Notice Date, (f) the Company, if Buyer shall have given (i)
the Schedule Non-Acceptance Notice (provided that neither the Company nor the
Sellers are in breach of any of their respective covenants contained in Section
6.01 or Section 6.21) or (ii) the Due Diligence Notice (provided that neither
the Company nor the Sellers are in breach of any of their respective covenants
contained in Section 6.01 or Section 6.21), and (g) the Company, if on or prior
to the 45th day after the date hereof Buyer shall have failed to give the
Company notice that it has received the waiver and consent referred to on
Schedule 3.02; PROVIDED, HOWEVER, that no party may terminate this Agreement
pursuant to (b) or (c) or (d) above if such party is, at the time of any such
attempted termination, in breach of any term hereof.
8.02. EFFECT OF TERMINATION. If this Agreement is terminated pursuant
to the provisions of Section 8.01, all further obligations of each party under
this Agreement shall terminate without further liability of such party;
PROVIDED, HOWEVER, that such termination shall not constitute a waiver by any
party of any claim it may have for specific performance or for damages caused by
reason of a breach by any other party of a representation, warranty, covenant,
or agreement contained herein; and PROVIDED FURTHER, that, anything herein to
the contrary notwithstanding, the respective rights and obligations of the
parties pursuant to Article IX hereof shall survive the termination of this
Agreement.
8.03. WAIVER. If any condition specified in Section 7.01 or Section
7.02 of Buyer, on the one hand, and Sellers and the Company, on the other, has
not been satisfied, the parties, in addition to any other rights which may be
available to it or them, shall have the right to waive any condition that is for
its or their benefit and to require the other party or parties to proceed with
the Closing.
ARTICLE IX
MISCELLANEOUS
9.01. COLLATERAL AGREEMENTS, AMENDMENTS AND WAIVERS. This Agreement
(together with the documents delivered pursuant hereto) supersedes all prior
documents, understandings and agreements, oral or written, relating to this
transaction and constitutes the entire understanding among the parties with
respect to the subject matter hereof. Any modification or amendment to, or
waiver of, any provision of this Agreement (or any document delivered pursuant
to this Agreement unless otherwise expressly provided therein) may be made only
by an instrument in writing executed by the party against whom enforcement
thereof is sought. Notwithstanding the foregoing, this Agreement may be amended
prior to the Closing but not thereafter in any respect by written agreement of
Buyer and Kauri, and no such amendment of any nature shall require the consent
(written or oral) of the Company or any Seller to be effective against, and
32
binding upon, the Company or such Seller. The Company and each Seller consents
to the foregoing provisions of this Section 9.01 and acknowledges and agrees
that he or it is aware of and understands the implications thereof.
9.02. INTERPRETATION AND CERTAIN DEFINITIONS. When a reference is made
in this Agreement to an Article or a Section, such reference shall be to an
Article or a Section of this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "INCLUDE," "INCLUDES" or "INCLUDING" are used in
this Agreement, they shall be deemed to be followed by the words "WITHOUT
LIMITATION." The phrase "MADE AVAILABLE" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. As used in this Agreement, the
term "SUBSIDIARY" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person,
and the term "AFFILIATE" shall have the meaning set forth in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended. As used in
this Agreement, "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means,
with respect to any entity referred to, any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to result in any change
or effect) that, individually or in the aggregate with any such other changes or
effects, is materially adverse to the business, operations, assets (including
intangible assets), financial condition or results of operations of such entity
and its Subsidiaries, taken as a whole. As used in this Agreement, "KNOWLEDGE OF
THE COMPANY AND KAURI" means the actual knowledge (except as set forth in
Section 4.06(b)) of the Sellers and of the directors, officers and general
managers of the Company named on SCHEDULE 9.02 with respect to the matter in
question. As used in this Agreement, "KNOWLEDGE OF BUYER" means the actual
knowledge of the Buyer's directors, officers and persons listed on SCHEDULE 9.02
with respect to the matter in question.
9.03. SUCCESSORS AND ASSIGNS. Neither Buyer's, the Company's nor any
Seller's rights or obligations under this Agreement may be assigned (except that
Buyer may assign its rights and obligations to any affiliate (as defined in Rule
144 promulgated under the Securities Act) thereof with the written consent of
the Company or the Sellers). Any assignment in violation of the foregoing shall
be null and void. Subject to the preceding sentences of this Section 9.03, the
provisions of this Agreement (and, unless otherwise expressly provided therein,
of any document delivered pursuant to this Agreement) shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
9.04. EXPENSES. Buyer shall pay all of its costs and expenses incurred
in connection with the transactions contemplated by this Agreement. The Company
shall pay all of the Company's costs and expenses incurred in connection with
the transactions contemplated by this Agreement. In addition, the Company shall
bear the reasonable costs and expenses of providing the Financial Statements
pursuant to Section 4.06 hereof and the monthly financial statements pursuant to
Section 6.11 hereof. The Sellers, and not the Company, shall pay all of the
Sellers'(but not the Company's) costs and expenses incurred in connection with
this Agreement.
33
9.05. INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.
9.06. INFORMATION AND CONFIDENTIALITY. Each party hereto agrees that
such party shall hold in strict confidence all information and documents
received from any other party hereto and if the Closing does not occur each such
party shall return to the other parties hereto all such documents then in such
receiving party's possession without retaining copies; PROVIDED, HOWEVER, that
each party's obligations under this Section 9.06 shall not apply to (a) any
information or document required to be disclosed by law, (b) any information or
document in the public domain other than because of the wrongful actions of the
disclosing party, or (c) any information or document that Buyer discloses to any
potential lender to or investor in Buyer or the Company.
9.07. WAIVER. No failure or delay on the part of any party in
exercising any right, power or privilege hereunder or under any of the documents
delivered in connection with this Agreement shall operate as a waiver of such
right, power or privilege; nor shall any single or partial exercise of any such
right, power or privilege preclude any other or future exercise thereof or the
exercise of any other right, power or privilege.
9.08. NOTICES. Any notices required or permitted to be given under this
Agreement (and, unless otherwise expressly provided therein, under any document
delivered pursuant to this Agreement) shall be given in writing and shall be
deemed received (a) when personally delivered to the relevant party at its
address as set forth below, (b) if sent by mail, on the third day following the
date when deposited in the United States mail, certified or registered mail,
postage prepaid, or (c) if sent by facsimile transmission, when electronic
confirmation is received by the transmitting party, to the relevant party at its
address indicated below:
Buyer and Sub: RailAmerica, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇ Traurig, P.A.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
34
The Company: StatesRail, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax:(▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. Garden, Esq.
Fish & ▇▇▇▇▇▇▇▇▇▇ P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax:(▇▇▇) ▇▇▇-▇▇▇▇
The Sellers: c/o Kauri, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax:(▇▇▇) ▇▇▇-▇▇▇▇
With copies to: J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax:(▇▇▇) ▇▇▇-▇▇▇▇
and:
▇▇▇▇▇▇ ▇. Garden, Esq.
Fish & ▇▇▇▇▇▇▇▇▇▇ P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax:(▇▇▇) ▇▇▇-▇▇▇▇
Each party may change its address for purposes of this Section 9.08 by proper
notice to the other parties. Sellers hereby acknowledge and agree that, in
giving notice to any or all of the Sellers, Buyer need only deliver one copy of
such notice to Kauri (who shall be responsible for delivering copies of such
notice to the Sellers).
9.09. PUBLIC ANNOUNCEMENT. Except as required by applicable law, all
press releases and other public announcements concerning this Agreement and the
transactions contemplated hereby must be approved by Buyer and Kauri prior to
publication.
9.10. WAIVER OF CERTAIN RIGHTS. Each Seller hereby waives any rights of
first refusal, preemptive rights or other rights of any nature whatsoever which
the Company or such Seller may have to purchase any of the Company Shares or
35
other capital stock or equity securities of any nature of the Company or the
Subsidiaries.
9.11. FURTHER ASSURANCES. At, and from time to time after, the Closing,
at the request of Buyer but without further consideration, each Seller shall
execute and deliver such other instruments of conveyance, assignment, transfer
and delivery and take such other action as Buyer may reasonably request in order
more effectively to consummate the transactions contemplated hereby.
9.12. NO THIRD-PARTY BENEFICIARIES. No person or entity not a party to
this Agreement shall be deemed to be a third-party beneficiary hereunder or
entitled to any rights hereunder.
9.13. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
9.14. PREVAILING PARTY. If any legal action, arbitration or any other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
9.15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when said counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all parties
need not sign the same counterpart. A facsimile signature shall be deemed an
original.
9.16. DISPUTE RESOLUTION. If the parties should have a dispute arising
out of or relating to this Agreement or the parties' respective rights and
duties hereunder, then the parties will resolve such dispute in the following
manner: (i) any party may at any time deliver to the others a written dispute
notice setting forth a brief description of the issue for which such notice
initiates the dispute resolution mechanism contemplated by this Section; (ii)
during the forty-five (45) day period following the delivery of the notice
described in clause (i) above, appropriate representatives of the various
parties will meet and seek to resolve the disputed issue through negotiation;
and (iii) if representatives of the parties are unable to resolve the disputed
issue through negotiation, then within thirty (30) days after the period
described in clause (ii) above, the parties will refer the issue (to the
exclusion of a court of law) to final and binding arbitration in Miami, Florida
in accordance with the then existing rules (the "RULES") of the American
Arbitration Association ("AAA"), and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof; PROVIDED,
HOWEVER, that the law applicable to any controversy shall be the law of the
State of Delaware, regardless of principles of conflicts of laws. In any
arbitration pursuant to this Agreement, (i) discovery shall be allowed and
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governed by the applicable Delaware code of civil procedure and (ii) the award
or decision shall be rendered by a majority of the members of a Board of
Arbitration consisting of three (3) members, one (1) of whom shall be appointed
by each of the respective parties and the third of whom shall be the chairman of
the panel and be appointed by mutual agreement of said two (2) party-appointed
arbitrators. In the event of failure of said two (2) arbitrators to agree within
sixty (60) days after the commencement of the arbitration proceeding upon the
appointment of the third arbitrator, the third arbitrator shall be appointed by
the AAA in accordance with the Rules. In the event that either party shall fail
to appoint an arbitrator within thirty (30) days after the commencement of the
arbitration proceedings, such arbitrator and the third arbitrator shall be
appointed by the AAA in accordance with the Rules. Nothing set forth above shall
be interpreted to prevent the parties from agreeing in writing to submit any
dispute to a single arbitrator in lieu of a three (3) member Board of
Arbitration. Upon the completion of the selection of the Board of Arbitration
(or if the parties agree otherwise in writing, a single arbitrator), an award or
decision shall be rendered within no more than forty-five (45) days.
Notwithstanding the foregoing, the request by any party for preliminary or
permanent injunctive relief, whether prohibitive or mandatory, shall not be
subject to arbitration and may be adjudicated only by the courts of the State of
Florida or the U.S. District Court in Florida. Notwithstanding the foregoing,
any actions for specific performance, including for injunctive relief, may be
brought before a court of competent jurisdiction.
9.17. REMEDIES IN INDEMNIFICATION AGREEMENT CONTROL. Notwithstanding
any provision in this Agreement to the contrary, but except for the right to
seek specific performance of any of the agreements contained herein, from and
after the Effective Time the remedies of the parties specifically provided for
by the Indemnification Agreement shall be the sole and exclusive remedies of the
parties for (a) any breach or inaccuracy of the representations and warranties
contained in this Agreement or in any document furnished or delivered pursuant
hereto, (b) the failure to perform any covenants, agreements or obligations
contained in this Agreement or in any document furnished or delivered pursuant
hereto, or (c) any Loss (as defined in the Indemnification Agreement) relating
to, resulting from or arising out of any transaction or matter relating in any
manner whatsoever to this Agreement or to any other agreement or document
furnished or delivered pursuant hereto. In the event of any conflict between or
among the provisions set forth in this Agreement and the provisions set forth in
the Indemnification Agreement, the provisions set forth in the Indemnification
Agreement shall control.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
RAILAMERICA, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, CHAIRMAN, PRESIDENT & CEO
STATESRAIL ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, CHAIRMAN, PRESIDENT & CEO
STATESRAIL, INC.
By: /s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------------------------
J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, PRESIDENT & CEO
THE SELLERS:
KAURI, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, PRESIDENT
/s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------------------------
J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
THE ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1993 CHILDREN'S IRREVOCABLE
TRUST
By: /s/ ▇▇▇▇▇▇ ▇. ALBERCINI
------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, TRUSTEE
38
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
39
SCHEDULE 3.02
Prior to Closing, Buyer and Sub shall be required to get a waiver and consent by
the "Required Lenders" under that certain Credit Agreement, dated as of February
4, 2001 (as amended, supplemented, amended and restated or otherwise modified
from time to time), by and among Buyer, its subsidiaries and the lenders
signatory thereto.
40