AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 13, 1997
AMONG
NEPTUNE ORIENT LINES LTD,
NEPTUNE U.S.A., INC.
AND
APL LIMITED
TABLE OF CONTENTS
Page
ARTICLE I
The Merger
SECTION 1.01 The Merger................................. 1
SECTION 1.02 Closing.................................... 1
SECTION 1.03 Effective Time of the Merger............... 1
SECTION 1.04 Effect of the Merger....................... 2
ARTICLE II
The Surviving Corporation
SECTION 2.01 Articles of Incorporation.................. 2
SECTION 2.02 By-laws.................................... 2
SECTION 2.03 Board of Directors; Officers............... 3
ARTICLE III
Conversion of Shares
SECTION 3.01 Merger Consideration....................... 3
SECTION 3.02 Dissenting Shares.......................... 4
SECTION 3.03 Payment.................................... 4
SECTION 3.04 No Further Rights.......................... 5
SECTION 3.05 Closing of the Company's Transfer Books.... 6
ARTICLE IV
Representations and Warranties of the Company
SECTION 4.01 Organization and Qualification;
Subsidiaries............................. 6
SECTION 4.02 Charter and By-Laws........................ 6
SECTION 4.03 Capitalization............................. 7
SECTION 4.04 Authority Relative to this Agreement....... 8
SECTION 4.05 No Conflict; Required Filings and
Consents................................. 8
SECTION 4.06 SEC Reports and Financial Statements...... 10
SECTION 4.07 Disclosure Documents...................... 11
SECTION 4.08 Litigation................................ 11
SECTION 4.09 Absence of Certain Changes or Events...... 11
SECTION 4.10 Employee Benefit Plans.....................12
i
SECTION 4.11 ERISA..................................... 13
SECTION 4.12 Taxes..................................... 14
SECTION 4.13 Compliance with Applicable Laws........... 15
SECTION 4.14 Voting Requirements....................... 15
SECTION 4.15 Certain Approvals......................... 15
SECTION 4.16 Rights Agreement.......................... 15
SECTION 4.17 Brokers................................... 15
SECTION 4.18 Environmental Matters..................... 16
SECTION 4.19 Insurance................................. 16
SECTION 4.20 Vessels................................... 16
SECTION 4.21 Maritime Security Program Subsidy and
Construction Differential Subsidy....... 17
SECTION 4.22 Capital Construction Fund................. 17
ARTICLE V
Representations and Warranties
of Parent and Merger Sub
SECTION 5.01 Organization and Qualification............ 17
SECTION 5.02 Authority Relative to this Agreement...... 18
SECTION 5.03 No Conflict; Required Filings and
Consents................................ 18
SECTION 5.04 Disclosure Documents...................... 19
SECTION 5.05 Financing................................. 19
SECTION 5.06 Parent Not an Interested Stockholder
or an Acquiring Person.................. 19
SECTION 5.07 Brokers................................... 20
ARTICLE VI
Covenants
SECTION 6.01 Conduct of Business of the Company........ 20
SECTION 6.02 Shareholder Meeting; Proxy Material....... 23
SECTION 6.03 Access to Information..................... 24
SECTION 6.04 Reasonable Best Efforts................... 24
SECTION 6.05 Consents.................................. 25
SECTION 6.06 Public Announcements ..................... 27
SECTION 6.07 Employee Benefit Arrangements ............ 27
SECTION 6.08 Stock Options and Stock Plans............. 28
SECTION 6.09 Indemnification........................... 28
SECTION 6.10 Corporate Presence........................ 30
SECTION 6.11 Maritime Transactions..................... 30
SECTION 6.12 No Solicitation........................... 30
SECTION 6.13 Notification of Certain Matters........... 31
ii
SECTION 6.14 Redemption of Rights; Amendment of
By-Laws................................. 32
SECTION 6.15 Voting of Shares.......................... 32
SECTION 6.16 State Takeover and Environmental Laws..... 32
SECTION 6.17 Capital Construction Fund................. 32
ARTICLE VII
Conditions To Consummation Of the Merger
SECTION 7.01 Conditions to the Obligations of Each
Party................................... 33
SECTION 7.02 Conditions to the Obligations of Parent
and Merger Sub.......................... 33
SECTION 7.03 Conditions to the Obligations of the
Company................................. 34
ARTICLE VIII
Termination; Amendments; Waiver
SECTION 8.01 Termination............................... 35
SECTION 8.02 Effect of Termination..................... 36
SECTION 8.03 Fees and Expenses......................... 36
SECTION 8.04 Amendment................................. 37
SECTION 8.05 Extension; Waiver......................... 37
ARTICLE IX
Miscellaneous
SECTION 9.01 Non-Survival of Representations and
Warranties.............................. 37
SECTION 9.02 Entire Agreement; Assignment.............. 38
SECTION 9.03 Validity.................................. 38
SECTION 9.04 Notices................................... 38
SECTION 9.05 Governing Law............................. 39
SECTION 9.06 Descriptive Headings...................... 39
SECTION 9.07 Counterparts.............................. 39
SECTION 9.08 Parties in Interest....................... 40
SECTION 9.09 Certain Definitions....................... 40
SECTION 9.10 Specific Performance; Consent to
Jurisdiction............................ 41
SECTION 9.11 Appointment of Agent for Service of
Process................................. 41
SECTION 9.12 Guarantee................................. 42
iii
ANNEX A ..........................................A-1
iv
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"),
dated as of April 13, 1997, by and among NEPTUNE ORIENT LINES
LTD, a corporation organized under the laws of Singapore ("Par-
ent"), NEPTUNE U.S.A., INC., a corporation organized under the
laws of the State of Delaware and an indirect wholly-owned sub-
sidiary of Parent ("Merger Sub"), and APL LIMITED, a corpora-
tion organized under the laws of the State of Delaware (the
"Company").
WHEREAS, the respective Boards of Directors of Par-
ent, Merger Sub and the Company have approved the merger of
Merger Sub with and into the Company (the "Merger"), upon the
terms and subject to the conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing
premises and the representations, warranties and agreements
contained herein the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Upon the terms and
subject to the conditions hereof, at the Effective Time (as
defined in Section 1.03), Merger Sub shall be merged with and
into the Company and the separate existence of Merger Sub shall
thereupon cease, and the Company shall continue as the
surviving corporation in the Merger (the "Surviving
Corporation") under the laws of the State of Delaware and under
the name "APL Limited."
SECTION 1.02 Closing. Unless this Agreement shall
have been terminated and the transactions herein contemplated
shall have been abandoned pursuant to Section 8.01, and subject
to the satisfaction or waiver of the conditions set forth in
Article VII, the closing of the Merger will take place as
promptly as practicable (and in any event within two business
days) after satisfaction or waiver of the conditions set forth
in Sections 7.01(a), (b) and (c), at the offices of Wachtell,
Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York
10019, unless another date, time or place is agreed to in writ-
ing by the parties hereto (the "Closing Date").
SECTION 1.03 Effective Time of the Merger. The
Merger shall become effective upon the filing of a certificate
of merger with the Secretary of State of the State of Delaware
in accordance with the applicable provisions of the Delaware
General Corporation Law (the "DGCL"), which filing shall be
made as soon as practicable on the Closing Date. When used in
this Agreement, the term "Effective Time" shall mean the time
at which such certificate is duly filed with the Secretary of
State of Delaware or at such later time as is specified in the
certificate of merger.
SECTION 1.04 Effect of the Merger. The Merger
shall, from and after the Effective Time, have all the effects
provided by applicable Delaware law. If at any time after the
Effective Time the Surviving Corporation shall consider or be
advised that any further deeds, conveyances, assignments or as-
surances in law or any other acts are necessary, desirable or
proper to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, the title to any property or rights
of Merger Sub or the Company (the "Constituent Corporations")
to be vested in the Surviving Corporation, by reason of, or as
a result of, the Merger, or otherwise to carry out the purposes
of this Agreement, the Constituent Corporations agree that the
Surviving Corporation and its proper officers and directors
shall execute and deliver all such deeds, conveyances, assign-
ments and assurances in law and do all things necessary, desir-
able or proper to vest, perfect or confirm title to such prop-
erty or rights in the Surviving Corporation and otherwise to
carry out the purposes of this Agreement, and that the proper
officers and directors of the Surviving Corporation are fully
authorized in the name of each of the Constituent Corporations
or otherwise to take any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.01 Articles of Incorporation. The Cer-
tificate of Incorporation of the Company as in effect im-
mediately prior to the Effective Time shall be the Certificate
of Incorporation of the Surviving Corporation after the Effec-
tive Time, until thereafter changed or amended as provided
therein or by applicable law, except that Articles Fourth,
Fifth, Sixth, Seventh, Eighth, Tenth, Fourteenth and Fifteenth
of the Certificate of Incorporation of the Company shall be
amended as set forth in Annex A.
SECTION 2.02 By-laws. The By-laws of the Company
as in effect immediately prior to the Effective Time (as
amended in accordance with Section 6.14) shall be the By-laws
of the
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Surviving Corporation, until, subject to Section 6.09, thereaf-
ter changed or amended as provided therein or by applicable
law.
SECTION 2.03 Board of Directors; Officers. The di-
rectors of Merger Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation and the of-
ficers of the Company immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, in each
case, until the earlier of their respective resignations or the
time that their respective successors are duly elected or ap-
pointed and qualified.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.01 Merger Consideration. As of the
Effective Time, by virtue of the Merger and without any action
on the part of any shareholder of the Company or Merger Sub:
(a) All shares of common stock, $0.01 par value, of
the Company ("Common Shares"), and the associated Pre-
ferred Share Purchase Rights (the "Rights") issued pursu-
ant to the Rights Agreement dated as of October 27, 1991
between the Company and the First National Bank of Boston,
as Rights Agent (the "Rights Agreement"), which are held
by Parent, the Company or any wholly-owned subsidiary of
Parent (including Merger Sub) or the Company shall be can-
celled and retired and shall cease to exist, and no con-
sideration shall be delivered in exchange therefor. The
Common Shares together with, to the extent applicable, the
Rights are referred to herein collectively as the
"Shares".
(b) Each issued and outstanding Share, other than
those to which the first sentence of Section 3.01(a) ap-
plies and other than any Dissenting Shares (as defined in
Section 3.02) shall be converted into and represent the
right to receive $33.50 in cash, without interest thereon;
(such amount of cash being referred to herein as the
"Merger Consideration").
(c) Each issued and outstanding share of common
stock, $.01 par value, of Merger Sub shall be converted
into and become one fully paid and nonassessable share of
common stock, $0.01 par value, of the Surviving Corpora-
tion.
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SECTION 3.02 Dissenting Shares. Notwithstanding
anything in this Agreement to the contrary, each Share out-
standing immediately prior to the Effective Time and held by a
holder who has not voted in favor of the Merger or consented
thereto in writing and who has demanded appraisal for such
Share in accordance with Section 262 of the DGCL, if such Sec-
tion 262 provides for appraisal rights for such Share in the
Merger ("Dissenting Shares"), shall not be converted into the
right to receive the Merger Consideration unless and until such
holder fails to perfect or withdraws or otherwise loses his
right to appraisal and payment under the DGCL. If, after the
Effective Time, any such holder fails to perfect or withdraws
or loses his right to appraisal, such Dissenting Shares shall
thereupon be treated as if they had been converted as of the
Effective Time into the right to receive the Merger Consider-
ation, if any, to which such holder is entitled, without inter-
est or dividends thereon. The Company shall give Parent prompt
notice of any demands received by the Company for appraisal of
Shares and Parent shall have the right to participate in all
negotiations and proceedings with respect to any such demands.
Neither the Company nor the Surviving Corporation shall, except
with the prior written consent of Parent, voluntarily make any
payment with respect to, or settle or offer to settle, any such
demand for payment.
SECTION 3.03 Payment.
(a) Pursuant to an agreement in form and substance
reasonably acceptable to the Company to be entered into prior
to the Effective Time among Parent and a disbursing agent se-
lected by Parent and reasonably acceptable to the Company (the
"Disbursing Agent"), at the Effective Time, Parent or Merger
Sub shall make available to the Disbursing Agent the aggregate
amount of cash to which holders of Shares shall be entitled
pursuant to Section 3.01(b).
(b) As soon as practicable after the Effective Time,
Parent shall cause the Disbursing Agent to send a notice and a
letter of transmittal to each holder of certificates formerly
evidencing Shares (other than certificates formerly represent-
ing Shares to be cancelled pursuant to Section 3.01(a) and cer-
tificates representing Dissenting Shares) advising such holder
of the effectiveness of the Merger and the procedure for sur-
rendering to the Disbursing Agent such certificates for ex-
change into the Merger Consideration for each Share so repre-
sented, and that delivery shall be effected, and risk of loss
and title to the Shares shall pass, only upon proper delivery
to the Disbursing Agent of the certificates for the Shares and
a duly executed letter of transmittal and any other required
documents of transfer. Each holder of certificates theretofore
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evidencing Shares, upon surrender thereof to the Disbursing
Agent together with such letter of transmittal (duly executed)
and any other required documents of transfer, shall be entitled
to receive in exchange therefor the Merger Consideration with
respect to each such Share. Upon such surrender, the Disburs-
ing Agent shall promptly deliver the Merger Consideration (less
any amount required to be withheld under applicable law) in ac-
cordance with the instructions set forth in the related letter
of transmittal, and the certificates so surrendered shall
promptly be cancelled. Until surrendered, certificates for-
merly evidencing Shares (other than Dissenting Shares) shall be
deemed for all purposes to evidence only the right to receive
the Merger Consideration per Share or, in the case of Dissent-
ing Shares, the fair value of such Dissenting Shares. No in-
terest shall accrue or be paid on any cash payable upon the
surrender of certificates which immediately prior to the Effec-
tive Time represented outstanding Shares (other than Dissenting
Shares in accordance with applicable provisions of the DGCL).
(c) If the Merger Consideration is to be delivered
to a person other than the person in whose name the certifi-
cates surrendered in exchange therefor are registered, it shall
be a condition to the payment of such Merger Consideration that
the certificates so surrendered shall be properly endorsed or
accompanied by appropriate stock powers and otherwise in proper
form for transfer, that such transfer otherwise be proper and
that the person requesting such transfer pay to the Disbursing
Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Disbursing
Agent that such taxes have been paid or are not required to be
paid.
(d) Unless otherwise required by applicable law, any
portion of the aggregate Merger Consideration which remains un-
distributed to holders of Shares one year after the Effective
Time shall be delivered to Parent, and any holders of Shares
who have not theretofore complied with the provisions of this
Article III shall thereafter look only to the Surviving Corpo-
ration as general creditors for payment of any Merger Consider-
ation to which they are entitled pursuant to this Article III.
Neither Parent nor the Disbursing Agent shall be liable to any
holder of Shares for any cash held by Parent or the Disbursing
Agent for payment pursuant to this Article III delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
SECTION 3.04 No Further Rights. From and after the
Effective Time, all of the Shares shall no longer be outstand-
ing and shall be cancelled and retired and shall cease to ex-
ist, and holders of certificates theretofore evidencing Shares
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shall cease to have any rights as shareholders of the Company,
except as provided herein or by law.
SECTION 3.05 Closing of the Company's Transfer
Books. At the Effective Time, the stock transfer books of the
Company shall be closed and no transfer of Shares shall be made
thereafter. In the event that, after the Effective Time, cer-
tificates for Shares are presented to Parent or the Surviving
Corporation, they shall be cancelled and exchanged for the
Merger Consideration for each Share represented as provided in
Section 3.03, subject to applicable law in the case of Dissent-
ing Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and
Merger Sub that except as disclosed in the SEC Reports (as
defined herein) filed, or in the disclosure statement (the
"Company Disclosure Statement") delivered to Parent, prior to
the execution of this Agreement:
SECTION 4.01 Organization and Qualification; Sub-
sidiaries. The Company is a corporation duly organized, val-
idly existing and in good standing under the laws of the State
of Delaware. Each of the Company's significant subsidiaries
(within the meaning of Regulation S-X under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")),
including without limitation any subsidiary that owns a C-10 or
C-11 Vessel (as defined herein) (the "Significant
Subsidiaries"), is a corporation duly organized, validly ex-
isting and in good standing under the laws of the jurisdiction
of its incorporation. The Company and each of the Significant
Subsidiaries has the requisite corporate power and authority to
own, operate or lease its properties and to carry on its
business as it is now being conducted, and is duly qualified or
licensed to do business, and is in good standing, in each
jurisdiction in which the nature of its business or the
properties owned, operated or leased by it makes such
qualification, licensing or good standing necessary.
SECTION 4.02 Charter and By-Laws. The Company has
heretofore made available to Parent and Merger Sub a complete
and correct copy of the charter and the By-Laws, each as
amended to the date hereof, of the Company.
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SECTION 4.03 Capitalization. The authorized capi-
tal stock of the Company consists of 60,000,000 Common Shares
and 5,000,000 shares of Preferred Stock, $.01 par value, of
which 500,000 shares have been designated as shares of Series A
Junior Participating Preferred Stock ("Junior Participating
Preferred Stock") and 2,000,000 shares have been designated as
9% Series D Convertible Preferred Stock ("Convertible Preferred
Stock"). As of the close of business on April 4, 1997,
24,598,652 Common Shares were issued and outstanding, and there
were no Common Shares held in treasury and no shares of
Convertible Preferred Stock or Junior Participating Preferred
Stock issued and outstanding. The Company has no shares
reserved for issuance, except that, as of December 31, 1996,
there were 5,671,958 Common Shares reserved for issuance (of
which as of April 4, 1997, 4,012,720 were subject to
outstanding Options (as defined herein) and bonus share, pre-
mium share and phantom stock awards and dividend equivalent
rights under the Stock Bonus Plan) pursuant to the Option Plans
and the Stock Bonus Plan (as such terms are defined in Section
6.08) and 500,000 shares of Junior Participating Preferred
Stock reserved for issuance upon exercise of the Rights. Since
April 4, 1997, the Company has not issued any shares of capital
stock except pursuant to the exercise of Options (as defined
herein) outstanding as of such date or pursuant to the Stock
Bonus Plan. All the outstanding Common Shares are, and all
Common Shares which may be issued pursuant to the exercise of
outstanding Options or pursuant to the Stock Bonus Plan will
be, when issued in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and non-
assessable. There are no bonds, debentures, notes or other
indebtedness having general voting rights (or convertible into
securities having such rights) ("Voting Debt") of the Company
or any of its Significant Subsidiaries issued and outstanding.
Except as set forth above or for the Rights and except for the
Merger, there are no existing options, warrants, calls,
subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or
unissued capital stock of the Company or any of its Significant
Subsidiaries, obligating the Company or any of its Significant
Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt
of, or other equity interest in, the Company or any of its
Significant Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests or obligations
of the Company or any of its Significant Subsidiaries to grant,
extend or enter into any such option, warrant, call, subscrip-
tion or other right, agreement, arrangement or commitment.
Except as contemplated by this Agreement or the Rights Agree-
ment and except for the Company's obligations in respect of
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the Options under the Option Plans, there are no outstanding
contractual obligations of the Company or any of its Signifi-
cant Subsidiaries to repurchase, redeem or otherwise acquire
any Common Shares or the capital stock of the Company or any of
its Significant Subsidiaries. Each of the outstanding shares
of capital stock of each of the Company's Significant
Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and all of the shares of the Company's
Significant Subsidiaries are owned by the Company or by a
subsidiary of the Company, in each case free and clear of any
lien, claim, option, charge, security interest, limitation,
encumbrance and restriction of any kind (any of the foregoing
being a "Lien"), except such as would not have a Material Ad-
verse Effect on the Company.
SECTION 4.04 Authority Relative to this Agreement.
The Company has all necessary corporate power and authority to
execute and deliver this Agreement and, subject to the approval
of this Agreement and the transactions contemplated hereby by
the holders of the Common Shares, to consummate the
transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly
and validly authorized and approved by the Board of Directors
of the Company (the "Company Board") and no other corporate
proceedings on the part of the Company are necessary to
authorize or approve this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to
the Merger, the approval and adoption of the Merger and this
Agreement by the affirmative vote of the holders of a majority
of the Common Shares then outstanding). This Agreement has
been duly and validly executed and delivered by the Company
and, assuming the due and valid authorization, execution and
delivery of this Agreement by Parent and Merger Sub,
constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms,
except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws af-
fecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity.
SECTION 4.05 No Conflict; Required Filings and
Consents.
(a) None of the execution and delivery of this
Agreement by the Company, the consummation by the Company of
the transactions contemplated hereby or compliance by the
Company with any of the provisions hereof will (i) conflict
with or violate the Certificate of Incorporation or By-Laws
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of the Company or the comparable organizational documents of
any of its Significant Subsidiaries, (ii) conflict with or
violate any statute, ordinance, rule, regulation, order,
judgment or decree applicable to the Company or its Significant
Subsidiaries, or by which any of them or any of their
respective properties or assets are bound or affected, or (iii)
result in a violation or breach of or constitute a default (or
an event which with notice or lapse of time or both would
become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or
result in any loss of any material benefit, or the creation of
any Lien on any of the property or assets of the Company or any
of its Significant Subsidiaries (any of the foregoing referred
to in clause (ii) or this clause (iii) being a "Violation")
pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other
material instrument or obligation ("Contracts"), including
without limitation material collective bargaining Contracts and
other material Contracts with unions ("Union Contracts"),
material alliance Contracts with other shipping companies
("Alliance Contracts"), material Contracts with MarAd (as
defined herein) ("MarAd Contracts"), material Contracts
relating to the provision of or access to rail service ("Rail
Contracts"), and material Contracts allowing the use by the
Company or its Vessels of any port terminal ("Terminal
Contracts") to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries or
any of their respective properties are bound or affected. As
of the date hereof, the Company is not in material breach of
its obligations under any Union Contract, Alliance Contract,
MarAd Contract, Rail Contract, Terminal Contract or Contract
relating to indebtedness for money borrowed.
(b) None of the execution and delivery of this
Agreement by the Company, the consummation by the Company of
the transactions contemplated hereby or compliance by the
Company with any of the provisions hereof will require any
consent, waiver, approval, authorization or permit of, or
registration or filing with or notification to (any of the
foregoing being a "Consent"), any government or subdivision
thereof, domestic, foreign or supranational or any adminis-
trative, governmental or regulatory authority, agency, com-
mission, tribunal or body, domestic, foreign or supranational
(a "Governmental Entity"), except for (i) compliance with any
applicable requirements of the Exchange Act, (ii) the filing of
a certificate of merger pursuant to the DGCL, (iii) certain
state takeover and environmental statutes, (iv) compliance with
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and any requirements of any
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foreign or supranational Antitrust Laws (as hereinafter de-
fined), (v) Consents of any Governmental Entity that become
applicable as a result of the specific regulatory status of
Parent, Merger Sub or any of their affiliates, if any, (vi) the
filing of notification with the Committee on Foreign Investment
in the United States ("CFIUS") under Section 721 of Title VII
of the Defense Production Act of 1950, as amended by the
Omnibus Trade and Competitiveness Act of 1988 (the "Exon Florio
Amendment"); (vii) approvals of United States government
departments and agencies, including but not limited to the
Maritime Administration, United States Department of
Transportation ("MarAd") and the United States Coast Guard, set
forth on Section 4.05(b) of the Company Disclosure Statement
(the "Maritime Approvals"), and (viii) compliance with Sections
4, 5 and 6 of the Shipping Act of 1984 (the "Shipping Act")
with respect to the agreements related to the "Charter
Transactions" (as defined in Section 4.05(b) of the Company
Disclosure Statement), to the extent any such agreement is
required to be filed by Sections 4 and 5 of the Shipping Act.
SECTION 4.06 SEC Reports and Financial Statements.
(a) The Company has filed with the Securities and
Exchange Commission (the "SEC") all forms, reports, schedules,
registration statements and definitive proxy statements (the
"SEC Reports") required to be filed by the Company with the SEC
since January 1, 1995. As of their respective dates, the SEC
Reports complied in all material respects with the requirements
of the Exchange Act or the Securities Act of 1933 and the rules
and regulations of the SEC promulgated thereunder applicable,
as the case may be, to such SEC Reports, and none of the SEC
Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
(b) The consolidated balance sheets as of December
27, 1996 and December 29, 1995 and the related consolidated
statements of income, common shareholders' equity and cash
flows for each of the three years in the period ended December
27, 1996 (including the related notes and schedules thereto) of
the Company contained in the Form 10-K for the year ended
December 27, 1996 included in the SEC Reports present fairly,
in all material respects, the consolidated financial position
and the consolidated results of operations and cash flows of
the Company and its consolidated subsidiaries as of the dates
or for the periods presented therein in conformity with United
States generally accepted accounting
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principles ("GAAP") applied on a consistent basis during the
periods involved except as otherwise noted therein, including
the related notes.
SECTION 4.07 Disclosure Documents.
(a) The proxy statement of the Company (the "Company
Proxy Statement") to be filed with the SEC in connection with
the Merger, and any amendments or supplements thereto will,
when filed (or if amended or supplemented, when and as so
amended or supplemented), comply in all material respects with
the applicable requirements of the Exchange Act.
(b) At the time of filing the Company Proxy State-
ment (or if amended or supplemented, at the time of the filing
of such amendment or supplement) with the SEC, at the time the
Company Proxy Statement or any amendment or supplement thereto
is first mailed to shareholders of the Company, at the time
such shareholders vote on adoption of this Agreement, and at
the Effective Time, the Company Proxy Statement, as
supplemented or amended, if applicable, will not contain any
untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they
were made, not misleading. The representations and warranties
contained in this Section 4.07(b) will not apply to statements
or omissions included in the Company Proxy Statement based upon
information furnished to the Company in writing by Parent or
Merger Sub specifically for use therein.
SECTION 4.08 Litigation. As of the date hereof,
there is no (i) suit, action or proceeding pending or, to the
knowledge of the Company, threatened against or affecting the
Company or any of its subsidiaries or (ii) judgment, decree,
injunction or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its subsidiaries, in
each case that would have, individually or in the aggregate, a
Material Adverse Effect on the Company.
SECTION 4.09 Absence of Certain Changes or Events.
Except as contemplated by this Agreement, from December 31,
1996 until the date hereof, the Company has conducted its
business only in the ordinary course, and there has not been
(i) any change that would have a Material Adverse Effect on the
Company, other than (x) changes relating to or arising from
general economic, market or financial conditions or generally
affecting the industries, markets or trade lanes in which the
Company operates or (y) changes relating to or arising from the
consummation or disclosure of this Agreement or any transaction
contemplated by this Agreement or by the
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Company Disclosure Statement, (ii) any declaration, setting
aside or payment of any dividend or other distribution (whether
in cash, securities or property) with respect to any of the
Company's capital stock, except for the regular quarterly
dividend on the Common Shares not in excess of $0.10 per Common
Share with a record and payment date in accordance with recent
practice, (iii) any damage, destruction or loss, whether or not
covered by insurance, that would have a Material Adverse Effect
on the Company, (iv) any change in accounting methods,
principles or practices by the Company materially affecting its
assets, liabilities or business, except insofar as may have
been required by GAAP or (v) any increase in the compensation
payable or which would become payable by the Company and its
subsidiaries to the officers or key employees of the Company
and its subsidiaries (taken as a whole), other than as provided
in agreements entered into prior to the date hereof between the
Company or its subsidiaries and such officers or employees
(copies of which have been made available to Parent prior to
the date hereof), or any amendments to any Company Benefit
Plans (as defined herein).
SECTION 4.10 Employee Benefit Plans. Section 4.10
of the Company Disclosure Statement lists all bonus, deferred
compensation, pension, retirement, profit sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase,
restricted stock and stock option plans, all employment or
severance contracts and all other employee benefit plans or
contracts (including without limitation any "employee benefit
plans" as defined in Section 3(3) of the Employee Retirement
Security Act of 1974, as amended ("ERISA") and plans or
agreements which cover employees or former employees of the
Company and its subsidiaries and contain applicable "change of
control" or similar provisions), other than those that are not
material to the Company and its subsidiaries as a whole (the
"Company Benefit Plans"). True and complete copies of all
Company Benefit Plans (other than multiemployer plans and plans
primarily covering foreign employees) have been made available
to Parent. As of the date hereof, since January 1, 1996, there
have been no disputes or grievances subject to any grievance
procedure, unfair labor practice proceedings, arbitration or
litigation under such Company Benefit Plans, which have not
been finally resolved, settled or otherwise disposed of, nor is
there any default, or any condition which, with notice or lapse
of time or both, would constitute such a default, under any
such Company Benefit Plans, by the Company or its subsidiaries
or, to the best knowledge of the Company, any other party
thereto, other
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than disputes, grievances, arbitration, litigation, proceed-
ings, defaults or conditions which, alone or in the aggregate,
would not have a Material Adverse Effect on the Company.
SECTION 4.11 ERISA. All Company Benefit Plans
which are subject to ERISA have been administered in ac-
cordance, and are in compliance, with the applicable provisions
of ERISA. Each Company Benefit Plan which is an "employee
pension benefit plan" within the meaning of Section 3(2) of
ERISA, other than multiemployer plans ("Pension Plan") and
which is intended to be qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), has
received a favorable determination letter from the Internal
Revenue Service for "TRA" (as defined in Rev. Proc. 93-39) and
the Company is not aware of any circumstances likely to result
in the revocation of any such favorable determination letter.
No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by the Company or any of its
subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any
of the Company or its subsidiaries, or the single-employer plan
of any entity which is considered one employer with the Company
under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate"). There have not been any non-exempt
"prohibited transactions," as such term is defined in Section
4975 of the Code or Section 406 of ERISA, involving the Company
Benefit Plans which could subject the Company, its subsidiaries
or Parent to the penalty or tax imposed under Section 502(i) of
ERISA or Section 4975 of the Code. Neither the Company nor any
of its subsidiaries has made a complete or partial withdrawal,
within the meaning of Section 4201 of ERISA, from any multi-
employer plan which has resulted in, or is reasonably expected
to result in, any withdrawal liability to the Company or any of
its subsidiaries with respect to a multiemployer plan under
Subtitle E of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate). No notice of a
"reportable event," within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Pension Plan or by any
ERISA Affiliate for a single-employer plan of such ERISA
Affiliate within the 12-month period ending on the date hereof.
All contributions required to be made under the terms of any
Pension Plan or single-employer plan of an ERISA Affiliate have
been timely made. No Pension Plan has an "accumulated funding
deficiency" (whether or not
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waived) within the meaning of Section 412 of the Code or Sec-
tion 302 of ERISA. Neither the Company nor any of its sub-
sidiaries has provided, or is required to provide, security to
any Pension Plan or single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code. Under each Pension
Plan, as of the last day of the most recent plan year ended
prior to the date hereof, the actuarially determined present
value of all "benefit liabilities," within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such Pension Plan's most
recent actuarial valuation), did not exceed the then current
value of the assets of such Pension Plan. All Company Benefit
Plans covering foreign Employees comply in all material
respects with applicable local law. Except as set forth in
Section 4.11 of the Company Disclosure Statement, neither the
execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (i) result in any
material payment (including, without limitation, severance,
unemployment compensation or golden parachute) becoming due to
any director or employee of the Company, (ii) materially
increase any benefits otherwise payable under any Company
Benefit Plan or (iii) result in the acceleration of the time of
payment or vesting of any such benefits to any material extent.
SECTION 4.12 Taxes. (i) All material Tax Returns
(as defined below) have been duly filed and are complete and
accurate in all material respects, (ii) all Taxes (as defined
below) shown to be due on the Tax Returns referred to in clause
(i) have been paid in full, (iii) the United States federal and
California state income Tax Returns referred to in clause (i)
have been examined by the Internal Revenue Service or the
California state taxing authority through 1991 or the period
for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired, (iv) as of the
date hereof, all deficiencies proposed as a result of any
audits have been paid or settled, and (v) as of the date
hereof, no waivers of statutes of limitation have been given by
or requested in writing with respect to any Taxes. "Tax
Returns" shall mean all reports and returns required to be
filed on or before the Closing Date (taking into account any
extension of time within which to file) with respect to the
Taxes of the Company including, without limitation, con-
solidated, combined or unitary tax returns of any group of
companies of which the Company is a member. "Taxes" shall mean
all federal, state, local or foreign income, gross receipts,
windfall profits, severance, property, production,
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sales, use, license, excise, franchise, employment, withholding
or similar taxes imposed on the income, properties or op-
erations of the Company, together with any interest, additions
or penalties with respect thereto and any interest in respect
of such additions or penalties.
SECTION 4.13 Compliance with Applicable Laws. To
the best knowledge of the Company, the Company and its sub-
sidiaries hold all material permits, licenses, variances, ex-
emptions, orders and approvals of all Governmental Entities
necessary for them to own, lease or operate their properties
and assets and to carry on their businesses substantially as
now conducted (the "Compliance Permits"). To the best knowl-
edge of the Company, the Company and its subsidiaries are in
substantial compliance with applicable laws and the terms of
the Compliance Permits. To the best knowledge of the Company,
the business operations of the Company and its subsidiaries are
not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible
violations which, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
SECTION 4.14 Voting Requirements. The affirmative
vote of the holders of at least a majority of the total number
of votes entitled to be cast by the holders of the Common
Shares outstanding as of the record date for the Company
Shareholder Meeting (as defined herein) is the only vote of the
holders of any class or series of the Company's capital stock
necessary to adopt and approve this Agreement and the
transactions contemplated by this Agreement (including the
Merger).
SECTION 4.15 Certain Approvals. The Company Board
has taken appropriate action such that, assuming the accuracy
of Parent's representations in Section 5.06 of this Agreement,
the provisions of Section 203 of the DGCL will not apply to any
of the transactions contemplated by this Agreement. The
Company Board has approved the transactions contemplated by
this Agreement for purposes of Article Sixth and Article Eighth
of the Company's Certificate of Incorporation.
SECTION 4.16 Rights Agreement. Assuming the ac-
curacy of Parent's representation in Section 5.06 of this
Agreement, neither the execution and the delivery of this
Agreement nor consummation of the transactions contemplated
hereby will result in a "Distribution Date" (as defined in the
Rights Agreement).
SECTION 4.17 Brokers. Except for the engagement of
J.P. Morgan & Company, a copy of the engagement letter
-15-
with which has been provided to Parent, none of the Company,
any of its subsidiaries, or any of their respective officers,
directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or
finder's fees in connection with the transactions contemplated
by this Agreement.
SECTION 4.18 Environmental Matters. Except as
would not reasonably be expected to have a Material Adverse
Effect on the Company, as of the date hereof: (i) to the best
knowledge of the Company no real property currently or formerly
owned or operated by the Company or any current subsidiary is
contaminated with any Hazardous Substances to an extent or in a
manner or condition now requiring remediation under any
Environmental Law; (ii) no judicial or administrative
proceeding is pending or to the best knowledge of the Company
threatened relating to liability for any off-site disposal or
contamination; and (iii) the Company and its subsidiaries have
not received any claims or notices alleging liability under any
Environmental Law, and the Company has no knowledge of any
circumstances that could result in such claims. "Environmental
Law" means any applicable domestic or foreign federal, state or
local law, regulation, order, decree, or judicial opinion or
other agency requirement having the force and effect of law and
relating to noise, odor, Hazardous Substance or the protection
of the environment. "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of
any Environmental Law. None of the items set forth on Section
4.18 of the Company Disclosure Statement is, at the date
hereof, reasonably likely to result in a net cost to the
Company and its subsidiaries in excess of $5 million.
SECTION 4.19 Insurance. Each of the Company and
its subsidiaries maintains such policies of maritime, property,
casualty, worker's compensation, general liability and other
insurance, or has self insured and established reserves, as are
appropriate and as are comparable in amounts and scope to such
policies maintained by similarly situated businesses or as
required by applicable law or Contracts.
SECTION 4.20 Vessels. Schedule 4.20 accurately
lists all vessels having a size in excess of 4,000 twenty-foot
equivalent units ("Vessels") owned by the Company or any of its
subsidiaries. As of the date of this Agreement, each of the
Vessels is (i) in good running order and repair, and is
sufficiently tackled, appareled, furnished, equipped, and
seaworthy and in good operating condition, ordinary wear and
tear and depreciation excepted, and (ii) in such condition as
will entitle each Vessel to the highest classification and
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rating for a vessel of the same age and type of the American
Bureau of Shipping.
SECTION 4.21 Maritime Security Program Subsidy and
Construction Differential Subsidy. (a) Each of the five C-10
Vessels and at least four of the C-11 Vessels at the date
hereof owned and operated by the Company or its subsidiaries
will, following the consummation of the transactions
contemplated by Item A of Section 4.05(b) of the Company Dis-
closure Statement, meet all of the requirements necessary in
order to be eligible to receive payments from MarAd pursuant to
the Maritime Security Act of 1996 and the relevant MSP Op-
erating Agreement (or pursuant to the Operating-Differential
Subsidy and related agreements), except to the extent that
(x) the MSP Operating Agreement with respect to such Vessel has
been terminated in accordance with its terms or (y) such C-11
Vessel has not yet been registered as a U.S. flag vessel.
(b) The transactions contemplated by Section 4.05(b)
of the Company Disclosure Statement will not have a Material
Adverse Effect on the Company.
(c) As of May 1, 1997, the aggregate unamortized CDS
will be $2,214,588 for the four Pacesetter Vessels.
SECTION 4.22 Capital Construction Fund. As of the
date hereof, the fund (the "Capital Construction Fund") es-
tablished pursuant to the Maritime Administration Capital
Construction Fund Agreement (Contract No. MA/CCF-306), dated as
of December 8, 1976, between the Assistant Secretary of
Commerce for Maritime Affairs and American President Lines,
Ltd., and Addenda Nos. 1-22 thereto, consists of an investment
of not greater than $65 million in the Company's trade accounts
receivable.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the
Company as follows:
SECTION 5.01 Organization and Qualification. Par-
ent is a corporation duly organized, validly existing and in
good standing under the laws of Singapore and each material
subsidiary of Parent is a corporation duly organized, validly
-17-
existing and in good standing under the laws of the jurisdic-
tion of its organization. Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware and is a direct or indirect wholly-
owned subsidiary of Parent. Parent and each of its material
subsidiaries (including Merger Sub) has the requisite corporate
power and authority to own, operate or lease its properties and
to carry on its business as it is now being conducted, and is
duly qualified or licensed to do business, and is in good
standing, in each jurisdiction in which the nature of its
business or the properties owned, operated or leased by it
makes such qualification, licensing or good standing necessary.
SECTION 5.02 Authority Relative to this Agreement.
Each of Parent and Merger Sub has all necessary corporate power
and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions
contemplated hereby have been duly and validly authorized and
approved by the Boards of Directors of Parent and Merger Sub
and by each stockholder of Merger Sub and no other corporate
proceedings on the part of Parent, Merger Sub or any other
affiliate of Parent are necessary to authorize or approve this
Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by
each of Parent and Merger Sub and, assuming the due and valid
authorization, execution and delivery by the Company,
constitutes a valid and binding obligation of each of Parent
and Merger Sub enforceable against each of them in accordance
with its terms, except that such enforceability (i) may be
limited by bankruptcy, insolvency, moratorium or other similar
laws affecting or relating to the enforcement of creditors'
rights generally and (ii) is subject to general principles of
equity.
SECTION 5.03 No Conflict; Required Filings and
Consents.
(a) None of the execution and delivery of this
Agreement by Parent or Merger Sub, the consummation by Parent
or Merger Sub of the transactions contemplated hereby or com-
pliance by Parent or Merger Sub with any of the provisions
hereof will (i) conflict with or violate the organizational
documents of Parent or Merger Sub, (ii) conflict with or vio-
late any statute, ordinance, rule, regulation, order, judgment
or decree applicable to Parent or Merger Sub, or any of their
subsidiaries, or by which any of them or any of their
respective properties or assets are bound or affected, or
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(iii) result in a Violation pursuant to any material note,
bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which
Parent or Merger Sub, or any of their subsidiaries, is a party
or by which any of their respective properties or assets are
bound or affected.
(b) None of the execution and delivery of this
Agreement by Parent and Merger Sub, the consummation by Parent
and Merger Sub of the transactions contemplated hereby or
compliance by Parent and Merger Sub with any of the provisions
hereof will require any Consent of any Governmental Entity,
except for (i) compliance with any applicable requirements of
the Exchange Act, (ii) the filing of a certificate of merger
pursuant to the DGCL, (iii) notifications required by certain
state takeover and environmental statutes, (iv) compliance with
the HSR Act and any requirements of any foreign or
supranational Antitrust Laws and filings under the Exon-Florio
Amendment and (v) Consents required to be obtained by the
Company.
SECTION 5.04 Disclosure Documents. The information
with respect to Parent and its subsidiaries that Parent
furnishes to the Company in writing, specifically for use in
the Company Proxy Statement, will not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading at the time of filing the Company Proxy Statement
(or if amended or supplemented, at the time of the filing of
such amendment or supplement) with the SEC, at the time the
Company Proxy Statement or any amendment or supplement thereto
is first mailed to shareholders of the Company, at the time the
shareholders vote on adoption of this Agreement and at the
Effective Time.
SECTION 5.05 Financing. Parent or Merger Sub has
all funds necessary to consummate the Merger and the transac-
tions contemplated hereby and to pay related fees and expenses.
SECTION 5.06 Parent Not an Interested Stockholder
or an Acquiring Person. As of the date of this Agreement,
neither Parent nor any of its affiliates is an "Interested
Stockholder" as such term is defined in Section 203 of the
DGCL, Article Sixth of the Company's Certificate of Incorpo-
ration or Article Eighth of the Company's Certificate of In-
corporation or an "Acquiring Person" as such term is defined in
the Rights Agreement.
-19-
SECTION 5.07 Brokers. Neither Parent nor Merger
Sub, nor any of their respective subsidiaries, officers, di-
rectors or employees, has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or
finder's fees in connection with the transactions contemplated
by this Agreement with respect to which the Company is or might
be liable if the Merger contemplated hereby is not consummated.
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company.
The Company agrees to consult and cooperate with Parent prior
to the Effective Time in order to facilitate planning and ex-
ecution of the integration of operations of the Company and
Parent from and after the Effective Time. Except with the
prior written consent of Parent or as contemplated by this
Agreement or the Company Disclosure Statement, during the pe-
riod from the date of this Agreement to the Effective Time,
the Company will, and will cause each of its subsidiaries to,
conduct its operations only in the ordinary and usual course
of business consistent with past practice and will use its
reasonable efforts, and will cause each of its subsidiaries
to use its reasonable efforts, to preserve intact the busi-
ness organization of the Company and each of its subsidiar-
ies, to keep available the services of its and their present
officers and key employees, and to preserve the good will of
its customers, employees, unions and others having business
relationships with it. In addition, except as otherwise con-
templated by this Agreement or the Company Disclosure State-
ment, the Company will not, and will not permit any of its
Significant Subsidiaries to, prior to the Effective Time,
without the prior written consent of Parent:
(a) adopt any amendment to its charter or By-Laws
or comparable organizational documents or the Rights
Agreement;
(b) except for issuances of capital stock of the
Company's subsidiaries to the Company or a wholly-owned
subsidiary of the Company, issue, reissue or sell, or
authorize the issuance, reissuance or sale of (i) ad-
ditional shares of capital stock of any class, or secu-
rities convertible into capital stock of any class, or
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any rights, warrants or options to acquire any convert-
ible securities or capital stock, other than the issu-
ance of Common Shares (and the related Rights) in ac-
cordance with the terms of the instruments governing
such issuance on the date hereof, pursuant to the exer-
cise of Options outstanding on the date hereof, or the
issuance of Common Stock (and the related Rights) pursu-
ant to the Stock Bonus Plan, or (ii) any other securi-
ties in respect of, in lieu of, or in substitution for,
Common Shares outstanding on the date hereof;
(c) declare, set aside or pay any dividend or
other distribution (whether in cash, securities or prop-
erty) in respect of any of its capital stock other than
between any of the Company and any of its wholly-owned
subsidiaries, except for (x) the regular quarterly divi-
dend on the Common Shares not in excess of $0.10 per
Common Share with a record and payment date in accor-
dance with recent practice, and (y) the redemption of
the Rights;
(d) split, combine, subdivide, reclassify or re-
deem, purchase or otherwise acquire, or propose to re-
deem or purchase or otherwise acquire, any shares of its
capital stock, or any of its other securities;
(e) except for (i) increases in the ordinary
course consistent with past practice in salary, wages
and benefits granted to grade 13 or below employees of
the Company or its subsidiaries, (ii) entry into termi-
nation and severance agreements in the ordinary course
consistent with past practice in accordance with the
severance policy described in Section 4.09 of the Com-
pany Disclosure Statement, or (iii) increases in salary,
wages and benefits to employees of the Company or its
subsidiaries pursuant to collective bargaining agree-
ments entered into in the ordinary course of business,
increase the compensation or fringe benefits payable or
to become payable to its directors, officers or key em-
ployees (whether from the Company or any of its subsid-
iaries), or pay any benefit not required by any existing
plan or arrangement (including, without limitation, the
granting of stock options, stock appreciation rights,
shares of restricted stock or performance units) or
grant any severance or termination pay to (except pursu-
ant to existing agreements or policies), or enter into
any employment or severance agreement with, any direc-
tor, officer or other key employee of the Company or es-
tablish, adopt, enter into, or amend any collective bar-
gaining, bonus, profit sharing, thrift, compensation,
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stock option, restricted stock, pension, retirement,
savings, welfare, deferred compensation, employment,
termination, severance or other employee benefit plan,
agreement, trust, fund, policy or arrangement for the
benefit or welfare of any directors, officers or current
or former employees (any of the foregoing being an "Em-
ployee Benefit Arrangement"), except in each case to the
extent required by applicable law or regulation; pro-
vided, however, that nothing herein will be deemed to
prohibit the payment of benefits as they become payable;
(f) acquire, sell, lease or dispose of any vessel;
(g) acquire, sell, lease or dispose of any assets
(other than vessels) or securities which are material to
the Company and its subsidiaries taken as a whole, or
enter into any commitment to do any of the foregoing or
enter into any other material commitment or transaction,
outside the ordinary course of business consistent with
past practice other than transactions between a wholly
owned subsidiary of the Company and the Company or an-
other wholly owned subsidiary of the Company;
(h) (i) incur, assume or pre-pay any long-term
debt or incur or assume any short-term debt, except that
the Company and its subsidiaries may incur, assume or
pre-pay debt in the ordinary course of business consis-
tent with past practice, (ii) assume, guarantee, endorse
or otherwise become liable or responsible (whether di-
rectly, contingently or otherwise) for the obligations
of any other person except in the ordinary course of
business consistent with past practice, or (iii) make
any loans, advances or capital contributions to, or in-
vestments in, any other person except in the ordinary
course of business consistent with past practice and ex-
cept for loans, advances, capital contributions or in-
vestments between any wholly owned subsidiary of the
Company and the Company or another wholly owned subsid-
iary of the Company;
(i) neither the Company nor any of its subsidiar-
ies shall (i) settle or compromise any material claims
or litigation (other than any settlement or compromise
not involving payments by the Company, net of insurance,
in excess of $500,000), or (ii) except in the ordinary
course of business, modify, amend or terminate any of
its material Contracts or Permits or waive, release or
assign any other material rights or claims;
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(j) neither the Company nor any subsidiary shall
permit any insurance policy naming it as a beneficiary
or a loss payable payee to be canceled or terminated
without notice to Parent, except in the ordinary course
of business;
(k) grant any lien on any Vessel in respect of
borrowed money; and
(l) agree in writing or otherwise to take any of
the foregoing actions.
SECTION 6.02 Shareholder Meeting; Proxy Material.
(a) The Company shall take all action necessary,
in accordance with applicable law and its Certificate of In-
corporation and By-laws, to convene a meeting of its share-
holders (the "Company Shareholder Meeting") as promptly as
reasonably practicable after the date on which the definitive
Company Proxy Statement has been mailed to the Company's
shareholders for the purpose of considering and taking action
upon the Merger and this Agreement. Subject to the fiduciary
duties of the Company Board, the Company Board will recommend
that holders of Common Shares vote in favor of the approval
of this Agreement at the Company Shareholder Meeting.
(b) In connection with such meeting, the Company
(i) will as promptly as practicable prepare and file with the
SEC, will use its best efforts to have cleared by the SEC and
will thereafter mail to its shareholders as promptly as prac-
ticable the Company Proxy Statement and all other proxy mate-
rials for such meeting, (ii) subject to the fiduciary duties
of the Company Board, will use its best efforts to obtain the
necessary approvals by its shareholders of this Agreement and
the transactions contemplated hereby and (iii) will otherwise
comply with all legal requirements applicable to such meet-
ing. The Company will provide Parent with a copy of the pre-
liminary proxy statement and all modifications thereto prior
to filing or delivery to the SEC and will consult with Parent
in connection therewith. The Company will notify Parent
promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for amend-
ments or supplements to the Company Proxy Statement or for
additional information and will supply Parent with copies of
all written correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff,
on the other hand, with respect to the Company Proxy State-
ment or the Merger. If at any time prior to the Company
Shareholder Meeting there shall occur any event that should
be set forth in an amendment or supplement to the Company
-23-
Proxy Statement, the Company will promptly prepare and mail
to its shareholders such an amendment or supplement.
SECTION 6.03 Access to Information. From the
date of this Agreement until the Effective Time, the Company
will, and will cause its subsidiaries, and each of their
respective officers, directors, employees, counsel, advisors
and representatives (collectively, the "Company
Representatives") to, give Parent and Merger Sub and their
respective officers, employees, counsel, advisors and
representatives (collectively, the "Parent Representatives")
reasonable access (subject, however, to existing
confidentiality and similar non-disclosure obligations, as to
which the Company will use reasonable efforts to obtain
waivers or to make non-applicable to Parent or Merger Sub,
and the preservation of attorney client and work product
privileges) during normal business hours and upon reasonable
notice, to the offices and other facilities and to the books
and records of the Company and its subsidiaries, as will
permit Parent and Merger Sub to make inspections of such as
either of them may reasonably require and will cause the
Company Representatives and the Company's subsidiaries to
furnish Parent, Merger Sub and the Parent Representatives to
the extent available with such financial and operating data
and such other information with respect to the business and
operations of the Company and its subsidiaries as Parent and
Merger Sub may from time to time reasonably request. Unless
otherwise required by law, Parent and Merger Sub will, and
will cause the Parent Representatives to, hold any such
information in confidence until the Effective Time or such
time as such information otherwise becomes publicly available
through no wrongful act of Parent, Merger Sub or the Parent
Representatives. In the event of termination of this
Agreement for any reason, Parent and Merger Sub will, and
will cause the Parent Representatives to, return to the
Company all copies of written information furnished by the
Company or any of the Company Representatives to Parent or
Merger Sub or the Parent Representatives and destroy all
memoranda, notes and other materials prepared by Parent,
Merger Sub or the Parent Representatives based upon or
including the information furnished by the Company or any of
the Company Representatives to Parent or Merger Sub or the
Parent Representatives (and Parent will certify to the
Company that such destruction has occurred). In addition,
Parent will comply with the terms of the Confidentiality
Agreement (as hereinafter defined), which the parties hereby
agree will terminate as of the Effective Time.
SECTION 6.04 Reasonable Best Efforts. Subject to
the terms and conditions herein provided and to applicable
legal requirements, each of the parties hereto agrees to use
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its reasonable best efforts to take, or cause to be taken,
all action, and to do, or cause to be done, and to assist and
cooperate with the other parties hereto in doing, as promptly
as practicable, all things necessary, proper or advisable un-
der applicable laws and regulations to ensure that the condi-
tions set forth in Article VII are satisfied and to consum-
mate and make effective the transactions contemplated by this
Agreement.
In addition, if at any time prior to the Effective
Time any event or circumstance relating to either the Company
or Parent or Merger Sub or any of their respective subsidiar-
ies, should be discovered by the Company or Parent, as the
case may be, and which should be set forth in an amendment to
the Company Proxy Statement, the discovering party will
promptly inform the other party of such event or circum-
stance.
SECTION 6.05 Consents.
(a) Each of the parties will use its reasonable
best efforts to obtain as promptly as practicable all Con-
sents of any Governmental Entity or any other person required
in connection with, and waivers of any Violations that may be
caused by, the consummation of the transactions contemplated
by this Agreement.
(b) (i) In furtherance and not in limitation of
the foregoing, Parent shall use its reasonable best efforts
to resolve such objections, if any, as may be asserted with
respect to the transactions contemplated by this Agreement
under any antitrust, competition or trade regulatory laws,
rules or regulations of any domestic or foreign government or
governmental authority or any multinational authority ("Anti-
trust Laws"). The obligation to use such reasonable best ef-
forts shall not require Parent to agree to hold separate or
to divest any of the businesses, product lines or assets of
Parent or any of its affiliates or of any of the Company, its
subsidiaries or affiliates) or take any other action that
would have a Material Adverse Effect on the Company or a Ma-
terial Adverse Effect on Parent and the Company taken as a
whole.
(ii) In furtherance and not in limitation of
the foregoing, each of the Company, Merger Sub and Parent
shall use its reasonable best efforts to obtain the Maritime
Approvals and to otherwise resolve such objections, if any,
as may be asserted with respect to the transactions contem-
plated by this Agreement under any shipping or maritime laws,
rules or regulations of any domestic or foreign government or
-25-
governmental authority or any multinational authority ("Mari-
time Laws"). If the Maritime Approvals have not been ob-
tained, Parent shall take such action or make such commit-
ments or agreements to take action in the future (and shall
consent to the Company taking such action or making such com-
mitments or agreements) as may be required by the applicable
government or governmental or multinational authority (in-
cluding, without limitation, MarAd or the Federal Maritime
Commission) in order to obtain the Maritime Approvals or to
resolve such objections as such government or authority may
have; provided, however, that no such action, commitment or
agreement shall be required to be taken or made if it would
have a Material Adverse Effect on the Company or a Material
Adverse Effect on Parent and the Company, taken as a whole.
(c) Any party hereto shall promptly inform the
others of any material communication from MarAd, the Federal
Maritime Commission, the United States Federal Trade Commis-
sion, the Department of Justice, the European Economic Area,
CFIUS or any other domestic or foreign government or govern-
mental or multinational authority regarding any of the trans-
actions contemplated by this Agreement. If any party or any
affiliate thereof receives a request for additional informa-
tion or documentary material from any such government or au-
thority with respect to the transactions contemplated by this
Agreement, then such party will endeavor in good faith to
make, or cause to be made, as soon as reasonably practicable
and after consultation with the other party, an appropriate
response in compliance with such request. Parent and the
Company will consult and cooperate with one another with re-
spect to (and prior to) any understandings, undertakings or
agreements (oral or written) which are proposed to be made or
entered into with MarAd, the Federal Maritime Commission, the
Federal Trade Commission, the Department of Justice, the Eu-
ropean Economic Area, CFIUS or any other domestic or foreign
government or governmental or multinational authority in con-
nection with the transactions contemplated by this Agreement
and no such understandings, undertaking or agreements shall
be made or entered into without prior consultation with Par-
ent.
(d) (i) (A) In the event that any filings are
required pursuant to Sections 4 or 5 of the Shipping Act in
connection with the Charter Transactions, the Company shall,
after consultation with Parent, make such filings as soon as
practicable (and in no event later than ten business days af-
ter finalization of all documentation related to such trans-
actions). (B) Neither Parent nor (except as set forth
above) the Company (or any of their affiliates) shall enter
into any other agreement related to this Agreement or the
-26-
transactions contemplated hereby that would require filing
under Section 4 or 5 of the Shipping Act ("Additional Ship-
ping Act Agreements") without the prior written consent of
the other. In the event that any such agreement is entered
into (with such consent) it shall be filed as soon as practi-
cable (and in no event later than 10 business days) thereaf-
ter pursuant to Sections 4 and 5 of the Shipping Act.
(ii) Parent and the Company shall each
promptly, and in any event within 10 days after execution and
delivery of this Agreement, make all filings or submissions
as are required under the HSR Act or any other Antitrust Laws
or the Exon-Florio Amendment.
SECTION 6.06 Public Announcements. So long as
this Agreement is in effect, Parent, Merger Sub and the Com-
pany agree to use reasonable efforts to consult with each
other before issuing any press release or otherwise making
any public statement with respect to the transactions contem-
plated by this Agreement.
SECTION 6.07 Employee Benefit Arrangements.
(a) Parent agrees that the Company will honor and,
from and after the Effective Time, Parent will cause the Sur-
viving Corporation to honor, (i) each Employee Benefit Ar-
rangement that is set forth in the Company Disclosure State-
ment and (ii) each other Employee Benefit Arrangement to
which the Company or any of its subsidiaries is presently a
party, in the case of clause (ii), to the extent that any
benefit has accrued thereunder as of the Effective Time.
(b) Parent will cause the Surviving Corporation to
take such actions as are necessary so that, for a period of
at least two years from the Effective Time, employees of the
Company and its subsidiaries (excluding employees covered by
collective bargaining agreements) will be provided cash com-
pensation, employee benefit (including without limitation in-
demnification arrangements and directors' and officers' in-
surance) and incentive compensation and similar plans and
programs as will provide compensation and benefits which in
the aggregate are no less favorable than those provided to
such employees as of the date hereof; provided, however, that
it is understood that after the Effective Time no party
hereto will have any obligation to issue shares of capital
stock of any entity pursuant to any such plan or program and
that any substitute plan or program may be based on criteria
other than stock performance.
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(c) Nothing in this Section 6.07 shall require any
party hereto to retain any employee (other than pursuant to
agreements existing at the Effective Time).
SECTION 6.08 Stock Options and Stock Plans.
(a) The Company shall take all actions necessary
to provide that, immediately prior to the Effective Time, (i)
each outstanding option to purchase Common Shares (an "Op-
tion") granted under the Company's 1989 Stock Incentive Plan
or the Company's 1992 Directors Stock Option Plan (col-
lectively, the "Option Plans"), whether or not then exercis-
able or vested, shall become fully exercisable and vested,
(ii) each Option which is then outstanding shall be cancelled
and (iii) in consideration of such cancellation, and except
to the extent that Parent or the Merger Sub and the holder of
any such Option otherwise agree, the Company shall pay to
such holders of Options an amount in respect thereof equal to
the product of (A) the excess, if any, of the Merger Consid-
eration over the per share exercise price thereof and (B) the
number of Common Shares subject thereto (such payment to be
net of applicable withholding taxes).
(b) The Company shall take all actions necessary
to provide that, immediately prior to the Effective Time, (i)
all Common Shares granted under any Option Plan or under the
Company's 1995 Stock Bonus Plan (the "Stock Bonus Plan") (in-
cluding without limitation "Premium Shares" under the Stock
Bonus Plan), whether or not then vested or subject to re-
strictions, shall become fully vested and free of restric-
tions and (ii) all "Phantom Shares" under the Stock Bonus
Plan shall be cancelled and, in consideration of such cancel-
lation, the Company shall pay to the holders of such Phantom
Shares the product of the Merger Consideration and the number
of Phantom Shares held by such holder.
SECTION 6.09 Indemnification.
(a) Parent agrees that all rights to indemnifica-
tion now existing in favor of any employee, agent, director
or officer of the Company and its subsidiaries (the "Indemni-
fied Parties") as provided in their respective charters or
By-Laws, in an agreement between an Indemnified Party and the
Company or one of its subsidiaries, or otherwise in effect on
the date hereof shall survive the Merger and shall continue
in full force and effect for a period of not less than six
years from the Effective Time; provided that in the event any
claim or claims are asserted or made within such six-year pe-
riod, all rights to indemnification in respect of any such
claim or claims shall continue until final disposition of any
-28-
and all such claims. Parent also agrees to indemnify all In-
demnified Parties to the fullest extent permitted by ap-
plicable law with respect to all acts and omissions arising
out of such individuals' services as officers, directors, em-
ployees or agents of the Company or any of its subsidiaries
or as trustees or fiduciaries of any plan for the benefit of
employees, or otherwise on behalf of, the Company or any of
its subsidiaries, occurring prior to the Effective Time in-
cluding, without limitation, the transactions contemplated by
this Agreement. Without limitation of the foregoing, in the
event any such Indemnified Party is or becomes involved in
any capacity in any action, proceeding or investigation in
connection with any matter, including, without limitation,
the transactions contemplated by this Agreement, occurring
prior to, and including, the Effective Time, Parent will pay
as incurred such Indemnified Party's legal and other expenses
(including the cost of any investigation and preparation) in-
curred in connection therewith. Notwithstanding the forego-
ing two sentences, Parent shall have no obligation to indem-
nify or pay expenses of such Indemnified Party to the extent
that the Company or the relevant insurer shall have actually
paid or satisfied (and eliminated any liability of such In-
demnified Party with respect to ) such applicable indemnifi-
cation obligation or expense reimbursement within 5 business
days (or such shorter period as may be required so that such
Indemnified Party suffers no legal disadvantage) of the date
that such obligation of such Indemnified Party became due.
Parent shall pay all expenses, including attorneys' fees,
that may be incurred by any Indemnified Party in enforcing or
otherwise in respect of the indemnity and other obligations
provided for in this Section 6.09.
(b) Parent agrees that the Company, and from and
after the Effective Time, the Surviving Corporation shall
cause to be maintained in effect for not less than two years
from the Effective Time the current policies of the direc-
tors' and officers' liability insurance maintained by the
Company; provided that the Surviving Corporation may substi-
tute therefor policies of at least the same coverage contain-
ing terms and conditions which are no less advantageous and
provided that such substitution shall not result in any gaps
or lapses in coverage with respect to matters occurring prior
to the Effective Time; and provided, further, that the Sur-
viving Corporation shall not be required to pay an annual
premium in excess of 200% of the last annual premium paid by
the Company prior to the date hereof and if the Surviving
Corporation is unable to obtain the insurance required by
this Section 6.09(b) it shall obtain as much comparable in-
surance as possible for an annual premium equal to such maxi-
mum amount.
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SECTION 6.10 Corporate Presence. For a period of
at least three years after the Effective Time, Parent shall
cause the Surviving Corporation to retain a substantial cor-
porate presence in the Oakland, California area.
SECTION 6.11 Maritime Transactions.
(a) Subject to receipt of the Approvals described
in Section 4.05(b) of the Company Disclosure Statement, the
Company shall, on or prior to the Effective Time, (i) consum-
mate and effectuate the transfers, agreements, trusts and
charters set forth in item A of Section 4.05(b) of the Com-
pany Disclosure Statement, (ii) transfer or terminate the
Company's contracts and agency agreements relating to the
Ready Reserve Force as set forth in item B of Section 4.05(b)
of the Company Disclosure Statement, (iii) terminate (and/or
transfer under a structure similar to that described in item
A of Section 4.05 of the Company Disclosure Statement) the
Company's ODS Agreement (and, if terminated, reasonably con-
temporaneous with such termination, commence operations under
a minimum of five of the Company's MSP Operating Agreements)
as set forth in item C of Section 4.05(b) of the Company Dis-
closure Statement and (iv) with respect to certain of the
Company's Pacesetter Vessels that are subject to Construction
Differential Subsidy Agreements, consummate and effectuate,
at the Company's election, one of the transactions set forth
in items D.1, D.2 or D.3 of Section 4.05(b) of the Company
Disclosure Statement, in each case set forth in clauses (i)
through (iv) above, on terms and conditions and involving
agreements and obligations of the Company and/or its subsid-
iaries as determined by the Company after consultation with
Parent.
(b) The Company shall, on or prior to the Effec-
tive Time, at its election and on terms and conditions and
involving agreements and obligations of the Company and/or
its subsidiaries as determined by the Company, either (i)
sell or otherwise transfer to an entity that is a 75%-owned
citizen under Section 2 of the 1916 Shipping Act the barges
that are chartered to Trailer Marine Transport Corporation
pursuant to a Bareboat Charter Party dated as of January 14,
1985 or (ii) terminate such Bareboat Charter Party with re-
spect to such barges.
SECTION 6.12 No Solicitation. The Company agrees
that, prior to the Effective Time, it shall not, and shall
not authorize or permit any of its subsidiaries or any of its
or its subsidiaries' directors, officers, employees, agents
-30-
or representatives, directly or indirectly, to solicit, ini-
tiate or encourage any inquiries or the making of any pro-
posal with respect to any merger, consolidation or other
business combination involving the Company or its subsidiar-
ies or acquisition of all or substantially all of the assets
or capital stock of the Company and its subsidiaries taken as
a whole (an "Acquisition Transaction") or negotiate, explore
or otherwise engage in substantive discussions with any per-
son (other than Parent, Merger Sub or their respective direc-
tors, officers, employees, agents and representatives) with
respect to any Acquisition Transaction or enter into any
agreement, arrangement or understanding requiring it to aban-
don, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement and the Company
will immediately cease or cause to be terminated any existing
discussions or negotiations with any parties conducted here-
tofore with respect to any of the foregoing; provided that
the Company may, in response to an unsolicited proposal with
respect to an Acquisition Transaction from a third party that
a nationally recognized investment banking firm retained by
the Company advises, and the Company Board determines, may
reasonably be expected to result in a transaction that is
more favorable to the Company and its stockholders than the
transactions contemplated hereby, furnish information to, and
negotiate, explore or otherwise engage in substantive discus-
sions with such third party, and enter into any such agree-
ment, arrangement or understanding, in each case only if the
Company Board deems it necessary to do so in the exercise of
its fiduciary obligations after consultation with outside
counsel. The Company will notify Parent promptly if any such
inquiries or proposals are received by, any such information
is requested from, or any such negotiations or discussions
are sought to be initiated or continued with the Company.
The Company also will promptly request each person which has
heretofore executed a confidentiality agreement in connection
with its consideration of acquiring the Company to return all
confidential information heretofore furnished to such person
by or on behalf of the Company.
SECTION 6.13 Notification of Certain Matters.
Parent and the Company shall promptly notify each other of
(a) the occurrence or non-occurrence of any fact or event
which would be reasonably likely (i) to cause any representa-
tion or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date
hereof to the Effective Time or (ii) to cause any material
covenant, condition or agreement under this Agreement not to
be complied with or satisfied in all material respects and
(b) any failure of the Company or Parent, as the case may be,
-31-
to comply with or satisfy any covenant, condition or agree-
ment to be complied with or satisfied by it hereunder in any
material respect; provided, however, that no such notifica-
tion shall affect the representations or warranties of any
party or the conditions to the obligations of any party here-
under.
SECTION 6.14 Redemption of Rights; Amendment of
By-Laws. The Company will (a) redeem all outstanding Rights
at a redemption price of $0.01 per Right (or otherwise make
such Rights inapplicable to the Merger) and (b) delete or
amend Section 3 of Article VII of the Company's By-Laws to
permit the unrestricted acquisition of Common Shares by
Merger Sub pursuant to the Merger and in accordance with this
Agreement, in each case effective no later than immediately
prior to the Effective Time. Prior to such redemption (or
other action) and deletion or amendment, Parent will provide
the Company with reasonable assurances that the Merger will
be consummated.
SECTION 6.15 Voting of Shares. Parent agrees to
vote all Common Shares beneficially owned by it, if any, in
favor of adoption of this Agreement at the Company Share-
holder Meeting.
SECTION 6.16 State Takeover and Environmental
Laws. The Company shall, upon the request of and in coopera-
tion with Merger Sub, take all reasonable steps to (a) ob-
tain, grant or have granted such approvals pursuant to and
otherwise act to eliminate or minimize the effects on, or as-
sist in any challenge by Merger Sub to the validity or ap-
plicability to, the transactions contemplated by this Agree-
ment, including the Merger, of any state takeover law and (b)
obtain, grant or have granted any approvals applicable to the
transactions contemplated by this Agreement, including the
Merger, under any applicable state environmental law.
SECTION 6.17 Capital Construction Fund. The Com-
pany agrees to use its reasonable efforts, following consul-
tation with Parent and subject to Parent's reasonable objec-
tions, to spend or invest the Capital Construction Fund prior
to the Effective Time in order to minimize any adverse tax
consequences to such fund or the Company as a result of the
Merger and maximize the value of such fund to the Company.
-32-
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to the Obligations of
Each Party. The obligations of the Company, Parent and
Merger Sub to consummate the Merger are subject to the
satisfaction (or waiver by Parent and the Company) of the
following conditions:
(a) this Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requi-
site vote of the holders of the outstanding Common Shares
of the Company in accordance with the DGCL;
(b) any (ii) waiting period under (x) the HSR Act
relating to the Merger and (y) Sections 4, 5 and 6 of the
Shipping Act relating to the Charter Transactions or to
any Additional Shipping Act Agreements shall have expired
and (ii) waiting periods or, if applicable, review periods
of Governmental Authorities, under the Exon Florio Amend-
ment and any foreign or supranational Antitrust Laws shall
have expired;
(c) the Maritime Approvals shall have been obtained;
and
(d) the consummation of the Merger shall not be re-
strained, enjoined or prohibited by any order, judgment,
decree, injunction or ruling of a court of competent ju-
risdiction, provided, however, that the parties shall com-
ply with Sections 6.04 and 6.05 and shall further use
their reasonable best efforts to cause any such order,
judgment, decree, injunction or ruling to be vacated or
lifted, unless such action would have a Material Adverse
Effect on the Company or a Material Adverse Effect on Par-
ent and the Company, taken as a whole.
SECTION 7.02 Conditions to the Obligations of Parent
and Merger Sub. The obligations of Parent and Merger Sub to
consummate the Merger are further subject to the satisfaction
(or waiver by Parent) of the following conditions:
(a) the representations and warranties of the Com-
pany set forth in this Agreement shall be true when made
and (except for representations and warranties made as of
a specific date, which need only be true as of such date)
at and as of the Effective Time as if made at and as of
such time, except for any failures to be true that, in the
aggregate, do not have a Material Adverse Effect on the
-33-
Company; the Company shall have performed its covenants
and agreements under this Agreement in all material re-
spects; and Parent and Merger Sub shall have received a
certificate of the Chief Executive Officer or a Vice
President of the Company to the foregoing effect;
(b) except as contemplated by this Agreement, in-
cluding the Company Disclosure Statement, no change shall
have occurred, since the date of this Agreement, that
would have a Material Adverse Effect on the Company, other
than (x) changes relating to or arising from general eco-
nomic, market or financial conditions or generally affect-
ing the industries, markets or trade lanes in which the
Company operates or (y) changes relating to or arising
from the consummation or disclosure of this Agreement or
any transaction contemplated by this Agreement; and
(c) there shall not have occurred and be continuing
(i) any general suspension of, or limitation on prices
for, trading in securities on the Singapore Stock Exchange
or the New York Stock Exchange, (ii) a declaration of a
banking moratorium or any suspension of payments in re-
spect of banks or other lending institutions in the United
States or Singapore, (iii) a commencement or escalation of
a war, armed hostilities or other international or na-
tional calamity directly or indirectly involving the
United States or Singapore, or (iv) or in the case of any
of the foregoing existing at the date hereof, a material
acceleration or worsening thereof.
SECTION 7.03 Conditions to the Obligations of the
Company. The obligations of the Company to consummate the
Merger are further subject to the satisfaction (or waiver by
the Company) of the condition that the representations and war-
ranties of Parent and Merger Sub set forth in this Agreement
shall be true when made and (except for representations and
warranties made as of a specific date, which need only be true
as of such date) at and as of the Effective Time as if made at
and as of such time, except for any failures to be true that,
in the aggregate, do not have a Material Adverse Effect on Par-
ent; Parent and Merger Sub shall have performed their covenants
and agreements under this Agreement in all material respects;
and the Company shall have received certificates of the Chief
Executive Officer or a Vice President of Parent and Merger Sub
to the foregoing effect.
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ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.01 Termination. This Agreement may be
terminated and the Merger contemplated hereby may be aban-
doned at any time prior to the Effective Time, notwithstand-
ing approval thereof by the stockholders of the Company:
(a) by the mutual written consent of Parent and
the Company;
(b) by either Parent or the Company if the Company
Shareholder Meeting (including as it may be adjourned
from time to time) shall have concluded without the Com-
pany having obtained the required shareholder approval
of this Agreement and the transactions contemplated
hereby;
(c) by Parent or the Company if any court or other
Governmental Entity shall have issued, enacted, entered,
promulgated or enforced any order, judgment, decree, in-
junction, or ruling or taken any other action restrain-
ing, enjoining or otherwise prohibiting the Merger and
such order, judgment, decree, injunction, ruling or
other action shall have become final and nonappealable;
(d) by either the Company or Parent, if the Merger
has not been consummated by January 31, 1998, provided,
however, that the party seeking to terminate the Agree-
ment shall not have breached its obligations under this
Agreement in any material respect;
(e) by Parent, at any time prior to the Effective
Time, by action of the Board of Directors of Parent, (i)
upon a material breach of this Agreement on the part of
the Company which has not been cured and which would
cause the condition set forth in Section 7.02(a) of this
Agreement to be incapable of being satisfied by January
31, 1998, or (ii) if the Company Board shall have with-
drawn or modified in a manner adverse to Parent or
Merger Sub its recommendation of this Agreement or the
Merger (which for these purposes shall be deemed to have
been made as of the date hereof), or shall have resolved
to do any of the foregoing; or
(f) by the Company, at any time prior to the Ef-
fective Time, by action of the Company Board, (i) upon a
material breach of this Agreement on the part of Parent
or Merger Sub which has not been cured and which would
-35-
cause the condition set forth in Section 7.03 of this
Agreement to be incapable of being satisfied by January
31, 1998, or (ii) if a third party, including any group,
shall have made a proposal in respect of an Acquisition
Transaction that a nationally recognized investment
banking firm retained by the Company advises, and the
Company Board determines, may reasonably be expected to
result in a transaction that is more favorable to the
Company and its stockholders than the transactions con-
templated hereby.
SECTION 8.02 Effect of Termination. In the event
of the termination of this Agreement pursuant to Section
8.01, this Agreement shall forthwith become void and have no
effect, without any liability on the part of any party or its
directors, officers or stockholders, other than the provi-
sions of this Section 8.02, Section 8.03 and the last sen-
tence of Section 6.03, which shall survive any such termina-
tion. Nothing contained in this Section 8.02 shall relieve
any party from liability for any breach of this Agreement or
the Confidentiality Agreement.
SECTION 8.03 Fees and Expenses.
(a) Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement
and the transactions contemplated by this Agreement shall be
paid by the party incurring such expenses.
(b) In the event (i) Parent shall have terminated
this Agreement pursuant to Section 8.01(e)(ii) and (x) ten
business days shall have elapsed from the withdrawal or modi-
fication in a manner adverse to Parent or Merger Sub of the
Company Board's recommendation of this Agreement and the
Merger (except if the Company Board shall have taken any of
the actions set forth in clause (y) below), without such rec-
ommendation being reinstated in full prior to such termina-
tion or (y) the Company Board shall have advised shareholders
to reject this Agreement and the Merger or to tender shares
to, or accept or vote for an agreement relating to an Acqui-
sition Transaction with, any person other than Parent (or af-
filiates thereof) or (ii) the Company shall have terminated
this Agreement pursuant to Section 8.01(f)(ii), then the Com-
pany shall promptly, but in no event later than two days af-
ter the date of request (in accordance with the terms hereof)
therefor, reimburse Parent for the documented fees and ex-
penses of Parent and Merger Sub related to this Agreement,
the transactions contemplated hereby and any related financ-
ing (subject to a maximum of $2,000,000), which amount shall
be payable in same day funds and pay Parent a termination fee
-36-
of $25,000,000, which amount shall be payable in same day
funds. The Company acknowledges that the agreements con-
tained in this Section 8.03(b) are an integral part of the
transactions contemplated in this Agreement, and that, with-
out these agreements, Parent and Merger Sub would not enter
into this Agreement; accordingly, if the Company fails to
promptly pay the expense reimbursement or the termination fee
due pursuant to this Section 8.03(b), and, in order to obtain
such payment, Parent or Merger Sub commences a suit which re-
sults in a judgment against the Company for the fee set forth
in this paragraph (b), the Company shall pay to Parent or
Merger Sub its costs and expenses (including attorneys' fees)
in connection with such suit, together with interest on the
amount due (accruing from the day after such amount was due
and payable pursuant to the terms hereof until the date of
payment) at the three month T-bill rate as disclosed in the
Wall Street Journal on the date such payment was required to
be made.
SECTION 8.04 Amendment. This Agreement may be
amended by the Company, Parent and Merger Sub at any time be-
fore or after any approval of this Agreement by the stock-
holders of the Company but, after any such approval, no
amendment shall be made which decreases the Merger Consider-
ation or which adversely affects the rights of the Company's
stockholders hereunder without the approval of such stock-
holders. This Agreement may not be amended except by an in-
strument in writing signed on behalf of all the parties.
SECTIOn 8.05 Extension; Waiver. At any time
prior to the Effective Time, the parties hereto may (i)
extend the time for the performance of any of the obligations
or other acts of any other party hereto, (ii) waive any
inaccuracies in the representations and warranties contained
herein by any other party or in any document, certificate or
writing delivered pursuant hereto by any other party or (iii)
waive compliance with any of the agreements of any other
party or with any conditions to its own obligations. Any
agreement on the part of any party to any such extension or
waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and
Warranties. The representations and warranties made in this
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Agreement shall not survive beyond the Effective Time. Not-
withstanding the foregoing, the agreements set forth in Sec-
tions 3.03, 6.07, 6.08, 6.09 and 6.10 shall survive the Ef-
fective Time indefinitely (except to the extent a shorter pe-
riod of time is explicitly specified therein).
SECTION 9.02 Entire Agreement; Assignment.
(a) This Agreement (including the documents and
the instruments referred to herein) and the letter agreement
dated February 12, 1997 (the "Confidentiality Agreement"),
constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof and
thereof.
(b) Neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned by any of
the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party pro-
vided, however, that Parent may designate, by written notice
to the Company, another wholly-owned direct or indirect sub-
sidiary in lieu of Merger Sub, in the event of which, all
references herein to Merger Sub shall be deemed references to
such other subsidiary except that all representations and
warranties made herein with respect to Merger Sub as of the
date of this Agreement shall be deemed representations and
warranties made with respect to such other subsidiary as of
the date of such designation. Subject to the preceding sen-
tence, this Agreement will be binding upon, inure to the ben-
efit of and be enforceable by the parties and their respec-
tive successors and assigns.
SECTION 9.03 Validity. The invalidity or unen-
forceability of any provision of this Agreement shall not af-
fect the validity or enforceability of any other provision of
this Agreement, each of which shall remain in full force and
effect.
SECTION 9.04 Notices. All notices, requests,
claims, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given when
delivered in person, by overnight courier or facsimile to the
respective parties as follows:
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If to Parent or Merger Sub:
Neptune Orient Lines Ltd
456 Alexandra Road, #06-00 NOL Building
Singapore 119962, Republic of Singapore
Attention: President
with a copy to:
Sullivan & Cromwell
28th Floor
Nine Queen's Road, Central
Hong Kong
Attention: Robert G. DeLaMater, Esq.
If to the Company:
APL Limited
1111 Broadway
Oakland, California 94607
Attention: President
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff, Esq.
or to such other address as the person to whom notice is
given may have previously furnished to the other in writing
in the manner set forth above (provided that notice of any
change of address shall be effective only upon receipt
thereof).
SECTION 9.05 Governing Law. This Agreement shall
be governed by and construed in accordance with the laws of
the State of Delaware, regardless of the laws that might oth-
erwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.06 Descriptive Headings. The descrip-
tive headings herein are inserted for convenience of refer-
ence only and are not intended to be part of or to affect the
meaning or interpretation of this Agreement.
SECTION 9.07 Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute
one and the same agreement.
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SECTION 9.08 Parties in Interest. This Agreement
shall be binding upon and inure solely to the benefit of each
party hereto, and, except with respect to Sections 6.07,
6.08, 6.09 and 6.10, as to which the third parties who ben-
efit from such sections are intended third party beneficia-
ries, nothing in this Agreement, express or implied, is in-
tended to confer upon any other person any rights or remedies
of any nature whatsoever under or by reason of this Agree-
ment.
SECTION 9.09 Certain Definitions. As used in
this Agreement:
(a) the term "affiliate", as applied to any per-
son, shall mean any other person directly or indirectly
controlling, controlled by, or under common control
with, that person. For the purposes of this definition,
"control" (including, with correlative meanings, the
terms "controlling," "controlled by" and "under common
control with"), as applied to any person, means the pos-
session, directly or indirectly, of the power to direct
or cause the direction of the management and policies of
that person, whether through the ownership of voting se-
curities, by contract or otherwise;
(b) the term "person" shall include individuals,
corporations, partnerships, trusts, other entities and
groups (which term shall include a "group" as such term
is used in Section 13(d)(3) of the Exchange Act);
(c) the term "subsidiary" or "subsidiaries" means,
with respect to Parent, the Company or any other person,
any corporation, partnership, joint venture or other le-
gal entity of which Parent, the Company or such other
person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or
indirectly, stock or other equity interests the holders
of which are generally entitled to more than 50% of the
vote for the election of the board of directors or other
governing body of such corporation or other legal en-
tity;
(d) the term "Material Adverse Effect on the Com-
pany", as used in this Agreement, means any change in or
effect on the business, operations or financial condi-
tion of the Company or any of its subsidiaries that is
materially adverse to the Company and its subsidiaries
taken as a whole or would materially adversely affect
the ability of the Company to consummate the transac-
tions contemplated hereby;
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(e) the term "Material Adverse Effect on Parent",
as used in this Agreement, means any change in or effect
on the business, operations or financial condition of
Parent or any of its subsidiaries that would be materi-
ally adverse to Parent and its subsidiaries taken as a
whole or would materially adversely affect the ability
of Parent or Merger Sub to consummate the transactions
contemplated hereby; and
(f) the phrase "Material Adverse Effect on Parent
and the Company, taken as a whole" as used in this
Agreement, means any change in or effect on the busi-
ness, operations or financial condition of Parent or the
Company, or any of their respective subsidiaries, that
is materially adverse to Parent, the Company and their
subsidiaries, taken as one combined enterprise, or would
materially adversely affect the ability of Parent or the
Company to consummate the transactions contemplated
hereby.
SECTION 9.10 Specific Performance; Consent to Ju-
risdiction. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their spe-
cific terms or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to en-
force specifically the terms and provisions hereof in any
court of the United States located in the Northern District
of California, any California state court located in the
Northern District of California or any Delaware state court,
this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the par-
ties hereto (a) consents to submit itself to the personal ju-
risdiction of the Federal District Court for the Northern
District of California, any California state court located in
the Northern District of California and any Delaware state
court, (b) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court
other than a Federal District Court for the Northern District
of California, a California state court located in the North-
ern District of California or a Delaware state court.
SECTION 9.11 Appointment of Agent for Service of
Process. Parent hereby consents to service of process upon
it by mailing or delivering such service to its agent, NOL
(USA), Inc. (the "Agent"), located at 80 Grand Avenue, No.
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700, Oakland, California 94612, USA, and authorizes and di-
rects its Agent to accept such service.
SECTION 9.12 Guarantee. Parent hereby guarantees
the due performance by Merger Sub of all of the Merger Sub's
obligations incurred in connection with the Merger, this
Agreement and the transactions contemplated hereby.
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IN WITNESS WHEREOF, each of the parties has caused
this Agreement to be executed on its behalf by its respective
officer thereunto duly authorized, all as of the day and year
first above written.
NEPTUNE ORIENT LINES LTD
By: /s/ H.R. Hochstadt
Name: H.R. Hochstadt
Title: Chairman
NEPTUNE U.S.A., INC.
By: /s/ Lua Cheng Eng
Name: Lua Cheng Eng
Title: Director
APL LIMITED
By: /s/ Timothy J. Rhein
Name: Timothy J. Rhein
Title: President and Chief
Executive Officer
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Annex A
Amendments to Certificate of Incorporation. The
Company's Certificate of Incorporation shall be amended at the
Effective Time as set forth below:
(a) Article Fourth shall be amended to read in its
entirety as follows:
"The aggregate number of shares which the Corpo-
ration shall have authority to issue is 1,000
shares of Common Stock, par value $0.01 per
share. The holders of the Common stock shall be
entitled to one vote for each share held by them
of record on the books of the Corporation."
(b) Article Fifth shall be amended to read in its
entirety as follows:
"A. Number of Directors. The authorized number
of Directors of this Corporation shall be deter-
mined from time to time by resolution adopted by
the affirmative vote of a majority of the entire
Board of Directors at any regular or special
meeting of said Board, within any limits pre-
scribed in the By-Laws of this Corporation; pro-
vided, however, that in no event shall the num-
ber of directors be less than one.
B. Vacancies. In case of any increase in the
number of Directors, the additional Directors
may be elected, by the Board of Directors to
hold office until the next election and until
their successors are elected and qualified. In
case of vacancies in the Board of Directors, a
majority of the remaining members of the Board
may elect Directors to fill such vacancies to
hold office until the next election and until
their successors are elected and qualified."
(c) Article Sixth shall be amended to read in its
entirety as follows:
"Reserved"
(d) Article Seventh shall be amended to read in its
entirety as follows:
A-1
"Reserved"
(e) Article Eighth shall be amended to read in its
entirety as follows:
"Reserved"
(f) Article Tenth shall be amended to read in its
entirety as follows:
"In furtherance and not in limitation of the
powers conferred by statute, the Board of Direc-
tors is expressly authorized to make, alter,
amend or repeal the By-Laws of this Corporation,
without any action on the part of the stockhold-
ers."
(g) Article Fourteenth shall be amended to read in
its entirety as follows:
"Reserved"
(h) Paragraph D of Article Fifteenth shall be de-
leted in its entirety.
A-2