SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
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DETROIT & CANADA TUNNEL CORPORATION
(Name of Registrant as Specified In Its Charter)
____________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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DETROIT & CANADA TUNNEL CORPORATION
100 East Jefferson Avenue
Detroit, Michigan 48226
(313) 567-4422
January 9, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
(the "Special Meeting") of Detroit & Canada Tunnel Corporation (the
"Company"), which will be held on Friday, February 7, 1997 at the Company's
corporate headquarters, located at 100 East Jefferson Avenue, Detroit,
Michigan 48226, commencing at 10:00 A.M., local time. The official Notice of
Special Meeting of Shareholders, Proxy Statement and form of proxy are
enclosed with this letter. You are urged to read them carefully.
At the Special Meeting you will be asked to consider and approve the
Agreement and Plan of Merger, dated as of November 14, 1996 (the "Merger
Agreement"), by and among the Company, Hyde Park Tunnel Holdings L.L.C.
("Parent") and Jessica Acquisition Corp. ("Acquisition"), pursuant to which
Acquisition will merge with and into the Company (the "Merger") and each
outstanding share of the Company's common stock will be converted into the
right to receive $54.00 in cash, all as more particularly described in the
attached Proxy Statement. The Board of Directors believes that the Merger is
in the best interests of the Company and its shareholders. The Board
unanimously has approved the Merger Agreement and recommends that you vote for
its approval and adoption.
Please read carefully the accompanying Notice of Special Meeting of
Shareholders and Proxy Statement for additional information regarding the
Merger and related matters.
Pursuant to an agreement described in the accompanying Proxy
Statement, the owner of a majority of the outstanding Common Stock has agreed
to vote such shares in favor of the approval of the Merger Agreement.
Accordingly, the approval of the Merger Agreement by the requisite vote of the
shareholders is expected to occur irrespective of whether, or the manner in
which, other shareholders vote their shares.
Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed, postage prepaid envelope. If you attend the Special Meeting, you may
vote in person if you wish, even though you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
Please do not send your stock certificates with your proxy card.
Following the approval and adoption of the Merger Agreement and the
satisfaction or waiver of all other conditions to the Merger, you will receive
a transmittal form and instructions for the surrender and exchange of your
share certificates.
Sincerely yours,
/s/ Donald M. Vuchetich
--------------------------------------------
Donald M. Vuchetich
President and Chief Executive Officer
DETROIT & CANADA TUNNEL CORPORATION
100 East Jefferson Avenue
Detroit, Michigan 48226
(313) 567-4422
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 7, 1997
---------------------
To the Shareholders of Detroit & Canada Tunnel Corporation:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
Detroit & Canada Tunnel Corporation, a Michigan corporation (the "Company"),
will be held on Friday, February 7, 1997 at 10:00 A.M., local time, at the
Company's corporate headquarters, located at 100 East Jefferson Avenue,
Detroit, Michigan 48226, for the following purposes:
1. To consider and approve the Agreement and Plan of Merger,
dated as of November 14, 1996 (the "Merger Agreement"), by and among
the Company, Hyde Park Tunnel Holdings L.L.C. ("Parent"), a Delaware
limited liability company, and Jessica Acquisition Corp.
("Acquisition"), a Delaware corporation and wholly-owned subsidiary of
Parent. Pursuant to the Merger Agreement, Acquisition will be merged
with and into the Company, the Company will become a wholly-owned
subsidiary of Parent and each outstanding share of common stock of the
Company will be converted into the right to receive $54.00 in cash,
all as more particularly described in the attached Proxy Statement.
2. To consider and act upon such other business as may properly
come before the meeting or any adjournment thereof.
Shareholders of record at the close of business on December 23, 1996
will be entitled to notice of, and to vote at, the Special Meeting and any
adjournment thereof.
All shareholders are cordially invited to attend the Special Meeting.
However, the Company urges you to assure your representation at the Special
Meeting by signing and returning the enclosed proxy in the postage prepaid
envelope provided as promptly as possible. The giving of this proxy does not
affect your right to vote in person if you attend the Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
Charles J. O'Brien
Secretary
Detroit, Michigan
January 9, 1997
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY CARD
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE SPECIAL
MEETING.
TABLE OF CONTENTS
SUMMARY................................................................... 1
The Special Meeting................................................ 1
The Merger......................................................... 2
The Parties........................................................ 4
Recent Developments................................................ 4
GENERAL INFORMATION....................................................... 5
PURPOSE OF THE SPECIAL MEETING............................................ 5
VOTING, PROXIES AND REVOCABILITY.......................................... 6
THE MERGER................................................................ 7
Background of the Merger........................................... 7
Recommendation of the Board of Directors of the Company............ 8
Certain Financial Projections of the Company....................... 9
Opinion of Financial Advisor....................................... 10
Required Vote...................................................... 13
Terms of the Merger................................................ 13
Effective Date..................................................... 14
Exchange of Stock Certificates..................................... 14
Sources and Amount of Funds........................................ 15
Representations and Warranties; Covenants; Conditions.............. 15
Modification; Termination.......................................... 16
Expenses........................................................... 17
Federal Income Tax Consequences to the Company's Shareholders...... 17
Regulatory Matters................................................. 18
INTERESTS OF CERTAIN PERSONS IN THE MERGER................................ 18
Stock Agreement.................................................... 18
Agreements with Management......................................... 18
Other Interests.................................................... 19
INFORMATION ABOUT THE COMPANY............................................. 19
CAPITALIZATION............................................................ 20
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY....................... 20
INFORMATION ABOUT PARENT AND ACQUISITION.................................. 22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................................ 22
INDEPENDENT PUBLIC ACCOUNTANTS............................................ 23
i
SHAREHOLDER PROPOSAL DEADLINE............................................. 24
OTHER BUSINESS............................................................ 24
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 24
ii
DETROIT & CANADA TUNNEL CORPORATION
100 East Jefferson Avenue
Detroit, Michigan 48226
(313) 567-4422
--------------
PROXY STATEMENT
--------------
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 7, 1997
Approximate date of mailing - January 9, 1997
SUMMARY
The following is only a summary of certain information contained
elsewhere in this Proxy Statement and does not purport to be complete. All
statements in the following summary are qualified by, and are made subject to,
the more detailed information contained elsewhere in this Proxy Statement and
the Appendices to this Proxy Statement. The full text of the Merger Agreement
is attached as Appendix A. All references in this Proxy Statement to the
Merger Agreement and the transactions to be effected pursuant to the Merger
Agreement are qualified in their entirety by reference to the actual text of
the Merger Agreement.
The Special Meeting
Date, Time and Place. The Special Meeting of Shareholders of the
Company will be held at the offices of the Company, located at 100 East
Jefferson Avenue, Detroit, Michigan, on Friday, February 7, 1997 at 10:00
A.M., Eastern Standard Time. See "General Information."
Record Date; Shares Entitled to Vote. Holders of record of the
Company's Common Stock at the close of business on December 23, 1996 (the
"Record Date") are entitled to notice of, and to vote at, the Special Meeting
and at any adjournment thereof. On such date, there were 676,027 shares of
Common Stock outstanding, each of which will be entitled to one vote. See
"Voting, Proxies and Revocability."
Purpose of the Special Meeting. The purpose of the Special Meeting is
to vote on the approval and adoption of the Agreement and Plan of Merger,
dated as of November 14, 1996, among Parent, Acquisition and the Company (the
"Merger Agreement"). A copy of the Merger Agreement is attached to this Proxy
Statement as Appendix A. Upon consummation of the Merger, Acquisition will be
merged into the Company, the Company will become a wholly-
1
owned subsidiary of Parent, and each outstanding share of the Company's Common
Stock will be converted into the right to receive $54.00 in cash.
Vote Required. Under Michigan law, the affirmative vote of holders of
not less than a majority of the outstanding shares of the Company's Common
Stock is required for approval and adoption of the Merger Agreement. Pursuant
to an agreement by Henry Penn Wenger ("Wenger") with Parent, dated as of
November 14, 1996, Wenger agreed to vote in favor of the Merger all of the
shares of Common Stock of the Company that he owns. Accordingly, the approval
and adoption of the Merger Agreement by the requisite vote of the Company's
shareholders is expected to occur irrespective of whether, or the manner in
which, any other shareholders of the Company vote their shares. See "Voting,
Proxies and Revocability" and "Interests of Certain Persons in the Merger."
Security Ownership of Management and Certain Other Persons. As of
November 22, 1996, Wenger, a director, owned approximately 64% of the
outstanding Common Stock. Other directors and executive officers as a group
owned less than 1% of the outstanding Common Stock.
The Merger
Principal Effects of the Merger. The Merger Agreement provides that,
when the Merger becomes effective, each outstanding share of the Company's
Common Stock will be converted into the right to receive $54.00 in cash,
without interest.
As a result of the Merger, the outstanding shares of Acquisition
common stock owned by Parent will be converted into shares of Common Stock of
the Company, and the Company will, therefore, become a wholly-owned subsidiary
of Parent.
Effective Time of the Merger. If the Merger Agreement is approved by
the shareholders of the Company and if all of the conditions to its
consummation are satisfied or waived, the Merger will become effective upon
the filing of Certificates of Merger with the Secretary of State of the State
of Delaware and the Administrator of the Department of Consumer and Industry
Services of the State of Michigan. Assuming such approval and satisfaction or
waiver of such conditions are obtained, it is expected that these filings will
be made and the Merger will become effective as soon as is practicable after
the Special Meeting; provided, that the closing of the Merger may be extended
to such other day as Acquisition, Parent and the Company shall mutually agree
upon. The Board of Directors of Parent or the Company may terminate the Merger
Agreement if the Merger is not consummated by March 31, 1997 (unless such
failure to consummate is due to such party's action or failure to act). See
"The Merger -- Effective Date" and "The Merger -- Modification; Termination."
Opinion of Financial Advisor. The Company engaged Mesirow Financial,
Inc. ("Mesirow") to act as its financial advisor in connection with the Merger
and related matters. On November 13, 1996, Mesirow delivered its opinion to
the Board of Directors to the effect
2
that, as of such date, the proposed consideration to be received by the
holders of Common Stock in the Merger ($54.00 per share in cash) is fair to
such shareholders from a financial point of view. The opinion of Mesirow will
not be updated and is limited to the facts and circumstances on November 13,
1996. See "The Merger -- Opinion of Financial Advisor." A copy of the Mesirow
opinion is attached as Appendix B and incorporated into this Proxy Statement
by reference. Shareholders of the Company are urged to read carefully in its
entirety the opinion of Mesirow which sets forth the assumptions made, matters
considered and limits on the review undertaken.
Certain Federal Income Tax Consequences. The receipt of cash for
shares of the Company's Common Stock pursuant to the Merger will be a taxable
transaction for federal income tax purposes to the shareholders receiving such
cash (and may be a taxable transaction for state, local and foreign tax
purposes as well). A holder of the Company's Common Stock will realize gain or
loss measured by the difference between such shareholder's adjusted tax basis
for the shares of the Company's Common Stock owned by the shareholder at the
time of the Merger and the amount of cash received for such shares. In
general, such gain or loss will be capital gain or loss if the shares of the
Company's Common Stock are capital assets in the hands of such shareholder;
any such gain or loss realized will constitute long-term or short-term capital
gain or loss depending on the shareholder's holding period for such shares and
the date such shares were acquired. See "The Merger -- Federal Income Tax
Consequences to the Company's Shareholders."
The foregoing is only a general description of certain of the federal
income tax consequences of the Merger to holders of the Company's Common
Stock, without giving consideration to the particular facts and circumstances
of each shareholder's situation, and is based on present law. Shareholders are
urged to consult their personal tax advisors with respect to the tax
consequences of the transaction, including the federal, state, local and
foreign tax consequences of the Merger.
Interests of Certain Persons in the Merger. As of the Record Date,
directors and executive officers of the Company beneficially owned an
aggregate of 432,055 shares of Common Stock. In connection with the execution
of the Merger Agreement, Wenger, a member of the Board of Directors, agreed to
vote all shares owned by him (431,955 shares (approximately 64%) of the
Company's Common Stock) in favor of approval and adoption of the Merger
Agreement. See "Interests of Certain Persons in the Merger -- Stock
Agreement."
Pursuant to the terms of the Merger Agreement, the surviving
corporation will indemnify and hold harmless each present and former director
or officer of the Company from and against any and all claims arising out of,
or in connection with, activities in such capacity, or on behalf of, or at the
request of, the Company (the "Claims") to the fullest extent permitted by
applicable law, and the surviving corporation will also advance expenses
incurred in connection with the Claims, as they are incurred, to the fullest
extent permitted under applicable law. The indemnification and expense
advancement provisions of the Merger Agreement will continue for
3
a period of at least six years after the closing date. See "Interests of
Certain Persons in the Merger -- Other Interests."
Appraisal rights. Under the Michigan Business Corporation Act
("MBCA"), holders of the Company's Common Stock are not entitled to any
appraisal rights with respect to the Merger.
Sources and Amount of Funds. The amount of funds to be used to acquire
the shares of Common Stock pursuant to the Merger Agreement is approximately
$36.5 million. See "The Merger -- Representations and Warranties; Covenants;
Conditions". The Company has been informed by Parent that Parent expects to
obtain from John Hancock Mutual Life Insurance Company ("John Hancock") the
funds for such purposes and to pay related fees and expenses. Parent has
received a commitment letter, dated November 15, 1996, from John Hancock (the
"Commitment Letter") pursuant to which John Hancock has committed, subject to
the terms and conditions set forth in the Commitment Letter, to provide the
funds. See "The Merger -- Source and Amount of Funds."
The Parties
The Company. The Company operates an approximately one-mile long
international tunnel beneath the Detroit River connecting the downtown
business and shopping districts of Detroit, Michigan, and Windsor, Ontario,
Canada (the "Tunnel"). The Company leases the Detroit Tunnel properties from
the City of Detroit under a lease that expires in 2020. The Windsor Tunnel
properties are owned by the City of Windsor. The Company operates the entire
Tunnel for itself and the City of Windsor under an operating agreement. See
"Information About the Company."
Parent. Parent is a newly-formed Delaware limited liability company
whose members on the Closing Date will be affiliates of Hyde Park Holdings,
Inc., a Delaware corporation whose shares are owed by Laurence S. Levy and
Clifford Press, and John Hancock.
Acquisition. Acquisition is a Delaware corporation which is 100% owned
by Parent. Acquisition was recently formed in preparation for the Merger and
has not conducted any business.
Recent Developments
Tunnel traffic increased significantly to 4,464,219 vehicles in the
year ended October 31, 1996 from 4,121,566 vehicles in the year ended October
31,1995. As a result of the additional traffic and an increase in tolls in
March 1996, toll revenues increased to $8,778,035 in the year ended October
31, 1996 from $7,482,575 in the previous fiscal year. The increase in traffic
was primarily due to the opening of a second gambling casino in Windsor in
December, 1995. Management contemplates that the present high level of traffic
will continue.
4
Operating revenue for the 1996 fiscal year was $10,708,718, including
$433,000 received in settlement of a lease dispute, compared to $9,055,946 in
the prior fiscal year. Unaudited net earnings for the year ended October 31,
1996 were $2,817,910 ($4.17 per share) compared to $2,015,449 ($2.97 per
share) in the prior fiscal year.
In September 1996, the Supreme Court of Ontario denied the petition of
the City of Windsor and Regional Assessment Commissioner for leave to appeal a
decision by the Court of Appeal relating to real estate and business taxes
paid by the Company from 1986 to 1990. The Court of Appeal's decision held
that the tax assessments should have taken into account the right of the City
of Windsor to acquire the Canadian tunnel properties in 1990. No date for a
hearing before the Assessment Review Board has been scheduled, and the Company
is unable to estimate the amount of the tax refund it may ultimately receive
or the timing of any payment.
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by and on behalf of the Board of Directors of Detroit
& Canada Tunnel Corporation (the "Company") for use at the Special Meeting of
Shareholders to be held at the offices of the Company, located at 100 East
Jefferson Avenue, Detroit, Michigan 48226, on Friday, February 7, 1997 at
10:00 A.M., Eastern Standard Time, or any adjournment thereof, for the
purposes set forth below and in the accompanying Notice of Special Meeting of
Shareholders. The merger of Jessica Acquisition Corp. ("Acquisition"), a
wholly-owned subsidiary of Hyde Park Tunnel Holdings L.L.C. ("Parent"), with
and into the Company is referred to in this Proxy Statement as the "Merger."
This Proxy Statement and the accompanying form of proxy are first being mailed
on or about January 9, 1997 to shareholders of record at the close of
business on December 23, 1996 (the "Record Date"). The Company will pay the
cost of soliciting proxies, including expenses for preparing and mailing proxy
solicitation materials. In addition to use of the mails, proxies may be
solicited by certain officers, directors and regular employees of the Company,
without extra compensation, by telephone, telegraph, facsimile or personal
interview.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, the shareholders of the Company will vote on
whether to approve the Merger in accordance with the Agreement and Plan of
Merger, dated as of November 14, 1996, among Parent, Acquisition and the
Company (the "Merger Agreement"). A copy of the Merger Agreement is attached
to this Proxy Statement as Appendix A. Upon consummation of the Merger,
Acquisition will be merged into the Company, the Company will become a
wholly-owned subsidiary of Parent, and each outstanding share of the Company's
common stock will be converted into the right to receive $54.00 in cash.
THE TRANSACTION TO BE CONSIDERED AT THIS SPECIAL MEETING INVOLVES A
MATTER OF GREAT IMPORTANCE TO THE SHAREHOLDERS. IF THE MERGER IS APPROVED,
UPON THE CONSUMMATION OF THE MERGER, THE
5
SHAREHOLDERS WILL HAVE NO FURTHER RIGHTS AS SHAREHOLDERS OF THE COMPANY AND
WILL HAVE ONLY THE RIGHT TO RECEIVE A PAYMENT OF $54.00 PER SHARE IN CASH.
ACCORDINGLY, SHAREHOLDERS ARE URGED TO READ AND CONSIDER CAREFULLY THE
INFORMATION PRESENTED IN THIS PROXY STATEMENT.
VOTING, PROXIES AND REVOCABILITY
December 23, 1996 has been fixed as the Record Date for determining
shareholders of the Company entitled to notice of, and to vote at, the Special
Meeting. At the Special Meeting, shareholders of record at the close of
business on the Record Date will be entitled to one vote for each share of the
Company's common stock ("Common Stock") held. As of the close of business on
November 22, 1996, the Company had 676,027 shares of Common Stock outstanding.
A majority, or 338,014 shares of the Company's Common Stock, must be
represented at the Special Meeting in person or by proxy in order to
constitute a quorum for the transaction of business.
Under Michigan law, the affirmative vote of holders of not less than a
majority of the outstanding shares of the Company's Common Stock is required
for approval of the Merger Agreement. Pursuant to an agreement, dated November
14, 1996 between Parent and Wenger, Wenger agreed to vote approximately 64% of
the Company's outstanding shares of Common Stock owned by Wenger in favor of
the acquisition of the Company by Parent pursuant to the Merger Agreement.
Accordingly, the approval of the Merger Agreement by the requisite vote of the
Company's shareholders is expected to occur irrespective of whether, or the
manner in which, any other shareholders of the Company vote their shares. See
"Interests of Certain Persons in the Merger."
Proxies in the enclosed form which are returned in time for the
Special Meeting, and executed in accordance with the instructions thereon will
be voted as specified therein. If no specification is made, the proxies will
be voted FOR approval and adoption of the Merger Agreement. Wenger, a member
of the Board of Directors, currently has voting control over 64% of the
Company's outstanding Common Stock as of November 22, 1996. Wenger agreed to
attend the Special Meeting in person or by proxy and vote these shares FOR
approval and adoption of the Merger Agreement, thus, a quorum and approval of
the Merger Agreement at the Special Meeting are anticipated.
A shareholder giving a proxy has the power to revoke it at any time
before it is exercised by filing with the Secretary of the Company at the
Company's principal executive offices, 100 East Jefferson Avenue, Detroit,
Michigan 48226, either an instrument revoking the proxy or a duly executed
proxy bearing a later date. A proxy will be revoked automatically if the
shareholder who executed it is present at the Special Meeting and votes in
person.
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This Special Meeting may be adjourned, and additional proxies
solicited, if at the time of the Special Meeting the votes necessary to
approve the Merger Agreement have not been obtained. Any adjournment of the
Special Meeting will require the affirmative vote of a majority of the Common
Stock represented at the Special Meeting, in person or by proxy, even if less
than a quorum.
THE MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY HAVE
DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
SHAREHOLDERS AND RECOMMEND THAT SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
THE MERGER
Background of the Merger
In late 1995, Management and the Board of Directors began a review of
the Company's long-term prospects and financial alternatives. They recognized
the Company's business was unique, that it depended upon a lease with the City
of Detroit that expires in 2020, that the operation of a single tunnel
presented limited opportunities for significant increases in revenues, and
that the market for the Company's Common Stock did not provide adequate
liquidity to shareholders or justify the costs associated with reporting as a
public company. In addition, payment of income taxes at the corporate level
substantially reduced the cash flow available to the Company in comparison
with other real estate related investments. Wenger informally indicated to the
Board of Directors that he would support the restructuring or sale of the
Company.
As a result of these considerations, in December, 1995, the Board of
Directors authorized Management to contact investment bankers in order to
select an advisor to assist the Board of Directors in exploring the available
alternatives, including a possible sale. In view of the limited public market
for the Company's shares and the shareholders' desire for liquidity, the sale
of all of the outstanding shares of the common stock for cash was deemed the
most likely method of achieving the greatest value for shareholders and was
the only alternative considered and pursued by the Board. Management contacted
some potential buyers directly to determine whether there would be an interest
in the Company as an acquisition candidate. After interviewing several
investment banking firms, Management recommended that the Board of Directors
select Mesirow to be the Company's financial advisor. The Board of Directors
authorized the engagement of Mesirow in April, 1996 and a review of the
Company's financial affairs began. In May, 1996, Robert M. Teeter resigned
from the Board of Directors after determining that he might have an interest
in forming a group to present an acquisition proposal to the Company.
A press release regarding the retention of an investment banker was
issued in July, 1996. From July, 1996 to September, 1996, Mesirow contacted
131 potential buyers of whom fifty-nine requested additional materials
concerning the Company and executed confidentiality agreements. In September,
acquisition proposals were received from nine buyers. On October 16, 1996, the
7
Board of Directors authorized Mesirow to continue discussions with the three
buyers who had offered the highest prices and had demonstrated the ability to
raise financing for the acquisition. On October 17, Mesirow received a
proposal from Parent for the acquisition of the Company for a price of $54.00
in cash to all shareholders, with financing provided by John Hancock Mutual
Life Insurance Company ("John Hancock"). The $54 per share price was the
highest offer received. Mesirow recommended to the Board of Directors that it
accept Parent's proposal, and the Board of Directors executed a letter of
intent with Parent on October 21, 1996. Wenger agreed to be bound by the
non-solicitation clause in the Company's letter of intent.
A definitive merger agreement was entered into between the Company,
Parent and Acquisition on November 14, 1996, a copy of which is attached as
Appendix A. Wenger joined the agreement with respect to the solicitation of
other potential buyers and the voting of his shares in favor of the
transaction.
Recommendation of the Board of Directors of the Company
A majority of the Board of Directors of the Company has approved the
Merger Agreement and directed that it be submitted to the shareholders for
their approval and adoption. The terms of the Merger, including the conversion
rate of $54.00 in cash for each outstanding share of the Company's Common
Stock, are the result of arm's-length negotiations between representatives of
the Company and of Parent.
The Board of Directors recommends the approval of the Merger Agreement
by the shareholders of the Company in the belief that the Merger is in the
best interests of the Company and its shareholders. In making the
determination, the Board of Directors considered, among other factors, the
following: (i) the purchase price of $54.00 per share ($36,505,458.00 in the
aggregate) reflects a premium over the market price (without giving effect to
any increase in market price attributable to the Merger) of the Company's
Common Stock, (ii) the belief of the Board of Directors that the Merger will
permit the Company's shareholders to realize more for their shares than they
could otherwise reasonably expect to receive in the near future, (iii) the
belief of the Board of Directors that the proposed Merger was the best
proposal received by the Company after its solicitation process, (iv) the
belief of the Board of Directors that no other bidder at a higher price would
be forthcoming, (v) the recommendation of Management that the Merger Agreement
be approved, (vi) the past earnings of the Company and its future prospects,
(vii) historical market prices for the Company's Common Stock, (viii) the
Company's book value, and (ix) the opinion of Mesirow, the Company's financial
advisor, that the proposed cash consideration to be received by the holders of
the shares pursuant to the Merger is fair to such shareholders from a
financial point of view. The Board of Directors did not assign relative
weights to the foregoing factors or determine that any factor was of greater
importance than another factor. Rather, the Board of Directors viewed its
position and recommendations as being based on the totality of the information
presented to it and considered by it. See "Selected Consolidated Financial
Data of the Company" and "Capitalization." For a description of Mesirow's
opinion and fee in connection with the Merger, see "Opinion of Financial
Advisor" and "Expenses."
8
Accordingly the Board of Directors of the Company believes that, under
all the circumstances, the purchase price of $54.00 per share is in the best
interests of the Company's shareholders. The Board, therefore, recommends that
the Merger Agreement be approved and adopted by the shareholders of the
Company.
See "Interests of Certain Persons in the Merger" concerning interests
of various persons in the Merger.
Certain Financial Projections of the Company
During the course of discussions between Parent and the Company that
led to the execution of the Merger Agreement, the Company provided Parent and
other prospective purchasers with certain non-public business and financial
information about the Company, including then current projections of future
results of operations for the fiscal years ending October 31, 1996, 1997, 1998
1999 and 2000. Projections of operating revenue (dollars in thousands) for
such fiscal years were $10,434, $11,303, $11,995, $13,482 and $13,949,
respectively; operating income projections (dollars in thousands) were $3,721,
$4,431, $4,878, $5,835 and $6,073, respectively; and projections of net income
(dollars in thousands) for such fiscal years were $2,591, $2,731, $2,999,
$3,573 and $3,716, respectively. These projections did not give effect to the
Merger or the financing thereof.
Based on a traffic study, management estimates a 5.6% growth in
traffic in 1997 because of continued volume increases from gaming, tourism and
trade. The 17.3% increase in toll revenue in 1996 over 1995 was attributable
to the opening of a second casino in December, 1995 and a toll increase in
March 1996 and is not expected to be repeated in 1997. Traffic for 1998 is
predicted to increase by 7.6% based upon the net effect of a new casino
opening and the closing of the temporary Windsor casino and riverboat. Traffic
for 1999 is predicted to increase at the rate of 2.9% as casino based traffic
stabilizes. In the year 2000, traffic is projected to increase by 2.1% which
reflects economic growth. The projections also assume toll rate increases in
1999 of $.25 per passenger vehicle, as well as an increase in the truck and
bus vehicle charges.
Unaudited results for the year ended October 31, 1996 were operating
revenue of $10,708,718 (including $433,000 from settlement of a lease
dispute), operating income of $4,201,881, and net income of $2,817,910.
The Company does not as a matter of course make public any projections
as to future performance or earnings, and the projections set forth above are
included in this Proxy Statement only because the information was provided to
Parent. The projections were not prepared with a view to public disclosure or
compliance with the published guidelines of the Securities and Exchange
Commission or the guidelines established by the American Institute of
Certified Public Accountants regarding projections or forecasts. The Company's
internal operating projections (upon which the projections provided to Parent
were based in part) are, in general, prepared solely for internal use and
capital budgeting and other management decisions and are subjective in many
respects and thus susceptible to various interpretations and periodic
revisions based on
9
actual experience and business developments. The projections were based on a
number of assumptions that are beyond the control of the Company or the Parent
or their respective financial advisors. Many of the assumptions upon which the
projections were based are dependent upon economic forecasting (both general
and specific to the Company's business), which is inherently uncertain and
subjective. Accordingly, there can be no assurance that the projected results
would be realized or that actual results would not be significantly higher or
lower than those projected. None of the Company, Parent or Mesirow assumes any
responsibility for the accuracy of any of the projections.
Opinion of Financial Advisor
On November 13, 1996, Mesirow orally delivered its opinion to the
Board of Directors to the effect that, as of such date, the proposed
consideration to be received by the holders of Common Stock in the Merger is
fair to such shareholders from a financial point of view. A written opinion
was subsequently provided. A copy of the Mesirow opinion is attached as
Appendix B and incorporated into this Proxy Statement by reference. Mesirow's
opinion to the Board of Directors addresses only the fairness from a financial
point of view of the consideration to be received by such shareholders
pursuant to the Merger Agreement and does not constitute a recommendation to
any shareholder of the Company with respect to the approval of the
transactions contemplated by the Merger Agreement. SHAREHOLDERS OF THE COMPANY
ARE URGED TO READ CAREFULLY IN ITS ENTIRETY THE OPINION OF MESIROW, WHICH SETS
FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE REVIEW
UNDERTAKEN. THE SUMMARY OF THE MESIROW OPINION SET FORTH IN THIS PROXY
STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION.
In April 1996, Mesirow was retained by the Board of Directors of the
Company to act as its financial adviser in connection with the Merger. Mesirow
is a nationally recognized investment banking firm and was selected by the
Board of Directors based on its experience and expertise. As part of its
investment banking business, Mesirow is regularly engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, private placements and valuations for estate,
corporate and other purposes.
In connection with Mesirow's engagement, the Board of Directors of the
Company requested that Mesirow evaluate the fairness, from a financial point
of view, to the holders of the Company's Common Stock, of the consideration to
be received in the Merger by such holders. On November 13, 1996, Mesirow
rendered to the Company's Board of Directors its opinion to the effect that,
as of such date, the consideration to be received in the Merger by the holders
of the Company's Common Stock was fair to such holders from a financial point
of view.
Mesirow did not assume responsibility for independent verification of
any of the information provided to or otherwise reviewed by Mesirow and relied
upon its being complete and accurate in all respects. With respect to
financial projections and other data reviewed, the Company advised Mesirow
that such projections and other data were reasonably prepared on
10
bases reflecting the best currently available estimates and judgments of the
Company's Management as to the future financial performance of the Company. In
addition, Mesirow did not make an independent evaluation of the assets or
liabilities (contingent or otherwise) of the Company or its subsidiaries, nor
was Mesirow furnished with any such evaluations or appraisals. Mesirow's
opinion is necessarily based upon economic, market and other conditions as in
effect on, and the information made available to it as of, the date of its
opinion. Although Mesirow evaluated the fairness of the consideration to be
received in the Merger by the holders of the Company's Common Stock from a
financial point of view, Mesirow was not asked to and did not recommend the
specific consideration payable in the Merger. The consideration to be received
by the Company's shareholders as a result of the Merger was determined by
negotiation between the Company and Parent.
In preparing its opinion to the Company's Board of Directors, Mesirow
performed a variety of financial and comparative analyses, including those
described below. Other analyses performed but not described below include
debt capacity analysis and estimated asset replacement value. The summary of
Mesirow's analyses set forth below does not purport to be a complete
description of the analyses or presentation to the Board of Directors.
However, the summary describes all analyses that Mesirow judged to be
material in reaching its opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and therefore, such an opinion
is not readily susceptible to summary description. In arriving at its opinion,
and based upon the Company's unique nature, Mesirow assigned greater weight to
the discounted cash flow analysis and purchase price premium analysis than the
comparable company analysis and comparable transaction analysis. However,
Mesirow believes that its analyses must be considered as a whole and that
selecting portions of its analyses and factors, without considering all
analyses and factors could create a misleading or incomplete view of the
processes underlying such analyses and its opinion. In its analyses, Mesirow
made numerous assumptions with respect to the Company, general business,
economic, market and financial conditions and other matters. Such assumptions
were used in developing estimates of future results that are not necessarily
indicative of actual values or predictive of future results or values. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, such estimates are inherently
subject to substantial uncertainty.
In analyzing the value of the Company's common stock, Mesirow (i)
analyzed the market prices at which the Common Stock traded in the 12-month
period immediately preceding the announcement of the Merger on October 21,
1996 (the "Announcement Date") and the implied purchase price premiums over
certain of those market prices to be paid to the Company's shareholders in the
Merger, based on the cash consideration offered by Parent (the "Purchase Price
Premium Analysis"); (ii) performed a discounted cash flow analysis; (iii)
performed a comparable company analysis; and (iv) performed a comparable
transaction analysis.
The following description summarizes the analyses used by Mesirow as
the basis for its opinion:
11
Purchase Price Premium Analysis
Mesirow analyzed the closing prices of the Common Stock over the
12-month period preceding the Announcement Date and the purchase price
premiums implied by the Purchaser's offer as of certain such dates. This
analysis resulted in a range of purchase price premiums for the Common Stock
of (i) 35% based upon the last trade of the Common Stock prior to the
Announcement Date ($40.00 on August 27, 1996); (ii) 51% based upon the average
closing price during the 3-month period prior to the Announcement Date
($35.88); (iii) 35% based upon the highest closing price of the Common Stock
during the 52-week period prior to the Announcement Date ($40.00 on August 27,
1996). Mesirow noted that the market for Common Stock was highly illiquid for
a publicly traded security and experienced sustained periods with limited
trading volume. Mesirow further noted that the indicated purchase price
premiums compared favorably with the mean premiums reported in a study of
similarly sized and otherwise relevant transactions as reported in the
Mergerstat Review 1995 study published by Houlihan Lokey Howard & Zukin.
Discounted Cash Flow Analysis
Mesirow performed a discounted cash flow analysis of the projected
unleveraged cash flows of the Company for the fiscal years ended October 31,
1997 through 2000, based upon certain operating and financial assumptions,
forecasts and other information provided by the Management of the Company.
Mesirow compared the projections against a traffic and toll revenue study
prepared for the Company by a consulting firm, as well as estimates regarding
capital expenditures provided to the Company by engineering firms. Mesirow
applied discount rates of 10.0%, 12.5% and 15.0% and terminal year
capitalization multiples of 5.5x, 6.0x and 6.5x to the projected unleveraged
cash flows. This analysis resulted in a range of values (including cash and
investments on the Company's balance sheet of approximately $16.00 per share)
for the Company of $38.92 to $47.68 per share, with a mean value of $43.06.
Comparable Company Analysis
Mesirow reviewed and compared certain actual and estimated financial,
operating and stock market information of the Company and a group of publicly
traded utilities and municipal airport service companies judged to be
generally comparable to the Company. Utilities selected as comparable to the
Company were Connecticut Water Services Inc., Dominguez Services Corp.,
Energynorth Inc., Eselco Inc., Main Public Service, Middlesex Water Co.,
National Gas & Oil Co., Roanoke Gas Co., and Upper Peninsula Energy Corp.
Municipal airport service companies selected as comparable to the Company were
Mercury Air Group Inc. and Hudson General Corp. Mesirow also compared equity
values as a multiple of trailing net income, projected 1997 net income and
current book value. All multiples were calculated using closing stock prices
on November 11, 1996. Applying the comparable company multiples to the
subject, the indicated value for each share of Common Stock ranged from $42.62
to $45.67, with an overall mean value of $44.14.
Comparable Transaction Analysis
12
Using publicly available information, Mesirow analyzed the purchase
prices and multiples paid in the following selected transactions in the
utilities industry: Union Electric/CIPSCO Inc., Long Island Power
Authority/LILCO, Public Service Company of Colorado/Southwestern Public
Service Company, Wisconsin Energy Corp./Northern States Power Co., Midwest
Resources, Inc./Iowa-Illinois Gas & Electric, California Energy Company/Magma
Power Company, Cincinnati Gas & Electric/PSI Resources, Inc., Washington Water
Power Co./Sierra Pacific Resources, United Water Resources, Inc./GWC Corp.
Mesirow compared purchase prices as a multiple of latest reported fiscal net
income. This analysis resulted in a range of values for each share of Common
Stock from $24.35 to $55.84, with a mean of $40.33.
The comparable company analysis, comparable transaction analysis, and
discounted cash flow analysis resulted in an overall value range for each
share of Common Stock of $35.30 to $49.73, with a mean of $42.51.
Pursuant to the terms of Mesirow's engagement, the Company has agreed
to pay Mesirow a transaction fee for its advisory services of 1 3/4% of the
consideration paid to shareholders ($638,846) and a separate $50,000 fee for
rendering its opinion. The Company has also agreed to reimburse Mesirow for
its reasonable out-of-pocket expenses, including the fees and expenses of
legal counsel, and to indemnify Mesirow and certain related persons or
entities against certain liabilities, including liabilities under the federal
securities laws, relating to or arising out of its engagement.
Required Vote
Approval and adoption of the Merger Agreement requires the affirmative
vote of a majority of the outstanding shares of the Company's Common Stock.
Abstentions and broker non-votes will be counted for purposes of determining
whether a quorum is present at the Special Meeting, but they will have the
effect of a "no" vote with respect to the approval and adoption of the Merger
Agreement, because such approval and adoption requires the affirmative vote of
a majority of the outstanding shares of Common Stock. Wenger has agreed to
vote all shares he owns in favor of adoption and approval of the Merger
Agreement. These shares are sufficient to approve and adopt the Merger
Agreement without the affirmative vote of any other shareholder. See
"Interests of Certain persons in the Merger--Stock Agreement."
Terms of the Merger
A copy of the Merger Agreement is attached to this Proxy Statement as
Appendix A and all references in this Proxy Statement to the Merger Agreement
and the transactions to be effected pursuant to the Merger Agreement are
qualified in their entirety by reference to the actual text of the Merger
Agreement. The Merger Agreement provides for the merger of Acquisition, a
wholly-owned subsidiary of Parent, into the Company. After consummation of the
Merger, the Articles of Incorporation and Bylaws of the Company will be the
Articles of Incorporation and Bylaws of the surviving corporation, and the
officers of Acquisition will be the officers of the surviving corporation. The
Company will cause its directors, other than Donald M. Vuchetich,
13
to submit their written resignations from the Board of Directors, effective as
of the closing of the Merger. Upon such closing, the directors of the
surviving corporation will be Laurence S. Levy, Clifford Press and Donald M.
Vuchetich. The Merger Agreement further provides that, when the Merger becomes
effective, each outstanding share of the Company's Common Stock will be
cancelled and retired and will cease to exist, and each such share will be
converted into the right to receive $54.00 in cash, without interest.
On the effective date of the Merger, Acquisition will cease to exist
and the Company will automatically assume all liabilities and obligations of
Acquisition. As a result of the Merger, the outstanding shares of Acquisition
common stock owned by Parent will be converted into shares of Common Stock of
the Company, and the Company will, therefore, become a wholly-owned subsidiary
of Parent. As of the effective time of the Merger, the Company's Common Stock
is expected to be delisted from the Nasdaq Stock Market, and shares of the
Company's Common Stock will no longer be traded on the Nasdaq Stock Market. In
addition, the registration of the Company's Common Stock under the Securities
Exchange Act of 1934 will be terminated.
Effective Date
If the Merger Agreement is approved by the shareholders of the Company
and if all of the conditions to its consummation are satisfied or waived, then
the Merger will become effective upon the filing of Certificates of Merger
with the Secretary of State of the State of Delaware and the Administrator of
the Department of Consumer and Industry Services of the State of Michigan.
Assuming such approval and satisfaction or waiver of such conditions are
obtained, it is expected that these filings will be made and the Merger will
become effective as soon as is practicable after the Special Meeting;
provided, that the closing of the Merger may be extended to such other day as
Acquisition, Parent and the Company shall mutually agree upon, by written
instrument signed on behalf of the Company, Parent and Acquisition. The Board
of Directors of Parent or the Company may terminate the Merger Agreement if
the Merger is not consummated by March 31, 1997 (unless such failure to
consummate is due to such party's action or failure to act.) See
"Modification; Termination."
Exchange of Stock Certificates
At the effective date of the Merger, certificates representing shares
of the Company's Common Stock will be deemed to represent solely the right to
receive cash in the amount of $54.00 per share. Promptly after the effective
time of the Merger, a transmittal letter will be forwarded to the Company's
shareholders of record by a federally insured bank selected by the surviving
corporation (the "Disbursing Agent"), giving them instructions concerning the
exchange of their stock certificates for payment. HOLDERS OF THE COMPANY'S
COMMON STOCK SHOULD NOT FORWARD THEIR STOCK CERTIFICATES UNTIL RECEIPT OF THE
LETTER OF INSTRUCTIONS.
Upon surrender to the Disbursing Agent of certificates representing
their shares of the Company's Common Stock and of the transmittal letter
described above, properly endorsed,
14
shareholders will be entitled to receive $54.00 in cash per share of the
Company's Common Stock.
Sources and Amount of Funds
The amount of funds to be used to acquire the shares of Common Stock
pursuant to the Merger Agreement is approximately $36.5 million. See
"Representations and Warranties; Covenants; Conditions". The Company has been
informed by Parent that Parent expects to obtain from John Hancock the funds
for such purposes and to pay related fees and expenses. Parent has received
the Commitment Letter from John Hancock pursuant to which John Hancock has
committed, subject to the terms and conditions set forth in the Commitment
Letter, to provide debt and equity financing aggregating $38,250,000.
Representations and Warranties; Covenants; Conditions
The Company, Acquisition and Parent have made certain representations
and warranties to, and agreed to certain covenants with, one another in the
Merger Agreement. The representations and warranties of the Company concern,
among other things, the Company's outstanding capital stock, the absence of
certain violations or breaches caused by the Merger, consents and approvals
required, compliance with laws (including securities, tax and other laws),
financial condition, results of operations and cash flows, absence of certain
changes or events between October 31, 1995 and the effective date of the
Merger, ownership of, and encumbrances on, the Company's assets, liabilities
(including tax and environmental matters), legal proceedings, employee benefit
plans, licenses, insurance coverage, finder's fees, corporate records,
intellectual property, contracts, labor matters and confidentiality of the
other parties' confidential information. The representations and warranties of
Parent and Acquisition concern, among other things, their organization,
authority relative to the Merger Agreement, consents and approvals required,
finder's fees and taking actions with respect to the Merger. Also, the Company
has agreed that the Company's Board of Directors will recommend to the
Company's shareholders the approval and adoption of the Merger Agreement,
subject to the fiduciary duties of the Company's directors.
In addition, the Company has agreed not to solicit, directly or
indirectly, any merger, business combination, sale of a significant amount of
assets outside of the ordinary course of business, sale of shares of capital
stock outside of the ordinary course of business or similar transaction
involving the Company or any of its subsidiaries or divisions ("Acquisition
Transaction") or, subject to the fiduciary duties of the Company's Board of
Directors, furnish information or engage in discussions or negotiations with
any person or entity concerning an Acquisition Transaction. If the Company
agrees to enter into an Acquisition Transaction and, as a result, the Merger
is not consummated or the Merger Agreement is terminated, then the Company
will pay Parent $1,000,000 (the "Break Fee"). See "Modification; Termination".
The Company has also covenanted in the Merger Agreement not to declare or pay
any dividend, other than as provided in the Merger Agreement, or other
distribution with respect to the Common Stock before the Merger, without the
prior written consent of Parent. If the Merger is
15
consummated, all representations, warranties and covenants in the Merger
Agreement automatically terminate, except for covenants related to payment of
the merger price for the Company's Common Stock, the covenant to indemnify the
Company's officers and directors (see "Interests of Certain Persons in the
Merger") and specified confidentiality obligations of the parties.
The consummation of the Merger is subject to a number of conditions,
including the following: (i) the representations and warranties of each party
in the Merger Agreement shall be true and correct in all material respects as
of the closing date, (ii) all actions, undertakings, covenants or agreements
required to be performed by a party at or before the closing date shall have
been so performed or complied with, in all material respects, on or before the
closing date, including, among other things, the delivery of legal opinions
and specified certificates of officers, (iii) the Company shall have obtained
all necessary approvals and consents required by the Merger Agreement, (iv)
the Merger Agreement shall have been approved by the requisite vote of holders
of the Company's Common Stock, (v) no action or proceeding shall have been
instituted by any person to restrain or invalidate the Merger Agreement, delay
the consummation of the Merger or seek damages from Parent or impose
obligations upon Parent by reason of the Merger Agreement, and (vi) the
Company shall have delivered the documents it is required to deliver pursuant
to the Merger Agreement and Parent shall have deposited the cash purchase
price with the Disbursing Agent.
The Merger Agreement provides that the party whose obligation to
proceed is subject to the satisfaction of such condition, may waive the
satisfaction of any such condition in writing. This provision would not allow
the parties to waive the requirement that the Company's shareholders approve
and adopt the Merger Agreement.
Modification; Termination
At any time before the effective time of the Merger, the Company,
Acquisition and Parent may, by written agreement, extend the time for the
performance of any obligation or other act of the parties under the Merger
Agreement, waive compliance with any agreements or conditions, waive any
inaccuracies in the representations and warranties contained in the Merger
Agreement or in any document delivered in connection with the Merger
Agreement, or, notwithstanding any shareholder approval, amend the Merger
Agreement; provided, that after approval and adoption of the Merger Agreement
by the Company's shareholders, no amendment may be made that by law requires
further approval by such shareholders unless such approval shall be obtained.
The Merger Agreement may be terminated and the Merger abandoned,
notwithstanding shareholder approval and adoption of the Merger Agreement, at
any time before the effective time of the Merger (i) by mutual action of the
Boards of Directors of the Company and Parent, (ii) by the Board of Directors
of Parent if the conditions precedent to its obligations or Acquisition's
obligations set forth in the Merger Agreement shall not have been complied
with or performed, or if there has been a material violation or breach by the
Company of any representation, warranty or agreement contained in the Merger
Agreement, (iii) by the Board of Directors of the
16
Company if the conditions precedent to its obligations set forth in the Merger
Agreement shall not have been complied with or performed, or if there has been
a material violation or breach by Parent or Acquisition of any representation,
warranty or agreement contained in the Merger Agreement, and such
non-compliance, non-performance, violation or breach shall not have been cured
or eliminated after 30 days written notice (or by its nature cannot be cured
or eliminated), (iv) by the Board of Directors of the Company or Parent if the
effective time of the Merger does not occur by March 31, 1997 (except that a
party whose failure to fulfill an obligation under the Merger Agreement causes
the effective time of the Merger not to occur by March 31, 1997 may not
terminate the Merger Agreement based on this provision), or (v) by the Company
or Parent if either the Company or Parent is precluded by any permanent
injunction or other order of a court or other competent authority from
consummating the Merger and such permanent injunction or other order shall
have become final and nonappealable.
If the Merger Agreement is terminated and the Merger is abandoned,
then the Merger Agreement will have no effect and none of the parties shall
have any liability to the other parties with respect to the Merger Agreement
or the Merger, and each party will bear its own expenses; provided, however,
that a party that breaches the Merger Agreement shall continue to be liable
for such breach; and provided further, that if the Company enters into, or
agrees to enter into, an Acquisition Transaction, and the Merger is not
consummated, then the Company shall be liable to Parent for the Break Fee.
Expenses
Except for the Break Fee described above and a provision awarding
attorneys' fees to the prevailing party in any action under the Merger
Agreement, each party to the Merger Agreement will pay its own costs and
expenses incident to the Merger Agreement and the related transactions. The
Company has entered into an agreement with Mesirow, which has acted as
financial advisor for the Company in connection with the Merger. The Company
will pay Mesirow an aggregate fee of approximately $689,000 for it services,
if the Merger is consummated, plus Mesirow's reasonable out-of-pocket
expenses. See "Opinion of Financial Advisor". Parent is responsible for any of
its broker's fees in connection with the Merger.
Federal Income Tax Consequences to the Company's Shareholders
The receipt of cash for shares of the Company's Common Stock pursuant
to the Merger will be a taxable transaction for federal income tax purposes to
the shareholders receiving such cash (and may be a taxable transaction for
state, local and foreign tax purposes as well). A holder of the Company's
Common Stock will realize gain or loss measured by the difference between such
shareholder's adjusted tax basis for the shares of the Company's Common Stock
owned by the shareholder at the time of the Merger and the amount of cash
received for such shares. In general, such gain or loss will be capital gain
or loss if the shares of the Company's Common Stock are capital assets in the
hands of such shareholder; any such gain or loss realized will constitute
long-term or short-term capital gain or loss depending on the shareholder's
holding
17
period for such shares and the date such shares were acquired. Under current
federal law, a non-corporate shareholder will be taxed at a maximum rate of
28% on long-term capital gain.
No ruling has been or will be requested from the Internal Revenue
Service as to any of the tax effects of the transactions discussed in this
Proxy Statement.
The foregoing is only a general description of certain of the federal
income tax consequences of the Merger to holders of the Company's Common
Stock, without giving consideration to the particular facts and circumstances
of each shareholder's situation, and is based on present law. Shareholders are
urged to consult their personal tax advisors with respect to the tax
consequences of the transaction, including the federal, state, local and
foreign tax consequences of the Merger.
Regulatory Matters
Other than the issuance of Certificates of Merger by the Secretary of
State of the State of Delaware and the Administrator of the Department of
Consumer and Industry Services of the State of Michigan, the Company is aware
of no federal or state regulatory requirements that must be complied with or
approvals that must be obtained before the consummation of the Merger to
permit such consummation.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Stock Agreement
In connection with the execution of the Merger Agreement, Wenger
agreed to vote all of the shares of Common Stock of the Company owned by him
in favor of approval and adoption of the Merger Agreement. Wenger is a member
of the Board of Directors of the Company. As of the Record Date for the
Special Meeting, 676,027 shares of the Company's Common Stock were
outstanding. Thus, the 431,955 shares that Wenger has agreed to vote in favor
of the approval and adoption of the Merger Agreement constitute approximately
64% of the outstanding shares of the Company's Common Stock. Wenger is
required by his agreement to vote these shares in favor of the Merger, and
such vote alone will be sufficient to approve and adopt the Merger Agreement
without the affirmative vote of any other shareholder. See "Required Vote".
Wenger also agreed not to solicit any alternative proposals for a business
combination involving the Company.
Agreements with Management
It is contemplated that, on or prior to the Closing Date, Mr.
Vuchetich and Mr. Canavesio will enter into employment agreements with the
Company providing for terms of two years at minimum compensation equal to
their present salaries plus discretionary bonuses. These officers also will
participate in a deferred compensation equity participation program of the
Company.
18
Other Interests
Pursuant to the terms of the Merger Agreement, the surviving
corporation will indemnify and hold harmless, each present and former director
or officer of the Company from and against any and all claims arising out of,
or in connection with, activities in such capacity, or on behalf of, or at the
request of, the Company (the "Claims") to the fullest extent permitted by
applicable law, the Articles of Incorporation or the Bylaws. Pursuant to the
Merger Agreement, the surviving corporation will also advance expenses
incurred in connection with the Claims, as they are incurred, to the fullest
extent permitted under applicable law. In addition, the indemnification and
expense advancement provisions of the Merger Agreement will continue for a
period of at least six years after the closing date.
INFORMATION ABOUT THE COMPANY
The Company operates an approximately one-mile long international
tunnel beneath the Detroit River connecting the downtown business and shopping
districts of Detroit, Michigan, and Windsor, Ontario, Canada (the "Tunnel").
The Company leases the Detroit Tunnel properties from the City of Detroit
under a lease that expires in 2020. The Windsor Tunnel properties are owned by
the City of Windsor. The Company operates the entire Tunnel for itself and the
City of Windsor under an operating agreement. In connection with such
activities, the Company employs approximately 116 employees, of whom
approximately 104 are full-time employees.
Detroit & Canada Tunnel Corporation was incorporated under the laws of
the State of Michigan in November 1936. Unless the context otherwise requires,
all reference to the Company in this Proxy Statement refer to Detroit & Canada
Tunnel Corporation. The Company's executive offices are located at 100 East
Jefferson Avenue, Detroit, Michigan 48226, and its telephone number is
(313) 567-4422.
The Company is subject to the information requirements of the Exchange
Act and, in accordance therewith, files reports and other information with the
Commission. Such reports, proxy and information statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission in Washington, D.C. at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices in New York (Seven World Trade Center, 13th Floor, New York,
New York 10048) and Chicago (Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60621-2511) or through the Commission's
Web site at http://www.sec.gov. Copies of such material can
be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Company's
Common Stock is listed on the Nasdaq Stock Market. After the Merger,
registration of the Company's Common Stock under the Exchange Act and the
listing of the Company's Common Stock on the Nasdaq Stock Market are expected
to be terminated.
19
CAPITALIZATION
The following table sets forth unaudited information relating to the
capitalization of the Company as of July 31, 1996. This table should be read
in conjunction with the Company's Consolidated Financial Statements and Notes
to Consolidated Financial Statements which are incorporated by reference in
this Proxy Statement. See "Incorporation of Certain Documents by Reference."
July 31, 1996
-------------
Long-Term Debt................................................. $ 0
-------------
Shareholders' equity:
Common stock; authorized 1,000,000 shares,
issued and outstanding 676,027 shares........................ $ 3,382,965
Capital Surplus................................................ 28,124
Retained Earnings.............................................. 14,700,292
Unrealized Net Gain on Investment
Securities Available For Sale............................. 945,215
-------------
Total shareholders' equity................................ 19,056,596
-------------
Total capitalization................................. $ 19,056,596
=============
The book value per share of the Company's Common Stock as of July 31,
1996 was $28.19.
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following selected consolidated financial data relating to the
Company for the three years ended October 31, 1995, have been derived from the
audited Consolidated Financial Statements of the Company. The following
selected financial data for the nine months ended July 31, 1996 and 1995, have
been derived from the Company's unaudited financial statements, and in the
opinion of management includes all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of such information for
such periods on a consistent basis. Such selected financial data should be
read in conjunction with the Consolidated Financial Statements and unaudited
Consolidated Financial Statements and the Notes relating to such Statements
incorporated by reference in this Proxy Statement.
20
Nine Months Ended
July 31, Years Ended October 31,
------------------- -------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(unaudited)
(in thousands, except share and per share data)
Operating Data:
Operating Revenue $7,907 $6,641 $9,056 $8,001 $7,439
Other Income 324 375 459 1,203 498
Tunnel Operating Expenses 4,516 4,373 5,734 5,509 5,549
Taxes-Federal, State, Local 1,550 1,222 1,790 1,948 1,178
Foreign Currency Transaction
(Gain) Loss 63 8 (24) 46 103
Effect of Accounting Change 0 0 0 0 1,720
------ ----- ----- ----- -----
Net Income (Loss) $2,102 $1,413 $2,015 $1,701 $(612)
====== ===== ===== ===== =====
Share and per Share Data:
Average Number of Shares
Outstanding 676,027 678,078 677,560 684,472 695,163
Income Before Cumulative Effect
of Accounting Change $ 3.11 $ 2.08 $ 2.97 $ 2.49 $ 1.59
Cumulative Effect of
Accounting Change $ 0 $ 0 $ 0 $ 0 $ 2.47
Net Income (Loss) per Average
Share Outstanding $ 3.11 $ 2.08 $ 2.97 $ 2.49 $ (0.88)
Dividends per Share $ 0.375 $ 0.375 $ 0.50 $ 0.50 $ 0.50
21
Nine Months Ended
July 31, Years Ended October 31,
------------------- ------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(unaudited)
(in thousands, except share and per share data)
Balance sheet data:
Working capital $ 8,564 $ 6,886 $ 6,960 $ 7,181 $ 8,102
Total Assets $23,643 $20,305 $21,964 $21,177 $20,012
Shareholders' Equity $19,057 $15,745 $17,066 $14,745 $13,669
Common stock prices:
Fiscal 1996 Fiscal 1995 Fiscal 1994
--------------- ---------------- -----------------
Quarter Ended Low High Low High Low High
- ------------- --- ---- --- ---- --- ----
January 31 24 33 1/4 25 1/2 26 26 1/2 26 1/2
April 30 31 36 25 1/4 25 1/2 26 3/4 26 3/4
July 31 30 3/4 36 24 3/4 24 3/4 26 3/4 26 3/4
October 31 34 1/4 52 24 1/2 25 26 26 1/2
On October 21, 1996, the date the proposed merger was announced, the
high and low sale prices were $51 and $44-1/2, respectively. As of October 20,
1996, there were 438 holders of record of the Company's Common Stock. During
each of the first three quarters of fiscal year 1996, the Company declared
dividends of $0.125 per share of Common Stock outstanding.
INFORMATION ABOUT PARENT AND ACQUISITION
Parent is a newly-formed Delaware limited liability company whose
members on the Closing Date will be affiliates of Hyde Park Holdings, Inc., a
Delaware corporation whose shares are owed by Laurence S. Levy and Clifford
Press, and John Hancock. Messrs. Levy and Press own and operate a diversified
industrial manufacturing company and other business ventures. Acquisition is a
Delaware corporation which is 100% owned by Parent. Acquisition was recently
formed in preparation for the Merger and has not conducted any business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of November 22,
1996, regarding the beneficial ownership of the Company's Common Stock by each
director of the Company, each person known by the Company to own beneficially
more than 5% of the Company's
22
outstanding Common Stock, each executive officer of the Company named in the
Summary Compensation Table set forth in the Company's Proxy Statement in
connection with the 1995 Annual Meeting of Shareholders, held on March 9,
1996, and all directors and executive officers as a group:
Percent of
Name of Number of Shares Outstanding
Beneficial Owner Beneficially Owned Common Stock
---------------- ------------------ ------------
Henry Penn Wenger .................................... 431,955 63.9%
CenTra, Inc (1)....................................... 37,800 5.6%
Levy, Harkins & Co., Inc (1).......................... 37,000 5.5%
Donald M. Vuchetich................................... 0
Douglas L. Bridges.................................... 0
Charles C. Stewart.................................... 100 *
All Directors and Executive Officers
as a Group (6 Persons).............................. 432,055
<FN>
- -------------
* Indicates an amount less than 1%.
(1) Based on information contained in a Form 13D filed with the Securities and
Exchange Commission (the "SEC"). According to the Form 13D filed with the SEC
by Levy, Harkins & Co., Inc. ("L&H"), 35,000 of these shares are owned by
discretionary account customers of L&H as to which each such customer and L&H
share voting power and as to which L&H has sole dispositive power, and 2,000
of these shares are owned by an employee benefit plan of L&H as to which each
such employee and L&H share voting power and as to which L&H has sole
dispositive power.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young, LLP ("Ernst & Young") was the Company's independent
public accountants for the fiscal year ended October 31, 1996. A
representative of Ernst & Young is expected to be present at the Special
Meeting and will have the opportunity to make a statement if he desires to do
so. The representative will also be available to respond to appropriate
questions from shareholders.
23
SHAREHOLDER PROPOSAL DEADLINE
A shareholder proposal intended to be presented at the 1997 Annual
Meeting, if such a meeting is held, must have been received by the Company on
or before October 9, 1996 to be considered for inclusion in the Company's
proxy statement and form of proxy relating to that meeting.
OTHER BUSINESS
The Company is not aware of any matters to be brought before the
Special Meeting except those set forth in the attached Notice of Special
Meeting of Shareholders. However, if any other matters are properly presented
at the Special Meeting for action to be taken thereon, it is the intention of
the proxy holders named in the enclosed form of proxy and acting thereunder to
vote on such matters in their discretion in accordance with their best
judgment.
Shareholders are urged to specify their choice on the matters to be
voted on at the Special Meeting and to date, sign and return the enclosed
proxy in the envelope provided. A prompt response is helpful and your
cooperation will be appreciated.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby specifically incorporated by
reference into this Proxy Statement: (i) the Company's Annual Reports on Form
10-KSB for the years ended October 31, 1995, filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, (ii) the
Company's Quarterly Reports on Form 10-QSB for the quarters ended January 31,
1996, April 30, 1996 and July 31, 1996, filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, and (iii) all
other reports filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 since October 31, 1995.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Proxy Statement is delivered, upon written or
oral request of such person, by first class mail or other equally prompt
means, within one business day of receipt of such request, a copy of any and
all of the information that has been incorporated by reference in this Proxy
24
Statement (not including exhibits to the information that is incorporated by
reference unless such exhibits are specifically incorporated by reference into
the information that this Proxy Statement incorporates). Requests for such
copies should be addressed to Detroit & Canada Tunnel Corporation, 100 East
Jefferson Avenue, Detroit, Michigan 48226, Attention: Treasurer,
(313) 567-4422.
25
Appendix A
=================================================================
AGREEMENT AND PLAN OF MERGER, as amended,
by and among
HYDE PARK TUNNEL HOLDINGS L.L.C.
and
JESSICA ACQUISITION CORP.
and
DETROIT & CANADA TUNNEL CORPORATION
Dated as of November 14, 1996
=================================================================
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............................................................. 1
ARTICLE II
THE MERGER; CONVERSION AND EXCHANGE..................................... 6
Section 2.01. Closing.......................................... 6
Section 2.02. The Merger....................................... 6
Section 2.03. Effective Time................................... 6
Section 2.04. Corporate Organization........................... 7
Section 2.05. Conversion of Shares............................. 7
Section 2.06. Surrender and Payment............................ 7
Section 2.07. No Further Transfers............................. 8
Section 2.08. Certain Effects of the Merger.................... 8
Section 2.09. Return to the Purchaser. ....................... 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DCTC.................................. 9
Section 3.01. Organization and Good Standing................... 9
Section 3.02. Foreign Qualification............................ 9
Section 3.03. Capitalization................................... 9
Section 3.04. Authority of DCTC................................ 10
Section 3.05. No Default; Non-Contravention.................... 11
Section 3.06. Compliance with Law; Consents and
Approvals........................... 11
Section 3.07. Financial Statements............................. 11
Section 3.08. Liabilities...................................... 12
Section 3.09. Personal Property................................ 12
Section 3.10. Real Property; Leases............................ 12
Section 3.11. Litigation....................................... 13
Section 3.12. Taxes............................................ 13
Section 3.13. Insurance........................................ 14
Section 3.14. Contracts........................................ 15
Section 3.15. Intellectual Property............................ 15
Section 3.16. Books and Records................................ 16
Section 3.17. Employees and Related Agreements; ERISA.......... 16
Section 3.18. Ordinary Course; No Material
Adverse Change...................... 21
Section 3.19. Finder's Fees.................................... 22
Section 3.20. Environmental Matters............................ 22
Section 3.21. SEC Reports...................................... 23
Section 3.22. Representations and Warranties................... 23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER AND JESSICA CORP.......................................... 23
Section 4.01. Organization and Good Standing................... 23
Section 4.02. Authority Relative to Agreement.................. 24
i
Page
Section 4.03. No Default; Non-Contravention..................... 24
Section 4.04. Consents and Approvals............................ 25
Section 4.05. Jessica Corp...................................... 25
Section 4.08. Finder's Fees..................................... 25
Section 4.09. Representations and Warranties.................... 25
Section 4.10. Net Worth......................................... 25
Section 4.11. Commitment........................................ 25
ARTICLE V
PROXY STATEMENT; STOCKHOLDER APPROVALS;
BOARD OF DIRECTORS RECOMMENDATIONS....................................... 25
Section 5.01. Proxy Statement................................... 25
Section 5.02. Stockholder Approvals; Board of
Directors Recommendations............ 26
Section 5.03. DCTC Information.................................. 26
ARTICLE VI
PRE-CLOSING COVENANTS.................................................... 26
Section 6.01. Conduct of Business............................... 27
Section 6.02. No Breach of Representations
and Warranties....................... 28
Section 6.03. Access by Purchaser............................... 29
Section 6.04. No Solicitation................................... 29
Section 6.05. Consents; Notices; Termination.................... 29
Section 6.06. Voting............................................ 30
Section 6.07. Break Fee......................................... 30
Section 6.08. Best Efforts...................................... 30
ARTICLE VII
PRE-CLOSING COVENANTS OF THE PURCHASER AND JESSICA CORP.................. 30
Section 7.01. No Breach of Representations
and Warranties....................... 30
Section 7.02. Merger............................................ 30
Section 7.03. Best Efforts...................................... 31
ARTICLE VIII
CONDITIONS TO THE PURCHASER'S AND
JESSICA CORP.'S OBLIGATIONS.............................................. 31
Section 8.01. Representations and Warranties.................... 31
Section 8.02. Covenants......................................... 31
Section 8.03. Officer's Certificate............................. 31
Section 8.04. Opinions of Counsel............................... 31
Section 8.05. Governmental Consents............................. 31
Section 8.06. Legality.......................................... 32
Section 8.07. Injunctions....................................... 32
Section 8.08. Resignations...................................... 32
Section 8.09. Contract Consents................................. 32
Section 8.10. Stockholder Approval.............................. 32
Section 8.11. Merger............................................ 32
Section 8.12. Employment Agreements............................. 32
Section 8.13. Institution of Proceedings........................ 32
ii
Page
ARTICLE IX
CONDITIONS TO DCTC'S OBLIGATIONS......................................... 33
Section 9.01. Representations and Warranties.................... 33
Section 9.02. Covenants......................................... 33
Section 9.03. Officer's Certificate............................. 33
Section 9.04. Opinion of Counsel................................ 33
Section 9.05. Governmental Consents............................. 33
Section 9.06. Legality.......................................... 33
Section 9.07. Injunctions....................................... 34
Section 9.08. Stockholder Approval.............................. 34
Section 9.09. Merger............................................ 34
Section 9.10. Institution of Proceedings........................ 34
ARTICLE X
TERMINATION.............................................................. 34
Section 10.01. Termination...................................... 34
Section 10.02. Effect of Termination............................ 35
Section 10.03. Amendment........................................ 35
Section 10.04. Extension; Waiver................................ 36
ARTICLE XI
MISCELLANEOUS............................................................ 36
Section 11.01. Further Assurances............................... 36
Section 11.02. Entire Agreement................................. 36
Section 11.03. Notices.......................................... 36
Section 11.04. Successors and Assigns........................... 37
Section 11.05. Governing Law.................................... 38
Section 11.06. Gender and Person................................ 38
Section 11.07. Captions......................................... 38
Section 11.08. Confidentiality of Disclosures................... 38
Section 11.09. Publicity........................................ 38
Section 11.10. Fees and Expenses................................ 39
Section 11.11. Costs of Enforcement............................. 39
Section 11.12. Third Parties.................................... 39
Section 11.13. Counterparts..................................... 39
Section 11.14. Indemnification and Insurance.................... 39
Section 11.15. Non-Survival..................................... 40
iii
Schedules
Schedule 3.03 Capitalization and Securities Ownership
Schedule 3.05 Defaults; Breaches
Schedule 3.06 Governmental Consents and Approvals
Schedule 3.08 Liabilities
Schedule 3.09 Liens
Schedule 3.10 Leases
Schedule 3.11 Litigation
Schedule 3.12 Taxes
Schedule 3.13 Insurance
Schedule 3.14 Contracts
Schedule 3.15 Intellectual Property
Schedule 3.17 Employees and Related Agreements
Schedule 3.18 Material Changes
Schedule 3.19 Finder's Fees
Schedule 3.20 Environmental Matters
Schedule 3.21 Undisclosed Matters
Schedule 4.03 Liens on the Purchaser
Schedule 6.05 Consents
Schedule 8.08 Resignations
iv
AGREEMENT AND PLAN OF MERGER, dated as of the 14th day of November,
1996, by and among HYDE PARK TUNNEL HOLDINGS L.L.C. (the "Purchaser"), a
Delaware limited liability company, and JESSICA ACQUISITION CORP. ("Jessica
Corp."), a Delaware corporation, on the one hand, and DETROIT & CANADA TUNNEL
CORPORATION ("DCTC"), a Michigan corporation, on the other hand.
W I T N E S S E T H:
WHEREAS, the Board of Managers of the Purchaser and the Board of
Directors of DCTC deem it to be desirable and in the best interests of such
companies that the Purchaser acquire DCTC through the merger (the "Merger") of
Jessica Corp., a wholly-owned subsidiary of the Purchaser organized solely for
the purpose of consummating the transactions contemplated hereby, into DCTC,
upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Board of Managers of the Purchaser and the Boards of
Directors of Jessica Corp. and DCTC have approved the Merger upon the terms
and subject to the conditions set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
"Acquisition Transaction" has the meaning ascribed to such
term in Section 6.04 hereof.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.).
"Certificates" has the meaning ascribed to such term in
Section 2.06 hereof.
"Claims" and "Claim" have the meanings ascribed to such terms in
Section 11.14 hereof.
"Closing", "Closing Date", "Closing Time" and "Closing Place" have the
respective meanings ascribed to such terms in Section 2.01 hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, any successor statute thereto and all final or temporary regulations
promulgated thereunder and generally applicable published rulings entitled to
precedential effect.
"Commission" means the Securities and Exchange Commission.
"Constituent Corporations" has the meaning ascribed to such term in
Section 2.08 hereof.
"Contracts" has the meaning ascribed to such term in Section 3.14
hereof.
"Controlling Stockholder" means Henry Penn Wenger.
"Corporation" means DCTC and all of its subsidiaries.
"Jessica Corp. means the Jessica Acquisition Corp., a Delaware
corporation.
"DCTC" means Detroit & Canada Tunnel Corporation, a Michigan
corporation.
"DCTC Stock" means the common stock of DCTC.
"DCTC Stockholders' Meeting" has the meaning ascribed to such term in
Section 5.02 hereof.
"Delaware Certificate of Merger" has the meaning ascribed to such term
in Section 2.03 hereof.
"Disbursing Agent" has the meaning ascribed to such term in Section
2.06 hereof.
"Effective Time" has the meaning ascribed to such term in Section 2.03
hereof.
"Environment" means soil, surface waters, ground waters, land, stream,
sediments, surface or subsurface strata and ambient air.
"Environmental Approvals" has the meaning ascribed to such term in
Section 3.20 hereof.
"Environmental Condition" means any condition with respect to the
Environment on any Facility, whether or not yet discovered, which could or
does result in any Losses, including any condition resulting from the
operation of the business of the Corporation or the operation of the business
of any subtenant or occupant of any Facility.
"Environmental Laws" means all Governmental Rules relating to injury
to, or the protection of, real or personal property or human health or the
Environment as in effect prior to the Closing Date, including, without
limitation, all valid and lawful requirements of courts and other Governmental
Bodies pertaining to reporting, licensing, permitting, investigation,
remediation and removal of, emissions, discharges, releases or threatened
2
releases of Hazardous Substances, chemical substances, pesticides, petroleum
or petroleum products, pollutants, contaminants or hazardous or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature,
into the Environment, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances, pollutants, contaminants or hazardous or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, any successor statute thereto and all final or
temporary regulations promulgated thereunder and generally applicable
published rulings entitled to precedential effect.
"ERISA Affiliate" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control and all other entities which, together with DCTC, are treated
as a single employer under any or all of Sections 414(b), (c), (m) or (o) of
the Code on either the date of this Agreement or the Closing Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Facility" means any facility which is now or has heretofore been
owned or used by the Corporation.
"Financing" has the meaning ascribed to such term in Section 4.11
hereof.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Body" means any federal, state, local or foreign
governmental authority or regulatory body, any subdivision, agency, commission
or authority thereof (including, without limitation, environmental protection,
planning and zoning), or any quasi-governmental or private body exercising any
regulatory authority thereunder and any person directly or indirectly owned by
and subject to the control of any of the foregoing, or any court, arbitrator
or other judicial or quasi- judicial tribunal.
"Governmental Rules" means any statute, law, treaty, rule, code,
ordinance, regulation, permit, certificate or order of any Governmental Body
or any judgment, decree, injunction, writ, order or like action of any
Governmental Body.
"Hazardous Substances" means any substance:
3
(a) the presence of which requires notification, investigation,
or remediation under any Environmental Law as in effect prior to the
Closing Date;
(b) which prior to the Closing Date is or becomes defined as a
"hazardous waste", "hazardous material" or "hazardous substance" or
"pollutant" or "contaminant" under any present or future Environmental
Law or amendments thereto including, without limitation, CERCLA, RCRA,
the Clean Air Act (42 U.S.C. Section 7401 et seq.) and any
Environmental Law applicable to any jurisdiction in which or from
which the Corporation conducts or has conducted its business;
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous and is or becomes regulated by any Governmental Body under
Environmental Laws prior to the Closing Date;
(d) without limitation, which contains gasoline, diesel fuel or
other petroleum hydrocarbons or volatile organic compounds;
(e) without limitation, which contains polychlorinated
byphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or
(f) without limitation, which contains or emits radioactive
particles, waves or materials, including radon gas.
"Indemnified Party" has the meaning ascribed to such term in Section
11.14 hereof.
"John Hancock" means John Hancock Mutual Life Insurance Company or any
affiliate thereof.
"Leased Property" has the meaning ascribed to such term in Section
3.10 hereof.
"Lien" means any mortgage, charge, pledge, lien, security interest,
claim, encumbrance or restriction, of any kind or nature.
"Material Adverse Effect" means a material adverse effect on the
business, assets, financial condition or results of operations of the
specified person or entity.
"MBCA" means the Michigan Business Corporation Act.
"Merger" means the merger of Jessica Corp. and DCTC pursuant to
Section 2.02 hereof.
4
"Merger Consideration" has the meaning ascribed to such term in
Section 2.05(a) hereof.
"Michigan Certificate of Merger" has the meaning ascribed to such term
in Section 2.03 hereof.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 3(37) or Section 4001(a)(3) of ERISA.
"October Balance Sheet" means the consolidated balance sheet of DCTC
as of October 31, 1995.
"PBGC" means the Pension Benefit Guaranty Corporation or any person
succeeding to the functions thereof.
"Pension Plan" means a Plan which is subject to Subtitle B of Title IV
of ERISA and which is not a Multiemployer Plan.
"Plan" means any plan, program, arrangement, agreement or commitment
which is a pension, profit sharing, savings, thrift or other retirement plan
(including without limitation any "employee pension benefit plan" as defined
in Section 3(2) of ERISA), deferred compensation, health or welfare plan (as
defined in Section 3(1) of ERISA), stock purchase, stock option, performance
share, bonus or other incentive or severance pay plan, policy or procedure, or
vacation or other employee benefit plan, program, arrangement, agreement or
commitment, whether or not written.
"Proprietary Rights" has the meaning ascribed to such term in Section
3.15 hereto.
"Proxy Statement" has the meaning ascribed to such term in Section
5.01(a) hereof.
"Purchaser" means Hyde Park Tunnel Holdings L.L.C., a Delaware limited
liability company.
"Purchaser's Representatives" has the meaning ascribed to such term in
Section 6.03 hereof.
"RCRA" means the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.).
"SEC Reports" means all reports, registration statements, definitive
proxy statements and other documents and all amendments thereto and
supplements thereof filed by DCTC with the Commission.
"Securities Act" means the Securities Act of 1933.
"Surviving Corporation" has the meaning ascribed to such term in
Section 2.02 hereof.
5
"Tax" has the meaning ascribed to such term in Section 3.12 hereof.
"Unfunded Current Liability" of any Pension Plan means the amount, if
any, by which the actuarial present value of the accumulated plan benefits
under the Pension Plan as of the close of its most recent plan year exceeds
the fair market value of the assets allocable thereto, each determined in
accordance with Statement of Financial Accounting Standards No. 35, based upon
the actuarial assumptions used by the Pension Plan's actuary in the most
recent annual valuation of the Pension Plan.
"Voting Debt" has the meaning ascribed to such term in Section 3.03(b)
hereof.
ARTICLE II
THE MERGER; CONVERSION AND EXCHANGE
Section 2.01. Closing. The closing (the "Closing") of the transactions
contemplated by this Article II shall take place at 10:00 A.M., on the fifth
business day after the fulfillment or waiver of the last of the conditions
specified in Articles VIII and IX hereof, at the offices of Rosenman & Colin
LLP, 575 Madison Avenue, New York, New York, or at such other time, date and
place as may be agreed upon in writing by the Purchaser, Jessica Corp. and
DCTC. (Hereinafter, the date on which the Closing shall take place is referred
to as the "Closing Date", the time on the Closing Date when the Closing shall
take place is referred to as the "Closing Time" and such office or such other
place is referred to as the "Closing Place".)
Section 2.02. The Merger. Upon the terms and subject to the conditions
of this Agreement and in accordance with Section 735 of the MBCA and Section
252 of the General Corporation Law of the State of Delaware, on the Closing
Date, Jessica Corp. shall be merged with and into DCTC. DCTC shall continue
its existence as the surviving corporation in the Merger (and is hereinafter
sometimes referred to as the "Surviving Corporation") and the separate
corporate existence of Jessica Corp. shall terminate at the Effective Time.
Section 2.03. Effective Time. The Merger shall become effective at
such time as (a) a certificate of merger (the "Michigan Certificate of
Merger"), in form and substance reasonably satisfactory to the Purchaser,
Jessica Corp. and DCTC, is filed by the Administrator of the Department of
Consumer and Industry Services of the State of Michigan in accordance with
Section 707 of the MBCA and (b) a certificate of merger (the "Delaware
Certificate of Merger"), in form and substance reasonably satisfactory to the
Purchaser, Jessica Corp. and DCTC, is filed by the Secretary of State of the
State of Delaware in accordance with Section 103 of the General Corporation
Law of the State of Delaware or at such later time as is specified in the
6
Michigan Certificate of Merger and the Delaware Certificate of Merger (the
"Effective Time").
Section 2.04. Corporate Organization. (a) Immediately subsequent to
the Effective Time, the Surviving Corporation (i) shall be a wholly-owned
subsidiary of the Purchaser, (ii) shall continue its separate corporate
existence with all its purposes, objects, rights, privileges, powers,
certificates and franchises unimpaired by the Merger under the laws of the
State of Michigan and the State of Delaware, (iii) shall retain the name
"Detroit & Canada Tunnel Corporation" and (iv) shall succeed to all rights,
assets, liabilities and obligations of Jessica Corp. and DCTC in accordance
with the MBCA and the General Corporation Law of the State of Delaware.
(b) The Articles of Incorporation and By-laws of DCTC at the Effective
Time shall be the Articles of Incorporation and Bylaws, respectively, of the
Surviving Corporation after the Effective Time, and thereafter may be amended
in accordance with their respective terms and as provided by applicable law.
(c) At the Effective Time, the Board of Directors of the Surviving
Corporation shall consist of Laurence S. Levy, Clifford Press and Donald M.
Vuchetich and the officers of Jessica Corp. immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and By-laws of the Surviving
Corporation.
Section 2.05. Conversion of Shares. At the Effective
Time:
(a) The holders of each issued and outstanding share of DCTC Stock
immediately prior to the Effective Time shall, by reason of the Merger and
without any action by the holders thereof, be entitled to receive $54.00 per
share in cash (the "Merger Consideration").
(b) Each share of common stock, $1.00 par value per share, of Jessica
Corp. issued and outstanding immediately prior to the Effective Time shall, by
reason of the Merger and without any action by the holder thereof, be
converted into one share of DCTC Stock.
Section 2.06. Surrender and Payment. Not less than two business days
prior to the Closing Date, the Purchaser shall deposit or cause to be
deposited with a federally insured bank with assets of not less than $1
billion selected by the Surviving Corporation (the "Disbursing Agent"), a
certified check for $36,505,458, in immediately available funds, with
directions to hold such funds until the Effective Date. Promptly after the
Effective Time, the Disbursing Agent shall mail to each holder of record of a
certificate or certificates which immediately prior
7
to the Effective Time represented DCTC Stock (the "Certificates") a letter of
transmittal and instructions for use in effecting the surrender of the
Certificates in exchange for $54.00 per share in cash. Upon surrender of a
Certificate to the Disbursing Agent, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
cash the Merger Consideration for each share of DCTC Stock formerly
represented by such Certificate, and the Certificate so surrendered shall
forthwith be canceled. Until surrendered as contemplated by this Article II,
from and after the Effective Time each Certificate shall be deemed to
represent only the right to receive the Merger Consideration for each share of
DCTC Stock formerly represented by such Certificate, and shall not evidence
any interest in, or any right to exercise the rights of a stockholder of, the
Surviving Corporation. If a cash payment is to be made to a person other than
the one in whose name the Certificate surrendered in exchange therefor is
registered, it shall be a condition to such issuance or payment that such
Certificate be properly endorsed (or accompanied by an appropriate instrument
of transfer) and accompanied by evidence that any applicable stock transfer
taxes have been paid or provided for.
Section 2.07. No Further Transfers. At the Effective Time, the stock
transfer books of DCTC shall be closed, and no transfer of DCTC Stock shall
thereafter be made.
Section 2.08. Certain Effects of the Merger. At the Effective Time,
the Surviving Corporation shall thereupon and thereafter possess all the
rights, privileges, powers and franchises, as well of a public as of a private
nature, and be subject to all restrictions, disabilities and duties, of each
of Jessica Corp. and DCTC (sometimes hereinafter referred to as the
"Constituent Corporations"); and all and singular, the rights, privileges,
powers and franchises of each of the Constituent Corporations, and all
property, real, personal and mixed, and all debts due to either of the
Constituent Corporations on whatever account, as well as for stock
subscriptions as all other things, in action or belonging to each of the
Constituent Corporations shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises and all and every other
interest shall be thereafter as effectively the property of the Surviving
Corporation as they were of the several and respective Constituent
Corporations; and the title to any real estate, vested by deed or otherwise,
under the laws of the State of Delaware or elsewhere in either of the
Constituent Corporations, shall not revert or in any way be impaired by reason
of the Merger; but any claim existing or action or proceeding pending by or
against DCTC may be prosecuted as if this Merger had not taken place, or the
Surviving Corporation may be substituted in its place, and all rights of
creditors and liens upon any property of either of the Constituent
Corporations shall be preserved unimpaired, and all debts, liabilities and
duties of each of the
8
Constituent Corporations shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said
debts, liabilities and duties had been incurred or contracted by it.
Section 2.09. Return to the Purchaser. Any cash made available to the
Disbursing Agent and not disbursed for Certificates within six months after
the Effective Time shall be redelivered or repaid by the Disbursing Agent to
the Purchaser, after which time any holder of Certificates who has not
theretofore delivered or surrendered such Certificates to the Disbursing
Agent, subject to applicable law, shall look as a general creditor only to the
Surviving Corporation for payment of the Merger Consideration. Notwithstanding
the foregoing, none of the Disbursing Agent, the Surviving Corporation or any
other party hereto shall be liable to a holder of DCTC Stock for any Merger
Consideration delivered to a public official pursuant to applicable escheat
laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DCTC
DCTC represents and warrants to the Purchaser and Jessica Corp. that:
Section 3.01. Organization and Good Standing. Each of DCTC and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
corporate power and authority to own or lease all of the properties and assets
owned or leased by it and to carry on its business as it is now being
conducted. DCTC has heretofore delivered to the Purchaser true and complete
copies of its Articles of Incorporation and By-laws and the Articles of
Incorporation and By-laws of each of its subsidiaries, each as currently in
effect.
Section 3.02. Foreign Qualification. Each of DCTC and its subsidiaries
is duly licensed or qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such qualification, except
for jurisdictions in which the failure to become so qualified or to be in good
standing would not have a Material Adverse Effect on the Corporation.
Section 3.03. Capitalization. (a) DCTC is authorized to issue
1,000,000 shares of DCTC Stock, of which 676,027 are issued and outstanding as
of the date hereof. There are no other series or classes of capital stock of
DCTC authorized or issued and outstanding.
(b) Except as specified in Schedule 3.03 hereto, there are no issued
or outstanding bonds, debentures, notes or other
9
indebtedness of DCTC or any of its subsidiaries which has the right to vote
(or which is convertible into other securities having the right to vote) on
any matters on which stockholders of DCTC may vote ("Voting Debt"). Except as
specified in said Schedule 3.03, there are no outstanding or authorized
subscriptions, warrants, options, contracts, rights (preemptive or otherwise),
calls, commitments or demands of any character relating to any authorized and
issued or unissued shares of capital stock of DCTC, including, without
limitation, the DCTC Stock or outstanding securities, obligations, rights,
Voting Debt or other instruments convertible into or exchangeable for such
stock, or which obligate DCTC to seek authorization to issue additional shares
of any class of stock or Voting Debt, nor will any be created by virtue of
this Agreement or the transactions hereby contemplated.
(c) All of the outstanding shares of DCTC Stock have been duly
authorized and validly issued, are fully paid and nonassessable and have been
listed for trading on the NASDAQ Stock Market.
(d) Except as set forth in said Schedule 3.03, DCTC does not own any
shares of stock or any other securities of any corporation or have any
interest in any firm, partnership, association or other entity. All of the
shares of capital stock of each subsidiary of DCTC (1) have been duly
authorized and validly issued, (2) are fully paid and nonassessable, (3) are
owned, directly or indirectly, by DCTC, free and clear of all Liens and (4)
are not subject to, nor have they been issued in violation of, any preemptive
rights. Except as set forth in said Schedule 3.03, there are no outstanding or
authorized subscriptions, warrants, options, contracts, rights (preemptive or
otherwise), calls, commitments or demands of any character that, directly or
indirectly, (1) call for or relate to the sale, pledge, transfer or other
disposition by DCTC or any subsidiary of DCTC of any shares of capital stock,
any partnership or other equity interests, or any Voting Debt of DCTC or any
subsidiary thereof or (2) relate to the voting or control of such capital
stock, partnership or other equity interests or Voting Debt.
Section 3.04. Authority of DCTC. DCTC has the corporate power to
execute and deliver this Agreement and all other documents hereby
contemplated, to consummate the transactions hereby contemplated and to take
all other actions required to be taken by it pursuant to the provisions
hereof. The execution, delivery and performance of, and consummation of the
transactions contemplated by, this Agreement, the Michigan Certificate of
Merger, the Delaware Certificate of Merger and all other documents hereby
contemplated has been duly authorized by its Board of Directors and, except
for approval of this Agreement and the transactions contemplated hereby by the
holders of outstanding shares of DCTC Stock, no other corporate proceedings on
the part of DCTC are necessary to authorize this Agreement and
10
the transactions contemplated hereby. This Agreement constitutes and, on the
Closing Date, the Michigan Certificate of Merger, the Delaware Certificate of
Merger and all other documents hereby contemplated to be executed by DCTC will
constitute, legal, valid and binding obligations of DCTC, enforceable against
it in accordance with their respective terms.
Section 3.05. No Default; Non-Contravention. Neither DCTC nor any of
its subsidiaries is in violation of any term of its Articles of Incorporation
or its By-laws. Neither the execution and delivery of this Agreement and all
other documents hereby contemplated nor the consummation of the transactions
hereby contemplated shall (i) constitute any violation or breach of the
Articles of Incorporation or the By-laws of DCTC; or (ii) except as disclosed
in Schedule 3.05 hereto, (a) constitute a default under or a breach of, or
result in acceleration of any obligation under, any provision of any contract,
lease, mortgage or other instrument to which the Corporation is a party or by
which any of its assets may be affected or secured, which default, breach or
acceleration has not been waived; (b) violate any judgment, order, writ,
injunction, decree, statute, rule or regulation affecting the Corporation or
any of its assets; (c) result in the creation of any Lien on any of the assets
or properties of the Corporation; or (d) result in the termination of any
license, franchise, lease or permit to which the Corporation is a party or by
which it is bound, except in the case of those items specified in this clause
(ii) which would not, individually or in the aggregate, limit the
Corporation's ability to consummate the transactions hereby contemplated or
have a Material Adverse Effect on the Corporation.
Section 3.06. Compliance with Law; Consents and Approvals. The
Corporation has (i) complied with all laws, rules and regulations (including,
without limitation, any federal, state or local laws, rules or regulations
regulating the safety of the workplace and/or the discharge of materials into
the environment or otherwise relating to the protection of the environment)
applicable to the Corporation or its business and (ii) maintained in full
force and effect all licenses, approvals, permits and consents for the lawful
conduct of its business, except where the failure to so comply or maintain
would not, singly or in the aggregate, have a Material Adverse Effect on the
Corporation. Except as set forth in Schedule 3.06 hereto, no authorization,
approval, order, license, permit, franchise or consent, and no registration,
declaration, notice or filing by or with any domestic or foreign Governmental
Body or the Corporation is required in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby.
Section 3.07. Financial Statements. The audited consolidated balance
sheets of DCTC as of October 31, 1995, 1994 and 1993, and the related
consolidated statements of operations,
11
cash flows and stockholders' equity, including the notes thereto, all of which
have been certified by DCTC's independent certified public accountants, have
been delivered to the Purchaser. Such financial statements present fairly the
consolidated financial position of DCTC as of October 31, 1995, 1994 and 1993,
respectively, and the results of its consolidated operations, cash flows and
shareholders' equity for each of the three years in the period ended October
31, 1995, in conformity with GAAP.
Section 3.08. Liabilities. Except as set forth on Schedule 3.08
hereto, the Corporation has no debts, liabilities or other obligations,
accrued, absolute, contingent or otherwise, due or to become due, other than:
(a) liabilities disclosed or provided for in the October
Balance Sheet;
(b) liabilities incurred since October 31, 1995 in the ordinary
and regular course of its business and consistent with past practice; and
(c) liabilities which, individually or in the aggregate, will
not exceed One Hundred Thousand ($100,000.00) Dollars.
Section 3.09. Personal Property. Except as set forth in Schedule 3.09
hereto and except for Liens for any current taxes or assessments not yet
delinquent or of carriers, warehousemen, mechanics, laborers and materialmen
incurred in the ordinary course of business for sums not yet due, the
Corporation has good and marketable title, free and clear of all Liens, to all
of the personal property reflected on the October Balance Sheet and all
personal property acquired since October 31, 1995, except such personal
property as has been disposed of in the ordinary course of business since such
date.
Section 3.10. Real Property; Leases. Schedule 3.10 hereto identifies
and describes each item of real property leased by the Corporation or in which
the Corporation has an interest (the "Leased Property"). The Corporation does
not own any real property. Except as set forth in said Schedule 3.10, each
Leased Property is subject to a valid, binding and enforceable lease agreement
in accordance with its terms. A true and complete copy of each such lease
agreement has been made available to the Purchaser. Each such lease agreement
is in full force and effect, the Corporation has performed all obligations
required to be performed by it thereunder, no default exists under any
provision thereof, and no event has occurred thereunder which, with the lapse
of time or the giving of notice or both, would constitute a default by the
Corporation thereunder, except for any such failure to perform or default
which would not have a Material Adverse Effect on the Corporation.
12
Section 3.11. Litigation. Except as set forth in Schedule 3.11 hereto
or in the SEC Reports:
(a) (i) there is no claim, suit, action, proceeding, audit or
investigation pending or, to the extent of DCTC's knowledge, threatened
against, involving or affecting the Corporation, its officers and directors in
such capacities or any of its properties or rights seeking equitable relief or
claiming damages in excess of $25,000, and (ii) there is no judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against the Corporation or
its officers and directors in such capacities which seeks to or may (1) result
in the modification, termination, suspension, impairment or reformation of any
material contract to which the Corporation is a party, which modification,
termination, suspension, impairment or reformation would have a Material
Adverse Effect on the Corporation; (2) materially adversely affect the manner
in which the Corporation conducts its business; or (3) materially adversely
affect the ability of the Corporation or the Purchaser to consummate any of
the transactions contemplated hereby;
(b) the Corporation has not been charged with or, to the extent
of DCTC's knowledge, threatened with a charge of any violation of, and, to the
extent of DCTC's knowledge, is not under investigation with respect to a
possible violation of, any provision of any federal, state or local law or
administrative ruling or regulation relating to its business;
(c) the Corporation has not received any written notice of any
pending or threatened action or proceeding, in any court, before any
arbitrator or arbitration tribunal or before or by any governmental authority,
agency or other instrumentality, domestic or foreign; and
(d) the Corporation is not in default under or with respect to
any judgment, writ, injunction, order or decree of any court, any arbitrator
or arbitration tribunal or any governmental authority, agency or other
instrumentality, domestic or foreign, having jurisdiction over the Corporation
or any of its assets.
Section 3.12. Taxes. (a) The Corporation has timely and duly filed
(giving effect to extensions duly taken) all federal, state, local or foreign
tax returns or reports required to be filed by, or with respect to, the
Corporation on or prior to the Closing Date.
(b) The tax returns and reports described in subparagraph (a)
above reflect accurately all liability for taxes, charges, fees, levies or
other assessments of any nature whatsoever (including, without limitation, all
federal, state, local and foreign income taxes, estimated taxes, excise taxes,
sales taxes, use taxes, transfer taxes, gross receipts taxes,
13
franchise taxes, employment and payroll related taxes, property taxes and
import duties, whether or not measured in whole or in part by net income),
together with any related penalties, interest and additions to taxes (any of
the foregoing being referred to herein as a "Tax"), for the periods covered
thereby, other than Taxes which in the aggregate do not exceed $50,000. The
Corporation has paid all Taxes required to be paid by it with respect to the
periods covered by the returns and reports described in subparagraph (a)
above. All Taxes not yet due but incurred on or before the Closing Date
(including, without limitation, Taxes arising out of the transactions hereby
contemplated) are adequately disclosed and fully provided for on the books and
records and the financial statements of the Corporation. The Corporation has
fully collected, withheld and/or paid over all Taxes required to be collected,
withheld and/or paid over to a taxing authority.
(c) Except as set forth on Schedule 3.12 hereto, the
Corporation is not currently being audited by any taxing authority with
respect to the returns and reports described in subparagraph (a) above and
there are no claims or assessments pending against the Corporation. The
Corporation has not agreed to waive or extend the statute of limitations with
respect to any Taxes or tax returns and has not filed any consent under
section 341(f) of the Code (or any corresponding provision of state, local or
foreign tax law). The Corporation is not a party to any agreement providing
for the allocation or sharing of any Taxes and does not have a contractual
obligation to indemnify any other person or entity with respect to any Taxes.
No written claim has ever been made by a taxing authority in a jurisdiction
where the Corporation does not presently file Tax returns that the Corporation
is or may be subject to taxation by that jurisdiction. True and complete
copies of all tax returns and reports filed by the Corporation have been made
available to the Purchaser. True and complete copies of any closing agreements
with respect to the Corporation which were entered into with the Internal
Revenue Service or any other taxing authority have heretofore been furnished
to the Purchaser.
Section 3.13. Insurance. Schedule 3.13 hereto is a complete and
correct list of all policies of insurance carried by the Corporation or
pursuant to which the Corporation is a named beneficiary or pursuant to which
the business or properties of the Corporation are insured and true and
complete copies of all such policies have been provided to the Purchaser. All
of such policies are in full force and effect; all premiums due and payable in
respect of such policies have been paid in full; and, to the extent of DCTC's
knowledge, there exists no default or other circumstance which would create
the substantial likelihood of the cancellation or non-renewal of any such
policy. The Corporation has notified such insurers of any claim known to the
Corporation which it believes is covered by any such insurance policy and has
provided the Purchaser with a copy of such claim.
14
Section 3.14. Contracts. Schedule 3.14 hereto contains a complete and
correct list of all contracts, arrangements and agreements as in effect on the
date hereof (the "Contracts") to which the Corporation is a party, including
evidences of indebtedness, whether written or oral, purchase or sale
agreements, agency or advertising contracts, agreements with employees, sales
representatives and distributors, and agreements with factors, banks or other
lending institutions, except the Contracts listed in Schedule 3.10 or 3.15
hereto, and except for any Contracts which were entered into in the ordinary
and regular course of the Corporation's business consistent with its past
practice and, in the aggregate, do not involve an expenditure of more than
$25,000 from the date of this Agreement. A true and complete copy of each
written Contract listed in said Schedule 3.14, and a true and complete summary
of each oral Contract listed in said Schedule 3.14, has heretofore been made
available to the Purchaser. The Corporation has performed all of its
obligations required to be performed by it, has paid all amounts required to
be paid by it and is not in default (a) in any material respect under the
contracts identified on Schedule 3.10 as Tube Lease between the city of
Detroit and DCTC and Sublease between DCTC and Ford Motor Properties, Inc. and
identified in said Schedule 3.14 as Joint Operating Agreement and (b) in any
material respect under any other Contract, and no event has occurred
thereunder in each case which, with the lapse of time or the giving of notice
or both, would constitute such a default and, to the extent of DCTC's
knowledge, no other party to any Contract is in default in any material
respect thereunder, except for defaults which in the aggregate would not have
a Material Adverse Effect on the Corporation. Each of the Contracts listed in
said Schedule 3.14 constitutes a valid, binding, enforceable and legal
obligation of the Corporation and the other parties thereto in accordance with
its terms. The Corporation has not received notice that any other party to any
of the Contracts is in default thereunder. Except as set forth on said
Schedule 3.14, none of the Contracts requires the consent of a third party in
connection with the transactions contemplated hereby and the Corporation is
not a party to any contract, agreement or understanding which contains a
"change in control" or "potential change in control" or similar provision.
Section 3.15. Intellectual Property. Schedule 3.15 hereto is a list of
the principal trademarks, trade names, patents, fictitious business names,
service marks and pending applications therefor that are owned by the
Corporation and a list of the principal trademarks, trade names, patents,
fictitious business names, service marks and pending applications therefor
that are used by the Corporation or which the Corporation has the right to
use. The trademarks, trade names, patents, fictitious business names, service
marks and pending applications appearing on said Schedule 3.15, together with
any other trademarks, trade names, patents, fictitious business names and
service marks owned or used by the Corporation, are collectively herein
referred to as
15
the "Proprietary Rights". The Corporation owns and/or has the sole and
exclusive right to use each of the Proprietary Rights for the categories of
goods and services to the extent that each such Proprietary Right is currently
being used. Except as disclosed on said Schedule 3.15, (i) the Corporation is
not bound by or a party to any option, license or material agreement of any
kind with respect to the Proprietary Rights and (ii) has not assigned,
licensed or in any manner encumbered or materially impaired any rights in the
Proprietary Rights. The Proprietary Rights owned or used by the Corporation
are free and clear of all Liens. Except as disclosed on said Schedule 3.15, no
Proprietary Right owned or used by the Corporation infringes or violates any
statutory or common law or any other rights of any third parties (including,
without limitation, copyright, trademark and the rights of privacy and
publicity) and no claim alleging any such infringement or violation has been
received by the Corporation. Except as disclosed in Schedule 3.11 hereto, no
unresolved claims or notices have been asserted or given during the past three
years by any person challenging the use by the Corporation of any of the
Proprietary Rights or challenging or questioning the validity, enforceability
or effectiveness of or the title to any of the Proprietary Rights or any
agreement relating thereto nor is there any action, suit, investigation or
proceeding by or before any court or other governmental entity reasonably
likely to affect adversely the validity or enforceability of or impair the
title or right of the Corporation to use any of the Proprietary Rights owned
or used by the Corporation. Except as disclosed on said Schedule 3.11, the
Corporation has not been informed of any claims or suits pending or threatened
against the Corporation that relate to the business of the Corporation
claiming an infringement by the Corporation of any patents, licenses,
trademarks, service marks or trade names of others and the Corporation has not
infringed any Proprietary Rights of any third party under any statutory or
common law or any other rights of third parties (including, without
limitation, copyright, trademark and the rights of privacy and publicity).
Section 3.16. Books and Records. The books and records of the
Corporation to which the Purchaser has been given access and to which it will
be given access on or prior to the Closing Date are the true and complete
books and records of the Corporation and reflect the underlying facts and
transactions in all material respects.
Section 3.17. Employees and Related Agreements; ERISA. (a) Except as
set forth in Schedule 3.17 hereto, neither the Corporation nor any ERISA
Affiliate maintains or contributes to, or has any obligation to contribute to,
and the Corporation has no liability (including, without limitation, a
liability arising out of an indemnification, guarantee, hold harmless or
similar agreement) or obligation with respect to, any Plan. Except as set
forth in said Schedule 3.17, no severance pay policy or procedure is
maintained by the Corporation which does or could
16
apply to employees of the Corporation in any form whether written or unwritten
and whether or not disclosed to one or more employees. Except as set forth on
said Schedule 3.17, neither the Corporation nor any ERISA Affiliate maintains,
contributes to or is obligated to contribute to any Pension Plan and neither
the Corporation nor any ERISA Affiliate maintains, contributes to or is
obligated to contribute to any Multiemployer Plan which is subject to Subtitle
B of Title IV of ERISA.
(b) To the extent of DCTC's knowledge, no event has occurred in
connection with which the Corporation or any Plan identified in said Schedule
3.17 or any "plan administrator" (as defined in Section 3(16) of ERISA)
thereof, directly or indirectly, is or could be subject to liability, other
than for routine claims for benefits, contingent or otherwise, or any lien,
whether or not perfected, under the terms of any Plan or under ERISA, the Code
or any other law, regulation or governmental order applicable to any Plan at
any time maintained or contributed to by the Corporation or any ERISA
Affiliate, including, without limitation, Sections 302(f), 404, 406, 409,
502(c)(1), 502(c)(3), 502(g), 502(i), 502(1), 601, 602, 603, 604, 605, 606,
607, 608, 4062, 4063, 4064, 4068, 4069, 4071 or 4201 of ERISA, or sections
412(n), 4971, 4975, 4976, 4980B or 5000 of the Code, or under any agreement,
instrument, statute, rule of law or regulation pursuant to or under which the
Corporation has agreed to indemnify or is required to indemnify any person
against liability incurred under, or for a violation or failure to satisfy the
requirements of, any such statute, regulation or order.
(c) No Pension Plan maintained by the Corporation or any ERISA
Affiliate or to which the Corporation or any ERISA Affiliate makes or is
obligated to make contributions, nor any trust created thereunder, has
incurred any "accumulated funding deficiency" (waived or unwaived) or unpaid
required installment within the meaning of Section 302 of ERISA. No Pension
Plan has an Unfunded Current Liability.
(d) With respect to any Multiemployer Plan identified in said Schedule
3.17, the aggregate of the annual employer contributions and other direct
expenses paid in connection with such Plan by the Corporation for each of the
last three plan years of each such Plan is set forth in said Schedule 3.17.
(e) With respect to each Pension Plan identified in said Schedule 3.17
which is subject to the provisions of Title IV of ERISA, (1) there has not
occurred any "reportable event" within the meaning of Section 4043(b) of ERISA
or the regulations thereunder with respect to which the thirty (30) day notice
requirement has not been waived under applicable regulations, (2)
17
there exists no ground upon which the PBGC could demand termination of any
Pension Plan or appointment of itself or its nominee or trustee thereunder,
(3) there has been no notice given of intent to terminate any Pension Plan
under Section 4041 of ERISA, (4) there has not been any proceeding instituted
under Section 4042 of ERISA to terminate any Pension Plan, and (5) there has
been no termination or partial termination of any Employee Pension Plan within
the meaning of Section 411(d)(3) of the Code. The PBGC has not instituted or
threatened a proceeding to terminate any Pension Plan. All PBGC premiums due
on or before the Closing with respect to each Pension Plan have been paid in
full, including late fees, interest and penalties, if and to the extent
applicable.
(f) With respect to each Multiemployer Plan identified in said
Schedule 3.17 which is subject to the provisions of Subtitle B of Title IV of
ERISA, (1) the trustees of each such Plan have not instituted proceedings to
terminate, reorganize or merge any such Multiemployer Plan; (2) no condition
or event exists or has occurred which presents a material risk of the
termination, reorganization or merger of any such Multiemployer Plan which
could result in the imposition on the Corporation of any liability under Title
IV or ERISA or otherwise, whether to the PBGC or otherwise, including, without
limitation, termination liability, withdrawal liability or partial withdrawal
liability; (3) no such Multiemployer Plan has filed an application for
financial assistance pursuant to the provisions of Section 4245(f) or 4281(d)
of ERISA; (4) no contribution to any such Multiemployer Plan required of the
Corporation pursuant to the terms thereof or of any collective bargaining
agreement is nondeductible by reason of any provision of Section 412 of the
Code; (5) no liability under Sections 4201 of ERISA or otherwise under Title
IV of ERISA would exist if the Corporation withdrew from or ceased to be an
employer under any Multiemployer Plan; and (6) there are no unfunded vested
benefits as determined under Section 4211 of ERISA with respect to any such
Multiemployer Plan allocable to the Corporation.
(g) All payments and contributions due from the Corporation under each
Plan identified in said Schedule 3.17 have been made and all amounts properly
accrued to date as liabilities of the Corporation which have not been paid
have been or will, prior to the Closing Date, have been properly recorded on
the books of the Corporation and, to the extent not theretofore paid, will be
reflected as a liability on Schedule 3.08 hereto.
(h) Except as provided in said Schedule 3.17, no "employee welfare
benefit plan" as defined in Section 3(1) of ERISA or "multiple employer
welfare arrangement" as defined in Section 3(40) of ERISA provides benefits,
including, without limitation, death or medical benefits (whether or not
insured) with respect to any current or former employee of the Corporation
beyond his or her retirement or other termination of service other than (1)
18
coverage mandated by applicable law or (2) disability benefits that have been
fully provided for by insurance or otherwise. Neither the Corporation nor any
ERISA Affiliate has any contingent liability with respect to any
post-retirement "employee welfare benefit plan" as defined in Section 3(1) of
ERISA or "multiple employer welfare arrangement" as defined in Section 3(40)
of ERISA except as has been disclosed to the Purchaser on Schedule 3.17.
(i) The transactions contemplated by this Agreement will not result in
any payment or series of payments by the Surviving Corporation under any Plan
established by the Corporation to any person of a parachute payment within the
meaning of section 280G of the Code.
(j) Except as set forth on said Schedule 3.17, the consummation of the
transactions contemplated by this Agreement will not (1) entitle any employee
or former employee of the Corporation to severance pay, unemployment
compensation or any other payment except as expressly provided in this
Agreement or (2) result in any prohibited transaction described in Section 406
of ERISA or section 4975 of the Code for which an exemption is not available.
(k) Other than as set forth in said Schedule 3.17, there has been
delivered to the Purchaser with respect to each Plan (other than a
Multiemployer Plan) identified in said Schedule 3.17:
(1) A copy of the annual report (with accompanying schedules
and exhibits), if required under ERISA, which has been filed with
respect to such Plan for the two most recently completed plan years.
The information contained in such report (including such schedules and
exhibits) is true and complete and there has been no material adverse
change in the condition of such Plan, financial or otherwise, since
the date thereof;
(2) A copy of the actuarial report, if any, with respect to
each such Plan for the last two years. The information contained
therein, and the information furnished by the administrator of such
Plan or by the Corporation or any ERISA Affiliate in connection with
the preparation thereof, is true and complete and there has been no
material adverse change therein since the date thereof;
(3) A copy of the most recent summary plan description,
together with each Summary of Material Modifications with respect
thereto, required under ERISA with respect to such Plan, all material
employee communications relating to such Plan, distributed within the
last twelve (12) months and a true and complete copy of such Plan;
19
(4) If such Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding vehicle and the
latest financial statements thereof; and
(5) The most recent determination letter received from the
Internal Revenue Service with respect to each Plan that is intended to
qualify under Section 401 of the Code.
(l) Neither the Corporation nor any ERISA Affiliate has made any
agreement, understanding or promise, whether written or oral, to create,
establish, sponsor, maintain or contribute, directly or indirectly, to or
under any additional Plan for the benefit of current or former employees of
the Corporation nor, except as set forth in said Schedule 3.17, to amend or
modify any existing Plan identified in said Schedule 3.17 in any manner not
reflected in the plan documents of such Plan delivered to the Purchaser on or
before the date hereof.
(m) Except as set forth in said Schedule 3.17, the Corporation is not
a party to any collective bargaining agreements, whether or not expired. With
the exception of representation pursuant to such agreements, there are no
labor unions or other organizations representing or purporting to represent or
attempting to represent any employee of the Corporation. All employee benefit
plans (as defined in Section 3(3) of ERISA) which are specifically referred to
in any collective bargaining agreement are listed in said Schedule 3.17 and
are defined as such in said Schedule 3.17.
(n) The Corporation has not violated any provision of federal or state
law or any governmental rule or regulation, or any order, ruling, decree,
judgment or arbitration award of any court, arbitrator or any government
agency regarding the terms and conditions of employment of employees, former
employees or without limitation, laws, rules, regulations, orders, rulings,
decrees, judgments and awards relating to discrimination (including, without
limitation, discrimination on the basis of age, sex, race or religion), fair
labor standards and occupational health and safety, wrongful discharge or
violation of the person rights of employees, former employees or prospective
employees or state temporary disability laws, rules or regulations, except for
violations which would not have, singly or in the aggregate, a Material
Adverse Effect on the Corporation.
(o) There is no unfair labor practice charge or complaint pending or,
to the extent of DCTC's knowledge, threatened against the Corporation before
the National Labor Relations Board or any State Labor Relations Board. There
are no claims of discrimination of any kind pending or threatened against the
Corporation before any Governmental Body. The Corporation does
20
not have any liability to any or all of its employees under or arising as a
result of the Worker Adjustment and Retraining Act.
(p) There is no labor strike or dispute, slowdown, work stoppage,
lockout, disturbance, grievance or claim pending or, to the extent of DCTC's
knowledge, threatened against the Corporation.
(q) Each Plan to which the Corporation contributes or has any
obligation to contribute and each Multiemployer Plan to which the Corporation
contributes or has any obligation to contribute which is intended to be
qualified under section 401 of the Code, has received a favorable
determination letter from the Internal Revenue Service with respect to such
qualification and with respect to the exemption from tax of the trusts created
thereunder under section 501(a) of the Code, and nothing has occurred that has
affected or is likely adversely to affect such qualification or exemption
since the date of such letter with respect to each Plan and with respect to
each Multiemployer Plan.
(r) Except as set forth in said Schedule 3.17, to the extent of DCTC's
knowledge, all reports and other information required under ERISA or any other
applicable law or regulation to be filed in respect of any Plan by the
administrator thereof or by the Corporation on or prior to the date hereof
with the relevant governmental authority and/or distributed or made available
to any Plan participant and beneficiary (including "alternate payees", as such
term is defined in Section 206(d)(3)(K) of ERISA), as the case may be, have
been filed, distributed or made available in accordance with ERISA or such
other applicable law or regulation, as the case may be, and all such reports
and other information are true and complete in all material respects as of the
date given.
(s) The Corporation has not entered into any agreement, written or
otherwise, relating to any Plan providing medical benefits obligating the
Corporation or its successor in interest to make any supplemental or
retrospective premium payments for the current or any prior contract period in
the event of adverse experience, termination of the minimum premium
arrangement or termination of an insurance contract relating to such Plan.
Section 3.18. Ordinary Course; No Material Adverse Change.
(a) Except as set forth in Schedule 3.18 hereto and other than
as permitted by this Agreement, since October 31, 1995, the Corporation has
conducted its business in the ordinary and regular course thereof and (i)
there has not been (a) any material adverse change in the business, assets,
financial condition or results of operations of the Corporation, (b) any
damage, destruction or loss, whether or not covered by insurance, which has
had a Material Adverse Effect on the Corporation or (c) any event or condition
of any character whatsoever the occurrence
21
of which affects or threatens to have a Material Adverse Effect on the
Corporation, and (ii) there has not been any transaction or event of the types
restricted or prohibited by Section 6.01 hereof.
(b) Since October 31, 1995, no legislation has been enacted by
or has been introduced before any Governmental Body which would (i) regulate
or otherwise seek to control the tariffs or rates applicable to the tunnel
operated by the Corporation or (ii) prohibit government licensed casino
gambling activity in the City of Windsor, Ontario as now conducted.
Section 3.19. Finder's Fees. Except for the fees disclosed in Schedule
3.19 hereto payable to Mesirow Financial, Inc., the Corporation has not
incurred any liability for finder's or brokerage fees or agent's commissions
in connection with this Agreement or the transactions hereby contemplated.
Section 3.20. Environmental Matters. (a) Except as set forth in
Schedule 3.20 hereto, the Corporation has obtained or caused to be obtained
and continues to maintain or cause the maintenance of property and permits,
licenses, consents and approvals (the "Environmental Approvals") necessary for
conducting the business of the Corporation which are required under
Environmental Laws, and, to the extent of DCTC's knowledge, the Corporation
has not operated in violation of any Environmental Law or the terms of any
Environmental Approval.
(b) Except as set forth in said Schedule 3.20:
(1) the Corporation has not used, stored, generated,
discharged, emitted, transported, disposed of or treated
Hazardous Substances except in a manner which complies with
all Environmental Laws;
(2) no prior owner, occupant, tenant or user of any
Facility has ever used, stored, generated, discharged,
emitted, transported, disposed of or treated Hazardous
Substances, at, on or from any Facility except in a manner
which complies with all Environmental Laws; and
(3) there is not, and there has not been, any
Environmental Condition or release or threat of release (as
those terms are defined in Section 101 of CERCLA) of Hazardous
Substances at, on or from any Facility.
(c) Except as set forth on said Schedule 3.20, the Corporation
has not received written notice of any pending or threatened investigation,
claim, enforcement proceeding, cleanup order, citizen suit or other action
instituted by any private party, employee or Governmental Body arising out of
the conduct or the operations of the Corporation, in connection with any
22
Environmental Laws, or as a result of any Environmental Condition at any
Facility.
Section 3.21. SEC Reports. DCTC has timely filed all SEC Reports
required to be filed by it with the Commission, all of which have complied in
all material respects with all applicable requirements of the Securities Act,
the Exchange Act and the rules and regulations promulgated thereunder. Except
as disclosed in Schedule 3.21 hereto, as of their respective dates of filing
in final or definitive form (or, if amended or superseded by a subsequent
filing, then on the date of such subsequent filing), none of the SEC Reports,
including, without limitation, any financial statements or schedules included
therein, contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances in which they were made,
not misleading. Each of the balance sheets (including the related notes)
included in the SEC Reports fairly presents the consolidated financial
position of DCTC as of the respective dates thereof, and the other related
financial statements (including the related notes) included therein fairly
presented the consolidated results of operations and changes in financial
position of DCTC for the respective periods indicated, except, in the case of
interim financial statements, for year-end audit adjustments, consisting only
of normal recurring accruals. Each of the financial statements (including the
related notes) included in the SEC Reports has been prepared in accordance
with GAAP, except as otherwise noted therein or, in the case of the unaudited
financial statements, as permitted by the applicable rules and regulations of
the Commission.
Section 3.22. Representations and Warranties. At the Closing Time, the
representations and warranties of DCTC contained in this Article III shall be
true as though made on and as of such time, other than those representations
and warranties which are expressly made as of a specified earlier date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND JESSICA CORP.
Each of the Purchaser and Jessica Corp., jointly and severally,
represents and warrants to DCTC that:
Section 4.01. Organization and Good Standing. The Purchaser is a
limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware. Jessica Corp. is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Purchaser and Jessica Corp. has the
limited liability company power and the corporate power, respectively, and
authority respectively to own or lease all of
23
the properties and assets owned or leased by it and to carry on its business
as it is now being conducted.
Section 4.02. Authority Relative to Agreement. Each of the Purchaser
and Jessica Corp. has the limited liability company power and the corporate
power, respectively, to execute and deliver this Agreement and all other
documents hereby contemplated, and to consummate the transactions hereby
contemplated and to take all other actions required to be taken by it pursuant
to the provisions hereof. The execution, delivery and performance of, and
consummation of the transactions contemplated by, this Agreement, the Michigan
Certificate of Merger, the Delaware Certificate of Merger and all other
documents hereby contemplated to be executed by the Purchaser or Jessica Corp.
has been duly authorized by the Board of Managers and the Board of Directors,
respectively, of the Purchaser and Jessica Corp. This Agreement constitutes
and, on the Closing Date, the Michigan Certificate of Merger, the Delaware
Certificate of Merger and all other documents hereby contemplated to be
executed by the Purchaser or Jessica Corp. will constitute, legal, valid and
binding obligations of the Purchaser or Jessica Corp. enforceable against each
of them in accordance with their respective terms. The payment of the Merger
Consideration does not require any further corporate proceedings on the part
of the Purchaser and will not breach or result in a default under any
provision of any agreement to which the Purchaser is a party or by which it is
bound.
Section 4.03. No Default; Non-Contravention. Neither the Purchaser nor
Jessica Corp. is in violation of any term of its Certificates of Formation or
its Operating Agreement, in the case of the Purchaser, or its Certificate of
Incorporation or its Bylaws, in the case of Jessica Corp. Neither the
execution and delivery of this Agreement and all other documents hereby
contemplated nor the consummation of the transactions hereby contemplated
shall (i) constitute any violation or breach of the Certificate of Formation
or Operating Agreement of the Purchaser or the Certificate of Incorporation or
By-laws of Jessica Corp.; (ii) constitute a default under or a breach of, or
result in acceleration of any obligation under, any provision of any contract,
lease, mortgage or other instrument to which it is a party or by which any of
its assets may be affected or secured, which default, breach or acceleration
has not been waived; (iii) violate any judgment, order, writ, injunction,
decree, statute, rule or regulation affecting the Purchaser or Jessica Corp.
or any of their respective assets; (iv) except as listed in Schedule 4.03
hereto, result in the creation of any Lien on any of the assets or properties
of the Purchaser or Jessica Corp.; or (v) result in the termination of any
license, franchise, lease or permit to which the Purchaser or Jessica Corp. is
a party or by which it is bound, except in the case of those items specified
in clause (ii), (iii), (iv) or (v) above which would not, individually or in
the aggregate, limit the Purchaser's or
24
Jessica Corp.'s ability to consummate the transactions hereby contemplated or
have a Material Adverse Effect on the Purchaser or Jessica Corp.
Section 4.04. Consents and Approvals. No authorization, approval,
order, license, permit, franchise or consent, and no registration,
declaration, notice or filing by or with any domestic or foreign Governmental
Body or the Purchaser is required in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby.
Section 4.05. Jessica Corp. Jessica Corp. has not and will not conduct
any business nor does it or will it have any operating assets, and the
Purchaser has good and valid title to all of the issued and outstanding shares
of Jessica Corp.
Section 4.08. Finder's Fees. Neither the Purchaser nor Jessica Corp.
has incurred any liability for finder's or brokerage fees or agent's
commissions in connection with this Agreement or the transactions hereby
contemplated.
Section 4.09. Representations and Warranties. At the Closing Time,
each of the representations and warranties of the Purchaser and Jessica Corp.
contained in this Article IV shall be true as though made on and as of such
time, other than those representations and warranties which are expressly made
as of a specified earlier date.
Section 4.10. Net Worth. On or prior to the thirty-first day next
succeeding the date of execution of this Agreement (or if such day shall not
be a business day, the next succeeding business day), Purchaser shall have a
tangible net worth of not less than $250,000, evidence of which will be
supplied to DCTC.
Section 4.11. Commitment. A copy of the commitment to be issued by
John Hancock to Jessica Corp. and/or Purchaser for debt and equity financing
aggregating at least $37,000,000 (the "Financing") will be delivered to DCTC
not later than November 15, 1996.
ARTICLE V
PROXY STATEMENT; STOCKHOLDER APPROVALS;
BOARD OF DIRECTORS RECOMMENDATIONS
Section 5.01. Proxy Statement. (a) As promptly as practicable after
the receipt by the Purchaser from John Hancock of a commitment for the
Financing, DCTC shall prepare a notice of meeting, proxy statement and form of
proxy (collectively, the "Proxy Statement") to be filed with the Commission
and used in connection with the meeting of the stockholders of DCTC to be held
on a date or dates to be mutually agreed upon by the Purchaser and DCTC.
25
(b) DCTC shall notify the Purchaser promptly of the receipt of any
comments from the Commission or its staff and of any request by the Commission
or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply the Purchaser with copies of all
correspondence with the Commission or its staff with respect to the Proxy
Statement. DCTC shall use its best efforts to respond promptly to any comments
of the Commission in respect of the Proxy Statement.
(c) Whenever any event occurs which should be set forth in a
supplement to the Proxy Statement, DCTC shall promptly inform the Purchaser of
such occurrence and file with the Commission or its staff, and/or mail to
stockholders of DCTC, such supplement.
Section 5.02. Stockholder Approvals; Board of Directors
Recommendations. DCTC shall take all action necessary in accordance with
Michigan law, its Articles of Incorporation, its By-laws and the requirements
of The NASDAQ Stock Market to convene a meeting of its stockholders (the "DCTC
Stockholders' Meeting") as promptly as practicable after receipt by the
Purchaser from John Hancock of a commitment for the Financing, and upon at
least 10 days prior written notice thereof to its stockholders, to consider
and vote upon, among other things, this Agreement, the Merger and the
transactions contemplated hereby. DCTC's Board of Directors shall, subject to
its fiduciary obligations under Michigan law as advised in writing by counsel,
recommend that the stockholders of DCTC vote in favor of this Agreement, the
Merger and the transactions contemplated hereby. Subject to such fiduciary
obligations, DCTC shall use its best efforts to solicit from its stockholders
proxies in favor of such approval.
Section 5.03. DCTC Information. DCTC covenants that the information
contained in the Proxy Statement (other than information relating to the
Purchaser and Jessica Corp.) will not, at the time the Proxy Statement any
supplement thereto is filed with the Commission, at the time of mailing of the
Proxy Statement or any supplement thereto to the stockholders of DCTC, at the
time of the DCTC Stockholders' Meeting or at any time thereafter until the
Closing Time (a) contain an untrue statement of a material fact or (b) omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein not false or misleading.
ARTICLE VI
PRE-CLOSING COVENANTS
DCTC agrees that, subsequent to the date hereof and until the
Effective Time:
Section 6.01. Conduct of Business. Except as otherwise consented to or
approved by the Purchaser: (i) the Corporation
26
shall carry on its business only in the ordinary and regular course thereof
consistent with past practice, and shall cause the business of the Corporation
to remain intact, (ii) the Corporation shall use its best efforts to preserve,
in accordance with past practice, the goodwill of its present officers,
employees, independent contractors, suppliers, customers and others having
business relations with it, and (iii) the Corporation shall pay and perform in
all material respects all of its debts, obligations and liabilities as and
when due (unless contested in good faith), perform in all material respects
its obligations under all leases, agreements, contracts and other commitments
to which it is a party in accordance with the terms and provisions thereof and
comply in all material respects with all laws that are applicable to it or its
business.
Without limiting the generality of the foregoing, without the
Purchaser's consent, DCTC shall not:
(i) Change or amend its Articles of Incorporation or
By-Laws;
(ii) Authorize for issuance, issue or sell any shares of
its capital stock or other securities, acquire directly or indirectly, by
redemption or otherwise, any such capital stock, reclassify or split-up any
such capital stock, or grant or enter into any options, warrants, calls or
commitments of any kind with respect thereto, except for any issuance or sale
upon the exercise of any options or other convertible securities listed on
Schedule 3.03 hereto;
(iii) Incur or assume any indebtedness whatsoever for
borrowed money, or make any capital contributions to or equity investments in
any person, or incur or assume any other indebtedness, assume or otherwise
become liable or responsible for the obligations of any other person or make
any loans or advances to any person outside of the ordinary and regular course
of the Corporation's business;
(iv) Except pursuant to Contracts listed in Schedule 3.14,
acquire any assets for a price in excess of $20,000 in any one case or $50,000
in the aggregate;
(v) Cancel any debts of others or waive any claims or
rights in excess of $20,000 in any one case or $50,000 in the aggregate or,
except as specifically contemplated by the terms of this Agreement, amend or
terminate any agreement listed in the Schedules hereto;
(vi) Dispose of or permit to lapse any material Proprietary
Right;
(vii) Increase the compensation or fringe benefits (whether
or not provided under or pursuant to a Plan) of any of
27
the Corporation's officers or employees, except for ordinary and regular
course changes due to changes in responsibilities of any such officer or
employee and customary year-end bonuses;
(viii) Pay, declare or set aside any dividend or make any
other distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock, except for a dividend of
approximately $80,000 to be paid in March 1997 to stockholders of record on
February 20, 1997;
(ix) Sell, lease or dispose of other tangible assets of the
Corporation (other than sales in the ordinary and regular course of the
Corporation's business);
(x) Fail to retain any employees the loss of whom would
have a Material Adverse Effect on the Corporation (provided, however, that
nothing herein shall change at will relationships or preclude the employer's
rights thereunder);
(xi) Fail to maintain in full force and effect each Plan
(whether or not listed in Schedule 3.17 hereto) in which any employees of the
Corporation participate and timely make all required contributions thereto and
administer each such Plan in accordance with its terms and all applicable
laws;
(xii) Change any of the accounting principles used by it in
the preparation of the annual report on Form 10-KSB for the year ended October
31, 1995 (except as required by GAAP);
(xiii) Cancel, modify or change any of the insurance
policies listed in Schedule 3.13 hereto, except to extend the maturity dates
thereof; or
(xiv) Agree, whether in writing or otherwise, to do any of
the foregoing.
Section 6.02. No Breach of Representations and Warranties. DCTC shall
not take any action which would cause or constitute a material breach, or
would, if it had been taken prior to the date hereof, have caused or
constituted a material breach of, any of its representations and warranties
set forth in Article III hereof. DCTC shall, in the event of, or promptly
after the occurrence of, or promptly after obtaining knowledge of the
occurrence of or the impending or threatened occurrence of, any fact or event
which would cause or constitute a breach of any of the representations and
warranties set forth in Article III hereof as of the Closing Date, give
detailed notice thereof to the Purchaser; and DCTC shall use its best efforts
to prevent or promptly to remedy such breach.
Section 6.03. Access by the Purchaser. The directors, officers,
employees and representatives of the Purchaser (collectively, the "Purchaser's
Representatives") shall be
28
permitted access, during usual business hours and as often as may be
reasonably requested, to, and will be permitted to make copies of and extracts
from, the accounts, minute books, other records, books of account, other
books, deeds, leases, title documents, insurance policies, Contracts,
commitments, sale orders, purchase orders, tax returns, records and files of
the Corporation, and such other information relating to the Corporation as the
Purchaser shall request. The Purchaser's Representatives shall be permitted
access, during usual business hours, and as often as may be reasonably
requested, to the premises and physical properties used in connection, in
whole or in part, with or by the Corporation. The Purchaser's Representatives
shall be permitted to discuss the affairs, finances and accounts of the
Corporation with the officers, employees, distributors, sales representatives,
licensees, licensors, suppliers and customers of the Corporation.
Section 6.04. No Solicitation. DCTC and the Controlling Stockholder
shall immediately cease any existing discussions or negotiations with any
third parties conducted prior to the date hereof with respect to any merger,
business combination, sale of a significant amount of assets outside of the
ordinary course of business, sale of shares of capital stock outside of the
ordinary course of business or similar transaction involving such party or any
of its subsidiaries or divisions (an "Acquisition Transaction"). The
Corporation and the Controlling Stockholder shall not, and DCTC shall use its
best efforts to ensure that none of its affiliates, officers, directors,
representatives, agents or affiliates shall, directly or indirectly, solicit,
initiate or encourage (including by way of furnishing information) any person,
entity or group (including any set forth in the first sentence of this Section
6.04) concerning any Acquisition Transaction (other than the transactions
contemplated by this Agreement); provided, however, that DCTC (including the
Controlling Stockholder in his capacity as a director) may participate in
negotiations with or furnish information to a third party which has initiated
contact with DCTC with respect to an Acquisition Transaction consistent with
the fiduciary obligations of its Board of Directors. DCTC shall advise the
Purchaser of any such inquiries or proposals regarding an Acquisition
Transaction, including the terms thereof, within 24 hours of the receipt of
any such inquiries or proposals.
Section 6.05. Consents; Notices; Termination. DCTC shall use its best
efforts (which shall not include payments of money to third parties) to obtain
and deliver to the Purchaser the written consents set forth in Schedule 6.05,
in form and substance satisfactory to the Purchaser, required in connection
with this Agreement or the transactions hereby contemplated. DCTC shall also
deliver all notices to third parties required to be delivered in connection
with the execution of this Agreement and the transactions hereby contemplated.
29
Section 6.06. Voting. The Controlling Stockholder hereby irrevocable
and unconditionally agrees to vote at the DCTC Stockholders' Meeting all
shares of DCTC Stock owned by him on the date hereof in favor of the adoption
and authorization of this Agreement, the Merger and the transactions
contemplated hereby.
Section 6.07. Break Fee. In the event that DCTC shall have entered
into or agreed to enter into an Acquisition Transaction and, as a result of
any of the foregoing, the Merger is not consummated and/or this Agreement is
terminated, then DCTC shall promptly, but in no event later than one business
day following the termination of this Agreement, pay to the Purchaser, in
immediately available funds, the sum of One Million Dollars ($1,000,000.00),
which amount is inclusive of the Purchaser's expenses hereunder.
Section 6.08. Best Efforts. Subject to its fiduciary obligations to
its stockholders, DCTC shall use its best efforts to effectuate the
transactions hereby contemplated and to fulfill the conditions to the
Purchaser's and Jessica Corp.'s obligations under Article VIII of this
Agreement.
ARTICLE VII
PRE-CLOSING COVENANTS OF THE PURCHASER AND JESSICA CORP.
The Purchaser and Jessica Corp., jointly and severally, agree that,
subsequent to the date hereof and until the Effective Time:
Section 7.01. No Breach of Representations and Warranties. Neither the
Purchaser nor Jessica Corp. shall take any action which would cause or
constitute a material breach, or would, if it had been taken prior to the date
hereof, have caused or constituted a material breach of, any of the
representations and warranties set forth in Article IV hereof. The Purchaser
and Jessica Corp. shall, in the event of, or promptly after the occurrence of,
or promptly after obtaining knowledge of the occurrence or the impending or
threatened occurrence of, any fact or event which would cause or constitute a
breach of any of the representations and warranties set forth in Article IV
hereof as of the Closing Date, give detailed notice thereof to DCTC; and the
Purchaser and Jessica Corp. shall use their best efforts to prevent or
promptly to remedy such breach.
Section 7.02. Merger. The Purchaser shall consent to the Merger and
shall cause Jessica Corp. to execute the Michigan Certificate of Merger and
the Delaware Certificate of Merger and shall take any and all other actions
necessary to effectuate the Merger in accordance with Section 735 of the MBCA
and Section 252 of the General Corporation Law of the State of Delaware.
30
Section 7.03. Best Efforts. The Purchaser and Jessica Corp. shall use
their best efforts to obtain the Financing, to effectuate the transactions
hereby contemplated and to fulfill the conditions to DCTC's obligations under
Article IX of this Agreement.
ARTICLE VIII
CONDITIONS TO THE PURCHASER'S AND JESSICA CORP.'S OBLIGATIONS
All obligations of the Purchaser and Jessica Corp. under this
Agreement are subject to the fulfillment, at the Closing Time, of each of the
following conditions, any or all of which may be waived in whole or in part,
at or prior to the Closing Time by the Purchaser in its sole discretion:
Section 8.01. Representations and Warranties. The representations and
warranties contained in Article III hereof shall, if specifically qualified by
materiality, be true and correct and, if not so qualified, be true and correct
in all material respects in each case at and as of the Closing Time as though
such representations and warranties were made at and as of such time, except
for those representations and warranties which are expressly made as of a
specified earlier date.
Section 8.02. Covenants. The Corporation shall have performed and
complied in all material respects with all agreements and conditions on its
part required by this Agreement to be performed or complied with prior to or
at the Closing Time.
Section 8.03. Officer's Certificate. The Purchaser shall have received
(i) a certificate of an executive officer of DCTC, dated the Closing Date,
certifying to the fulfillment of the conditions specified in Sections 8.01 and
8.02 hereof and (ii) such other evidence with respect to the fulfillment of
any of said conditions as the Purchaser may reasonably request.
Section 8.04. Opinions of Counsel. The Purchaser shall have received
opinions of American and Canadian counsel for the Corporation, dated the
Closing Date, in customary form and substance reasonably satisfactory to the
Purchaser, which opinion shall opine, among other things, as to the validity,
binding nature and enforceability of each of (i) the Joint Operating
Agreement, dated June 27, 1991, as amended, between the Corporation and the
Corporation of the City of Windsor and Windsor Tunnel Commission, (ii) the
Tube Lease, dated March 20, 1978, between the City of Detroit and DCTC and
(iii) the Sublease, dated March 20, 1978, between Ford Motor Properties, Inc.
and DCTC and as to the compliance by DCTC with material Environmental Laws
applicable to the tunnel operated by the Corporation.
Section 8.05. Governmental Consents. The Purchaser shall have received
(in form and substance satisfactory to the
31
Purchaser) all approvals required by Section 4.04 hereto from all governmental
and regulatory authorities of the United States and the several States in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions hereby contemplated.
Section 8.06. Legality. No change shall have occurred in any law, rule
or regulation which would prohibit the performance of the Purchaser's
obligations under Article II hereof.
Section 8.07. Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent the performance of the Purchaser's obligations under Article II
hereof. No statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any United States
court or Governmental Body of competent jurisdiction which prohibits the
consummation of the Merger.
Section 8.08. Resignations. DCTC shall have caused to be delivered to
the Purchaser written resignations, effective as of the Closing, of each of
the directors of the Corporation specified in Schedule 8.08 hereto from all
directorships of the Corporation and its subsidiaries held by him or her.
Section 8.09. Contract Consents. DCTC shall have obtained all
necessary consents and approvals to the transactions contemplated hereby under
the agreements listed on Schedule 3.14 hereto, which consents shall be in form
and substance acceptable to the Purchaser.
Section 8.10. Stockholder Approval. The Purchaser shall have received
the approval of its stockholders to the transactions contemplated by this
Agreement, and this Agreement shall have been approved and adopted by the
holders of DCTC Stock, in accordance with applicable law.
Section 8.11. Merger. Each of the Delaware Certificate of Merger and
the Michigan Certificate of Merger shall have been executed by DCTC and
delivered to the Purchaser.
Section 8.12. Employment Agreements. On or prior to December 31, 1996,
each of Donald Vuchetich and David Canavesio shall have entered into an
Employment Agreement with the Surviving Corporation in form and substance
reasonably satisfactory to Purchaser.
Section 8.13. Institution of Proceedings. There shall not have been
instituted by any third party any suit or proceeding to restrain or invalidate
this Agreement or the transactions hereby contemplated or seeking damages from
or to impose obligations upon the Purchaser by reason of this Agreement or the
transactions hereby contemplated which, in the Purchaser's good
32
faith judgment, would involve expenses or lapse of time that would be
materially adverse to the Purchaser's interests.
ARTICLE IX
CONDITIONS TO DCTC'S OBLIGATIONS
All obligations of DCTC under this Agreement are subject to the
fulfillment, at the Closing Time, of each of the following conditions, any or
all of which may be waived in whole or in part, at or prior to the Closing
Time by DCTC in its sole discretion:
Section 9.01. Representations and Warranties. The representations and
warranties contained in Article IV hereof shall, if specifically qualified by
materiality, be true and correct and, if not so qualified, be true and correct
in all material respects in each case at and as of the Closing Time as though
such representations and warranties were made at and as of such time, except
for those representations and warranties which are expressly made as of a
specified earlier date.
Section 9.02. Covenants. Each of the Purchaser and Jessica Corp. shall
have performed and complied in all material respects with all agreements and
conditions on its part required by this Agreement to be performed or complied
with prior to or at the Closing Time.
Section 9.03. Officer's Certificate. DCTC shall have received (i) a
certificate of an executive officer of each of the Purchaser and Jessica
Corp., dated the Closing Date, certifying to the fulfillment of the conditions
specified in Sections 9.01 and 9.02 hereof and (ii) such other evidence with
respect to the fulfillment of any of said conditions as DCTC may reasonably
request.
Section 9.04. Opinion of Counsel. DCTC shall have received an opinion
of counsel for the Purchaser and Jessica Corp., dated the Closing Date, in
form and substance reasonably satisfactory to DCTC.
Section 9.05. Governmental Consents. DCTC shall have received (in form
and substance satisfactory to it) all approvals set forth in Schedule 3.06
hereto from all governmental and regulatory authorities of the United States
and the several States in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions hereby
contemplated.
Section 9.06. Legality. No change shall have occurred in any law, rule
or regulation which would prohibit the performance of DCTC's obligations under
Article II hereof.
33
Section 9.07. Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent the performance of DCTC's obligations under Article II hereof. No
statute, rule, regulation, executive order, decree or injunction shall have
been enacted, entered, promulgated or enforced by any United States court or
Governmental Body of competent jurisdiction which prohibits the consummation
of the Merger.
Section 9.08. Stockholder Approval. DCTC shall have received the
approval of the holders of DCTC Stock to the transactions contemplated by this
Agreement in accordance with applicable law.
Section 9.09. Merger. Each of the Delaware Certificate of Merger and
the Michigan Certificate of Merger shall have been executed and delivered by
Jessica Corp. to DCTC.
Section 9.10. Institution of Proceedings. There shall not have been
instituted by any third party any suit or proceeding to restrain or invalidate
this Agreement or the transactions hereby contemplated or seeking damages from
or to impose obligations upon DCTC by reason of this Agreement or the
transactions hereby contemplated which, in DCTC's good faith judgment, would
involve expenses or lapse of time that would be materially adverse to DCTC's
interests.
ARTICLE X
TERMINATION
Section 10.01. Termination. This Agreement may be terminated at any
time prior to the Closing Date:
(a) by mutual consent of the Purchaser and DCTC;
(b) by the Purchaser or DCTC, if John Hancock shall not have executed
and delivered to the Purchaser on or prior to November 15, 1996 a commitment
letter, in form and substance reasonably satisfactory to the Purchaser, which
incorporates the terms of the Financing;
(c) by the Purchaser or DCTC, if, December 31, 1996 (or if such day
shall not be a business day, the next succeeding business day), John Hancock
shall have failed to complete its due diligence of the operations and financial
condition of the Corporation to its reasonable satisfaction, and the Purchaser
or DCTC shall have given notice to the other on or prior to such day of such
failure.
(d) by the Purchaser, if there has been a material violation or breach
by DCTC of any representation, warranty or agreement contained in this
Agreement or any failed condition to
34
the Purchaser's and Jessica Corp.'s obligations under Article VIII hereof;
(e) by DCTC, if there has been a material violation or breach by the
Purchaser or Jessica Corp. of any representation, warranty or agreement
contained in this Agreement or any failed condition to DCTC's obligations
under Article IX hereof;
(f) by either DCTC or the Purchaser, if the Merger shall not have been
consummated on or before March 31, 1997 (unless the failure to consummate the
Merger by such date shall be due to the action or failure to act of the party
seeking to terminate this Agreement); or
(g) by either DCTC or the Purchaser, if (1) the conditions to such
party's obligations shall have become impossible to satisfy, other than as a
result of its own acts or omissions in violation of its obligation hereunder
or (2) any permanent injunction or other order of a court or other competent
authority preventing the consummation of the Merger shall have become final
and nonappealable.
Section 10.02. Effect of Termination. (a) In the event of the
termination and abandonment of this Agreement pursuant to Section 10.01
hereof, this Agreement shall forthwith become void and have no effect, without
any liability on the part of any party hereto or its affiliates, directors,
officers or stockholders, other than the provisions of Section 6.07, except
that nothing contained in this Section 10.02 shall relieve any party from
liability for any breach of this Agreement.
(b) If the Purchaser or DCTC shall have the right to terminate this
Agreement, the party which does not have the right to terminate shall use its
best efforts to cure or otherwise remedy the condition giving rise to such
right. If such party is unable to cure or otherwise remedy the condition
giving rise to such right within 30 days after receiving notice of the
condition, the other party by notice given to such first-mentioned party may
exercise its right to terminate this Agreement or waive such right and proceed
to consummate the transactions contemplated hereby. The giving of notice
pursuant to Section 6.02 or Section 7.01 hereof shall not act as a waiver of
any breach hereunder. Notwithstanding the exercise of the foregoing right to
terminate or waive, the aggrieved party shall have and may pursue its rights
to recover damages for breach of contract or any representation, warranty or
covenant giving rise to such right.
Section 10.03. Amendment. This Agreement may be amended by the parties
hereto at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of DCTC, but, after any such
approval, no amendment shall be made which by law requires further approval by
such
35
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 10.04. Extension; Waiver. At any time prior to the Effective
Time, the parties hereto may, to the extent legally allowed (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Further Assurances. Each of the parties agrees and
covenants promptly to execute and deliver, or cause to be executed and
delivered, to each of the other parties such documents or instruments, in
addition to those expressly required by the Agreement to be executed and
delivered, as any of the other parties may reasonably deem necessary or
desirable to carry out or implement any provision of the Agreement and the
transactions contemplated hereby.
Section 11.02. Entire Agreement. All prior or contemporaneous
agreements, contracts, promises, representations and statements, if any, among
the parties hereto as to the subject matter hereof, are merged into this
Agreement. This Agreement, together with all agreements, Schedules, Exhibits,
documents and other instruments to be attached hereto or delivered hereunder
sets forth the entire understanding between the parties, and there are no
terms, conditions, representations, warranties or covenants other than those
contained herein and in such agreements, Schedules, Exhibits, documents and
other instruments to be attached hereto or delivered hereunder.
Section 11.03. Notices. (a) All notices, consents, demands or other
communications required or permitted to be given pursuant to the Agreement
shall be in writing and shall be deemed sufficiently given on (i) the day on
which delivered personally or by telecopy (with prompt confirmation by mail)
during a business day to the appropriate location listed as the address below,
(ii) three business days after the posting thereof by United States registered
or certified first class mail, return receipt requested with postage and fees
prepaid, or (iii) one business day after deposit thereof for overnight
delivery. Such
36
notices, consents, demands or other communications shall be addressed
respectively:
As to DCTC: Detroit & Canada Tunnel Corporation
100 East Jefferson Avenue
Detroit, MI 48226
Attention: Donald M. Vuchetich,
President
Telecopy No.: 313-567-2565
with a copy to: Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, MI 48226
Attention: Cyril Moscow, Esq.
Telecopy No.: 313-256-4183
As to the Purchaser: Jessica Acquisition Corp.
595 Madison Avenue
New York, NY 10022
Attention: Laurence S. Levy
Telecopy No.: 212-644-6262
with a copy to: Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attn: Joseph L. Getraer, Esq.
Telecopy No.: 212-940-8776
and
John Hancock Mutual Life Insurance Co.
John Hancock Place
200 Clarendon Avenue
Boston, MA 02117
Attention: Sandeep Alva
Senior Investment Officer
Telecopy No.: 617-572-1606
or to any other address or telecopy number which such party may have
subsequently communicated to the other parties in writing.
(b) Except as otherwise provided in this Agreement, any notice,
consent, demand or other communication given hereunder may be signed on behalf
of a party by any duly authorized representative of that party.
Section 11.04. Successors and Assigns. Each and every representation,
warranty, covenant, agreement, indemnification, and provision of the Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto. Except as otherwise
expressly provided herein, this Agreement may not be assigned by any party
hereto without the prior written consent of the other parties
37
hereto. Any purported assignment in violation of this Agreement shall be void.
Section 11.05. Governing Law. This Agreement and any other agreement
entered into in connection herewith shall be governed by, and construed under
and in accordance with, the laws of the State of Michigan applicable to
contracts made and wholly to be performed therein by residents thereof,
without giving effect to the conflict of laws principles thereof, except that
the General Corporation Law of the State of Delaware also shall apply to the
Merger.
Section 11.06. Gender and Person. Wherever the context so requires,
the masculine pronoun shall include the feminine and the neuter, and the
singular shall include the plural.
Section 11.07. Captions. The captions and the table of contents
appearing in this Agreement, are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope or intent of
this Agreement or any of the provisions hereof.
Section 11.08. Confidentiality of Disclosures. Any corporate
information, records, documents, descriptions or other disclosures of
whatsoever nature or kind made or disclosed by any of the parties to any of
the other parties, or to the authorized representative thereof, or learned or
discovered by such other party or by any representative thereof in the course
of the investigations pursuant to the consummation of the transactions
contemplated by this Agreement (whether prior to or after the date of the
execution of this Agreement) and not known by or available to the public at
large, shall be received in confidence and none of the parties nor any such
authorized representative shall disclose or make use of such information or
authorize anyone else to disclose or make use thereof without the written
consent of the other relevant parties hereto, except (a) as necessary to
consummate the transactions contemplated hereby or (b) as compelled by
judicial or administrative process or by other requirements of applicable law
including any disclosure under federal securities laws; provided, however,
that in the case of any disclosure contemplated pursuant to this clause (b),
the party seeking to disclose such information shall give the other party or
parties reasonable prior written notice thereof in order to afford such other
party or parties reasonable opportunity to seek a protective order or other
limitation under such disclosure.
Section 11.09. Publicity. Any communications and notices to third
parties and all other publicity concerning the transactions contemplated by
the Agreement (other than governmental or regulatory filings) shall be planned
and coordinated by and among each of the parties. Unless required by
applicable law, none of the parties shall disseminate or make
38
public or cause to be disseminated or made public any information regarding
the transactions contemplated hereunder without the prior written approval of
the other parties, which approval shall not be unreasonably withheld.
Section 11.10. Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses.
Section 11.11. Costs of Enforcement. The prevailing party in any
proceeding brought to enforce any provision of the Agreement shall be entitled
to recover the reasonable fees and costs of its counsel, plus all other costs
of such proceeding.
Section 11.12. Third Parties. Other than the parties hereto, no person
shall have any rights under or to enforce any provision of this Agreement.
Section 11.13. Counterparts. The Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
taken together shall constitute a single agreement.
Section 11.14. Indemnification and Insurance. (a) For six years after
the Closing Date, the Surviving Corporation shall indemnify and hold harmless
each present and former director or officer of DCTC (the "Indemnified
Parties") from and against any and all claims arising out of or in connection
with the activities undertaken by such former director or officer when acting
in such capacity or otherwise on behalf of, or at the request of, DCTC and
occurring on or prior to the Closing Date ("Claims"), to the fullest extent
permitted under applicable law and, in addition (if not prohibited by
applicable law), to the fullest extent provided in DCTC's Articles of
Incorporation and Bylaws in effect at the date hereof. If any of such Claims
is asserted or made within such six-year period, all rights to indemnification
in respect of any such Claim shall continue until disposition of any such
Claim. After the Effective Time, the Surviving Corporation shall advance
expenses incurred with respect to any Claim, as they are incurred, to the
fullest extent permitted under applicable law.
(b) After the Effective Time, the Surviving Corporation shall
maintain DCTC's existing officers' and directors' liability insurance in
respect of Claims, or other insurance (including a run-off policy) in respect
of Claims no less favorable in scope and amount of coverage, in full force and
effect without reduction of coverage for a period of three years after the
Closing Date; provided, however, that the Surviving Corporation will not be
required to pay an annual premium therefor in excess of two times the last
annual premium paid by DCTC prior to the date hereof. If the Surviving
Corporation is
39
unable to purchase the insurance required by this Section 11.14, it shall
purchase as much comparable insurance as can be obtained for an annual premium
equal to such maximum amount.
Section 11.15. Non-Survival. The representations, warranties and
agreements in this Agreement shall terminate at the Effective Time, except
that the agreements set forth in Articles II and XI shall survive the
Effective Time, and no claim may be brought after the Effective Time against
any person alleging a breach of any representation or warranty or a failure to
comply with the terms and provisions of this Agreement except those agreements
set forth in Articles II and XI.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the 14th day of November, 1996.
HYDE PARK TUNNEL HOLDINGS L.L.C.
By /s/ Laurence Levy
---------------------------------
Name: Laurence S. Levy
Title: President
JESSICA ACQUISITION CORP.
By /s/ Laurence Levy
---------------------------------
Name: Laurence S. Levy
Title: President
DETROIT & CANADA TUNNEL CORPORATION
By /s/ Donald M. Vuchetich
---------------------------------
Name: Donald M. Vuchetich
Title: President
The undersigned hereby agrees to be bound by the provisions of Section 6.04
and Section 6.06 of the above Agreement and executes the Agreement solely for
that purpose.
/s/ Henry Penn Wenger
---------------------------------
Henry Penn Wenger
40
Appendix B
[Mesirow Financial, Inc. Letterhead]
November 13, 1996
Board of Directors
Detroit & Canada Tunnel Corporation
100 East Jefferson
Detroit, Michigan 48226
Gentlemen:
We understand that Detroit & Canada Tunnel Corporation (the "Company") has
agreed to be acquired by Hyde Park Holdings L.L.C. (the "Purchaser") through
the merger of DC Corp., a wholly-owned subsidiary of the Purchaser, into the
Company (the "Merger"), in an exchange of the Company's stock for cash of
$54.00 per share as set forth in an Agreement and Plan of Merger (the "Merger
Agreement").
We further understand that the Merger Agreement is subject to approval and
adoption by the stockholders of the Company.
The foregoing summary of the transaction contemplated by the parties is
qualified in its entirety by the more detailed information appearing in the
Merger Agreement.
You have requested our opinion as investment bankers as to whether or not the
consideration to be received in Merger Agreement by the Company's Common
Stockholders is fair to the Company's Common Stockholders from a financial
point of view.
Mesirow Financial, Inc., is a nationally recognized securities firm. As part
of its investment banking business, Mesirow is regularly engaged in
structuring financings and the valuations of businesses and their securities
in connection with mergers, acquisitions and leveraged buyout transactions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, and private placements.
Board of Directors
Detroit & Canada Tunnel Corporation
Page 2
In conducting our investigation and analysis, and in arriving at the opinion
set forth below, we have reviewed the Merger Agreement and related documents
prepared by the parties, and have taken into account such accepted financial
and investment banking procedures as we have deemed relevant. We have, among
other things (i) reviewed publicly available information concerning the
Company, including audited and interim, unaudited financial statements of the
Company; (ii) reviewed the Company's financial projections provided by senior
management of the Company, which are not publicly available; (iii) solicited
offers to purchase the Company; (iv) reviewed the median premiums paid in
types of transactions we deemed relevant; (v) prepared a valuation analysis of
public companies we deemed relevant in the utilities industry and the
municipal airport services industry; (vi) reviewed public financial and
transaction information relating to the merger and acquisition transactions in
the utilities industry; (vii) reviewed the current and historical market
prices and trading volumes of the Company's common stock; and (viii) made or
considered such other analyses, studies and investigations as we deemed
appropriate.
In addition, we have met and held discussions with the Company's management
concerning the Company's business and operations, assets, financial condition,
and future prospects, and we visited the Company's facilities.
In arriving at our opinion, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied
on its being complete and accurate in all material respects. We have neither
made nor obtained independent evaluations or appraisals of the assets of the
Company. With respect to the financial projections provided us by the Company,
we assumed in reliance upon the assurances of management that they have been
reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the Company's management as to the future financial
performance of the Company. Our opinion is necessarily based upon market,
economic and other conditions as they exist and can be evaluated as of the
date of this opinion. It should be understood that subsequent developments may
affect this opinion and that we do not have any obligation to update, revise
or reaffirm this opinion. We are not rendering any opinion regarding the
future performance of the Company.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a contingent transaction fee for our services and a
separate, non-contingent fee for rendering our opinion, and the Company has
agreed to indemnify us against certain liabilities. We assisted the Company in
the negotiations with respect to the terms of the Merger.
Board of Directors
Detroit & Canada Tunnel Corporation
Page 3
This letter is provided solely for the benefit of the Board of Directors of
the Company in connection with and for the purposes of its evaluation of the
Merger. This letter does not constitute a recommendation to any stockholder
with respect to whether to vote in favor of the Merger. This opinion is based
on the business and operations of the Company as represented to us as of
October 31, 1996, and does not purport to take into consideration any
information or event arising subsequent to such date. The information
contained in this opinion may not be used for any other purpose, or
reproduced, disseminated, quoted, referred to or disclosed or otherwise made
available to, or relied upon by any other party nor may reference be made
hereto to our firm without our prior written consent, provided, however, that
it is understood that the opinion may be referred to, and printed, in the
proxy statement to be filed by the Company with the Securities and Exchange
Commission describing the Merger, for the special shareholders meeting of the
Company at which the Merger Agreement is to be voted upon for shareholder
approval.
Based upon the foregoing and our experience as investment bankers, we are of
the opinion that the consideration to be received in the Merger by the
Company's Common Stockholders is fair to the Company's common stockholders
from a financial point of view as of the date of this letter.
Sincerely,
MESIROW FINANCIAL, INC.
/s/ Mesirow Financial, Inc.
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Detroit & Canada Tunnel Corporation
We have audited the accompanying consolidated balance sheets of
Detroit & Canada Tunnel Corporation and subsidiaries (the "Corporation")
as of October 31, 1995 and 1994, and the related consolidated statements
of operations, stockholders' investment, and cash flows for the years then
ended. Our audits also included the 1995 and 1994 financial statement
schedules listed at Section 7 of the 10-KSB. These financial statements
and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Detroit & Canada Tunnel Corporation and subsidiaries at
October 31, 1995 and 1994, and the consolidated results of their
operations and their cash flows for the years then ended inconformity with
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
/s/ Ernst & Young LLP
December 15, 1995
[ Form of Proxy -- Side 1 ]
PROXY DETROIT & CANADA TUNNEL CORPORATION PROXY
Special Meeting of Shareholders, February 7, 1997
The undersigned hereby appoints Douglas L. Bridges and Donald M.
Vuchetich, and each of them, with power of substitution, the proxies of the
undersigned to vote all of the stock of the undersigned at the Special Meeting
of Shareholders of DETROIT & CANADA TUNNEL CORPORATION (the "Company"), to be
held on Friday, February 7, 1997, and at any adjournment thereof:
1. APPROVAL OF THE AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 14, 1996
/ /FOR approval of the Merger / /AGAINST approval of the Merger
/ /ABSTAIN
2. In their discretion with respect to any other matters that may
properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED.
IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED IN FAVOR OF
THE MERGER.
(Please use other side for signature.)
[ Form of Proxy -- Side 2 ]
Dated: ______________________ ________________________________
________________________________
Shareholder Should Sign Here
NOTE: Please date this proxy and sign exactly as your name appears
hereon. If the shares are registered in more than one name, each joint owner
should sign. When signing as attorney, administrator, personal representative,
executor, guardian or trustee, add your title to the signature.