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
(Amendment No. 1)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
ARNOLD INDUSTRIES, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
___________________________________________________________________________
(2) Form, schedule or registration statement no.:
___________________________________________________________________________
(3) Filing party:
___________________________________________________________________________
(4) Date filed:
___________________________________________________________________________
[ARNOLD INDUSTRIES, INC. LOGO]
625 SOUTH FIFTH AVENUE
LEBANON, PENNSYLVANIA 17042-0210
TELEPHONE: (717) 236-4408
A MERGER PROPOSAL - YOUR VOTE IS VERY IMPORTANT
Dear Shareholder:
You are cordially invited to attend a special meeting of the shareholders
of Arnold Industries, Inc., which will be held on ___________, 2001, at 10
a.m., prevailing time, at the Lebanon Country Club, 3375 West Oak Street,
Lebanon, Pennsylvania.
At this meeting, you will vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of August 21, 2001, by and among
Roadway Corporation, a Delaware corporation, Lion Corp., a Pennsylvania
corporation and a wholly owned subsidiary of Roadway Corporation, and Arnold
Industries, a Pennsylvania corporation. Pursuant to the merger agreement, Lion
Corp. will be merged with and into Arnold Industries, with Arnold Industries
continuing as the surviving corporation and becoming a wholly owned subsidiary
of Roadway. Mr. Edward H. Arnold, Chairman and Chief Executive Officer of
Arnold Industries, has agreed to vote the shares of Arnold Industries common
stock over which he has voting control, constituting approximately 16% of the
outstanding shares of Arnold Industries common stock, in favor of the merger.
In the merger, each share of Arnold Industries common stock issued and
outstanding at the effective time of the merger, other than shares held by
Roadway or any of its subsidiaries or by Arnold Industries or any of its
subsidiaries, all of which will be canceled, or by shareholders, if any, who
properly exercise their dissenters' rights granted pursuant to the merger
agreement, will be converted into the right to receive $21.75 per share in
cash, without interest. Consummation of the merger is subject to various
conditions, including approval and adoption of the merger agreement and the
merger by the affirmative vote of a majority of the votes cast by shareholders
entitled to vote, either in person or by proxy, at the special meeting. The
merger agreement and the merger are more fully described in the accompanying
proxy statement.
The board of directors has diligently reviewed and considered the terms
and conditions of the merger agreement, has unanimously determined that the
merger agreement and the merger are fair to and in the best interests of
Arnold Industries and its shareholders and has unanimously approved the merger
agreement and the merger. In addition, Morgan Stanley has rendered its
opinion, which is attached to this proxy statement as Annex B, to the effect
that, as of August 21, 2001 and based upon and subject to the considerations
in its opinion, the $21.75 cash per share in consideration to be received by
holders of Arnold Industries common stock pursuant to the merger agreement was
fair from a financial point of view to such shareholders. You are encouraged
to read Morgan Stanley's opinion carefully and in its entirety.
THE ARNOLD INDUSTRIES BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
Please read the enclosed information carefully before completing and
returning your proxy card. Returning your proxy card as soon as possible will
ensure your vote is counted at the meeting, whether or not you plan to attend.
If you are a registered shareholder and do attend the special meeting, you may
withdraw your proxy and vote in person if you wish. If you wish to vote in
person at the meeting and hold your shares in your broker's or other record
holder's name, you must contact the record holder and request a document
called a "legal proxy." You must bring this legal proxy to the meeting in
order to vote in person. YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF
SHARES YOU OWN.
Sincerely,
Edward H. Arnold
President and Chief
Executive Officer
The proxy statement is dated __________, 2001,
and was mailed to you on or about _____, 2001.
[ARNOLD INDUSTRIES, INC. LOGO]
625 SOUTH FIFTH AVENUE
LEBANON, PENNSYLVANIA 17042-0210
_______________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
_______________________________
To Our Shareholders:
You are hereby notified that a special meeting of shareholders of Arnold
Industries, Inc., a Pennsylvania corporation, will be held on ____________,
2001, at 10 a.m., prevailing time, at the Lebanon Country Club, 3375 West Oak
Street, Lebanon, Pennsylvania:
1. to consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of August 21, 2001, by and among Roadway
Corporation, a Delaware corporation, Lion Corp., a Pennsylvania
corporation and a wholly owned subsidiary of Roadway Corporation, and
Arnold Industries, pursuant to which:
o Lion Corp. will be merged with and into Arnold Industries, with Arnold
Industries continuing as the surviving corporation and becoming a wholly
owned subsidiary of Roadway; and
o each share of Arnold Industries common stock issued and outstanding at
the effective time of the merger, other than shares held by Roadway or
any of its subsidiaries or by Arnold Industries or any of its
subsidiaries, all of which will be canceled, or by shareholders, if any,
who properly exercise their dissenters' rights granted pursuant to the
merger agreement, will be converted into the right to receive $21.75 per
share in cash, without interest; and
2. to transact such other business as may properly be brought before the
special meeting or any adjournment or postponement of the special
meeting.
The board of directors of Arnold Industries unanimously recommends that
Arnold Industries shareholders vote "FOR" for the approval and adoption of the
merger agreement.
The record of shareholders entitled to notice and to vote at the meeting
was taken as of the close of business on ______, 2001.
The accompanying proxy statement describes the merger agreement, the
proposed merger and various actions to be taken in connection with the merger.
Approval and adoption of the merger agreement is a condition to the merger.
WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON, IT IS IMPORTANT THAT YOUR SHARES
BE REPRESENTED AT THE SPECIAL MEETING. Accordingly, if you are a registered
shareholder (that is, you hold stock certificates registered in your own
name), please complete, date, sign and return the enclosed proxy card in the
enclosed envelope, which requires no postage if mailed in the United States.
If you wish to vote in person at the meeting and hold your shares in your
broker's or other record holder's name, you must contact the record holder and
request a document called a "legal proxy." You must bring this legal proxy to
the meeting in order to vote in person.
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. If the merger is
consummated, you will be sent instructions regarding the surrender of your
certificates.
By the order of the Board of Directors
Heath L. Allen
Secretary
Lebanon, Pennsylvania
_______________, 2001
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION ............................. 1
SUMMARY TERM SHEET ...................................................... 3
FORWARD-LOOKING STATEMENTS .............................................. 8
THE ARNOLD INDUSTRIES SPECIAL MEETING ................................... 9
General .............................................................. 9
Matters To Be Considered At The Special Meeting ...................... 9
Record Date; Voting At The Special Meeting ........................... 9
Dissenters' Rights ................................................... 10
Proxies, Revocation of Proxies ....................................... 10
Solicitation Of Proxies .............................................. 11
THE MERGER .............................................................. 11
General .............................................................. 11
The Exchange ......................................................... 11
Background Of The Merger ............................................. 12
Arnold Industries' Reasons For The Merger; Recommendation Of The
Board Of Directors ................................................... 15
Opinion Of Morgan Stanley ............................................ 17
Interests Of Officers And Directors In The Merger .................... 23
Shareholder Voting Agreement ......................................... 24
Regulatory Matters ................................................... 25
Financing Of The Merger .............................................. 25
Material Federal Income Tax Consequences ............................. 26
Dissenters' Rights ................................................... 27
MATERIAL PROVISIONS OF THE MERGER AGREEMENT ............................. 30
THE COMPANIES ........................................................... 36
Arnold Industries, Inc. .............................................. 36
Roadway Corporation .................................................. 37
Lion Corp. .......................................................... 37
MARKET PRICES OF COMMON STOCK ........................................... 37
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS . 38
SHAREHOLDER PROPOSALS ................................................... 38
WHERE YOU CAN FIND MORE INFORMATION ..................................... 38
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QUESTIONS AND ANSWERS ABOUT THE TRANSACTION
Q: When and where is the special meeting?
A: The special meeting will be held on ___________, 2001 at 10 a.m., prevailing
time, at the Lebanon Country Club, 3375 West Oak Street, Lebanon,
Pennsylvania.
Q: What is happening?
A: You are being asked to vote on a merger agreement pursuant to which Roadway
Corporation would acquire Arnold Industries in a cash merger.
Q: Why are Roadway and Arnold Industries proposing the merger?
A: For Arnold Industries, the merger presents an opportunity for its
shareholders to realize a premium over recent market prices for their
shares. In addition, the merger allows Arnold Industries to better compete
in the transportation market.
For Roadway, the merger presents an opportunity to build upon and extend its
transportation services. New Penn, Arnold Industries' less-than-truckload
business unit, is complementary to Roadway and fundamentally repositions
that business among the world leaders.
Q: Please explain what I will receive in the merger.
A: If the merger is completed, you will receive $21.75 in cash, without
interest, for each share of Arnold Industries common stock you own.
Q: Do I have dissenters' rights?
A: Yes. Pursuant to the terms of the merger agreement, the holders of Arnold
Industries shares are entitled to dissenters' rights in connection with the
approval and adoption of the merger agreement and the merger. If you do not
vote in favor of the merger agreement and the merger, and you properly elect
to exercise your dissenters' rights as described under "The Merger--
Dissenters' Rights" and in Annex C, you may receive the court determined
"fair value" of your shares of Arnold Industries common stock. The fair
value could be equal to, less than or more than $21.75 per share.
Q: When do you expect the merger to be completed?
A: We are working toward completing the merger as quickly as possible. We hope
to complete the merger prior to the end of 2001.
Q: What are the tax consequences of the merger?
A: In general, the merger will be taxable to you, and you will recognize a gain
or loss in an amount equal to the difference, if any, between the adjusted
tax basis of your shares and the amount of cash you receive in the merger.
Q: Who can vote at the special meeting?
A: Holders of shares of Arnold Industries common stock at the close of business
on ________, 2001 may vote at the special meeting.
Q: What vote is required?
A: The merger agreement and the merger must be approved, assuming a quorum, by
a majority of the votes cast on the proposal, either in person or by proxy,
at the special meeting. A majority of the issued and outstanding shares must
be present in person or by proxy to constitute a quorum.
Q: What do I need to do now?
A: We urge you to carefully read this proxy statement, including its annexes.
You may also want to review the documents referenced under "Where You Can
Find More Information." If you are a registered shareholder (that is, you
hold stock certificates registered in your own name), complete, date, sign
and return your proxy card in the enclosed return envelope as soon as
possible so that your shares may be represented at the special meeting.
Q: If my shares of Arnold Industries common stock are held in "street name" by
my broker, will my broker vote my shares for me?
A: Your broker will vote your shares of Arnold Industries common stock only if
you provide instructions on how to vote. Your broker will contact you
regarding the procedures necessary for him or her to vote your shares.
Please tell your broker how you would like him or her to vote your shares.
IF YOU DO NOT TELL YOUR BROKER HOW TO VOTE, YOUR SHARES WILL NOT BE VOTED BY
YOUR BROKER AND WILL NOT BE COUNTED AS A VOTE FOR OR AGAINST THE MERGER
AGREEMENT AND THE MERGER. If you instruct a broker to vote your shares, you
must follow directions received from your broker to change those
instructions. If you wish to vote in person at the meeting and hold your
shares in
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your broker's or other record holder's name, you must contact the record
holder and request a document called a "legal proxy." You must bring this
legal proxy to the meeting in order to vote in person.
Q: What do I do if I want to change my vote?
A: You may change your vote at any time prior to the vote at the special
meeting. To do so, you may send in a later-dated, signed proxy card, or
written notice stating that you would like to revoke your proxy to the
Secretary of Arnold Industries. The last recorded vote will be what is
counted at the special meeting. In addition, you may attend the special
meeting in person, provide notice of revocation of your proxy to the
Secretary of Arnold Industries and vote. If you instruct a broker or other
record holder to vote your shares, you must follow directions received from
your broker or record holder to change those instructions.
Q: What is the effect if I do not vote?
A: If you do not submit a proxy card or attend the special meeting and vote,
your shares will not be voted for or against the merger agreement and the
merger, and will also not be counted as present for determining if a quorum
is present at the special meeting. If you attend the special meeting but do
not vote or if you abstain from voting, your shares will not be counted as a
vote for or against the merger agreement and the merger but will nonetheless
be counted as present for determining if a quorum is present at the special
meeting.
Q: Should I send in my stock certificates now?
A: No. If the merger agreement and the merger are approved and adopted and the
merger is consummated, you will be mailed instructions, which will explain
how to exchange your stock certificates for the appropriate amount of cash.
Q: Who may I contact with any additional questions?
A: If you would like additional copies of this proxy statement or proxy card or
have questions about the special meeting, where to send your proxy card or
other aspects of your vote, you should contact:
[Proxy Solicitation Firm]
Alternatively, you may contact:
Arnold Industries, Inc.
625 South Fifth Avenue
Lebanon, Pennsylvania 17042-0210
Telephone: (717) 236-4408
Attention: Investor Relations
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SUMMARY TERM SHEET
This summary highlights selected information from this proxy statement and
may not contain all of the information that is important to you. To understand
the merger fully and for a more complete description of the legal terms of the
merger, you should carefully read this entire document, including the
documents we have referred you to and the Annexes. We have included page
references parenthetically to direct you to a more complete description of
each topic presented in this summary. The merger agreement is attached as
Annex A to this proxy statement. We encourage you to read the merger agreement
as it is the legal document that governs the transaction.
The Special Meeting (Page 9)
The special meeting will be held at 10 a.m., prevailing time, on
_____________, 2001, at the Lebanon Country Club, 3375 West Oak Street,
Lebanon, Pennsylvania. At the special meeting, you will be asked to approve
and adopt the merger agreement providing for the merger of Lion Corp. into
Arnold Industries, after which Arnold Industries would become a wholly owned
subsidiary of Roadway.
The Companies (Page 36)
Arnold Industries is a holding company of transportation and logistics
companies. Its business units include New Penn Motor Express, a Northeast
regional next-day less-than-truckload carrier, Arnold Transportation Services,
an irregular route and dedicated truckload carrier, and Arnold Logistics,
which provides distribution, order fulfillment, direct mail and printing, call
center management, reverse logistics and contract packaging services.
Roadway is the parent of Roadway Express, one of the nation's largest
transportation companies providing less-than-truckload and truckload freight
services throughout North America that includes export services to 66
countries.
Recommendation Of The Board of Directors (Page 15)
The board of directors has unanimously approved the merger agreement and the
merger, unanimously determined that the merger agreement and the merger are
fair to you and in your best interest as a shareholder and unanimously
recommends that you vote "FOR" the approval and adoption of the merger
agreement and the merger.
Our Reasons For The Merger (Page 15)
The merger presents an opportunity for Arnold Industries shareholders to
realize a premium over recent market prices for their shares. In addition, the
merger allows Arnold Industries to better compete in the transportation
market.
Opinion Of Morgan Stanley (Page 17)
In deciding to approve the transaction, the board of directors, among the
numerous factors discussed below in "The Merger--Arnold Industries' Reasons
For The Merger; Recommendation Of The Board of Directors," considered the oral
opinion of Morgan Stanley to the effect that, as of August 21, 2001 and based
upon and subject to the considerations in its opinion, the $21.75 in cash per
share in consideration to be received by holders of Arnold Industries common
stock pursuant to the merger agreement was fair from a financial point of view
to such holders. That oral opinion was confirmed in writing by Morgan Stanley
as of August 21, 2001, and the written opinion is attached as Annex B to this
proxy statement. We encourage you to read the entire opinion.
Financing Of The Merger (Page 25)
It is estimated that the merger consideration will total approximately
$552,000,000. Roadway expects to obtain the funds necessary to pay the merger
and option consideration from a credit facility of up to $445,000,000 to be
provided by Credit Suisse First Boston Corp. and a bond offering of
$275,000,000 (or a bridge loan in that amount if the bonds are not issued
before the consummation of the merger). The proceeds from the financing are
expected to be used:
o to consummate the merger and pay related fees and expenses; and
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o after consummation of the merger, to fund general corporate purposes and
working capital requirements of Roadway and its subsidiaries.
Roadway has received a financing commitment letter from Credit Suisse First
Boston Corp. for this credit facility, which is subject to the satisfaction of
various conditions that are typical of financing commitment letters of this
nature. See "The Merger--Financing of the Merger".
Effects Of The Merger; Merger Consideration (Page 11)
Upon consummation of the merger, Lion Corp. will be merged with and into
Arnold Industries, with Arnold Industries continuing as the surviving
corporation and becoming a wholly owned subsidiary of Roadway. In addition,
each share of Arnold Industries common stock issued and outstanding at the
date and time the merger becomes effective, other than shares held by Roadway
or any of its subsidiaries or by Arnold Industries or any of its subsidiaries,
all of which will be canceled, or by shareholders, if any, who properly
exercise their dissenters' rights granted pursuant to the merger agreement,
will be converted into the right to receive $21.75 in cash, without interest.
Voting At The Special Meeting (Page 9)
You will be entitled to vote at the special meeting if you owned shares of
Arnold Industries common stock as of the close of business on the record date
of __________, 2001. On the record date, there were ______________ shares of
Arnold Industries common stock outstanding. You will have one vote at the
special meeting for each share of Arnold Industries common stock you owned on
the record date.
The affirmative vote of a majority of the votes cast, either in person or by
proxy, at the special meeting is required to approve and adopt the merger
agreement and the merger.
Dissenters' Rights (Page 27)
Pursuant to the terms of the merger agreement, the holders of Arnold
Industries shares are entitled to dissenters' rights in connection with the
approval and adoption of the merger agreement and the merger. If you do not
vote in favor of the merger agreement and the merger, and you properly elect
to exercise your dissenters' rights under the procedures set forth in the
relevant provisions of Pennsylvania law attached as Annex C to this proxy
statement, you may have the fair value of your shares of Arnold Industries
common stock determined in an appraisal proceeding and paid to you in cash.
These procedures require, among other things, that a dissenter:
o file with Arnold Industries a written notice of intention to dissent
prior to the vote on the merger proposal;
o make no change in his or her beneficial ownership of Arnold Industries
shares from the date of filing of the notice until the effective time of
the merger; and
o not vote "FOR" the approval of the merger proposal.
There are also post-vote procedures that you must follow if you wish to
dissent. Dissenters' rights will be forfeited if these requirements are not
fully and precisely satisfied. See the relevant provisions of Pennsylvania law
attached as Annex C to this proxy statement.
Voting by Management (Page 24)
On the record date, directors and executive officers beneficially owned and
were entitled to vote __________ of the outstanding shares of our common
stock, or ____%. Mr. Edward H. Arnold has entered into a voting agreement with
Roadway obligating Mr. Arnold to vote the shares of Arnold Industries common
stock over which he has voting control, constituting approximately 16% of the
outstanding shares of Arnold Industries common stock, for adoption of the
merger agreement and the merger. See "The Merger--Shareholder Voting
Agreement."
4
Interests Of Officers And Directors In The Transaction (Page 23)
A number of our directors and executive officers have interests in the
transaction as employees or directors that are different from, or in addition
to, your interests as shareholders, including:
o Each stock option, including stock options held by executive officers and
directors, will be canceled upon consummation of the merger and the
holder of each such option will be entitled to $21.75, less the exercise
price of the such option, in cash.
o Concurrent with the signing of the merger agreement, Mr. Arnold and
certain members of the management team of Arnold Logistics (ARLO) were
granted by Roadway an exclusive right to enter into an agreement with
Roadway to purchase substantially all of the assets of ARLO if the merger
is completed. See "The Merger--Interests Of Certain Officers and
Directors" for a complete description of that agreement.
Conditions To The Merger (Page 34)
The merger will not be completed unless a number of conditions are met (or,
where permitted, waived), including the following (which are set forth fully
in the merger agreement):
o the shareholders of Arnold Industries approve and adopt the merger
agreement and the merger;
o all necessary governmental and regulatory approvals are obtained, except
those which would not have a material adverse effect on the surviving
company;
o no final, nonappealable legal restraint or prohibition is in effect
preventing the consummation of the merger or limiting ownership or
operation by Roadway, Arnold Industries or any of their respective
subsidiaries of any material portion of the business or assets of Roadway
or Arnold Industries; and
o the relevant waiting period imposed under the antitrust laws expires or
is terminated.
In addition, Roadway and Lion Corp. have the right not to consummate the
merger if any of the following occurs:
o Arnold Industries has failed to perform in all material respects its
obligations under the merger agreement;
o the representations and warranties made by Arnold Industries do not
continue to be accurate as of the closing date;
o facts or circumstances resulting in or reasonably expected to result in a
material adverse effect on the business, financial condition or results
of operations of Arnold Industries or the ability of Arnold Industries to
consummate the merger or any other transactions contemplated by the
merger agreement or any of its obligations under the merger agreement
have occurred since August 21, 2001; or
o Roadway has not obtained financing in an amount sufficient to pay the
full amount of the merger and option consideration.
Additionally, Arnold Industries has the right not to consummate the merger
if any of the following occurs:
o Roadway has failed to perform in all material respects its obligations
under the merger agreement; or
o the representations and warranties made by Roadway do not continue to be
accurate as of the closing date.
Regulatory Matters (Page 24)
Under the Hart-Scott-Rodino Act, Arnold Industries and Roadway cannot
complete the merger until certain information and documentary material are
furnished for review by the Federal Trade Commission and the Antitrust
Division of the Department of Justice, and the required waiting period under
the Hart-
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Scott-Rodino Act either expires or is terminated by such agencies. Arnold
Industries and Roadway filed Hart-Scott-Rodino Premerger Notification and
Report Forms on August 31, 2001. The Federal Trade Commission and the
Antitrust Division granted early termination of the waiting period for the
merger under the Hart-Scott-Rodino Act on September 18, 2001.
Termination Of The Merger Agreement (Page 35)
Roadway and Arnold Industries may agree to terminate the merger agreement at
any time. In addition, either party may terminate the merger agreement if:
o the merger is not completed by March 1, 2002;
o there exists a final, nonappealable legal restraint or prohibition having
the effect of preventing the consummation of the merger or limiting
ownership or operation by Roadway, Arnold Industries or any of their
respective subsidiaries of any material portion of the business or assets
of Roadway or Arnold Industries; or
o Arnold Industries shareholders do not approve and adopt the merger
agreement and the merger.
In addition, Arnold Industries may terminate the merger agreement if Roadway
or Lion Corp. has breached or failed to perform in any material respect any of
its representations, warranties, covenants or other agreements, which breach
or failure to perform would give rise to failure of the conditions to close
and is not cured within 30 days after written notice or is incapable of being
cured.
Additionally, Roadway may terminate the merger agreement if:
o Arnold Industries has breached or failed to perform in any material
respect any of its representations, warranties, covenants or other
agreements, which breach or failure to perform would give rise to failure
of the conditions to close and is not cured within 30 days after written
notice or is incapable of being cured;
o the Arnold Industries board of directors withdraws or modifies its
recommendation of the merger;
o the Arnold Industries board of directors approves or recommends any
alternative transaction;
o the Arnold Industries board of directors proposes or announces an
intention to enter into an agreement relating to an alternative
transaction; or
o the Arnold Industries board of directors breaches the no solicitation or
shareholder recommendation provisions of the merger agreement.
Arnold Industries does not have the right to terminate the merger agreement
or enter into an agreement with respect to an alternative transaction before
the special meeting. Arnold Industries, however, may furnish information to
and negotiate with a third party after receiving from that party a written,
unsolicited proposal for an alternative transaction that the board of
directors of Arnold Industries determines in good faith to be more favorable
to you than the merger with Roadway.
Payment Of Termination Fees (Page 35)
We must pay Roadway a termination fee of $15,000,000 if:
o the merger agreement is terminated:
o by Arnold Industries if the merger is not consummated prior to March 1,
2002 or shareholder approval is not obtained, and prior to the
shareholder meeting Arnold Industries receives an unsolicited
acquisition proposal for an alternative transaction or there has been
announced publicly an intention to make an acquisition proposal to
Arnold Industries or its shareholders and within one year of such
termination Arnold Industries enters into an agreement related to such
acquisition proposal or consummates the transaction contemplated by such
acquisition proposal;
o by Roadway if:
- the merger is not consummated prior to March 1, 2002 or shareholder
approval is not obtained, and prior to the shareholder meeting Arnold
Industries receives an unsolicited acquisition
6
proposal for an alternative transaction or there has been announced
publicly an intention to make an acquisition proposal to Arnold
Industries or its shareholders and within one year of such termination
Arnold Industries enters into an agreement related to such acquisition
proposal or consummates the transaction contemplated by such
acquisition proposal;
- the Arnold Industries board of directors withdraws or modifies its
approval or recommendation of the merger;
- the Arnold Industries board of directors proposes or announces an
intention to enter into an agreement relating to an alternative
transaction; or
- the Arnold Industries board of directors breaches the no solicitation
or shareholder recommendation provisions of the merger agreement.
Material Federal Income Tax Consequences (Page 26)
In general, your receipt of cash as a shareholder of Arnold Industries
pursuant to the merger will be a taxable transaction for federal income tax
purposes and may also be taxable under applicable state, local and foreign
income and other tax laws. You will recognize a gain or loss in an amount
equal to the difference, if any, between the adjusted tax basis of your shares
of Arnold Industries common stock and the amount of cash received in exchange
for your shares in the merger. This gain or loss will be a capital gain or
loss if your shares of Arnold Industries common stock are a capital asset and
will be a long-term capital gain or loss if your holding period of the shares
exceeds one year. See "The Merger--Material Federal Income Tax Consequences."
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FORWARD-LOOKING STATEMENTS
Arnold Industries' statements contained in this proxy statement and in the
documents that have been incorporated into this proxy statement by reference,
including our annual and quarterly reports, include forward-looking statements
about Arnold Industries that are subject to risks and uncertainties. Forward-
looking statements include information concerning the prospects for the
consummation of the merger and the future results of operations of Arnold
Industries during the period prior to the effective time of the merger, set
forth, among other places, under "Questions And Answers About The
Transaction," "Summary Term Sheet," "The Merger--Background Of The Merger,"
"The Merger--Arnold Industries' Reasons For The Merger; Recommendation Of The
Board Of Directors," "The Merger--Opinion Of Morgan Stanley" and those
statements preceded by, followed by or that otherwise include, the words
"believes," "expects," "anticipates," "intends," "estimates" or similar
expressions. For those statements, Arnold Industries claims the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
In addition to the other factors and matters discussed elsewhere in this
proxy statement and in the documents that have been incorporated into this
proxy statement by reference, factors that, in the view of Arnold Industries,
could cause our actual results or our ability to consummate the merger to
differ materially from those discussed in the forward-looking statements
include, among others:
o the timely receipt of necessary shareholder and other consents and
approvals needed to complete the merger, which could be delayed for a
variety of reasons related or not related to the merger itself;
o the fulfillment of all of the closing conditions specified in the merger
agreement, including the Roadway financing condition;
o our receipt of any unsolicited acquisition proposals;
o reactions to the merger from our customers and competitors;
o changing conditions or market trends in the industries in which Arnold
Industries operates;
o general economic or business conditions, including any effects on our
customers;
o our ability to implement our business strategy;
o the level of demand for our services and the actions of our competitors;
and
o our ability to obtain financing for specific or general corporate
purposes.
8
THE ARNOLD INDUSTRIES SPECIAL MEETING
General
This proxy statement is being furnished to holders of shares of Arnold
Industries common stock in connection with the solicitation of proxies by and
on behalf of the board of directors for use at the special meeting to be held
at 10 a.m., prevailing time, on __________, 2001, at Lebanon Country Club,
3375 West Oak Street, Lebanon, Pennsylvania, and at any adjournments or
postponements of the special meeting. This proxy statement and the
accompanying notice, proxy card and letter to the Arnold Industries
shareholders are first being mailed on or about ___________, 2001 to holders
of shares of Arnold Industries common stock entitled to notice of, and to vote
at, the special meeting.
Matters To Be Considered At The Special Meeting
At the special meeting, shareholders will be asked to consider and vote upon
a proposal to approve and adopt the merger agreement and the merger. The board
of directors has unanimously determined that the merger agreement and the
merger are fair to and in the best interests of Arnold Industries and its
shareholders and has unanimously approved the merger agreement and the merger.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
See "The Merger--Background Of The Merger" and "The Merger--Arnold Industries'
Reasons For The Merger; Recommendation Of The Board of Directors."
Record Date; Voting At The Special Meeting
___________, 2001, has been fixed as the record date for the determination
of the holders of shares of Arnold Industries common stock entitled to receive
notice of, and to vote at, the special meeting. Only shareholders of record at
the close of business on that date will be entitled to receive notice of, and
to vote at, the special meeting. At the close of business on _________, 2001,
the most recent practicable date prior to the date of this proxy statement,
there were ___________ shares of Arnold Industries common stock outstanding,
held by approximately ____ shareholders of record.
Shareholders of record on the record date are entitled to one vote per
share, exercisable in person or by properly executed proxy, upon each matter
properly submitted for the vote of shareholders at the special meeting. The
presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Arnold Industries common stock is
necessary to constitute a quorum at the special meeting. Under Pennsylvania
law, not less than a quorum of shareholders as of the record date must be
present to conduct business at the special meeting. Abstentions and broker
non-votes (i.e., shares held by brokers in "street name" (the name of the
broker or other record holder) that are not entitled to vote at the special
meeting due to the absence of specific instructions from the beneficial owners
of those shares) will be counted as present for the purpose of determining the
presence of a quorum at the special meeting.
The affirmative vote of a majority of the votes cast by all holders entitled
to vote at the meeting is required to approve and adopt the merger agreement
and the merger.
If you are a registered shareholder (that is, you hold stock certificates
registered in your own name), you are requested to complete, date, sign and
return the accompanying proxy card promptly to Arnold Industries in the
enclosed postage-paid envelope. If your shares are held in "street name" by
your broker, you should follow the directions provided by your broker to vote
your shares.
THE FAILURE TO SUBMIT A PROXY CARD OR ATTEND THE SPECIAL MEETING AND VOTE
WILL RESULT IN YOUR SHARES NOT BEING VOTED OR BEING COUNTED AS PRESENT FOR
DETERMINING IF A QUORUM IS PRESENT AT THE SPECIAL MEETING. IF YOU ATTEND THE
SPECIAL MEETING BUT DO NOT VOTE OR YOU ABSTAIN FROM VOTING, YOUR SHARES WILL
NOT BE COUNTED AS A VOTE "FOR" OR "AGAINST" THE ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER BUT WILL NONETHELESS BE COUNTED AS PRESENT FOR
DETERMINING IF A QUORUM IS PRESENT AT THE SPECIAL MEETING. BROKER NON-VOTES
WILL HAVE THE SAME EFFECT AS AN ABSTENTION.
9
The board of directors is not aware of any matters other than the approval
and adoption of the merger agreement and the merger set forth in the notice of
special meeting of shareholders transmitted with this proxy statement that may
be brought before the special meeting. If any other matters properly come
before the special meeting, the persons named in the accompanying proxy card
will vote the shares represented by all properly executed proxies on such
matters in such manner as is determined by a majority of the board of
directors.
Dissenters' Rights
Holders of shares of Arnold Industries common stock on the record date who
do not vote in favor of the merger agreement and the merger and who comply
with the applicable statutory procedures of Pennsylvania law will be entitled
to dissenters' rights in connection with the merger pursuant to the merger
agreement. Shareholders of Arnold Industries who vote in favor of adopting the
merger agreement and the merger, however, will waive their dissenters' rights
by doing so. See "The Merger--Dissenters' Rights."
Proxies, Revocation Of Proxies
Because many of our shareholders are unable to attend shareholders meetings,
the board of directors is soliciting proxies to give each shareholder an
opportunity to vote on the proposal to approve and adopt the merger agreement
and the merger, which is set forth in this proxy statement. You are urged to
read carefully the material in this proxy statement and specify your vote on
the proposal by marking the appropriate box on the enclosed proxy card and
sign, date and return the card in the enclosed postage-paid envelope. If you
do not specify a choice on the enclosed proxy card and the card is properly
executed and returned, the shares will be voted by the proxies "FOR" the
proposal to approve and adopt the merger agreement and the merger. All shares
of our common stock that are represented at the special meeting by properly
executed proxies received and not duly and timely revoked will be voted at the
special meeting in accordance with the instructions contained in them.
Shareholders whose shares are held in "street name" (i.e., in the name of a
broker or other record holder) must either direct the record holder of the
shares as to how to vote their shares or obtain a "legal proxy" from the
record holder to vote at the special meeting.
A proxy may be revoked prior to its being voted by:
o delivering to the Secretary of Arnold Industries, at or before the
special meeting, a written instrument bearing a later date than the
proxy, which instrument, by its terms, revokes the proxy;
o duly executing a subsequent proxy relating to the same shares and
delivering it to the Secretary of Arnold Industries at or before the
special meeting;
o attending the special meeting and giving notice of revocation to the
Secretary of Arnold Industries prior to the proxy being voted; or
o if your shares are held by a broker, following the directions received
from your broker to change those instructions.
Attendance at the special meeting without taking other affirmative action as
mentioned above will not constitute a revocation of a proxy. Any written
instrument revoking a proxy should be sent to: Arnold Industries, Inc., 625
South Fifth Avenue, Lebanon, Pennsylvania 17042-0210, Attention: Secretary.
If a quorum is not obtained, or if fewer shares of our common stock than the
number required are voted in favor of approving and adopting the merger
agreement and the merger, we expect the special meeting will be postponed or
adjourned in order to permit additional time for soliciting and obtaining
additional proxies or votes. At any subsequent reconvening of the special
meeting, all proxies will be voted in the same manner as such proxies would
have been voted at the original convening of the special meeting, except for
any proxies that have been revoked or withdrawn. In the absence of a quorum,
the special meeting may be adjourned from time to time by the holders of a
majority of the shares represented at the special meeting in person or by
proxy.
The obligations of Arnold Industries and Roadway to consummate the merger
are subject to, among other things, the condition that our shareholders
approve and adopt the merger agreement and the merger by a majority vote of
the votes cast at the special meeting. See "Material Provisions of the Merger
Agreement--Conditions Precedent."
YOU SHOULD NOT FORWARD ANY CERTIFICATES REPRESENTING SHARES OF COMMON STOCK
WITH YOUR PROXY CARD. IF THE MERGER IS CONSUMMATED, CERTIFICATES SHOULD
10
BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF
TRANSMITTAL, WHICH WILL BE SENT TO YOU PROMPTLY AFTER THE EFFECTIVE TIME OF
THE MERGER.
Shareholders who require assistance in changing or revoking a proxy should
contact ________________, at the address or phone number provided in this
proxy statement under the caption "Questions and Answers About the
Transaction."
Solicitation Of Proxies
We will pay all costs of soliciting proxies from our shareholders. In
addition to soliciting proxies by mail, our directors, officers and employees
may solicit proxies by telephone, in person or by other means of
communication, but will not receive additional compensation for doing so. In
addition, we have retained _______________________ to assist us in the
solicitation of proxies from brokerage firms and other custodians, nominees
and fiduciaries. _______________________ will be paid a fee estimated at
$____________, plus reimbursement of expenses. Arrangements will be made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares of our common stock
held of record by such persons, and we will reimburse such brokerage firms,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in performing those services.
THE MERGER
This section of the proxy statement describes the proposed merger. Although
this section summarizes the material terms of the merger, this summary may not
contain all of the information that is important to each shareholder.
Shareholders should carefully read this entire document and the merger
agreement attached as Annex A for a more complete understanding of the merger.
General
The merger agreement provides, on the terms and subject to the conditions
set forth in the merger agreement:
o for the merger of Lion Corp. with and into Arnold Industries, with
Arnold Industries surviving the merger as a wholly owned subsidiary
of Roadway; and
o that each share of Arnold Industries common stock outstanding
immediately prior to the effective time of the merger, other than
shares owned by Roadway or any of its subsidiaries or by Arnold
Industries or any of its subsidiaries, all of which will be canceled
or by shareholders, if any, who properly exercise their dissenters'
rights granted pursuant to the merger agreement, will be converted
into the right to receive $21.75 in cash, without interest. The
effective time of the merger will be at the time articles of merger
are filed with the Department of State of the Commonwealth of
Pennsylvania (or at a later time as specified in the articles of
merger), which is expected to occur after the last of the conditions
precedent to the merger set forth in the merger agreement has been
satisfied or waived. See "Material Provisions of the Merger
Agreement--Conditions Precedent."
The Exchange
If the merger is completed, you will receive $21.75 in cash for each share
of Arnold Industries common stock that you own. Current holders of Arnold
Industries common stock will not share in any of the future earnings and
potential growth of Arnold Industries.
As soon as practicable after the effective time of the merger, Registrar and
Transfer Company, as the exchange agent for the merger, will mail to each
holder of record of Arnold Industries common stock as of the effective time of
the merger a transmittal letter to be used in forwarding such shareholder's
certificates representing such shares for surrender to Registrar and Transfer
Company. Upon such surrender, Registrar and Transfer Company will forward such
holder a check for the amount of merger consideration such shareholder is
entitled to receive.
11
Arnold Industries shareholders should not forward stock certificates to
Registrar and Transfer Company until they have received transmittal letters,
nor should they return stock certificates with the enclosed proxy.
Until surrendered to Registrar and Transfer Company, outstanding stock
certificates previously issued by Arnold Industries will, from the effective
time of the merger, represent the right to receive $21.75 per share, without
interest, that such certificate represents. Therefore, in order to receive
cash, Arnold Industries shareholders should surrender all outstanding
certificates previously issued by Arnold Industries as soon as possible after
receiving a transmittal letter.
Background Of The Merger
In January 1999, after some informal preliminary conversations,
representatives of Roadway and Arnold Industries met to discuss the
possibility of a business combination involving Roadway and Arnold Industries
or Arnold Industries' business unit, New Penn Motor Express. Follow-up
meetings were held in early February and May 1999 to discuss the possible
combination. No formal proposals were made and Roadway and Arnold did not
discuss a possible combination again until April 2000.
Throughout the remainder of 1999 and the beginning of 2000, senior
executives of Arnold Industries held meetings with several nationally
recognized investment banks to discuss strategic alternatives to enhance
shareholder value and long-term strategies for the company, including, among
other things, a going private transaction, a Dutch auction to repurchase
shares and a disposition of one or more of Arnold Industries' three business
units. Several alternatives were considered but rejected by the board because
they did not offer the prospect of maximizing shareholder value. An outright
sale of the company was among the alternatives presented to and considered by
the board.
On February 17, 2000, the board authorized senior executives of the company
to begin the process of soliciting interest for Arnold Transportation
Services, the company's truckload carrier. Preliminary discussions regarding
Arnold Transportation Services had been held with an investment bank, but no
firm commitment had been given to any of the investment banks consulted by the
company.
In early April 2000, during the course of informal discussions, senior
executives of Roadway first discussed with senior executives of Arnold
Industries the possibility of Roadway purchasing New Penn. Following these
discussions, on April 19, 2000, Roadway executed a confidentiality agreement
in favor of Arnold Industries and submitted to Arnold Industries a preliminary
due diligence list to solicit information to assist in determining value. On
May 31 and June 1, 2000, senior executives of Roadway and Arnold Industries
met to discuss again Roadway's interest in acquiring New Penn.
The Arnold Industries board of directors decided that it was advisable to
engage an investment bank in connection with a possible transaction with
Roadway and interviewed three investment banks before determining to retain
Morgan Stanley. Pursuant to an engagement letter dated July 14, 2000, Arnold
Industries retained Morgan Stanley to advise in the possible sale of one or
more of the company's business units and/or in assessing other strategic
alternatives available to the company.
The board authorized Morgan Stanley to solicit interests for Arnold
Transportation Services. Morgan Stanley was not authorized to solicit interest
for Arnold Logistics, however, because the board believed it would be in the
best interests of the shareholders to retain that business unit to complement
New Penn in the event that discussions with Roadway did not result in a
transaction. Throughout the fall of 2000, eight strategic and a number of
financial buyers were contacted, but no firm proposals were received for the
sale of Arnold Transportation Services.
As to a possible transaction with Roadway, Morgan Stanley and Roadway's
financial advisors, Credit Suisse First Boston Corp., engaged in discussions
throughout August and September 2000. These discussions did not result in an
offer or indication of value from Roadway.
Informal discussions between Arnold Industries and Roadway senior executives
continued throughout the remainder of 2000 and the first half of January 2001.
On January 17, 2001, representatives of Morgan Stanley and
12
Roadway's financial advisor met to formally discuss the possibility of a
transaction involving Arnold Industries and Roadway.
On February 16, 2001, Kenneth Leedy, an Arnold Industries director and
President of New Penn, met with Michael Wickham, Chief Executive Officer of
Roadway. During that meeting, Mr. Wickham indicated that Roadway would be
willing to pay $17 per share for all of the outstanding shares of Arnold
Industries common stock. Mr. Leedy indicated that a $17 per share price would
likely be unacceptable to Arnold Industries' board of directors, but Mr.
Wickham and Mr. Leedy agreed that Roadway would commence a due diligence
review of Arnold Industries and its operations to determine if a higher price
could be justified.
During the first week of March 2001 Roadway's financial and legal advisors
conducted due diligence of Arnold Industries at the offices of Arnold
Industries' legal and accounting advisors.
On March 15, 2001, representatives of Arnold Industries and Roadway and each
of their legal and financial advisors met to further discuss a potential
transaction between the two companies. Representatives of Arnold Industries
and its financial advisors indicated that the Arnold Industries board of
directors would be unwilling to engage in a transaction unless the per share
consideration to Arnold Industries shareholders was above $20.00 per share.
Roadway indicated it was primarily interested in acquiring New Penn and
inquired whether New Penn could be acquired separately from the other two
companies. Edward H. Arnold, Chief Executive Officer and Chairman of the Board
of Arnold Industries, indicated that he might be willing to consider acquiring
one or both of the companies in which Roadway did not have an interest if such
an acquisition would be in the best interests of Arnold shareholders and would
facilitate a transaction with Roadway for New Penn. However, because the
parties were not sufficiently close on price for New Penn, representatives of
Arnold Industries and its financial advisors rejected Roadway's proposal and
the two parties ceased discussions.
During May and June 2001, representatives of Arnold Industries and
representatives of Morgan Stanley met and discussed other potential strategic
alternatives, including a share repurchase program and a spin-off of one or
more or Arnold Industries' business units to its shareholders.
On July 20, 2001, Mr. Wickham contacted Mr. Leedy, indicating Roadway's
desire to resume discussions concerning a possible transaction involving
Arnold Industries and Roadway.
On July 26, 2001, Messrs. Arnold, Leedy and Walborn from Arnold Industries
and Mr. Wickham from Roadway met to once again discuss a possible transaction
involving Roadway and Arnold Industries. At this meeting, Mr. Wickham
indicated again that Roadway's primary interest was to acquire New Penn
although it was open to discussions regarding acquiring Arnold Industries in
its entirety. During this meeting, Mr. Arnold requested an indication of the
price Roadway would be willing to pay both for Arnold Industries in its
entirety and for each of Arnold Industries' three business units separately.
After further discussion among these executives, Mr. Wickham indicated that
Roadway would submit preliminary offers for Arnold Industries with and without
Arnold Logistics shortly after the meeting.
On July 30, 2001, Arnold Industries received a preliminary offer from
Roadway in the form of a letter from Mr. Wickham. The letter indicated a
preliminary offer for Arnold Industries of $21.00 per share in cash.
Alternatively, the letter indicated a preliminary offer of $18.00 per share in
cash for Arnold Industries without ARLO based on certain assumptions regarding
the disposition of ARLO including that such disposition would be tax neutral
to Roadway. The letter also indicated Roadway's preliminary offer was subject
to various conditions, including financing, due diligence and the execution of
a voting agreement by Mr. Arnold in favor of Roadway with respect to the
shares of Arnold Industries common stock over which he has voting power.
The board of directors held a special meeting on August 1, 2001 to discuss
Roadway's preliminary offer. After full consideration and discussion, the
board determined it was advisable to pursue a transaction in which Arnold
Industries be sold in its entirety, without undertaking separate efforts to
solicit interests for New Penn or ARLO. As to New Penn, the board concluded
that the material adverse tax consequences that would result from the separate
sale of New Penn did not make such a sale a viable alternative. Furthermore,
the board concluded, based in part upon input from representatives from Morgan
Stanley, that few, if any, strategic buyers, other than Roadway, would be
interested in and capable of acquiring a unionized less-than-truckload carrier
such as New Penn. As to each of ARLO and New Penn, the board considered the
adverse impact of a public auction on both the on-going business development
efforts of each of the divisions and its employees and management. The board
13
also considered the fact that Roadway indicated that a transaction had to
occur promptly or other alternatives would be pursued by Roadway. The board
concluded that due to these factors a public auction of ARLO and/or New Penn
was not in the best interest of Arnold Industries' shareholders. Based on the
foregoing and the fact that the Company had previously been unsuccessful in
its efforts to sell Arnold Transportation Services, and its resulting view
that the most favorable transaction for Arnold Industries' shareholders was a
sale of Arnold Industries in its entirety, the board instructed Mr. Arnold to
inform Mr. Wickham that Roadway's preliminary offer with respect to acquiring
Arnold Industries in its entirety provided a basis upon which to proceed with
further discussions regarding a potential transaction. The board instructed
Morgan Stanley to contact Roadway's financial advisors to discuss the process
of moving forward. The board agreed to consider in greater detail with its
financial and legal advisors the ultimate valuation of the proposed
transaction as well as the associated financing and structural details.
Throughout the first half of August 2001, representatives of Roadway and its
financial and legal advisors sought, and representatives of Arnold Industries
and its financial and legal advisors provided, additional due diligence
information.
On the afternoon of August 15, 2001, the executive committee of the Arnold
Industries board of directors held a meeting to discuss the status of
negotiations with Roadway. Mr. Arnold and Mr. Leedy reported on the continuing
discussions of the parties. The executive committee received a detailed
presentation from Arnold Industries' special counsel, Morgan, Lewis & Bockius
LLP, regarding the board of directors' fiduciary duties in considering the
proposed transaction as well as a summary of the material terms of the initial
draft of the proposed merger agreement distributed by Roadway's counsel on
August 14, 2001, which included the proposed voting agreement for Mr. Arnold.
At a meeting of the executive committee of the Arnold Industries board of
directors held on August 16, 2001, the executive committee was informed by
representatives of Morgan Stanley that Roadway had completed its due diligence
review of Arnold Industries and had reconfirmed its initial offer of $21.00
per share. At this meeting, Mr. Arnold informed the executive committee that
he was considering entering into formal discussions with Roadway to acquire
ARLO in a separate transaction following completion of the proposed merger.
After a full discussion of the executive committee, and a review of the board
of directors' fiduciary duties by legal counsel, the executive committee
determined that Mr. Arnold should retain separate legal counsel and financial
advisors to assist him in considering such a purchase of ARLO and that Mr.
Arnold would have to recuse himself from all discussions regarding the
proposed merger once he made a formal offer to Roadway for ARLO. The executive
committee discussed how Mr. Arnold's proposed transaction might impact Arnold
Industries' proposed transaction with Roadway. The executive committee
determined it would not permit Roadway to condition the proposed transaction
with Arnold Industries upon the success or consummation of Mr. Arnold's
proposed transaction. The executive committee then determined that Mr.
Arnold's discussions with Roadway should not be a factor in the board's
consideration of the proposed merger and that all future discussions regarding
the proposed merger would be conducted without any consideration to Mr.
Arnold's proposed transaction.
A meeting of the executive committee of the board of directors was held on
the evening of August 17, 2001 to discuss the status of negotiations with
Roadway. The executive committee discussed the principal terms of the proposed
merger agreement and the timing of, and need for, future special meetings of
the board. Mr. Arnold informed the executive committee that he had entered
into discussions with Roadway and had made a formal offer to acquire ARLO in a
separate transaction following the completion of the proposed merger. Mr.
Arnold recused himself from discussions regarding the proposed merger until
the board was prepared to take its final vote regarding the proposed merger.
Mr. Arnold excused himself from the meeting and did not attend any other
meetings of the board until the special meeting held on the evening of August
21, 2001, at which the board approved the merger. After Mr. Arnold excused
himself from the meeting, the executive committee was updated regarding the
open issues relating to the merger agreement.
From August 18 through August 21, 2001, Arnold Industries and Roadway
management and the financial and legal advisors of each company continued to
negotiate the terms of the merger agreement. The executive committee, without
Mr. Arnold, and the independent directors received full briefings of the
progress of negotiations throughout the period.
14
On August 20, 2001, the board of directors, without Mr. Arnold, held a
special meeting to discuss the remaining open issues relating to the merger
agreement. Representatives of Morgan, Lewis & Bockius LLP summarized the
remaining issues and answered the board's questions regarding the merger
agreement. The board was informed that Mr. Arnold and the management team of
ARLO planned to enter into an agreement with Roadway granting Mr. Arnold and
the management team the exclusive right to enter into an agreement to purchase
ARLO from Roadway for $105 million in cash and the assumption of ARLO's
indebtedness following the completion of the proposed merger. Representatives
of Morgan Stanley reviewed with the board Morgan Stanley's financial analysis
of the $21.00 per share cash merger consideration. After full consideration
and discussion, the board authorized Mr. Leedy to contact the chief executive
officer of Roadway to negotiate an increase in the per share merger
consideration.
On the evening of August 20, 2001, Mr. Leedy informed Mr. Wickham that the
$21.00 per share merger consideration was unacceptable to the board of
directors. After further discussions between Mr. Leedy and Mr. Wickham, Mr.
Wickham indicated that Roadway would be willing to offer a per share merger
consideration of $21.75. Mr. Leedy indicated that he would present Roadway's
revised offer to the board of directors. Later that evening the board held a
special meeting to discuss Roadway's revised offer.
A special meeting of the board of directors was held on the morning of
August 21, 2001 to discuss the remaining open issues relating to the merger
agreement. After full consideration and discussion of the revised offer and
the remaining open issues, the board authorized representatives of Morgan,
Lewis & Bockius LLP to finalize the merger agreement with Roadway's counsel.
The board scheduled another special meeting for the afternoon of August 21,
2001 to make its final determination with respect to the proposed merger.
On the afternoon of August 21, 2001, the board of directors held a special
meeting to review the proposed transaction. Mr. Leedy reviewed with the board
the status of the negotiations with Roadway and the terms of the proposed
merger transaction. A representative of Morgan, Lewis & Bockius LLP reviewed
with the board the terms and provisions of the proposed merger agreement
(including, in particular, the provisions relating to (a) the ability of the
directors to consider other acquisition proposals should they arise and (b)
the payment of a termination fee to Roadway in certain circumstances) and the
legal duties and responsibilities of the directors in connection with the
proposed transaction. Representatives of Morgan Stanley presented an overview
of the financial aspects of the proposed merger transaction and orally
delivered Morgan Stanley's opinion, which was subsequently confirmed in
writing, to the effect that, as of August 21, 2001, based upon and subject to
the various considerations set forth in its opinion, the $21.75 cash per share
consideration to be received by the Arnold Industries shareholders pursuant to
the merger agreement was fair from a financial point of view to such
shareholders. Following full consideration and discussion and a review of the
principal reasons for the merger, the Arnold Industries board of directors
unanimously approved the merger agreement determining that the merger
agreement and the transactions contemplated by the merger agreement were fair
to and in the best interests of Arnold Industries and its shareholders. The
reasons for the Arnold Industries board of directors' approval are summarized
below.
On the evening of August 21, 2001, Roadway, Lion Corp. and Arnold Industries
executed the definitive merger agreement. On August 22, 2001, a joint press
release announcing the merger was issued.
Arnold Industries' Reasons For The Merger; Recommendation Of The Board Of
Directors
The board of directors unanimously determined that the terms of the merger
agreement and the merger are fair to and in the best interests of Arnold
Industries and its shareholders, has unanimously approved the merger agreement
and the merger, and unanimously recommends that shareholders vote "FOR"
approval and adoption of the merger agreement and the merger.
In reaching its decision to unanimously approve the merger agreement and the
merger, the board of directors consulted with senior management and financial
and legal advisors, and considered a number of factors, including the
following:
o the consideration offered to Arnold Industries shareholders, which
represents a premium of:
o 21.1% over the average closing price of a share of Arnold
Industries common stock for the one-year period preceding
August 20, 2001 (the day preceding the announcement of the
merger);
15
o 18.0% over the average closing price of a share of Arnold
Industries common stock for the six-month period preceding
August 20, 2001;
o 11.2% over the average closing price of a share of Arnold
Industries common stock for the one-month period preceding
August 20, 2001;
o 4.8% over the closing price of a share of Arnold Industries
common stock on August 21, 2001;
o a review of the possible strategic alternatives to a sale of Arnold
Industries, including the prospects of continuing to operate Arnold
Industries as an independent company, the value to shareholders of
these alternatives and the timing and likelihood of achieving
additional value from these alternatives, and the possibility that
Arnold Industries' future performance might not lead to a stock
price having a higher present value than the merger consideration;
o the opinion of Morgan Stanley to the effect that, as of August 21,
2001 and based on and subject to the considerations in its opinion,
the $21.75 cash per share in consideration to be received by holders
of Arnold Industries common stock pursuant to the merger agreement
was fair from a financial point of view to such holders and the
financial analyses conducted by Morgan Stanley in connection with
its opinion, as described under "The Merger--Opinion Of Morgan
Stanley;"
o the likelihood of consummation of the merger;
o the fact that Roadway had obtained a financing commitment, subject
to customary conditions, from Credit Suisse First Boston sufficient
to provide the financing necessary to consummate the merger and the
transactions contemplated by the merger agreement;
o the board of directors' view that the terms of the merger agreement,
as reviewed by the board of directors with its legal and financial
advisors, are fair to Arnold Industries and its shareholders and
give the board of directors the flexibility needed to comply with
its fiduciary duties under Pennsylvania law. See "Material
Provisions Of The Merger Agreement--Covenants--No Solicitation" and
"Material Provisions Of The Merger Agreement--Additional
Agreements--Fees and Expenses;"
o the board of directors' knowledge of the business, operations,
properties, assets, financial condition and operating results of
Arnold Industries;
o the fact that Roadway is willing to acquire all three operating
business units of Arnold Industries, thereby avoiding any adverse
impact of a separate public auction of each of the three business
units and the adverse tax impact of selling the business units
separately;
o the determination that a sale of Arnold Industries in its entirety
is more favorable to the shareholders of Arnold Industries than a
sale of its business units separately; and
o the fact that Roadway is a unionized LTL carrier and may be the only
strategic buyer willing and financially able to acquire another
unionized LTL carrier.
In addition to the factors set forth above, in the course of its meetings,
the board of directors reviewed and considered a wide variety of information
relevant to the merger including:
o information concerning Arnold Industries' and Roadway's businesses,
historical financial performance and condition, operations,
customers, competitive positions, prospects and management;
o current financial market conditions and historical market prices,
volatility and trading information with respect to the Arnold
Industries common stock;
o the consideration to be paid to the Arnold Industries shareholders
in the merger and a comparison of comparable merger transactions;
and
o the potential impact of the merger on customers, employees and other
constituencies of Arnold Industries.
16
The board of directors also considered certain countervailing factors in its
deliberations concerning the merger, including:
o the potential disruption of Arnold Industries' business that might
result from the announcement of the merger;
o the possibility that the merger may not be consummated, particularly
in light of Roadway's financing condition;
o the fact that the cash consideration to be received by Arnold
Industries shareholders will be taxable to them;
o the fact that following the merger, Arnold Industries shareholders
will cease to have an interest in Arnold Industries and will forego
the upside opportunity associated with any future growth of Arnold
Industries; and
o the required payment by Arnold Industries in various circumstances
of a termination fee under the merger agreement. See "Material
Provisions Of The Merger Agreement--Termination, Fees, Amendment And
Waiver."
The foregoing discussion of the information and factors discussed by the
board of directors is not meant to be exhaustive, but is believed to include
all material factors considered by the board of directors. The board of
directors did not quantify or attach any particular weight to the various
factors that it considered in reaching its determination that the merger
agreement and the merger are fair to and in the best interests of Arnold
Industries and its shareholders. Rather, the board of directors viewed its
position and recommendation as being based on the totality of the information
presented to and considered by it. As a result of its consideration of the
foregoing and other relevant considerations, the board of directors
unanimously determined that the merger agreement and the merger are fair to
and in the best interests of Arnold Industries and its shareholders and
approved the merger agreement and the merger. Accordingly, the board of
directors unanimously recommends that shareholders vote "FOR" approval and
adoption of the merger agreement and the merger.
Opinion Of Morgan Stanley
Pursuant to an engagement letter dated July 14, 2000, Arnold Industries
retained Morgan Stanley to act as its financial advisor in connection with a
possible sale of the company. Morgan Stanley was selected by the Arnold
Industries Board of Directors to act as Arnold Industries' financial advisor
based on Morgan Stanley's qualifications, expertise and reputation and its
knowledge of the business and affairs of Arnold Industries and of Roadway. At
the August 21, 2001 meeting of the Arnold Industries board of directors,
Morgan Stanley rendered an oral opinion, which was confirmed in writing as of
August 21, 2001, to the effect that as of such date and based upon and subject
to the various considerations set forth in its opinion, the consideration to
be received by the holders of Arnold Industries common stock pursuant to the
merger agreement was fair from a financial point of view to such holders.
The full text of the written opinion of Morgan Stanley, dated August 21,
2001, describes among other things, the assumptions made, procedures followed,
matters considered and limitations on the scope of the review undertaken by
Morgan Stanley in rendering its opinion. The opinion is attached to this proxy
statement as Annex B and is incorporated herein by reference. This opinion
should be read carefully and in its entirety. Morgan Stanley's opinion is
directed to the Arnold Industries board of directors and addresses only the
fairness of the consideration to be received by holders of Arnold Industries
common stock pursuant to the merger agreement from a financial point of view
to such holders as of the date of this opinion. The opinion does not address
any other aspect of the merger and does not constitute a recommendation to any
person as to how to vote with respect to the merger. The summary of the
opinion of Morgan Stanley described in this proxy statement is qualified in
its entirety by reference to the full text of the opinion.
In connection with rendering its opinion, Morgan Stanley, among other
things:
o reviewed certain publicly available financial statements and other
business and financial information of Arnold Industries and Roadway;
17
o reviewed certain internal financial statements and other financial
and operating data concerning Arnold Industries and its constituent
businesses prepared by the management of Arnold Industries;
o reviewed certain financial forecasts prepared by the management of
Arnold Industries and its constituent businesses;
o discussed the past and current operations and financial condition
and the prospects of Arnold Industries and its constituent
businesses, including information relating to certain strategic,
financial and operational benefits anticipated from the merger, with
senior executives of Arnold Industries;
o reviewed the reported prices and trading activity for the Arnold
Industries common stock;
o compared the financial performance of Arnold Industries and its
constituent businesses and the prices and trading activity of the
Arnold Industries common stock with that of certain other comparable
publicly-traded companies and their securities;
o reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
o participated in discussions and negotiations among representatives
of Arnold Industries and Roadway and their financial and legal
advisors;
o reviewed the merger agreement and certain related documents; and
o considered such other factors and performed such other analyses as
Morgan Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
supplied or otherwise made available to it by Arnold Industries for the
purposes of its opinion. With respect to the financial forecasts, including
information relating to certain strategic, financial and operational benefits
anticipated from the merger, Morgan Stanley assumed that they were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the future financial performance of Arnold Industries and its
constituent businesses. As the Arnold Industries board of directors was aware,
Morgan Stanley did not receive financial forecasts for Roadway and instead,
with the consent of the Arnold Industries board of directors, relied on the
publicly available estimates of certain analysts who report on Roadway. Morgan
Stanley is not a legal, regulatory or accounting expert and has relied on the
assessments of Arnold Industries and its advisors with respect to certain tax
effects with and without the merger. In addition, Morgan Stanley assumed that
the merger would be consummated in accordance with the terms set forth in the
merger agreement. Morgan Stanley did not make any independent valuation or
appraisal of the assets or liabilities of Arnold Industries and its
constituent businesses, nor was Morgan Stanley furnished with any such
appraisals. Morgan Stanley's opinion was necessarily based on financial,
economic, market and other conditions as in effect on, and the information
made available to it as of, the date of its opinion.
Since Morgan Stanley was not requested to, and did not consider, the option
by which Edward H. Arnold will have the opportunity to acquire ARLO from
Roadway (the "Option") in arriving at its opinion, Morgan Stanley's opinion
also did not, in any way, address the fairness of the Option.
The following is a brief summary of all the material analyses performed by
Morgan Stanley in connection with rendering its oral opinion to the Arnold
Industries board of directors and its written opinion letter, dated August 21,
2001. The information used by Morgan Stanley in its analyses was as of August
20, 2001. Some of these summaries of financial analyses include information
presented in tabular format. In order to understand fully the financial
analyses used by Morgan Stanley, the tables must be read together with the
text of each summary. The tables alone do not constitute a complete
description of the financial analyses.
Historical Offer Premium Analysis
Morgan Stanley reviewed and analyzed the implied offer premiums of the daily
and average closing share price of Arnold Industries over various periods
during a twelve-month period beginning August 20, 2000, and ending August 20,
2001. The following table presents the implied offer premium to the average
closing price of Arnold Industries common stock during the periods covered and
as of August 20, 2001, based on the merger consideration of $21.75 per share
of Arnold Industries' common stock and a closing share price for Arnold
Industries' common stock of $21.75 on August 20, 2001.
18
Period Implied Offer Premium to Merger Consideration
------ --------------------------------------------------
August 20, 2001 0.0%
Last 5 days prior to August 20, 2001 5.6%
Last 1 month prior to August 20, 2001 11.2%
Last 2 months prior to August 20, 2001 13.8%
Last 3 months prior to August 20, 2001 15.2%
Last 6 months prior to August 20, 2001 18.0%
Last 12 months prior to August 20, 2001 21.1%
Latest twelve months low (August 22, 2000) 52.6%
Equity Research Analyst Price Targets Analysis
Morgan Stanley reviewed the twelve-month price target estimate for Arnold
Industries of the available published equity research analyst. The twelve-
month price target of $20.00 per share was approximately 8.0% below the
consideration of $21.75 per share.
Comparable Company Analysis
Morgan Stanley compared various publicly available information of Arnold
Industries with publicly traded companies that share similar characteristics
with Arnold Industries. The following table sets forth the companies used in
the comparable company analysis.
Comparable Companies
--------------------
Arkansas Best Corporation
CNF Incorporated
Consolidated Freightways
Old Dominion Freight Line, Incorporated
Roadway Corporation
USFreightways Corporation
Yellow Corporation
Morgan Stanley determined the market capitalization for the comparable
companies based on the closing share price of each company on August 20, 2001.
Morgan Stanley then arrived at a range of comparable company multiples by (1)
dividing the market capitalizations of projected earnings and (2) dividing the
market capitalization, plus net debt, by revenues, earnings before interest,
taxes, depreciation and amortization, or EBITDA, and earnings before interest
and taxes, or EBIT, in each case, for each of the comparable companies for the
last twelve months and years 2001 and 2002 based upon estimates compiled by
First Call Corp., publicly available financial information and publicly
available Morgan Stanley equity research.
Based upon these comparable company multiples, Morgan Stanley applied
multiples to the corresponding Arnold Industries statistic estimates based
upon publicly available financial information. The resulting valuation range
computed by Morgan Stanley implied a value of $14.98 to $16.57 per share of
Arnold Industries common stock.
No company utilized in the comparable company analysis is identical to
Arnold Industries. In evaluating the peer group, Morgan Stanley made judgments
and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of Arnold Industries. These other matters include the
impact of competition on the business of Arnold Industries and the industry
generally, industry growth and the absence of any material change in the
financial condition and prospects of Arnold Industries or in the industry or
financial markets in general. Mathematical analysis, such as determining the
average or median, is not in itself a meaningful method of using comparable
company data.
Precedent Transaction Analysis
Morgan Stanley used publicly available information to calculate multiples of
selected financial data paid in several precedent transactions and applied
these multiples to comparable financial data of Arnold Industries. The
following table sets forth the precedent transactions utilized in this
analysis.
19
Precedent Transactions
----------------------
FedEx Corporation/American Freightways
Yellow Corporation/Jevic Transportation, Incorporated
Yellow Corporation/Action Express, Incorporated
FedEx Corporation/Caliber Systems Incorporated
Super Group Limited/Regional Transporters
Arkansas Best Corporation/Worldway Corporation
For the acquired corporation in each of these transactions, Morgan Stanley
calculated or was provided (1) EBITDA, (2) EBIT and (3) earnings, in each case
realized or projected during the applicable transaction year, without giving
effect to the impact of the transaction based on publicly available
information. Morgan Stanley then calculated the multiples of the amounts paid
by the acquiror applicable in each precedent transaction. Based on these
precedent transaction multiples, Morgan Stanley applied multiples to the
corresponding Arnold Industries statistic estimate based on publicly available
financial information. The resulting valuation range computed by Morgan
Stanley implied a value of $17.74 to $20.42 per Arnold Industries share.
No transaction utilized as a comparison in the precedent transactions
analysis is identical to the merger. Additionally, Morgan Stanley observed
that the majority of precedent transactions were consummated between non-union
carriers. In evaluating the precedent transactions, Morgan Stanley made
judgments and assumptions with regard to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Arnold Industries. These other matters include
the impact of competition on the business of Arnold Industries and the
industry generally, industry growth and the absence of any material change in
the financial condition and prospects of Arnold Industries or in the industry
or financial markets in general. Mathematical analysis, such as determining
the average or median, is not in itself a meaningful method of using precedent
transaction data.
Sum-of-Parts Analysis
Morgan Stanley noted that Arnold Industries contains three distinct
divisions, less-than-truckload (New Penn), truckload (Arnold Transportation
Services) and logistics (ARLO). Morgan Stanley analyzed financial information
for each of Arnold Industries' substantial businesses to arrive at an equity
valuation for the entire Arnold Industries business. The valuation of each of
Arnold Industries' businesses was implied from similar methodologies, such as
the comparable company, precedent transaction and discounted cash flow
analyses. Based upon the evaluation of each of Arnold Industries' businesses
as detailed below, post adjustment of Arnold Industries' net cash, the
resulting valuation range computed by Morgan Stanley implied a value of $16.71
to $19.86 per share of Arnold Industries common stock.
Comparable Company Analysis
For each of Arnold Industries' businesses, Morgan Stanley compared publicly
available financial information of each business with publicly traded
companies that share similar characteristics with such business. The following
tables set forth the comparable companies utilized for each business.
New Penn ARLO Arnold Transportation Services
-------- ------------------------------------ -------------------------------------------------
Arkansas Best Corporation Airborne, Inc. Celadon Group, Incorporation
CNF Incorporated CNF Incorporated Covenant Transport, Incorporated
Consolidated Freightways FedEx Corporation Transport Corp. of America, Incorporated
Old Dominion Freight Line, HUB Group, Incorporated U.S. Xpress Enterprises, Incorporated
Incorporated Ryder System Inc. USA Truck, Incorporated
Roadway Corporation
USFreightways Corporation
Yellow Corporation
Morgan Stanley determined the market capitalization for the comparable
companies based on the closing share price of each company on August 20, 2001.
Morgan Stanley then arrived at a range of comparable company multiples by (1)
dividing the market capitalizations of projected earnings and (2) dividing the
market capitalization, plus net debt, by revenues, EBITDA, and EBIT, in each
case, for each of the comparable companies for the last twelve months and
years 2001 and 2002 based upon estimates compiled by First Call Corp.,
publicly available financial information and publicly available Morgan Stanley
equity research.
20
Morgan Stanley then applied these comparable company multiples to the
corresponding business statistic estimated based on publicly available
financials. The analysis implied the following valuation ranges.
Range
Business ($MM)
-------- ---------
New Penn 190-245
ARLO 60-80
Arnold Transportation Services 70-87
Precedent Transaction Analysis
For each of Arnold Industries' businesses, Morgan Stanley used publicly
available information to calculate multiples of selected financial data paid
in several precedent transactions and applied these multiples to comparable
financial data of each business. The following table sets forth the precedent
transactions utilized for each business.
New Penn ARLO Arnold Transportation Services
-------- ------------------------------------ -------------------------------------------------
FedEx Corporation/American Kuehne & Nagel International Swift Transportation Co., Incorporated/
Freightways AG/USCO Logistics MS Carriers, Incorporated
Yellow Corporation/Jevic United Parcel Service, High Road Acquisition Subsidiary
Transportation, Incorporated Incorporated/Mailboxes Etc. Corp./KLLM Transport Services,
Yellow Corporation/Action Express, United Parcel Service, Incorporated/ Incorporated
Incorporated Fritz Companies, Inc. USFreightways Corporation/
FedEx Corporation/Caliber APL Limited/GATX Corporation Transportation Corporation of
Systems Incorporated TNT Post Group NV /CTI Logistix, America
Super Group Limited/Regional Incorporated Schneider National/Landstar Poole
Transporters EGL, Inc./Circle International Group, Schneider National/Builders Transport,
Arkansas Best Corporation/Worldway Incorporated Incorporated
Corporation Ocean Group Plc./NFC Plc. Odyssey Partners Limited/Celedon
FedEx Corporation/Tower Group Group, Incorporation
C.H. Robinson Worldwide, US Xpress Enterprises,
Incorporated/American Incorporated/Victory Express
Backhaulers Toll Holdings Limited/TNT Seafast
Deutsche Post AG/Air Express Penske Truck Leasing Co./Leaseway
International Corporation Transportation Corporation
Ocean Group Plc/Mark VII, Laidlaw Incorporated/Mayflower Group,
Incorporated Incorporated
Danzas Holding-AG/ASG AB.
Morgan Stanley calculated or was provided (1) EBITDA, (2) EBIT and (3)
earnings, in each case realized or projected during the applicable transaction
year, without giving effect to the impact of the transaction. Morgan Stanley
then calculated the multiples of the amounts paid by the acquiror applicable
in each precedent transaction and applied these multiples to the corresponding
business statistic estimate based on publicly available financial information.
The analysis implied the following valuation ranges.
Range
Business ($MM)
-------- ---------
New Penn 275-330
ARLO 90-115
Arnold Transportation Services 70-95
21
Discounted Cash Flow Analysis
Morgan Stanley also performed an analysis of discounted cash flows for each
business based upon projections supplied by Arnold Industries. Morgan Stanley
calculated or was provided free cash flow estimates for the projection period
and applied a terminal multiple to each business' projected year 2005 EBITDA
to the corresponding business statistic estimate based upon estimates provided
by Arnold Industries and utilized a discount rate for each business' cash
flows. The analysis implied the following valuation ranges.
Discount Rate Range
Business (%) ($MM)
-------- ------------- -----
New Penn 10.0 230-270
ARLO 12.0 110-130
Arnold Transportation Services 11.0 60-75
Asset Valuation
Morgan Stanley was provided with an indicative valuation of Arnold
Transportation Services' assets. The net liquidation value of the Arnold
Transportation Services' assets was estimated to be approximately $70.0MM.
After-tax Component Sum-of-Parts Analysis
Morgan Stanley also analyzed financial information for each of Arnold
Industries' substantial businesses to arrive at an equity valuation for the
entire Arnold Industries business assuming the sales of ARLO and Arnold
Transportation Services. Based upon information provided to Morgan Stanley
from Arnold Industries, the tax bases of the ARLO and Arnold Transportation
Services businesses were assumed to be $52.0MM and $38.8MM, respectively.
Morgan Stanley assumed a tax rate of 39%. The pre-tax valuation range of ARLO
as computed by Morgan Stanley implied a value of $80.0MM to $110.0MM. The pre-
tax valuation range of Arnold Transportation Services as computed by Morgan
Stanley implied a value of $60.0MM to $70.0MM. Based upon the evaluation of
each of Arnold Industries' businesses as detailed in the previous analyses,
post adjustments for Arnold Industries' net cash and estimated tax effect of
the sale of Arnold Transportation Services and ARLO, the resulting valuation
range computed by Morgan Stanley implied a value of $15.95 to $18.49 per share
of Arnold Industries common stock.
In connection with the review of the merger by the Arnold Industries Board
of Directors, Morgan Stanley performed a variety of financial and comparative
analyses for the purpose of its opinion. The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to partial analysis or
summary description. In arriving at its opinion, Morgan Stanley considered the
results of all of its analyses as a whole and did not attribute any particular
weight to any analysis or factor considered by it. Furthermore, Morgan Stanley
believes that selecting any portion of its analyses, without considering all
analyses, would create an incomplete view of the process underlying its
opinion. In addition, Morgan Stanley may have given various analyses and
factors more or less weight than other analyses and factors, and may have
deemed various assumptions more or less probable than other assumptions, so
that the ranges of valuation resulting from any particular analysis described
above should not be taken to be Morgan Stanley's view of the actual value of
Arnold Industries.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic condition and
other matters, many of which are beyond the control of Arnold Industries. Any
estimates contained in Morgan Stanley's analyses are not necessarily
indicative of future results or actual values, which may be significantly more
or less favorable than those of the fairness of the consideration in the
merger agreement to Arnold Industries. The analyses do not purport to be
appraisals or to reflect the prices at which Arnold Industries common stock or
Roadway common stock might actually trade. The consideration and other terms
of the merger agreement were determined through arm's length negotiations
between Arnold Industries and Roadway and were approved by the Arnold
Industries board of directors. Morgan Stanley has provided advice to Arnold
Industries during such negotiations. However, Morgan Stanley did not recommend
any specific form of consideration to Arnold Industries or that any specific
form of consideration constituted the only appropriate consideration for the
merger. In arriving at its opinion, Morgan Stanley was not authorized to
solicit, and did not solicit, interest from any party with respect to an
acquisition or business combination involving Arnold Industries in its
entirety.
22
Morgan Stanley's opinion was one of the many factors taken into
consideration by the Arnold Industries board of directors in making its
determination to approve the merger. Morgan Stanley's analyses summarized
above should not be viewed as determinative of the opinion of the Arnold
Industries Board of Directors with respect to whether or not the Arnold
Industries board of directors would have been willing to agree to a different
amount or form of consideration.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking and financial
advisory business, is continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In addition, Morgan Stanley is a full-service securities firm
engaged in securities trading, brokerage and financing activities. In the
ordinary course of Morgan Stanley's trading and brokerage activities, Morgan
Stanley or its affiliates may at any time hold long or short positions, and
may trade or otherwise effect transactions for its own account or the accounts
of customers, in debt or equity securities or senior loans of Arnold
Industries or Roadway.
Pursuant to an engagement letter, Arnold Industries agreed to pay Morgan
Stanley a customary fee, which is contingent upon the closing of the merger,
and to reimburse Morgan Stanley for any reasonable expenses incurred in
connection with Morgan Stanley's engagement. Arnold Industries also agreed to
indemnify Morgan Stanley and its affiliates, their respective directors,
officers, agents and employees and each person, if any, controlling Morgan
Stanley or any of its affiliates, against certain liabilities and expenses,
including certain liabilities under the federal securities laws arising out of
Morgan Stanley's engagement. In the past, Morgan Stanley and its affiliates
have provided financial advisory services to Arnold Industries and have
received fees for the rendering of these services.
Interests Of Officers And Directors In The Merger
In considering the recommendation of the board of directors with respect to
the merger agreement and the merger, you should be aware that the directors
and executive officers of Arnold Industries have certain interests in the
merger that may be different from, or in addition to, shareholders of Arnold
Industries. The board of directors was aware of these interests as they
existed on August 21, 2001, and considered them, among other factors, in
approving the merger agreement and the merger. These interests are summarized
below.
Interest in Common Shares and Options. As of ________, 2001, our executive
officers and directors beneficially owned an aggregate of ________ shares of
our common stock. The aggregate consideration that would be received in the
merger in respect of these shares would be $__________. As of ________, 2001,
our executive officers and directors also owned an aggregate of _______ stock
options to purchase shares of our common stock. Upon consummation of the
merger, each option to purchase shares of our common stock will be cancelled
pursuant to our stock option plans and the holder of each such cancelled
option will be entitled to $21.75 less the exercise price of such option. The
aggregate consideration that would be received in the merger by our executive
officers and directors in respect of these options (net of the aggregate
exercise price) would be $___________. The aggregate consideration that would
be received in the merger by each of our executive officers with respect to
his stock options would be as follows:
Number of Net Consideration to be Received
Name of Executive Officer Options Owned in Respect of Options Owned
--------------------------- ------------- --------------------------------
Edward H. Arnold 175,000 $ 557,813
Kenneth F. Leedy 216,400 1,850,534
Heath L. Allen 90,000 774,325
Ronald E. Walborn 90,000 774,325
Donald G. Johnson 76,000 674,507
23
The aggregate consideration that would be received in the merger by each of
the following non-employee directors with respect to his stock options would
be as follows:
Number of Net Consideration to be Received
Name of Director Options Owned in Respect of Options Owned
------------------- ------------- --------------------------------
Arthur L. Peterson 0 $ 0
John B. Warden III 4,000 47,000
Indemnification and Insurance. The merger agreement requires the surviving
corporation to, for a period of six years after the merger, indemnify and hold
harmless, and provide advancement of expenses to, persons serving as directors
and officers of Arnold Industries and its subsidiaries immediately prior to
the time the merger becomes effective for actions based on matters and events
occurring at or prior to the merger to the same extent as currently provided
in our applicable charter documents. Further, the merger agreement requires
Roadway to provide for a period of six years following the merger, to officers
and directors in office immediately prior to the time the merger becomes
effective, on terms with respect to such coverage and amount no less favorable
to the insured than those of the policies in effect immediately prior to the
consummation of the merger, director, officer and fiduciary liability
insurance, subject to certain limitations concerning premium limitation.
Option To Enter Into Purchase Agreement To Purchase ARLO. Mr. Arnold and
certain members of the management team at ARLO were granted by Roadway an
exclusive right to enter into an agreement to purchase substantially all of the
assets of ARLO for $105 million in cash and the assumption of ARLO's
indebtedness if a definitive agreement between Roadway and Mr. Arnold can be
reached within 45 days after the execution of the merger agreement. Mr. Arnold
retained separate counsel and advisors to assist him in the negotiation of the
purchase of the assets of ARLO. On October 4, 2001, Roadway agreed to extend Mr.
Arnold's exclusivity until October 26, 2001. If a definitive agreement is
reached between Roadway and Mr. Arnold, the sale of ARLO would occur after the
closing of the merger in accordance with the terms of the definitive agreement.
ARLO, a division of Arnold Transportation Services, Inc., provides
value-added warehousing services including fulfillment, distribution center
management, contract-packaging, reverse logistics, call center management,
direct mail and integrated print services. ARLO has over 4.3 million square feet
of warehousing space located in Pennsylvania, Texas, Ohio and North Carolina.
ARLO traces its roots to 1976 when, at the request of a large customer, the
corporation began providing warehousing and distribution services. Today, ARLO
employs over 900 people and has established a reputation for, and a culture of,
superior service. Operating revenues totaled $47.8 million in 2000.
The following table presents certain financial information about ARLO as of,
and for the respective six- and twelve-month periods ending on, the dates
indicated below (all numbers in thousands):
June 30, 2001(1) December 31, 2000 December 31, 1999 December 31, 1998
---------------- ----------------- ----------------- -----------------
Operating Revenues $28,714 $47,822 $37,023 $29,445
Operating Income 3,897 6,928 5,460 5,532
Total Assets 56,066 57,129 50,541 39,287
Depreciation and Amortization 2,144 3,913 2,678 2,198
Purchase of Property and Equipment 1,616 2,809 15,869 11,355
---------------
(1) The information as of, and for the six-month period ending on, June 30,
2001 is unaudited.
Shareholder Voting Agreement
Edward H. Arnold has entered into a voting agreement with Roadway obligating
Mr. Arnold to vote the shares of Arnold Industries common stock over which he
has voting control, constituting approximately 16% of the outstanding shares
of Arnold Industries common stock, for approval and adoption of the merger
agreement and the merger and against any alternative acquisition of Arnold
Industries or any corporate action that would impair or delay consummation of
the merger. Furthermore, the voting agreement grants Roadway a proxy to vote
Mr. Arnold's shares as set forth in the preceding sentence and places
restrictions on the transfer of such shares. The voting agreement and the
irrevocable proxy granted thereunder will terminate if the merger agreement is
terminated or upon consummation of the merger.
Regulatory Matters
Roadway and Arnold Industries must comply with certain regulatory
requirements before the merger is consummated. Arnold Industries and Roadway
are not aware of any other material governmental consents or approvals that
are required prior to the parties' consummation of the merger other than those
described below. It is presently contemplated that, if such additional
governmental consents and approvals are required, such consents and approvals
will be sought. There can be no assurance, however, that any such additional
consents or approvals will be obtained.
Hart-Scott-Rodino Act. The consummation of the merger is subject to the
requirements of antitrust laws and regulations, including the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, and its related rules
and regulations, which provide that certain acquisition transactions may not
be consummated until certain information has been furnished to the Antitrust
Division of the Department of Justice and the Federal Trade Commission and
until certain waiting periods have been terminated or have expired. Roadway
and Arnold Industries filed Notification and Report Forms with the Antitrust
Division and the Federal Trade Commission on August 31, 2001. The Federal
Trade Commission and the Antitrust Division granted early termination of the
waiting period under the Hart-Scott-Rodino Act on September 18, 2001.
24
The termination of the Hart-Scott-Rodino waiting period does not preclude the
Antitrust Division, the Federal Trade Commission or any state governmental or
regulatory authority from challenging the merger on antitrust grounds either
before or after the waiting period has expired or been terminated. Accordingly,
at any time before or after the effective time of the merger, the Antitrust
Division, the Federal Trade Commission or any state governmental or regulatory
authority could take action under the antitrust laws as it deems necessary or
desirable in the public interest, or various other persons, including private
parties, could take action under the antitrust laws. These actions could include
seeking to enjoin the merger. Based on information available to them, Roadway
and Arnold Industries believe the merger can be completed in compliance with
federal and state antitrust laws. There can be no assurance, however, that a
challenge to the merger will not be made or that, if such a challenge is made,
Roadway and Arnold Industries will prevail.
Injunctions. The obligations of Roadway and Arnold Industries to consummate
the merger are subject to the condition that there be no final and
nonappealable injunction, preliminary restraining order or other order by any
court or governmental or regulatory authority of competent jurisdiction,
including any state governmental or regulatory authorities, or any other legal
restraint prohibiting consummation of the merger or limiting the ownership or
operation by Roadway or Arnold Industries or any of their respective
subsidiaries, of any material portion of the business or assets of either
Roadway or Arnold Industries.
Roadway and Arnold Industries are not aware of any foreign governmental
approvals or actions that may be required for consummation of the merger.
Should any of these other approvals or actions be required, Roadway and Arnold
Industries currently contemplate that it would be sought. The failure to make
any of these filings or to obtain any of these approvals is not anticipated to
have a material effect on the merger or the combined company.
Financing Of The Merger
It is estimated that the total amount of funds necessary for Roadway to
consummate the merger and pay related fees and expenses is approximately
$552,000,000. These funds are expected to come from the following:
o existing cash balances of $65,600,000;
o net cash proceeds of $275,000,000 from the issuance of senior
unsecured notes or in the event such notes are not issued before the
consummation of the merger, a $275,000,000 senior secured bridge
facility arranged by Credit Suisse First Boston Corp.;
o a term loan in the amount of $225,000,000; and
o a revolving credit facility in the amount of $200,000,000, which
revolving credit facility will not be used in connection with the
consummation of the merger other than (x) the borrowing of revolving
loans in an aggregate principal amount not exceeding $20,000,000 to
finance the merger to the extent necessary as a result of any cash
payment made by Roadway to fund any contingent tax payment in
respect of the tax liability described in Note 5 to the financial
statements contained in Roadway's 10-Q filed with the Securities and
Exchange Commission on July 26, 2001 for the period ending June 16,
2001, or to refinance indebtedness incurred by Roadway to fund any
such contingent tax payment and (y) the issuance of standby letters
of credit thereunder in an aggregate stated amount of approximately
$56,400,000 to backstop and/or replace existing standby letters of
credit in connection with the merger.
Pursuant to the terms of a binding commitment letter, Credit Suisse First
Boston Corp. has committed to provide to Roadway the full amount of the bridge
facility, the term loan and the revolving credit facility to be used to
consummate the merger and to pay related fees and expenses as well as for
working capital and general corporate purposes following the consummation of
the merger
.
The credit facility will be agented by Credit Suisse First Boston Corp. and
will consist of (i) a $200,000,000 five-year senior secured revolving credit
facility and (ii) a $225,000,000 five-year senior secured term loan facility.
The credit facility will be guaranteed by all direct and indirect subsidiaries
of Roadway. The term loan and the revolving loan are to bear interest at
fluctuating rates based on Credit Suisse First Boston Corp.'s base rate or the
London Interbank Offered Rate, plus an additional margin of 50 basis points
and 150 basis points, respectively. In addition, the credit facility will be
subject to customary covenants for this type of financing, including
restrictions on indebtedness, liens, sales and acquisitions other than in the
ordinary course of business, and affiliate transactions.
The senior notes, if offered, will have market terms. The bridge facility,
if necessary, will consist of a $275,000,000 term loan which matures six
months after the date the loan is first drawn. The bridge facility will be
25
guaranteed by all direct and indirect subsidiaries of Roadway. The bridge
loans will bear interest at fluctuating rates based on Credit Suisse First
Boston Corp.'s base rate or the London Interbank Offered Rate, plus an
additional margin which increases over time from 50 basis points to 150 basis
points and 150 basis points to 250 basis points, respectively. In addition,
the bridge facility will be subject to customary covenants for this type of
financing, including restrictions on indebtedness, liens, sales and
acquisitions other than in the ordinary course of business, and affiliate
transactions.
The commitment relating to the credit facility and the bridge facility is
contained in a commitment letter from Credit Suisse First Boston Corp. and is
subject to various conditions, including:
o the execution of definitive loan agreements and related documents;
o the absence of a material adverse change that affects Roadway's or
Arnold Industries' business or the likelihood of the merger being
consummated;
o the absence of a material adverse change in the financial, banking,
capital or debt markets that in Credit Suisse First Boston Corp.'s
reasonable judgment would reasonably be likely to have a material
adverse effect on the syndication of the credit facility; and
o Credit Suisse First Boston Corp.'s satisfaction that prior to and
during the syndication of the credit facility there are no competing
financing arrangements on behalf of Roadway or Arnold Industries or
their respective subsidiaries.
The commitment letter also provides that fundings under the credit facility
and the bridge facility may be subject to customary conditions contained in
the definitive loan agreements.
Material Federal Income Tax Consequences
The following discussion describes in general the material United States
federal income tax consequences relevant to the merger. The discussion is
based on the Internal Revenue Code of 1986, as amended, existing and proposed
Treasury regulations promulgated under the Internal Revenue Code of 1986,
rulings, administrative pronouncements and judicial decisions, changes to
which could materially affect the tax consequences described in this proxy
statement and could be made on a retroactive basis.
In general, the receipt of cash in exchange for shares of Arnold Industries
common stock pursuant to the merger will be a taxable transaction for federal
income tax purposes and may also be a taxable transaction under applicable
state, local and foreign income and other tax laws. The tax consequences of
such receipt may vary depending upon, among other things, the particular
circumstances of the shareholder. In general, a shareholder will recognize a
gain or a loss for federal income tax purposes equal to the difference between
the adjusted tax basis of his or her shares of Arnold Industries common stock
and the amount of cash received in exchange for those shares in the merger.
Such gain or loss generally will be:
o calculated separately for each block of shares (i.e., shares
acquired at the same cost in a single transaction) sold or exchanged
pursuant to the merger;
o a capital gain or loss if the shares of Arnold Industries common
stock are a capital asset in the hands of the shareholder; and
o a long-term capital gain or loss if the holding period of the shares
of Arnold Industries common stock is more than one year at the
effective time of the merger.
The receipt of cash by a shareholder of Arnold Industries pursuant to the
merger may be subject to backup withholding at the applicable rate unless the
shareholder provides a certified taxpayer identification number on Form W-9
and otherwise complies with the backup withholding rules or demonstrates that
it is exempt from backup withholding. Backup withholding is not an additional
tax; any amounts withheld may be allowed as a refund or a credit against the
federal income tax liability of the shareholder.
26
The foregoing discussion does not address all aspects of federal income
taxation that may be relevant to a shareholder and may not apply to
shareholders:
o who acquired their shares of Arnold Industries common stock pursuant
to the exercise of employee stock options or other compensation
arrangements with Arnold Industries;
o who are foreign corporations, foreign partnerships, other foreign
entities, or not citizens or residents of the United States;
o who perfect their dissenters' rights; or
o who are subject to special tax treatment under the Internal Revenue
Code (such as dealers in securities, insurance companies, other
financial institutions, regulated investment companies, shareholders
who hold their shares as part of a hedge, straddle, or conversion
transaction, and tax-exempt entities).
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, SHAREHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
MERGER, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL OR FOREIGN INCOME OR
OTHER TAX LAWS OR FEDERAL TAX LAWS OTHER THAN THOSE PERTAINING TO INCOME TAX.
Dissenters' Rights
Under the terms of the merger agreement, if you do not wish to accept the
cash payment provided for in the merger agreement, you have the right to
dissent from the merger and to receive payment in cash for the fair value of
your Arnold Industries common stock. Arnold Industries' shareholders electing
to exercise their dissenters' rights granted pursuant to the merger agreement
must comply with the provisions of Section 1571 to 1580 (Subchapter D of
Chapter 15) of the Pennsylvania Business Corporation Law in order to perfect
their rights. Arnold Industries will require strict compliance with the
statutory procedures. A copy of Subchapter D is attached to this proxy
statement as Annex C.
The following is intended as a brief summary of the material provisions of
the Pennsylvania statutory procedures required to be followed by a shareholder
in order to dissent from the merger and perfect dissenters' rights. This
summary, however, is not a complete statement of all applicable requirements
and is qualified in its entirety by reference to Subchapter D of Chapter 15 of
the Pennsylvania Business Corporation Law, the full text of which appears in
Annex C of this proxy statement.
IF YOU WISH TO CONSIDER EXERCISING YOUR DISSENTERS' RIGHTS, YOU SHOULD
CAREFULLY REVIEW THE TEXT OF SUBCHAPTER D CONTAINED IN ANNEX C SINCE FAILURE
TO TIMELY AND PROPERLY COMPLY WITH THE REQUIREMENTS OF SUBCHAPTER D WILL
RESULT IN THE LOSS OF YOUR DISSENTERS' RIGHTS.
Filing Notice Of Intention To Demand Fair Value
If you wish to dissent from the merger, you must deliver to Arnold
Industries, before the vote of Arnold Industries shareholders is taken on the
merger, a written notice of intention to demand that you be paid the fair
value of your shares if the merger is completed. This written notice may be
sent to the Secretary of Arnold Industries at 625 Fifth Avenue, Lebanon,
Pennsylvania 17402-0210. Neither the return of a proxy with instructions to
vote your shares against the merger, nor a vote against the merger, is
sufficient to satisfy the requirement of delivering a written notice to Arnold
Industries. In addition, you must not change beneficial ownership of your
shares at any time during the period from the date of filing the notice with
Arnold Industries through the effective date of the merger, and you must not
vote your shares in favor of the merger. The submission of a signed blank
proxy, if not revoked, will serve to waive dissenters' rights, but a failure
to vote against the merger will not waive your rights to dissent. Proper
revocation of a signed blank proxy or a signed proxy instructing a vote for
approval and adoption of the merger will also preserve your dissenters'
rights. FAILURE TO COMPLY WITH ANY OF THE FOREGOING WILL RESULT IN THE
FORFEITURE OF THE RIGHT TO PAYMENT OF THE FAIR VALUE OF YOUR SHARES, AND YOUR
SHARES WILL BE CONVERTED INTO THE MERGER CONSIDERATION IN THE MANNER DESCRIBED
IN THIS DOCUMENT.
27
Record And Beneficial Owners
Pennsylvania law distinguishes between record holders and beneficial owners.
Generally if you choose to assert your dissenters' rights, you must dissent as
to all of the shares you own. A record holder of shares may assert dissenters'
rights for fewer than all of the shares of Arnold Industries common stock
registered in the record holder's name only if the record holder dissents with
respect to all the shares of Arnold Industries common stock beneficially owned
by any one person and discloses the name and address of the person or persons
on whose behalf the record holder is dissenting. If you are a beneficial owner
of shares who is not the record holder, you may assert your dissenters' rights
with respect to shares held on your behalf if you submit to Arnold Industries,
no later than the time of assertion of dissenters' rights, the written consent
of the record holder. If you are a beneficial owner, you may not dissent with
respect to less than all of the shares of Arnold Industries common stock
beneficially owned by you, whether or not such shares are registered in your
name.
Notice To Demand Payment
If the merger is approved at the special meeting, Arnold Industries will
mail a notice to all dissenters who filed notice of intention to dissent and
who did not vote in favor of the merger. The notice will state where and when
a demand for payment must be sent and where certificates for shares must be
deposited in order to obtain payment. The notice will be accompanied by a copy
of Subchapter D of Chapter 15 of the Pennsylvania Business Corporation Law and
a form for demanding payment. This form will include a request for
certification of the date that beneficial ownership of the dissenting shares
was acquired by the shareholder or the person on whose behalf the shareholder
dissents. The time set for the receipt of demands and the deposit of
certificates will not be less than 30 days from the mailing of the notice.
Failure by you as a dissenting shareholder to timely demand payment or timely
deposit certificates as required by the notice will cause you to lose all
right to receive payment of the fair value of your shares. If the merger has
not been completed within 60 days after the date set for demanding payment and
depositing certificates, Arnold Industries will return any certificates that
have been deposited. Arnold Industries, however, may at any later time send a
new notice regarding demand for payment and deposit of certificates.
Payment Of Fair Value Of Shares
Promptly after the merger, or upon timely receipt of demand for payment if
the merger has already been completed, Arnold Industries will either:
o remit to dissenters who have made demand and deposited their
certificates the amount Arnold Industries estimates to be the fair
value of their shares; or
o give written notice that no remittance will be made.
The remittance or notice will be accompanied by:
o the closing balance sheet and statement of income of Arnold
Industries for a fiscal year ending not more than 16 months prior to
the date of the remittance or notice together with the latest
available interim financial statements;
o a statement of Arnold Industries' estimate of the fair value of the
shares;
o a notice of the right of the dissenting shareholder to demand
payment or supplemental payment, as the case may be; and
o a copy of Subchapter D of Chapter 15 of the Pennsylvania Business
Corporation Law.
If Arnold Industries does not remit the amount of its estimate of the fair
value of the shares, it will return all certificates that have been deposited
and may make a notation on them that a demand for payment has been made.
28
Estimate By You Of Fair Value Of Shares
If you, as a dissenting shareholder, believe that the amount estimated by
Arnold Industries and not remitted to you or the amount paid by Arnold
Industries to you for your shares is less than their fair value, you may send
to Arnold Industries your own estimate of the fair value. This will be deemed
a demand for payment of the amount of the deficiency. If you do not file your
own estimate of fair value within 30 days after the mailing of Arnold
Industries' notice or remittance, you will only be entitled to the amount
stated in the notice or remitted to you by Arnold Industries.
Valuation Proceedings
Within 60 days after the latest of (i) the effective date of the merger,
(ii) timely receipt of any demands for payment, or (iii) timely receipt of any
shareholder estimates of fair value, if any demands for payment remain
unsettled, Arnold Industries may file in court an application for relief
requesting that the fair value of the shares be determined by the court. If
your demands have not been settled, you will be made a party to the proceeding
and will be entitled to recover the amount by which the fair value of your
shares is found to exceed the amount, if any, previously remitted, plus
interest. If Arnold Industries fails to file an application within the 60-day
period and you have not settled your claim, you may file an application in
Arnold Industries' name within 30 days after the expiration of the 60-day
period. If no dissenter files an application within this 30-day period and you
have not settled your claim, you will be paid no more than Arnold Industries'
estimate of the fair value of your shares and may bring an action to recover
any amount not previously remitted.
Costs And Expenses Of Valuation Proceedings
The costs and expenses of any valuation proceedings, including the
reasonable compensation and expenses of any appraiser appointed by the court,
will be determined by the court and assessed against Arnold Industries. The
court may, however, apportion and assess any part of such costs and expenses
against all or some of the dissenters whose action in demanding supplemental
payment is found by the court to be in bad faith. The court may also assess
the fees and expenses of counsel and experts for any or all of the dissenters
against Arnold Industries if Arnold Industries fails to comply substantially
with Subchapter D or acts in bad faith. If the court finds that the services
of counsel for any dissenter were of substantial benefit to the other
dissenters and should not be assessed against Arnold Industries, it may award
to such counsel reasonable fees to be paid out of the amounts awarded to the
dissenters who were benefited.
Other
You should be aware that certain courts have disagreed as to whether
dissenters' rights are the exclusive remedy available to a shareholder who is
opposed to a corporate transaction, such as the merger. You should note that
Section 1572 of the Pennsylvania Business Corporation Law defines "fair value"
as: the fair value of shares immediately before the effectuation of the
corporate action to which the dissenter objects, taking into account all
relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action. The fair value of shares could be equal
to, less than or more than $21.75 per share. In view of the complexities of
these provisions of Pennsylvania law, if you are considering dissenting from
the merger, you should consult your own counsel.
MATERIAL PROVISIONS OF THE MERGER AGREEMENT
This section of the proxy statement describes material provisions of the
merger agreement. The description of the merger agreement contained in this
proxy statement is qualified in its entirety by reference to the complete text
of the merger agreement, a copy of which is attached as Annex A to this proxy
statement and is incorporated in this proxy statement by reference. You are
urged to review the merger agreement carefully and in its entirety.
General
Pursuant to the merger agreement, at the effective time of the merger, Lion
Corp. will merge into Arnold Industries, and Lion Corp. will cease to exist.
Following the effective time of the merger, Arnold Industries will be the
surviving corporation and a wholly owned subsidiary of Roadway.
29
Merger Consideration
At the effective time of the merger, by virtue of the merger and without any
action on the part of any shareholder, each issued and outstanding share of
Arnold Industries common stock held by Arnold Industries shareholders will be
converted into the right to receive $21.75 in cash, without interest, except
for shares held by Roadway or any of its wholly owned subsidiaries or by
Arnold Industries or any of its wholly owned subsidiaries and shares as to
which dissenters' rights are properly exercised by a dissenting shareholder.
Any shares of Arnold Industries common stock held in treasury automatically
will be canceled and retired at the effective time of the merger and will
cease to exist. No consideration will be delivered in exchange for these
shares. Each share of Arnold Industries common stock, if any, that is owned by
Roadway or any of its wholly owned subsidiaries or Arnold Industries or any of
its wholly owned subsidiaries will also be cancelled.
As of the effective time of the merger, all shares of Arnold Industries
common stock will no longer be outstanding, will automatically be canceled and
retired, and will cease to exist. Each holder of Arnold Industries shares of
common stock will cease to have any rights with respect to those shares,
except the right to receive the merger consideration in accordance with the
terms of the merger agreement or to perfect the holders' dissenters' rights
under Pennsylvania law if the holder has properly exercised these rights.
As of the effective time of the merger, each share of Lion Corp. common
stock issued and outstanding immediately prior to the effective time of the
merger will be converted into one fully paid and nonassessable share of common
stock of the surviving corporation.
No dissenting shareholder will be entitled to any portion of the merger
consideration or other distributions unless and until the dissenting
shareholder fails to perfect or otherwise effectively withdraws or loses his
or her dissenters' rights for failure to comply with Subchapter D of Chapter
15 of the Pennsylvania Business Corporation Law. Shares of Arnold Industries
common stock as to which dissenters' rights have been exercised will be
treated in accordance with Subchapter D of Chapter 15 of the Pennsylvania
Business Corporation Law. If any person who otherwise would be deemed a
dissenting shareholder fails to properly perfect or effectively withdraws or
loses the right to dissent with respect to any shares of Arnold Industries
common stock, those shares will be treated as though they had been converted
as of the later of the effective time of the merger or the occurrence of such
an event into the right to receive the merger consideration, without interest.
See "The Merger--Dissenters' Rights."
Treatment of Equity Plans
Each holder of an outstanding option to purchase shares of our common stock
immediately prior to the effective time of the merger that is issued pursuant
to either the Arnold Industries 1997 Stock Option Plan or the 1987 Stock
Option Plan, whether or not then exercisable, will be entitled to receive a
cash payment equal to the amount, if any, by which $21.75 exceeds the per
share exercise price of such option, multiplied by the number of shares of
common stock subject to such option, less all required tax withholding. We
have agreed to cause our equity plans to be terminated effective upon the
consummation of the merger.
Representations and Warranties
The merger agreement contains customary representations and warranties by
Arnold Industries, Roadway and Lion Corp. relating to, among other things:
o the corporate organization, standing and power of each of Arnold
Industries, Roadway and Lion Corp.;
o the subsidiaries of Arnold Industries;
o the capital structure of Arnold Industries;
o each of Arnold Industries', Roadway's and Lion Corp.'s authority to
enter, and noncontravention of organizational documents, orders,
writs, injunctions, decrees, statutes, rules, regulations and
agreements upon entrance, into the merger agreement;
o documents filed by each of Arnold Industries and Roadway with the
Securities and Exchange Commission and other regulatory entities and
the accuracy of information contained in those filings;
30
o the absence of certain material changes or events with respect to
Arnold Industries;
o Arnold Industries' compliance with applicable laws and the existence
of litigation;
o matters relating to Arnold Industries' compliance with the Employee
Retirement Income Security Act of 1974, as amended;
o taxes of Arnold Industries;
o the effect of state anti-takeover laws in connection with the merger
agreement and the merger;
o the vote required by the shareholders of Arnold Industries in
connection with the merger agreement and the merger;
o Arnold Industries' and Roadway's engagement of and payment of fees
to brokers, investment bankers, finders and financial advisors in
connection with the merger agreement;
o environmental matters affecting Arnold Industries;
o the non-existence of shareholders' rights or poison pill agreements,
plans or arrangements;
o the preparation of this proxy statement;
o the intellectual and real properties of Arnold Industries;
o the opinion of Morgan Stanley Dean Witter;
o labor agreements and material labor disputes of Arnold Industries;
o material contracts of Arnold Industries;
o liabilities of Arnold Industries not disclosed on our financial
statements;
o the non-existence of any other discussions by Arnold Industries with
any other person regarding the sale of Arnold Industries;
o the financial ability of Roadway to attain the financing necessary
to consummate the transactions contemplated by the merger agreement;
o certain business practices of Arnold Industries;
o insurance policies of Arnold Industries; and
o transactions between Arnold Industries and its affiliates.
Covenants
Conduct of Business. Pursuant to the merger agreement, Arnold Industries
has agreed that, except as consented to by Roadway, during the period from the
date of the merger agreement to its effective time, Arnold Industries will and
will cause its subsidiaries to carry on its business in the ordinary course
consistent with past practice. Arnold Industries will use all reasonable
efforts to keep the services of its current officers and other key employees
available and preserve its relationships with those persons having business
dealings with Arnold Industries and its subsidiaries.
The merger agreement provides that Arnold Industries and its subsidiaries
will not, among other things, and with some exceptions:
o declare or pay any dividend or other distribution other than
regularly scheduled quarterly dividends;
o issue, deliver, sell, pledge or encumber any shares of capital stock
or any rights to purchase capital stock or any securities
convertible into capital stock;
o amend its certificate of incorporation, by-laws, form any
subsidiaries, or be a party to any merger, consolidation, business
combination or any other similar transaction;
o increase or decrease its authorized capital stock;
31
o make any changes in its capital structure;
o purchase, redeem or cancel for value any shares of its capital stock
or any options or convertible notes;
o enter into any commitments for capital expenditures other than in
the ordinary course of business;
o sell, lease, encumber, mortgage or dispose of any assets or
properties other than in the ordinary course of business;
o incur new indebtedness, liabilities or other obligations other than
in the ordinary course of business;
o enter into or amend any benefit plan or employment, severance or
collective bargaining agreement, pay any bonuses in connection with
the merger, or grant any increases in compensation or benefits;
o acquire or invest in any other business;
o make any tax election;
o settle any tax liability or change any accounting principles;
o modify, waive or assign any contract, forgive any indebtedness or
settle any litigation, proceeding or material claims;
o write-off or establish extraordinary reserves for any accounts
receivable;
o make any loans, advances, capital contributions or investments in
any third person; or
o take any action that would reasonably be expected to result in any
of the conditions of the merger not being satisfied.
Roadway agreed that it will not take any action that would reasonably be
expected to result in any of the conditions of the merger not being satisfied.
In addition, the parties have agreed that they will notify each other of any
changes or events that could reasonably be expected to have a material adverse
effect on the notifying party or the truth of their respective representations
and warranties.
No Solicitation. The merger agreement provides that Arnold Industries will
not, and will not authorize or permit any of its subsidiaries or any of its or
their respective directors, officers, employees, agents or representatives,
directly or indirectly, to solicit, initiative, encourage, induce or knowingly
facilitate, or furnish or disclose non-public information in furtherance of
any inquiries or the making of any proposal that constitutes an acquisition
proposal (as defined below).
o Notwithstanding the foregoing, at any time prior to the approval of
the merger by the shareholders of Arnold Industries, the board of
directors of Arnold Industries may, in the exercise of its fiduciary
obligations under Pennsylvania law as determined by the board of
directors of Arnold Industries in good faith, after consultation
with and receipt of written advice from its outside counsel as to
the nature of the fiduciary duties of the board of directors under
applicable law, pursuant to a customary confidentiality agreement
with terms not substantially more favorable to such third party than
the confidentiality agreement between Roadway and Arnold Industries,
furnish information to, or engage in discussions with, any third
party who delivers a written proposal for a superior proposal (as
defined below) that was not solicited, initiated, knowingly
facilitated or encouraged after the date of the merger agreement.
o If prior to the approval of the merger by the shareholders of Arnold
Industries, the board of directors of Arnold Industries receives a
superior proposal that was not solicited, initiated, induced,
knowingly facilitated or encouraged after the date of the merger
agreement except as otherwise permitted pursuant to the merger
agreement, as described above, the board of directors of Arnold
Industries may, subject to this and the following sentences, in the
exercise of its fiduciary obligations under Pennsylvania law as
determined by the board of directors of Arnold Industries in good
faith, after consultation with and receipt of advice from its
outside counsel as to the nature of the fiduciary duties of the
board of directors under applicable law, withdraw, modify or change
the recommendation of the board of
32
directors of Arnold Industries of the merger agreement and/or
recommend a superior proposal to the shareholders of Arnold
Industries and/or comply with Rule 14e-2 promulgated under the
Exchange Act with respect to an acquisition proposal, provided that
it gives Roadway four business days prior written notice of its
intention to do so and during such four business day period, Arnold
Industries otherwise cooperates with Roadway to enable Roadway to
engage in good faith negotiations so that the merger can be
consummated. Any withdrawal, modification or change of the
recommendation of the board of directors of Arnold Industries of the
merger agreement will not change the approval of the board of
directors of Arnold Industries for purposes of causing any state
takeover statute or other state law to be inapplicable to the
transactions contemplated by the merger agreement, including the
merger.
o From and after the execution of the merger agreement, Arnold
Industries must promptly advise Roadway orally and in writing of the
receipt of any inquiries, discussions, negotiations or proposals
relating to an acquisition proposal, including the specific terms
thereof and the identity of the other party or parties involved, and
must promptly furnish to Roadway a copy of any written proposal
along with any information provided to or by any third party
relating thereto. In addition, Arnold Industries must promptly
advise Roadway in writing if the board of directors of Arnold
Industries makes any determination to take any action with respect
to any acquisition proposal as permitted by the merger agreement (as
described above).
o Nothing in the merger agreement permits Arnold Industries to
terminate the merger agreement or to enter into any agreement with
respect to any acquisition proposal before the special meeting of
its shareholders.
An "acquisition proposal" is any inquiry, proposal or offer from any person
other than Roadway relating to any:
o merger, consolidation, share exchange, business combination,
issuance of securities, tender offer, exchange offer, or other
similar transaction involving Arnold Industries or any of its
subsidiaries in which:
o any third party acquires beneficial or record ownership of more
than 10% of any outstanding class of voting securities of
Arnold Industries or its subsidiaries; or
o Arnold Industries or its subsidiaries issues or sells
securities representing more than 10% of any outstanding class
of voting securities of any of Arnold Industries or its
subsidiaries; or
o direct or indirect acquisition or sale of a business that
constitutes 10% or more of the net revenues, net income or the
assets of Arnold Industries and its subsidiaries, taken as a whole.
A "superior proposal" is an unsolicited bona fide written acquisition
proposal that the Arnold Industries board of directors determines, in its good
faith judgment, would be :
o after consulting with and receipt of advice from a nationally
recognized investment banking firm, superior to the shareholders of
Arnold Industries from a financial point of view than the merger; or
o more favorable to Arnold Industries and its shareholders (taking
into account all financial and strategic considerations, including
relevant legal, financial, regulatory and other aspects of that
proposal, the third party making the proposal, the conditions of the
proposal and all constituencies and pertinent factors permitted
under the Pennsylvania Business Corporation Law), and for which
financing, to the extent required, is then committed and the Arnold
Industries board of directors reasonably expects a transaction
pursuant to such proposal could be consummated.
Additional Agreements
Preparation of Proxy Statement. Arnold Industries has agreed to, as soon as
practicable following the date of the merger agreement, to prepare, file with
the Securities and Exchange Commission and mail to its shareholders this proxy
statement.
Shareholders Meeting. Arnold Industries has agreed to, as soon as
practicable following the date of the merger agreement, duly call and hold a
meeting of its shareholders for the purpose of obtaining shareholder
33
approval and, through the Arnold Industries board of directors, recommend to
its shareholders the adoption of the merger agreement and the merger and
solicit proxies in favor of such approval.
Access to Information; Confidentiality. Subject to the confidentiality
agreement, dated April 19, 2000, between Arnold Industries and Roadway, Arnold
Industries agreed to afford to Roadway and its counsel, financial advisors,
accountants and other representatives, reasonable access during normal
business hours during the period prior to the effective time of the merger, to
all of Arnold Industries' properties, books, contracts, commitments, personnel
and records. Arnold Industries and Lion Corp. agreed to hold, and to cause its
counsel, financial advisors, auditors and other representatives and affiliates
to hold, any nonpublic information in accordance with the terms of the
confidentiality agreement.
Efforts; Cooperation. Subject to the terms and conditions provided in the
merger agreement, Arnold Industries, Roadway and Lion Corp. agreed to use
reasonable best efforts to consummate the merger and the related transactions
contemplated in the merger agreement, including the obtaining of all material
consents of third parties and governmental authorities, the making of all
governmental filings necessary to consummate and make effective the
transactions, including required filings under the applicable antitrust laws
and defending any lawsuits or other legal proceedings challenging the merger
agreement or the merger. If, at any time after the effective time of the
merger, any further action is necessary or desirable to carry out the purposes
of the merger agreement, the proper officers and directors of each party to
the merger agreement are required to take all of these necessary actions.
Indemnification and Insurance. Pursuant to the merger agreement, all rights
to indemnification and expense advancement as provided in Arnold Industries'
or its subsidiaries' organizational documents or in any indemnification
agreement in effect as of the date of the merger agreement existing in favor
of any person who is an officer, director or employee of Arnold Industries
immediately prior to the effective time of the merger will survive the
effective time of the merger for a period of six years.
The merger agreement also provides that for six years after the effective
time of the merger, the surviving corporation will maintain liability
insurance policies covering Arnold Industries' officers and directors,
provided, however, that Roadway is not required to expend in any one year an
amount in excess of 200% of the annual premiums currently paid by Arnold
Industries for those policies.
Fees and Expenses. Except as described below, whether or not the merger is
completed, all fees and expenses incurred in connection with the merger, the
merger agreement and the transactions contemplated thereby will be paid by the
party incurring these fees or expenses, except that the filing fees under the
Hart-Scott-Rodino Act are required to be shared equally between Arnold
Industries and Roadway.
Employee Benefits. Roadway has agreed that any individual who is an
employee of Arnold Industries or its subsidiaries immediately after the merger
and who was an employee prior to the merger, will be eligible to participate
in the employee benefit programs of the surviving corporation on the same
basis and subject to the same terms and conditions as similarly situated
employees of Roadway.
Conditions Precedent
The obligations of Roadway, Lion Corp. and Arnold Industries to effect the
merger do not arise until the following conditions have been satisfied or
waived:
o Arnold Industries shareholders have approved the merger agreement
and the merger;
o all material consents, approvals and filings from and to any
governmental entity have been obtained or made;
o no final judgment, decree, rule, law, order or injunction by any
governmental entity is in effect that prevents the consummation of
the merger or limits Roadway's ability to own and operate Arnold
Industries or its subsidiaries; and
o all applicable waiting periods under the Hart-Scott-Rodino Act have
expired or been terminated.
34
The obligations of Roadway and Lion Corp. to effect the merger do not arise
until the following conditions have been satisfied or waived:
o the representations and warranties of Arnold Industries will be true
and correct except where the failure of such representations and
warranties to be true and correct have not or would not reasonably
be expected to have a material adverse effect on Arnold Industries
or on Arnold Industries' ability to consummate the merger or any
other transactions contemplated by the merger agreement;
o Arnold Industries will have performed, in all material respects, all
of its obligations under the merger agreement;
o Roadway will have obtained financing in an amount sufficient to pay
the merger and option consideration; and
o there shall not have occurred a material adverse change in Arnold
Industries and its subsidiaries or in Arnold Industries' ability to
consummate the merger.
The obligations of Arnold Industries to effect the merger do not arise until
the following conditions have been satisfied or waived:
o the representations and warranties of Roadway and Lion Corp. will be
true and correct except where the failure of such representations
and warranties to be true and correct have not had or would not
reasonably be expected to have a material adverse effect on Roadway;
and
o Roadway and Lion will have performed, in all material respects, all
of their obligations under the merger.
Termination, Fees, Amendment and Waiver
Termination. The merger agreement may be terminated by:
o mutual consent of the parties;
o either party if the merger has not been completed on or before March
1, 2002, however, the right to terminate under this clause is not
available to a party whose failure to fulfill an obligation under
the merger agreement is the cause of the failure of the merger to
occur;
o either party if the shareholders meeting has concluded and the
approval of Arnold Industries shareholders is not obtained, however,
the right to terminate under this clause is not available to a party
whose failure to fulfill an obligation under the merger agreement is
the cause of the failure to obtain such approval;
o either party if any court or governmental entity has issued a final
and nonappealable order or taken any other nonappealable final
action preventing the consummation of the merger or limiting the
ownership or operation by Roadway, Arnold Industries or any of their
respective subsidiaries of any material portion of the business or
assets of Roadway or Arnold Industries;
o Arnold Industries if Roadway or Lion Corp. materially breaches its
representations, warranties and covenants contained in the merger
agreement and those breaches have not been cured within 30 days;
o Roadway if Arnold Industries materially breaches its
representations, warranties and covenants contained in the merger
agreement and those breaches have not been cured within 30 days; and
o Roadway if the Arnold Industries board of directors:
o fails to recommend the merger to the shareholders or withdraws
or modifies their recommendation of the transaction;
o approves or recommends any alternative transaction;
o proposes or announces its intention to enter into an agreement
for an alternate transaction; or
o breaches the no solicitation or shareholder recommendation
provisions of the merger agreement.
35
Termination Fee. Arnold Industries will be required to pay Roadway a
termination fee of $15,000,000 if:
o the merger agreement is terminated by Roadway or Arnold Industries
because of:
o the failure of the merger to be consummated by March 1, 2002;
or
o the failure of the shareholders to approve the merger at the
shareholders meeting; and
o in either case, prior to the shareholders meeting, an
acquisition proposal has been made known to Arnold Industries
or been made directly to its shareholders or any third party
has publicly announced an intention to make an acquisition
proposal or any third party solicits proxies or consents in
opposition to the merger and within one year of such
termination Arnold Industries enters into an agreement related
to such acquisition proposal or consummates the transaction
contemplated by such acquisition proposal.
o Roadway terminates the merger agreement because the Arnold
Industries board of directors:
o fails to recommend the merger to the shareholders or withdraws
or modifies its recommendation of the transaction;
o approves or recommends any alternative transaction;
o proposes or announces any intention to enter into an agreement
for an alternate transaction; or
o breaches the no solicitation or shareholder recommendation
provisions of the merger agreement.
Amendment. The merger agreement may be amended by the parties at any time
before or after the approval of the merger agreement by the Arnold Industries
shareholders. After approval, however, the parties may not make any amendment
that by law requires further approval of the shareholders without the approval
of such shareholders.
THE COMPANIES
Arnold Industries, Inc.
Arnold Industries is a holding company of transportation and logistics
companies. Its business units include New Penn Motor Express, a Northeast
regional next-day less-than-truckload carrier, Arnold Transportation Services,
an irregular route and dedicated truckload carrier, and Arnold Logistics,
which provides distribution, order fulfillment direct mail and printing, call
center management, reverse logistics and contract packaging services.
Arnold Industries' principal executive offices are located at 625 South
Fifth Avenue, Lebanon, Pennsylvania 17042-0210, and its telephone number is
(717) 236-4408. Arnold Industries' Internet address is (www.aind.com).
Information on the Internet site is not incorporated by reference into this
proxy statement.
For a more detailed description of the business and properties of Arnold
Industries, see the descriptions set forth in Arnold Industries' Annual Report
on Form 10-K for the year ended December 31, 2000, which is incorporated in
this proxy statement by reference. See "Where You Can Find More Information."
Roadway Corporation
Roadway Corporation is a holding company for a portfolio of strategically
linked transportation companies with yearly revenues of approximately
$3,000,000,000. Roadway Corporation common stock is traded on Nasdaq under the
ticker symbol "ROAD." Principal among Roadway Corporation's holdings is
Roadway Express, Inc., the second largest less-than-truckload carrier in the
United States. Roadway Express, Inc. provides service between all 50 states,
Canada, Mexico and Puerto Rico including export services to 66 countries.
Roadway Corporation's principal executive offices are located at 1077 Gorge
Boulevard, Akron, Ohio 44309-0471 and its telephone number is (330) 384-1717.
36
Lion Corp.
Lion Corp. is a newly formed Pennsylvania corporation and a wholly owned
subsidiary of Roadway. Lion Corp. was formed for the sole purpose of effecting
the merger.
MARKET PRICES OF COMMON STOCK
The principal market on which shares of Arnold Industries common stock are
traded is The Nasdaq National Market, under the ticker symbol "AIND." On
________, 2001, the last practicable trading day before the printing of this
proxy statement, the high and low sales prices of shares of our common stock
were $______ and $_______, respectively. On August 21, 2001, the last trading
day before the public announcement of the merger agreement, the high and low
sales prices of our shares of common stock were $21.50 and $20.50,
respectively.
YOU ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR OUR SHARES OF COMMON
STOCK.
The following table sets forth, for the calendar quarters indicated, the
high and low closing prices per share of Arnold Industries common stock as
reported by The Nasdaq National Market:
HIGH LOW
------- -------
1999
----
First Quarter ............................................. 16.7500 13.0000
Second Quarter ............................................ 17.0000 13.7500
Third Quarter ............................................. 16.4375 12.3750
Fourth Quarter ............................................ 13.6875 8.0000
2000
----
First Quarter ............................................. 15.7500 10.6250
Second Quarter ............................................ 14.2500 11.0625
Third Quarter ............................................. 17.0000 12.0000
Fourth Quarter ............................................ 20.8750 14.5000
2001
----
First Quarter ............................................. 21.2500 16.0000
Second Quarter ............................................ 20.0200 16.5000
Third Quarter .............................................
Fourth Quarter ............................................
(through _________, 2001)
As of ______, 2001 there were approximately __________ holders of record of
Arnold Industries common stock. The total number of common shares outstanding
as of _________, 2001 was ______________.
37
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of ___________, 2001,
with respect to the beneficial ownership of the outstanding common stock of
Arnold Industries by each person known to us to own beneficially five percent
or more of the outstanding Arnold Industries common stock, each director, each
of our named executive officers and all directors and executive officers as a
group as reported by each person:
Name of
Beneficial Owner Number of Shares Percent of Class
---------------- Beneficially Owned Beneficially Owned
------------------ ------------------
Edward H. Arnold 4,345,189(1) 16.52%
Kenneth F. Leedy 414,585(2) 1.58%
Ronald E. Walborn 412,962(3) 1.57%
Heath L. Allen 277,280(4) 1.05%
Donald G. Johnson 89,176(5) *
John B. Warden III 8,000(6) *
Arthur L. Peterson 6,300 *
Directors and Officers as a
Group (7 in number) 5,555,492(7) 21.12%
---------------
* less than 1.0%
(1) The shares shown include 175,000 shares underlying options which are
exercisable by the holder at any time. The address of Mr. Arnold is
Arnold Industries, Inc., 625 South Fifth Avenue, Lebanon, Pennsylvania,
17402.
(2) Includes (a) 211,210 shares underlying options which are exercisable by
the holder at any time and (b) 5,190 shares underlying options which will
vest immediately prior to the merger.
(3) Includes (a) 90,000 shares underlying options which are exercisable by
the holder at any time and (b) 6,140 shares held for Mr. Walborn's
segregated account of Walborn Shambach Associates Profit Sharing Trust.
(4) Includes (a) 90,000 shares underlying options which are exercisable by
the holder at any time and (b) 109,870 shares held jointly by Mr. Allen
and his spouse.
(5) Includes (a) 25,750 shares underlying options which are exercisable by
the holder at any time and (b) 50,250 shares underlying options which
will vest immediately prior to the merger.
(6) Includes (a) 4,000 shares underlying options which will vest immediately
prior to the merger, (b) 2,000 shares held in a trust of which Mr. Warden
is both a trustee and a partial beneficiary, and (c) 2,000 shares owned
by Mr. Warden individually.
(7) The totals include the named individuals who exercise sole voting and
dispositive power over the shares shown unless otherwise indicated. See
also Notes (1) through (6) above.
SHAREHOLDER PROPOSALS
The 2002 annual meeting of the shareholders of Arnold Industries will be
held only if the merger transaction discussed in this proxy statement is not
approved and adopted. An eligible shareholder who wants to have a qualified
proposal considered for inclusion in the proxy statement for the 2002 annual
meeting must notify the Secretary of Arnold Industries. The proposal must be
received at Arnold Industries' offices no later than December 31, 2001.
WHERE YOU CAN FIND MORE INFORMATION
Arnold Industries and Roadway file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
that Arnold Industries or Roadway files at the public reference facilities of
the Securities and
38
Exchange Commission at its principal office at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington DC 20549, and its regional office at
CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
You may also call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. Arnold Industries' and
Roadway's Securities and Exchange Commission filings are also available to the
public from commercial document retrieval services and at the web site
maintained by the Securities and Exchange Commission at www.sec.gov.
The Securities and Exchange Commission allows Arnold Industries and Roadway
to "incorporate by reference" information into this proxy statement, which
means that Arnold Industries and Roadway can disclose important information to
shareholders by referring them to another document filed separately with the
Securities and Exchange Commission. The information incorporated by reference
is deemed to be part of this proxy statement, except for any information
superseded by information in this proxy statement. This proxy statement
incorporates by reference the documents set forth below that we have
previously filed with the Securities and Exchange Commission. These documents
contain important information about Arnold Industries, Roadway and their
respective finances.
ARNOLD INDUSTRIES SECURITIES AND EXCHANGE
COMMISSION FILINGS (FILE NO. 0-10894) PERIOD
----------------------------------------- --------------------------------------
Annual Report on Form 10-K Year ended December 31, 2000
Quarterly Reports on Form 10-Q Quarters ended June 30, 2001 and March 31, 2001
Current Report on Form 8-K Filed on August 22, 2001
ROADWAY (AND ROADWAY EXPRESS, INC.,
PREDECESSOR TO ROADWAY) SECURITIES AND
EXCHANGE COMMISSION FILINGS
(FILE NOS. 000-32821, 000-00600) PERIOD
------------------ --------------------------------------
Annual Report on Form 10-K Year ended December 31, 2000
Quarterly Reports on Form 10-Q Quarters ended June 16, 2001 and March 24, 2001
ARNOLD INDUSTRIES AND ROADWAY ARE ALSO INCORPORATING BY REFERENCE ADDITIONAL
DOCUMENTS THAT WE MAY FILE WITH THE SECURITIES AND EXCHANGE COMMISSION BETWEEN
THE DATE OF THIS PROXY STATEMENT AND THE DATE OF THE SPECIAL MEETING.
Roadway and Lion Corp. have supplied all information contained or
incorporated by reference in this proxy statement relating to Roadway and Lion
Corp.; Arnold Industries has supplied all such information relating to Arnold
Industries.
Arnold Industries may have sent to you some of the documents incorporated by
reference by it, but you can obtain any of them through Arnold Industries,
Roadway or the Securities and Exchange Commission. Documents incorporated by
reference are available without charge, excluding all exhibits unless they
have been specifically incorporated by reference in this proxy statement. You
may obtain documents incorporated by reference in this proxy statement by
requesting them from the appropriate party in writing at the following
addresses:
Arnold Industries, Inc. Roadway Corporation
625 South Fifth Avenue 1077 Gorge Boulevard
Lebanon, Pennsylvania 17042-0210 Akron, Ohio 44309-0471
Attn: Secretary Attn: Secretary
Telephone: (717) 236-4408 Telephone: (330) 384-1717
Arnold Industries and Roadway will send any document so requested to the
requesting shareholder by first-class mail or other equally prompt means
within one business day of receiving the request.
39
If you would like to request documents from Arnold Industries or Roadway,
please do so by ________, 2001 to receive them before the special meeting.
You should rely only on the information contained or incorporated by
reference in this proxy statement to vote your shares at the special meeting.
We have not authorized anyone to provide you with information that is
different from what is contained in this proxy statement. This proxy statement
is dated ___________, 2001. You should not assume that the information
contained in the proxy statement is accurate as of any date other than such
date, and the mailing of this proxy statement to you will not create any
implication to the contrary.
40
ANNEX A
---------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among:
ROADWAY CORPORATION,
a Delaware corporation
LION CORP.,
a Pennsylvania corporation
and
ARNOLD INDUSTRIES, INC.,
a Pennsylvania corporation
Dated as of August 21, 2001
---------------------------------------------------------
Table of Contents
Page
ARTICLE 1 THE MERGER..................................................................... 1
Section 1.1 The Merger..................................................................... 1
Section 1.2 Closing........................................................................ 1
Section 1.3 Effective Time................................................................. 2
Section 1.4 Effects of the Merger.......................................................... 2
Section 1.5 Articles of Incorporation and Bylaws........................................... 2
Section 1.6 Directors and Officers of the Surviving Corporation............................ 2
ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES AND PAYMENT................ 2
Section 2.1 Effect on Capital Stock........................................................ 2
Section 2.2 Payment and Surrender of Certificates.......................................... 3
Section 2.3 Company Equity Plans........................................................... 4
Section 2.4 Dissenters' Rights............................................................. 5
Section 2.5 Further Assurances............................................................. 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES................................................. 6
Section 3.1 Representations and Warranties of Company...................................... 6
Section 3.2 Representations and Warranties of Parent and Merger Sub........................ 22
ARTICLE 4 COVENANTS RELATING TO CONDUCT OF BUSINESS...................................... 24
Section 4.1 Conduct of Business............................................................ 24
Section 4.2 No Solicitation................................................................ 26
ARTICLE 5 ADDITIONAL AGREEMENTS.......................................................... 29
Section 5.1 Preparation of Proxy Statement; Shareholders Meeting........................... 29
Section 5.2 Access to Information; Confidentiality......................................... 29
Section 5.3 Efforts; Cooperation........................................................... 30
Section 5.4 Indemnification................................................................ 30
Section 5.5 Employee Benefits.............................................................. 31
Section 5.6 Public Announcements........................................................... 31
Section 5.7 Fees and Expenses.............................................................. 32
Section 5.8 Credit Agreement............................................................... 32
Section 5.9 Shareholder Litigation......................................................... 32
Section 5.10 Transition..................................................................... 32
Section 5.11 Section 16(b).................................................................. 33
Section 5.12 Financing...................................................................... 33
ARTICLE 6 CONDITIONS PRECEDENT........................................................... 33
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger..................... 33
Section 6.2 Conditions to Obligation of Parent and Merger Sub.............................. 34
Section 6.3 Conditions to Obligation of the Company........................................ 34
Section 6.4 Frustration of Closing Conditions.............................................. 35
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER.............................................. 35
Section 7.1 Termination.................................................................... 35
Section 7.2 Effect of Termination.......................................................... 36
ARTICLE 8 GENERAL PROVISIONS............................................................. 37
Section 8.1 Amendment...................................................................... 37
Section 8.2 Extension; Waiver.............................................................. 37
Section 8.3 Nonsurvival of Representations and Warranties.................................. 38
Section 8.4 Notices........................................................................ 38
Section 8.5 Interpretation................................................................. 38
Section 8.6 Counterparts................................................................... 39
Section 8.7 Entire Agreement; No Third-Party Beneficiaries................................. 39
Section 8.8 Governing Law.................................................................. 39
Section 8.9 Assignment..................................................................... 40
Section 8.10 Consent to Jurisdiction........................................................ 40
Section 8.11 Specific Enforcement........................................................... 40
Section 8.12 Severability................................................................... 40
A-i
TABLE OF DEFINED TERMS
1987 Plan ................................................................ 5
1997 Plan ................................................................ 5
affiliate ................................................................ 44
Acquisition Proposal ..................................................... 10
Acquisition Transaction .................................................. 33
Agreement ................................................................ 1
Articles of Merger ....................................................... 2
Business Day ............................................................. 2
Certificate .............................................................. 3
Closing .................................................................. 1
Closing Date ............................................................. 2
Code ..................................................................... 11
Commitment Letter ........................................................ 28
Common Stock ............................................................. 1
Company .................................................................. 1
Company Benefit Plans .................................................... 11
Company Disclosure Letter ................................................ 7
Company Entities ......................................................... 7
Company Entities Proprietary Asset ....................................... 21
Company Entity Contract .................................................. 24
Company Material Adverse Effect .......................................... 6
Company Subsidiaries ..................................................... 6
Company Subsidiary ....................................................... 6
Confidentiality Agreement ................................................ 34
Continuing Employees ..................................................... 36
Contract ................................................................. 6
control .................................................................. 44
Defects .................................................................. 37
Dissenting Shares ........................................................ 3
Effective Time ........................................................... 2
Environmental Claim ...................................................... 18
Environmental Laws ....................................................... 18
Equity Plans ............................................................. 5
ERISA .................................................................... 11
ERISA Affiliate .......................................................... 12
Exchange Act ............................................................. 9
Financial Statements ..................................................... 9
Foreign Antitrust Laws ................................................... 9
Foreign Plan ............................................................. 11
GAAP ..................................................................... 9
Governmental Entity ...................................................... 9
Hazardous Substance ...................................................... 18
HSR Act .................................................................. 9
knowledge ................................................................ 44
Laws ..................................................................... 44
Leased Real Property ..................................................... 24
Leases ................................................................... 24
Legal Proceeding ......................................................... 44
Liens .................................................................... 7
Material Contract ........................................................ 21
Merger ................................................................... 1
Merger Consideration ..................................................... 3
Merger Sub ............................................................... 1
Multiemployer Plan ....................................................... 13
Multiple Employer Plan ................................................... 13
Option ................................................................... 5
A-ii
Option Consideration ..................................................... 5
Owned Real Property ...................................................... 24
Parent ................................................................... 1
Paying Agent ............................................................. 3
Payment Fund ............................................................. 3
PBCL ..................................................................... 1
Permits .................................................................. 10
Permitted Exceptions ..................................................... 37
person ................................................................... 44
Policy ................................................................... 37
Preliminary Report ....................................................... 37
Proprietary Asset ........................................................ 20
Proxy Statement .......................................................... 9
Real Property ............................................................ 25
Real Property Documents .................................................. 25
Recent SEC Documents ..................................................... 16
Release .................................................................. 18
Restraints ............................................................... 39
Returns .................................................................. 14
SEC ...................................................................... 9
SEC Documents ............................................................ 9
Securities Act ........................................................... 9
Shareholder Approval ..................................................... 16
Shareholders Meeting ..................................................... 34
Subsidiary ............................................................... 44
Superior Proposal ........................................................ 33
Survey ................................................................... 37
Surviving Corporation .................................................... 1
taxes .................................................................... 16
Taxing Authority ......................................................... 14
Termination Fee .......................................................... 42
Title Company ............................................................ 37
Voting Agreement ......................................................... 1
A-iii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), is dated as of August
21, 2001, by and among Roadway Corporation, a Delaware corporation ("Parent"),
Lion Corp., a Pennsylvania corporation and a wholly-owned subsidiary of Parent
("Merger Sub"), and Arnold Industries, Inc., a Pennsylvania corporation (the
"Company").
R E C I T A L S
1. Parent, Merger Sub and the Company intend to effect a merger (the
"Merger") of Merger Sub with and into the Company in accordance with this
Agreement and the Pennsylvania Business Corporation Law (the "PBCL"). Upon
consummation of the Merger, Merger Sub will cease to exist and the Company will
become a wholly-owned subsidiary of Parent.
2. The respective Boards of Directors of Parent, Merger Sub and the Company
have approved this Agreement and the Merger.
3. In order to induce Parent to enter into this Agreement and to consummate
the Merger, concurrently with the execution and delivery of this Agreement,
Edward H. Arnold and the Parent are entering into a voting agreement (the
"Voting Agreement") pursuant to which Edward H. Arnold has agreed to, among
other things, vote his shares of common stock, par value $1.00 per share, of the
Company ("Common Stock") in favor of the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
ARTICLE 1
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the PBCL, Merger Sub will be
merged with and into the Company at the Effective Time (as defined in Section
1.3) and the separate corporate existence of Merger Sub will thereupon cease.
Following the Effective Time, the Company will be the surviving corporation (the
"Surviving Corporation").
Section 1.2. Closing. The closing of the Merger (the "Closing") will take
place at a time and on a date to be specified by the parties, which is to be no
later than the second Business Day after satisfaction or waiver (subject to
applicable Law (as defined in Section 8.5(e))) of the conditions (excluding
conditions that, by their terms, cannot be satisfied until the Closing Date, but
subject to the satisfaction or waiver of such conditions) set forth in Article
6, unless another time or date is agreed to by the parties to this Agreement.
The Closing will be held at the offices of Jones, Day, Reavis & Pogue, 901
Lakeside Avenue, Cleveland, Ohio 44114, or such other location as the parties to
this Agreement agree to in writing. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date." "Business Day" means any day
other than Saturday, Sunday or any federal holiday.
Section 1.3. Effective Time. Subject to the provisions of this Agreement, as
soon as practicable on or after the Closing Date, the parties shall (i) file the
articles of merger (the "Articles of Merger") in such form as is required by and
executed in accordance with the relevant provisions of the PBCL and (ii) make
all other filings or recordings required under the PBCL. The Merger will become
effective at such time as the Articles of Merger are duly filed with the
Department of State of the Commonwealth of Pennsylvania, or at such subsequent
date or time as the Company and Merger Sub agree and specify in the Articles of
Merger (the date and time the Merger becomes effective is hereinafter referred
to as the "Effective Time").
Section 1.4. Effects of the Merger. The Merger will have the effects set
forth in Section 1929 of the PBCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Merger Sub will be vested
in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub will become the debts, liabilities and duties of the
Surviving Corporation.
A-1
Section 1.5. Articles of Incorporation and Bylaws. The Articles of
Incorporation of the Company, as in effect immediately before the Effective
Time, will be the Articles of Incorporation of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable Law; provided
that, at the Effective Time, the Articles of Incorporation of the Company shall
be amended as provided in Exhibit A attached hereto. The Bylaws of Merger Sub,
as in effect immediately before the Effective Time, will be the Bylaws of the
Surviving Corporation, until thereafter changed or amended as provided therein
or by applicable Law.
Section 1.6. Directors and Officers of the Surviving Corporation. The
directors of Merger Sub immediately prior to the Effective Time will be the
directors of the Surviving Corporation, until the earlier of their death,
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be. The officers of the Company immediately prior to
the Effective Time will be the officers of the Surviving Corporation, until the
earlier of their death, resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES AND PAYMENT
Section 2.1. Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the
Company or any shareholder of the Company:
(a) Cancellation of Treasury Stock and Parent and Merger Sub Owned Common
Stock. Each share of Common Stock that is owned by Parent or Merger Sub or any
other wholly-owned subsidiary of Parent (other than shares of Common Stock in
trust accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties) and any Common Stock then held by the
Company or wholly-owned subsidiary of the Company (or held in the Company's
treasury) will automatically be canceled and retired and will cease to exist,
and no consideration will be delivered in exchange therefor.
(b) Conversion of Common Stock. Each issued and outstanding share of Common
Stock (other than shares to be canceled in accordance with Section 2.1(a) and
shares of Common Stock that are owned by shareholders that have properly
exercised dissenters rights pursuant to Sections 1571 through 1580 and Section
1930 of the PBCL (the "Dissenting Shares")) will be converted into the right to
receive $21.75, without interest, in cash (the "Merger Consideration"). At the
Effective Time, all such shares of Common Stock will no longer be outstanding
and will automatically be canceled and retired and will cease to exist, and each
holder of a certificate representing immediately prior to the Effective Time
such share of Common Stock (the "Certificate") will cease to have any rights
with respect thereto, except the right to receive the Merger Consideration upon
surrender of such Certificate in accordance with Section 2.2.
(c) Capital Stock of Merger Sub. At the Effective Time, each share of common
stock of Merger Sub issued and outstanding immediately prior to the Effective
Time will be converted into and become one fully-paid and nonassessable share of
common stock of the Surviving Corporation.
Section 2.2. Payment and Surrender of Certificates.
(a) Paying Agent. Prior to the Effective Time, Merger Sub shall appoint a
paying agent mutually agreeable to the Company and Parent to act as paying agent
(the "Paying Agent") for the payment of the Merger Consideration. On the Closing
Date, Parent shall deposit or shall cause to be deposited with the Paying Agent,
in a separate fund established for the benefit of the holders of shares of
Common Stock for payment in accordance with this Article 2 through the Paying
Agent (the "Payment Fund"), immediately available funds in amounts necessary to
make the payments pursuant to Section 2.1(b) and this Section 2.2 to holders of
shares of Common Stock entitled thereto.
(b) Payment Procedures. As soon as reasonably practicable after the Effective
Time, Parent shall cause the Paying Agent to mail to each holder of record of a
Certificate or Certificates whose shares were converted into the right to
receive the Merger Consideration pursuant to Section 2.1(b), (i) a letter of
transmittal (which shall specify that delivery will be effected, and risk of
loss and title to the Certificates will pass, only upon delivery of the
Certificates to the Paying Agent and will be in such form and have such other
provisions as the Company and Parent may reasonably specify) and (ii)
instructions for use in surrendering the Certificates in exchange for the
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Merger Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent, together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Paying Agent, the holder of
such Certificate will be entitled to receive in exchange therefor cash in an
amount equal to the product of (i) the number of shares of Common Stock
represented by such Certificate multiplied by (ii) the Merger Consideration, and
the Certificate so surrendered will forthwith be canceled. No interest will be
paid or accrued on the Merger Consideration payable upon the surrender of any
Certificate. If payment is to be made to a person other than the person in whose
name the surrendered Certificate is registered, it will be a condition of
payment that the Certificate so surrendered will be properly endorsed or
otherwise be in proper form for transfer and that the person requesting such
payment shall (i) pay any transfer or other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the surrendered Certificate or (ii) establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable.
(c) Stock Transfer Books. After the Effective Time, there will be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of shares of Common Stock. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent for
any reason, they will be canceled and exchanged as provided in this Article 2,
except as otherwise provided by applicable Law. Until surrendered as
contemplated by this Section 2.2, each Certificate (other than Certificates
representing Dissenting Shares and shares cancelled pursuant to Section 2.1(a))
will be deemed at any time after the Effective Time to represent only the right
to receive upon surrender the Merger Consideration, without interest, that the
holder thereof has the right to receive in respect of such Certificate pursuant
to the provisions of this Article 2.
(d) Termination of Payment Fund. Any portion of the Payment Fund that remains
undistributed to holders of the Certificates for six months after the Effective
Time is to be delivered to the Surviving Corporation, upon demand, and any
holders of the Certificates who have not theretofore complied with this Article
2 shall thereafter look only to the Surviving Corporation for payment of their
claim for the Merger Consideration.
(e) No Liability. None of Merger Sub, the Company, the Surviving Corporation
or the Paying Agent will be liable to any person in respect of any amount
properly delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Law. Immediately prior to the date on which any
payment pursuant to this Article 2 would otherwise escheat to or become the
property of any Governmental Entity, such payment will, to the extent permitted
by applicable Law, become the property of the Surviving Corporation, free and
clear of all claims or interests of any person previously entitled thereto.
(f) Lost Certificates. If any Certificate has been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by such person of a bond in such reasonable amount as
the Surviving Corporation may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Paying Agent shall issue
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration due to such person pursuant to this Agreement.
(g) Withholding Rights. Parent or the Paying Agent will be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of shares of Common Stock such amounts as Parent or the Agent is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld and paid over to the appropriate taxing authority
by Parent or the Paying Agent, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Common Stock in respect of which such deduction and withholding was made by
Parent or the Paying Agent.
Section 2.3. Company Equity Plans.
(a) Option Payments. Each individual who held an option to purchase shares of
Common Stock under the Company's 1997 Stock Option Plan (the "1997 Plan"), and
the Company's 1987 Stock Option Plan (the "1987 Plan", and together with the
1997 Plan, the "Equity Plans"), and had such option cancelled upon the Effective
Time pursuant to the terms of the applicable Equity Plan, whether or not then
exercisable (an "Option"), will be entitled to receive, at the Effective Time,
for each share subject to such Option an amount (subject to any applicable
withholding tax) in cash equal to the difference between the Merger
Consideration and the per share exercise price of such Option to the extent such
difference is a positive number (such amount is hereinafter
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referred to as the "Option Consideration"). The Surviving Corporation or Parent
shall pay the Option Consideration within one Business Day following the
Effective Time (provided the Company has delivered by the Effective Time a list
of outstanding Options as of the Effective Time). Pursuant to the terms of the
Equity Plans, upon the Effective Time, the Options will be canceled.
(b) Termination of Plans. Prior to the Effective Time, the Company shall use
its reasonable efforts to obtain all necessary consents or releases from holders
of Options under the Equity Plans and take all such other lawful action as may
be necessary (which includes, but is not limited to, satisfying the requirements
of Rule 16b-3(e) promulgated under Section 16 of the Exchange Act, without
incurring any liability in connection therewith) to provide for and give effect
to the transactions contemplated by this Section 2.3. Except as otherwise agreed
to in writing by the parties, (i) the Equity Plans will terminate as of the
Effective Time, and (ii) the Company shall assure that following the Effective
Time no participant in the Equity Plans, or other plans, programs or
arrangements, will have any right thereunder to acquire equity securities of the
Company, the Surviving Corporation or any subsidiary thereof.
Section 2.4. Dissenters' Rights. Notwithstanding anything in this Agreement
to the contrary, shares of Common Stock that are issued and outstanding
immediately prior to the Effective Time and that are held by shareholders of the
Company who have complied with all procedures necessary to assert dissenters
rights in the manner provided in Chapter 15 of the PBCL will not be canceled and
converted into the right to receive the Merger Consideration, unless and until
such shareholder has failed to perfect, or effectively has withdrawn or lost,
such shareholder's right to appraisal and payment under the PBCL, but rather,
such shareholder will be entitled to payment of the fair value of their shares
determined and payable in accordance with the provisions of Chapter 15,
Subchapter D of the PBCL. If such shareholder has so failed to perfect, or
effectively has withdrawn or lost such right, the Common Stock owned by such
shareholder will thereupon be deemed to have been canceled and converted as
described in Section 2.1(b) at the Effective Time, and each share of Common
Stock owned by such shareholder will represent solely the right to receive the
Merger Consideration, without interest. From and after the Effective Time, no
shareholder who has exercised dissenters rights as provided in Chapter 15,
Subchapter D of the PBCL will be entitled to vote his or her shares of Common
Stock for any purpose or to receive payment of dividends or other distributions
with respect to such shares (except dividends and other distributions payable to
shareholders of record at a date that is prior to the Effective Time). The
Company shall give Parent prompt notice of and copies of any written demands for
appraisal, attempted withdrawals of such demands and any other instruments
received by the Company relating to shareholders' rights of appraisal. Parent
shall conduct all negotiations and proceedings with respect to demand for
appraisal under the PBCL and the Company will be entitled to participate therein
only as and to the extent requested by Parent. The Company shall not, except
with the prior written consent of Parent, make any payment with respect to any
demands for appraisals of Dissenting Shares, offer to settle or settle any such
demands or approve any withdrawal of any such demands.
Section 2.5. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger Sub, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or Merger Sub, any other actions and things to
vest, perfect or confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the rights, properties
or assets acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of Company. Except as set forth
in the disclosure letter delivered by the Company to the Merger Sub prior to the
execution of this Agreement (the "Company Disclosure Letter") (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant to the extent specified therein), and except as disclosed in the SEC
Documents (as defined in Section 3.1(e)) filed with the SEC prior to the date
hereof, the Company hereby represents and warrants to Parent and Merger Sub as
follows:
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(a) Organization, Standing and Corporate Power. The Company and each of the
Company Subsidiaries (as defined in Section 3.1(b)) is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized and has the requisite
corporate or other power, as the case may be, and authority: (i) to conduct its
business in the manner in which its business is currently being conducted; (ii)
to own and use its assets in the manner in which its assets are currently owned
and used; and (iii) to perform its obligations under all Contracts by which it
is bound, except any failure to be in good standing that would not reasonably be
expected to have a Company Material Adverse Effect (as defined below). The
Company and each of the Company Subsidiaries is duly qualified or licensed to do
business and is in good standing (with respect to jurisdictions that recognize
such concept) in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure to be so
qualified or licensed or to be in good standing individually or in the aggregate
has not had or would not reasonably be expected to have a Company Material
Adverse Effect (as defined below). "Contract" means any written or oral
agreement, contract, subcontract, lease, instrument, note, option, warranty,
purchase order, license, sublicense or legally binding commitments or
undertakings. An event, inaccuracy, circumstance, change, state of facts, effect
or other matter will be deemed to have a "Company Material Adverse Effect" if
such event, inaccuracy, circumstance, change, state of facts, effect or other
matter had or would reasonably be expected to have a material adverse effect on
(i) the business, financial condition or results of operations of the Company
Entities taken as a whole, or (ii) the ability of the Company to consummate the
Merger or any of the other transactions contemplated by this Agreement or to
perform any of its obligations under this Agreement; provided, however, that any
change, event, inaccuracy, circumstance, state of facts, effect or other matter
relating to the following will not be taken into account in determining whether
there has been or would be a Company Material Adverse Effect: (i) the economy or
financial markets in general; (ii) conditions generally affecting the industry
(or industries) in which any of the Company Entities participates, (iii) the
announcement or pendency of this Agreement, or the transactions contemplated
hereby, and (iv) any changes in GAAP (as defined in Section 3.1(e)).
(b) Subsidiaries. Section 3.1(b) of the Company Disclosure Letter sets forth
all the subsidiaries (as defined in Section 8.5(d)) of the Company (each a
"Company Subsidiary," collectively, the "Company Subsidiaries," and together
with the Company, the "Company Entities"). All outstanding shares of capital
stock of, or other equity interests in, each Company Subsidiary (i) have been
validly issued and are fully paid and nonassessable, (ii) are free and clear of
all pledges, adverse claims, liens, options, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens") and (iii) are
free of any other restriction (including preemptive rights or any restriction on
the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests). All outstanding shares of capital stock (or equivalent
equity interests of entities other than corporations) of each of the Company
Subsidiaries are owned, directly or indirectly, by the Company. The Company does
not, directly or indirectly, own less than 100% of the capital stock or other
equity interest in any person. None of the Company Entities has agreed to make
or is obligated to make, or is bound by any Contract under which it may become
obligated to make, any future investment in or capital contribution to any other
person. None of the Company Entities has, at any time, been a general partner of
any general partnership, limited partnership or other person.
(c) Capital Structure. The authorized capital stock of the Company consists
of 100,000,000 shares of Common Stock. At the close of business on August 10,
2001: (i) 24,800,816 shares of Common Stock were issued and outstanding
(excluding 5,141,812 shares of Common Stock held in the treasury of the
Company); and (ii) 3,625,000 shares of Common Stock were reserved for issuance
under the Equity Plans. Section 3.1(c) of the Company Disclosure Letter sets
forth the holders of all outstanding Options, and the number of shares that each
holder is entitled to purchase and exercise prices of each grant to such
holders. The Company has delivered to Parent accurate and complete copies of all
stock option plans pursuant to which the Company has stock options outstanding
as of the date hereof and the forms of all stock option agreements evidencing
such options. All outstanding shares of Common Stock have been duly authorized
and are validly issued, fully paid and nonassessable and not subject to or
issued in violation of preemptive rights. All outstanding shares of Common
Stock, all outstanding Options and all outstanding shares of capital stock of
each Company Subsidiary have been issued and granted, as the case may be, in
compliance with (i) all applicable securities Laws and other applicable Laws,
and (ii) all requirements set forth in applicable Contracts. Except (i) as set
forth above, and (ii) for shares of Common Stock issued pursuant to Options
outstanding on August 21, 2001 that are described on Schedule
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3.1(c) of the Company Disclosure Letter, (x) there are not issued, reserved for
issuance or outstanding (A) any shares of capital stock or other voting
securities of the Company, (B) any securities convertible into or exchangeable
or exercisable for shares of capital stock or voting securities of the Company,
or (C) any warrants, calls, options or other rights to acquire from the Company,
and no obligation of the Company or any Company Subsidiary to issue, any capital
stock, voting securities or securities convertible into or exchangeable or
exercisable for capital stock or voting securities of the Company and (y) there
are no outstanding obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any such securities or to issue, deliver
or sell, or cause to be issued, delivered or sold, any such securities. Neither
the Company nor any Company Subsidiary is a party to any voting agreement with
respect to the voting of any such securities. There are no outstanding (A)
securities convertible into or exchangeable or exercisable for shares of capital
stock or other voting securities or ownership interests in any Company
Subsidiary, (B) warrants, calls, options or other rights to acquire from the
Company or any Company Subsidiary, and no obligation of the Company or any
Company Subsidiary to issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable or
exercisable for any capital stock, voting securities or ownership interests in,
any Company Subsidiary, or (C) obligations of the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire any such outstanding
securities of Company Subsidiaries or to issue, deliver or sell, or cause to be
issued, delivered or sold, any such securities. There are no agreements,
arrangements or commitments of any character (contingent or otherwise) entered
into in connection with acquisitions pursuant to which any person is or may be
entitled to receive any payment based on the revenues, earnings or financial
performance of the Company or any Company Subsidiary or any of their respective
assets or calculated in accordance therewith.
(d) Authority; Noncontravention. The Company has all requisite corporate
power and authority to enter into this Agreement, and, subject to the
Shareholder Approval (as defined in Section 3.1(k)), to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of the Merger,
to the Shareholder Approval. This Agreement has been duly executed and delivered
by the Company, and, assuming the due authorization, execution and delivery by
Merger Sub and Parent, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar Laws relating to or affecting creditors generally or by
general equity principles (regardless of whether such enforceability is
considered in a proceeding inequity or at law). The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated by
this Agreement will not, (i) conflict with the articles of incorporation or
bylaws or comparable organizational documents of any of the Company Entities,
(ii) result in any breach, violation or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
creation or acceleration of any obligation or right of a third party or loss of
a benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company Entities under, any Contract applicable to,
affecting or relating in any way to, the Company Entities or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, conflict with or violate any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company Entities or their respective properties, assets or businesses,
other than, in the case of clauses (ii) and (iii) any such conflicts,
violations, defaults, rights, losses or Liens that, individually or in the
aggregate, do not have or would not reasonably be expected to have a Company
Material Adverse Effect or that would not prevent or materially delay
consummation of the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, action by or in respect of, or
registration, declaration or filing with, any federal, state, or local, foreign
or supra-national government, any court, administrative, regulatory or other
governmental agency, commission or authority or any non-governmental United
States or foreign self-regulatory agency, commission or authority or any
arbitral tribunal (each, a "Governmental Entity") is required by the Company in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby, except
for: (i) the filing with the Securities and Exchange Commission (the "SEC") of
(A) a proxy statement relating to the Shareholders Meeting (such proxy
statement, as amended or supplemented from time to time, the "Proxy Statement")
and (B) such reports under Section 13(a), 13(d), 15(d) or 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be
required in connection with this Agreement and the transactions contemplated
hereby; (ii) the filing of the Articles of Merger
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with the Department of State of the Commonwealth of Pennsylvania; (iii) the
filing of a premerger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act");
(iv) the filing and consents as may be required by the antitrust and competition
laws of foreign countries ("Foreign Antitrust Laws"); and (v) such consents,
approvals, orders or authorizations the failure of which to be made or obtained,
individually or in the aggregate, would not have or would not reasonably be
expected to have a Company Material Adverse Effect.
(e) SEC Reports and Financial Statements. The Company has filed all required
reports, schedules, forms, statements and other documents (including exhibits
and all other information incorporated therein) under the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act, with the SEC (as
such reports, schedules, forms, statements and documents have been amended since
the time of their filing, collectively, the "SEC Documents"). As of their
respective dates, or if amended or superseded prior to the date hereof, as of
the date of the last such amendment or filing, the SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents when
filed, or as so amended, 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 the light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Documents (the "Financial Statements") (i) comply as to
form, as of their respective date of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
(except, in the case of unaudited statements) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto),
and (iii) fairly present in all material respects the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated statement of income, cash flows and stockholders'
equity for the periods then ended (subject, in the case of unaudited statements,
to normal recurring year-end audit adjustments).
(f) Absence of Certain Changes or Events. Except for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby, since
December 31, 2000, (i) the Company Entities have conducted their respective
operations only in the ordinary course consistent with past practice, (ii) there
has not been a Company Material Adverse Effect and no event has occurred or
circumstance has arisen that, in combination with any other events or
circumstances, would reasonably be expected to have a Company Material Adverse
Effect, (iii) the Company Entities have not taken action that if taken after the
date of this Agreement would constitute a violation of Section 4.1, and (iv)
none of the Company Entities has received any Acquisition Proposal. "Acquisition
Proposal" means any offer, proposal, inquiry or indication of interest (other
than an offer, proposal, inquiry or indication of interest by Parent)
contemplating or otherwise relating to any Acquisition Transaction (as defined
in Section 4.2(e)).
(g) Compliance with Applicable Laws; Litigation; Orders.
(i) Except for violations of Environmental Laws (which are the subject of
Section 3.1(m)), each of the Company Entities is in compliance in all material
respects with all applicable Laws and the operations of the Company Entities
have not been and are not being conducted in violation of any Permit (as defined
below). None of the Company Entities has received any notice, or has knowledge,
of any claim regarding any actual or possible violation of, or failure to comply
with, any applicable Law.
(ii) The Company Entities hold all material licenses, permits, variances,
consents, authorizations, waivers, grants, franchises, concessions, exemptions,
orders, registrations and approvals of Governmental Entities or other persons
necessary for the conduct of their respective businesses as currently conducted
("Permits"). All such Permits are valid and in full force and effect. Each
Company Entity is in substantial compliance with the terms and requirements of
such Permits. None of the Company Entities has received notice that any Permit
will be terminated or modified or cannot be renewed in the ordinary course of
business, and the Company has no knowledge of any reasonable basis for any such
termination, modification or nonrenewal. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
do not and will not violate any Permit, or result in any termination,
modification or nonrenewals thereof.
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(iii) (a) no Legal Proceeding involving a claim alleging damages in excess
of $100,000 is pending or, to the knowledge of the Company, threatened and (b)
none of the Company Entities (or any of their respective properties) is subject
to any order, writ, injunction, judgment or decree with respect to the Company
or any Company Subsidiary or any of their respective properties.
(h) ERISA Compliance.
(i) Schedule 3.1(h)(i) of the Company Disclosure Letter sets forth a true
and complete list of each United States collective bargaining agreement and any
United States bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, employment, disability, death benefit, hospitalization,
medical, life, severance or other plan, agreement, arrangement or understanding,
or change of control agreement providing benefits to any current or former
employee, officer or director of the Company or any Company Subsidiary or to
which the Company or any Company Subsidiary contributes or is obligated to
contribute (collectively, the "Company Benefit Plans"). For purposes of this
Agreement, the term "Foreign Plan" means each plan, agreement, arrangement or
understanding that is subject to or governed by the laws of any jurisdiction
other than the United States, and which would have been treated as a Company
Benefit Plan had it been a United States plan, agreement, arrangement or
understanding. Schedule 3.1(h)(i) sets forth a true and complete list of each
Foreign Plan. Other than pursuant to the terms of the Company Benefit Plans or
under applicable Laws, the Company has no material liability with respect to any
plan, arrangement or practice of the type described in this paragraph that is
not appropriately disclosed on the Company Financial Statements.
(ii) Each Company Benefit Plan has been administered in all material
respects in accordance with its terms, all applicable laws, including the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the
Internal Revenue Code of 1986, as amended (the "Code"), and the terms of all
applicable collective bargaining agreements. Each Company Benefit Plan that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service. To the
Company's Knowledge, no fact or event has occurred that is reasonably likely to
materially adversely affect the qualified status of any such Company Benefit
Plan or the exempt status of any such trust, and all contributions to, and
payments from, such Company Benefit Plans that are required to be made in
accordance with such Company Benefit Plans, ERISA or the Code have been timely
made, or are appropriately reflected on the Company's Financial Statements. Each
Company Benefit Plan intended to meet the requirements of Section 501(c)(9) of
the Code meets such requirements in all material respects and provides no
disqualified benefits (as defined in Section 4976(b) of the Code.
(iii) Neither the Company nor any trade or business, whether or not
incorporated, which, together with the Company, would be deemed to be a "single
employer" within the meaning of Section 4001(b) of ERISA (an "ERISA Affiliate")
has incurred any liability under Title IV of ERISA or 4971 of the Code, or has a
current failure to meet the minimum funding standards of Section 302 of ERISA or
Section 412 of the Code.
(iv) No Company Benefit Plan provides medical benefits (whether or not
insured) with respect to current or former employees or officers or directors
after retirement or other termination of service except as required by
applicable Laws.
(v) The consummation of the transactions contemplated by this Agreement will
not, either alone or in combination with another event, (A) entitle any current
or former employee, officer or director of the Company to severance pay,
unemployment compensation or any other payment, except as expressly provided in
this Agreement, or (B) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee, officer or director.
(vi) Neither the Company nor any Company Subsidiary is a party to any
agreement, contract or arrangement (including this Agreement) that could result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code. No Company Benefit
Plan provides for the reimbursement of excise taxes under Section 4999 of the
Code or any income taxes under the Code.
(vii) With respect to each Company Benefit Plan, the Company has delivered
or made available to Parent a true and complete copy of: (A) each writing
constituting a part of such Company Benefit Plan, including,
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without limitation, all Company Benefit Plan documents, and trust agreements;
(B) the most recent Annual Report (Form 5500 Series) and accompanying schedule,
if any; (C) the most recent annual financial report, if any; (D) the most recent
actuarial report, if any; and (E) the most recent determination letter from the
Internal Revenue Service, if any. Except as specifically provided in the
foregoing documents delivered or made available to Parent, there are no
amendments to any Company Benefit Plan that have been adopted or approved nor
has the Company or any Company Subsidiary undertaken to make any such amendments
or to adopt or approve any new Company Benefit Plan.
(viii) No Company Benefit Plan is a multiemployer plan (as defined in
Section 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a plan that has two or
more contributing sponsors at least two of whom are not under common control,
within the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"). None
of the Company, the Company Subsidiaries nor any of their respective ERISA
Affiliates has, at any time during the last six years, contributed to or been
obligated to contribute to any Multiemployer Plan or Multiple Employer Plan.
None of the Company, the Company Subsidiaries nor any ERISA Affiliates has
incurred any material withdrawal liability under a Multiemployer Plan that has
not been satisfied in full.
(ix) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations that have been
asserted or instituted, or to the Company's knowledge, no set of circumstances
exists that may reasonably give rise to a claim or lawsuit, against the Company
Benefit Plans, any fiduciaries thereof with respect to their duties to the
Company Benefit Plans or the assets of any of the trusts under any of the
Company Benefit Plans that have resulted in or could reasonably be expected to
result in any material liability of the Company or any Company Subsidiaries to
the Pension Benefit Guaranty Corporation, the United States Department of
Treasury, the United States Department of Labor, any Multiemployer Plan, any
Company Benefit Plan or any participant in a Company Benefit Plan.
(x) With respect to each Foreign Plan: (A) all amounts required to be
reserved under each book reserved Foreign Plan have been so reserved in
accordance with reasonable accounting practices prevailing in the country where
such Foreign Plan is established; (B) each Foreign Plan required to be
registered with a Governmental Entity has been registered, has been maintained
in good standing with the appropriate Governmental Entities, and has been
maintained and operated in accordance with its terms and applicable Law; and (C)
the fair market value of the assets of each funded Foreign Plan that is a
defined pension plan (or termination indemnity plan), and the liability of each
insurer for each Foreign Plan that is a defined benefit pension plan (or
termination indemnity plan) and is funded through insurance or the book reserve
established for each Foreign Plan that is a defined benefit pension plan (or
termination indemnity plan) that utilizes book reserves, together with any
accrued contributions, is sufficient to procure or provide for the liability for
accrued benefits with respect to those current and former employees of the
Company and the Company Subsidiaries that participate in such Foreign Plan
according to the reasonable actuarial or other applicable assumptions and
valuations most recently used to determine employer contributions to or the
funded status or book reserve of such Foreign Plans.
(i) Taxes. Except to the extent that it would constitute a Company Material
Adverse Effect (taking all years described in this Section 3.1(i) as a whole)
(A) All tax returns, statements, reports and forms (including estimated tax
or information returns and reports) due to be filed with any Governmental Entity
responsible for the imposition of any tax (a "Taxing Authority") with respect to
any tax period (or portion thereof) ending on or before the date hereof by or on
behalf of the Company and Company Subsidiary (collectively, the "Returns") have,
to the extent required to be filed on or before the date hereof, been filed when
due in accordance with all applicable Laws.
(B) All taxes due with respect to all periods (or portions thereof) covered
by the Returns (whether or not shown as due and payable on the Returns that have
been filed) have been timely paid, withheld and remitted to the appropriate
Taxing Authority or provided for in the Financial Statements.
(C) There is no action, suit or proceeding now pending and no claim, audit
or investigation now pending or, any action, suit, claim, audit or investigation
threatened against or with respect to the Company or the Company Subsidiaries in
respect of any tax.
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(D) There are no liens for taxes upon the assets of the Company and its
Company Subsidiaries, except liens for current taxes not yet due.
(E) The Company and the Company Subsidiaries have withheld and paid all
taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party.
(F) Neither the Company nor any Company Subsidiary has ever been a party to
any transaction characterized as a "safe harbor" lease under the Internal
Revenue Code or has ever filed an election under section 341(f) of the Code.
(G) There is no basis on which the Internal Revenue Service could
successfully require the Company or any Company Subsidiary to change any of the
accounting methods it uses in determining its taxable income or liability for
taxes, and there has been no such change in the five years preceding the date
hereof.
(H) Neither the Company nor any Company Subsidiary has, within four years of
the date hereof, been either the distributing corporation or the controlled
corporation in a transaction intended to qualify as a tax-free transaction under
section 355 of the Code.
(I) Neither the Company nor any of the Company Subsidiaries has any
liability for taxes of any person (other than the Company and the Company
Subsidiaries under Treasury Regulation Section 1.1502-6 (or any comparable
provision of state or local or foreign Law)), and
(J) Neither the Company nor any Company Subsidiary is a party to any
agreement relating to the allocation or sharing of taxes.
As used in this Agreement, "tax" or "taxes" include all federal, state or
local or foreign net and gross income, alternative or add-on minimum,
environmental, gross receipts, ad valorem, value added, goods and services,
capital stock, profits, license, single business, employment, severance, stamp,
unemployment, customs, property, sales, excise, use, occupation, service,
transfer, payroll, franchise, withholding and other taxes or similar
governmental duties, charges, fees, levies or other assessments, including any
interest, penalties or additions with respect thereto.
(j) State Takeover Statutes. The Board of Directors of the Company (at a
meeting duly called and held) has (i) unanimously determined that the Merger is
fair and in the best interests of the Company and its shareholders, (ii)
unanimously authorized and approved the execution, delivery and performance of
this Agreement by the Company and unanimously approved the Merger, and (iii)
unanimously recommended the adoption of this Agreement by the holders of Common
Stock and directed that this Agreement and the Merger be submitted for
consideration by the Company's shareholders at the Shareholders Meeting (as
defined in Section 5.1(b)). The Board of Directors of the Company authorized
this Agreement and the transactions contemplated hereby and thereby, including
the Merger, prior to Parent or Merger Sub becoming an "interested shareholder"
as defined in Section 2553 of the PBCL. Other than opting out of any of the
subchapters of the PBCL, the Company has taken all action necessary to render
the provisions of any anti-takeover statute, rule or regulation that may be
applicable to the transactions contemplated by this Agreement (including Section
2538 and Subchapters E, F, G, H, I and J of Chapter 25 of the PBCL but excluding
the provisions of Subchapter D of Chapter 15) inapplicable to Parent, Merger Sub
and their respective affiliates, and to the Merger and this Agreement and the
transactions contemplated hereby and thereby. As a result of the foregoing
actions, the only corporate action required to authorize the Merger is the
Shareholder Approval and no further action is required to authorize the Merger
and the transactions contemplated by this Agreement.
(k) Voting Requirement. The affirmative vote of a majority of the votes cast
by all shareholders entitled to vote at the Shareholders Meeting (the
"Shareholder Approval") is the only vote of the holders of any class or series
of the Company's capital stock necessary to adopt and approve this Agreement,
the Merger and the transactions contemplated hereby.
(l) Brokers. Except for Morgan Stanley Dean Witter, whose fees, commissions
and expenses are the sole responsibility of the Company, no broker, investment
banker, financial advisor or other person is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The Company
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has furnished to Parent accurate and complete copies of all agreements under
which any such fees, commissions or other amounts have been paid to or may
become payable to Morgan Stanley Dean Witter and all indemnification and other
agreements related to the engagement of Morgan Stanley Dean Witter.
(m) Environmental Matters.
(i) The Company Entities are in compliance in all material respects with
all applicable Environmental Laws.
(ii) There are no written (or, to the knowledge of the Company, other)
Environmental Claims pending or, to the knowledge of the Company,
threatened, against the Company or any of the Company Subsidiaries.
(iii) Prior to and during the period of ownership, lease or operation by
the Company or the Company Subsidiaries, to the knowledge of the Company,
no Hazardous Substance was released onto or from or disposed of on to any
currently or previously owned, leased or operated property.
(iv) None of the Company or the Company Subsidiaries has received from
any Governmental Entity or other third party any written (or, to the
knowledge of the Company, oral) notice that any of them is or may be a
potentially responsible party in respect of or may otherwise bear liability
for any actual or threatened Release of Hazardous Substance at any site or
facility that is or has been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability
Information System or any similar or analogous federal, state, provincial,
territorial, municipal, county, or local list, schedule, inventory or
database of Hazardous Substance sites or facilities.
(v) None of the Company or the Company Subsidiaries has transported
wastes or spent materials for recycling, treatment, storage or disposal.
(vi) None of the property owned by the Company or the Company
Subsidiaries contains any asbestos-containing material, equipment or
containers containing polychlorinated biphenyls, or underground storage
tank systems, nor is the Company or the Company Subsidiaries responsible
for the repair, removal or replacement of such material, equipment,
containers or tank systems at any other property.
(vii) As used in this Agreement:
(A) the term "Environmental Claim" means any written demand, lawsuit,
action, proceeding, arbitration, investigation or notice to any of the
Company Entities by any person alleging any potential liability (including,
without limitation, potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resource damages, or penalties)
arising out of any Environmental Law;
(B) the term "Environmental Laws" means all Laws relating to protection
of the environment or human health, including any Law relating to Releases
or threatened Releases of Hazardous Substances, or to the manufacture,
generation, processing, distribution, use, sale, treatment, receipt,
storage, disposal, transport or other handling of Hazardous Substances,
including the Comprehensive Environmental Response, Compensation and
Liability Act and the Resource Conversation and Recovery Act, and the
Occupational Safety and Health Act;
(C) the term "Hazardous Substance" means (1) pollutants, contaminants,
hazardous wastes, toxic substances, and oil and petroleum products, (2) any
substance that is or contains friable asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum or petroleum- derived
substances or wastes, radon gas, (3) any substance that is defined, listed
or identified as a "hazardous waste" or "hazardous substance" or as toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic, or otherwise hazardous under any Environmental Law;
(D) the term "Release" means any releasing, disposing, discharging,
injecting, spilling, leaking, pumping, dumping, emitting, escaping,
emptying, migration, transporting or placing, including into or upon, any
land, soil, surface water, ground water or air, or otherwise entering into
the environment.
(n) No Company Rights Agreement. The Company is not subject to a shareholder
rights agreement, poison pill or similar obligation, agreement, plan or
arrangement.
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(o) Proxy Statement. The Proxy Statement at the date mailed to Company
shareholders and at the time of the Shareholders Meeting (i) will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading and (ii) will comply in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder; except that no
representation is made by the Company with respect to statements made in the
Proxy Statement based on information supplied in writing by Parent or Merger Sub
specifically for inclusion in the Proxy Statement.
(p) Proprietary Assets. Except as would not reasonably be expected to have a
Company Material Adverse Effect: (a) the Company and each of the Company
Subsidiaries owns, or is licensed to use (in each case, free and clear of any
Liens), any Intellectual Property (as defined below) necessary for the conduct
of its business as currently conducted; (b) to the knowledge of the Company, the
use of any Intellectual Property by the Company and the Company Subsidiaries
does not infringe on or otherwise violate the rights of any Person and is in
accordance with any applicable license pursuant to which the Company or any
Company Subsidiary acquired the right to use any Intellectual Property; (c) to
the knowledge of the Company, no person is challenging, infringing on or
otherwise violating any right of the Company or any of the Company Subsidiaries
with respect to any Intellectual Property owned by and/or licensed to the
Company or any Company Subsidiaries; and (d) neither the Company nor any Company
Subsidiaries has received any written notice of any pending claim with respect
to any Intellectual Property used by the Company and any Company Subsidiaries
and to its knowledge no Intellectual Property owned and/or licensed by the
Company or any Company Subsidiary is being used or enforced in a manner that
would result in the abandonment, cancellation or unenforceability of such
Intellectual Property. For purposes of this Agreement, "Intellectual Property"
means trademarks, service marks, brand names, certification marks, trade dress
and the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, applications for patents
(including, without limitation, divisions, continuations, continuations in part
and renewal applications), and any renewals, extensions or reissues thereof, in
any jurisdiction; trade secrets and rights in any jurisdiction to limit the use
or disclosure thereof by any person; copyrights in any jurisdiction;
registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof; and any claims or causes
of action arising out of or relating to any infringement or misappropriation of
any of the foregoing.
(q) Opinion of Financial Advisor. The Company's Board of Directors has
received the opinion of Morgan Stanley Dean Witter, dated the date of this
Agreement, to the effect that, as of such date, the Merger Consideration is fair
from a financial point of view to holders of shares of Common Stock. A signed
copy of such opinion will be made available to Parent promptly after the date
hereof.
(r) Labor Agreements. Schedule 3.1(r) of the Company Disclosure Letter sets
forth a true and complete list of each collective bargaining agreement or other
labor agreement with any union or labor organization to which the Company or any
of the Company Subsidiaries is a party in the United States. To the knowledge of
the Company, neither the Company nor any Company Subsidiary knows of any
activity or proceeding of any labor organization (or representative thereof) to
organize any of its or their employees. Except as would not reasonably be
expected to have a Material Adverse Effect, the Company and the Company
Subsidiaries are not, and have not been, subject to any pending, or to the
knowledge of the Company, threatened (i) unfair labor practice, employment
discrimination or other complaint, (ii) strike, lockout or dispute, slowdown or
work stoppage or (iii) claim, suit, action or governmental investigation, in
respect of which any director, officer, employee or agent of the Company or any
of the Company Subsidiaries is or may be entitled to claim indemnification from
the Company or any Company Subsidiary. To the knowledge of the Company, no event
has occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute other than stoppages or disputes that would not
reasonably be expected to have a Company Material Adverse Effect. The Company
and each Company Subsidiary has complied in all material respects with all Laws
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and plant
closing other than such noncompliance that would not reasonably be expected to
have a Company Material Adverse Effect. Neither the Company nor any Company
Subsidiary is liable for the payment of any compensation, damages, taxes, fines,
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penalties, or other amounts, however designated, for failure to comply with any
of the foregoing other than the payment of amounts that would not reasonably be
expected to have a Company Material Adverse Effect.
(s) Contracts. As of the date hereof, neither the Company nor any Company
Subsidiary is a party to or bound by (i) any "material contract" (as such term
is defined in Item 601(b)(10) of Regulation S-K of the SEC) or (ii) any non-
competition agreement or any other agreement or arrangement that limits or
otherwise restricts the Company or any Company Subsidiary or that would, after
the Effective Time, to the knowledge of the Company, limit or restrict the
Surviving Corporation or any of its subsidiaries from engaging or competing in
any line of business or in any geographic area.
(t) Real Property; Assets.
(i) Section 3.1(t)(i) of the Company Disclosure Letter contains a true
and complete list of each parcel of real property owned by the Company and
the Company Subsidiaries (the "Owned Real Property"). The Company or a
Company Subsidiary has good and marketable fee simple title to all such
Owned Real Property. The Company has made available to Parent true and
complete copies of all documents evidencing the ownership interest of the
Company in the Owned Real Property.
(ii) Section 3.1(t)(ii) of the Company Disclosure Letter contains a true
and complete list and brief description of all material real property
leased by the Company and the Company Subsidiaries, all of which are
hereinafter referred to as the "Leased Real Property." The Company or a
Company Subsidiary has a valid leasehold interest in or valid rights to all
Leased Real Property. The Company has made available to Parent true and
complete copies of all leases of the Leased Real Property (the "Leases").
No option, extension or renewal has been exercised under any Lease except
options, extensions or renewals whose exercise has been evidenced by a
written document, a true and complete copy of which has been made available
to Parent with the corresponding Lease. Each of the Company and the Company
Subsidiaries has complied in all material respects with and is not in
material default under the terms of all Leases to which it is a party and
under which it is in occupancy, and all such Leases are valid and in full
force and effect. The lessors under the Leases to which the Company or a
Company Subsidiary is a party have complied in all material respects with
and are not in material default under the terms of their respective Leases.
Each of the Company and the Company Subsidiaries enjoys peaceful and
undisturbed possession under all such Leases.
(iii) None of the Owned Real Property Leases or Leased Real Property is
subject to any Liens (whether absolute, accrued, contingent or otherwise)
except for Permitted Liens. "Permitted Liens" means, collectively, (i)
liens or other encumbrances securing real estate taxes and assessments, all
of which are not yet due and payable or which are currently being contested
in good faith or (ii) liens or other encumbrances of a character that do
not materially detract from the value of the real property subject thereto,
or materially impair the operation of the Company or its subsidiaries or
detract from its business.
(iv) The Company has good and valid title to all material personal
property, improvements on the Owned Real Property, assets and rights
relating to or used or held for use in connection with the business of the
Company and the Company Subsidiaries and such material personal property,
improvements, assets and rights comprise all of the assets required for the
conduct of the business of the Company and the Company Subsidiaries as
currently being conducted.
(v) With respect to the Owned Real Property and the Leased Real
Property (collectively, the "Real Property"):
(A) Regarding all documents which evidence, secure or otherwise
relate to the Real Property (collectively, the "Real Property
Documents"): (a) there is no material default (or alleged default)
thereunder by any of the parties thereto, nor has any event occurred
which, with the passage of time or notice, or both, would constitute a
material default thereunder or a violation of the terms (or permit the
termination) thereof; and (b) none of the transactions or documents
required or contemplated by this Agreement will constitute or create a
default or event of default thereunder (or permit the termination
thereof or require third party approval or other action pursuant
thereto); and none of the Real Property Documents will be amended or
terminated by any of the Company Entities without the prior written
consent of Parent;
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(B) None of the Company Entities has leased or sublet, as lessor or
sublessor, and no third party is in possession of, or has the right of
use of occupancy of any portion of, any of the Real Property, and
neither the whole nor any portion of any tract of the Real Property
has been condemned, requisitioned or otherwise taken by any
Governmental Entity and, to the knowledge of each of the Company
Entities, no such condemnation, requisition or taking is threatened or
contemplated;
(C) Each Real Property comprises a single contiguous parcel of land
with no intervening strips, parcels or easements between such Real
Property and the public roads adjacent to such Real Property;
(D) No written notice of any increase in the assessed valuation of
the Real Property, and no written notice of any contemplated special
assessment, has been received by any of the Company Entities and, to
the knowledge of each of the Company Entities, there is no threatened
special assessment pertaining to any of the Real Property;
(E) There are no contracts or agreements to which any of the
Company Entities is a party, or by which any of the Real Property is
bound, granting to any person the right of use or occupancy of any
portion of the Real Property; and
(F) All accounts for work and services performed and materials
placed or furnished upon or in respect of the Real Property at the
request of any of the Company Entities are fully paid and satisfied
and no person is entitled to a claim of any mechanics or materialman's
liens.
(u) Liabilities. None of the Company Entities has any accrued, contingent or
other liabilities of any nature, either matured or unmatured, other than those
liabilities that would not reasonably be expected to have a Company Material
Adverse Effect, except for: (i) liabilities, as and to the extent disclosed or
reserved against, on the Company's audited December 31, 2000 balance sheet
incorporated by reference in its Annual Report of Form 10-K filed with the SEC
for the fiscal year ended December 31, 2000 or the notes thereto; and (ii)
liabilities that have been incurred by the Company Entities since December 31,
2000 in the ordinary course of business and consistent with past practices.
(v) Certain Business Practices. None of the Company Entities nor any
director, officer, agent or employee of any of the Company Entities has (i) used
any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or (iii) made any other unlawful payment
other than those payments that would not reasonably be expected to have a
Company Material Adverse Effect.
(w) Insurance. The Company has delivered to Parent a copy of all material
insurance policies and all material self insurance programs and arrangements
relating to the business, assets and operations of the Company Entities. Each of
such insurance policies is in full force and effect. Since January 1, 2000, none
of the Company Entities has received any notice or other communication regarding
any actual or possible (i) cancellation or invalidation of any insurance policy,
(ii) refusal of any coverage or rejection of any material claim under any
insurance policy, or (iii) material adjustment in the amount of the premiums
payable with respect to any insurance policy. There is no pending workers'
compensation or other claim under or based upon any insurance policy of any of
the Company Entities.
(x) Transactions with Affiliates. Between the date of the Company's last
proxy statement filed with the SEC and the date of this Agreement, no event has
occurred that would be required to be reported by the Company pursuant to Item
404 of Regulation S-K promulgated by the SEC.
(y) No Existing Discussions. None of the Company Entities, and no
representative of any of the Company Entities, is engaged, directly or
indirectly, in any discussions or negotiations with any other person relating
to an Acquisition Proposal.
Section 3.2. Representations and Warranties of Parent and Merger
Sub. Parent and Merger Sub hereby represent and warrant to the Company as
follows:
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(a) Organization and Standing. Each of Parent and Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, in the case of Parent, and the Commonwealth of Pennsylvania,
in the case of Merger Sub.
(b) Authority; Noncontravention. Parent and Merger Sub have all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Parent and Merger Sub, and the consummation by Parent and Merger
Sub of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent and Merger Sub. This Agreement
has been duly executed and delivered by Parent and Merger Sub, and, assuming the
due authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of each of Parent and Merger Sub, as applicable,
enforceable against Parent and Merger Sub in accordance with its terms. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement, will not conflict with the respective certificate of
incorporation or bylaws or comparable organizational documents of Parent and
Merger Sub. No consent, approval, order or authorization of, action by or in
respect of, or registration, declaration or filing with, any Governmental Entity
is required by Parent and Merger Sub in connection with the execution and
delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger Sub of the transactions contemplated hereby, except for (i)
the filing of a premerger notification and report form under the HSR Act; (ii)
the filing of the Articles of Merger with the Department of State of the
Commonwealth of Pennsylvania; (iii) the filings and consents as may be required
by Foreign Antitrust Laws; and (iv) such consents, approvals, orders or
authorizations the failure of which to be made or obtained, individually or in
the aggregate, would not reasonably be expected to prevent or delay the
consummation by Parent or Merger Sub of the transactions contemplated by this
Agreement.
(c) Brokers. Except for Credit Suisse First Boston, whose fees, commissions
and expenses are the sole responsibility of Parent and Merger Sub, no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Merger Sub or Parent.
(d) Financing. Parent and Merger Sub, collectively, have obtained written
commitments (the "Commitment Letter") from Credit Suisse First Boston to provide
any required financing in an amount not less than the full amount of the Merger
Consideration and the Option Consideration, a copy of which has been provided by
Parent to the Company. As of the date of this Agreement, neither Parent nor
Merger Sub is aware of any facts or circumstances that (i) contradict or are in
conflict with the terms and conditions set forth in the Commitment Letter or
(ii) create a reasonable basis for either Parent or Merger Sub to believe that
it will not be able to obtain financing in accordance with the terms of the
Commitment Letter.
(e) Information in Proxy Statement. None of the information supplied by
Parent or Merger Sub for inclusion in the Proxy Statement will, on the date the
Proxy Statement is mailed to shareholders and at the time of the Shareholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading.
(f) Parent SEC Reports and Financial Statements. Parent has filed all
required reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) under the Securities
Act, and the Exchange Act, with the SEC (as such reports, schedules, forms,
statements and documents have been amended since the time of their filing,
collectively, the "Parent SEC Documents"). As of their respective dates, or if
amended or superseded prior to the date hereof, as of the date of the last such
amendment or filing, the Parent SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Parent SEC Documents, and none of the Parent SEC Documents when filed,
or as so amended, 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 the light of the circumstances under which they
were made, not misleading. The financial statements of Parent included in the
Parent SEC Documents (i) comply as to form, as of their respective date of
filing with the SEC, in all material respects with applicable accounting
requirements
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and the published rules and regulations of the SEC with respect thereto, (ii)
have been prepared in accordance with GAAP (except, in the case of unaudited
statements applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto), and (iii) fairly present in all material
respects the consolidated financial position of Parent and its consolidated
subsidiaries as of the dates thereof and the consolidated statement of income,
cash flows and stockholders' equity for the periods then ended (subject, in the
case of unaudited statements, to normal recurring year- end audit adjustments).
ARTICLE 4
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1. Conduct of Business.
(a) Conduct of Business by the Company. Except as consented to in writing by
Parent, during the period from the date of this Agreement to the Effective Time,
the Company shall carry on its business, and shall cause the Company
Subsidiaries to carry on their respective businesses, in the ordinary course
consistent with past practice and, to the extent consistent therewith, use all
reasonable efforts to keep available the services of its current officers and
other key employees and preserve its relationships with customers, suppliers,
distributors and other persons having business dealings with them. Without
limiting the generality of the foregoing (but subject to the above exceptions),
during the period from the date of this Agreement to the Effective Time, the
Company shall not, and shall not permit any Company Subsidiary, to:
(i) (A) other than dividends and distributions by a direct or indirect
wholly-owned Company Subsidiary to its parent or the Company's regularly
scheduled quarterly dividend in accordance with past practice, declare, set
aside or pay any dividends on, or make any other distributions in respect of,
any of its capital stock, or (B) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, except for
issuances of Common Stock upon the valid exercise of the Options or other rights
under the Equity Plans, in each case which are disclosed on Schedule 3.1(c) of
the Company Disclosure Letter as outstanding on the date hereof;
(ii) issue, deliver, sell, pledge or otherwise encumber or subject to any
Lien any shares of its capital stock, any other voting securities or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities, other than the issuance of shares of Common Stock upon the valid
exercise of the Options or other rights under the Equity Plans or in connection
with other awards under the Equity Plans, in each case, which are disclosed on
Schedule 3.1(c) of the Company Disclosure Letter as outstanding on the date
hereof and in accordance with their present terms, or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock or other
securities;
(iii) amend its articles of incorporation, bylaws or other comparable
organizational documents, form any subsidiary or acquire any equity interest or
other interest in any other person, or effect or be a party to any merger,
consolidation, share exchange, business combination, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(iv) sell, lease, license, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its properties or assets other than in the
ordinary course of business consistent with past practice;
(v) enter into commitments for capital expenditures other than in the
ordinary course of business except as may be necessary for the maintenance of
existing facilities, machinery and equipment in good operating condition and
repair in the ordinary course of business as reflected in the capital plan of
the Company previously provided to Parent;
(vi) (A) incur any long-term indebtedness (whether evidenced by a note or
other instrument, pursuant to a financing lease, sale-leaseback transaction,
guarantee or otherwise) or (B) incur short-term indebtedness in the ordinary
course of business consistent with past practice under lines of credit existing
on the date hereof;
(vii) (A) except for normal increases in salary and wages in the ordinary
course of business consistent with past practice or as set forth on Schedule 4.1
of the Company Disclosure Letter, grant any increase in the compensation or
benefits payable or to become payable by the Company or any Company Subsidiary
to any current or former director, officer, employee or consultant; (B) adopt,
enter into, amend or otherwise increase,
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reprice or accelerate the payment or vesting of the amounts, benefits or rights
payable or accrued or to become payable or accrued under any bonus, incentive
compensation, deferred compensation, severance, termination, change in control,
retention, hospitalization or other medical, life, disability, insurance or
other welfare, profit sharing, stock option, stock appreciation right,
restricted stock or other equity-based, pension, retirement or other employee
compensation or benefit plan, program, agreement or arrangement; (C) enter into
or amend any employment or collective bargaining agreement or, except as
required in accordance with the existing written policies of the Company or
contracts or agreements entered into or approved (and previously disclosed to
Parent) on or prior to the date of this Agreement, grant any severance or
termination pay to any officer, director, consultant or employee of the Company
or any Company Subsidiaries; or (D) pay or award any pension, retirement,
allowance or other non-equity incentive awards, or other employee benefit not
required by any outstanding employee benefit plan or arrangement;
(viii) change the accounting principles used by it unless required by GAAP
(or, if applicable with respect to foreign subsidiaries, foreign generally
accepted accounting principles);
(ix) except as otherwise expressly permitted in this Agreement, acquire by
merging or consolidating with, by purchasing any equity interest in or a portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof, or
otherwise acquire any material amount of assets of any other person (other than
the purchase of assets from suppliers or vendors in the ordinary course of
business consistent with past practice);
(x) except in the ordinary course of business consistent with past practice,
make or rescind any express or deemed election or settle or compromise any
claim or action relating to U.S. federal, state or local taxes, or change any
of its methods of accounting or of reporting income or deductions for U.S.
federal income tax purposes;
(xi) satisfy any claims or liabilities, other than the satisfaction, in the
ordinary course of business consistent with past practice, in accordance with
their terms, of liabilities reflected or reserved against in, or contemplated
by, the consolidated financial statements (or the notes thereto) of the Company
included in the Recent SEC Documents or incurred in the ordinary course of
business consistent with past practice;
(xii) make any loans, advances or capital contributions to, or investments
in, any other person, except for loans, advances, capital contributions or
investments between any wholly-owned Company Subsidiary and the Company or
another wholly-owned Company Subsidiary;
(xiii) other than in the ordinary course of business consistent with past
practice, (A) modify, amend or terminate any Contract, (B) waive, release,
relinquish or assign any Contract (or any of the Company's rights thereunder),
right or claim, (C) cancel or forgive any indebtedness owed to the Company or
any Company Subsidiary or (D) commence or settle any Legal Proceeding (as
defined in Section 8.5(f)); provided, however, that the Company may not under
any circumstance waive or release any of its rights under any confidentiality or
standstill agreement to which it is a party;
(xiv) except in the ordinary course of business consistent with past
practice, write off as uncollectible or establish an extraordinary reserve with
respect to any account receivable or any indebtedness; or
(xv) authorize, or commit or agree to take, any of the foregoing actions.
(b) Other Actions. Except as required by law, the Company and Parent shall
not, and shall not permit any of their respective Subsidiaries to, voluntarily
take any action that would, or that could reasonably be expected to, result in
(i) any of the representations and warranties of such party set forth in this
Agreement that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions to the consummation of the
transactions contemplated hereby not being satisfied.
(c) Advice of Changes. The Company and Parent shall promptly advise the other
party of any change or event having, or which, insofar as can reasonably be
foreseen, could reasonably be expected to have, a material adverse effect on
such party or on the truth of their respective representations and warranties or
the ability of the conditions to the consummation of the transactions
contemplated hereby to be satisfied; provided, however, that
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no such notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement.
Section 4.2. No Solicitation.
(a) The Company shall immediately cease all existing activities, discussions
and negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal.
(b) The Company shall not, and shall not authorize or permit any of the
Company Subsidiaries or any of its or their directors, officers, employees,
agents or representatives (including any investment banker, financial advisor,
attorney or accountant), directly or indirectly, to (i) solicit, initiate,
encourage, induce or knowingly facilitate, or furnish or disclose non-public
information in connection with or in furtherance of, any inquiries or the
making, submission or announcement of an Acquisition Proposal or take any action
that would reasonably be expected to lead, directly or indirectly, to an
Acquisition Proposal, or (ii) negotiate, explore or otherwise engage in
discussions with any person (other than Parent, Merger Sub or their respective
directors, officers, employees, agents and representatives) with respect to any
Acquisition Proposal or (iii) enter into any letter of intent or similar
document or any Contract contemplating or otherwise relating to any Acquisition
Proposal or (iv) subject to Section 4.2(c) below, approve, endorse or recommend
any Acquisition Proposal; provided that, at any time prior to the Shareholder
Approval, if the Board of Directors of the Company determines in good faith,
after consultation with and receipt of written advice from its outside counsel
as to the nature of the fiduciary duties of the Board of Directors under
applicable Law, that such action is consistent with the fiduciary obligations of
the Board of Directors of the Company under applicable Law, the Company may
furnish, pursuant to a customary confidentiality agreement with terms not
substantially more favorable to such third party than the Confidentiality
Agreement (as defined in Section 5.2) (and which shall not contain any
exclusivity provisions that would prohibit the Company from complying with the
obligations under this Section 4.2 or otherwise under this Agreement),
information to or enter into discussions with, any third party who delivers a
Superior Proposal that did not result from a breach of this Section 4.2(b) of
this Agreement. Without limiting the foregoing, the Company shall advise its
directors and officers of the restrictions set forth in this Section 4.2, and
shall use reasonable best efforts to cause such persons to comply with such
restrictions.
(c) If prior to the Shareholder Approval, the Board of Directors of the
Company receives a Superior Proposal that did not result from a breach of
Section 4.2(b) of this Agreement, the Board of Directors of the Company may
(subject to this and the following sentences), if it determines in good faith,
after consultation with and receipt of written advice from its outside counsel
as to the nature of the fiduciary duties of the Board of Directors under
applicable Law, that such action is consistent with the fiduciary obligations of
the Board of Directors of the Company under applicable Law, withdraw, modify or
change, in a manner adverse to Parent, its recommendation of this Agreement
and/or recommend a Superior Proposal to the shareholders of the Company and/or
comply with Rule 14e-2 promulgated under the Exchange Act with respect to any
Acquisition Proposal, provided that it (i) gives Parent four Business Days prior
written notice of its intention to do so (provided that the foregoing in no way
limits or otherwise affects Parent's right to terminate this Agreement pursuant
to Section 7.1(e) at such time as the requirements of such subsection have been
met) and (ii) during such four Business Day period, the Company otherwise
cooperates with Parent with respect to the Acquisition Proposal that constitutes
a Superior Proposal with the intent of enabling Parent to engage in good faith
negotiations so that the transactions contemplated hereby may be consummated.
Any such withdrawal, modification or change of the recommendation of the Board
of Directors of the Company of this Agreement will not change the approval of
the Board of Directors of the Company of this Agreement or the Merger,
including, without limitation, for purposes of causing any state takeover
statute or other Law to be inapplicable to the transactions contemplated hereby,
including the Merger. Nothing in this Section 4.2 (i) permits the Company to
terminate this Agreement, (ii) permits the Company to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
("Acquisition Agreement") with respect to any Acquisition Proposal (whether or
not it constitutes a Superior Proposal) or (iii) affects any other obligation of
the Company under this Agreement.
(d) From and after the execution of this Agreement, the Company shall
promptly advise Parent, orally and in writing, of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations or proposals relating to
an Acquisition Proposal (including the specific terms thereof and the identity
of the other party or parties involved) and promptly furnish to Parent a copy of
any such written proposal in addition to any information, including
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correspondence and draft agreements, provided to or by any third party relating
thereto. In addition, the Company shall promptly advise Parent, orally and in
writing, if the Board of Directors of the Company makes any determination as to
any Acquisition Proposal as contemplated by the proviso to the first sentence of
Section 4.2(b).
(e) As used herein, the term (i) "Acquisition Transaction" means any
transaction or series of transactions involving: (A) any merger, consolidation,
share exchange, business combination, issuance of securities, acquisition of
securities, tender offer, exchange offer or other similar transaction (1) in
which any of the Company Entities is a constituent corporation, (2) in which a
person or "group" (as defined in the Exchange Act and the rules promulgated
thereunder) of persons directly or indirectly acquires beneficial or record
ownership of securities representing more than 10% of the outstanding securities
of any class of voting securities of any of the Company Entities, or (3) in
which any of the Company Entities issues or sells securities representing more
than 10% of the outstanding securities of any class of voting securities of any
of the Company Entities; or (B) any sale (other than sales of inventory in the
ordinary course of business), lease (other than in the ordinary course of
business), exchange, transfer (other than sales of inventory in the ordinary
course of business), license (other than nonexclusive licenses in the ordinary
course of business), acquisition or disposition of any business or businesses or
assets that constitute or account for 10% or more of the consolidated net
revenues, net income or assets of the Company Entities; and (ii) "Superior
Proposal" means an unsolicited, bona fide written Acquisition Proposal on terms
that the Board of Directors of the Company determines in its good faith
judgment, would be (A) after consulting with and receipt of advice from a
nationally recognized investment banking firm, superior to the shareholders of
the Company from a financial point of view than the transactions contemplated by
this Agreement (including any adjustment to the terms and conditions proposed by
Parent or Merger Sub in response to such written offer) and (B) more favorable
to the Company and the shareholders of the Company (taking into account all
financial and strategic considerations, including relevant legal, financial,
regulatory and other aspects of such proposal, the third party making such
proposal, the conditions of such proposal and all constituencies and pertinent
factors permitted under the PBCL) and for which financing, to the extent
required, is then committed, and that the Board of Directors reasonably expects
a transaction pursuant to such proposal could be consummated.
(f) The Company agrees not to release or permit the release of any person
from, or to waive or permit the waiver of any provision of, any confidentiality,
"standstill" or similar agreement to which any of the Company Entities is a
party, and will use its best efforts to enforce or cause to be enforced each
such agreement at the request of Parent.
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.1. Preparation of Proxy Statement; Shareholders Meeting.
(a) As soon as reasonably practicable following the date of this Agreement,
the Company shall prepare and file with the SEC, and Parent and Merger Sub shall
cooperate with the Company in such preparation and filing of, the Proxy
Statement. The Company shall use reasonable best efforts to cause the Proxy
Statement to be mailed to the Company's shareholders as promptly as practicable
after the Proxy Statement is cleared by the staff of the SEC for mailing to the
Company's shareholders.
(b) The Company shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Shareholders Meeting") in accordance with applicable Law and
the Company's articles of incorporation and bylaws for the purpose of obtaining
Shareholder Approval with respect to this Agreement and the Merger and shall,
through the Board of Directors of the Company, subject to Section 4.2(c),
recommend to its shareholders the approval and adoption of this Agreement, the
Merger and the other transactions contemplated hereby. Without limiting the
generality of the foregoing, but subject to its rights under Section 4.2, the
Company agrees that its obligations pursuant to the first sentence of this
Section 5.1(b) shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company of any Acquisition Proposal.
Notwithstanding any withdrawal, modification or change in any approval or
recommendation of the Board of Directors of the Company, the Company shall hold
the Shareholders Meeting
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pertaining to this Section 5.1(b). The Company shall ensure that all proxies
solicited in connection with the Shareholders Meeting are solicited in
compliance with all applicable Laws.
(c) Parent shall (i) provide the Company with all information concerning
Parent or the Merger Sub reasonably requested by the Company to be included in
the Proxy Statement and (ii) at the Shareholders Meeting, if held, or any
postponement or adjournment thereof (or at any other meeting at which the Merger
or this Agreement are considered by shareholders), vote, or cause to be voted,
all of the shares of Common Stock then owned by it, the Merger Sub or any of its
other subsidiaries, if any, in favor of the approval and adoption of this
Agreement and the transactions contemplated hereby.
Section 5.2. Access to Information; Confidentiality. To the extent permitted
by applicable Law and subject to the Agreement dated April 19, 2000, between the
Company and Parent (the "Confidentiality Agreement"), and any confidentiality or
similar agreement binding on any Company Entity, upon reasonable notice, the
Company shall afford to Parent and to the officers, employees, accountants,
counsel, financial advisors and other representatives of Parent, reasonable
access during normal business hours during the period prior to the Effective
Time to all of the Company's properties, books, contracts, commitments,
personnel and records, consistent with its legal obligations, and all other
information concerning its business, properties and personnel as Parent may
reasonably request. Each of the Company and Merger Sub shall hold, and shall
cause its respective officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any nonpublic
information in accordance with the terms of the Confidentiality Agreement.
Section 5.3. Efforts; Cooperation.
(a) Upon the terms and subject to the conditions set forth in this Agreement,
each of the parties agrees to use reasonable best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement and to obtain satisfaction or waiver of the conditions precedent to
the Merger, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all consents,
approvals or waivers from third parties necessary for the consummation of the
Merger, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. Nothing set forth in this
Section 5.5(a) will limit or affect actions permitted to be taken pursuant to
Section 4.2.
(b) Parent and the Company shall (i) make the filings required of such party
under the HSR Act with respect to the Merger and the other transactions
contemplated by this Agreement within ten days after the date of this Agreement,
(ii) comply at the earliest practicable date with any request under the HSR Act
for additional information, documents or other materials received by such party
from the Federal Trade Commission or the Department of Justice or any other
Governmental Entity in respect of such filings or the Merger and the other
transactions contemplated by this Agreement, and (iii) cooperate with the other
party in connection with making any filing under the HSR Act and in connection
with any filings, conferences or other submissions related to resolving any
investigation or other inquiry by any such Governmental Authority under the HSR
Act with respect to the Merger and the other transactions contemplated by this
Agreement; provided, however, that in no event will Parent by required to
prosecute any litigation instituted by the Federal Trade Commission or the
Department of Justice or any other Governmental Entity which seeks to restrain
or prohibit the consummation of the Merger or which seeks to impose material
limitations on the ability of Buyer, the Surviving Corporation or any of their
respective affiliates or Subsidiaries to acquire, operate or hold, or to require
Parent, Surviving Corporation or any of their respective affiliates or
Subsidiaries to dispose of or hold separate, any material portion of their
assets or business or the Company's assets or business.
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Section 5.4. Indemnification.
(a) For six years after the Effective Time, the Surviving Corporation shall
indemnify and hold harmless, and provide advancement of expenses to, all past
and present directors, officers and employees of the Company and any of the
Company Subsidiaries to the same extent such persons are indemnified or have the
right to advancement of expenses as of the date of this Agreement by the Company
and any of the Company Subsidiaries pursuant to the Company's or any such
Company Subsidiary's certificate of incorporation, by-laws or other constituent
documents and indemnification agreements, if any, in existence on the date
hereof with any such directors, officers and employees for acts or omissions
occurring at or prior to the Effective Time (including for acts or omissions
occurring in connection with the approval of this Agreement and the consummation
of the transactions contemplated hereby).
(b) For six years after the Effective Time, the Surviving Corporation or
Parent shall maintain in effect directors' and officers' liability insurance and
fiduciary liability insurance covering acts or omissions occurring on or prior
to the Effective Time (including for acts or omissions occurring in connection
with the approval of this Agreement and the consummation of the transactions
contemplated hereby) with respect to those persons who are currently covered by
the Company's directors' and officers' liability insurance policy (a copy of
which has been heretofore delivered to Parent) on terms with respect to such
coverage and amount no less favorable to the insured than those of such current
insurance coverage; provided, however, that in no event will Parent be required
to expend in any one year an amount in excess of 200% of the annual premiums
currently paid by the Company for such insurance; and provided, further, that,
if the annual premiums of such insurance coverage exceed such amount, Parent
shall obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
(c) The provisions of this Section 5.4 are intended to be for the benefit of,
and will be enforceable by, each indemnified party, his or her heirs and his or
her representatives and are in addition to, and not in substitution for, any
other right to indemnification or contribution that any such person may have by
contract or otherwise.
Section 5.5. Employee Benefits. Parent agrees that all employees of the
Company Entities who continue employment with Parent, the Surviving Corporation
or any Subsidiary of the Surviving Corporation after the Effective Time
("Continuing Employees") will be eligible to participate in employee benefit
programs of the Surviving Corporation, any Subsidiary of the Surviving
Corporation or the Parent on the same basis and subject to the same terms and
conditions as similarly situated employees of the Parent. Nothing in this
Section 5.5 or elsewhere in this Agreement limits the right of the Parent, the
Surviving Corporation or any Subsidiary of the Surviving Corporation to
terminate any such employee benefit plan. Nothing in this Section 5.5 or
elsewhere in this Agreement is to be construed to create a right in any employee
to employment with Parent, the Surviving Corporation or any other subsidiary of
Parent and, subject to any other Contract between an employee and Parent, the
Surviving Corporation or any other subsidiary of Parent, the employment of each
Continuing Employee will be "at will" employment.
Section 5.6. Public Announcements. Unless otherwise required by applicable
Laws or applicable exchange rules (and, in that event, only if time does not
permit), at all times prior to the earlier of the Effective Time or termination
of this Agreement pursuant to Section 7.1, (a) Parent, Merger Sub and the
Company shall consult with each other before holding any press conferences,
analysts calls or other meetings or discussions and before issuing any press
release or other public announcements with respect to the transactions
contemplated by this Agreement, including the Merger; and (b) the parties shall
provide each other the opportunity to review and comment upon any press release
or other public announcement or statement with respect to the transactions
contemplated by this Agreement, including the Merger, and shall not issue any
such press release or other public announcement or statement prior to such
consultation. The parties shall mutually agree upon the initial press release or
releases to be issued with respect to the transactions contemplated by this
Agreement prior to the issuance thereof. In addition, the Company shall, and
shall cause the Company Subsidiaries to, (a) coordinate with Parent and Merger
Sub regarding communications with customers, shareholders and employees relating
to the transactions contemplated hereby, and (b) allow and facilitate Parent
contact with customers, shareholders and employees of the Company.
Section 5.7. Fees and Expenses. Except as provided in Section 7.2(b), all
fees and expenses incurred in connection with the Merger, this Agreement and
the transactions contemplated hereby are to be paid by the party
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incurring such fees or expenses, whether or not the Merger is consummated;
provided, however, that Parent and the Company shall share equally all fees and
expenses, other than attorneys' fees, incurred in connection with the filing of
the premerger notification and report forms relating to the Merger under the HSR
Act and the filing of any notice or other document under any applicable Foreign
Antitrust Laws.
Section 5.8. Credit Agreement. Prior to the Effective Time, the Company shall
terminate its bank credit facility or, at the option of the Company, obtain a
waiver of such credit facility (so long as such waiver would prevent a cross
default under any other agreements).
Section 5.9. Shareholder Litigation. The parties to this Agreement shall
cooperate and consult with one another, to the fullest extent possible, in
connection with any shareholder litigation against any of them or any of their
respective directors or officers with respect to the transactions contemplated
by this Agreement. In furtherance of and without in any way limiting the
foregoing, each of the parties shall use its respective reasonable best efforts
to prevail in such litigation so as to permit the consummation of the
transactions contemplated by this Agreement in the manner contemplated by this
Agreement. Notwithstanding the foregoing, the Company shall not compromise or
settle any litigation commenced against it or its directors or officers relating
to this Agreement or the transactions contemplated hereby (including the Merger)
without Parent's prior written consent, which consent Parent shall not
unreasonably withhold.
Section 5.10. Transition. In order to facilitate an orderly transition of the
management of the business of the Company and the Company Subsidiaries to Parent
and in order to facilitate the integration of the operations of the Company and
Parent and its subsidiaries and to permit the coordination of their related
operations on a timely basis, and in an effort to accelerate to the earliest
time possible following the Effective Time the realization of synergies,
operating efficiencies and other benefits expected to be realized by Parent and
the Company as a result of the Merger, the Company shall and shall cause the
Company Subsidiaries to consult with Parent on all strategic and operational
matters to the extent such consultation is not in violation of applicable Law,
including Laws regarding the exchange of information and other Laws regarding
competition. The Company shall and shall cause the Company Subsidiaries to make
available to Parent at the facilities of the Company and the Company
Subsidiaries, where determined by Parent to be appropriate and necessary, office
space in order to assist it in observing all operations and reviewing all
matters concerning the Company's affairs. Without in any way limiting the
provisions of Section 5.3, Parent, its subsidiaries, officers, employees,
counsel, financial advisors and other representatives shall, upon reasonable
written notice to the Company, be entitled to review the operations and visit
the facilities of the Company and the Company Subsidiaries at all times as may
be deemed reasonably necessary by Parent in order to accomplish the foregoing
arrangements. Notwithstanding the foregoing, nothing contained in this Agreement
gives Parent, directly or indirectly, the right to control or direct the
Company's operations prior to the Effective Time. Prior to the Effective Time,
the Company shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its and the Company
Subsidiaries' respective operations. The parties acknowledge that they have
discussed a key employee retention program to aid in the transition process.
Section 5.11. Section 16(b). Parent and the Company shall take all steps
reasonably necessary to cause the transactions contemplated hereby and any other
dispositions of equity securities of the Company (including derivative
securities) in connection with this Agreement by each individual who is a
director or officer of the Company to be exempt under Rule 16b-3 under the
Exchange Act.
Section 5.12. Financing. Parent shall use all reasonable best efforts to
obtain the financing contemplated by the Commitment Letter, or financing with a
different lender or lenders in an amount not less than the full amount of the
Merger Consideration and the Option Consideration, prior to the Closing.
ARTICLE 6
CONDITIONS PRECEDENT
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
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(a) Shareholder Approval. The Shareholder Approval with respect to this
Agreement and the Merger shall have been obtained.
(b) Governmental and Regulatory Approvals. Other than the filing of the
Articles of Merger, all consents, approvals and actions of, filings with and
notices to any Governmental Entity required of Parent, Merger Sub, the Company
or any Company Subsidiary to consummate the Merger and the other transactions
contemplated hereby the failure of which to be obtained or taken would
reasonably be expected to have a Material Adverse Effect on the Surviving
Corporation or its subsidiaries shall have been obtained.
(c) No Injunctions or Restraints. No final and nonappealable judgment,
decree, Law or rule, order, injunction or ruling entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect preventing the consummation of the Merger or
limiting the ownership or operation by Parent, the Company or any of their
respective subsidiaries of any material portion of the business or assets of
Parent or the Company.
(d) HSR Act; Foreign Antitrust Laws. The waiting period (including any
extension thereof) applicable to the consummation of the Merger under the HSR
Act and any applicable Foreign Antitrust Laws shall have expired or been
terminated.
Section 6.2. Conditions to Obligation of Parent and Merger Sub. The
obligation of Parent and Merger Sub to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and warranties of the
Company contained in Section 3.1(c) shall be true and correct in all respects
both when made and as of the Closing Date as though made on and as of the
Closing Date, and all other representations and warranties of the Company set
forth herein shall be true and correct in all respects (without giving effect to
any materiality or material adverse effect qualifications contained therein)
both when made and at and as of the Closing Date, as if made at and as of such
time (except to the extent expressly made as of an earlier date, in which case
as of such date), except where the failure of such representations and
warranties to be so true and correct have not had or resulted in or would not
reasonably be expected to have or result in, individually or in the aggregate, a
Company Material Adverse Effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all of its obligations required to be
performed by it under this Agreement at or prior to the Closing Date.
(c) Officer's Certificate. The Company shall have furnished Parent and Merger
Sub with a certificate dated the Closing Date signed on its behalf by an
executive officer to the effect that the conditions set forth in Sections 6.2(a)
and (b) have been satisfied.
(d) Financing. Parent shall have consummated financing in an amount not less
than the full amount of the Merger Consideration and the Option Consideration.
(e) Material Adverse Change. At any time after the date of this Agreement,
there shall not have occurred facts or circumstances resulting in or reasonably
expected to result in a Company Material Adverse Effect.
Section 6.3 Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub set forth herein shall be true and correct in all respects
(without giving effect to any materiality or material adverse effect
qualifications contained therein) both when made and at and as of the Closing
Date, as if made at and as of such time (except to the extent expressly made as
of an earlier date, in which case as of such date), except where the failure of
such representations and warranties to be so true and correct have not had or
resulted in or would not reasonably be expected to have or result in,
individually or in the aggregate, a material adverse effect on Parent.
(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger
Sub shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date.
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(c) Officer's Certificate. Each of Parent and Merger Sub shall have furnished
the Company with a certificate dated the Closing Date signed on its behalf by an
executive officer to the effect that the conditions set forth in Section 6.3(a)
and (b) have been satisfied.
Section 6.4. Frustration of Closing Conditions. None of Parent, Merger Sub or
the Company may rely on the failure of any condition set forth in Sections 6.1,
6.2 or 6.3, as the case may be, to be satisfied if such failure was caused by
such party's failure to comply with its obligations to consummate the Merger and
the other transactions contemplated by this Agreement, as required by and
subject to Section 5.3.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Shareholder Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger has not been consummated by March 1, 2002; provided,
however, that the right to terminate this Agreement pursuant to this Section
7.1(b)(i) is not available to any party whose failure to perform any of its
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Merger to be consummated by such time;
(ii) if the Shareholders Meeting (including any adjournment or postponement
thereof) has concluded and the Shareholder Approval has not been obtained;
provided, however, that the right to terminate this Agreement pursuant to this
Section 7.1(b)(ii) is not available to any party whose failure to perform any of
its obligations under this Agreement has been the cause of, or resulted in, the
failure to obtain such Shareholder Approval; or
(iii) if any Restraint having any of the effects set forth in Section 6.1(c)
is in effect and has become final and nonappealable; provided, however, that the
right to terminate this Agreement pursuant to this Section 7.1(b)(iii) is not
available to any party whose failure to perform any of its obligations under
this Agreement has been the cause of, or resulted in, such Restraint;
(c) by Parent, if the Company has breached or failed to perform in any
material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform (A)
would give rise to a failure of the conditions set forth in Sections 6.2(a) or
(b), and (B) is not cured within 30 days after written notice thereof or is
incapable of being cured by the Company;
(d) by the Company, if Parent or Merger Sub has breached or failed to perform
in any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or failure to perform
(A) would give rise to a failure of the condition set forth in Sections 6.3(a)
or (b), and (B) is not cured within 30 days after written notice thereof or is
incapable of being cured by Parent or Merger Sub;
(e) by Parent, if the Board of Directors of the Company or any committee
thereof (i) withdraws or modifies or changes, or proposes or announces any
intention or resolves to withdraw or modify or change, in a manner adverse to
Parent or Merger Sub, the approval or recommendation by the Board of Directors
of the Company or committee thereof of this Agreement or the transactions
contemplated hereby, including the Merger, (ii) approves or recommends, or
proposes to or announce any intention to approve or recommend, any Acquisition
Transaction, or (iii) proposes or announces any intention to enter into any
agreement, with respect to any Acquisition Transaction, or if the Company
breaches the provisions of Section 4.2 or Section 5.1(b).
Section 7.2. Effect of Termination.
(a) In the event of termination of this Agreement by either the Company or
Parent as provided in Section 7.1, this Agreement will forthwith become void and
have no effect, without any liability or obligation on the part of Parent,
Merger Sub or the Company, other than the provisions of Section 5.2 as such
Section relates to confidentiality, Section 5.6, Section 5.7, this Section 7.2
and Article 8, which provisions survive such termination; provided, however,
that nothing herein will relieve any party from any liability for any willful
and
A-24
material breach by such party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
(b) (i) If this Agreement is terminated (A) by either the Company or Parent
pursuant to Section 7.1(b)(i) or (ii) and prior to the Shareholders Meeting, an
Acquisition Proposal has been made known to the Company or been made directly to
its shareholders generally or any person has publicly announced an intention
(whether or not conditional and whether or not such proposal shall have been
rejected or withdrawn prior to the time of such termination) to make an
Acquisition Proposal or solicited proxies or consents in opposition to the
Merger, or (B) by Parent pursuant to Section 7.1(e) then the Company shall
promptly, but in no event later than two days after the date of such
termination, pay Parent by wire transfer of same day funds a fee equal to
$15,000,000 (the "Termination Fee"); provided, however, that no Termination Fee
will be payable by the Company pursuant to clause (A) above unless and until
within 12 months of such termination the Company or any of its Subsidiaries
enters into an Acquisition Agreement, or consummates the transactions,
contemplated by such Acquisition Proposal, in which case such Termination Fee
shall be paid upon signing of the Acquisition Agreement or at the closing (and
as a condition for closing) of the transactions contemplated by the Acquisition
Proposal.
(ii) The Company acknowledges that the agreements contained in this Section
7.2(b) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Parent would not enter into this Agreement.
(c) If the Company fails to pay when due any amount payable under Section
7.2(b), then (i) the Company shall reimburse Parent for all costs and expenses
(including fees and disbursements of counsel) incurred in connection with the
collection of such overdue amount and the enforcement by Parent of its rights
under Section 7.2(b), and (ii) the Company shall pay to Parent interest on such
overdue amount (for the period commencing as of the date such overdue amount was
originally required to be paid and ending on the date such overdue amount is
actually paid to Parent in full) at a rate per annum equal to 3% over the "prime
rate" (as announced by Citibank N.A.) in effect on the date such overdue amount
was originally required to be paid.
ARTICLE 8
GENERAL PROVISIONS
Section 8.1. Amendment. This Agreement may be amended with the approval of
the respective Boards of Directors of the Company and Parent at any time before
or after the Shareholder Approval; provided, however, that, after such
Shareholder Approval, there is not to be made any amendment that by Law requires
further approval by the shareholders of the Company without further approval of
such shareholders. This Agreement may not be amended except by an agreement in
writing signed on behalf of each of the parties.
Section 8.2. Extension; Waiver. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
8.1, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver will be valid only if set forth in an agreement in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise will not
constitute a waiver of such rights.
Section 8.3. Nonsurvival of Representations and Warranties. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument or certificate delivered pursuant to this Agreement will survive
the Effective Time, except the covenants and agreements contained in Article 2
and Article 8 and Section 5.4, each of which will survive in accordance with its
terms.
Section 8.4. Notices. All notices, requests, claims, demands and other
communications under this Agreement must be in writing and will be deemed given
if delivered personally, telecopied (which is confirmed) or sent by a nationally
recognized overnight courier service (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as is
specified by like notice):
A-25
(a) if to the Company, to: Arnold Industries, Inc.
625 South Fifth Avenue
P.O. Box 210 Lebanon, PA 17042-0210
Facsimile No.: (717) 253-0958
Attention: Kenneth F. Leedy
(b) with a copy to: Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
Facsimile No.: 215-963-5299
Attention: Howard L. Shecter, Esq.
(c) if to Parent or Merger Sub, to: Roadway Corporation
1077 Gorge Blvd.
P.O. Box 471 Akron, OH 44309-0471
Facsimile No.: (330) 258-6082
Attention: John Gasparovic,
General Counsel
with a copy to: Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Facsimile No.: (216) 579-0212
Attention: Patrick J. Leddy, Esq.
Section 8.5. Interpretation. When a reference is made in this Agreement to an
Article, Section or Exhibit, such reference is to an Article or Section of, or
an Exhibit to, this Agreement unless otherwise indicated. The table of contents,
table of defined terms and headings contained in this Agreement are for
reference purposes only and do not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they will be deemed to be followed by
the words "without limitation." The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement will refer to this Agreement
as a whole and not to any particular provision of this Agreement. All terms
defined in this Agreement will have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. For purposes of this
Agreement, (a) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity (including its permitted successors and assigns);
(b) "knowledge" of any person that is not an individual means the knowledge
after due inquiry of such person's executive officers and officers with direct
responsibility for the subject matter to which such knowledge relates; (c)
"affiliate" of any person means another person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first person, where "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of voting
securities, by contract or otherwise; (d) an entity shall be deemed a
"subsidiary" of another person if such person directly or indirectly owns,
beneficially or of record, (i) an amount of voting securities or other interests
in such entity that is sufficient to enable such person to elect at least a
majority of the members of such entity's board of directors or other governing
body or (ii) at least 50% of the outstanding equity or financial interests of
such entity; (e) "Laws" means any statute, ordinance, regulation, directive,
order or other legally enforceable requirement in effect as of the date hereof;
and (f) "Legal Proceeding" means any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving, any
court or other Governmental Entity or any arbitrator or arbitration panel. The
parties
A-26
have participated jointly in the negotiation and drafting of this Agreement. In
the event of an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden or proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provision of this Agreement.
Section 8.6. Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 8.7. Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and (b) are not intended to
confer upon any person other than the parties any rights or remedies.
Section 8.8. Governing Law. Except to the extent that the PBCL is mandatorily
applicable to the Merger and the rights of shareholders of the Company, this
Agreement is to be governed by, and construed in accordance with, the laws of
the State of New York, regardless of the laws that might otherwise govern under
applicable principles of conflict of laws thereof.
Section 8.9. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other party. Any assignment in violation of this
Section 8.9 will be void. Subject to the preceding two sentences, this Agreement
is binding upon, inures to the benefit of, and is enforceable by, the parties
and their respective successors and assigns.
Section 8.10. Consent to Jurisdiction. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of New York or any New York state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) shall not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (c)
shall not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal court sitting
in the State of New York or a New York state court.
Section 8.11. Specific Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in the
State of Ohio or an Ohio state court, this being in addition to any other remedy
to which they are entitled at Law or in equity.
Section 8.12. Severability.
(a) If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement will nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
(b) The Company and Parent agree that the Termination Fee provided in Section
7.2(b) is fair and reasonable in the circumstances, considering not only the
Merger Consideration but also the outstanding funded indebtedness (including
capital leases) of the Company and the Company Subsidiaries. If a court of
competent jurisdiction shall nonetheless, by a final, non-appealable judgment,
determine that the amount of the Termination Fee exceeds the maximum amount
permitted by Law, then the amount of the Termination Fee shall be reduced to the
maximum amount permitted by Law in the circumstances, as determined by such
court of competent jurisdiction.
A-27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of
Merger to be signed by their respective officers thereunto duly authorized, all
as of the date first written above.
ROADWAY CORPORATION
By: /s/ Michael W. Wickham
-----------------------------
Name: Michael W. Wickham
Title: Chairman and Chief
Executive Officer
LION CORP.
By: /s/ Michael W. Wickham
-----------------------------
Name: Michael W. Wickham
Title: President
ARNOLD INDUSTRIES, INC.
By: /s/ Edward H. Arnold
-----------------------------
Name: Edward H. Arnold
Title: President
A-28
ANNEX B
[Letterhead of Morgan Stanley]
August 21, 2001
Board of Directors
Arnold Industries, Inc.
625 South Fifth Avenue
Lebanon, PA 17042
Members of the Board:
We understand that Arnold Industries, Inc. (the "Company"), Roadway
Corporation (the "Buyer" or "Roadway") and Roadway Acquisition Sub, a wholly-
owned subsidiary of Roadway Corporation ("Acquisition Sub"), propose to enter
into an Agreement and Plan of Merger, substantially in the form of the draft
dated August 19, 2001 (the "Merger Agreement"), which provides, among other
things, for the merger (the "Merger") of Acquisition Sub with and into the
Company. Pursuant to the Merger, the Company will become a wholly-owned
subsidiary of the Buyer and each outstanding share of common stock, par value
$1.00 per share (the "Common Stock"), of the Company other than shares held in
treasury or held by the Buyer or any affiliate of the Buyer or the Company or
as to which dissenters' rights have been perfected, will be converted into the
right to receive $21.75 per share in cash. The terms and conditions of the
Merger are more fully set forth in the Merger Agreement.
We also are aware that, simultaneously with the execution of the Merger
Agreement, Roadway and Edward H. Arnold may propose to enter into an option
agreement pursuant to which, among other things, Mr. Arnold will have the
option to purchase the Arnold Logistics assets from Roadway (the "Option").
You have asked for our opinion as to whether the consideration to be
received by the holders of shares of Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other business and financial information of the Company and the
Buyer;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company and its
constituent businesses prepared by the management of the
Company;
(iii) reviewed certain financial forecasts prepared by the management
of the Company and its constituent businesses;
(iv) discussed the past and current operations and financial
condition and the prospects of the Company and its constituent
businesses, including information relating to certain
strategic, financial and operational benefits anticipated from
the Merger, with senior executives of the Company;
(v) reviewed the reported prices and trading activity for the
Common Stock;
(vi) compared the financial performance of the Company and its
constituent businesses and the prices and trading activity of
the Common Stock with that of certain other comparable
publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
B-1
(viii) participated in discussions and negotiations among
representatives of the Company and the Buyer and their
financial and legal advisors;
(ix) reviewed the Merger Agreement and certain related documents;
and
(x) considered such other factors and performed such other analyses
as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information supplied or otherwise made
available to us by the Company for the purposes of this opinion. With respect
to the financial forecasts, including information relating to certain
strategic, financial and operational benefits anticipated from the Merger, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the future financial
performance of the Company and its constituent businesses. As you know, Morgan
Stanley did not receive financial forecasts for the Buyer and instead, with
your consent, relied on the publicly available estimates of certain analysts,
who report on the Buyer. We are not legal, regulatory or accounting experts
and have relied on the assessments of the Company and its advisors with
respect to certain tax effects with and without the Merger. In addition, we
have assumed that the Merger will be consummated in accordance with the terms
set forth in the Merger Agreement. We have not made any independent valuation
or appraisal of the assets or liabilities of the Company and its constituent
businesses, nor have we been furnished with any such appraisals. Our opinion
is necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
In arriving at its opinion, Morgan Stanley was not authorized to solicit,
and did not solicit, interest from any party with respect to an acquisition or
business combination involving Arnold.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services.
In the past, Morgan Stanley & Co. Incorporated and its affiliates have
provided financial advisory and financing services for the Company and have
received fees for the rendering of these services.
In the ordinary course of its business, Morgan Stanley may from time to time
trade in the debt or equity securities or senior loans of the Company and the
Buyer for its own accounts, the accounts of investment funds and other clients
under the management of Morgan Stanley and for the accounts of its customers
and, accordingly, may at any time hold a long or short position in such
securities or indebtedness.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its
entirety, if required, in any filing made by the Company in respect of the
transaction with the Securities and Exchange Commission. In addition, this
opinion does not in any manner address the prices at which the Buyer's common
stock will trade following consummation of the Merger, and Morgan Stanley
expresses no opinion or recommendation as to how the shareholders of the
Company should vote with respect to the Merger. Since Morgan Stanley was not
requested to, and did not consider, the Option in arriving at its opinion,
Morgan Stanley's opinion also did not, in any way, address the fairness of the
Option.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by the holders of shares of
Common Stock pursuant to the Merger Agreement is fair from a financial point
of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Kent P. Hitchcock
-------------------------------
Kent P. Hitchcock
Managing Director
B-2
ANNEX C
Subchapter D of Chapter 15 of The Pennsylvania Business Corporation Law
PENNSYLVANIA STATUTORY PROVISIONS RELATING TO DISSENTERS RIGHTS
EXCERPT FROM SUBCHAPTER 19C
ss.1930. Dissenters rights
(a) General rule.If any shareholder of a domestic business corporation that
is to be a party to a merger or consolidation pursuant to a plan of merger or
consolidation objects to the plan of merger or consolidation and complies with
the provisions of Subchapter D of Chapter 15 (relating to dissenters rights),
the shareholder shall be entitled to the rights and remedies of dissenting
shareholders therein provided, if any. See also section 1906(c) (relating to
dissenters rights upon special treatment).
SUBCHAPTER 15D
Dissenters rights
Section:
1571. Application and effect of subchapter.
1572. Definitions.
1573. Record and beneficial holders and owners.
1574. Notice of intention to dissent.
1575. Notice to demand payment.
1576. Failure to comply with notice to demand payment, etc.
1577. Release of restrictions or payment for shares.
1578. Estimate by dissenter of fair value of shares.
1579. Valuation proceedings generally.
1580. Costs and expenses of valuation proceedings.
ss.1571. Application and effect of Subchapter.
(a) General rule.Except as otherwise provided in subsection (b), any
shareholder (as defined in Section 1572 (relating to definitions)) of a
business corporation shall have the right to dissent from, and to obtain
payment of the fair value of his shares in the event of, any corporate action,
or to otherwise obtain fair value for his shares, only where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of election).
Section 2904(b) (relating to procedure).
C-1
Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares shall not have the right to dissent
and obtain payment of the fair value of the shares under this subchapter if,
on the record date fixed to determine the shareholders entitled to notice of
and to vote at the meeting at which a plan specified in any of section 1930,
1931(d), 1932(c) or 1952(d) is to be voted on, or on the date of the first
public announcement that such a plan has been approved by the shareholders
by consent without a meeting, the shares are either:
(i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system
by the National Association of Securities Dealers, Inc.; or
(ii) held beneficially or of record by more than 2,000 persons.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:
(i) Shares of any preferred or special class or series unless the
articles, the plan or the terms of the transaction entitle all
shareholders of the class or series to vote thereon and require
for the adoption of the plan or the effectuation of the
transaction the affirmative vote of a majority of the votes cast
by all shareholders of the class or series.
(ii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares,
property or assets of another corporation by the issuance of shares,
obligations or otherwise, with or without assuming the liabilities of the
other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by the
issuance of voting shares of the corporation to be outstanding immediately
after the acquisition sufficient to elect a majority or more of the
directors of the corporation.
(c) Grant of optional dissenters rights. The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall
have dissenters rights in connection with any corporate action or other
transaction that would otherwise not entitle such shareholders to dissenters
rights.
(d) Notice of dissenters rights. Unless otherwise provided by statute, if a
proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value of
their shares by complying with the terms of this subchapter; and
(2) a copy of this subchapter.
(e) Other statutes. The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part
that makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain provisions of articles ineffective. This subchapter may not be
relaxed by any provision of the articles.
(g) Computation of beneficial ownership. For purposes of subsection
(b)(1)(ii), shares that are held beneficially as joint tenants, tenants by the
entireties, tenants in common or in trust by two or more persons, as
fiduciaries or otherwise, shall be deemed to be held beneficially by one
person.
C-2
(h) Cross references. See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished),
1763(c) (relating to dissenters rights procedure) and 2512 (relating to
dissenters' rights procedure).
ss.1572. Definitions.
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter before
the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
one or more of the resulting corporations is the successor corporation for the
purposes of this subchapter. The designated successor corporation or
corporations in a division shall have sole responsibility for payments to
dissenters and other liabilities under this subchapter except as otherwise
provided in the plan of division.
"Dissenter." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
"Shareholder." A shareholder as defined in section 1103 (relating to
definitions), or an ultimate beneficial owner of shares, including, without
limitation a holder of depository receipts, where the beneficial interest
owned includes an interest in the assets of the corporation upon dissolution.
"Fair value." The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects, taking into account
all relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action.
"Interest." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all of the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.
ss.1573. Record and beneficial holders and owners.
(a) Record holders of shares. A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of
the same class or series beneficially owned by any one person and discloses
the name and address of the person or persons on whose behalf he dissents. In
that event, his rights shall be determined as if the shares as to which he has
dissented and his other shares were registered in the names of different
shareholders.
(b) Beneficial owners of shares. A beneficial owner of shares of a business
corporation who is not the record holder may assert dissenters rights with
respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the
corporation not later than the time of the assertion of dissenters rights a
written consent of the record holder. A beneficial owner may not dissent with
respect to some but less than all shares of the same class or series owned by
the owner, whether or not the shares so owned by him are registered in his
name.
ss.1574. Notice of intention to dissent.
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect
no change in the beneficial ownership of his shares from the date of such
filing continuously through the effective date of the proposed action and must
refrain from voting his shares in approval of such action. A dissenter who
fails in any respect shall not acquire any right to payment of the fair value
of his shares under this subchapter. Neither a proxy nor a vote against the
proposed corporate action shall constitute the written notice required by this
section.
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ss.1575. Notice to demand payment.
(a) General rule. If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice
of intention to demand payment of the fair value of their shares and who
refrained from voting in favor of the proposed action. If the proposed
corporate action is to be taken without a vote of shareholders, the
corporation shall send to all shareholders who are entitled to dissent and
demand payment of the fair value of their shares, a notice of the adoption of
the plan or other corporate action. In either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment. The time set for receipt of the
demand and deposit of certificated shares shall be not less than 30 days from
the mailing of the notice.
ss.1576. Failure to comply with notice to demand payment, etc.
(a) Effect of failure of shareholder to act. A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575
(relating to notice to demand payment) shall not have any right under this
subchapter to receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares. If the shares are not represented
by certificates, the business corporation may restrict their transfer from the
time of receipt of demand for payment until effectuation of the proposed
corporate action or the release of restrictions under the terms of section
1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder. The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
ss.1577. Release of restrictions or payment for shares.
(a) Failure to effectuate corporate action. Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares
from any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of notice to demand payment. When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming
to the requirements of section 1575 (relating to notice to demand payment),
with like effect.
(c) Payment of fair value of shares. Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are
certificated) have deposited their certificates the amount that the
corporation estimates to be the fair value of the shares, or give written
notice that no remittance under this section will be made. The remittance or
notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
C-4
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) Failure to make payment. If the corporation does not remit the amount of
its estimate of the fair value of the shares as provided by subsection (c), it
shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such
certificate or on the records of the corporation relating to any such
uncertificated shares that such demand has been made. If shares with respect
to which notation has been so made shall be transferred, each new certificate
issued therefor or the records relating to any transferred uncertificated
shares shall bear a similar notation, together with the name of the original
dissenting holder or owner of such shares. A transferee of such shares shall
not acquire by such transfer any rights in the corporation other than those
that the original dissenter had after making demand for payment of their fair
value.
ss.1578. Estimate by dissenter of fair value of shares.
(a) General rule. If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the
fair value of the shares, which shall be deemed a demand for payment of the
amount or the deficiency.
(b) Effect of failure to file estimate.Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the
corporation.
ss.1579. Valuation proceedings generally.
(a) General rule. Within 60 days after the latest of:
(1) Effectuation of the proposed corporate action;
(2) Timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) Timely receipt of any estimates pursuant to section 1578 (relating to
estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the
shares be determined by the court.
(b) Mandatory joinder of dissenters. All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served
on each such dissenter. If a dissenter is a nonresident, the copy may be
served on him in the manner provided or prescribed by or pursuant to 42
Pa.C.S. Ch. 53 (relating to bases of jurisdiction and interstate and
international procedure).
(c) Jurisdiction of the court. The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery. Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found
to exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application. If the corporation
fails to file an application as provided in subsection (a), any dissenter who
made a demand and who has not already settled his claim against the
corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file
an application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not
previously remitted.
C-5
ss.1580. Costs and expenses of valuation proceedings.
(a) General rule. The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578
(relating to estimate by dissenter of fair value of shares) the court finds to
be dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears. Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply
substantially with the requirements of this subchapter and may be assessed
against either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner
in respect to the rights provided by this subchapter.
(c) Award of fees for benefits to other dissenters. If the court finds that
the services of counsel for any dissenter were of substantial benefit to other
dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of
the amounts awarded to the dissenters who were benefitted.
C-6
REVOCABLE PROXY
ARNOLD INDUSTRIES, INC.
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
SPECIAL MEETING OF SHAREHOLDERS
________, 2001
The undersigned hereby acknowledges receipt of the Notice of Special Meeting
of Shareholders of Arnold Industries, Inc., to be held on _________, ____,
2001, at 10:00 a.m., at the Lebanon Country Club, 3375 West Oak Street,
Lebanon, Pennsylvania, and the proxy statement for said meeting attached
thereto, and hereby appoints Kenneth R. Leedy or Heath L. Allen, or either of
them, the attorneys, agents and proxies, with full power of substitution, to
act at the Special Meeting of Shareholders or at adjournment or adjournments
thereof, and to vote as specified herein the number of shares which the
undersigned, if personally present, would be entitled to vote on any business
that may properly come before such meeting, including taking action on
Proposals 1 and 2 set forth below.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
For Against Abstain
1. To adopt the Agreement and Plan of Merger, dated as |_| |_| |_|
of August 21, 2001, by and among Roadway
Corporation, a Delaware corporation, Lion Corp., a
Pennsylvania corporation and a wholly owned
subsidiary of Roadway Corporation, and Arnold
Industries, Inc., pursuant to which each share of
Arnold Industries common stock issued and
outstanding at the effective time of the merger,
other than shares held by Roadway or any of its
subsidiaries or by Arnold Industries or any of its
subsidiaries, all of which will be canceled, or by
shareholders, if any, who properly exercise their
dissenters' rights granted pursuant to the merger
agreement, will be converted into the right to
receive $21.75 per share in cash, without interest.
SEE REVERSE SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
For Against Abstain
2. With respect to the use of their discretion in such |_| |_| |_|
other business as may come before the meeting or
any adjournments thereof.
This proxy, when properly executed, will be voted in accordance with the
specifications made herein. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSALS 1 AND 2. All prior proxies are hereby revoked. This
proxy may be revoked prior to its exercise by filing with the Secretary of
Arnold Industries a duly executed proxy bearing a later date or an instrument
revoking this proxy, or by attending the meeting and electing to vote in
person.
Please sign your proxy exactly as your name
appears on the certificate. When signing as
attorney, executor, administrator, trustee
or guardian, give title as such. If owner is
a corporation, sign full corporate name by a
duly authorized officer.
If two or more persons are named as owners,
both or all should sign.
Please be sure to sign and date this proxy
in the box below.
THIS PROXY IS SOLICITED ON BEHALF OF ARNOLD
INDUSTRIES BOARD OF DIRECTORS. PLEASE ACT
PROMPTLY - SIGN, DATE & MAIL YOUR PROXY CARD
TODAY.
____________________________________________
Shareholder sign above
____________________________________________
Co-Holder (if any)
Dated ________________________________ , 2001