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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of
1934 (Amendment No. __)
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for use of the
[X] Definitive proxy statement Commission only (as permitted
[ ] Definitive additional materials by Rule 14a-6(e)(2))
[ ] Soliciting material under Rule 14a-12
KENAN TRANSPORT COMPANY
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[ ] No fee required.
[X] 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:
Common stock, no par value
2) Aggregate number of securities to which transaction applies:
2,420,662 shares of common stock, no par value, of
Kenan Transport Company and 398,200 options to
acquire such shares.
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
is determined):
$35 per share cash merger consideration
4) Proposed maximum aggregate value of transaction:
$86,993,645, based on 2,420,662 shares outstanding as
of March 1, 2001 and payment of $2,270,475 for
in-the-money unexercised options to purchase common
stock, no par value, of Kenan Transport Company.
5) Total fee paid:
$17,399
[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:
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March 29, 2001
To Our Shareholders:
On behalf of the Board of Directors of Kenan Transport Company, we
cordially invite you to attend a special meeting of shareholders of Kenan
Transport Company to be held on Wednesday, April 25, 2001, at 10:00 a.m., local
time, at The Kenan Center, Bowles Drive, Chapel Hill, North Carolina. The Kenan
Center is adjacent to the Dean Smith Student Activities Center. The purpose of
the meeting is to consider a merger that, if approved and subsequently
completed, will result in our shareholders receiving $35 in cash per share.
The merger will be accomplished pursuant to a merger agreement that we
negotiated with Advantage Management Holdings Corp., a tank truck carrier
headquartered in Canton, Ohio. Following the merger, Kenan and Advantage will be
owned by a privately-held company called The Kenan Advantage Group, Inc. The
accompanying proxy statement describes the proposed merger, and you should read
it carefully.
Our board of directors believes that the merger is fair to and in the
best interests of our shareholders, and recommends that you approve the merger.
We have also received the opinion of our financial advisor, First Union
Securities, Inc., that the merger price of $35 per share is fair from a
financial point of view to our shareholders. First Union's written opinion is
attached as Appendix B to the accompanying proxy statement. You should read it
carefully.
Our two largest shareholders, which are trusts for the benefit of the
family members of the company's deceased founder, Frank H. Kenan, have agreed to
vote their shares in favor of the merger. In addition, all directors and
executive officers who own Kenan shares have agreed to vote their shares in
favor of the merger. Collectively, these shareholders own almost 58% of our
outstanding shares, and their vote in favor of the merger will ensure that it is
approved by our shareholders.
We hope you will attend the meeting. However, whether or not you plan
to attend, it is important to us for your shares to be represented at the
special meeting. A failure to vote will effectively count as a vote against the
merger. Accordingly, please promptly complete, sign and date the enclosed proxy
card and return it in the enclosed envelope.
LEE P. SHAFFER THOMAS S. KENAN, III
President and Chief Executive Officer Chairman of the Board
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KENAN TRANSPORT COMPANY
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on April 25, 2001
To the Shareholders of Kenan Transport Company:
Notice is hereby given that a special meeting of shareholders of Kenan
Transport Company will be held on April 25, 2001 at 10:00 a.m., local time, at
The Kenan Center, Bowles Drive (adjacent to the Dean Smith Student Activities
Center), Chapel Hill, North Carolina, for the following purposes:
o To consider and vote on a proposal to adopt and approve the
plan of merger attached as Exhibit B to the Agreement and Plan
of Merger, dated as of January 25, 2001, among Advantage
Management Holdings Corp., KTC/AMG Holdings Corp., Kenan
Transport Company and KTC Acquisition Corp. In the merger,
each Kenan shareholder (other than KTC/AMG Holdings Corp. and
KTC Acquisition Corp.) will be entitled to receive $35 in cash
for each outstanding share of Kenan Transport Company. A copy
of the merger agreement is attached to the accompanying proxy
statement as Appendix A and is described in the accompanying
proxy statement.
o To consider and act upon such other matters as may properly
come before the special meeting or any adjournment or
adjournments thereof.
The board of directors has determined that only holders of Kenan shares
of record at the close of business on March 23, 2001 will be entitled to notice
of, and to vote at, the special meeting, including any adjournment.
By order of the board of directors:
WILLIAM L. BOONE
Vice President--Finance, Secretary and Treasurer
March 29, 2001
YOUR VOTE IS IMPORTANT TO US. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE PROMPTLY COMPLETE AND DATE YOUR PROXY CARD AND RETURN IT IN THE
ENCLOSED ENVELOPE. PLEASE DO NOT SEND ANY OF YOUR STOCK CERTIFICATES AT THIS
TIME. IF THE MERGER IS COMPLETED, WE WILL SEND YOU INSTRUCTIONS ABOUT HOW TO
EXCHANGE YOUR STOCK CERTIFICATES FOR THE MERGER CONSIDERATION.
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QUESTIONS AND ANSWERS
ABOUT THE MERGER
(SUMMARY TERM SHEET)
The following question-and-answer summary addresses significant aspects
of the proposed merger. This summary does not contain all the information that
you should consider before voting on the proposed merger. You should read the
entire proxy statement and all of its appendices before voting on the proposed
merger.
Q: WHO IS MERGING WITH KENAN?
A: We negotiated the merger agreement with Advantage Management Holdings
Corp., a tank truck carrier headquartered in Canton, Ohio. KTC/AMG
Holdings Corp. and KTC Acquisition Corp. were formed in connection with
the merger agreement. In the merger, KTC Acquisition Corp. will merge
with and into Kenan, and Kenan will be the surviving corporation.
Prior to the merger, Advantage Management Holdings Corp. will become a
subsidiary of KTC/AMG Holdings Corp., and the equity owners of
Advantage will become the principal equity owners of KTC/AMG Holdings
Corp. Following the merger, KTC/AMG Holdings Corp. will change its name
to The Kenan Advantage Group, Inc. and will own 100% of Kenan and
Advantage.
For more information about the merger, please refer to "The Merger
Agreement - The Merger Transaction" and "- Operation of Kenan After the
Merger" on pages 22 and 23 of this proxy statement.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: You will be entitled to receive $35 in cash, without interest, for each
Kenan share that you own. For example, if you own 100 Kenan shares, you
will be entitled to receive $3,500 in cash. Kenan has received the
opinion of its financial advisor, First Union Securities, Inc., that
the consideration to be received by you is fair from a financial point
of view. For additional information about the analysis performed by
First Union in connection with its opinion, please refer to "The Merger
- Opinion of Kenan's Financial Advisor" on pages 11 - 17 of this proxy
statement.
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: You are being asked to approve the plan of merger attached as Exhibit B
to the merger agreement, which is included as Appendix A to this proxy
statement. The merger will be accomplished under the terms of the plan
of merger. Please refer to "The Special Meeting - Required Vote; Voting
Procedures" on page 2 of this proxy statement.
Q: WHY ARE WE MERGING?
A: Our two largest shareholders are trusts for the benefit of the family
members of our deceased founder, Frank H. Kenan. Collectively, these
trusts own about 45% of our
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outstanding shares. Following Mr. Kenan's death in 1996, the trusts
advised our board of directors that they would be interested in selling
their Kenan shares in a transaction that was fair to all of our
shareholders. In the latter part of 1996, we formed a special committee
of the board of directors to consider the sale of the company. Shortly
thereafter, we were presented with the opportunity to expand our
operations through the acquisition of Transport South, Inc. and
Petro-Chemical Transport, Inc. Following these acquisitions, we decided
to suspend any further consideration of a sale of the company until we
had successfully integrated the operations of Transport South, Inc. and
Petro-Chemical Transport, Inc.
In the summer of 1999, our special committee again began to consider
the possible sale of the company. Since that time, we have had
discussions with a number of potential buyers, none of whom was willing
to acquire 100% of the company at a price greater than $35 per share.
As part of that process, we also considered the risks and uncertainties
of remaining independent, and the financial implications to our
shareholders of doing so. Ultimately, the special committee and our
board of directors concluded that the merger agreement with Advantage
is in the best interest of all our shareholders. For more information
about the background of the merger, you should refer to "The Merger -
Background of the Merger" and "- Recommendation of, and Factors
Considered by, the Special Committee and Board of Directors" on pages 3
- 11 of this proxy statement.
Q: HAS THE SPECIAL COMMITTEE AND BOARD OF DIRECTORS RECOMMENDED THE
MERGER?
A: Yes. The special committee determined that the merger agreement is fair
and in your best interest, and recommended that the board of directors
of Kenan approve the merger agreement. The board of directors also
determined that the merger agreement is fair and in your best interest,
and recommends that you approve the plan of merger.
For more information about the events leading up to Kenan's execution
of the merger agreement, you should refer to "The Merger - Background
of the Merger" and "- Recommendation of, and Factors Considered by, the
Special Committee and Board of Directors" on pages 3 - 11 of this proxy
statement.
Q: HOW DID THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS DETERMINE THAT
THE MERGER IS FAIR AND IN MY BEST INTEREST?
A: In determining that the merger agreement is fair and in your best
interest, the special committee and board of directors considered
several factors, including:
o the price to be paid in the merger, which represents a 32%
premium over the last sale price of Kenan shares on January
25, 2001, the day before the merger was announced;
o First Union's analysis and opinion that the merger price is
fair from a financial point of view to Kenan shareholders;
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o the process by which First Union solicited potential buyers
for the company, and discussions between Kenan and the parties
who expressed an interest in acquiring the company, none of
whom ultimately was willing to proceed with a transaction at a
price in excess of $35 per share;
o the risks associated with remaining independent, including the
effect of increased fuel and wage costs on the trucking
industry, and the possible financial implications to
shareholders of remaining independent;
o the fact that the Kenan family trusts and all directors and
executive officers who own Kenan shares agreed to vote their
shares in favor of the merger; and
o the interests of Kenan's executive officers in the merger.
To review the background and reasons for the merger and the factors
considered by the special committee and the board of directors in
approving and recommending the merger, you should refer to "The Merger
- Background of the Merger" and "- Recommendation of, and Factors
Considered by, the Special Committee and Board of Directors" on pages 3
- 11 of this proxy statement.
Q: IF THE MERGER IS COMPLETED, WHEN CAN I EXPECT TO RECEIVE THE MERGER
CONSIDERATION FOR MY SHARES?
A: First Union National Bank will act as the payment agent in connection
with the merger. Promptly after the effective time of the merger, the
payment agent will send you detailed instructions regarding the
surrender of your stock certificates. YOU SHOULD NOT SEND YOUR STOCK
CERTIFICATES TO KENAN OR ANYONE ELSE UNTIL YOU RECEIVE THESE
INSTRUCTIONS. The payment agent will pay the merger consideration to
you as promptly as practicable following its receipt of your stock
certificates and other required documents. For more information
regarding the procedures for delivery of your certificates and receipt
of the merger consideration, please refer to "The Merger Agreement -
Payment of the Merger Consideration" on pages 23 and 24 of this proxy
statement.
Q: WHEN WILL THE MERGER TO BE COMPLETED?
A: Assuming the merger is approved by our shareholders, we expect to
complete the merger as soon as practicable after the special meeting.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE MERGER?
A: Under North Carolina law, the affirmative vote of holders of a majority
of the outstanding shares of Kenan is required to approve the plan of
merger. Kenan's two largest shareholders, which are trusts for the
benefit of the family members of the company's deceased founder, Frank
H. Kenan, and all directors and executive officers of Kenan who own
Kenan shares have agreed to vote their Kenan shares in favor of the
merger. Collectively, these shareholders own almost 58% of Kenan's
outstanding shares. Accordingly, their vote in favor of the merger will
ensure that it is approved by the shareholders of Kenan. For more
information about the vote required and share
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ownership of these shareholders, please refer to "The Special Meeting -
Required Vote; Voting Procedures" and "Additional Information - Stock
Ownership" on pages 2 and 36 and 37, respectively, of this proxy
statement.
Q: WHO CAN VOTE ON THE MERGER?
A: All shareholders of record as of the close of business on March 23,
2001 will be entitled to notice of, and to vote at, the special
meeting. Please refer to "The Special Meeting - Record Date and Quorum
Requirement" on pages 1 and 2 of this proxy statement.
Q: WHAT RIGHTS DO I HAVE IF I OPPOSE THE MERGER?
A: If you oppose the merger, you may vote against it at the special
meeting. You do not have any statutory rights of dissent and appraisal.
Accordingly, if the merger is approved by the shareholders and
completed, you will have to accept the $35 per share merger payment for
your shares even if you believe that amount is insufficient. For more
information, please refer to "The Special Meeting - Rights of Objecting
Shareholders" on page 3 of this proxy statement.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: The receipt of the merger consideration by you will be a taxable
transaction for federal income tax purposes. To review the tax
consequences to you in greater detail, please refer to "The Merger -
Federal Income Tax Consequences" on page 21 of this proxy statement.
Your tax consequences will depend on your personal situation. You
should consult with your tax advisors for a full understanding of the
tax consequences of the merger to you.
Q: HOW DO I CAST MY VOTE?
A: Just indicate on your proxy card how you want to vote, and sign and
mail it in the enclosed envelope as soon as possible. A failure to vote
or a vote to "ABSTAIN," as permitted on the proxy card, will have the
same effect as a vote "AGAINST" the merger. The special meeting will
take place on Wednesday, April 25, 2001, at 10:00 a.m., local time, at
The Kenan Center, Bowles Drive, Chapel Hill, North Carolina. The Kenan
Center is adjacent to the Dean Smith Student Activities Center. You may
also attend the special meeting and vote your shares in person, rather
than voting by proxy. Please refer to "The Special Meeting - Time,
Place and Date; Proxy Solicitation" and "- Required Vote; Voting
Procedures" on pages 1 and 2, respectively, of this proxy statement.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will vote your shares on the proposed merger only if you
provide instructions on how to vote. You should instruct your broker
how to vote your shares, following the directions your broker provides
to you for doing so. If you do not provide instructions to your broker,
your shares will not be voted, which will have the effect of votes cast
"AGAINST" the merger. For additional information about the procedures
for
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dealing with your broker if your shares are held in "street name,"
please refer to "The Special Meeting - Required Vote; Voting
Procedures" on page 2 of this proxy statement.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You may revoke your proxy at any time before the vote is taken at
the special meeting by:
o submitting to the secretary of Kenan a written instrument
revoking the proxy;
o submitting a duly executed proxy bearing a later date; or
o voting in person at the special meeting.
Any of these actions will have the automatic effect of revoking any
prior proxy that you have sent in. For more information about revoking
your proxy, please refer to "The Special Meeting - Voting and
Revocation of Proxies" on page 2 of this proxy statement.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any additional questions about the special meeting, you may
call William L. Boone, Vice President - Finance, Secretary and
Treasurer of Kenan, at (919) 929-4740 (Ext. 217), or write to him at:
William L. Boone
Vice President - Finance, Secretary and Treasurer
Kenan Transport Company
University Square - West
143 W. Franklin Street
Chapel Hill, North Carolina 27516
We will also be happy to send you a copy of our 2000 annual report on
Form 10-K, which we filed with the Securities and Exchange Commission
on March 21, 2001. To request a copy of our annual report on Form 10-K,
please call or write William L. Boone at the telephone number or
address set forth above. Our SEC filings are also available at the web
site maintained by the SEC at http://www.sec.gov and at the SEC's
public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. You may call the SEC at 1-800-SEC-8330 for more
information about the public reference rooms.
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TABLE OF CONTENTS
Page
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THE SPECIAL MEETING..............................................................................1
Time, Place and Date; Proxy Solicitation................................................1
Record Date and Quorum Requirement......................................................1
Required Vote; Voting Procedures........................................................2
Voting and Revocation of Proxies........................................................2
Rights of Objecting Shareholders........................................................3
Other Matters to Be Considered at the Special Meeting...................................3
THE MERGER.......................................................................................3
Background of the Merger................................................................3
Recommendation of, and Factors Considered by, the Special Committee and Board of
Directors.........................................................................9
Opinion of Kenan's Financial Advisor...................................................11
Interests of Management in the Merger..................................................17
Accounting Treatment...................................................................21
Federal Income Tax Consequences........................................................21
Regulatory Approvals...................................................................22
THE MERGER AGREEMENT............................................................................22
The Merger Transaction.................................................................22
Operation of Kenan After the Merger....................................................23
Conversion of Securities...............................................................23
Payment of the Merger Consideration....................................................23
Payment of Kenan Stock Options.........................................................24
Transfer of Shares After the Merger....................................................25
Conditions.............................................................................25
Representations and Warranties.........................................................26
Covenants..............................................................................28
Agreement Not to Solicit Other Acquisition Proposals...................................30
Expenses...............................................................................32
Termination of the Merger Agreement....................................................32
Termination Fee........................................................................33
Amendment and Waiver...................................................................34
Joint and Several Liability............................................................34
Voting Agreements......................................................................35
ADDITIONAL INFORMATION..........................................................................35
Information About Kenan................................................................35
Information About Advantage............................................................35
Shareholder Proposals..................................................................35
Stock Ownership........................................................................36
Forward-Looking Information............................................................38
Appendices
Appendix A - Agreement and Plan of Merger
Appendix B - Opinion of First Union Securities, Inc.
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KENAN TRANSPORT COMPANY
UNIVERSITY SQUARE - WEST
143 W. FRANKLIN STREET
CHAPEL HILL, NORTH CAROLINA 27516
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PROXY STATEMENT
---------------------------------
SPECIAL MEETING OF THE SHAREHOLDERS
(TO BE HELD ON APRIL 25, 2001)
---------------------------------
We are providing this proxy statement and accompanying proxy card to
our shareholders in connection with the solicitation by our board of directors
of proxies to be used at the special meeting of shareholders. The meeting will
be held on Wednesday, April 25, 2001, at 10:00 a.m., local time, at The Kenan
Center, Bowles Drive, Chapel Hill, North Carolina. The Kenan Center is adjacent
to the Dean Smith Student Activities Center. At the meeting, shareholders of
Kenan will consider and vote upon a merger that, if approved and subsequently
completed, will result in our shareholders receiving $35 in cash per share. We
will begin mailing these materials to our shareholders on or about March 29,
2001.
THE SPECIAL MEETING
TIME, PLACE AND DATE; PROXY SOLICITATION
The special meeting will be held on Wednesday, April 25, 2001, at 10:00
a.m., local time, at The Kenan Center, Bowles Drive, Chapel Hill, North
Carolina. The Kenan Center is adjacent to the Dean Smith Student Activities
Center. We will pay all expenses incurred in connection with this solicitation.
Our officers, directors and regular employees may solicit proxies by telephone
or personal call, but they will receive no additional compensation for doing so.
We have requested brokers and nominees who hold stock in their names to furnish
this proxy statement to their customers and to request authority for the
execution of the accompanying proxy card. We will reimburse these brokers and
nominees for their reasonable out-of-pocket expenses for doing so.
RECORD DATE AND QUORUM REQUIREMENT
Our common shares, no par value, are our only outstanding voting
securities. The board of directors has fixed the close of business on March 23,
2001 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the special meeting, including at any adjournment. Each
holder of record of common shares at the close of business on the record date is
entitled to one vote for each share held. At the close of business on the
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record date, we had 2,420,662 shares issued and outstanding held by 703 holders
of record.
To conduct any business at the special meeting, holders of a majority
of the outstanding shares must be present in person or represented by proxy at
the beginning of the meeting. Proxies marked as abstentions will be counted as
shares represented by proxy at the special meeting for purposes of this quorum
requirement.
REQUIRED VOTE; VOTING PROCEDURES
At the special meeting, shareholders of Kenan will be asked to vote on
the plan of merger, which is attached as Exhibit B to the merger agreement. The
merger agreement is attached as Appendix A to this proxy statement. Approval of
the plan of merger will require the affirmative vote of the holders of a
majority of the outstanding Kenan shares entitled to vote at the special
meeting. A failure to vote or a vote to abstain will have the same legal effect
as a vote cast against the plan of merger.
Our two largest shareholders, which are trusts for the benefit of the
family members of our deceased founder, Frank H. Kenan, have agreed to vote
their Kenan shares in favor of the plan of merger. In addition, all directors
and executive officers who own Kenan shares have agreed to vote their shares in
favor of the plan of merger. Collectively, these shareholders own almost 58% of
our outstanding shares. Accordingly, their vote in favor of the plan of merger
will ensure that it is approved by our shareholders.
If you hold your shares through a broker, your broker will vote your
shares, with regard to the merger proposal, only if you provide instructions on
how to vote. You should instruct your broker how to vote your shares, following
the directions your broker provides to you for doing so. If you do not provide
instructions to your broker, your shares will not be voted, which will have the
effect of votes "AGAINST" the plan of merger.
VOTING AND REVOCATION OF PROXIES
A shareholder giving a proxy has the power to revoke it at any time
before the vote is taken at the special meeting by:
o submitting to the secretary of Kenan a written instrument
revoking the proxy;
o submitting a duly executed proxy bearing a later date; or
o voting in person at the special meeting.
Subject to revocation, all shares represented by each properly executed
proxy card received by Kenan will be voted in accordance with the instructions
indicated on the proxy card. If no instructions are indicated, the shares will
be voted to approve the merger and on any other matter considered at the meeting
as the persons named on the enclosed proxy card in their discretion decide.
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RIGHTS OF OBJECTING SHAREHOLDERS
If you oppose the merger, you may vote against it at the special
meeting. However, if holders of a majority of Kenan's outstanding shares vote to
approve the merger, it will be completed and your shares will be converted into
the right to receive the $35 per share cash merger consideration. The two
largest shareholders of Kenan, which are trusts for the benefit of the family
members of the company's deceased founder, Frank H. Kenan, and all directors and
executive officers who own Kenan shares have agreed to vote their shares in
favor of the merger. Because these shareholders collectively own almost 58% of
Kenan's outstanding shares, their vote in favor of the merger will ensure that
it is approved by the shareholders.
Because Kenan is incorporated in North Carolina, North Carolina law
governs its internal affairs, as well as any rights you may have if you object
to the merger. North Carolina, like many states, generally provides a statutory
remedy to shareholders who object to a merger. This remedy, commonly called
"dissent and appraisal rights," entitles shareholders who object to a merger and
who follow required procedures to dissent and have a court determine the fair
value of their shares. However, North Carolina law specifically denies dissent
and appraisal rights if a company's shares are listed on the Nasdaq National
Market or a national stock exchange, and if shareholders receive cash for their
shares. Because Kenan's shares are listed on the Nasdaq National Market and cash
will be paid in the merger, you do not have any statutory dissent and appraisal
rights with respect to the merger.
OTHER MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
Under North Carolina law, only business within the purpose described in
the notice of a special meeting and procedural motions regarding the conduct of
the meeting may be presented for shareholder approval at the meeting. We do not
expect to ask you to vote on any matters at the special meeting other than the
merger. However, if a motion is made to take some other action, such as a
procedural action to adjourn the meeting, you may be asked to vote on such
action at the special meeting. If you send your proxy card for use at the
special meeting and do not revoke that proxy in the manner indicated above, we
will have authority to vote your shares in our discretion with regard to any
other motion or action that may arise. However, a proxy card marked to vote
"AGAINST" the merger will be voted "AGAINST" any proposal to adjourn the meeting
to permit Kenan more time to solicit proxies.
THE MERGER
BACKGROUND OF THE MERGER
Kenan Transport Company was founded by Frank H. Kenan in 1949, and Mr.
Kenan served as its chairman of the board and chief executive officer until his
death in June 1996 at the age of 83. Currently, the two largest shareholders of
Kenan are two trusts for the benefit of Mr. Kenan's family members, which
collectively own about 45% of Kenan's outstanding shares.
From time to time prior to Frank H. Kenan's death in 1996, Mr. Kenan
and the trustees of the Kenan family trusts discussed their desire to diversify
the trusts' investment in Kenan at the appropriate time. In this regard, no
Kenan family member other than Frank H. Kenan has ever
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been actively involved in the day-to-day management of the company. Three of
Kenan's current directors -- Owen G. Kenan, Thomas S. Kenan, III and Braxton
Schell -- also are trustees of one or both of the Kenan family trusts, and from
time to time, these directors have had similar discussions with other directors
and executive officers of the company.
Following the death of Frank H. Kenan in June 1996, the trustees began
more actively to discuss the possible sale of the Kenan shares held by the
trusts. At a meeting of Kenan's board of directors on October 26, 1996, Braxton
Schell, a director of the company and a trustee of the Frank H. Kenan trust,
advised the board that the trusts would be interested in selling their Kenan
shares in a transaction that was fair to all shareholders of the company. At the
request of the directors of the company who are also trustees of the Kenan
family trusts, the board of directors created a special committee consisting of
Paul J. Rizzo, William O. McCoy and Kenneth G. Younger, each of whom is an
outside independent director of the company with no affiliation with or interest
in any of the Kenan family trusts. The board requested the special committee to
consider all alternatives for the sale of the company, including taking no
action, and to report its findings and recommendations to the full board of
directors. The board also authorized the committee to employ independent legal
and financial advisors to assist it in its deliberations.
In November 1996, the special committee engaged the law firm of
Robinson, Bradshaw & Hinson, P.A. as counsel to the committee. Robinson,
Bradshaw & Hinson had not represented Kenan or its board of directors prior to
such time. In December 1996, the committee also had preliminary discussions
regarding the engagement of Bowles Hollowell Conner & Co., a financial advisory
firm that subsequently was acquired by First Union Securities, Inc., as the
financial advisor to the committee.
Beginning in 1996 and continuing into 1997, the industry in which Kenan
operates began to undergo increased consolidation. In addition, several large
petroleum companies that historically had maintained their own private fleets of
bulk, or "tank truck," carriers began to outsource this service to companies
like Kenan in order to focus on their core businesses. In response to these
trends, in early 1997 management of Kenan entered into discussions with CITGO
Petroleum Corporation regarding the acquisition by Kenan of Petro-Chemical
Transport, Inc., a captive tank truck carrier owned by CITGO. Because of these
discussions, the special committee was inactive during the first part of 1997,
although Paul J. Rizzo, the acting chairman of the special committee, and legal
counsel to the committee continued to have discussions with Bowles Hollowell
regarding their engagement and their views about the sale of the company. At a
July 28, 1997 meeting of the board of directors, Bowles Hollowell reported to
the board of directors regarding the possible sale of the company.
Discussions regarding the acquisition of Petro-Chemical Transport
continued into the latter part of 1997, and in September 1997 Kenan management
also began to discuss the acquisition of Transport South, Inc., a captive tank
truck carrier owned by Racetrac Petroleum, Inc. In September 1997, Kenan engaged
Bowles Hollowell to act as its financial advisor in connection with these
acquisitions. In December 1997, Kenan acquired substantially all the assets of
Transport South, Inc. for approximately $11.4 million, and in February 1998,
Kenan acquired Petro-Chemical Transport, Inc. for approximately $7.9 million.
Following these acquisitions, the board of directors determined to suspend any
further consideration of the sale of
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the company until Kenan had successfully integrated the operations of Transport
South, Inc. and Petro-Chemical Transport, Inc.
Early in 1999, the Kenan family trusts again expressed their interest
in considering strategic alternatives that would involve a sale of their Kenan
shares. At the request of the board of directors, on June 23, 1999 the special
committee met with representatives of First Union Securities, Inc., which had
acquired Bowles Hollowell during 1998, to discuss First Union's preliminary
analysis of the sale of the company. Thereafter, Mr. Rizzo and legal counsel to
the committee proceeded to negotiate the terms of First Union's engagement as
the special committee's exclusive financial advisor. On July 16, 1999, upon the
recommendation of the special committee, the board of directors ratified the
selection of First Union as the special committee's exclusive financial adviser
in connection with the sale of the company.
During August and September 1999, First Union prepared a confidential
information memorandum regarding Kenan and met with legal counsel to the
committee to discuss the proposed sale transaction, including the process by
which First Union would solicit potential buyers, the projected timetable,
possible transaction structures, and the willingness of large shareholders,
including the Kenan family trusts and members of Kenan's management, to sign
voting agreements agreeing to vote their shares in favor of the transaction.
On September 20, 1999, the special committee met by telephone with its
legal and financial advisors to review First Union's proposed strategy for
soliciting potential buyers for the company. The special committee discussed a
list of potential buyers identified by First Union as those who might have an
interest in acquiring Kenan.
During October 1999, First Union contacted 15 parties to solicit their
interest in acquiring Kenan, and 11 of them entered into
confidentiality/standstill agreements and were provided with a confidential
information memorandum regarding the company. In early November 1999, four of
these parties expressed an interest in acquiring Kenan. In mid-November 1999,
Kenan's management and First Union met separately with all four parties at the
offices of Robinson, Bradshaw & Hinson in Charlotte, North Carolina, and Kenan
also made available to all four parties documents for their preliminary legal
and financial due diligence review.
On November 12, 1999, legal counsel to the special committee met by
telephone with the trustees of the Kenan family trusts to discuss their
willingness to execute a voting agreement under which they would agree to
support a transaction with the party who submitted the highest bid. There was
discussion during the meeting that a voting agreement may prompt interested
parties to submit their highest and best bid because the highest bidder would
have some assurance that the transaction would be approved by shareholders.
On November 18, 1999, First Union requested final offers from all four
parties who had expressed an initial interest in acquiring Kenan, and each party
was provided with a form of merger agreement and voting agreement prepared by
legal counsel to the special committee. Two of these parties submitted final
acquisition proposals to First Union during the first part of December 1999. One
of the parties was an industry participant, and the other was a financial buyer
with an investment in the industry. Both parties proposed the acquisition of all
of Kenan's outstanding shares at a price that was slightly higher than $35 per
share.
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On December 10, 1999, the special committee met with its financial and
legal advisors to review the results of the solicitation process and the terms
of the two offers that had been received. The committee considered the fact that
both bids were less than estimates initially discussed with First Union and
either below or at the lower end of the preliminary interest expressed by both
parties, although First Union advised the committee that both bids were within
the range of fairness from a financial point of view. The committee also
discussed the effect on the trucking industry of increased fuel and wage costs,
which had substantially increased Kenan's operating costs during the second half
of 1999 and affected the company's financial performance. The committee also
considered the uncertainty as to if and when industry conditions would improve.
At the recommendation of the committee, on December 13, 1999 and
December 14, 1999, the full board of directors met to discuss both offers. At
the meetings, the board of directors considered substantially the same
information discussed at the December 10th meeting of the special committee. The
board of directors also considered First Union's valuation analysis, and First
Union advised the board that it believed that both offers were within the range
of fairness from a financial point of view. The board also considered Kenan's
prospects if it remained independent. There was also discussion about the level
of due diligence performed by each bidder and whether either bidder would
increase its bid. At the conclusion of these discussions, the board expressed a
preference for a transaction with the industry bidder. Thereafter, Kenan entered
into substantive discussions with the industry bidder, which commenced an
extensive legal and due diligence investigation of Kenan.
During January 2000, Kenan's stock fell from the $30 to $35 range, at
which it had been trading for a substantial part of 1999, to the low $20s. Other
publicly traded truck carriers experienced a similar decline in their stock
prices as the effect of increased fuel and wage costs began to affect the
industry in general.
In January and early February 2000, the industry bidder continued its
due diligence review, and the parties proceeded to negotiate the terms of the
definitive transaction documentation. In early February 2000, the industry
bidder advised First Union that it was unwilling to proceed with a transaction
unless Kenan agreed to a price of no more than $31.50 per share. Kenan then
terminated further discussions with that party.
Later in February 2000, Kenan renewed discussions with the financial
bidder who had expressed an interest in acquiring the company. During the
remainder of February through the early part of April 2000, the financial bidder
conducted additional due diligence. On April 25, 2000, the financial bidder
advised First Union that it was unwilling to proceed with a transaction unless
Kenan agreed to a price of no more than $30 per share. Kenan then terminated
further discussions with that party.
In late April 2000, representatives of First Union met by telephone
with representatives of the special committee to discuss Kenan's alternatives,
and First Union recommended that the committee suspend further efforts to sell
the company until later in the year.
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In June 2000, Kenan received an unsolicited indication of interest from
another financial bidder for the acquisition of the company at a price of $33 to
$34 per share. After preliminary discussions with First Union, this party
subsequently indicated a willingness to acquire the company for $35 per share.
The board discussed the offer with First Union at an August 8, 2000 meeting of
the board of directors, and Kenan thereafter entered into discussions with the
second financial bidder. During the remainder of August 2000 until October 2000,
the second financial bidder performed financial and legal due diligence and
began to arrange for financing, and the parties proceeded with negotiations
regarding definitive transaction documentation.
In September 2000, Malcolm Turner of Turner, Mason & Company, located
in Dallas, Texas, spoke with Lee P. Shaffer, Kenan's president and chief
executive officer, and First Union about a transaction in which Turner, Mason &
Company would acquire the Kenan shares held by the Kenan family trusts. By
letter dated September 8, 2000, Mr. Turner contacted Thomas S. Kenan III, the
chairman of the board of Kenan and a trustee of both Kenan family trusts, to
indicate that Turner, Mason & Company was interested in acquiring a controlling
interest in Kenan and to request a meeting to discuss whether the Kenan family
trusts would be interested in selling their Kenan shares in such a transaction.
In his letter, Mr. Turner estimated a transaction value of $33 per share,
potentially to be increased to $35 per share based on the results of his due
diligence. By letter dated September 11, 2000, Mr. Kenan advised Mr. Turner that
the Kenan family trusts had no interest in selling their shares to Mr. Turner
and directed Mr. Turner to direct all future communications to legal counsel to
the special committee. Later in September 2000, legal counsel to the committee
spoke by telephone with Mr. Turner to advise him that the Kenan family trusts
had no interest in selling their shares in a transaction that did not involve
all other Kenan shareholders equally.
By letter dated September 13, 2000, Advantage Management Holdings Corp.
made an unsolicited proposal to acquire 100% of Kenan in a cash-out merger at
$33 to $34 per share. This proposal followed conversations during the summer of
2000 between Dennis A. Nash, Advantage's president and chief executive officer,
and Lee P. Shaffer regarding the possible combination of Advantage and Kenan.
At a meeting of the board of directors on September 26, 2000, the board
discussed the proposals made by Turner, Mason & Company and Advantage Management
Holdings Corp. Because of ongoing discussions between Kenan and the second
financial bidder, Kenan determined to advise both parties that Kenan did not
have an interest in pursuing a transaction with either of them at that
particular time.
By letter dated September 26, 2000, Turner, Mason & Company advised the
board of directors of its interest in a transaction for less than 100% of Kenan
at a price of $33 to $35 per share. The transaction proposed by Turner, Mason &
Company involved a share repurchase program by Kenan for a majority of its
outstanding shares, the issuance of "payment rights" to Kenan shareholders who
elected not to tender their shares and the issuance of a sufficient number of
Kenan shares to Turner, Mason & Company to give it control of Kenan following
the transaction. After discussions between First Union and Turner, Mason &
Company, by letter dated October 2, 2000, Turner, Mason & Company revised its
offer to remove any limit on the number of shares that could be acquired by
Kenan in the share repurchase program. On October
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24, 2000, Turner, Mason & Company publicly announced its interest in acquiring a
controlling interest in Kenan.
On October 31, 2000, the second financial bidder with whom Kenan was
negotiating a transaction submitted a revised offer consisting, on a per share
basis, of cash of $31 plus an unspecified form of preferred securities with a
face value of $4.00 per share and with dividends payable in kind. Discussions
between Kenan and that bidder were suspended at that time.
On November 2, 2000, First Union met with representatives of Advantage
Management Holdings Corp. to discuss a transaction involving Kenan. On November
8, 2000, Advantage increased its initial offer for 100% of Kenan's stock to $35
per share in cash.
At a November 8, 2000 meeting of the board of directors, the board
discussed the October 31, 2000 offer by the second financial bidder and the
proposals by Turner, Mason & Company and Advantage Management Holdings Corp. The
board considered the fact that Advantage was in Kenan's industry and understood
the opportunities and risks of Kenan's operations. First Union also advised the
board that there was the potential for operating synergies with Advantage. The
board also discussed the financial markets in general, and First Union advised
the board that it believed that Advantage was in a better position than the
other interested parties to obtain financing because of its proposed capital
structure, its relationships with its existing equity sponsors and bank lenders,
and the fact that it was an existing operating company in Kenan's industry.
Following such discussion, the board of directors authorized the company to
enter into an exclusivity agreement with Advantage. On November 15, 2000, the
company entered into an exclusivity agreement with Advantage expiring on
December 31, 2000. Thereafter, Advantage began to conduct legal and financial
due diligence and arrange financing, and the parties began to negotiate
definitive transaction documentation.
Because of Kenan's agreement to negotiate exclusively with Advantage,
by letter dated November 13, 2000, legal counsel to the special committee
advised Malcolm M. Turner that the company did not have any interest at that
time in discussing with him a transaction involving the sale of the company. By
letter dated November 17, 2000, Mr. Turner withdrew his offer.
For the rest of 2000 and into January 2001, Advantage conducted
extensive legal and financial due diligence, and the parties proceeded to
negotiate the terms of definitive transaction documentation. During this period
of time, Dennis Nash and Carl Young, Advantage's president and chief executive
officer and chief financial officer, respectively, also had discussions with Mr.
Shaffer about his role and the role of other members of Kenan's management in
the company following the transaction. See "- Interests of Management in the
Merger." On December 28, 2000, the parties extended the exclusivity period from
December 31, 2000 until January 15, 2001. The exclusivity period expired on
January 15, 2001, although the parties continued to negotiate definitive
transaction documentation.
On January 25, 2001, the special committee met with its financial and
legal advisors to review the proposed transaction with Advantage. At the
meeting, First Union reviewed with the committee its financial analysis of the
transaction and rendered its oral opinion, subsequently confirmed in writing,
that the proposed merger consideration was fair to the shareholders of Kenan
from a financial point of view. Legal counsel to the committee also discussed
with the
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committee the proposed terms of the definitive merger agreement and voting
agreement. Following this discussion, the special committee unanimously
recommended that the board of directors approve the merger agreement.
Immediately following the January 25, 2001 meeting of the special
committee, the full board of directors met to review the proposed merger
agreement. First Union discussed with the full board its financial analysis of
the transaction, including its opinion that the merger consideration was fair to
the shareholders of Kenan from a financial point of view, and legal counsel
reviewed the terms of the merger agreement and voting agreement. There was also
discussion about the fact that Advantage had requested each executive officer
and director of Kenan to execute a voting agreement. Following this discussion,
the board of directors approved the merger agreement and recommended that it be
approved by the shareholders of the company. Mr. Shaffer abstained from voting
because of his anticipated arrangements with the company following the merger.
See "- Interests of Management in the Merger."
Following the close of business on January 25, 2001, the parties
executed the merger agreement, and the Kenan family trusts and all directors and
executive officers who own Kenan shares agreed to vote their shares in favor of
the transaction. Prior to the opening of the financial markets on January 26,
2001, the parties issued a joint press release announcing the transaction.
RECOMMENDATION OF, AND FACTORS CONSIDERED BY, THE SPECIAL COMMITTEE AND BOARD OF
DIRECTORS
At the meeting held on January 25, 2001, the special committee
unanimously:
o determined that the merger agreement is fair to and in the
best interest of Kenan and its shareholders; and
o recommended that the board of directors of Kenan approve the
merger agreement substantially in the form as presented to the
special committee.
At the meeting of the board of directors immediately following the
meeting of the special committee, the board of directors:
o approved the merger agreement, the plan of merger attached as
Exhibit B to the merger agreement and the merger, and
authorized Kenan to enter into the merger agreement;
o determined that the terms of the merger agreement are fair to
and in the best interest of Kenan and its shareholders; and
o recommended that the shareholders of Kenan approve the merger
agreement, the merger and the plan of merger.
In reaching the determination that the terms of the merger agreement
are fair to and in the best interests of Kenan's shareholders, the special
committee and the board of directors consulted with their financial and legal
advisors, drew on their knowledge of Kenan's business, operations,
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properties, assets, financial condition, operating results, historical public
share trading prices and prospects and considered the following factors:
o the price to be received by Kenan shareholders in the merger,
which represents a premium of 32% from the last sale price of
Kenan shares on January 25, 2001, the day before the merger
was publicly announced;
o the analysis and presentation of First Union, and First
Union's oral opinion, subsequently confirmed in writing, to
the effect that the consideration to be received in the merger
is fair from a financial point of view to Kenan's
shareholders;
o the ability, under certain circumstances, of Kenan to
terminate the merger agreement to accept an acquisition
proposal deemed by the board of directors to be superior to
the merger upon payment of a termination fee to Advantage;
o the process by which First Union solicited potential buyers
for the company, and discussions between Kenan and the parties
who expressed an interest in acquiring the company, none of
whom ultimately was willing to proceed with a transaction at a
price in excess of $35 per share;
o the effect of increased fuel and wage costs on the trucking
industry, and the uncertainty as to if and when industry
conditions would improve;
o the risks associated with remaining independent, and the
possible financial implications to shareholders of remaining
independent;
o the market for Kenan shares, including the historic
illiquidity of such market and the difficulty of selling a
large number of shares at prevailing market prices;
o the fact that the Kenan family trusts and all directors and
executive officers who own Kenan shares agreed to vote their
shares in favor of the merger; and
o the interests of Kenan's executive officers in the merger, as
described in "- Interests of Management in the Merger" on page
17.
The foregoing discussion of the information and factors considered by
the special committee and the board is not meant to be exhaustive, but includes
all material factors considered by the special committee and the board as part
of the determination that the terms of the merger agreement are fair to, and in
the best interests of, Kenan and its shareholders and the recommendation that
the shareholders approve the merger. While the board and the special committee
each considered the analysis and conclusions of First Union as described in "-
Opinion of Kenan's Financial Advisor," it also considered all the factors listed
above in making the determination that the terms of the merger agreement are
fair to, and in the best interests of, Kenan and its shareholders. The special
committee and the board did not assign relative weights or quantifiable values
to those factors. Rather, the conclusions of the special committee and the board
were based on the subjective analysis by its members of those factors, including
the analysis and conclusions of First Union. The special committee and the board
each
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viewed its position and recommendations as being based on the totality of the
information presented to and considered by it. Lee P. Shaffer, Kenan's president
and chief executive officer and a member of its board of directors, abstained
from voting on the merger agreement because of his anticipated arrangements with
Kenan following the merger.
For the reasons discussed above, the Kenan board has approved the
merger, the merger agreement and the plan of merger, and recommends that the
Kenan shareholders vote FOR approval of the merger, the merger agreement and the
plan of merger.
OPINION OF KENAN'S FINANCIAL ADVISOR
Under an engagement letter dated July 16, 1999, the special committee
retained First Union to act as its exclusive financial advisor with respect to a
possible sale of Kenan. The special committee selected First Union because First
Union is a leading investment banking and financial advisory firm with
experience in the sale of businesses and in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of securities, private placements and
valuations for corporate purposes.
On January 25, 2001, First Union delivered its oral opinion to the
special committee, subsequently confirmed in writing, that as of that date and
based upon the assumptions made, matters considered and limitations on the
review set forth in the opinion, the consideration to be received by the
shareholders of Kenan in the merger is fair from a financial point of view.
THE FULL TEXT OF FIRST UNION'S OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON FIRST UNION'S REVIEW, IS
ATTACHED TO THIS PROXY STATEMENT AS APPENDIX B. THE DESCRIPTION OF FIRST UNION'S
OPINION BELOW SETS FORTH THE MATERIAL TERMS OF THE OPINION. SHAREHOLDERS OF
KENAN ARE URGED TO READ THE ENTIRE OPINION CAREFULLY. THE FOLLOWING SUMMARY OF
FIRST UNION'S OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE OPINION.
First Union's opinion is addressed to the special committee and
addresses only the fairness from a financial point of view of the consideration
to be received by the shareholders of Kenan in the merger. The opinion does not
address the merits of Kenan's underlying decision to engage in the merger. The
opinion does not constitute, nor should it be construed as, a recommendation to
any shareholder as to whether he or she should vote in favor of the merger.
In connection with the preparation of the opinion, First Union:
o reviewed certain publicly available business and financial
information relating to Kenan that it deemed to be relevant;
o reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets,
liabilities and prospects of Kenan, furnished to it by Kenan;
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o conducted discussions with members of senior management and
representatives of Kenan and Advantage concerning the matters
described above;
o reviewed the market prices and valuation multiples for Kenan
shares and compared them with those of certain publicly traded
companies that it deemed to be relevant;
o reviewed historical market prices and trading activity for
Kenan shares;
o reviewed the results of operations of Kenan and compared them
with those of certain publicly traded companies that it deemed
to be relevant;
o compared the proposed financial terms of the merger with the
financial terms of certain other transactions that it deemed
to be relevant;
o reviewed the merger agreement and certain related documents;
and
o reviewed and conducted such other financial studies and
analyses and took into account such other matters as it deemed
necessary, including its assessment of general economic,
market and monetary conditions.
In preparing its opinion, First Union assumed and relied on the
accuracy and completeness of all information supplied or otherwise made
available to it, discussed with or reviewed by it, or publicly available. First
Union did not assume any responsibility for independently verifying any of this
information or undertaking an independent evaluation or appraisal of the assets
or liabilities of Kenan, nor was it furnished with any independent evaluation or
appraisal. In addition, First Union did not assume any obligation to conduct,
and it did not conduct, any physical inspection of the properties or facilities
of Kenan. With respect to the financial forecast information furnished to or
discussed with First Union by Kenan, First Union assumed that such forecast
information had been reasonably prepared and reflected the best currently
available estimates and judgment of Kenan's management as to the expected future
financial performance of Kenan. First Union expressed no opinion as to this
financial forecast information or the assumptions on which they were based.
First Union's opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated, and on the information
made available to First Union, as of the date of the opinion.
In accordance with customary investment banking practice, First Union
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material analyses utilized by First Union in
connection with the opinion.
SELECTED COMPARABLE PUBLICLY TRADED COMPANIES ANALYSIS
First Union compared certain financial and operating ratios for Kenan
with the corresponding financial and operating ratios for a group of publicly
traded companies engaged primarily in the trucking industry that First Union
deemed to be comparable to Kenan. First
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Union analyzed separately those groups of companies with large ($1 billion or
more) and small (less than $1 billion) equity market capitalizations. For the
purpose of its analyses, the following trucking companies were used:
Large Equity Capitalization Companies Small Equity Capitalization Companies
- ------------------------------------- -------------------------------------
Heartland Express, Inc. Allied Holdings, Inc.
J.B. Hunt Transport Services, Inc. Marten Transport, Ltd.
Landstar System, Inc. Patriot Transportation Holding, Inc.
Werner Enterprises, Inc. US Xpress Enterprises, Inc
For each of these companies, First Union calculated equity market
values relative to each company's net income for the latest 12 months and book
value as of the most recent balance sheet, and enterprise values (equity market
value, plus debt, less cash and equivalents) relative to each company's
revenues, EBIT (earnings before interest and taxes), and EBITDA (earnings before
interest, taxes, depreciation and amortization) for the latest 12 months. All
multiples were based on closing stock prices on January 24, 2001. Excluding
immaterial values, this analysis indicated multiples as follows:
Ratio of Equity Market Value to: Range Median
- ------------------------------- ----- ------
Latest 12 months net income:
Large Equity Capitalization Companies 12.9x to 21.9x 18.4x
Small Equity Capitalization Companies 4.8x to 13.9x 7.3x
Book Value:
Large Equity Capitalization Companies 1.6x to 1.7x 1.6x
Small Equity Capitalization Companies 0.5x to 1.0x 0.7x
Enterprise Value to:
- -------------------
Latest 12 months revenues:
Large Equity Capitalization Companies 0.5x to 1.9x 0.6x
Small Equity Capitalization Companies 0.3x to 1.1x 0.5x
Latest 12 months EBIT:
Large Equity Capitalization Companies 7.8x to 16.4x 11.3x
Small Equity Capitalization Companies 7.8x to 15.2x 10.2x
Latest 12 months EBITDA:
Large Equity Capitalization Companies 5.0x to 8.2x 6.0x
Small Equity Capitalization Companies 3.5x to 5.8x 4.3x
Given that Kenan is generally more similar in terms of size and
financial characteristics to the small equity capitalization companies, First
Union viewed the multiples for these companies as the most appropriate set of
comparable company valuation metrics. Based on the foregoing, First Union
applied the median trading multiples of the small equity capitalization
companies to Kenan's latest 12 months financial statistics to determine a
reference range of implied equity values for Kenan. Additionally, First Union
applied a control premium of 18.6%, as indicated by First Union's premiums paid
analysis discussed below, to the implied equity
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value to determine the equity value that a buyer might pay for 100% of Kenan's
outstanding shares. This analysis resulted in a reference range for a value per
share of $20.82 to $41.51, with a median of $35.85.
To calculate the trading multiples utilized in the analysis of selected
comparable publicly traded companies, First Union used publicly available
information concerning the historical financial performance of the comparable
companies. None of the comparable companies is identical to Kenan. Accordingly,
a complete analysis of the results of the foregoing calculations cannot be
limited to a quantitative review of the results and involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading volume of the comparable companies, as well as that of Kenan.
SELECTED COMPARABLE TRANSACTIONS ANALYSIS
Using publicly available information, First Union considered selected
transactions in the trucking industry that First Union deemed to be relevant.
Specifically, First Union reviewed the following transactions:
Acquiror Target
-------- ------
Swift Transportation Company M.S. Carriers, Inc. (pending as of
January 25, 2001)
Management of Trimac Corporation Trimac Corporation
Trimac Corporation DSI Transports, Inc.
Yellow Corporation Jevic Transporation, Inc.
Apollo Management LP/MTL, Inc. Chemical Leaman Corporation
U.S. Xpress Enterprises, Inc. PST Vans, Inc.
Apollo Management LP MTL, Inc.
US. Xpress Enterprises, Inc. Victory Express, Inc.
First Union believed that the management-led acquisition of Trimac
Corporation and Trimac Corporation's acquisition of DSI Transports, Inc.
represented the most comparable transactions to the sale of Kenan because of the
similarity of the operations of the target companies to Kenan and the recent
date of both transactions. Trimac Corporation, DSI Transports, Inc. and Kenan
are tank truck carriers, and the two Trimac transactions closed within 12 months
prior to the date Kenan entered into the merger agreement.
Using publicly available information concerning historical financial
performance, First Union calculated multiples of equity market value to latest
12 months net income and most recent book value and enterprise value to latest
12 months revenues, EBIT and EBITDA for the latest 12 months preceding the
announcement of the transactions. For the comparable transactions, multiples
were as follows:
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Equity Market Value to: Range Median
- ---------------------- ----- ------
Latest 12 months net income 16.2x to 18.6x 18.0x
Book Value 1.6x to 2.5x 2.0x
Enterprise Value to:
- -------------------
Latest 12 months revenues 0.5x to 1.0x 0.8x
Latest 12 months EBIT 9.3x to 14.3x 11.3x
Latest 12 months EBITDA 3.7x to 6.5x 5.7x
For the management-led acquisition of Trimac Corporation and Trimac
Corporation's acquisition of DSI Transports, Inc., mean multiples of enterprise
value to 12 month revenues, EBIT and EBITDA were 0.5x, 10.3x and 4.9x,
respectively. There was insufficient data to calculate multiples of equity
market value to net income and book value for these transactions.
Based on the foregoing, First Union applied the mean trading multiples
of the management-led acquisition of Trimac Corporation and Trimac Corporation's
acquisition of DSI Transports, Inc. to Kenan's latest 12 months financial
statistics to determine a reference range for an implied value per share of
$32.00 to $39.89, with a median of $35.83.
No company utilized in the selected comparable transactions analysis is
identical to Kenan nor is any transaction identical to the contemplated
transaction between Kenan and Advantage. An analysis of the results therefore
requires complex considerations and judgments regarding the financial and
operating characteristics of Kenan and the companies involved in the comparable
transactions analysis, as well as other facts that could affect their publicly
traded and transaction values. The numerical results are not in themselves
meaningful in analyzing the contemplated transaction as compared to the
comparable transactions.
DISCOUNTED CASH FLOW ANALYSIS
First Union performed a discounted cash flow analysis for Kenan for the
fiscal years ended 2001 through 2004, inclusive. This consisted of an analysis
of the present value of the projected unlevered free cash flows for Kenan for
the four-year period. First Union used discount rates, determined through the
use of the capital asset pricing model, ranging from 11.5% to 15.5% and terminal
value perpetual growth rates of 2004 unlevered free cash flow ranging from 0.0%
to 4.0%, based on the comparable companies analysis and general assumptions
regarding Kenan's long-term growth potential, respectively. Based upon the
foregoing, First Union determined a reference range for an implied value per
share of $23.69 to $48.56, with a median of $32.57.
FINANCIAL SPONSOR INTERNAL RATE OF RETURN ANALYSIS
Using financial projections provided by Kenan's management for the
years 2001 through 2004 inclusive, First Union performed a financial sponsor
internal rate of return valuation for Kenan. To determine the financial sponsor
internal rate of return, First Union calculated the rate of return on an equity
investment made on January 1, 2001 compared to the equity value of Kenan on
December 31, 2004, using a terminal value multiple of EBITDA of 4.25x. Assuming
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an offer price per share of $35.00 and current financing market parameters, the
foregoing analysis determined a financial sponsor internal rate of return of
approximately 35%, which is in the range of acceptable returns to financial
sponsors in the current market.
PREMIUMS PAID ANALYSIS
First Union performed a premiums paid analysis for Kenan based upon the
review and analysis of the range of premiums paid in acquisitions of
non-high-tech companies for the period between January 1, 1997 through January
16, 2001 in which 100% of the target's stock was acquired. Using information
obtained from Thomson Financial Securities Data, First Union obtained the
premium of the offer price per share relative to the target company's stock
price four weeks prior to the date of announcement of the transaction. The
median and mean range of premiums paid to the target company's stock price four
weeks prior to announcement were 18.6% and 27.7%, respectively. First Union
applied the median and mean premiums to Kenan stock price of $23.88 per share on
December 27, 2000, which was four weeks prior to the public announcement of the
merger, to determine a reference mid-point range for an implied value per share
of $28.31 to $30.49. Additionally, First Union noted that the premium implied by
the offer price per share of $35.00 to Kenan's stock price four weeks prior to
announcement of the merger was 46.6%.
The summary set forth above does not purport to be a complete
description of the analysis performed by First Union. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. First Union believes that selecting any
portion of its analysis or of the summary set forth above, without considering
the analyses as a whole, would create an incomplete view of the process
underlying First Union's opinion. In arriving at its opinion, First Union
considered the results of all such analyses. The analyses performed by First
Union are not necessarily indicative of actual values or actual future results,
which may be significantly more or less favorable than those suggested by such
analyses. The analyses do not purport to be appraisals or to reflect the prices
at which Kenan might actually be sold or the prices at which its shares may
trade at any time in the future. Such analyses were prepared solely for the
purposes of First Union providing its opinion to the special committee as to the
fairness, from a financial point of view, of the consideration to be received by
Kenan's shareholders pursuant to the merger. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors and events,
including, without limitation, factors related to general economic and
competitive conditions beyond the control of the parties or their respective
advisors, none of First Union, Kenan, Advantage or any other person assumes
responsibility if future results or actual values are materially different from
those forecasted. The foregoing summary does not purport to be a complete
description of the analysis performed by First Union and is qualified by
reference to First Union's written opinion dated as of January 25, 2001. The
opinion is attached as Appendix B to this proxy statement.
In the past, First Union and its affiliates have provided financing and
financial advisory services to Kenan and have received fees for rendering these
services. In this regard, in February 1998 an affiliate of First Union entered
into an unsecured $20 million line of credit facility with Kenan and an interest
rate swap agreement covering a portion of the loan. Interest under the facility
is variable based on LIBOR plus an applicable margin, which at December 31, 2000
was 7.1%. The principal amount outstanding under the facility at December 31,
2000 was
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$6 million, all of which will be repaid in full upon completion of the merger.
In the ordinary course of its business, First Union from time to time trades in
equity securities of Kenan for its own account and for the account of its
customers and, accordingly, may at any time hold a long or short position in
Kenan shares.
Under First Union's engagement letter, Kenan will pay total fees of
approximately $1.2 million to First Union for its strategic advisory services
and for the rendering of its opinion as to whether the merger consideration is
fair from a financial point of view to shareholders of Kenan. In addition to the
fees payable to First Union under the engagement letter, Kenan has agreed to
reimburse First Union for its reasonable out-of-pocket expenses in connection
with its services. Kenan has also agreed to indemnify First Union, its
affiliates and each of its directors, officers, agents, employees and
controlling persons against certain liabilities, including liabilities under
U.S. federal securities laws.
INTERESTS OF MANAGEMENT IN THE MERGER
General. In considering the recommendation of our board of directors
that Kenan shareholders vote to approve the merger, shareholders should be aware
that Lee P. Shaffer and other members of Kenan management, including Mr.
Shaffer's son, have interests in the merger that are different from, and in
addition to, the interests of Kenan shareholders. The Kenan board was aware of
these interests and considered them, among other matters, when voting to approve
the merger.
The merger agreement provides that, following the effective time of the
merger, Advantage will honor all obligations under employment and severance
agreements and pay all benefits to the extent vested through the effective time
under all employee benefit plans, programs, policies and arrangements in
accordance with the terms thereof.
Incentive Plan. Kenan has an incentive plan, under which it has granted
restricted shares and options to purchase Kenan shares. Generally, these awards
vest over a period of three to five years. However, under the plan, all unvested
options and restricted shares will vest in connection with the merger. The
merger agreement provides that all option holders will be entitled to receive in
exchange for their options a payment equal to the difference between the merger
consideration of $35 per share and the option price, multiplied by the number of
Kenan shares covered by their options. This payment must be made within ten
business days following the merger.
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The following table shows the number of options and restricted shares
that have been awarded to the executive officers of Kenan and the exercise price
of the options.
Stock Options Restricted Shares
----------------------------------------------- ---------------------------
Number of Number of
Executive Officer Grant Date Shares Exercise Price Grant Date Shares
----------------- ---------- --------- -------------- ---------- ---------
Lee P. Shaffer 2/4/98 140,900 $31.75 2/4/98 9,100
5/1/00 20,000 21.00
William L. Boone 2/4/98 57,300 31.75 2/4/98 3,700
5/1/00 15,000 21.00
Gary J. Knutson 2/4/98 20,700 31.75 2/4/98 1,300
5/1/00 10,000 21.00
John E. Krovic 2/4/98 20,700 31.75 2/4/98 1,300
5/1/00 10,000 21.00
William P. Prevost 2/4/98 23,500 31.75 2/4/98 1,500
5/1/00 15,000 21.00
James H. Reid 3/2/98 23,500 32.00 3/2/98 1,500
5/1/00 12,000 21.00
Lee Shaffer III 2/4/98 18,800 31.75 2/4/98 1,200
5/1/00 8,000 21.00
11/8/00 2,800 26.50
Employment Agreements. Following the merger, Kenan or The Kenan
Advantage Group, Inc. intends to enter into two-year employment agreements with
Lee P. Shaffer, Kenan's president and chief executive officer, and James H.
Reid, the president and chief executive officer of Kenan's wholly-owned
subsidiary, Petro-Chemical Transport, Inc. Under the agreement with Lee P.
Shaffer, Mr. Shaffer's base salary would be reduced from his current rate of
$344,315 to $300,000 per annum, and Mr. Shaffer would receive upon completion of
the merger a one-time lump sum payment of $88,630, representing 200% of the
reduction in his salary. Under the agreement with James H. Reid, Mr. Reid would
be entitled to a base salary of $259,830, which represents Mr. Reid's current
annual base compensation. The employment agreements with Mr. Shaffer and Mr.
Reid would also entitle these individuals to participate in all employee
benefits provided to the senior officers of The Kenan Advantage Group after the
merger. The merger is not conditioned upon either of these executive officers
entering into an employment agreement.
In addition, all executive officers of Kenan may be entitled to
participate in any bonus compensation plans adopted by the board of directors of
Kenan or The Kenan Advantage Group, Inc. from time to time after the merger.
Advantage Stock Options. The Kenan Advantage Group, Inc. will adopt a
stock option plan and intends to grant options to each of the Kenan executive
officers following completion of the merger in an amount comparable to the
number of options to be granted to senior management of Advantage. The options
will be exercisable at the fair market value of the underlying shares, as
determined by the board of directors of The Kenan Advantage Group, Inc.
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The number of shares covered by the options to be granted to each executive
officer of Kenan is as follows:
Executive Officer Shares
----------------- ------
Lee P. Shaffer 60,000
William L. Boone 10,000
Gary J. Knutson 10,000
John E. Krovic 10,000
William P. Prevost 10,000
James H. Reid 15,000
Lee Shaffer, III 10,000
Collectively, these options will represent no more than two percent of
the fully diluted equity of The Kenan Advantage Group, Inc. after the merger.
The merger is not conditioned upon the granting of any of these options.
Equity Investment. During the negotiations of the merger agreement,
Advantage expressed a willingness to permit Lee P. Shaffer to contribute a
portion of his Kenan shares to The Kenan Advantage Group, Inc. prior to
completion of the merger in exchange for an equity interest in The Kenan
Advantage Group. For this purpose, Kenan shares held by Mr. Shaffer would be
assigned a value of $35 per share, and the aggregate investment by Mr. Shaffer
would be no more than $1,676,000, which would entitle Mr. Shaffer to an equity
interest in The Kenan Advantage Group of about three percent. If Mr. Shaffer
makes the maximum investment, he would own the same percentage equity interest
in The Kenan Advantage Group as each of Dennis Nash and Carl Young, Advantage's
president and chief executive officer and chief financial officer, respectively.
The effective price to be paid by Mr. Shaffer for shares of The Kenan Advantage
Group will be the same as the price to be paid by outside investors in The Kenan
Advantage Group. The merger is not conditioned upon the investment by Mr.
Shaffer in The Kenan Advantage Group.
Severance Agreements. Kenan has entered into severance agreements with
each of its executive officers. Under these agreements, if an officer is
terminated without cause within 24 months following a "change in control" of
Kenan, the officer would be entitled to receive a payment equal to 200% of his
average annual base salary for the three fiscal years prior to the change in
control. The same payment also would be made to any officer who terminates his
employment during the 24-month period following a "change in control" due to a
change in employment conditions. Under the plan, a change in employment
conditions would occur if an officer's base salary is reduced below the rate in
effect prior to the change in control or the officer is required to change his
residence or principal place of business. The merger will be a "change in
control" for purposes of the severance agreements.
In addition, Kenan has adopted a life insurance plan for its executive
officers other than James H. Reid. Under the plan, if an officer is terminated
within two years after a "change in control," Kenan must continue to pay the
premiums under his insurance policy for a term of no more than fifteen years
following the time the officer became subject to the plan. The merger will be a
"change in control" for purposes of the life insurance plan.
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There are no plans for any of the executive officers of Kenan to be
terminated following the merger. However, assuming that all the executive
officers are terminated within two years following the completion of the merger,
Kenan would pay the amounts set forth below under the severance agreements and
the life insurance plan:
Life Insurance
----------------------------
Remaining
Executive Officer Severance Benefit Annual Premium Term
----------------- ----------------- -------------- ---------
Lee P. Shaffer $632,206 $70,262 11 years
William L. Boone 357,406 40,809 11 years
Gary J. Knutson 233,576 12,466 11 years
John E. Krovic 224,398 7,020 11 years
William P. Prevost 266,002 7,902 12 years
James H. Reid 481,000 -- --
Lee Shaffer III 211,444 4,654 11 years
Chairman of The Kenan Advantage Group. The parties currently
contemplate that Lee P. Shaffer will become the chairman of the board of The
Kenan Advantage Group, Inc. and a member if its board of directors following the
merger.
Indemnification and Insurance. In addition to the foregoing matters,
the merger agreement requires Advantage to indemnify Kenan's directors and
officers and maintain an insurance policy covering acts and omissions by Kenan's
directors and officers. Specifically, the merger agreement requires Advantage
to:
o indemnify Kenan's directors, officers and employees for any
claim, liability, loss, damage, judgment, fine, penalty,
amount paid in settlement or compromise, cost or expense,
including legal fees, based on or arising out of the
transactions contemplated by the merger agreement, except for
any liability or expenses incurred on account of activities
that were at the time taken known or believed by any such
person to be clearly in conflict with the best interests of
Kenan;
o for not less than six years after the effective time of the
merger, provide officers' and directors' liability insurance
covering acts or omissions occurring prior to the effective
time of the merger by each person covered by Kenan's
directors' and officers' liability insurance policy. The
coverage must be no less favorable than Kenan's current
coverage, except that there is no obligation to pay in the
aggregate more than 250% of the annual premium paid by Kenan
for its insurance policy; and
o for not less than six years after the effective time of the
merger, maintain the indemnification and exculpation
provisions contained in Kenan's articles of incorporation and
bylaws for its directors and officers.
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ACCOUNTING TREATMENT
The merger will be treated as a purchase business combination for
accounting purposes.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the merger that are generally applicable to holders
of Kenan shares. This discussion is based on currently existing provisions of
the Internal Revenue Code of 1986, existing and proposed Treasury Regulations
under the Internal Revenue Code and current administrative rulings and court
decisions, all of which are subject to change. Any such change, which may or may
not be retroactive, could alter the tax consequences to the holders of Kenan
shares as described in this proxy statement. Special tax consequences not
described below may be applicable to particular classes of taxpayers, including
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States or who are foreign corporations, foreign
partnerships or foreign estates or trusts as to the United States and holders
who acquired their shares through the exercise of an employee stock option or
otherwise as compensation.
The receipt of $35 per share in the merger will be a taxable
transaction for federal income tax purposes. Each holder's gain or loss per
share will be equal to the difference between $35 and the holder's basis per
share in his or her Kenan shares. This gain or loss generally will be a capital
gain or loss. In the case of individuals, trusts and estates, this capital gain
will be subject to a maximum federal income tax rate of 20% for shares held for
more than 12 months prior to the date of disposition. For shares held for less
than 12 months, the gain or loss will be a short-term capital gain or loss. As a
general rule, short-term capital gains are taxed at ordinary income rates.
A holder of Kenan shares may be subject to backup withholding at the
rate of 31% with respect to the merger consideration received, unless the holder
(a) is a corporation or comes within other exempt categories and, if required,
demonstrates this fact or (b) provides a correct taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholdings rules. To
prevent the possibility of backup federal income tax withholding on payments
made to shareholders, each holder must provide the payment agent with his or her
correct taxpayer identification number by completing a Form W-9 or Substitute
Form W-9. A holder of Kenan shares who does not provide Kenan with his or her
correct taxpayer identification number may be subject to penalties imposed by
the Internal Revenue Service as well as backup withholding. Any amount withheld
under these rules will be credited against the holder's federal income tax
liability. Kenan, or its agent, will report to the holders of Kenan shares and
the Internal Revenue Service the amount of any "reportable payments," as defined
in Section 3406 of the Internal Revenue Code, and the amount of tax, if any,
that is withheld.
The foregoing tax discussion is included for general information only
and is based upon present law. You should consult with your own tax advisor as
to the specific tax consequences of the merger to you, including the application
and effect of federal, state, local and other tax laws and the possible effect
of changes in such tax laws.
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REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
rules promulgated under the Act by the Federal Trade Commission, the merger
cannot occur until notifications have been given and certain information has
been furnished to the FTC and the Antitrust Division of the Department of
Justice and the specified waiting period requirements have been satisfied. The
obligations of the parties to consummate the merger are subject to the condition
that the applicable waiting periods under the Act have expired, and that there
is no order, decree or injunction of any court of competent jurisdiction that
prohibits the completion of the merger. We made the applicable filings under the
Act on February 26, 2001, and on March 9, 2001, we were granted our request for
early termination of the waiting period.
The merger agreement requires the parties to use their reasonable best
efforts, and to take all actions reasonably necessary, to obtain all regulatory
clearances under the antitrust laws as expeditiously as possible. This includes
taking all steps reasonably necessary to vacate or lift any decree, judgment,
injunction or other order that would prohibit the merger.
Despite the expiration of the holding period under the Act, the
Antitrust Division of the Department of Justice, the FTC or any state may
challenge the merger on antitrust grounds. Any time before or after the
effective time of the merger, the Antitrust Division, the FTC or any state could
take such actions under the antitrust laws as it deems necessary or desirable in
the public interest. In addition, other parties, including private individuals,
could take action under the antitrust laws and could seek to enjoin the
completion of the merger, to rescind the merger, or to seek divestiture of one
or more of the businesses of The Kenan Advantage Group after the merger.
THE MERGER AGREEMENT
The terms of and conditions to the merger are contained in the merger
agreement, which is attached as Appendix A and made a part of this proxy
statement. The following discussion of the merger and the summary description of
the principal terms of the merger agreement, while complete in all material
respects, are subject to and qualified in their entirety by reference to the
merger agreement. We urge you to read the merger agreement carefully before you
vote on the merger.
THE MERGER TRANSACTION
We negotiated the merger agreement with Advantage Management Holdings
Corp., a tank truck carrier headquartered in Canton, Ohio. KTC/AMG Holdings
Corp. and KTC Acquisition Corp. were formed in connection with the merger
agreement. KTC/AMG Holdings Corp. is a Delaware corporation, and KTC Acquisition
Corp. is a North Carolina corporation. In the merger, KTC Acquisition Corp. will
merge with and into Kenan, and Kenan will be the surviving corporation.
If the conditions to the merger are satisfied, the merger will be
effective when articles of merger are filed by the Secretary of State of the
State of North Carolina or at a later time that is specified in the articles of
merger. Assuming the merger is approved by the shareholders at the
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special meeting, we expect to complete the merger and file the articles of
merger as soon as practicable after the special meeting, subject to the
satisfaction of the conditions included in the merger agreement.
As a result of the merger, the shareholders of Kenan will be entitled
to receive $35 per share of Kenan common stock. This represents a 32% premium
over the closing price per share of Kenan shares on January 25, 2001, the day
before the merger was announced. As a result of the merger, Kenan shareholders
will no longer have an opportunity to continue their equity interest in Kenan as
an ongoing corporation and will not share in the future earnings and potential
growth of Kenan.
OPERATION OF KENAN AFTER THE MERGER
Prior to completion of the merger, Advantage Management Holdings Corp.
will become a subsidiary of KTC/AMG Holdings Corp., and the equity owners of
Advantage will become the principal equity owners of KTC/AMG Holdings Corp.
Following the merger, KTC/AMG Holdings Corp. will change its name to The Kenan
Advantage Group, Inc. and will own 100% of Kenan and Advantage.
The articles of incorporation of Kenan will continue to be the articles
of incorporation of Kenan after the merger until amended in accordance with
applicable law. The bylaws of KTC Acquisition Corp. will become the bylaws of
Kenan after the merger until amended in accordance with applicable law.
Advantage has agreed to maintain, for a period of not less than six years after
the effective time of the merger, the indemnification and exculpation provisions
contained in Kenan's articles of incorporation and bylaws for its directors and
executive officers. For more information about these and related provisions,
please refer to "The Merger - Interests of Management in the Merger;
Indemnification and Insurance."
The directors of KTC Acquisition Corp. will be the directors of Kenan
after the merger, and all directors of Kenan, other than Mr. Shaffer, will cease
to be directors of Kenan. The officers of Kenan immediately prior to the
effective time will be the initial officers of Kenan after the merger.
CONVERSION OF SECURITIES
In the merger, each Kenan share issued and outstanding immediately
prior to the effective time of the merger, other than shares held by KTC/AMG
Holdings Corp. and KTC Acquisition Corp., will automatically be converted in the
merger into the right to receive $35 in cash, without interest. Each Kenan share
held directly by KTC/AMG Holdings Corp. and KTC Acquisition Corp. will be
cancelled, and nothing will be paid for those shares. Each outstanding share of
KTC Acquisition Corp. will automatically be converted into one share of Kenan.
PAYMENT OF THE MERGER CONSIDERATION
First Union National Bank will act as the payment agent in connection
with the merger. At the closing of the merger, KTC/AMG Holdings Corp. will make
available to the payment agent the aggregate merger consideration payable to
holders of Kenan shares in the merger, which will be held by the payment agent
for the benefit of and distributed to holders of Kenan
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shares in accordance with the merger agreement. Earnings from the investment of
funds held by the payment agent will belong to KTC/AMG Holdings Corp.
Promptly after the effective time of the merger, KTC/AMG Holdings Corp.
will cause the payment agent to mail to Kenan shareholders a letter of
transmittal and instructions for exchanging their certificates for the merger
consideration. Delivery of Kenan certificates will be effected, and risk of loss
and title will pass, only upon delivery of the certificates to the payment
agent. Upon surrender of a certificate for cancellation by the payment agent,
together with the letter of transmittal duly completed and validly executed and
such other documents as may be reasonably required, the holder of the
certificate will be entitled to receive the merger consideration in exchange for
the certificate, and the certificate will be cancelled. No interest will be paid
or accrued on the merger consideration.
Any funds held by the payment agent that have not been distributed for
six months after the effective time of the merger will be returned to Kenan,
which will thereafter act as the payment agent. Thereafter, any holder of any
unsurrendered certificate evidencing Kenan shares may look as a general creditor
only to KTC/AMG Holdings Corp. and Kenan for payment of any funds that are due.
Any certificates presented to Kenan for any reason after the effective
time of the merger will be cancelled and exchanged as described above. If any
certificate evidencing Kenan shares has been lost, stolen or destroyed, the
payment agent will deliver the merger consideration after the owner has executed
an affidavit to that effect. In addition, KTC/AMG Holdings Corp. may require the
owner of the certificate to deliver a bond in such sum as is reasonably required
as indemnity against any claim that may be made against it, KTC Acquisition
Corp. or Kenan with respect to the certificate.
Kenan and KTC/AMG Holdings Corp. will be entitled to deduct and
withhold from the merger consideration any amounts as are required to be
deducted and withheld under the Internal Revenue Code. If any amounts are so
withheld, they will be treated for all purposes as having been paid to the
holder of Kenan shares in respect to which the deduction and withholding was
made.
No one will be liable to any person in respect of any merger
consideration properly delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
PAYMENT OF KENAN STOCK OPTIONS
Holders of options to purchase Kenan shares that are outstanding
immediately prior to the effective time of the merger will receive from KTC/AMG
Holdings Corp. or Kenan, within ten business days after the merger, an amount
equal to the difference between $35 and the exercise price of such stock option
for each share that could be purchased upon exercise of such stock option. All
options will be cancelled at the effective time of the merger.
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TRANSFER OF SHARES AFTER THE MERGER
No Kenan shareholder may transfer any Kenan shares on Kenan's records
after the effective time of the merger. If any merger consideration is to be
paid to a person other than a person in whose name a surrendered certificate is
registered, it will be a condition to payment of the merger consideration that
the certificate be properly endorsed and in proper form for transfer and that
the person requesting such payment pay the payment agent any transfer or similar
other taxes required as a result of the payment to a person other than the
registered holder.
CONDITIONS
The obligations of Kenan and Advantage to consummate the merger are
subject to the satisfaction of the following conditions:
o the merger must be approved by the shareholders of Kenan in
the manner required by North Carolina law;
o any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act relating to the merger must have
expired; and
o there must be no law, regulation, judgment, injunction, order
or decree that prohibits or enjoins the consummation of the
merger.
The obligations of KTC/AMG Holdings Corp. and KTC Acquisition Corp. to
consummate the merger are subject to the satisfaction, or waiver by KTC/AMG
Holdings Corp., of the following conditions:
o Kenan must have performed in all material respects all its
obligations and complied in all material respects with all its
covenants under the merger agreement;
o the representations and warranties of Kenan in the merger
agreement must be true and correct in all respects, with only
such exceptions as, individually or in the aggregate, have not
had and would not have a "material adverse effect" on Kenan,
disregarding all materiality and similar qualifications;
o the absence of any event, occurrence or development that,
individually or in the aggregate, has had or would reasonably
be expected to have a "material adverse effect" on Kenan; and
o KTC/AMG Holdings Corp. must receive a certificate signed by
the chief executive officer and chief financial officer of
Kenan to the effect that the foregoing conditions have been
satisfied.
The obligations of Kenan to consummate the merger are subject to the
satisfaction, or waiver by Kenan, of the following conditions:
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o KTC/AMG Holdings Corp. must have performed in all material
respects all its obligations and complied in all material
respects with all its covenants under the merger agreement;
o the representations and warranties of Advantage and KTC/AMG
Holdings Corp. in the merger agreement must be true and
correct in all respects, with only such exceptions as,
individually or in the aggregate, have not had and would not
have a "material adverse effect" on Advantage or KTC/AMG
Holdings Corp., disregarding all materiality and similar
qualifications; and
o Kenan must receive a certificate signed by the chief executive
officer and chief financial officer of Advantage and KTC/AMG
Holdings Corp. to the effect that the foregoing conditions
have been satisfied.
Under the merger agreement, a "material adverse effect" on any party
means a material adverse effect on the party's financial condition, business,
properties or results of operations or on the party's ability to perform its
obligations under the merger agreement. However, a "material adverse effect"
would not include any event, occurrence or development arising out of general
economic conditions or generally affecting the industries in which Kenan or
Advantage operates. With respect to Kenan, a "material adverse effect" also
would not include any event, occurrence or development in Kenan's business
attributable solely to actions taken by KTC/AMG Holdings Corp.
Because of these conditions, the merger may not occur even if it is
approved by the shareholders of Kenan.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, Kenan has made representations and warranties
regarding, among other things:
o its organization, power and authority;
o the required corporate action necessary to approve the merger
agreement and consummate the merger, and the enforceability of
the merger agreement against Kenan;
o the governmental authorizations necessary to consummate the
merger;
o the absence of conflicts between the merger agreement and
Kenan's articles of incorporation and bylaws, any applicable
law, and Kenan's permits and contracts, and the absence of any
right of termination or modification, necessary consents and
required payments under any of Kenan's permits or contracts;
o Kenan's capitalization, filings with the Securities and
Exchange Commission, including this proxy statement, and
financial statements;
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o the absence of certain changes in the business of Kenan since
September 30, 2000;
o the absence of undisclosed liabilities and litigation;
o Kenan's compliance with laws and agreements relating to taxes
and employee benefit plans, and the absence of undisclosed
liabilities for taxes or under employee benefit plans;
o Kenan's compliance with laws, Kenan's possession of necessary
permits and licenses, and Kenan's compliance with those
permits and licenses;
o the validity of existing contracts and agreements;
o the absence of any undisclosed brokerage, finder's or similar
fees or commissions;
o Kenan's compliance with all environmental laws, and the
absence of undisclosed liabilities under those laws;
o Kenan's title to its assets and the condition of those assets;
and
o the absence of undisclosed contracts, unlawful business
practices and undisclosed anti-takeover statutes.
Advantage and KTC/AMG Holdings Corp. have made representations and
warranties in the merger agreement regarding, among other things:
o their respective organization, power and authority;
o the required corporate action necessary to approve the merger
agreement and consummate the merger, and the enforceability of
the merger agreement against Advantage, KTC/AMG Holdings Corp.
and KTC Acquisition Corp.;
o the governmental authorizations necessary to consummate the
merger;
o the absence of conflicts between the merger agreement and the
articles of incorporation and bylaws of Advantage, KTC/AMG
Holdings Corp. and KTC Acquisition Corp., any applicable law,
and any of their respective permits or contracts, and the
absence of any right of termination or modification, necessary
consents and required payments under their respective permits
or contracts;
o the absence of undisclosed litigation;
o the accuracy of the information supplied by Advantage, KTC/AMG
Holdings Corp. and KTC Acquisition Corp. for inclusion in this
proxy statement; and
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o the delivery of all commitment letters obtained by Advantage
in connection with the merger agreement, the availability of
proceeds to consummate the merger and the absence of any fact,
occurrence or condition that would cause any financing letter
to be terminated or ineffective or any of the conditions
therein not to be met.
The representations and warranties of the parties in the merger
agreement will expire upon completion of the merger.
COVENANTS
In the merger agreement, Kenan has agreed that prior to the effective
time of the merger, it will conduct its business in the ordinary course
consistent with past practice and will use its reasonable best efforts to
preserve intact its relationships with customers, suppliers, creditors and
business partners and to keep available the services of its officers and
employees. Kenan has also agreed that, without the prior approval of KTC/AMG
Holdings Corp., it will not:
o amend its articles of incorporation or bylaws;
o adjust or reclassify its capital structure, or adopt a plan to
liquidate, dissolve, merge, consolidate, restructure,
recapitalize or otherwise reorganize;
o make any investment in or acquisition of any business, except
for acquisitions for cash not in excess of $250,000 in the
aggregate and capital expenditures permitted under the
agreement;
o sell, lease or otherwise dispose of assets, except in the
ordinary course of business consistent with past practice;
o declare, set aside or pay any dividend or make any other
distribution in respect of any of its shares of capital stock,
other than cash dividends in an amount not in excess of
$0.0775 per share per calendar quarter;
o issue any additional shares of capital stock or any options,
warrants or other rights to acquire shares of capital stock,
other than the issuance of shares upon exercise of options
granted under Kenan's long-term incentive plan;
o purchase or redeem any of its capital stock;
o move or close its headquarters;
o enter into or commit to a new lease or purchase any real
estate, except as otherwise permitted by the merger agreement,
or enter into any contract, modify any material contract or
waive any material rights or claims, other than in the
ordinary course of business;
o make any capital expenditure other than those committed to as
of the date of the merger agreement, which in the aggregate
are not more than $5,000,000;
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o incur any indebtedness for borrowed money or guarantee any
indebtedness of a third party, other than in the ordinary
course of business consistent with past practice, or make any
investment in any person, other than as otherwise permitted by
the merger agreement;
o change any tax election, change any tax accounting period,
change any method of tax accounting, file an amended tax
return, and take certain other actions regarding taxes, if
such actions would materially increase the tax liability of
Kenan;
o increase the compensation or benefits of any director, officer
or employee, except for normal increases in the ordinary
course of business consistent with past practice, accelerate
the vesting or payment of any compensation or benefit, except
as required by existing agreements, or hire any employee with
an annual compensation level in excess of $100,000, subject to
certain exceptions;
o amend any employee benefit plan, or adopt any new employee
benefit plan;
o pay, discharge, settle or satisfy any claims, litigation or
liabilities, other than in the ordinary course of business
consistent with past practice or in accordance with their
terms, or agree to modify any confidentiality, standstill or
similar agreement;
o accelerate any income, postpone any expense or reverse any
reserve, except on a basis consistent with past practice;
o revalue in any material respect any assets, other than as
required by generally accepted accounting principles;
o voluntarily permit any material insurance policy to be
canceled or terminated;
o take any action that would materially impair the ability of
Kenan, KTC/AMG Holdings Corp. or KTC Acquisition Corp. to
consummate the merger;
o agree or commit to do the foregoing; or
o take any action that would make any representation and
warranty of Kenan inaccurate.
Each party also has agreed to provide prompt notice to the other upon
obtaining knowledge of:
o any notice or other communication from any person alleging
that the consent of such person is required in connection with
the merger;
o any notice or other communication from any governmental
authority in connection with the merger;
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o any representation or warranty made by it contained in the
merger agreement becoming untrue, if it would have,
individually or in the aggregate with other representations
and warranties that are untrue, a material adverse effect on
the party giving notice;
o the failure by it to perform in any material respect any of
its obligations, covenants or agreements contained in the
agreement, if the failure to do so has had or would have a
material adverse effect on the party giving notice; and
o knowledge of a material breach by the other party of its
representations, warranties and covenants.
In addition, the merger agreement requires Kenan to notify KTC/AMG
Holdings Corp. of:
o any notice of, or other communications relating to, a default
or event that, with notice or lapse of time or both, would
become a default under any material agreement of Kenan or any
other agreement, if such default, individually or collectively
with other defaults, has had or would have a material adverse
effect on Kenan; and
o any actions, suits, claims, investigations or proceedings that
are commenced or threatened against Kenan relating to the
merger;
The merger agreement also requires KTC/AMG Holdings Corp. to notify
Kenan if:
o any actions, suits, claims, investigations or proceedings are
commenced or threatened against it relating to the merger; or
o any fact, occurrence or condition occurs that would cause or
be reasonably likely to cause the financing commitments
obtained by Advantage in connection with the merger to be
terminated or ineffective, or any of the conditions contained
in such letters not to be met.
AGREEMENT NOT TO SOLICIT OTHER ACQUISITION PROPOSALS
Under the terms of the merger agreement, Kenan has agreed not to, and
to cause its officers, directors, employees, investment bankers, consultants and
other agents not to:
o take any action to solicit, initiate, encourage or facilitate
the making of any "acquisition proposal" or inquiry with
respect to an "acquisition proposal";
o engage in discussions or negotiations with any person
regarding an "acquisition proposal"; or
o disclose any nonpublic information relating to Kenan or afford
access to the properties, books or records of Kenan to any
person that has made an "acquisition proposal."
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Under the merger agreement, an "acquisition proposal" means any
proposal for, or any indication of interest in:
o a merger or other business combination involving Kenan;
o the acquisition of an equity interest in, or a substantial
portion of the assets of, Kenan, subject to certain
exceptions; or
o any similar transaction the effect of which would be
reasonably likely to prohibit, restrict or delay consummation
of the merger.
Under the provisions of the merger agreement, Kenan may furnish
nonpublic information to, afford access to its properties, books and records and
enter into discussions and negotiations with any person in connection with a
bona fide acquisition proposal if:
o Kenan has complied with the nonsolicitation provisions of the
merger agreement;
o the board of directors of Kenan determines in good faith that
the acquisition proposal could lead to a "superior proposal"
and, after consulting with and taking into account the advice
of outside legal counsel, that such action is necessary;
o prior to taking any actions permitted by the nonsolicitation
provisions of the merger agreement, Kenan enters into a
confidentiality agreement with the person making the
acquisition proposal on terms no less favorable to Kenan than
those contained in the confidentiality agreement between Kenan
and Advantage, which contains customary standstill provisions;
and
o contemporaneously with furnishing information to the person,
Kenan furnishes the same information to KTC/AMG Holdings
Corp., to the extent not previously furnished.
Under the merger agreement, a "superior proposal" means any bona fide
acquisition proposal on terms that the board of directors of Kenan determines in
its good faith judgment, after consulting with and taking into account the
advice of its financial advisor and taking into account all the terms and
conditions of the acquisition proposal, are more favorable to Kenan's
shareholders than the merger agreement taken as a whole, and for which
financing, to the extent required, is then fully committed or reasonably
determined to be available.
The merger agreement requires Kenan to notify KTC/AMG Holdings Corp.
promptly after Kenan has received an acquisition proposal or any amendment or
change in any previously received acquisition proposal. Kenan must also notify
KTC/AMG Holdings Corp. if anyone who has made or is considering making an
acquisition proposal requests nonpublic information or access to the properties,
books or records of Kenan. Kenan must promptly provide KTC/AMG Holdings Corp.
with copies of any proposals, indications of interest, draft agreements and
correspondence relating to the acquisition proposal.
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EXPENSES
The parties have agreed to pay their respective costs and expenses in
connection with the merger. Kenan has agreed to pay one-half of the fee payable
in connection with filing notices under the Hart-Scott-Rodino Antitrust
Improvements Act. Kenan will pay all costs associated with preparing and mailing
this proxy statement to its shareholders.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated by the mutual consent of Kenan,
KTC/AMG Holdings Corp. and KTC Acquisition Corp.
Any party may terminate the merger agreement if:
o the merger has not been consummated by June 30, 2001;
o Kenan's shareholders have not approved the merger as required
by North Carolina law; or
o consummation of the merger would be prohibited by any law or
regulation or if any injunction, judgment, order or decree
enjoining Kenan or KTC/AMG Holdings Corp. from consummating
the merger is entered and the injunction, judgment, order or
decree has become final and nonappealable.
The merger agreement may be terminated by Kenan:
o if the board of directors of Kenan has received an acquisition
proposal which the board has determined is a superior
proposal, provided Kenan has:
o given KTC/AMG Holdings Corp. at least 72 hours'
advance notice;
o during such 72-hour period, Kenan has negotiated in
good faith with KTC/AMG Holdings Corp. if it so
requests to make such adjustments as would enable
Kenan to proceed with a transaction with Advantage;
and
o if required, Kenan has paid the termination fee, as
described below; and
o upon a breach of any representation, warranty, covenant or
agreement of KTC/AMG Holdings Corp., or if any representation
or warranty of Advantage or KTC/AMG Holdings Corp. becomes
untrue, in either case if the breach or misrepresentation is
not cured within 30 days after written notice from Kenan such
that the conditions to Kenan's obligation to consummate the
merger would be incapable of being satisfied by June 30, 2001.
KTC/AMG Holdings Corp. may terminate the merger agreement:
o if the Kenan board of directors has withdrawn, modified or
changed in a manner adverse to KTC/AMG Holdings Corp. its
approval or recommendation of the
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merger or has recommended a superior proposal with a person
other than KTC/AMG Holding Corp., Kenan has entered into a
definitive agreement providing for a superior proposal with a
person other than KTC/AMG Holdings Corp., or the Kenan board
has resolved to do any of the foregoing;
o upon a breach of any representation, warranty, covenant or
agreement by Kenan, or if any representation or warranty of
Kenan becomes untrue, in either case if the breach or
misrepresentation or warranty is not cured within a reasonable
period of time after written notice from KTC/AMG Holdings
Corp. such that the conditions to KTC/AMG Holdings Corp.'s
obligation to consummate the merger would be incapable of
being satisfied by June 30, 2001; or
o upon a knowing, willful and material breach of the
nonsolicitation provisions of the merger agreement by any
member of the board of directors of Kenan or any of Kenan's
financial or legal advisors, if the breach has not been cured
within a reasonable time after written notice by KTC/AMG
Holdings Corp.
Unless all parties consent to the termination of the merger agreement,
no party may terminate the merger agreement if its failure to fulfill its
obligations or to comply with its covenants under the agreement has been the
cause of, or resulted in, the failure to satisfy any conditions to the
obligations of any party under the merger agreement.
TERMINATION FEE
If the merger agreement is terminated:
o by Kenan because it has received an acquisition proposal that
the board of directors has determined is a superior proposal;
or
o by KTC/AMG Holdings Corp. because the board of directors of
Kenan has withdrawn, modified or changed in a manner adverse
to KTC/AMG Holdings Corp. its approval or recommendation of
the merger agreement, if Kenan has recommended a superior
proposal with another person, if Kenan has entered into a
definitive agreement for a superior proposal with another
person, or if the board of directors of Kenan has resolved to
do any of the foregoing,
then Kenan will be required to pay to KTC/AMG Holdings Corp. a termination fee
of $3,500,000 and to reimburse KTC/AMG Holdings Corp. for all of its documented
out-of-pocket expenses incurred in connection with the merger agreement up to an
aggregate of $750,000.
Kenan will also be required to pay to KTC/AMG Holdings Corp. a
termination fee of $3,500,000 and to reimburse it for its documented
out-of-pocket expenses up to an aggregate of $750,000 if:
o the merger agreement is terminated by:
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o Kenan or KTC/AMG Holdings Corp. because the
shareholders of Kenan failed to approve the merger
agreement as required by North Carolina law; or
o KTC/AMG Holdings Corp. because Kenan has willfully
and materially breached any representation, warranty,
covenant or agreement, and the breach is not cured
within a reasonable time after written notice from
KTC/AMG Holdings Corp;
and in each case,
o prior to the termination, a bona fide acquisition proposal was
communicated in writing to the board of directors of Kenan,
publicly disclosed or made directly to Kenan's shareholders or
any person had publicly announced or communicated in writing
to the Kenan board of directors an intention to make a bona
fide acquisition proposal; and
o within nine months of such termination, Kenan enters into a
definitive agreement with respect to any acquisition proposal
or an acquisition proposal is consummated.
In addition, if KTC/AMG Holdings Corp. terminates the merger agreement
because the board of directors of Kenan or its financial or legal advisors
knowingly, willfully and materially breached the nonsolicitation provisions of
the merger agreement and the breach was not cured within a reasonable time after
written notice from KTC/AMG Holdings Corp., Kenan will be required to pay
KTC/AMG Holdings Corp. an amount equal to $1,750,000 and to reimburse it for its
documented out-of-pocket expenses up to $750,000. However, in no event will the
aggregate payment by Kenan under these provisions be more than $2,125,000.
The merger agreement provides that if KTC/AMG Holdings Corp.
successfully brings an action to enforce its rights to the foregoing payments,
then Kenan will be required to reimburse KTC/AMG Holdings Corp. for its
reasonable fees and expenses in connection with the proceeding and will be
required to pay KTC/AMG Holdings Corp. interest on the amount of such payments
from the date the amounts become payable to the date of payment at the prime
rate of interest.
AMENDMENT AND WAIVER
Subject to the provisions of applicable law, the merger agreement may
be modified or amended, and its provisions waived, by written agreement of the
parties. However, after approval of the merger by the shareholders of Kenan,
there may not be any amendment that by law requires the approval of Kenan's
shareholders unless such approval is obtained.
JOINT AND SEVERAL LIABILITY
Under the merger agreement, Advantage Management Holdings Corp.,
KTC/AMG Holdings Corp. and KTC Acquisition Corp. have agreed to be jointly and
severally liable for all
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covenants, agreements, obligations and representations and warranties made by
any of them in the merger agreement.
VOTING AGREEMENTS
Kenan's two largest shareholders, which are trusts for the benefit of
the family members of its deceased founder, Frank H. Kenan, and all directors
and executive officers of Kenan who own Kenan shares have entered into voting
agreements under which they have agreed to vote all their Kenan shares in favor
of the merger and against any other proposal that would reasonably be expected
to materially impair or delay the completion of the merger. Under the
agreements, these shareholders also have agreed not to sell, tender, transfer or
dispose of their Kenan shares other than in the merger. The voting agreements
will automatically terminate if the merger agreement terminates, including if
the merger agreement is terminated by Kenan so that it may pursue another
acquisition proposal. Collectively, these shareholders own almost 58% of Kenan's
outstanding shares. Accordingly, their vote in favor of the merger will ensure
that it is approved by the shareholders of Kenan.
ADDITIONAL INFORMATION
INFORMATION ABOUT KENAN
Kenan provides logistics and transportation services to the petroleum
industry nationwide and transportation services for propane gas and chemicals
primarily in the southeastern United States. At December 31, 2000, Kenan had a
fleet of 730 tractors and 1,028 trailers.
Kenan was organized as a North Carolina corporation in 1949. Its
principal executive offices are located at University Square - West, 143 W.
Franklin Street, Chapel Hill, North Carolina 27516-3910. Its telephone number is
(919) 967-8221.
INFORMATION ABOUT ADVANTAGE
Advantage Management Holdings Corp. provides logistics and
transportation services to the petroleum and chemical industries. Advantage is a
Delaware corporation, and its principal executive offices are located at 4895
Dressler Road North West, Canton, Ohio 44718. Advantage's telephone number is
(330) 491-0474.
SHAREHOLDER PROPOSALS
Our annual meeting of shareholders is normally held in May of each
year. We have postponed indefinitely the date of the 2001 annual meeting of
shareholders initially scheduled to be held on May 7, 2001. If the proposal to
approve the merger is not approved at the special meeting, we expect to hold our
2001 annual meeting of shareholders in July 2001. Proposals of shareholders
intended to be presented at the annual meeting of shareholders must be
submitted, by registered or certified mail, to the attention of Kenan's
secretary at our principal executive offices by June 1, 2001 to be considered
for inclusion in our proxy statement and form of proxy for the annual meeting.
If a proposal is submitted after that date, proxies will have the authority to
vote in their discretion on the proposal.
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STOCK OWNERSHIP
The following table shows the number of Kenan shares beneficially owned
by each director, executive officer and person known by us to own more than five
percent of the outstanding Kenan shares, and by all directors and executive
officers as a group. Except as noted in the footnotes to the following table,
all share information is as of March 23, 2001.
Name Number of Shares Percent of Class
- --------------------------------------- ---------------- ----------------
Frank H. Kenan 1988 Trust (1)(2) 789,360 32.6%
1965 Trust established by Sarah Graham
Kenan (1)(3) 300,000 12.4%
Royce & Associates, Inc. (4) 208,830 8.6%
Franklin Resources, Inc. (5) 130,800 5.4%
Lee P. Shaffer (1)(6) 333,805 12.9%
Owen G. Kenan (1)(7)(8)(9)(10) 32,820 1.4%
Thomas S. Kenan, III (1)(7)(8)(9) 36,000 1.5%
William L. Boone (1)(11) 116,169 4.7%
William P. Prevost (1)(12) 40,000 1.6%
James H. Reid (1)(13) 37,000 1.5%
Gary J. Knutson (1)(14) 40,194 1.6%
John E. Krovic (1)(15) 34,259 1.4%
Lee Shaffer III (1)(16) 33,034 1.3%
William C. Friday (1) 1,100 *
William O. McCoy 0 -
Paul J. Rizzo 0 -
Braxton Schell (1)(7) 1,000 *
Kenneth M. Younger (1) 500 *
All directors and executive officers 705,881 25.0%
as a group (14 persons) (7)(8)(17)
- --------------------
* Represents less than one percent.
(1) These shareholders have agreed to vote their Kenan shares in favor of
the merger.
(2) The trustees of the Frank H. Kenan 1988 Trust are: Elizabeth P. Kenan,
Thomas S. Kenan, III, Owen G. Kenan, Elizabeth Kenan Howell, Annice
Hawkins Kenan and Braxton Schell. The trust's address is 100 Europa
Drive, Suite 525, Chapel Hill, North Carolina 27514.
(3) The trustees of the 1965 Trust established by Sarah Graham Kenan are:
Thomas S. Kenan, III, Owen G. Kenan, Elizabeth Kenan Howell and Morgan
Guaranty Trust Company of New York. The trust's address is 345 Park
Avenue, New York, New York 10154-1002.
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(4) Based on information contained in a Schedule 13G as of December 31,
2000. The address of Royce & Associates, Inc. is 1414 Avenue of the
Americas, New York, New York 10019.
(5) Based on information contained in a Schedule 13G as of December 31,
2000. Franklin Resources, Inc.'s address is 777 Mariners Island Blvd.,
San Mateo, California 94404.
(6) Includes 160,900 shares covered by options that have been granted to
Mr. Shaffer, the unvested portion of which will become exercisable in
connection with the merger. Mr. Shaffer's address is Post Office Box
2729, Chapel Hill, North Carolina 27515.
(7) The shares shown as beneficially owned by Owen G. Kenan, Thomas S.
Kenan, III, Braxton Schell and all directors and executive officers as
a group do not include any shares owned by the Frank H. Kenan 1988
Trust.
(8) The shares shown as beneficially owned by Owen G. Kenan, Thomas S.
Kenan, III and all directors and executive officers as a group do not
include any shares owned by the 1965 Trust established by Sarah Graham
Kenan.
(9) The shares shown as beneficially owned by Owen G. Kenan and Thomas S.
Kenan, III do not include 18,900 shares held by The Kenan Family
Foundation, a non-profit corporation of which Owen G. Kenan and Thomas
S. Kenan, III are two of six directors.
(10) Includes 1,380 shares owned by Owen G. Kenan's wife, 10,950 shares held
by his wife as custodian for their children and 11,490 shares held by a
trust of which Mr. Kenan serves as a trustee.
(11) Includes 72,300 shares covered by options that have been granted to Mr.
Boone, the unvested portion of which will become exercisable in
connection with the merger.
(12) Includes 38,500 shares covered by options that have been granted to Mr.
Prevost, the unvested portion of which will become exercisable in
connection with the merger.
(13) Includes 35,500 shares covered by options that have been granted to Mr.
Reid, the unvested portion of which will become exercisable in
connection with the merger.
(14) Includes 30,700 shares covered by options that have been granted to Mr.
Knutson, the unvested portion of which will become exercisable in
connection with the merger.
(15) Includes 30,700 shares covered by options that have been granted to Mr.
Krovic, the unvested portion of which will become exercisable in
connection with the merger.
(16) Includes 29,600 shares covered by options that have granted to Mr.
Shaffer III, the unvested portion of which will become exercisable in
connection with the merger.
(17) Includes 398,200 shares covered by options that have been granted to
executive officers, the unvested portion of which will become
exercisable in connection with the merger.
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FORWARD-LOOKING INFORMATION
The following cautionary statement identifies important factors that
could cause Kenan's actual results to differ materially from those projected in
forward-looking statements included in this proxy statement. Except for the
historical information, the matters discussed in this proxy statement may be
deemed forward-looking statements. Forward-looking statements are statements
that include projections, predictions, expectations or beliefs about future
events or results or otherwise are not statements of historical fact. Such
statements are often characterized by the use of qualifying words (and their
derivatives) such as "expect," "believe," "plan," "project," or other statements
concerning our opinions or judgment about future events. Our future results may
be affected by a number of factors that include but are not limited to: general
economic conditions such as inflation and interest rates; competitive conditions
within our markets, including adverse changes in demand for trucking services,
pricing pressure, availability of drivers and fuel prices; our ability to sell
services profitably, increase market share and manage expenses relative to
revenue growth; changes in governmental regulation; changes in trucking
transportation and logistic industries; and changes in our labor relations or
other unforeseeable circumstances.
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- FOLD AND DETACH HERE -
KENAN TRANSPORT COMPANY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING TO BE HELD ON APRIL 25, 2001
The undersigned hereby appoints THOMAS S. KENAN, III and PAUL J. RIZZO, and
each or either of them, proxies, with full power of substitution, with the
powers the undersigned would possess if personally present, to vote, as
designated below, all shares of the common stock, no par value, of the
undersigned in Kenan Transport Company at the Special Meeting of Shareholders to
be held on April 25, 2001, and at any adjournment thereof. THIS PROXY WILL BE
VOTED AS SPECIFIED HEREIN AND, UNLESS OTHERWISE DIRECTED, WILL BE VOTED "FOR"
THE MERGER DESCRIBED BELOW. THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE
MERGER.
1. PROPOSAL TO ADOPT AND APPROVE THE PLAN OF MERGER attached as Exhibit B
to the Agreement and Plan of Merger, dated as of January 25, 2001, among
Advantage Management Holdings Corp., KTC/AMG Holdings Corp., Kenan Transport
Company and KTC Acquisition Corp. Under the Plan of Merger, KTC Acquisition
Corp. will merge with and into Kenan, and each Kenan shareholder (other than
KTC/AMG Holdings Corp. and KTC Acquisition Corp.) will become entitled to
receive $35 in cash for each outstanding share of Kenan common stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting, except that if this proxy is
marked AGAINST Proposal 1, this proxy will be voted AGAINST any proposal to
adjourn the Special Meeting of Shareholders to permit Kenan more time to solicit
proxies.
(Continued on Reverse Side)
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- FOLD AND DETACH HERE -
(Continued from Reverse Side)
Receipt of the Notice of Special Meeting of Shareholders and accompanying
Proxy Statement is hereby acknowledged.
PLEASE DATE AND SIGN EXACTLY AS PRINTED BELOW AND RETURN PROMPTLY IN THE
ENCLOSED POSTAGE PAID ENVELOPE.
Dated: , 2001
------------------------
----------------------------------
----------------------------------
----------------------------------
(When signing as attorney,
executor, administrator, trustee,
guardian, etc., give title as
such. If joint account, each joint
owner should sign.)
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
AMONG
ADVANTAGE MANAGEMENT HOLDINGS CORP.,
KTC/AMG HOLDINGS CORP.,
KENAN TRANSPORT COMPANY
AND
KTC ACQUISITION CORP.
January 25, 2001
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TABLE OF CONTENTS
PAGE
----
ARTICLE I
THE MERGER
Section 1.1 The Merger......................................................................8
Section 1.2 Articles of Incorporation.......................................................9
Section 1.3 Bylaws..........................................................................9
Section 1.4 Directors and Officers..........................................................9
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Securities........................................................9
Section 2.2 Surrender of Certificates......................................................10
Section 2.3 No Further Ownership Rights in Company Common Stock............................11
Section 2.4 Lost, Stolen or Destroyed Certificates.........................................11
Section 2.5 Withholding Rights.............................................................11
Section 2.6 Adjustments....................................................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Section 3.1 Organization and Power.........................................................12
Section 3.2 Corporate Authorization........................................................12
Section 3.3 Governmental Authorization.....................................................13
Section 3.4 Non-Contravention..............................................................13
Section 3.5 Capitalization of Company......................................................14
Section 3.6 Capitalization of Subsidiaries.................................................15
Section 3.7 SEC Filings....................................................................15
Section 3.8 Financial Statements...........................................................15
Section 3.9 Disclosure Documents...........................................................16
Section 3.10 Absence of Certain Changes.....................................................16
Section 3.11 No Undisclosed Material Liabilities............................................17
Section 3.12 Litigation.....................................................................18
Section 3.13 Taxes..........................................................................18
Section 3.14 Employee Benefit Plans; ERISA..................................................19
Section 3.15 Compliance with Laws...........................................................21
Section 3.16 Licenses and Permits...........................................................21
Section 3.17 No Default.....................................................................21
Section 3.18 Finders' Fees..................................................................22
Section 3.19 Environmental Matters..........................................................22
Section 3.20 Title to and Condition of Assets...............................................23
Section 3.21 Material Contracts.............................................................23
Section 3.22 Absence of Certain Business Practices..........................................23
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Section 3.23 Opinion of Financial Advisor...................................................23
Section 3.24 Takeover Statutes..............................................................24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ADVANTAGE AND PARENT
Section 4.1 Organization and Power.........................................................24
Section 4.2 Corporate Authorization........................................................24
Section 4.3 Governmental Authorization.....................................................24
Section 4.4 Non-Contravention..............................................................24
Section 4.5 Litigation.....................................................................25
Section 4.6 Information Supplied...........................................................25
Section 4.7 Financing......................................................................25
ARTICLE V
COVENANTS
Section 5.1 Conduct of Company.............................................................25
Section 5.2 Shareholder Meeting, Proxy Materials...........................................28
Section 5.3 Access to Information..........................................................28
Section 5.4 No Solicitation................................................................28
Section 5.5 Notice of Certain Events.......................................................28
Section 5.6 Reasonable Best Efforts........................................................28
Section 5.7 Cooperation....................................................................28
Section 5.8 Public Announcements...........................................................28
Section 5.9 Further Assurances.............................................................28
Section 5.10 Director and Officer Liability.................................................28
Section 5.11 Obligations of Merger Subsidiary...............................................28
Section 5.12 Antitakeover Statutes..........................................................28
Section 5.13 Employee Benefits..............................................................28
Section 5.14 Integration Team...............................................................28
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1 Conditions to the Obligations of Each Party....................................28
Section 6.2 Conditions to the Obligations of Parent and Merger Subsidiary..................28
Section 6.3 Conditions to the Obligations of Company.......................................28
ARTICLE VII
TERMINATION
Section 7.1 Termination....................................................................28
Section 7.2 Effect of Termination..........................................................28
Section 7.3 Payments.......................................................................28
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ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices........................................................................28
Section 8.2 Entire Agreement; Non-Survival of Representations and Warranties; Third Party
Beneficiaries..................................................................28
Section 8.3 Amendments; No Waivers.........................................................28
Section 8.4 Successors and Assigns.........................................................28
Section 8.5 Governing Law..................................................................28
Section 8.6 Jurisdiction...................................................................28
Section 8.7 Waiver Of Jury Trial...........................................................28
Section 8.8 Counterparts; Effectiveness....................................................28
Section 8.9 Interpretation.................................................................28
Section 8.10 Severability...................................................................28
Section 8.11 Specific Performance...........................................................28
Section 8.12 Joint and Several Liability....................................................28
EXHIBITS
Exhibit A Voting Agreement
Exhibit B Plan of Merger
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DEFINED TERMS
"1933 Act" has the meaning given to it in SECTION 3.7(C).
"1934 Act" has the meaning given to it in SECTION 3.3.
"Acquisition Proposal" has the meaning given to it in SECTION 5.4.
"Advantage" has the meaning given to it in the introduction to the
Agreement.
"Advantage Confidentiality Agreement" has the meaning given to it in
SECTION 5.3.
"Agreement" has the meaning given to it in the introduction to the
Agreement.
"Antitrust Law" has the meaning given to it in SECTION 5.6(B).
"Certificates" has the meaning given to it in SECTION 2.2(C).
"Closing" has the meaning given to it in SECTION 1.1(B).
"Closing Date" has the meaning given to it in SECTION 1.1(B).
"Code" has the meaning given to it in SECTION 2.5.
"Company 10-Q" has the meaning given to it in SECTION 3.8.
"Company" has the meaning given to it in the introduction to the
Agreement.
"Company Agreement" has the meaning given to it in SECTION 3.4.
"Company Balance Sheet Date" has the meaning given to it in SECTION
3.8.
"Company Benefit Plans" has the meaning given to it in SECTION 3.14(A).
"Company Board" has the meaning given to it in SECTION 3.2(B).
"Company Common Stock" has the meaning given to it in the Background
Statement to this Agreement.
"Company Disclosure Schedule" has the meaning given to it in SECTION
3.1.
"Company Financial Advisor" has the meaning given to it in SECTION
3.18.
"Company Incentive Plan" has the meaning given to it in SECTION 2.1(D).
"Company Proxy Statement" has the meaning given to it in SECTION 3.9.
"Company Requisite Vote" has the meaning given to it in SECTION 3.2(A).
"Company SEC Documents" has the meaning given to it in SECTION 3.7(A).
"Company Securities" has the meaning given to it in SECTION 3.5(A).
"Company Shareholder Approval" has the meaning given to it in SECTION
5.2(A).
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"Company Shareholder Meeting" has the meaning given to it in SECTION
5.2(A).
"Company Subsidiary Securities" has the meaning given to it in SECTION
3.6.
"DOJ" has the meaning given to it in SECTION 5.6(C).
"Effective Time" has the meaning given to it in SECTION 1.1(C).
"End Date" has the meaning given to it in SECTION 7.1(B)(I).
"Environmental Laws" has the meaning given to it in SECTION 3.19(B)(I).
"Environmental Liabilities" has the meaning given to it in SECTION
3.19(B)(II).
"ERISA" has the meaning given to it in SECTION 3.14(A).
"ERISA Affiliate" has the meaning given to it in SECTION 3.14(A).
"Expenses" has the meaning given to it in SECTION 7.3(B).
"Financing Letters" has the meaning given to it in SECTION 4.7.
"FTC" has the meaning given to it in SECTION 5.6(C).
"GAAP" has the meaning given to it in SECTION 3.8.
"Governmental Authority" has the meaning given to it in SECTION 3.3.
"HSR Act" has the meaning given to it in SECTION 3.3.
"Hazardous Substances" has the meaning given to it in SECTION
3.19(B)(III).
"Indemnified Party" has the meaning given to it in SECTION 5.10(A).
"Indemnified Parties" has the meaning given to it in SECTION 5.10(A).
"know" or "knowledge" means, with respect to any party, the actual
knowledge of such party's executive officers after commercially reasonable
investigation and inquiry, except that no such inquiry of third parties who are
not employees of the applicable party or its Subsidiaries shall be required
under SECTION 3.17 or SECTION 5.5.
"Lien" has the meaning given to it in SECTION 3.4.
"Material Adverse Effect" has the meaning given to it in SECTION 3.1.
"Material Company Agreement" has the meaning given to it in SECTION
3.21.
"Merger" has the meaning given to it in SECTION 1.1(A).
"Merger Consideration" has the meaning given to it in SECTION 2.1(A).
"Merger Subsidiary" has the meaning given to it in the introduction to
the Agreement.
"NCBCA" has the meaning given to it in SECTION 1.1(A).
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"Options" has the meaning given to it in SECTION 2.1(D).
"Parent" has the meaning given to it in the introduction to the
Agreement.
"Payment Agent" has the meaning given to it in SECTION 2.2(A).
"Payment Funds" has the meaning given to it in SECTION 2.2(B).
"Permits" has the meaning given to it in SECTION 3.16.
"Permitted Liens" has the meaning given to it in SECTION 3.4.
"person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the 1934 Act).
"Plan of Merger" has the meaning given to it in SECTION 3.2(B).
"Proceeding" has the meaning given to it in SECTION 3.12.
"SEC" has the meaning given to it in SECTION 3.7(A).
"Service" has the meaning given to it in SECTION 3.13(C).
"Subsidiary" means when used with reference to any entity, any
corporation or other organization, whether incorporated or unincorporated, (i)
of which such party or any other subsidiary of such party is a general or
managing partner or (ii) the outstanding voting securities or interests of
which, having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization, is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries.
"Superior Proposal" has the meaning given to it in SECTION 5.4.
"Surviving Corporation" has the meaning given to it in SECTION 1.1(A).
"Takeover Statute" has the meaning given to it in SECTION 3.24.
"Tax Return" has the meaning given to it in SECTION 3.13.
"Taxes" has the meaning given to it in SECTION 3.13.
"Taxing Authority" has the meaning given to it in SECTION 3.13.
"Termination Fee" has the meaning given to it in SECTION 7.3(B).
"Voting Agreement" has the meaning given to it in the Background
Statement to this Agreement.
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
January 25, 2001, among ADVANTAGE MANAGEMENT HOLDINGS CORP., a Delaware
corporation ("Advantage"), KTC/AMG HOLDINGS CORP., a Delaware corporation
("Parent"), KENAN TRANSPORT COMPANY, a North Carolina corporation ("Company"),
and KTC ACQUISITION CORP., a North Carolina corporation and a wholly-owned
subsidiary of Parent ("Merger Subsidiary").
BACKGROUND STATEMENT
The respective Boards of Directors of Advantage, Parent and Company
have (i) each determined that it is in the best interest of their respective
companies and shareholders for Parent to acquire Company upon the terms and
subject to the conditions set forth herein and (ii) approved the merger of
Merger Subsidiary with and into Company on the terms and conditions set forth
herein. Pursuant to the Merger, among other things, each issued and outstanding
share of the common stock, no par value, of Company ("Company Common Stock")
issued and outstanding immediately prior to the effective time, other than
shares held directly by Parent and Merger Subsidiary, will be converted into the
right to receive in cash the Merger Consideration. The parties hereto desire to
provide for certain undertakings, conditions, representations, warranties and
covenants in connection with the transactions contemplated hereby.
Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, the Frank
H. Kenan 1988 Trust, the 1965 Trust established by Sarah Graham Kenan for the
benefit of the family of Frank H. Kenan and certain directors and executive
officers of Company are executing and delivering to Parent an agreement
substantially in the form of EXHIBIT A hereto (the "Voting Agreement"), pursuant
to which, among other things, each such person is agreeing to vote all of the
shares of Company Common Stock owned, beneficially or of record, by him, her or
it to approve the Merger.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the respective
undertakings, conditions, representations, warranties, covenants, and agreements
set forth herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time, Merger Subsidiary shall be merged (the
"Merger") with and into Company in accordance with the North Carolina Business
Corporation Act, as amended ("NCBCA"), whereupon the separate existence of
Merger Subsidiary shall cease and Company shall continue as the surviving
corporation (the "Surviving Corporation").
(b) Upon the terms and subject to the conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place at 10:00 a.m. on a date
(the "Closing Date") which shall be no later than
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the second business day after satisfaction or waiver (subject to applicable law)
of the conditions set forth in ARTICLE VI (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the satisfaction
or waiver of those conditions) at the offices of Fulbright & Jaworski L.L.P.,
666 Fifth Avenue, New York, New York 10103, or at such other time, date or place
as agreed to in writing by the parties hereto.
(c) Upon the Closing, Company and Merger Subsidiary shall deliver to
the North Carolina Secretary of State for filing articles of merger, with the
Plan of Merger attached thereto, with regard to the Merger in accordance with
the NCBCA, and make all other filings or recordings required by the NCBCA in
connection with the Merger. The Merger shall become effective at the time of
filing of the articles of merger or at such later time as is agreed to by Parent
and Company and specified in the articles of merger (the "Effective Time"). The
Merger shall have the effects set forth in Section 55-11-06 of the NCBCA.
SECTION 1.2 ARTICLES OF INCORPORATION. Subject to the last sentence of
SECTION 5.10(B), the articles of incorporation of Company in effect at the
Effective Time shall be the articles of incorporation of the Surviving
Corporation until amended in accordance with applicable law.
SECTION 1.3 BYLAWS. Subject to the last sentence of SECTION 5.10(B),
the bylaws of Merger Subsidiary in effect at the Effective Time shall be the
bylaws of the Surviving Corporation until amended in accordance with applicable
law.
SECTION 1.4 DIRECTORS AND OFFICERS. From and after the Effective Time
until their successors are duly elected or appointed and qualified in accordance
with the NCBCA and the articles of incorporation and bylaws of the Surviving
Corporation, (a) the directors of Merger Subsidiary at the Effective Time shall
be the directors of the Surviving Corporation and (b) the officers of Company at
the Effective Time shall be the officers of the Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.1 CONVERSION OF SECURITIES. As of the Effective Time, by
virtue of the Merger and without any action on the part of any holder of any
capital stock of Parent, Merger Subsidiary or Company:
(a) Company Common Stock. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any shares of
Company Common Stock held directly by Parent or Merger Subsidiary) automatically
shall be converted into the right to receive, pursuant to the provisions of this
SECTION 2.1, $35 in cash without interest (the "Merger Consideration").
(b) Cancellation of Certain Shares. Each share of Company Common Stock
held directly by Parent and Merger Subsidiary immediately prior to the Effective
Time shall be cancelled and extinguished, and no consideration shall be
delivered therefor.
(c) Capital Stock of Merger Subsidiary. Each share of common stock, no
par value, of Merger Subsidiary issued and outstanding immediately prior to the
Effective Time shall automatically be converted into one validly issued, fully
paid and nonassessable share of common stock, no par value, of the Surviving
Corporation.
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(d) Employee Stock Options. Each holder of an outstanding employee
stock option to purchase shares of Company Common Stock (the "Options") granted
under the Company's 1998 Long-Term Incentive Plan (the "Company Incentive Plan")
has agreed that, at or immediately prior to the Effective Time, each such Option
that has not been exercised prior to such time shall be cancelled, and each such
holder of any such Option shall be paid by Parent or the Surviving Corporation
for each such Option an amount determined by multiplying (x) the excess, if any,
of the Merger Consideration over the applicable per share exercise price of such
Option by (y) the number of shares of Company Common Stock such holder could
have purchased (assuming full vesting of all Options) had such holder exercised
such Option in full immediately prior to the Effective Time. Such payment shall
be made promptly (but not later than ten business days) after the Effective
Time.
SECTION 2.2 SURRENDER OF CERTIFICATES.
(a) Payment Agent. Parent shall select a bank or trust company
reasonably acceptable to Company to act as the payment agent (the "Payment
Agent") in the Merger.
(b) Parent to Provide Merger Consideration. At the Closing, Parent
shall make available to the Payment Agent for payment in accordance with this
ARTICLE II a cash amount equal to the aggregate Merger Consideration payable
pursuant to SECTION 2.1 in exchange for outstanding shares of Company Common
Stock, to be held by the Payment Agent for the benefit of and distributed to
holders of such shares in accordance with this Agreement. The Payment Agent
shall agree to hold such funds (the "Payment Funds") for delivery as
contemplated herein. If for any reason the Payment Funds are inadequate to pay
the Merger Consideration, Parent shall remain liable and shall promptly make
available to the Payment Agent additional funds for the payment thereof. The
Payment Funds shall not be used for any purpose except as expressly provided in
this Agreement. The Payment Funds shall be invested by the Payment Agent as
directed by Parent or the Surviving Corporation pending payment thereof by the
Payment Agent to the holders of record of shares of Company Common Stock.
Earnings from such investment shall be the sole and exclusive property of Parent
and the Surviving Corporation, and no part of such earnings shall accrue to the
benefit of holders of record of shares of Company Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time, Parent
shall cause the Payment Agent to mail to each holder of record as of the
Effective Time of a certificate or certificates (the "Certificates") that
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock which were converted into the right to receive the Merger
Consideration (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title shall pass, only upon delivery of
the Certificates to the Payment Agent and shall be in such form and have such
other provisions as Parent shall reasonably specify) and (ii) instructions for
effecting the exchange of the Certificates for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Payment Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal duly completed and validly executed in accordance with the
instructions thereto and such other documents as may reasonably be required, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Merger Consideration in accordance with SECTION 2.1, and the Certificate so
surrendered shall forthwith be cancelled. Until so surrendered, each outstanding
Certificate will be deemed from and after the Effective Time, for all corporate
purposes, to evidence only the right to receive the Merger Consideration
attributable to the Company Common Stock represented by each such Certificate.
No interest shall be paid or accrued on any amount payable upon surrender of any
Certificate. If any portion of the Merger Consideration is to be paid to a
person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition to such payment that the Certificate so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such payment shall pay to the Payment
Agent any transfer or similar other taxes required as a
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result of such payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Payment Agent that such tax
has been paid or is not payable.
(d) No Liability. Notwithstanding anything to the contrary in this
SECTION 2.2, none of the Payment Agent, Parent, Merger Subsidiary, the Surviving
Corporation or any other party hereto shall be liable to any person in respect
of any Merger Consideration for any amount properly delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(e) Termination of Payment Agent. Any Merger Consideration made
available to the Payment Agent pursuant to SECTION 2.2(B) which remains
undistributed for six months after the Effective Time pursuant to this SECTION
2.2 shall be returned by the Payment Agent to the Surviving Corporation, which
shall thereafter act as Payment Agent, and thereafter any holder of
unsurrendered Certificates shall look as a general creditor only to Parent and
the Surviving Corporation for payment of any funds to which such holder may be
due, subject to applicable law.
SECTION 2.3 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration paid in exchange for shares of Company Common Stock in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If after the Effective Time
Certificates are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this ARTICLE II.
SECTION 2.4 LOST, STOLEN OR DESTROYED CERTIFICATES. If any Certificates
shall have been lost, stolen or destroyed, the Payment Agent shall deliver in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, the Merger Consideration;
provided, however, that Parent may, in its discretion and as a condition
precedent to such delivery, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent, the Surviving
Corporation or the Payment Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
SECTION 2.5 WITHHOLDING RIGHTS. Each of the Surviving Corporation and
Parent shall be entitled, or shall be entitled to cause the Payment Agent, to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of shares of Company Common Stock such amounts as
it is required to deduct and withhold with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended (the "Code"), and the rules
and regulations promulgated thereunder, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by the Surviving
Corporation, Parent or the Payment Agent, as the case may be, such amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the shares of Company Common Stock in respect to which such deduction and
withholding was made by the Surviving Corporation, Parent or the Payment Agent,
as the case may be.
SECTION 2.6 ADJUSTMENTS. If prior to the Effective Time there is any
change in the outstanding shares of Company Common Stock, including by reason of
any reclassification, recapitalization, stock split or combination, exchange or
readjustment of such shares, or stock dividend thereon, the Merger Consideration
shall be appropriately adjusted.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent that:
SECTION 3.1 ORGANIZATION AND POWER. Each of Company and its
Subsidiaries is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, and has the requisite corporate or other power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each of Company and its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect on Company.
For purposes of this Agreement, a "Material Adverse Effect" with
respect to Company, Advantage or Parent, as the case may be, means a material
adverse effect on (i) the financial condition, business, properties or results
of operations of such person and its Subsidiaries, taken as a whole, or (ii) the
ability of such person to perform its obligations under or to consummate the
transactions contemplated by this Agreement, provided that none of the following
shall constitute a Material Adverse Effect: (a) any event, occurrence or
development relating to or arising out of general economic conditions; (b) any
event, occurrence or development generally affecting the industries in which
Company and its Subsidiaries or Advantage and its Subsidiaries operate; or (c)
any event, occurrence or development in Company's business after the date hereof
attributable solely to actions taken by Parent.
Section 3.1 of the disclosure schedule delivered by Company to Parent
prior to the execution of this Agreement (the "Company Disclosure Schedule")
sets forth a complete list of Company's Subsidiaries and a complete and accurate
list of all jurisdictions in which Company and each of its Subsidiaries is
qualified to do business as a foreign corporation. Company and its Subsidiaries
have no investments (whether through acquisition of an equity investment or
otherwise) in any person other than a Subsidiary.
Company has heretofore made available to Parent or its representatives
true and complete copies of Company's articles of incorporation and bylaws, and
the articles of incorporation and bylaws (or comparable organization documents)
of each Subsidiary, in each case as currently in effect.
SECTION 3.2 CORPORATE AUTHORIZATION.
(a) The execution, delivery and performance by Company of this
Agreement and the consummation by Company of the transactions contemplated
hereby are within Company's corporate powers and have been duly authorized by
all necessary corporate action required to be taken by Company, except actions
by the shareholders as set forth in the next succeeding sentence of this SECTION
3.2(A). The approval by the holders of a majority of the votes entitled to be
cast on the Plan of Merger (the "Company Requisite Vote") is the only vote of
any class or series of Company's capital stock necessary to approve and adopt
this Agreement, the Plan of Merger and the transactions contemplated thereby.
This Agreement has been duly executed and delivered by Company and constitutes a
valid and binding agreement of Company, enforceable against Company in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity,
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including concepts of materiality, reasonableness, good faith and fair dealing,
regardless of whether in a proceeding at equity or at law).
(b) The Board of Directors of Company (the "Company Board"), at a
meeting duly called and held on January 25, 2001, duly adopted resolutions (i)
authorizing the execution and delivery of this Agreement, (ii) adopting the plan
of merger attached hereto as EXHIBIT B ("Plan of Merger"), (iii) approving the
Merger, (iv) determining that the terms of the Merger are fair to and in the
best interest of Company and its shareholders and (v) recommending that the
shareholders of Company approve this Agreement, the Merger and the Plan of
Merger. The Company Board has directed that this Agreement and the Plan of
Merger be submitted to the shareholders of Company for their approval.
Notwithstanding the foregoing or any other provision of this Agreement to the
contrary, Company Board shall be permitted to withdraw, modify or change any
actions described in clauses (ii)-(v) of the first sentence of this SECTION
3.2(B) if and to the extent that the Company Board, upon receipt of a Superior
Proposal, and after consultation with outside legal counsel, determines in its
good faith judgment that such action is necessary for the Company Board to
comply with its duties to Company's shareholders under applicable law; provided,
however, that prior to publicly withdrawing, modifying or changing its
recommendation in favor of approving this Agreement, the Merger and the Plan of
Merger, Company shall have given Parent at least seventy-two hours' prior
written notice thereof and the opportunity to meet with Company and its counsel
and financial advisors.
SECTION 3.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Company of this Agreement, and the consummation by Company of the
transactions contemplated hereby, require no consent, approval, order or
authorization of or other action by or in respect of, or registration,
qualification, declaration or filing with, any federal, state or local
government or any court, administrative agency or commission or other
governmental agency or authority (a "Governmental Authority") other than: (a)
the filing of articles of merger with respect to the Merger by the Secretary of
State of the State of North Carolina and appropriate documents with the relevant
authorities of other states in which Company is qualified to do business; (b)
compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and similar state
antitrust statutes; (c) compliance with any applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "1934 Act") and similar state securities laws; (d)
those that may be required solely by reason of Parent's or Merger Subsidiary's
(as opposed to any other third party's) participation in the transactions
contemplated by this Agreement; (e) actions or filings which, if not taken or
made, would not, individually or in the aggregate, have a Material Adverse
Effect on Company; and (f) filings and notices not required to be made or given
until after the Effective Time.
SECTION 3.4 NON-CONTRAVENTION. Except as set forth in Section 3.4 of
the Company Disclosure Schedule, the execution, delivery and performance by
Company of this Agreement do not, and the consummation by Company of the
transactions contemplated hereby will not: (a) assuming receipt of the approval
of shareholders referred to in SECTION 3.2(A), contravene or conflict with the
articles of incorporation, bylaws or similar organizational documents of Company
or any of its Subsidiaries; (b) assuming receipt of the approval of shareholders
referred to in SECTION 3.2(A) and compliance with the matters referred to in
SECTION 3.3, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Company or its Subsidiaries; (c) require any consent or
other action by any person under, constitute a default (or an event which with
notice, the lapse of time or both would become a default) under or give rise to
a right of termination, modification, cancellation or acceleration of any right
or obligation of Company or any of its Subsidiaries or to a loss of any benefit
to which Company or any of its Subsidiaries is entitled under any provision of
any agreement, contract, commitment, arrangement, lease, undertaking or other
instrument binding upon Company or any of its Subsidiaries (a "Company
Agreement") or any Permit or other
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similar authorization held by Company or any of its Subsidiaries; (d) result in
the triggering of any payment or other obligation under any provision of any
Company Agreement or any Permit or similar authorization held by Company or any
of its Subsidiaries; or (e) result in the creation or imposition of any Lien on
any asset of Company or any of its Subsidiaries other than a Permitted Lien; all
except for such contraventions, conflicts or violations referred to in clause
(b) or failures to obtain any consents or other actions by any person or any
defaults, rights of termination, modification, cancellation or acceleration or
losses referred to in clause (c) that would not, individually or in the
aggregate, have a Material Adverse Effect on Company. For purposes of this
Agreement, "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
and "Permitted Liens" means (i) Liens disclosed in the Company SEC Documents
filed prior to the date hereof, (ii) Liens that are not, individually or in the
aggregate, material in character, amount or extent and that do not materially
detract from the value or materially interfere with the present use of the
assets subject thereto or affected thereby, (iii) Liens for current Taxes not
yet due and payable and (iv) Liens for mechanics' or materialmen's liens arising
in the ordinary course of business with respect to obligations that are not past
due or which are being contested in good faith.
SECTION 3.5 CAPITALIZATION OF COMPANY.
(a) The authorized capital stock of Company consists of 20,000,000
shares of Company Common Stock. As of the close of business on January 25, 2001,
2,420,662 shares of Company Common Stock were issued and outstanding, including
20,200 shares of restricted stock granted under the Company Incentive Plan, and
407,600 shares of Company Common Stock were reserved for issuance upon exercise
of outstanding Options granted under the Company Incentive Plan. Section 3.5 of
the Company Disclosure Schedule contains a true, correct and complete list of
all outstanding Options, the holders of such Options and the exercise price
thereof. All the outstanding shares of Company Common Stock are, and all shares
which may be issued pursuant to the Company Incentive Plan will be, when issued
in accordance with the terms thereof, duly authorized, validly issued, fully
paid and nonassessable. No shares of Company Common Stock have been, or upon
exercise of Options will be, issued in violation of preemptive rights, rights of
first refusal or similar rights. Except as set forth in the first sentence of
this SECTION 3.5(A), there are outstanding (i) no shares of capital stock or
other voting securities of Company, (ii) no securities of Company convertible
into or exchangeable for shares of capital stock or voting securities of
Company, (iii) no phantom shares, stock appreciation rights or similar
equity-based rights and (iv) no options, warrants or other rights to acquire
from Company, and no preemptive or similar rights, subscriptions or other
rights, convertible securities, agreements, arrangements or commitments of any
character, relating to the capital stock of Company, obligating Company to
issue, transfer or sell any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Company or obligating Company to grant, extend or enter into any such option,
warrant, subscription or other right, convertible security, agreement,
arrangement or commitment (the items in clauses (i), (ii), (iii) and (iv) being
referred to collectively as the "Company Securities"). Except as set forth in
Section 3.5 of the Company Disclosure Schedule, none of Company or its
Subsidiaries has any contractual obligation to redeem, repurchase or otherwise
acquire any Company Securities or any Company Subsidiary Securities, including
as a result of the transactions contemplated by this Agreement.
(b) There are no voting trusts or other agreements or understandings to
which Company or any of its Subsidiaries is a party with respect to the voting
of the capital stock of Company or any of its Subsidiaries other than the Voting
Agreements.
(c) There are no bonds, debentures, notes or other indebtedness of
Company having the right to vote (or convertible into securities having the
right to vote) on any matters on which shareholders of Company may vote.
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(d) Without expanding or limiting the effect of the penultimate
sentence of SECTION 3.5(A), Company has not entered into, and the Company Board
has not adopted or authorized the adoption of, a shareholder rights plan or
similar agreement.
SECTION 3.6 CAPITALIZATION OF SUBSIDIARIES. All the outstanding shares
of capital stock of, or other ownership interests in, each Subsidiary of Company
are owned (of record and beneficially) by Company, directly or indirectly, free
and clear of any consensual Lien (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests) other than a Permitted Lien. There are no outstanding (i) securities
of Company or any of its Subsidiaries convertible into or exchangeable for
shares of capital stock or other voting securities or ownership interests in any
Subsidiary of Company, or (ii) options or other rights to acquire from Company
or any of its Subsidiaries, and no other obligation of Company or any of its
Subsidiaries to issue, any capital stock, voting securities or other ownership
interests in, or any securities convertible into or exchangeable for, any
capital stock, voting securities or ownership interests in, any Subsidiary of
Company (the items in clauses (i) and (ii) being referred to collectively as the
"Company Subsidiary Securities").
SECTION 3.7 SEC FILINGS.
(a) Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the Securities and Exchange
Commission (the "SEC") since January 1, 1997. True, complete and correct copies
of all such filings, including exhibits, made by Company since such date (the
"Company SEC Documents") have been furnished to Parent.
(b) As of its filing date, each Company SEC Document filed pursuant to
the 1934 Act complied in all material respects with the requirements of the 1934
Act and did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except to
the extent that such statements have been modified or superseded by a later
filed Company SEC Document.
(c) Each Company SEC Document that is a registration statement, as
amended or supplemented, if applicable, filed pursuant to the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"1933 Act"), complied in all material respects with the requirements of the 1933
Act and as of the date such registration statement or amendment became effective
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, except to the extent that such statements have been
modified or superseded by a later filed Company SEC Document.
SECTION 3.8 FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Company
included in Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 and its Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2000 (the "Company 10-Q"), respectively, comply in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position of
Company and its consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end adjustments in the case of the unaudited interim
financial statements that are not likely to be material to Company and its
Subsidiaries as a whole). For purposes of this Agreement, "Company Balance
Sheet" means the consolidated balance sheet of Company as of September 30, 2000
set forth in the Company 10-Q.
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SECTION 3.9 DISCLOSURE DOCUMENTS. None of the information supplied or
to be supplied by Company for inclusion or incorporation by reference in any
documents filed or to be filed with the SEC in connection with the transactions
contemplated hereby, including the proxy statement of Company to be filed with
the SEC in connection with the Merger, and any amendment or supplement thereto
(the "Company Proxy Statement"), will, at the respective times such documents
are filed and, in the case of the Company Proxy Statement, the date the Company
Proxy Statement or any such amendment or supplement is first mailed to
shareholders of Company and at the time such shareholders vote on the adoption
and approval of this Agreement, contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company Proxy Statement will comply in all material respects
with the applicable requirements of the 1934 Act and the NCBCA. No
representation or warranty is made by Company with respect to statements made or
incorporated by reference in the Company Proxy Statement based on information
supplied by Advantage, Parent or Merger Subsidiary specifically for inclusion or
incorporation by reference in the Company Proxy Statement.
SECTION 3.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Company SEC Documents filed prior to the date of this Agreement or as disclosed
in Section 3.10 of the Company Disclosure Schedule, since September 30, 2000,
Company and its Subsidiaries have conducted their business in the ordinary
course consistent with past practice, and there has not been:
(a) any event, occurrence or development which, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect on Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Company other than
quarterly cash dividends in an amount not in excess of $0.0775 per share, or any
repurchase, redemption or other acquisition by Company or any of its
Subsidiaries of any outstanding shares of capital stock or other equity
securities of, or other ownership interests in, Company or any of its
Subsidiaries;
(c) any amendment of any term of any outstanding security of Company or
any of its Subsidiaries that would materially increase the obligations of
Company or such Subsidiary under such security;
(d) any (i) incurrence or assumption by Company or any of its
Subsidiaries of any indebtedness for borrowed money other than under existing
credit facilities (or any renewals, replacements or extensions that do not
increase the aggregate commitments thereunder) in the ordinary course of
business consistent with past practice or (ii) guarantee, endorsement or other
incurrence or assumption of liability (whether directly, contingently or
otherwise) by Company or any of its Subsidiaries for the obligations of any
other person (other than any wholly-owned Subsidiary of Company), other than in
the ordinary course of business consistent with past practice;
(e) any creation or assumption by Company or any of its Subsidiaries of
any Lien on any asset of Company or any of its Subsidiaries other than a
Permitted Lien incurred in the ordinary course of business consistent with past
practice;
(f) any making of any loan, advance or capital contribution to or
investment in any person by Company or any of its Subsidiaries other than (i)
any acquisition permitted by SECTION 5.1, (ii) loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries of Company or (iii)
loans or advances to employees of Company or any of its Subsidiaries made in the
ordinary course of business consistent with past practice;
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(g) any (i) acquisition or disposition of any assets or business of the
Company or any of its Subsidiaries except as permitted by SECTION 5.1 or (ii)
modification, amendment, assignment, termination or relinquishment by Company or
any of its Subsidiaries of any contract, license or other right that,
individually or in the aggregate, would have a Material Adverse Effect on
Company, other than, in the case of clauses (i) or (ii) of this SECTION 3.10(G),
transactions, commitments, contracts or agreements in the ordinary course of
business consistent with past practice and those contemplated by this Agreement;
(h) any revaluing in any material respect of the assets of Company or
any of its Subsidiaries, including without limitation writing down the value of
any assets or inventory or writing off notes or accounts receivable, other than
in the ordinary course of business consistent with past practices or as required
by GAAP;
(i) any material change in any method of accounting or accounting
principles or practice by Company or any of its Subsidiaries, except for any
such change required by reason of a change in GAAP;
(j) any (i) grant of the right to receive any severance, retention or
termination pay to any current or former director, officer or employee of
Company or any of its Subsidiaries, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any current or former director, officer or employee of
Company or any of its Subsidiaries, (iii) increase in or acceleration in vesting
of benefits payable under any existing severance or termination pay policies or
employment agreements or (iv) increase or acceleration in vesting or payment of
compensation, bonus or other benefits payable to current or former directors,
officers or employees of Company or any of its Subsidiaries other than, in the
case of clause (iv) only, normal increases in compensation, bonus or other
benefits payable to employees of Company or any of its Subsidiaries in the
ordinary course of business consistent with past practice or merit increases in
salaries of employees at regularly scheduled times in customary amounts
consistent with past practices;
(k) any material labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of Company or any Subsidiary, which employees
were not subject to a collective bargaining agreement at December 31, 1999, or
any material lockouts, strikes, slowdowns, work stoppages or threats thereof by
or with respect to such employees;
(l) any loss or termination of, or a material adverse change in the
relationship with, any (i) customer that accounted for more than two percent
(2%) of Company's revenues in the year ended December 31, 1999 or 2000, or is,
as of the date hereof, expected to account for more than two percent (2%) of
Company's revenues for the year ended December 31, 2001, or (ii) supplier that,
individually or in the aggregate, has resulted or would reasonably be expected
to result in a Material Adverse Effect;
(m) any material delay or postponement, outside the ordinary course of
business, in the payment of accounts payable and other liabilities;
(n) any action which, if it had been taken after the date hereof, would
have required the consent of Parent under SECTION 5.1 hereof; or
(o) any agreement to take any actions specified in this SECTION 3.10,
except for this Agreement.
SECTION 3.11 NO UNDISCLOSED MATERIAL LIABILITIES. Except as permitted
by SECTION 3.10(D), there have been no liabilities or obligations (whether
pursuant to contracts or otherwise) of any kind
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whatsoever incurred by Company or any of its Subsidiaries since September 30,
2000, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than:
(a) liabilities or obligations disclosed or provided for in the Company
Balance Sheet or in the notes thereto, in the Company SEC Documents filed prior
to the date hereof or on Section 3.11 of the Company Disclosure Schedule;
(b) liabilities or obligations, other than liabilities or obligations
referred to in clause (c) of this SECTION 3.11, incurred in the ordinary course
of business;
(c) liabilities and obligations arising out of any breach of contract,
breach of warranty, tort, injury caused to another, lawsuit or violation of law
that, individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect on Company;
(d) liabilities and obligations not incurred in the ordinary course of
business that are not in excess of $50,000 in the aggregate; and
(e) liabilities or obligations under this Agreement or incurred in
connection with the transactions contemplated hereby.
SECTION 3.12 LITIGATION. There is no action, suit, investigation or
proceeding (collectively, "Proceeding") pending against, or to the knowledge of
Company, threatened against or affecting, Company or any of its Subsidiaries or
any of their respective properties which, individually or in the aggregate,
would have a Material Adverse Effect on Company, nor is there any judgment,
decree, injunction, rule that names Company or any Subsidiary or otherwise is
specific to Company or any Subsidiary or order of any Governmental Authority or
arbitrator outstanding against Company or any of its Subsidiaries having any
such effect. No Governmental Entity has indicated in writing addressed to
Company or any Subsidiary an intention to conduct any audit, investigation or
other review with respect to Company or any of its Subsidiaries which
investigation or review, individually or in the aggregate, would have a Material
Adverse Effect on Company. Each currently pending Proceeding seeking damages in
excess of $50,000 has been timely reported to all applicable insurance carriers
and no reservation of rights or denial of coverage has been issued by any such
carrier.
SECTION 3.13 TAXES. Except as set forth in Section 3.13 of the Company
Disclosure Schedule:
(a) Company and each of its Subsidiaries, and each affiliated group
(within the meaning of Section 1504 of the Code) of which Company or any of its
Subsidiaries is or has been a member, has timely filed (or has had timely filed
on its behalf) all material Tax Returns required by applicable law to be filed
by it, and all such material Tax Returns are true, correct and complete in all
material respects;
(b) Company and each of its Subsidiaries has timely paid (or has had
paid on its behalf) all Taxes shown as due on their respective Tax Returns;
(c) The federal income Tax Returns of Company have been examined and
settled with the Internal Revenue Service (the "Service") (or the applicable
statutes of limitation for the assessment of federal income Taxes for such
periods have expired) for all years through December 31, 1995;
(d) There are no Liens for Taxes other than Permitted Liens on any of
the assets of Company or its Subsidiaries;
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(e) Company and its Subsidiaries have complied in all material respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes;
(f) None of Company or its Subsidiaries is a party to any tax
allocation, tax sharing, tax indemnity or similar agreement (whether or not in
writing), arrangement or practice with respect to Taxes (including any adverse
pricing agreement, closing agreement or other agreement relating to Taxes with
any taxing authority), except among themselves;
(g) No federal, state, local or foreign audits or administrative
proceedings are presently pending with regard to a material amount of Taxes or a
material Tax Return of Company or its Subsidiaries, and none of them has
received a written notice or has any knowledge of any proposed audit or
proceeding;
(h) With respect to any period for which Tax Returns have not yet been
filed or for which Taxes are not yet due and payable, Company and its
Subsidiaries have made due and sufficient accruals for such Taxes in their
respective books and records and financial statements; and
(i) No payment which Company or its Subsidiaries is obligated to pay to
any current or former director, officer, employee or independent contractor
pursuant to the terms of an employment agreement, severance agreement or
otherwise will constitute an excess parachute payment as defined in Section 280G
of the Code or will be non-deductible pursuant to Section 162(m) of the Code.
"Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, goods and services, service use, license, value added, capital,
net worth, payroll, profits, franchise, transfer and recording taxes, fees and
charges, and any other taxes, assessment or similar charges imposed by the
Service or any other taxing authority (whether domestic or foreign, including
any state, county, local or foreign government or any subdivision or taxing
agency thereof (including a United States possession)) (a "Taxing Authority"),
whether computed on a separate, consolidated, unitary, combined or any other
basis; and such term shall include any interest, whether paid or received,
fines, penalties or additional amounts, and any joint, several and/or transferee
liabilities, attributable to, or imposed upon, or with respect to, any such
taxes, charges, fees, levies or other assessments. "Tax Return" shall mean any
report, return, document, declaration or other information or filing required to
be supplied to any Taxing Authority in any jurisdiction (foreign or domestic)
with respect to Taxes, including information returns, any documents with respect
to or accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.
SECTION 3.14 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except as set forth in Section 3.14(a) of the Company Disclosure
Schedule, there are no employee benefit plans (including any plans for the
benefit of directors or former directors), arrangements, practices, contracts or
agreements (including employment agreements and severance agreements, incentive
compensation, bonus, stock option, stock appreciation rights and stock purchase
plans) of any type (including plans described in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not
subject to ERISA), maintained by Company, any of its Subsidiaries or any trade
or business, whether or not incorporated (an "ERISA Affiliate"), that together
with Company would be deemed a "controlled group" within the meaning of Section
4001(a)(14) of ERISA, or with respect to which Company or any of its
Subsidiaries has or may have a liability (the "Company Benefit Plans"). Except
as disclosed in Section 3.14(a) of the Company Disclosure Schedule (or as
otherwise permitted by this Agreement): (1) neither Company nor any ERISA
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Affiliate has any formal plan or commitment, whether legally binding or not, to
create any additional Company Benefit Plan or materially modify or change any
existing Company Benefit Plan that would affect any employee or terminated
employee of Company or any ERISA Affiliate; and (2) since September 30, 2000,
there has been no material change, amendment, modification to, or adoption of,
any Company Benefit Plan. Company has made available, or has caused to be made
available, to Parent (i) current, accurate and complete copies of all documents
embodying each Company Benefit Plan, including all amendments thereto, written
interpretations thereof and trust or funding agreements with respect thereto;
(ii) the two most recent annual actuarial valuations, if any, prepared for each
Company Benefit Plan; (iii) the two most recent annual reports (Series 5500 and
all schedules thereto), if any, required under ERISA in connection with each
Company Benefit Plan or related trust; (iv) a statement of alternative form of
compliance pursuant to Department of Labor Regulation ss. 2520.104-23, if any,
filed for each Company Benefit Plan that is an "employee pension benefit plan"
as defined in Section 3(2) of ERISA for a select group of management or highly
compensated employees; (v) each material communication received by or furnished
since January 1, 1996 to Company or any ERISA Affiliate from the Service,
Pension Benefit Guaranty Corporation, the Department of Labor or any other
Governmental Authority with respect to each Company Benefit Plan, including the
most recent determination letter received from the Service, if any, for each
Company Benefit Plan and related trust which is intended to satisfy the
requirements of Section 401(a) of the Code; (vi) if the Company Benefit Plan is
funded, the most recent annual and periodic accounting of such Company Benefit
Plan assets; (vii) the most recent summary plan description together with the
most recent summary of material modifications, if any, required under ERISA with
respect to each Company Benefit Plan; and (viii) all summary plan descriptions
and all other material written communications distributed to employees since
January 1, 1996 relating to any Company Benefit Plan.
(b) With respect to each Company Benefit Plan, except as specifically
disclosed in Section 3.14(b) of the Company Disclosure Schedule: (i) if intended
to qualify under Section 401(a) of the Code, such plan so qualifies, and since
its inception has been so qualified, and a determination letter has been issued
by the Service to the effect that each such Company Benefit Plan is so qualified
and that each trust forming a part of any such Company Benefit Plan is exempt
from taxation under Section 501(a) of the Code; (ii) such plan has been
administered in compliance in all material respects with its terms and
applicable law; (iii) no non-exempt prohibited transaction within the meaning of
Section 406 of ERISA has occurred; (iv) no Lien imposed under the Code or ERISA
exists; (v) all contributions and premiums due (including any extensions for
such contributions and premiums) with respect to all periods prior to the
Effective Time (on a pro rata basis consistent with past practice, where
otherwise accrued at year-end) have been or will be paid in full prior to the
Effective Time or adequately reserved for in Company's financial statements; and
(vi) there are no actions, proceedings, arbitrations, suits or claims pending
or, to the knowledge of Company, threatened (other than routine claims for
benefits) against Company or any ERISA Affiliate or any administrator, trustee
or other fiduciary of any Company Benefit Plan.
(c) Except as specifically disclosed in Section 3.14(c) of the Company
Disclosure Schedule, neither Company nor any ERISA Affiliate has incurred any
liability, direct or indirect, contingent or otherwise, under Title IV of ERISA
(including Sections 4063-4064 and 4069 of ERISA) or Section 302 of ERISA or
Section 412 of the Code that has not been satisfied in full prior to the
Effective Time except for any such liability that has been reflected on the
Company Balance Sheet. No Company Benefit Plan is subject to Section 412 of the
Code, Section 302 of ERISA or Title IV of ERISA.
(d) With respect to each Company Benefit Plan that is a "welfare plan"
(as defined in Section 3(l) of ERISA), except as specifically disclosed in
Section 3.14(d) of the Company Disclosure Schedule, no such plan provides
medical or death benefits with respect to current or former employees (and their
beneficiaries and dependents) of Company or any of its Subsidiaries beyond their
termination of employment, other than as may be required under Part 6 of Title I
of ERISA.
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(e) Except with respect to payments under the agreements and programs
specified in Section 3.14(e) of the Company Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will not entitle
any individual to severance pay or any tax "gross-up" payments with respect to
the imposition of any tax pursuant to Section 4999 of the Code or accelerate the
time of payment or vesting, or increase the amount, of compensation or benefits
due to any individual with respect to any Company Benefit Plan.
(f) Except as disclosed in Schedule 3.14(f) of the Company Disclosure
Schedule, none of Company, the ERISA Affiliates or any of their respective
predecessors has ever contributed to, contributes to, has ever been required to
contribute to, or otherwise participated in or participates in or in any way,
directly or indirectly, has any liability with respect to any "multiemployer
plan" (within the meaning of Section (3)(37) or 4001(a)(3) of ERISA or Section
414(f) of the Code) or any single employer pension plan (within the meaning of
Section 4001(a)(15) of ERISA) which is subject to Sections 4063 and 4064 of
ERISA. Company and each ERISA Affiliate has complied in all material respects
with the requirements of Section 4980B of the Code and Title I, Subtitle B, Part
6 of ERISA. Each Company Benefit Plan may be unilaterally terminated and/or
amended by Company at any time without damage or penalty. Neither Company nor
any ERISA Affiliate has any unfunded liabilities pursuant to any Company Benefit
Plan that is not intended to be qualified under Section 401(a) of the Code for
which due and sufficient accruals have not been made in their respective books
and records and financial statements.
(g) Neither Company nor any of its Subsidiaries is a party to any
collective bargaining agreement. Except as would not, individually or in the
aggregate, have a Material Adverse Effect on Company, (i) there is no labor
strike, slowdown or work stoppage or lockout against Company or any of its
Subsidiaries and (ii) there is no unfair labor practice charge or complaint
against or pending before the National Labor Relations Board. Except as set
forth on Section 3.14(g) of the Company Disclosure Schedule, there is no
representation, claim or petition pending before the National Labor Relations
Board and, to the knowledge of Company, no concerted effort relating to
representation exists with respect to the employees of Company or any of its
Subsidiaries. Neither Company nor any Subsidiary has instituted any general
"freeze" of, or delayed or deferred in any material respect the grant of, any
cost-of-living or other salary adjustments for any of its employees.
SECTION 3.15 COMPLIANCE WITH LAWS. Company and its Subsidiaries are in
compliance with all applicable statutes, laws, ordinances, regulations, rules,
judgments, decrees and orders of any Governmental Authority applicable to their
respective businesses or operations, except for instances of noncompliance that,
individually or in the aggregate, would not have a Material Adverse Effect on
Company.
SECTION 3.16 LICENSES AND PERMITS. Each of Company and its Subsidiaries
has in effect all Federal, state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices, permits
and rights ("Permits") necessary for it to own, lease or operate its properties
and assets and to carry on its business as now conducted, and there has occurred
no default under any such Permit, except where the absence of or defaults under
any such Permits, individually or in the aggregate, would not have a Material
Adverse Effect on Company. No Permit is subject to revocation or forfeiture by
virtue of any existing circumstances, there is no litigation pending or, to the
knowledge of Company, threatened to modify or revoke any Permit, and no Permit
is subject to any outstanding order, decree, judgment, stipulation, or, to the
knowledge of Company, investigation that would reasonably be likely to affect
such Permit, where the effect of the foregoing, individually or in the
aggregate, would have a Material Adverse Effect on Company.
SECTION 3.17 NO DEFAULT. Each Company Agreement is a valid, binding and
enforceable obligation of Company and, to the knowledge of Company, the other
party thereto, and in full force and
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effect, except where the failure to be valid, binding and enforceable and in
full force and effect would not, individually or in the aggregate, have a
Material Adverse Effect on Company. None of Company or any of its Subsidiaries
is in default or violation of any term, condition or provision of (i) its
respective articles of incorporation or bylaws or similar organizational
documents or (ii) except as disclosed in Section 3.17 of the Company Disclosure
Schedule, any Company Agreement, except in the case of this clause (ii) for
defaults or violations that, individually or in the aggregate, have not had or
would not reasonably be expected to have a Material Adverse Effect on Company.
SECTION 3.18 FINDERS' FEES. Except for First Union Securities, Inc.
("Company Financial Advisor"), Company has not engaged any investment banker,
broker, finder, other intermediary or other person which would be entitled to
any brokerage, finder's or similar fee or commission from Company or any of its
Subsidiaries in connection with the transactions contemplated by this Agreement.
SECTION 3.19 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Schedule 3.19 of the Company Disclosure
Schedule or as disclosed in the Company SEC Documents filed prior to the date
hereof:
(i) no notice, notification, demand, request for information,
citation, summons or order has been received by, no complaint has been
filed against, no penalty has been assessed against, and no
investigation, action, claim, suit, proceeding or review is pending or,
to the knowledge of Company, threatened by any person or Governmental
Authority against, Company or any of its Subsidiaries with respect to
any matters relating to or arising out of any Environmental Law which,
individually or in the aggregate, would have a Material Adverse Effect
on Company;
(ii) no Hazardous Substance has been discharged, disposed of,
dumped, injected, pumped, deposited, spilled, leaked, emitted or
released at, on or under any property now or previously owned, leased
or operated by Company or any of its Subsidiaries, or to the knowledge
of Company, on any adjacent properties, which circumstance,
individually or in the aggregate, would have a Material Adverse Effect
on Company; and
(iii) there are no Environmental Liabilities that,
individually or in the aggregate, have had or would have a Material
Adverse Effect on Company.
(b) For purposes of this Section, the following terms shall have the
meanings set forth below:
(i) "Environmental Laws" means any and all federal, state,
local and foreign law (including common law), treaty, judicial
decision, regulation, rule, judgment, order, decree, injunction,
permit, or governmental restrictions or any agreement with any
Governmental Authority or other third party, relating to human health
and safety, the environment or to pollutants, contaminants, wastes or
chemicals or toxic, radioactive, ignitable, corrosive, reactive or
otherwise Hazardous Substances, wastes or materials;
(ii) "Environmental Liabilities" means any and all liabilities
of or relating to Company or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, which (A) arise under or relate to matters
covered by Environmental Laws and (B) arise from actions occurring or
conditions existing on or prior to the Effective Time; and
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(iii) "Hazardous Substances" means any pollutant, contaminant,
waste or chemical or any toxic, radioactive, corrosive, reactive or
otherwise hazardous substance, waste or material, or any substance
having any constituent elements displaying any of the foregoing
characteristics, including, without limitation, petroleum, its
derivatives, by-products and other hydrocarbons, or any substance,
waste or material regulated under any Environmental Laws.
(c) Company has made available to Parent each written environmental
investigation, study, audit, test, review or other analysis conducted since
January 1, 1995 of which Company has knowledge and possession in relation to the
current or prior business of Company and its Subsidiaries or any property or
facility now or previously owned or leased by Company or any Subsidiary.
SECTION 3.20 TITLE TO AND CONDITION OF ASSETS. Company or one of its
Subsidiaries (a) has good and marketable title to or a valid leasehold interest
under a capitalized lease in all assets recorded on the Company Balance Sheet,
free and clear of all Liens other than Permitted Liens, except for assets
disposed of in the ordinary course of business consistent with past practice
since such date, and (b) has a valid leasehold or other interest in all other
assets used by it in its business, except in the case of clauses (a) or (b) of
this SECTION 3.20 for exceptions to the foregoing that would not, individually
or in the aggregate, have a Material Adverse Effect on Company. All of the
improvements on real property and fixtures, machinery, equipment and other
tangible personal property and assets owned or used by Company or its
Subsidiaries are in good condition and repair, except for ordinary wear and tear
not caused by neglect, and are usable in the ordinary course of business, except
for any matter otherwise covered by this sentence which would not, individually
or in the aggregate, have a Material Adverse Effect on Company.
SECTION 3.21 MATERIAL CONTRACTS. As of the date hereof, except as set
forth in the Company SEC Documents filed prior to the date hereof or in Section
3.21 of the Company Disclosure Schedule, neither Company nor any of its
Subsidiaries is a party to or bound by (a) any material contracts (as such term
is defined in Item 601(b)(10) of Regulation S-K of the SEC), (b) any agreement
or other instrument for borrowed money or guarantees thereof, (c) any agreement,
commitment, arrangement or other instrument (other than with a customer of
Company or any of its Subsidiaries) which involves the payment or receipt of
more than $500,000 per annum, (d) any agreement, commitment, arrangement or
other instrument with a customer of Company or any of its Subsidiaries which
involves the payment or receipt of more than $1,000,000 per annum or (e) any
non-competition agreements or any other agreements or arrangements that limit or
otherwise restrict Company or any of its Subsidiaries or any successor thereto
from engaging or competing in any line of business or in any geographic area
(collectively, the "Material Company Agreements").
SECTION 3.22 ABSENCE OF CERTAIN BUSINESS PRACTICES. None of Company,
any of its Subsidiaries or any directors, officers, agents or employees of
Company or any of its Subsidiaries has (i) used any funds of Company or any of
its Subsidiaries for unlawful contributions, gifts, entertainment or other
unlawful expenses related to political activity, (ii) made any unlawful payment
on behalf of Company or any of its Subsidiaries 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 on behalf of Company
or any of its Subsidiaries.
SECTION 3.23 OPINION OF FINANCIAL ADVISOR. Company has received the
opinion of Company Financial Advisor to the effect that, as of the date of such
opinion, the Merger Consideration to be received by the holders of shares of
Company Common Stock in connection with the Merger is fair to such holders from
a financial point of view.
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SECTION 3.24 TAKEOVER STATUTES. Articles 9 and 9A of the NCBCA are not
applicable to the Merger or the other transactions contemplated by this
Agreement. To Company's knowledge, no "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States (each, a "Takeover Statute")
applicable to Company or any of its Subsidiaries is applicable to the Merger or
the other transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ADVANTAGE AND PARENT
Advantage and Parent represent and warrant to Company that:
SECTION 4.1 ORGANIZATION AND POWER. Each of Advantage, Parent and
Merger Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, and has the requisite corporate or other power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. Advantage owns all the fully-diluted equity of Advantage Management
Group, Inc., an Ohio corporation.
SECTION 4.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by Advantage, Parent and Merger Subsidiary of this Agreement and the
consummation by Advantage, Parent and Merger Subsidiary of the transactions
contemplated hereby are within the corporate powers of Advantage, Parent and
Merger Subsidiary and have been duly authorized by all necessary corporate
action, including by resolution of the Board of Directors of Advantage and
Parent. No vote of any class or series of Advantage's or Parent's capital stock
is necessary in connection with the execution of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Advantage, Parent and Merger Subsidiary
and constitutes a valid and binding agreement of each of Advantage, Parent and
Merger Subsidiary, enforceable against Advantage, Parent and Merger Subsidiary,
as applicable, in accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally from time to time in effect and to
general principles of equity, including concepts of materiality, reasonableness,
good faith and fair dealing, regardless of whether in a proceeding at equity or
at law).
SECTION 4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Advantage, Parent and Merger Subsidiary of this Agreement, and
the consummation by Advantage, Parent and Merger Subsidiary of the transactions
contemplated hereby, require no action by or in respect of, or filing with, any
Governmental Authority other than: (a) the filing of articles of merger with
respect to the Merger by the Secretary of State of the State of North Carolina;
(b) compliance with any applicable requirements of the HSR Act and similar state
antitrust statutes; (c) compliance with any applicable requirements of the 1934
Act and similar state securities laws; (d) those that may be required solely by
reason of Company's (as opposed to any other third party's) participation in the
transactions contemplated by this Agreement; (e) actions or filings which, if
not taken or made, would not, individually or in the aggregate, have a Material
Adverse Effect on Advantage or Parent; and (f) filings and notices not required
to be made or given until after the Effective Time.
SECTION 4.4 NON-CONTRAVENTION. The execution, delivery and performance
by Advantage, Parent and Merger Subsidiary of this Agreement do not, and the
consummation by Advantage, Parent and Merger Subsidiary of the transactions
contemplated hereby will not: (a) contravene or conflict with the articles of
incorporation, bylaws or similar organizational documents of Advantage, Parent,
Merger
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Subsidiary or any of their respective Subsidiaries; (b) assuming compliance with
the matters referred to in SECTION 4.3, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to Advantage, Parent or
Merger Subsidiary; (c) require any consent or other action by any person under,
constitute a default (or an event which with notice, the lapse of time or both
would become a default) under or result in the triggering of any payment or
other obligations under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of Advantage, Parent, Merger Subsidiary
or any of their respective Subsidiaries or to a loss of any benefit to which
Advantage, Parent, Merger Subsidiary or any of their respective Subsidiaries is
entitled under any provision of any agreement, contract, commitment,
arrangement, lease, undertaking or other instrument binding upon Advantage,
Parent, Merger Subsidiary or any of their respective Subsidiaries or any
license, franchise, permit or other similar authorization held by Advantage,
Parent, Merger Subsidiary or any of their respective Subsidiaries; or (d) result
in the creation or imposition of any Lien on any asset of Advantage, Parent,
Merger Subsidiary or any of their respective Subsidiaries, except for such
contraventions, conflicts or violations referred to in clause (b) or failures to
obtain any consents or other actions or any defaults, payments, obligations,
rights of termination, cancellation or acceleration, losses or Liens referred to
in clause (c) or (d) that would not, individually or in the aggregate, have a
Material Adverse Effect on Advantage or Parent.
SECTION 4.5 LITIGATION. There is no action, suit, investigation or
proceeding pending or, to the knowledge of Advantage or Parent, threatened
against Advantage, Parent, Merger Subsidiary or any of their respective assets
or properties to prohibit or restrain the ability of Advantage, Parent or Merger
Subsidiary to enter into this Agreement or consummate the transactions
contemplated hereby.
SECTION 4.6 INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Advantage, Parent and Merger Subsidiary for inclusion or
incorporation by reference in any documents filed or to be filed with the SEC in
connection with the transactions contemplated hereby, including the Company
Proxy Statement, will, at the respective times such documents are filed and, in
the case of the Company Proxy Statement, the date the Company Proxy Statement or
any amendment or supplement is first mailed to shareholders of Company and at
the time such shareholders vote on the adoption and approval of this Agreement,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. No representation or
warranty is made by Advantage or Parent with respect to statements made or
incorporated by reference in the Company Proxy Statement based on information
supplied by Company specifically for inclusion or incorporation by reference in
the Company Proxy Statement.
SECTION 4.7 FINANCING. Advantage has delivered to Company true and
correct copies of signed letters with respect to the financing (the "Financing
Letters") obtained by it in connection with the transactions contemplated
hereby. Assuming full funding under the Financing Letters, the aggregate
proceeds under the Financing Letters will provide Parent with sufficient funds
to effect all the transactions contemplated hereby. The Financing Letters are in
full force and effect, and Advantage is not aware of any fact, occurrence or
condition that would cause the Financing Letters to be terminated or ineffective
or any of the conditions therein not to be met.
ARTICLE V
COVENANTS
SECTION 5.1 CONDUCT OF COMPANY. Company covenants and agrees that, from
the date hereof until the Effective Time, except as expressly provided otherwise
in this Agreement, including
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Sections 3.10 and 5.1 of the Company Disclosure Schedule, or as reasonably
necessary for Company to fulfill its obligations hereunder, Company and its
Subsidiaries shall conduct their business in the ordinary course consistent with
past practice and shall use their reasonable best efforts to preserve intact
their business organizations and relationships with customers, suppliers,
creditors and business partners and shall use their reasonable best efforts to
keep available the services of their present officers and employees. Without
limiting the generality of the foregoing, from the date hereof until the
Effective Time, without the prior written approval of Parent (which approval
shall not be unreasonably withheld):
(a) Company will not adopt or propose any change in its articles of
incorporation or any change in its bylaws;
(b) Company will not, and will not permit any of its Subsidiaries to,
(i) adjust, 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 or (ii) adopt a plan or agreement
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of Company or any of its
Subsidiaries (other than a liquidation or dissolution of any Subsidiary or a
merger or consolidation between wholly- owned Subsidiaries);
(c) Company will not, and will not permit any of its Subsidiaries to,
make any investment in or acquisition of any business of any person or any
material amount of assets, except for (i) acquisitions for cash not to exceed
$250,000 in the aggregate for all acquisitions and (ii) without duplication, any
capital expenditure permitted by SECTION 5.1(J);
(d) Company will not, and will not permit any of its Subsidiaries to,
sell, lease, license, close, shut down or otherwise dispose of any assets,
except sales, leases, licenses, closings, shutdowns or other dispositions of
assets in the ordinary course of business consistent with past practice,
including without limitation the disposition of tractors and trailers in
connection with the acquisition of replacement tractors and trailers;
(e) Company will not, and will not permit any of its Subsidiaries to,
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock other than (i) cash
dividends payable by Company in an amount not in excess of $0.0775 per share per
calendar quarter and (ii) dividends paid by any wholly-owned Subsidiary of
Company to Company or any other wholly-owned Subsidiary of Company;
(f) Company will not, and will not permit any of its Subsidiaries to,
issue, sell, transfer, pledge, dispose of or encumber any additional shares of,
or securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class or series of Company or its Subsidiaries, other than (i) issuances of
Company Common Stock pursuant to the exercise of stock-based awards or options
(including under the plan described in SECTION 3.5(A)) outstanding on the date
hereof, and (ii) issuances by any Subsidiary of Company to Company or any other
wholly-owned Subsidiary of Company;
(g) Company will not, and will not permit any of its Subsidiaries to,
redeem, purchase or otherwise acquire, directly or indirectly, any of Company's
capital stock, other than the acquisition of any such stock in payment of the
purchase price or any Tax-related obligations upon exercise of stock-based
awards or options (including under the plan described in SECTION 3.5(A));
(h) Company will not, and will not permit any of its Subsidiaries to,
move the location, close, shut down or otherwise eliminate Company's
headquarters;
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(i) Company will not, and will not permit any of its Subsidiaries to,
(i) except in connection with investments or acquisitions permitted by SECTION
5.1(C) or SECTION 5.1(J), (A) enter into (or commit to enter into) any new lease
(except pursuant to commitments for such lease entered into as of the date
hereof) or (B) purchase or acquire or enter into any agreement to purchase or
acquire any real estate (except pursuant to commitments existing as of the date
hereof that are disclosed in Section 5.1(i) of the Company Disclosure Schedule),
or (ii) except in the ordinary course of business or as otherwise permitted by
this SECTION 5.1, (A) enter into any contract or agreement, (B) modify, amend or
terminate any Material Company Agreement or (C) waive, release or assign any
material rights or claims;
(j) Company will not, and will not permit any of its Subsidiaries to,
make any capital expenditures except those committed to as of the date hereof,
which aggregate no more than $5,000,000;
(k) Company will not, and will not permit any of its Subsidiaries to,
(i) incur or assume any indebtedness for borrowed money other than under
existing credit facilities (or any renewals, replacements or extensions that do
not increase the aggregate commitments thereunder) in the ordinary course of
business consistent with past practice, (ii) guarantee, endorse, incur or assume
(whether directly, contingently or otherwise) the obligations of any other
person (other than any wholly-owned Subsidiary of Company), other than in the
ordinary course of business consistent with past practice, or (iii) make any
loan, advance or capital contribution to or investment in any person other than
(a) any acquisition permitted by SECTION 5.1(C) or SECTION 5.1(J) or (ii) loans,
advances, capital contributions or investment to any Subsidiaries or consistent
with past practice;
(l) Company will not, and will not permit any of its Subsidiaries to,
change any tax election, change any annual tax accounting period, change any
method of tax accounting, file any amended Tax Return, enter into any closing
agreement, settle any Tax claim or assessment, surrender any right to claim a
Tax refund or consent to any extension or waiver (other than a reasonable
extension or waiver) of the limitations period applicable to any Tax claim or
assessment, if any such action in this clause (l) would have the effect of
materially increasing the aggregate Tax liability or materially reducing the
aggregate tax assets of Company and its Subsidiaries, taken as a whole;
(m) Company will not, and will not permit any of its Subsidiaries to,
(i) increase the compensation or benefits of any director, officer or employee,
except for normal increases in the ordinary course of business consistent with
past practice or as required under applicable law or existing agreements or
commitments, (ii) accelerate the vesting, funding or payment of any compensation
payment or benefit except as required by existing agreements or commitments or
(iii) hire any employee with an annual compensation level in excess of $100,000,
except for employees who are not executive officers and are hired on an
"at-will" basis in the ordinary course of business consistent with past
practices;
(n) Company will not, and will not permit any of its Subsidiaries to,
(i) amend any existing Company Benefit Plan other than as required by law or
(ii) enter into or adopt any new employee benefit plans (including any plans for
the benefit of current or former employees or directors), arrangements,
practices, contracts or agreements (including employment agreements and
severance agreements, incentive compensation, bonus, stock option, stock
appreciation rights and stock purchase plans) of any type (including plans
described in Section 3(3) of ERISA), other than as permitted by SECTION 5.1(M);
(o) Company will not, and will not permit any of its Subsidiaries to,
pay, discharge, settle or satisfy any claims, litigation, arbitration,
liabilities or other controversies (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements (or
the notes thereto) included in the Company SEC Documents or incurred in
accordance with SECTION 3.11,
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or waive any benefits of, or agree to modify in any respect, any
confidentiality, standstill or similar agreements to which Company or any of its
Subsidiaries is a party;
(p) Company will not, and will not permit any of its Subsidiaries to,
accelerate any income, postpone any expense or reverse any reserve, except on a
basis consistent with past practice or as otherwise required by law;
(q) Company will not, and will not permit any of its Subsidiaries to,
revalue in any material respect the assets of Company or any of its
Subsidiaries, including without limitation writing down the value of any assets
or inventory or writing off notes or accounts receivable, other than as required
by GAAP;
(r) Company will not, and will not permit any of its Subsidiaries to,
voluntarily permit any material insurance policy naming Company or any
Subsidiary as a beneficiary or loss payable payee to be canceled or terminated;
(s) Company will not, and will not permit any of its Subsidiaries to,
take, or agree to take, any action that would materially impair the ability of
Company, Parent or Merger Subsidiary to consummate the Merger in accordance with
the terms hereof or materially delay such consummation, other than as permitted
by this Agreement;
(t) Company will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing; and
(u) Company will not, and will not permit any of its Subsidiaries to,
take or agree or commit to take any action that would make any representation
and warranty of Company hereunder inaccurate in any respect at, or as of any
time prior to, the Effective Time (or, in the case of representations and
warranties that are not qualified by reference to the term "Material Adverse
Effect" and/or derivatives or variations of such term, inaccurate in any
material respect at, or as of any time prior to, the Effective Time).
SECTION 5.2 SHAREHOLDER MEETING, PROXY MATERIALS.
(a) Company shall cause a meeting of its shareholders (the "Company
Shareholder Meeting") to be duly called and held as soon as reasonably
practicable (subject to the receipt of all necessary approvals) after the date
of this Agreement for the purpose of voting on the approval and adoption of this
Agreement and the Plan of Merger (the "Company Shareholder Approval"). Except as
provided in the next sentence, the Company Board shall recommend approval and
adoption of this Agreement and the Plan of Merger by Company's shareholders. The
Company Board shall be permitted to (i) not recommend to Company's shareholders
that they give the Company Shareholder Approval or (ii) withdraw or modify in a
manner adverse to Parent its recommendation to Company's shareholders that they
give the Company Shareholder Approval, only if and to the extent that the
Company Board, upon receipt of a Superior Proposal, and after consultation with
and after taking into account the advice of outside legal counsel, determines in
its good faith judgment that such action is necessary for the Company Board to
comply with its duties to Company's shareholders under applicable law.
(b) In connection with the Company Shareholder Meeting, Company shall,
as soon as practicable following the execution of this Agreement, prepare and
file with the SEC a preliminary Company Proxy Statement and use its reasonable
best efforts to respond to any comments of the SEC and to cause the Company
Proxy Statement to be mailed to Company's shareholders as promptly as
practicable after responding to all such comments to the satisfaction of the
SEC. Company shall give
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Parent and its counsel the opportunity to review the Company Proxy Statement and
all amendments and supplements thereto prior to their being filed with the SEC.
Company will notify Parent promptly of the receipt of any comments from the SEC
or its staff and of any request by the SEC or its staff for amendments or
supplements to the Company Proxy Statement or for additional information and
will supply Parent with copies of all correspondence between Company or any of
its representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Company Proxy Statement or the Merger. If at any time
prior to the Company Shareholder Meeting there shall occur any event that should
be set forth in an amendment or supplement to the Company Proxy Statement,
Company will promptly prepare and mail to its shareholders such an amendment or
supplement. Company will not mail the Proxy Statement, or any amendment or
supplement thereto, to which Parent reasonably objects after being afforded the
opportunity to review the same if such objection reasonably relates to the
accuracy or completeness in all material respects of the disclosure set forth
therein. Parent and Merger Subsidiary shall cooperate with Company in the
preparation of the Company Proxy Statement and in responding to comments of the
SEC, and Parent and Merger Subsidiary shall promptly notify Company if any
information supplied by them for inclusion in the Company Proxy Statement shall
have become false or misleading, and shall cooperate with Company in
disseminating the Company Proxy Statement, as so amended or supplemented, to
correct any such false or misleading information.
SECTION 5.3 ACCESS TO INFORMATION. From the date hereof until the
Effective Time and subject to applicable law, Company will give Parent, its
counsel, financial advisors, auditors and other authorized representatives
(including without limitation Parent's lenders (and such lenders' counsel))
reasonable access during normal business hours to the offices, properties, books
and records of Company and its Subsidiaries, will furnish to Parent, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information as such persons may
reasonably request and will instruct Company's employees, auditors, counsel and
financial advisors to cooperate with Parent in its investigation of the business
of Company and its Subsidiaries. The foregoing information shall be held in
confidence to the extent required by, and in accordance with, the provisions of
the letter agreement addressed to the Company Financial Advisor executed by
Advantage or its Subsidiaries as to confidentiality and other matters (the
"Advantage Confidentiality Agreement"). Advantage, Parent and Merger Subsidiary
hereby acknowledge and agree that they and their respective Subsidiaries and
affiliates are bound by and subject to the provisions of the Advantage
Confidentiality Agreement. No investigation or information furnished pursuant to
this SECTION 5.3 shall affect any representations or warranties made by Company
in this Agreement.
SECTION 5.4 NO SOLICITATION. From the date hereof until the termination
hereof, Company will not, and will cause its Subsidiaries and the officers,
directors, employees, investment bankers, consultants and other agents of
Company and its Subsidiaries not to, directly or indirectly, take any action to
solicit, initiate, encourage or facilitate the making of any Acquisition
Proposal or any inquiry with respect thereto or engage in discussions or
negotiations with any person with respect thereto, or disclose any nonpublic
information relating to Company or any of its Subsidiaries or afford access to
the properties, books or records of Company or any of its Subsidiaries to, any
person that has made any Acquisition Proposal. Notwithstanding the foregoing,
nothing contained in this SECTION 5.4 shall prevent Company from furnishing
nonpublic information to, affording access to properties, books and records or
entering into discussions or negotiations with, any person in connection with a
bona fide Acquisition Proposal received from such person if (i) Company has
complied with the terms of this SECTION 5.4, (ii) the Company Board determines
in good faith that such Acquisition Proposal could lead to a Superior Proposal
and, after consultation with and taking into account the advice of outside legal
counsel, determines in its good faith judgment that such action is necessary for
the Company Board to comply with its duties to Company's shareholders under
applicable law, (iii) prior to furnishing nonpublic information to, affording
access to properties, books and records to or entering into discussions or
negotiations with, such person, Company receives from such person an executed
confidentiality
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agreement with terms no less favorable to Company than those contained in the
Advantage Confidentiality Agreement (including the standstill provisions) and
(iv) contemporaneous with furnishing any such information to such person or
group, Company furnishes such information to Parent (to the extent such
information has not been previously furnished by Company to Parent); provided,
further, that nothing contained in this Agreement shall prevent the Company
Board from complying with Rule 14e-2 or 14d-9 under the 1934 Act with regard to
an Acquisition Proposal. Company will promptly (but in any event within 48
hours) notify (which notice shall be provided orally and in writing and shall
identify the person making such Acquisition Proposal) Parent after receipt of
any Acquisition Proposal or any amendment or change in any previously received
Acquisition Proposal, or any request for nonpublic information relating to
Company or any of its Subsidiaries or for access to the properties, books or
records of Company or any of its Subsidiaries by any person that is considering
making, or has made, an Acquisition Proposal, and shall promptly provide copies
of any proposals, indications of interest, draft agreements and correspondence
relating to such Acquisition Proposal. Company will, and will cause the other
persons listed in the first sentence of this SECTION 5.4 to, immediately cease
and cause to be terminated all discussions and negotiations, if any, that have
taken place prior to the date hereof with any parties with respect to any
Acquisition Proposal. Subject to compliance with their duties, as determined in
good faith by the Company Board, and subject to the exceptions set forth in this
SECTION 5.4, the Company Board shall not authorize Company to waive any
standstill or confidentiality provisions contained in agreements to which
Company is a party or to which Company is subject. Without limiting the
generality of the foregoing, the parties hereto understand and agree that any
violation of the restrictions of this SECTION 5.4 by any executive officer,
director, investment banker, consultant or other independent agent of Company or
its Subsidiaries shall be deemed to be a breach of this SECTION 5.4 by Company.
For purposes of this Agreement, "Acquisition Proposal" means any offer
or proposal for, or any indication of interest in, (i) a merger or other
business combination involving Company or any of its Subsidiaries, (ii) the
acquisition of any equity interest in, or a substantial portion of the assets
of, Company or any of its Subsidiaries, other than open market purchases of, or
an offer for, a bona fide de minimus equity interest, or for an amount of assets
not material to Company and its Subsidiaries taken as a whole, that Company has
no reason to believe could lead to a change in control of Company or to the
acquisition of a substantial portion of the assets of Company and its
Subsidiaries or (iii) any similar transaction the effect of which would be
reasonably likely to prohibit, restrict or delay consummation of the Merger. For
purposes of this Agreement, "Superior Proposal" means any bona fide Acquisition
Proposal on terms that the Company Board determines in its good faith judgment
(after consultation with and taking into account the advice of a financial
advisor and taking into account all the terms and conditions of the Acquisition
Proposal, including any break-up fees, expense reimbursement provisions and
conditions to and timing of consummation) are more favorable to Company's
shareholders than this Agreement and the Merger taken as a whole, and for which
financing, to the extent required, is then fully committed or reasonably
determined to be available by the Company Board.
SECTION 5.5 NOTICE OF CERTAIN EVENTS.
(a) Company and Parent shall promptly notify each other of:
(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this
Agreement;
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(iii) any representation or warranty made by it contained in
this Agreement (disregarding all qualifications and exceptions
contained therein relating to materiality or Material Adverse Effect or
any similar standard or qualification) which becomes untrue or
incorrect in any respect that individually or in the aggregate (when
taken together with all other representations and warranties that are
untrue or incorrect) has had or would have a Material Adverse Effect on
the party giving such notice;
(iv) the failure by it to perform, or comply with, in any
material respect any of its obligations, covenants, or agreements
contained in this Agreement and such failure, either individually or in
the aggregate, has had or would have a Material Adverse Effect on the
party giving such notice; or
(v) Company obtaining knowledge of a material breach by
Parent, or Parent obtaining knowledge of a material breach by Company,
of their respective representations, warranties or covenants hereunder
of which the breaching party has not already given notice pursuant to
clauses (iii) or (iv) above.
(b) Company shall promptly notify Parent of:
(i) any notice of, or other communications relating to, a
default or event that, with notice or lapse of time or both, would
become a default, received by it or any of its Subsidiaries subsequent
to the date of this Agreement, under (1) any Material Company Agreement
or (2) any other Company Agreement if any such defaults, individually
or in the aggregate, have had or would have a Material Adverse Effect
on Company; and
(ii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or
involving or otherwise affecting Company or any of its Subsidiaries
which relate to the consummation of the transactions contemplated by
this Agreement.
(c) Parent shall promptly notify Company of:
(i) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or
involving or otherwise affecting Advantage, Parent or any of their
respective Subsidiaries which relate to the consummation of the
transactions contemplated by this Agreement; and
(ii) any fact, occurrence or condition that has caused or
would be reasonably likely to cause the Financing Letters to be
terminated or ineffective or any of the conditions contained therein
not to be met.
(d) No notification under this SECTION 5.5 shall affect the
representations, warranties or obligations of the parties or the conditions to
the obligations of the parties hereunder, or limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 5.6 REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions of this Agreement, each party
will use its reasonable best efforts in good faith 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 under
applicable laws and regulations to consummate the Merger and the other
transactions contemplated by
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this Agreement, including using reasonable best efforts to accomplish the
following: (i) the taking of all reasonable acts necessary to cause the
conditions to Closing to be satisfied, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Authorities and the making of all necessary registrations and filings (including
filings with Governmental Authorities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Authority, (iii) the obtaining of all
necessary consents, approvals or waivers from third parties (provided that if
obtaining any such consent, approval or waiver would require any action other
than the payment of a nominal amount, such action shall be subject to the
consent of Parent, not to be unreasonably withheld), (iv) 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 Authority vacated or reversed and (v)
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. Company shall give Parent the opportunity to participate, on an
advisory basis, in the defense of any shareholder litigation against Company
and/or its directors relating to the transactions contemplated by this
Agreement. Subject to the terms and conditions of this Agreement, each party
shall also refrain from taking, directly or indirectly, any action contrary or
inconsistent with the provisions of this Agreement, including action that would
impair such party's ability to consummate the Merger and the other transactions
contemplated hereby.
(b) In furtherance and not in limitation of the foregoing, each party
hereto agrees to make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act and any other applicable Antitrust Law with respect to
the transactions contemplated hereby as promptly as practicable after the date
hereof and to supply as promptly as practicable any additional information and
documentary material that may be requested pursuant to the HSR Act or any other
applicable Antitrust Law and to take all other actions reasonably necessary to
cause the expiration or termination of the applicable waiting periods under the
HSR Act and any other applicable Antitrust Law as soon as practicable. For
purposes of this Agreement, "Antitrust Law" means the Sherman Act, as amended,
the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, and all other Federal, state and foreign, if any, statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines and other
laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition.
(c) Each of Parent and Company shall, in connection with the efforts
referenced in SECTION 5.6(B) to obtain all requisite approvals and
authorizations for the transactions contemplated by this Agreement under the HSR
Act or any other applicable Antitrust Law, use its reasonable best efforts to
(i) cooperate in all respects with each other in connection with any filing or
submission and in connection with any investigation or other inquiry, including
any proceeding initiated by a private party; (ii) keep the other party informed
in all material respects of any material communication received by such party
from, or given by such party to, the Federal Trade Commission (the "FTC"), the
Antitrust Division of the Department of Justice (the "DOJ") or any other
Governmental Authority and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding any of
the transactions contemplated hereby; and (iii) unless prohibited by applicable
law, permit the other party to review any material communication given by it to,
and consult with each other in advance of any meeting or conference with, the
FTC, the DOJ or any such other Governmental Authority or, in connection with any
proceeding by a private party, with any other person, and to the extent
permitted by the FTC, the DOJ or such other applicable Governmental Authority or
other person, give the other party the opportunity to attend and participate in
such meetings and conferences.
(d) Nothing in this Agreement shall require any of Parent and its
Subsidiaries or Company and its Subsidiaries to sell, hold separate or otherwise
dispose of or conduct any portion of their business
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in a specified manner, or agree to sell, hold separate or otherwise dispose of
or conduct any portion of their business in a specified manner, or permit the
sale, holding separate or other disposition of, any assets of Parent, Company or
their respective Subsidiaries or the conduct of their business in a specified
manner, whether as a condition to obtaining any approval from a Governmental
Authority or any other person or for any other reason, if such sale, holding
separate or other disposition or the conduct of their business in a specified
manner would reasonably be expected to have a Material Adverse Effect on Parent
and its Subsidiaries (including the Surviving Corporation and its Subsidiaries),
taken together, after giving effect to the Merger.
SECTION 5.7 COOPERATION. Without limiting the generality of SECTION
5.6, the parties shall together, or pursuant to an allocation of responsibility
to be agreed between them, coordinate and cooperate (i) in connection with the
preparation of the Company Proxy Statement, (ii) in determining whether any
action by or in respect of, or filing with, any Governmental Authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement, and (iii) in
seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith or with the
Company Proxy Statement and seeking timely to obtain any such actions, consents,
approvals or waivers.
SECTION 5.8 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in
effect, the parties will consult with each other before issuing any press
release or making any SEC filing or other public statement (including any
broadly issued statement or announcement to employees) with respect to this
Agreement or the transactions contemplated hereby and, except as may be required
by applicable law, will not issue any such press release or make any such SEC
filing or other public statement prior to such consultation and providing the
other party with a reasonable opportunity to comment thereon.
SECTION 5.9 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 Company or Merger Subsidiary,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of Company or Merger Subsidiary, 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 of Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
SECTION 5.10 DIRECTOR AND OFFICER LIABILITY.
(a) Parent agrees that at all times after the Effective Time, it shall,
or shall cause the Surviving Corporation, its Subsidiaries and their respective
successors to, indemnify (subject to the provisions of SECTION 5.10(D)) each
person who is now, or has been at any time prior to the date hereof, an
employee, agent, director or officer of Company or of any of its Subsidiaries,
its successors and assigns (individually, an "Indemnified Party" and
collectively, the "Indemnified Parties"), with respect to any claim, liability,
loss, damage, judgment, fine, penalty, amount paid in settlement or compromise,
cost or expense (including reasonable fees and expenses of legal counsel),
against any Indemnified Party in his or her capacity as an employee, agent,
officer or director of Company or its Subsidiaries, whenever asserted or
claimed, based in whole or in part on, or arising in whole or in part out of,
the transactions contemplated by this Agreement, whether commenced, asserted or
claimed before or after the Effective Time, including liability arising under
the 1933 Act, the 1934 Act or state law. Notwithstanding the foregoing, Parent
shall not be required to indemnify any Indemnified Party for any liability or
expense incurred by such Indemnified Party on account of activities which were
at the time taken known or believed by such Indemnified Party to be clearly in
conflict with the best interests of Company. Parent's and the Surviving
Corporation's obligation under this SECTION 5.10(A) shall continue for a period
of six
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years following the Effective Time; provided, however, that if any claim is
asserted or any situation, proceeding or investigation commenced within such
six-year period, all rights to indemnification with respect thereto shall
continue until the final disposition thereof.
(b) Parent shall, or shall cause the Surviving Corporation to, maintain
in effect for not less than six years after the Effective Time the current
policies of directors' and officers' liability insurance maintained by Company
and its Subsidiaries on the date hereof (provided that Parent may substitute
therefor policies with reputable and financially sound carriers having at least
the same coverage and amounts thereof and containing terms and conditions which
are no less advantageous in the aggregate to the persons currently covered by
such policies as insured, except to the extent any provisions in such insurance
are no longer generally available in the market) with respect to facts or
circumstances occurring at or prior to the Effective Time; provided that if the
aggregate annual premiums for such insurance during such six-year period shall
exceed 250% of the per annum rate of the aggregate premium currently paid by
Company and its Subsidiaries for such insurance on the date of this Agreement
(which Company represents is no more than $80,000), then Parent shall cause the
Surviving Corporation to, and the Surviving Corporation shall, obtain as much
coverage as can reasonably be obtained at an annual premium equal to 250% of
such rate; and provided further that notwithstanding the foregoing, Parent may
satisfy its obligations under this SECTION 5.10(B) by purchasing a "tail" policy
under Company's existing directors' and officers' insurance policy that (i) has
an effective term of six years from the Effective Time, (ii) covers those
persons who are currently covered, or will be covered on or prior to the
Effective Time, by Company's directors' and officers' insurance policy in effect
on the date hereof for actions and omissions occurring on or prior to the
Effective Time and (iii) contains terms and conditions (including without
limitation coverage amounts) that are at least as favorable in the aggregate as
the terms and conditions of Company's directors' and officers' insurance policy
in effect on the date hereof. Parent agrees to pay all expenses (including fees
and expenses of counsel) that may be incurred by any Indemnified Party in
successfully enforcing the indemnity or other obligations under this SECTION
5.10. The rights under this SECTION 5.10 are in addition to rights that an
Indemnified Party may have under the articles of incorporation, bylaws, or other
similar organizational documents of Company or any of its Subsidiaries or North
Carolina law. The rights under this SECTION 5.10 shall survive consummation of
the Merger and are expressly intended to benefit each Indemnified Party. Parent
agrees to cause the Surviving Corporation and any of its Subsidiaries (or their
successors) to maintain in effect, for a period of no less that the longer of
(i) six years following the Effective Time and (ii) the termination of any
applicable statute of limitations for any possible claims or causes of actions
against the Indemnified Parties, the provisions of the articles of incorporation
and bylaws of Company existing on the date hereof providing for exculpation or
indemnification of any Indemnified Parties (including with respect to facts or
circumstances occurring at or prior to the Effective Time and the advancement of
expenses incurred in the defense of any action or suit) to the fullest extent
permitted by law, and during such period the articles of incorporation and
bylaws of the Surviving Corporation shall not, unless required by applicable
law, be amended or modified to reduce the rights of indemnity or exculpation
afforded to the Indemnified Parties, or the ability of the Surviving Corporation
to indemnify them, nor to hinder, delay or make more difficult the exercise of
such rights of indemnity or exculpation or the ability to indemnify or
exculpate.
(c) Without limiting the rights of any Indemnified Party under SECTION
5.10(B), any Indemnified Party wishing to claim indemnification under SECTION
5.10(A) shall promptly notify the Surviving Corporation, upon learning of any
such claim, action, suit, proceeding or investigation, but the failure to so
notify shall not relieve Parent or the Surviving Corporation of any liability it
may have to such Indemnified Party if such failure does not materially prejudice
Parent or the Surviving Corporation. The Surviving Corporation may, at its own
expense: (i) participate in the defense of any claim, suit, action or
proceeding; or (ii) at any time during the course of any such claim, suit,
action or proceeding, assume the defense thereof, unless the Indemnified Parties
(or any of them) determine in good faith (after consultation with legal counsel)
that there is, under applicable standards of professional conduct, a
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conflict or any significant issue between the positions of Parent and any of
such Indemnified Parties, provided that the Surviving Corporation's counsel
shall be reasonably satisfactory to the Indemnified Parties. If the Surviving
Corporation assumes such defense, the Indemnified Parties shall have the right
(but not the obligation) to participate in the defense thereof and to employ
counsel, at their own expense, separate from the counsel employed by the
Surviving Corporation. Whether or not the Surviving Corporation chooses to
assume the defense of any such claim, suit, action or proceeding, the Surviving
Corporation and Parent shall cooperate in the defense thereof. If the Surviving
Corporation fails to so assume the defense thereof, the Indemnified Parties may
retain counsel reasonably satisfactory to the Surviving Corporation and the
Surviving Corporation shall pay the reasonable fees and expenses of such counsel
promptly after statements therefor are received, provided that each applicable
Indemnified Party has executed an undertaking to repay such amounts if it is
ultimately determined that such Indemnified Party is not entitled to be
indemnified by Parent under SECTION 5.10(A). Neither Parent nor the Surviving
Corporation shall be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld). The Indemnified
Parties as a group may retain only one law firm (in addition to local counsel)
to represent them with respect to a single action unless any Indemnified Party
determines in good faith (after consultation with legal counsel) that there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties.
(d) The obligations of Parent and the Surviving Corporation under
SECTION 5.10(A) are subject to the conditions that each Indemnified Party shall
comply with the reasonable requests of the Surviving Corporation and Parent in
defending or settling any action for which indemnification is sought and that
any Indemnified Party shall approve any proposed settlement of any such action
if (i) such settlement involves no finding or admission of any liability (or any
plea of nolo contendre by such Indemnified Party), and (ii) the sole relief
provided in connection with such settlement is monetary damages that are paid in
full by the Surviving Corporation or Parent.
SECTION 5.11 OBLIGATIONS OF MERGER SUBSIDIARY. Advantage will take all
actions necessary to cause Parent and Merger Subsidiary to perform, and Parent
will take all action necessary to cause Merger Subsidiary to perform, their
respective obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth in this Agreement.
SECTION 5.12 ANTITAKEOVER STATUTES. If any Takeover Statute is or may
become applicable to the Merger, each of Parent and Company shall take such
actions as are necessary so that the transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise act to eliminate or minimize the effects of any Takeover Statute
on the Merger.
SECTION 5.13 EMPLOYEE BENEFITS. Following the Effective Time, Parent
shall, or shall cause the Surviving Corporation to, (i) honor all obligations
under employment or severance agreements of Company or its Subsidiaries and (ii)
pay all benefits to the extent vested or which become vested in the ordinary
course of business through the Effective Time under employee benefit plans,
programs, policies and arrangements of Company or its Subsidiaries in accordance
with the terms thereof.
SECTION 5.14 INTEGRATION TEAM. Parent and Company shall, as soon as
reasonably practicable after the signing of this Agreement, create a task force
comprised of key employees of Parent and Company which shall review the policies
and procedures of Parent and Company and make recommendations for the successful
integration of the business of Company into the business of Parent.
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ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of Company, Parent and Merger Subsidiary to consummate the Merger
are subject to the satisfaction of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the shareholders of Company by the Company
Requisite Vote;
(b) any applicable waiting period under the HSR Act relating to the
transactions contemplated by this Agreement shall have expired; and
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of the
Merger.
SECTION 6.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER
SUBSIDIARY. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction (or waiver by Parent) of the following
further conditions:
(a) Company shall have performed in all material respects all its
obligations and complied in all material respects with all its covenants
hereunder required to be performed or complied with by it at or prior to the
Effective Time;
(b) the representations and warranties of Company contained in this
Agreement shall be true and correct in all respects at and as of the Effective
Time, as if made at and as of such time (other than representations and
warranties that address matters only as of a particular date, which shall be
true and correct as of such date), with only such exceptions as, individually or
in the aggregate, have not had and would not have a Material Adverse Effect on
Company (it being understood that, for purposes of determining the accuracy of
such representations and warranties, (i) all "Material Adverse Effect" and
materiality qualifications and other qualifications based on the word "material"
or similar phrases contained in such representations and warranties shall be
disregarded, and (ii) any update of or modification to the Company Disclosure
Schedule made or purported to have been made after the date of this Agreement
shall be disregarded);
(c) no event, occurrence or development shall have occurred since the
date of this Agreement and be continuing that, individually or in the aggregate,
has had or would reasonably be expected to have a Material Adverse Effect on
Company; and
(d) Parent shall have received a certificate signed by the chief
executive officer and chief financial officer of Company to the effect set forth
in clauses (a), (b) and (c).
SECTION 6.3 CONDITIONS TO THE OBLIGATIONS OF COMPANY. The obligations
of Company to consummate the Merger are subject to the satisfaction (or waiver
by Company) of the following further conditions:
(a) Parent shall have performed in all material respects all of its
obligations and complied in all material respects with all of its covenants
hereunder required to be performed or complied with by it at or prior to the
Effective Time;
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(b) the representations and warranties of Advantage and Parent
contained in this Agreement shall be true and correct in all respects at and as
of the Effective Time, as if made at and as of such time (other than
representations and warranties that address matters only as of a particular date
which shall be true and correct as of such date), with only such exceptions as,
individually or in the aggregate, have not had and would not have a Material
Adverse Effect on Advantage or Parent (it being understood that, for purposes of
determining the accuracy of such representations and warranties, all "Material
Adverse Effect" and materiality qualifications and other qualifications based on
the word "material" or similar phrases contained in such representations and
warranties shall be disregarded); and
(c) Company shall have received a certificate signed by the chief
executive officer and chief financial officer of Advantage and Parent to the
effect set forth in clauses (a) and (b).
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the shareholders of Company):
(a) by mutual written consent of Company, Parent and Merger Subsidiary;
(b) by either Company or Parent:
(i) if the Merger has not been consummated by June 30, 2001
(the "End Date"); or
(ii) if the Company Shareholder Approval shall not have been
obtained by reason of the failure to obtain the Company Requisite Vote
at a duly held meeting of shareholders or any adjournment thereof;
(c) by either Company or Parent (so long as such party has complied in
all material respects with its obligations under SECTION 5.6), if consummation
of the Merger would be prohibited by any law or regulation or if any injunction,
judgment, order or decree enjoining Company or Parent from consummating the
Merger is entered and such injunction, judgment, order or decree shall become
final and nonappealable;
(d) by Company:
(i) if the Company Board shall have received an Acquisition
Proposal which the Company Board has determined is a Superior Proposal;
provided (1) Company shall have given Parent at least seventy-two
hours' advance notice of any termination pursuant to this SECTION
7.1(D)(I), (2) during such seventy-two hour period Company shall, and
shall cause its financial and legal advisors to, negotiate in good
faith with Parent if Parent so requests to make such adjustments in the
terms and conditions of this Agreement as would enable Company to
proceed with the transactions contemplated hereby, and (3) if required,
Company shall have made the payment referred to in SECTION 7.3(B)
hereof; or
(ii) upon a breach of any representation, warranty, covenant
or agreement of Parent, or if any representation or warranty of
Advantage or Parent shall become untrue, in either case which breach or
misrepresentation or warranty shall not have been cured within 30 days
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following written notice from Company such that the conditions set
forth in SECTION 6.3(A) and 6.3(B) would be incapable of being
satisfied by the End Date;
(e) by Parent:
(i) (x) the Company Board shall have withdrawn, or modified or
changed in a manner adverse to Parent, its approval or recommendation
of this Agreement and the Merger or shall have recommended a Superior
Proposal with a person other than Parent or its Subsidiaries, (y)
Company shall have entered into a definitive agreement providing for a
Superior Proposal with a person other than Parent or its Subsidiaries
or (z) the Company Board shall have resolved to do any of the
foregoing;
(ii) upon a breach of any representation, warranty, covenant
or agreement of Company, or if any representation or warranty of
Company shall become untrue, in either case which breach or
misrepresentation or warranty shall not have been cured within a
reasonable period of time following written notice from Parent such
that the conditions set forth in SECTION 6.2(A) and 6.2(B) would be
incapable of being satisfied by the End Date; or
(iii) upon a knowing, willful and material breach by any
member of the Company Board or any of Company's financial or legal
advisors of the provisions of SECTION 5.4, if such breach shall not
have been cured within a reasonable period of time following written
notice from Parent.
The party desiring to terminate this Agreement pursuant to clauses (b),
(c), (d) or (e) of this SECTION 7.1 shall give written notice of such
termination to the other party in accordance with SECTION 8.1, specifying the
provision hereof pursuant to which such termination is effected.
SECTION 7.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to SECTION 7.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that (a) the agreements
contained in SECTION 7.2 and in SECTION 7.3 and the Advantage Confidentiality
Agreement shall survive the termination hereof and (b) no such termination shall
relieve any party of any liability or damages resulting from any willful
material breach by that party of this Agreement. Notwithstanding anything else
contained in this Agreement, (A) the right to terminate this Agreement under
this SECTION 7.1 shall not be available to any party whose failure to fulfill
its obligations or to comply with its covenants under this Agreement in all
material respects has been the cause of, or resulted in, the failure to satisfy
any condition to the obligations of either party hereunder, and (B) no party
that is in material breach of its obligations hereunder shall be entitled to any
payment of any amount from the other party pursuant to SECTION 7.3(B) or 7.3(C).
SECTION 7.3 PAYMENTS.
(a) Except as otherwise specified in this SECTION 7.3 or agreed in
writing by the parties, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such cost or expense, except that each of Parent and Company
shall bear and pay one-half of the filing fees under the HSR Act.
(b) If at the time of termination of this Agreement none of Advantage,
Parent or Merger Subsidiary is in material breach of its representations,
warranties, covenants or agreements under this Agreement and:
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(i) Company shall terminate this Agreement pursuant to SECTION
7.1(D)(I) hereof or Parent shall terminate this Agreement pursuant to
SECTION 7.1(E)(I) hereof, or
(ii) (x) Company or Parent shall terminate this Agreement
pursuant to SECTION 7.1(B)(II) or Parent shall terminate this Agreement
pursuant to SECTION 7.1(E)(II) (provided that the breach or failure to
perform by Company giving rise to Parent's right to terminate under
SECTION 7.1(E)(II) shall be willful and material), (y) prior to such
termination (but after the date of this Agreement), a bona fide
Acquisition Proposal shall have been communicated in writing to the
Company Board, publicly disclosed or made directly to Company's
shareholders or any person shall have publicly announced or
communicated in writing to the Company Board an intention (whether or
not conditional) to make a bona fide Acquisition Proposal, and (z)
within nine months of such termination Company enters into a definitive
agreement with respect to an Acquisition Proposal or an Acquisition
Proposal is consummated,
then Company shall pay to Parent an amount equal to $3,500,000 (the "Termination
Fee"), payable by wire transfer of immediately available funds, such payment to
be made (A) in the case of a termination contemplated by clause (b)(i), no later
than immediately prior to such termination (or within one (1) business day
following such termination, if by Parent), and (B) in the case of a termination
contemplated by clause (b)(ii), on the earlier of the date Company enters into a
definitive agreement or an Acquisition Proposal is consummated. Simultaneously
with the payment of the Termination Fee, Company shall reimburse Parent for all
of its documented out-of-pocket expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including documented fees
and expenses of accountants, attorneys and financial advisors and commitment
fees to lenders) up to an aggregate of $750,000 (the "Expenses").
Notwithstanding anything herein to the contrary, any amount paid by Company to
Parent pursuant to SECTION 7.3(C) shall reduce, on a dollar-for-dollar basis,
the aggregate amounts payable pursuant to this SECTION 7.3(B). Acceptance by
Parent of such payments shall constitute conclusive evidence that this Agreement
has been validly terminated and upon payment of such amounts Company shall be
fully released and discharged from any liability or obligation resulting from or
under this Agreement. Company acknowledges that the agreements contained in this
SECTION 7.3(B) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement. If Parent shall successfully bring an action to enforce its rights
under this SECTION 7.3(B), Company shall reimburse Parent for its reasonable
fees and expenses in connection therewith and shall pay Parent interest on the
Termination Fee and Expenses from the date such amounts become payable to the
date of payment at the prime rate in effect on the date the Termination Fee
became payable as published in The Wall Street Journal.
(c) If Parent shall terminate this Agreement pursuant to SECTION
7.1(E)(III), then Company shall pay to Parent an amount equal to the Expenses
and 50% of the Termination Fee (but in no event shall such amount in the
aggregate be greater than $2,125,000), payable by wire transfer of immediately
available funds no later than one business day following such termination.
Acceptance by Parent of such payment shall constitute conclusive evidence that
this Agreement has been validly terminated and upon payment of such amount
Company shall be fully released and discharged from any liability or obligation
resulting from or under this Agreement. Company acknowledges that the agreements
contained in this SECTION 7.3(C) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent would
not enter into this Agreement. If Parent shall successfully bring an action to
enforce its right under this SECTION 7.3(C), Company shall reimburse Parent for
its reasonable fees and expenses in connection therewith and shall pay Parent
interest on the amount payable to Parent pursuant to the first sentence of this
SECTION 7.3(C) from the date such amount becomes payable to the date of payment
at the prime rate in effect on the date such payment becomes payable as
published by The Wall Street Journal.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given:
if to Advantage or Parent, to: Advantage Management Holdings Corp.
KTC/AMG Holdings Corp.
4895 Dressler Road North West
Canton, Ohio 44718
Telecopy: (330) 491-1471
Attention: Dennis A. Nash
President and Chief
Executive Officer
with a copy to (which shall
not constitute notice): Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Telecopy: 212-318-3400
Attention: Paul Jacobs, Esq.
if to Company, to: Kenan Transport Company
University Square - West
143 W. Franklin Street
Chapel Hill, North Carolina 27516-3910
Telecopy: (919) 929-5295
Attention: Lee P. Shaffer
President and Chief
Executive Officer
with a copy to: (which shall Schell Bray Aycock Abel &
not constitute notice) Livingston P.L.L.C.
Suite 1500 Renaissance Plaza
230 North Elm Street
Greensboro, North Carolina 27401
Telecopy: (336) 370-8830
Attention: Braxton Schell
and to: Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Telecopy: (704) 378-4000
Attention: Russell M. Robinson, II
David W. Dabbs
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this SECTION 8.1 and
the appropriate telecopy confirmation is received or (b) if given by any other
means, when delivered at the address specified in this SECTION 8.1. Rejection or
other refusal to accept or the inability to deliver because of changed address
of which no notice was given shall be deemed to be receipt of the notice as of
the date of such rejection, refusal or inability to deliver.
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SECTION 8.2 ENTIRE AGREEMENT; NON-SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; THIRD PARTY BENEFICIARIES.
(a) This Agreement (including any exhibits hereto) and the Advantage
Confidentiality Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and negotiations, both written and oral, between the
parties with respect to such subject matter. None of this Agreement, the
Advantage Confidentiality Agreement or any provision hereof or thereof is
intended to confer on any person other than the parties hereto or thereto any
rights or remedies (except that ARTICLES I and II and SECTIONS 5.10 and 5.13 are
intended to confer rights and remedies on the persons specified therein).
(b) The representations and warranties of Company and Parent contained
herein or in any schedule, instrument or other writing delivered pursuant hereto
shall not survive the Effective Time.
SECTION 8.3 AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived prior to
the Effective Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Company and Parent or, in the case of a
waiver, by the party against whom the waiver is to be effective; provided that
after the adoption of this Agreement and the Plan of Merger by the shareholders
of Company, there shall be made no amendment that by law requires further
approval by shareholders without the further approval of such shareholders.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 8.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns; provided that no party may
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the written consent of the other parties hereto.
SECTION 8.5 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of North Carolina (without
regard to principles of conflict of laws).
SECTION 8.6 JURISDICTION. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated by this Agreement shall be
brought against any of the parties in any federal court located in the State of
North Carolina, or any North Carolina state court located in Orange County, and
each of the parties hereto hereby consents to the exclusive jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and waives any objection to venue laid therein. Process in
any such suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the State of North Carolina. Without limiting
the generality of the foregoing, each party hereto agrees that service of
process upon such party at the address referred to in SECTION 8.1, together with
written notice of such service to such party, shall be deemed effective service
of process upon such party.
SECTION 8.7 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
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PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 8.8 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
SECTION 8.9 INTERPRETATION. When a reference is made in this Agreement
to a Section or Company Disclosure Schedule, such reference shall be to a
Section of this Agreement or to the Company Disclosure Schedule as applicable,
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The phrases "the date of this
Agreement," "the date hereof," and terms of similar import, unless the context
otherwise requires, shall be deemed to mean January 25, 2001. All terms defined
in this Agreement shall have the defined meanings when used in any certificate
or other document made or delivered pursuant thereto 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. References to a person are also to its
permitted successors and assigns. Each of the parties has participated in the
drafting and negotiation of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement must be construed as if it is
drafted by all the parties and no presumption or burden of proof will arise
favoring or disfavoring any party by virtue of authorship of any of the
provisions of this Agreement. Notwithstanding anything in this Agreement to the
contrary, the parties acknowledge and agree (a) that subclause (i) of SECTION
3.10(L) shall not be construed to establish any standard of materiality and (b)
that the occurrence of any event described in such SECTION 3.10(L)(I) shall not
necessarily, in and of itself, constitute a Material Adverse Effect.
SECTION 8.10 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. Upon such determination that any term,
provision, covenant or restriction of this Agreement is invalid, void,
unenforceable or against regulatory policy, 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 in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.11 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall 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 North Carolina or any North Carolina state
court, in addition to any other remedy to which they are entitled at law or in
equity.
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SECTION 8.12 JOINT AND SEVERAL LIABILITY. Advantage, Parent and Merger
Subsidiary hereby agree that they will be jointly and severally liable for all
covenants, agreements, obligations and representations and warranties made by
any of them in this Agreement.
IN WITNESS WHEREOF, the parties have hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
ADVANTAGE MANAGEMENT HOLDINGS CORP.
By: /s/ Dennis A. Nash
--------------------------------------------
Name: Dennis A. Nash
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
KTC/AMG HOLDINGS CORP.
By: /s/ Dennis A. Nash
--------------------------------------------
Name: Dennis A. Nash
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
KENAN TRANSPORT COMPANY
By: /s/ Lee P. Shaffer
--------------------------------------------
Name: Lee P. Shaffer
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
KTC ACQUISITION CORP.
By: /s/ Dennis A. Nash
--------------------------------------------
Name: Dennis A. Nash
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
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EXHIBIT A
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (this "Agreement") is dated as of January
__, 2001, and is by and among KTC Acquisition Corp., a North Carolina
corporation ("Merger Sub"), KTC/AMG Holdings Corp., a Delaware corporation
("Parent"), and the shareholder listed on Schedule A hereto (the "Shareholder").
RECITALS
WHEREAS, Advantage Management Holdings Corp., a Delaware corporation,
Parent and Merger Sub have entered into an Agreement and Plan of Merger, dated
as of the date hereof (the "Merger Agreement"), with Kenan Transport Company, a
North Carolina corporation (the "Company"), which provides, among other things,
upon the terms and subject to the conditions thereof, that the Merger Sub will
merge with and into the Company (the "Merger") and all the outstanding shares of
Common Stock, no par value, of the Company ("Company Common Stock") (other than
shares of Company Common Stock held by Merger Sub and Parent) will be converted
into the right to receive $35 per share in cash (capitalized terms not defined
in this Agreement shall have the meanings ascribed to them in the Merger
Agreement); and
WHEREAS, as of the date hereof, the Shareholder owns (beneficially or
of record) the number of shares of Company Common Stock set forth opposite the
Shareholder's name on Schedule A hereto (the "Existing Shares"); and
WHEREAS, as a condition to the willingness of Parent and Merger Sub to
enter into the Merger Agreement, Parent and Merger Sub have required that the
Shareholder agree, and in order to induce Parent and Merger Sub to enter into
the Merger Agreement, the Shareholder has agreed, to vote, in accordance with
the terms of this Agreement, all the Existing Shares and any shares of Company
Common Stock which may hereafter be acquired by the Shareholder (collectively,
the "Shares") in favor of the Merger Agreement and the transactions contemplated
thereby.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
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ARTICLE I
COVENANTS OF THE SHAREHOLDER
Section 1.1 Disposition or Encumbrance of Shares. Except as
contemplated by this Agreement, the Shareholder shall not, directly or
indirectly: (a) sell, transfer, tender, assign, hypothecate, encumber or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, tender, assignment,
hypothecation, encumbrance or other disposition of, any or all of the Shares or
an interest therein; or (b) grant any proxies or powers of attorney with respect
to the Shares, deposit the Shares into a voting trust or enter into a voting
agreement with respect to the Shares.
Section 1.2 Solicitation of Transactions. The Shareholder shall not,
directly or indirectly: (a) solicit, initiate or encourage (including by way of
furnishing nonpublic information) inquiries or proposals concerning any
Acquisition Proposal or have discussions or negotiations with any third party
(other than Parent or Merger Sub) regarding any Acquisition Proposal (other than
the Merger); or (b) induce or encourage any other shareholder of the Company to
vote against, or fail to vote in favor of, the Merger Agreement, the Merger and
the Plan of Merger. The Shareholder shall notify Parent of any written inquiries
or proposals it receives relating to an Acquisition Proposal.
Section 1.3 Agreement to Vote Shares. Unless this Agreement shall have
terminated in accordance with its terms, the Shareholder hereby agrees that: (a)
at any meeting (whether annual or special and whether or not an adjourned or
postponed meeting) of the holders of Company Common Stock at which shareholders
of the Company will consider the Merger Agreement and the transactions
contemplated thereby, the Shareholder shall appear at the meeting or otherwise
cause the Shares to be counted as present at the meeting for purposes of
establishing a quorum, and the Shareholder shall vote (or cause to be voted) the
Shares in favor of the Merger Agreement, the Merger and the Plan of Merger; and
(b) the Shareholder shall vote the Shares against any other Acquisition Proposal
or any other corporate action that could reasonably be expected to materially
impair or delay consummation of the Merger.
Section 1.4 No Inconsistent Agreements. The Shareholder shall not, in
its capacity as a shareholder of the Company, enter into any agreement or take
any other action that would (a) violate Section 1.1, Section 1.2 or Section 1.3
of this Agreement or (b) reasonably be expected to materially restrict, limit or
interfere with the performance of its obligations hereunder or the consummation
of the transactions contemplated hereby or the Merger Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
Section 2.1 Authorization, etc. The Shareholder has the right, power,
authority and capacity to execute and deliver this Agreement and to perform the
Shareholder's obligations hereunder. This Agreement has been duly authorized,
executed and delivered by the Shareholder, and constitutes the legal, valid and
binding obligation of the Shareholder,
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enforceable against the Shareholder in accordance with its terms, subject to
laws of general application relating to bankruptcy, fraudulent conveyance,
insolvency and the relief of debtors, and rules of law governing specific
performance, injunctive relief and other equitable remedies. [If the Shareholder
is married and the Shares constitute community property, this Agreement has been
duly executed and delivered by, and constitutes the legal, valid and binding
obligation of, the Shareholder's spouse, enforceable against the Shareholder's
spouse in accordance with its terms, subject to laws of general application
relating to bankruptcy, fraudulent conveyance, insolvency and the relief of
debtors, and rules of law governing specific performance, injunctive relief and
other equitable remedies.(1)]
Section 2.2 No Conflicts or Consents. The execution and delivery of
this Agreement by the Shareholder do not, and the performance of this Agreement
by the Shareholder will not: (i) conflict with or violate any law, rule,
regulation, order, decree or judgment applicable to the Shareholder or by which
the Shareholder or any of the Shareholder's properties is or may be bound or
affected; (ii) result in or constitute (with or without notice or lapse of time)
any right of termination, amendment, acceleration or cancellation of, or result
(with or without notice or lapse of time) in the creation of any encumbrance or
restriction on any of the Shares pursuant to, any contract to which the
Shareholder is a party or by which the Shareholder or any of the Shareholder's
properties is or may be bound or affected; or (iii) require any consent or
approval of any person, except in the case of clause (i), (ii) or (iii) above
where any of such events would not have a material adverse effect on the
Shareholder or otherwise impair the Shareholder's ability to satisfy the
Shareholder's obligations hereunder.
Section 2.3 Title to Securities. As of the date of this Agreement: (a)
the Shareholder either (i) holds of record or (ii) beneficially owns with the
right to vote (in the case of clause (i) and (ii), free and clear of any liens,
claims, options, rights of first refusal, co-sale rights, charges or other
encumbrances (collectively, "Liens")) the number of outstanding shares of
Company Common Stock set forth under the heading "Number of Shares" on Schedule
A hereof; [and] (b) [the Shareholder holds (free and clear of any Liens) the
options and other rights to acquire shares of Company Common Stock set forth
under the heading "Options and Other Rights" on Schedule A hereof; and (c)](2)
the Shareholder does not directly or indirectly own any shares of capital stock
or other securities of the Company, or any option, warrant or other right to
acquire (by purchase, conversion or otherwise) any shares of capital stock or
other securities of the Company, other than the shares [and options and other
rights](2) specified on Schedule A hereof. Except as set forth on Schedule A,
the Shareholder has sole voting power with respect to the Shares.
Section 2.4 Accuracy of Representations. The representations and
warranties contained in this Agreement are accurate in all material respects as
of the date of this Agreement, and will be accurate in all material respects at
all times through the earlier to occur of the Effective Time or the termination
of the Merger Agreement in accordance with its terms.
- -----------------
(1) This sentence is to be included only in agreements executed by individuals.
(2) These clauses are to be included only in agreements with executive officers.
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Section 2.5 Reliance by Parent and Merger Sub. The Shareholder
understands and acknowledges that Parent and Merger Sub are entering into the
Merger Agreement in reliance upon the Shareholder's execution and delivery of
this Agreement.
ARTICLE III
MISCELLANEOUS
Section 3.1 Expenses. All costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
Section 3.2 Further Assurances. The parties hereto will execute and
deliver all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 3.3 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties hereto
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or in equity, and such remedies shall be cumulative and
not exclusive. The Shareholder further agrees that neither Parent, Merger Sub
nor any other person or entity shall be required to obtain, furnish or post any
bond or similar instrument in connection with or as a condition to obtaining any
remedy referred to in this Section 3.3, and the Shareholder irrevocably waives
any right the Shareholder may have to require the obtaining, furnishing or
posting of any such bond or similar instrument.
Section 3.4 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral, among
the parties hereto with respect to the subject matter hereof.
Section 3.5 Assignment. This Agreement shall not be assigned by
operation of law or otherwise (other than by will or the laws of descent and
distribution) without the written consent of all parties hereto. Any purported
assignment shall be void.
Section 3.6 Parties in Interest. This Agreement shall be binding upon,
inure solely to the benefit of, and be enforceable by, the parties hereto and
their successors and permitted assigns. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
Section 3.7 Amendment; Waiver. This Agreement may not be amended except
by an instrument in writing signed by the parties hereto. Any waiver under this
Agreement shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
Section 3.8 Severability. 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 shall
nevertheless remain in full force and effect so long as the
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economic or legal substance of this Agreement is not affected in any manner
materially adverse to any party. 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 in a mutually acceptable
manner in order that the terms of this Agreement remain as originally
contemplated to the fullest extent possible.
Section 3.9 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, telecopy, or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance with this Section
3.9):
if to Merger Sub or Parent:
KTC/AMG Holdings Corp.
KTC Acquisition Corp.
4895 Dressler Road North West
Canton, Ohio 44718
Attention: Dennis A.Nash
President and Chief Executive Officer
Telecopy: (330) 491-1471
with copy to (which shall not constitute notice):
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Paul Jacobs, Esq.
Telecopy: (212) 318-3400
if to a Shareholder:
at the address set forth on Schedule A
with a copy to (which shall not constitute notice):
Section 3.10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina applicable
to contracts executed in and to be performed in that State without regard to its
conflict of law principles or rules.
Section 3.11 Termination. This Agreement shall terminate automatically
without any further action of the parties hereto upon the earlier of (a) the
Effective Time and (b) the termination of the Merger Agreement in accordance
with its terms.
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Section 3.12 Shareholder Capacity. No person executing this Agreement
who is or becomes during the term hereof a director or officer of the Company
makes any agreement or understanding herein in his or her capacity as a director
or officer. The person(s) signing this Agreement as Shareholder are doing so
solely in his, her or its capacity as the record or beneficial owner of, or as
the trustee of a trust which is the record or beneficial owner of, shares of
Company Common Stock, and nothing herein shall limit or affect any actions taken
by the Shareholder (or a trustee or beneficiary of a trust which is a
Shareholder) in his or her capacity as an officer or director of the Company.
Section 3.13 Independence of Obligations. The covenants and obligations
of the Shareholder set forth in this Agreement shall be construed as independent
of any other agreement or arrangement between the Shareholder, on the one hand,
and the Company, Merger Sub or Parent, on the other. The existence of any claim
or cause of action by the Shareholder against the Company, Merger Sub or Parent
shall not constitute a defense to the enforcement of any of such covenants or
obligations against the Shareholder.
Section 3.14 Waiver. No failure on the part of Parent to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of Parent or Merger Sub in exercising any power, right, privilege or remedy
under this Agreement, shall operate as a waiver of such power, right, privilege
or remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy. Parent shall not be deemed to have waived any
claim arising out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of Parent; and any such waiver shall not be applicable or
have any effect except in the specific instance in which it is given.
Section 3.15 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
Section 3.16 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first written above.
KTC/AMG HOLDINGS CORP.
By: _____________________________
Name: _____________________________
Title: _____________________________
KTC ACQUISITION CORP.
By: _____________________________
Name: _____________________________
Title: _____________________________
[The remainder of this page is intentionally left blank]
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SHAREHOLDER:
----------------------------------------
[The remainder of this page is intentionally left blank]
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SCHEDULE A
Name, Address, Telecopy No. of Shareholder Number of Shares
- ------------------------------------------ ----------------
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EXHIBIT B
PLAN OF MERGER
A. Corporations Participating in Merger.
KTC ACQUISITION CORP., a North Carolina corporation (the "Merging
Corporation"), shall merge (the "Merger") into KENAN TRANSPORT COMPANY, a North
Carolina corporation (the "Company"), which shall be the surviving corporation
(the "Surviving Corporation").
B. Merger.
The Merger shall be effected pursuant to the terms and conditions of
this Plan of Merger (the "Plan") and the Agreement and Plan of Merger, dated as
of January 25, 2001, among ADVANTAGE MANAGEMENT HOLDINGS CORP., a Delaware
corporation, KTC/AMG HOLDINGS CORP., a Delaware corporation ("Parent
Corporation"), the Merging Corporation and the Company (the "Merger Agreement").
At the Effective Time (as defined below), the corporate existence of the Merging
Corporation shall cease, and the corporate existence of the Surviving
Corporation shall continue. The time when the Merger becomes effective is
referred to herein as the "Effective Time."
C. Conversion and Exchange of Shares.
As of the Effective Time, by virtue of the Merger and without any
action on the part of any holder of any capital stock of the Parent Corporation,
the Merging Corporation or the Company:
1. Company Common Stock. Each share of common stock, no par
value, of the Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time (other
than any shares of Company Common Stock held directly by the
Parent Corporation and the Merging Corporation), automatically
shall be converted into the right to receive $35 in cash
without interest (the "Merger Consideration").
2. Cancellation of Certain Shares. Each share of Company Common
Stock held directly by the Parent Corporation and the Merging
Corporation immediately prior to the Effective Time shall be
cancelled and extinguished, and no consideration shall be
delivered therefor.
3. Merging Corporation Common Stock. Each share of common stock,
no par value, of the Merging Corporation issued and
outstanding immediately prior to the Effective Time shall
automatically be converted into one validly issued, fully paid
and nonassessable share of common stock, no par value, of the
Surviving Corporation.
D. Exchange Procedures.
Promptly after the Effective Time, the Parent Corporation shall cause
First Union National Bank, as payment agent under the Merger Agreement (the
"Payment Agent"), to mail to each holder of record as of the Effective Time of a
certificate or certificates (the "Certificates") that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock which were
converted into the right to receive the Merger Consideration (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title shall pass, only upon delivery of the Certificates to the Payment
Agent and shall be in such form and have such provisions as the Parent
Corporation shall reasonably
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specify) and (ii) instructions for effecting the exchange of the Certificates
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Payment Agent or to such other agent or agents as may be appointed by the
Parent Corporation, together with such letter of transmittal duly completed and
validly executed in accordance with the instructions thereto and such other
documents as may reasonably be required, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration in accordance
with the Merger Agreement, and the Certificate so surrendered shall forthwith be
cancelled. Until so surrendered, each outstanding Certificate will be deemed
from and after the Effective Time, for all corporate purposes, to evidence only
the right to receive the Merger Consideration. No interest shall be paid or
accrued on any amount payable upon surrender of any Certificate. If any portion
of the Merger Consideration is to be paid to a person other than the person in
whose name the surrendered Certificate is registered, it shall be a condition to
such payment that the Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person requesting such
payment shall pay to the Payment Agent any transfer or similar taxes required as
a result of such payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Payment Agent that such tax
has been paid or is not payable. Any Merger Consideration made available to the
Payment Agent pursuant to the Merger Agreement which remains undistributed for
six months after the Effective Time shall be returned by the Payment Agent to
the Surviving Corporation, which shall thereafter act as Payment Agent, and
thereafter any holder of unsurrendered Certificates shall look as a general
creditor only to the Parent Corporation and the Surviving Corporation for
payment of any funds to which such holder may be due, subject to applicable law.
E. No Further Ownership Rights in Company Common Stock.
The Merger Consideration paid in exchange of shares of Company Common
Stock in accordance with the terms hereof shall be deemed to have been paid in
full satisfaction of all rights pertaining to such shares of Company Common
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Plan.
F. Abandonment.
After approval of this Plan by the shareholders of the Merging
Corporation and the Surviving Corporation, and at any time prior to the
Effective Time, the board of directors of the Company may abandon the Merger.
A-B-2
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APPENDIX B
January 25, 2001
Special Committee of the Board of Directors
Kenan Transport Company
University Square - West
143 W. Franklin Street
Chapel Hill, North Carolina 27516-3910
Dear Members of the Special Committee:
You have requested our opinion as to the fairness, from a financial
point of view, to the shareholders of Kenan Transport Company ("Kenan"), of the
consideration to be received by such shareholders pursuant to the terms of the
Agreement and Plan of Merger, dated as of January 25, 2001 (the "Agreement"),
among Kenan, Advantage Management Holdings Corp. ("Advantage"), KTC/AMG Holdings
Corp., and KTC Acquisition Corp. Pursuant to the Agreement, the shareholders of
Kenan will receive $35.00 net in cash for each share of Kenan Common Stock, no
par value. For purposes of this opinion, the "Transaction" means the proposed
acquisition of 100% of the outstanding shares of Kenan Common Stock by
Advantage, the terms of which are more fully set forth in the Agreement.
In arriving at our opinion, we have, among other things:
o Reviewed the Agreement, including the financial terms of the
Transaction;
o Reviewed certain historical business, financial, and other
information regarding Kenan that was publicly available or
furnished to us by members of Kenan management;
o Reviewed certain financial forecasts and other data provided
to us by members of Kenan management relating to its business;
o Conducted discussions with members of Kenan management with
respect to its business, financial, and other information,
including its business prospects and financial forecasts, and
the effects of the Transaction;
o Reviewed the current and historical market prices of Kenan
Common Stock;
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o Compared the financial position and operating results of Kenan
with those of publicly traded companies we deemed relevant;
o Compared the financial terms of the Transaction with certain
of the financial terms of other similar transactions we deemed
relevant; and
o Conducted such other financial studies, analyses, and
investigations as we deemed appropriate.
In connection with our review, we have relied upon the accuracy and
completeness of the foregoing financial and other information, and we have not
assumed any responsibility for any independent verification of such information.
With respect to Kenan's financial projections, we have assumed that they have
been reasonably prepared and reflect the best currently available estimates and
judgments of Kenan's management as to the expected future financial performance
of Kenan. We have discussed Kenan's financial projections with management of
Kenan, but we assume no responsibility for and express no view as to Kenan's
financial projections or the assumptions upon which they are based. In arriving
at our opinion, we have not conducted any physical inspection of the properties
or facilities of Kenan and have not made or been provided with any evaluations
or appraisals of the assets or liabilities of Kenan.
In rendering our opinion, we have assumed that the Transaction will be
consummated on the terms described in the Agreement that we reviewed, without
any waiver of any material terms or conditions. Our opinion is necessarily based
on economic, market, financial, and other conditions and the information made
available to us as of the date hereof. Although subsequent developments may
affect this opinion, we do not have any obligation to update, revise, or
reaffirm this opinion. Our opinion does not address the relative merits of the
Transaction and the other business strategies considered by Kenan's Board of
Directors, nor does it address the Board of Directors' decision to proceed with
the Transaction.
First Union Securities, Inc. is a subsidiary and affiliate of First
Union Corporation. We have been engaged to render financial advisory services to
Kenan in connection with the Transaction and will receive a fee for such
services which include the delivery of this opinion. In the ordinary course of
our business, we and our affiliates may actively trade or hold the securities of
Kenan for our own account or for the account of our customers and, accordingly,
may at any time hold a long or short position in such securities. We or our
affiliates have in the past provided investment banking and financial advisory
services to Kenan unrelated to the proposed Transaction, for which services we
have received compensation.
It is understood that this letter is solely for the information and use
of the Special Committee and the Board of Directors of Kenan in connection with
the Transaction and shall not confer any rights or remedies upon the
shareholders of Kenan or any other person or be used or relied upon for any
other purpose. This letter does not constitute a recommendation to any
shareholder of Kenan as to how such shareholder should vote on the Transaction.
This opinion may not be summarized, excerpted from or otherwise publicly
referred to without prior written consent, except that this opinion may be
reproduced in full in any proxy or information statement mailed or provided to
the shareholders of Kenan in connection with the Transaction.
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106
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the consideration to be received
by the shareholders of Kenan in the Transaction is fair, from a financial point
of view.
Sincerely,
FIRST UNION SECURITIES, INC.
/s/ First Union Securities, Inc.
B-3