Exhibit 99.1
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of October 3, 1997 (the
"Agreement"), among NORTH CAROLINA RAILROAD COMPANY, a North Carolina
corporation (the "Company"), THE NORTH CAROLINA DEPARTMENT OF TRANSPORTATION
(the "DOT") and BEAUFORT AND MOREHEAD RAILROAD COMPANY, a North Carolina
corporation and a wholly owned subsidiary of the DOT (the "B&M"). The Company
and B&M are hereinafter sometimes collectively referred to as the "Constituent
Corporations."
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") and the Special Committee (the "Special Committee") of the Board of
Directors have each considered the proposed merger of B&M with and into the
Company upon the terms set forth in this Agreement; the Special Committee has
adopted resolutions recommending to the Board of Directors the approval of this
Agreement and the transactions contemplated hereby; and the Board of Directors
has adopted resolutions approving this Agreement and the transactions
contemplated hereby;
WHEREAS, the Board of Directors of B&M and the DOT, as the sole
shareholder of B&M, have determined that the merger of B&M with and into the
Company upon the terms set forth in this Agreement would be fair to and in the
best interests of the shareholders of B&M, and such Board of Directors and sole
shareholder have adopted resolutions approving this Agreement and the
transactions contemplated hereby;
WHEREAS, the Company, B&M, and the DOT desire to make certain
representations, warranties, covenants and agreements in connection with the
proposed merger of B&M with and into the Company and desire to prescribe various
conditions to such merger; and
WHEREAS, the Special Committee has recommended that the Board of
Directors in turn recommend that the shareholders of the Company adopt and
authorize this Agreement and the transactions contemplated hereby, and the Board
of Directors has resolved so to recommend such shareholder adoption and
authorization.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements, and conditions contained
herein, the parties hereto, for themselves, their successors, and assigns, agree
as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. (a) In accordance with the provisions of this
Agreement and the North Carolina Business Corporation Act ("North Carolina
Corporate Law"), at the Effective Time (as defined in Section 1.5), B&M shall be
merged with and into the Company (the
"Merger"), and the Company shall be the surviving corporation (hereinafter
sometimes called the "Surviving Corporation") and shall continue its corporate
existence under North Carolina Corporate Law. The name of the Surviving
Corporation shall be "North Carolina Railroad Company." At the Effective Time,
the separate existence of B&M shall cease.
(b) The Merger shall have the effects set forth in Section 55-11-06 of
North Carolina Corporate Law. Without limiting the generality of the foregoing,
and subject thereto, the Surviving Corporation shall possess all the rights,
properties, privileges, immunities, powers, and purposes of each of the
Constituent Corporations and shall by operation of law assume and be liable for
all the liabilities, obligations and penalties of each of the Constituent
Corporations.
Section 1.2 Charter and Bylaws. (a) At the Effective Time, the Charter
of the Company, as in effect immediately prior to the Effective Time, shall be
the Charter of the Surviving Corporation following the Merger, until thereafter
further amended as provided therein and under North Carolina Corporate Law.
(b) The bylaws of the Company as in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation until thereafter
amended as provided by North Carolina Corporate Law, the Charter of the
Surviving Corporation and such bylaws.
Section 1.3 Directors and Officers. The directors of the Company
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Charter and
bylaws of the Surviving Corporation, and the President, Executive Vice
President, Secretary and Treasurer of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
Section 1.4 Shareholders' Meeting. The Company will take all action
necessary in accordance with and subject to applicable law and its Charter and
bylaws to convene a meeting of its shareholders (the "Shareholders' Meeting") as
soon as practicable after the date of this Agreement to consider and vote upon
the adoption and authorization of this Agreement. Subject to the fiduciary
duties of the Board of Directors to the shareholders of the Company, the
Company, through its Board of Directors, shall recommend to its shareholders
adoption and authorization of this Agreement and the transactions contemplated
hereby and shall use all reasonable efforts to obtain adoption and authorization
of this Agreement and the Merger by the shareholders of the Company.
Section 1.5 Effective Time. The Merger shall become effective on the
date and at the time of filing of articles of merger, in the form required by
and executed in accordance with North Carolina Corporate Law, with the Secretary
of State of the State of North Carolina in accordance with the provisions of
Section 55-11-05 of North Carolina Corporate Law (the "Articles of Merger") or
at such other time as may be specified in the Articles of Merger. The date and
time when the Merger shall become effective is herein referred to as the
"Effective Time."
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Section 1.6 Required Filings. At the Closing (as defined in Section
9.1), the DOT, B&M and the Company shall cause (i) the Articles of Merger to be
executed and filed with the Secretary of State of the State of North Carolina
and (ii) a certificate as specified in Section 47- 18.1 of the General Statutes
of North Carolina to be recorded in the office of the register of deeds of each
county in which B&M owns real estate, if any, in each case as provided in North
Carolina Corporate Law, and shall take any and all other lawful actions and do
any and all other lawful things to cause the Merger to become effective.
Section 1.7 Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Constituent Corporations acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Shares. (a) All shares of the Company's common stock, par
value $.50 per share (the "Shares"), issued and outstanding immediately prior to
the Effective Time, other than Canceled Shares as defined in subsection (c)
hereof and Dissenting Shares as defined in Section 2.2 hereof, shall be referred
to herein as the "Converted Shares." By virtue of the Merger and without any
action on the part of the holder thereof, each Converted Share shall be canceled
and converted at the Effective Time into the right to receive Sixty-six Dollars
($66.00) in cash (the "Merger Consideration") payable to the holder thereof,
without interest, upon surrender of the certificate evidencing such Converted
Share in the manner provided in Section 2.4.
(b) All Shares (including Dissenting Shares and Canceled Shares), by
virtue of the Merger and without any action on the part of the holders thereof,
shall at the Effective Time no longer be outstanding and shall be canceled and
retired and shall cease to exist, and each holder of a certificate representing
any such Shares shall thereafter cease to have any rights with respect to such
Shares, except, in the case of Converted Shares, the right to receive the Merger
Consideration for such Shares upon the surrender of such certificate in
accordance with Section 2.4, and, in the case of Dissenting Shares, the right,
if any, to receive payment from the Surviving Corporation of the "fair value" of
such Shares as determined in accordance with Sections 55-13- 01 et. seq. of
North Carolina Corporate Law.
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(c) Notwithstanding anything contained in this Section to the contrary,
each Share held in the treasury of the Company and each such Share owned by B&M
or the State of North Carolina (including shares held by the State of North
Carolina as a result of the escheat laws of such State) immediately prior to the
Effective Time ("Canceled Shares") shall be canceled without any conversion
thereof and no payment shall be made with respect thereto.
Section 2.2 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares that are outstanding immediately prior to the
Effective Time and that are held by shareholders who shall not have voted in
favor of the Merger and who otherwise shall have properly exercised their rights
for appraisal of such Shares in the manner provided in Sections 55- 13-01 et.
seq. of North Carolina Corporate Law ("Dissenting Shares") shall not be
converted into or be exchangeable for the right to receive the Merger
Consideration, but the holders thereof shall be entitled to payment of the
appraised value of such Dissenting Shares in accordance with the provisions of
Sections 55-13-01 et. seq. of North Carolina Corporate Law; provided, however,
that if any such shareholder shall withdraw his demand, for appraisal or shall
fail to perfect his appraisal rights in accordance with the North Carolina
Corporate Law, such Shares shall thereupon be deemed to have been converted into
and to have become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration, without any interest thereon (and such Shares
shall not, for purposes hereof, then be deemed to be Dissenting Shares). The
Surviving Corporation shall pay to a holder of Dissenting Shares who
subsequently fails to perfect or otherwise withdraws such holder's claim for
appraisal rights as provided above, against surrender of the certificate
representing such Shares in accordance with Section 2.4, the Merger
Consideration payable with respect to such Shares.
Section 2.3 B&M Stock. By virtue of the Merger and without any action
on the part of the holder thereof, at the Effective Time each share of the
capital stock of B&M issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid,
and non-assessable corresponding share of capital stock of the Surviving
Corporation.
Section 2.4 Exchange of Shares. (a) At or prior to the Closing Date (as
defined in Section 9.1), the Company shall designate a bank or trust company
reasonably acceptable to the DOT and B&M to serve as exchange agent (the
"Exchange Agent") for the Converted Shares. As soon as reasonably practicable at
or after the Effective Time, the DOT shall deposit, or shall cause to be
deposited, with the Exchange Agent for the benefit of the holders of
certificates (the "Certificates") that represented Converted Shares immediately
prior to the Effective Time, immediately available funds in United States
dollars in an amount that equals the aggregate Merger Consideration. Such funds
(the "Payment Fund") shall be invested by the Exchange Agent as directed by the
DOT in obligations of or guarantees by the United States of America, in
commercial paper obligations rated A-l or P-l or better by Moody's Investor
Services, Inc. or Standard & Poor's Corporation, respectively, or in
certificates of deposit, bank repurchase agreements, or bankers acceptances of
commercial banks with capital exceeding $500 million; provided, however, that in
the event that the Payment Fund shall realize a loss on any such investment, the
Surviving Corporation or DOT shall promptly thereafter deposit in such Payment
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Fund cash in an amount sufficient to enable such Payment Fund to satisfy all
remaining obligations originally contemplated to be paid out of such Payment
Fund.
(b) Promptly after the Effective Time (but in no event more than two
days thereafter), the Surviving Corporation shall instruct the Exchange Agent to
mail to each record holder, as of the Effective Time, of an outstanding
Certificate a form of letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates for payment
therefor. The form of letter of transmittal shall be subject to approval by the
Company prior to the Effective Time. Upon surrender to the Exchange Agent of a
Certificate, together with such letter of transmittal duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor the amount
of cash that such holder has the right to receive under this Article, and such
Certificate shall forthwith be canceled. If payment (or any portion thereof) is
to be made to a person other than the person in whose name the Certificate
surrendered is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes or indemnity bond fee required by
reason of the payment to a person other than the registered holder of the
Certificate surrendered or such person shall establish to the satisfaction of
the Exchange Agent that such tax or fee has been paid or is not applicable.
Until surrendered in accordance with the provisions of this Section, each
Certificate shall represent, for all purposes, the right to receive the Merger
Consideration in respect of the number of Converted Shares previously evidenced
by such Certificate, without any interest thereon.
(c) From and after the Effective Time there shall be no transfers on
the stock transfer books of the Surviving Corporation of the Converted Shares.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged as provided in this Article.
(d) At any time following the date one year after the Effective Time,
the Surviving Corporation shall be entitled to require the Exchange Agent to
deliver to it any funds (including any interest received with respect thereto)
that have been made available to the Exchange Agent and that have not been
disbursed to holders of Certificates and, thereafter, such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect to
the Merger Consideration payable upon due surrender of their Certificates.
Notwithstanding the foregoing, neither the Surviving Corporation nor the
Exchange Agent shall be liable to any holder of a Certificate for the Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 2.5 Reservation of Right to Revise Transaction; Further
Actions. (a) Subject to approval by the Company, which shall not be unreasonably
denied, the DOT may at any time change the method of effecting the acquisition
of the Company by the DOT if and to the extent that it deems such a change to be
reasonably desirable; provided, however, that no such change shall (A) alter or
change the amount or the kind of the consideration to be received by the holders
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of Converted Shares as provided for in this Agreement; (B) unfavorably change
the tax consequences to the holders of the Converted Shares compared to the
Merger; (C) cause a delay in the consummation of the transactions contemplated
by this Agreement; and, further provided that such modified structure results in
the DOT or the State of North Carolina owning directly or indirectly all of the
Common Stock of the Company (or in the case of a modification to the structure
resulting in the Company merging into a successor, all of the Common Stock of
such successor to the Company). Without limiting the foregoing, the parties
expressly agree that at the request of the DOT, the parties will use their best
efforts take steps necessary or desirable to allow for the Surviving Corporation
to remain eligible as a Real Estate Investment Trust ("REIT") including the
authorization of a series of non-voting preferred stock of the Company, the
Surviving Corporation and/or the B&M and the issuance thereof to sufficient
holders as to allow for the preservation of such REIT status. In the event
complying with this provision requires any expenditures prior to the Closing,
the Company shall not be obligated to take such action unless the DOT or B&M pay
such expenses in advance.
(b) To facilitate the Merger and the acquisition, the Company will
execute such additional agreements and documents and take such other actions as
the DOT and the Company reasonably determine necessary or appropriate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE DOT AND B&M
The DOT and B&M represent and warrant to the Company as follows:
Section 3.1 Organization. B&M is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. B&M is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed or in good
standing would not reasonably be expected to have a material adverse effect on
the business, financial condition or results of operations of B&M.
Section 3.2 Authority Relative to This Agreement. Subject to approval
or ratification by North Carolina Council of State if required by N.C.G.S. ss.
124-5, each of the DOT and B&M has the requisite power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. Subject to approval or ratification by North Carolina Council of State,
the execution and delivery of this Agreement by B&M and the consummation by it
of the transactions contemplated hereby have been duly and validly authorized
and approved by the Board of Directors of B&M and by the shareholder B&M, and no
other corporate proceedings on the part of B&M are necessary to authorize this
Agreement or the consummation by it of the transactions contemplated hereby
except as set forth in Section 6.3 hereof. This Agreement has been duly and
validly executed and delivered by each of the DOT and B&M and, assuming this
Agreement constitutes a legal, valid and binding agreement of the Company, this
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Agreement constitutes a legal, valid and binding agreement of each of the DOT
and B&M, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
Section 3.3 Broker's Fees. Except for the engagement of NationsBanc
Capital Markets, Inc., the fees and expenses of which engagement will be paid by
the DOT, neither the DOT nor B&M, has employed any broker, finder or financial
advisor or incurred any liability for any broker's fees, commissions, finder's
or financial advisory fees in connection with the transactions contemplated
hereby.
Section 3.4 Proxy Statement. None of the information to be supplied by
or through the DOT or B&M for inclusion or incorporation by reference in (i) the
final proxy statement on Schedule 14A, including any amendments or supplements
thereto (the "Proxy Statement"), to be delivered to the Company's shareholders,
or (ii) any other filings required to be made by the Company, the DOT or B&M
under the Securities Exchange act of 1934, as amended (the "Exchange Act"), the
Securities Act of 1933, as amended (the "Securities Act") or any other state or
federal securities laws (including without limitation a filing on Schedule
13E-3, if required) in connection with the Merger or the transactions
contemplated by this Agreement ("Other Filings") will, at the respective times
that the Proxy Statement or any Other Filings and any amendments or supplements
thereto are filed with the Securities and Exchange Commission ("SEC"), at the
time any amendment or supplement thereto is mailed to the Company's
shareholders, and at the time of the Shareholders' Meeting, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the DOT and B&M as
follows:
Section 4.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified or licensed to do business and is in
good standing in North Carolina, which is the only jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed or in good standing would not reasonably
be expected to have a Material Adverse Effect. For purposes of this Agreement,
"Material Adverse Effect" means any change or effect that would be materially
adverse to the business, operations, assets, condition (financial or otherwise)
or results
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of operations of the Company or that would materially impair the ability of the
Company to perform its obligations hereunder.
Section 4.2 Authority Relative to this Agreement. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, subject to the approval
of the Merger and the adoption and authorization of this Agreement by the
shareholders of the Company in accordance with North Carolina Corporate Law. The
execution and delivery of this Agreement by the Company, and the consummation by
the Company of the transactions contemplated hereby, have been duly and validly
authorized and approved by the Board of Directors and except for the adoption
and authorization of this Agreement by the shareholders of the Company in
accordance with North Carolina Corporate Law, no other corporate proceedings on
the part of the Company are necessary to authorize the transactions contemplated
hereby except as set forth in Section 6.3 hereof. This Agreement has been duly
and validly executed and delivered by the Company, and assuming this Agreement
constitutes a legal, valid and binding agreement of each of the DOT and B&M,
this Agreement constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights and
remedies generally, general equitable principles (whether considered in a
proceeding at law or in equity) and an implied covenant of good faith and fair
dealing.
Section 4.3 SEC Documents; Financial Statements. (a) The Company has
filed all documents required by law to be filed by it with the SEC under the
Securities Act or the Exchange Act since April 1, 1995 (the "SEC Documents"). As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act or Exchange Act, as the case may be,
and applicable rules and regulations promulgated by the SEC thereunder, and none
of the SEC Documents, at the time they were filed (or at the effective date
thereof in the case of registration statements) contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) Except as set forth in the SEC Documents, or press releases of the
Company since April 1, 1995, copies of which have been made available to the
DOT, (the "Press Releases"), the balance sheets of the Company, and the related
statements of operations and cash flows, including the footnotes thereto,
included in the SEC Documents, fairly present the consolidated financial
position of the Company as of the respective dates thereof and the consolidated
results of operations and cash flows, as the case may be, of the Company and its
subsidiaries for the periods set forth therein (subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments), all in
accordance with generally accepted accounting principles ("GAAP") consistently
applied during the periods involved, except as may be noted therein.
(c) Except as disclosed in the SEC Documents (including, without
limitation, the financial statements therein) filed, or the Press Releases,
there are no liabilities or obligations, accrued, absolute, contingent or
threatened, and whether due or to become due, which would be required
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to be reflected in a balance sheet or in the notes thereto prepared in
accordance with GAAP ("Liabilities"), other than Liabilities that, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect and other than Liabilities incurred in the ordinary course of business.
Section 4.4 Absence of Certain Changes. Except as disclosed in the SEC
Documents or the Press Releases, since April 1, 1995, the Company has conducted
its business only in, and has not engaged in any material transaction other than
in the ordinary and usual course of such business and there has not been (i) any
material adverse change in the financial condition, business or results of
operations of the Company taken as a whole; (ii) any declaration, setting aside
or payment of any dividend or other distribution with respect to the capital
stock of the Company; or (iii) any change by the Company in accounting
principles, practices or methods.
Section 4.5 Investment Bankers and Finders. Except for the engagement
of Credit Suisse First Boston Corporation ("CSFB") and Morgan Stanley & Co.
Incorporated pursuant to engagement letters, copies of which have previously
been delivered to the DOT and its consultants, advisers, or legal counsel, the
fees and expenses of which engagements will be paid by the Company, the Company
has not employed any broker, finder or financial advisor or incurred any
liability for any broker's fees, commissions, finders' or financial advisory
fees in connection with the transactions contemplated hereby. No amendment has
been or shall be made to the Company's agreement with CSFB that would increase
the amount of fees or other compensation required thereunder.
Section 4.6 Proxy Statement. None of the information to be supplied by
or through the Company for inclusion or incorporation by reference in the Proxy
Statement or Other Filings will, at the respective times that the Proxy
Statement to be delivered to the Company's shareholders or any Other Filings are
filed with the SEC, at the time any amendment or supplement thereto is mailed to
the Company's shareholders, and at the time of the Shareholders' Meeting,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they are made, not
misleading.
Section 4.7 Tax Reports.
(a) All reports and returns with respect to Taxes (as defined
below) that are or have been required to be filed by or with respect to
the Company (collectively, the "Company's Tax Returns"), including
without limitation the federal income tax returns of the Company (the
"Company's Federal Income Tax Returns") have been duly filed, or
requests for extensions have been timely filed and have not expired,
and such Company's Tax Returns were true, complete and accurate in all
material respects.
(b) All taxes (which shall include (i) federal and (ii)
material state, local or foreign income, gross receipts, windfall
profits, severance, property, production, sales, use, license, customs,
import, export, excise, franchise, employment, withholding or similar
taxes, duties or governmental charges, together with any interest,
additions, or
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penalties with respect thereto and any interest in respect of such
additions or penalties, collectively "Taxes") shown to be due on the
Company's Tax Returns have been paid in full to the best of the
Company's information. B&M and DOT acknowledge that certain property
and other taxes have been represented to have been paid by Norfolk
Southern Railway Company (or its affiliates) and not independently
verified by the Company.
(c) The Company's Federal Income Tax Returns have been
examined by the Internal Revenue Service ("I.R.S.") or the period of
assessment of the Taxes in respect of which such Company's Federal Tax
Returns were required to be filed has expired, and all Taxes due with
respect to completed and settled examinations have been paid in full
through the taxable year of the Company ended December 31, 1993, except
that the I.R.S. has claimed an additional $56,000 tax liability with
respect to the Company's 1994 Federal Income Tax Return (the "1994
Claim"). The Company has appealed such claim through the I.R.S.
administrative appeals process, and such appeal is still pending. The
1994 Claim is subject to adjustment by the I.R.S. during the course of
the administrative appeals. Other than the 1994 claim, no issues have
been raised by the relevant taxing authority in connection with the
examination of any of the Company's Federal Tax Returns that are
reasonably likely to result in a determination that would have a
Material Adverse Effect, and no waivers of statutes of limitations have
been given by or requested with respect to any liability of the Company
for Taxes.
Section 4.8 Capitalization. The authorized capital stock of the Company
consists of 10,000,000 Shares. As of the close of business on the date of this
Agreement, there were 4,283,470 Shares issued and outstanding, there were no
options, warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating the Company to issue, transfer or sell any shares of
capital stock of the Company or any other securities convertible into or
evidencing the right to subscribe for any such shares or obligating the Company
to grant, extend or enter into any such option, warrant, call, subscription,
right or agreement. All issued and outstanding Shares are duly authorized and
validly issued, fully paid, non-assessable.
Section 4.9 Opinion of the Special Committee's Financial Advisor. The
Special Committee has received the opinion of CSFB, financial advisor to the
Special Committee, to the effect that, as of the date of this Agreement, the
Merger Consideration is fair, from a financial point of view, to the holders of
Converted Shares (other than the DOT and its affiliates).
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business of the Company. Except (i) as disclosed
in the SEC Documents or the Press Releases, or (ii) as specifically and
expressly permitted by this Agreement (including the matters set forth in
Section 5.2) or (iii) as expressly agreed to in writing by the DOT, during the
period from the date of this Agreement to the Effective Time, the Company will
not, without the prior written consent of the Secretary of the DOT:
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(a) amend its Charter or bylaws (or equivalent organizational
documents);
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver any shares of its capital stock or any
options, warrants, calls, subscriptions or other securities or rights
convertible or exchangeable into, exercisable for or evidencing the
right to subscribe for any shares of its capital stock;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or purchase, redeem or otherwise acquire
any shares of its own capital stock;
(d) (i) create, incur or assume any long-term debt or any
short-term debt for borrowed money, in excess of $2,000,000 in the
aggregate, other than under existing lines of credit; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person; or (iii) make any loans, advances or capital contributions to,
or investments in, any other person;
(e) sell, transfer, lease, license, pledge, mortgage, or
otherwise dispose of, or encumber any assets or properties, real,
personal or mixed, that are material, individually or in the aggregate,
to the Company;
(f) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in
principle or an agreement with respect to, any merger, consolidation,
plan of liquidation or dissolution (other than the Merger), or
acquisitions of assets material to the Company;
(g) authorize or commit to make capital expenditures other
than of the types and in the amounts set forth in the Company's current
budget for capital expenditures, a copy of which has been delivered to
the Secretary of the DOT, except (1) as previously approved by the
Board of Directors and as identified to the Secretary of the DOT prior
to the date hereof or otherwise consistent with past practice and (2)
for additional capital expenditures in an amount not to exceed
1,000,000, in the aggregate;
(h) cancel or take steps intended to cause the cancellation of
any material insurance policy naming it as a beneficiary or a loss
payee, except in the ordinary and usual course of business;
(i) make any change to its accounting methods, principles or
practices, except as may be required or permitted by GAAP;
(j) maintain the books and records of the Company in a manner
not consistent with past business practices; or
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(k) agree to do any of the foregoing.
Section 5.2 Access to Information. (a) From the date of this Agreement
until the Effective Time, the Company will give the DOT and B&M and their
authorized representatives (including counsel, environmental and other
consultants, accountants, auditors and financing sources and their authorized
representatives) (the "Representatives"), at their expense upon reasonable
notice and in a manner so as not to interfere unduly with the Company's
operations, reasonable access during normal business hours to all facilities,
personnel and operations and to all books and records of the Company, will
permit the DOT and B&M and such authorized representatives to make such
inspections at the DOT's expense as they may reasonably require and will cause
its officers to furnish the DOT and B&M with such financial and operating data
and other information with respect to the business and properties of the Company
as the DOT and B&M may from time to time reasonably request (including
information regarding litigation matters if such information does not require
the disclosure of privileged information or information subject to
confidentiality agreements or protective orders); provided, that nothing in this
Section 5.3(a) shall require the Company to take action which would result in a
waiver of any attorney-client privilege with respect to any book, record or
other information subject to such privilege.
(b) Each of the DOT and B&M will hold, and will cause the
Representatives to hold, in strict confidence all documents and information
concerning the Company furnished to the DOT or B&M in connection with the
transactions contemplated by this Agreement, and the Company will hold, and will
cause its consultants and advisors to hold, in strict confidence all documents
and information concerning the DOT or B&M furnished to the Company in connection
with the transactions contemplated by this Agreement; provided, however, that in
each case any party may disclose any document or information (i) that is already
public knowledge prior to such disclosure and (ii) to the extent such disclosure
is required by corporate or securities law or legal process, but (to the extent
consistent with such law or legal process) only after the disclosing party has
given prior written notice of the disclosure to the other parties. The
confidentiality obligations set forth herein shall remain in full force and
effect regardless of whether the Merger is completed or this Agreement is
terminated for any reason.
(c) All information provided pursuant to this Agreement shall be
subject to the existing Confidentiality Agreement between the Company, and the
State of North Carolina dated as of October 1, 1996.
Section 5.3 Proxy Statement; Filings and Other Action. (a) In
connection with the Shareholders' Meeting, the Company will commence the
preparation of and file a preliminary proxy statement relating to the
transactions contemplated by this Agreement (the "Preliminary Proxy Statement")
with the SEC and use its reasonable best efforts to respond to the comments of
the SEC and to cause the final Proxy Statement to be mailed to the Company's
shareholders, all as soon as reasonably practicable. The DOT and the Company,
will, if required, jointly prepare and the DOT and the Company will, if
required, file with the SEC the Schedule 13E-3 (or any amendment or supplement
thereto) that shall be filed together with the Preliminary Proxy Statement. The
Company will notify the DOT promptly of the receipt of the comments of the
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SEC and of any request by the SEC for amendments or supplements to the
Preliminary Proxy Statement or the Schedule 13E-3 (if required) or for
additional information from the SEC or members of its staff. The DOT and the
Company will cooperate in responding to all comments or requests from the SEC or
members of its staff with respect to the Preliminary Proxy Statement, the final
Proxy Statement, the Schedule 13E-3, or the Merger. If at any time prior to the
Shareholders' Meeting, any event should occur relating to the Company that
should be set forth in an amendment of, or a supplement to, the Proxy Statement
or the Schedule 13E-3, the Company will promptly inform the DOT. If at any time
prior to the Shareholders' Meeting any event should occur relating to the DOT or
any of its affiliates or associates that should be set forth in an amendment of,
or a supplement to, the Proxy Statement or the Schedule 13E-3, the DOT will
promptly notify the Company. Whenever any event occurs that should be set forth
in an amendment of' or a supplement to, the Proxy Statement or the Schedule
13E-3, the Company and the DOT will, upon learning of such event, promptly,
jointly prepare and the Company will file and mail such amendment or supplement.
(b) Subject to the terms and conditions herein provided, the Company,
the DOT and B&M shall use all commercially reasonable efforts promptly to take,
or cause to be taken, all other actions and do, or cause to be done, all other
things necessary, proper or appropriate under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
At the Shareholders' Meeting, the DOT, shall cause all Shares directly or
indirectly owned or controlled by it, to be voted in favor of the transactions
pursuant to this Agreement.
(c) The Company shall not settle or compromise any claim with respect
to Dissenting Shares prior to the Effective Time without the prior written
consent of the DOT (which consent shall not be unreasonably withheld).
(d) Nothing in this Agreement shall prohibit accurate disclosure by the
Company that is required in any SEC document, proxy statement or other filing or
otherwise under applicable law with respect to the transactions contemplated
hereby.
Section 5.4 Public Announcements. The DOT and B&M, on the one hand, and
the Company, on the other hand, will consult with each other before issuing any
press release or otherwise making any public statements with respect to the
Merger and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or court
order, or which legal counsel advise would be required by prudent disclosure
policy, in which case the parties will make reasonable efforts (to the extent
consistent with such law or court order) to consult with each other prior to the
making of such public statement.
Section 5.5 Litigation. The Company shall keep the DOT reasonably
informed of the status of all pending or subsequently commenced litigation and
administrative proceedings involving the Company (the "Litigation"), shall
communicate to the DOT the Company's intent to settle any such Litigation and
will keep the DOT reasonably apprised of any other significant developments with
regard to the Litigation.
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Section 5.6 Expenses. The DOT and B&M, on the one hand, and the
Company, on the other hand, shall bear their respective expenses incurred in
connection with the contemplated sale of the Company, including without
limitation the preparation, execution and performance of this Agreement and the
transactions contemplated hereby and all fees and expenses of investment
bankers, finders, brokers, agents, representatives, consultants, counsel and
accountants, provided that the DOT shall bear one-half of the expense of the
filing fees and printing, mailing and solicitation costs of the Proxy Statement.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES
The respective obligations of all parties to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of each of the following
conditions:
Section 6.1 Shareholder Approval. At the Shareholders' Meeting this
Agreement shall have been (i) adopted by the affirmative vote of the holders of
a majority of the issued and outstanding Shares and (ii) approved by the
affirmative vote of the holders of a majority of the issued and outstanding
Shares not owned or controlled by the State of North Carolina or the DOT.
Section 6.2 No Orders. No United States, or state governmental
authority or other agency or commission shall have enacted, issued, promulgated,
enforced, or entered any statute, law, rule, regulation, executive order,
decree, injunction, or other order (whether temporary, preliminary, or
permanent) that is then in effect and has the effect of making the Merger
illegal or otherwise preventing or prohibiting the consummation of the Merger
and other transactions contemplated hereunder.
Section 6.3 STB Order. The issuance by the Surface Transportation Board
("STB") of an appropriate order authorizing the merger, if required by law.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
THE DOT AND B&M
The obligation of the DOT and B&M to effect the Merger and to perform
their other obligations to be performed at or subsequent to the Closing shall be
subject to the fulfillment at or prior to the Closing of the following
additional conditions, any one or more of which may be waived by the DOT:
Section 7.1 Representations and Warranties True. The representations
and warranties of the Company contained herein shall be true and correct in all
material respects on the date of
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this Agreement and at and on the Closing Date as though such representations and
warranties were made at and on such dates, except to the extent any such
representation or warranty relates to a date prior to the Closing Date and
except for changes permitted or contemplated by this Agreement.
Section 7.2 Performance. The Company shall have performed and complied
in all material respects with all agreements and obligations required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
Section 7.3 Certificates. The Company shall have furnished a
certificate of its Chief Executive Officer and Chief Financial Officer to
evidence compliance with the conditions set forth in Sections 7.1 and 7.2.
Section 7.4 Certain Proceedings. No writ, order, decree or injunction
of a court of competent jurisdiction or governmental entity shall have been
entered against the DOT, B&M or the Company that prohibits or restricts the
consummation of the Merger, limits or restricts the operation of the businesses
of the Company as they are currently conducted in a manner that would reasonably
be expected to result in a Material Adverse Effect, or would otherwise
materially restrict the Surviving Corporation's exercise of its rights to own
and vote its equity interest in the Company.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement to effect the
Merger shall be subject to the fulfillment at or prior to the Closing of the
following additional conditions, any one or more of which may be waived by the
Company:
Section 8.1 Representations and Warranties True. The representations
and warranties of the DOT and B&M contained herein shall be true and correct in
all material respects on the date of this Agreement and at and on the Closing
Date as though such representations and warranties were made at and on such
dates, except to the extent any such representation or warranty relates to a
date prior to the Closing Date and except for changes permitted or contemplated
by this Agreement.
Section 8.2 Performance. Each of the DOT and B&M shall have performed
and complied in all material respects with all agreements and obligations
required by this Agreement to be performed or complied with by it on or prior to
the Closing Date.
Section 8.3 Certificates. Each of the DOT and B&M shall have furnished
a certificate of the Secretary of the DOT and B&M shall have furnished a
certificate of its Chief Executive Officer and Chief Financial Officer to
evidence compliance with the conditions set forth in Sections 8.1 and 8.2.
15
Section 8.4 Certain Proceedings. No writ, order, decree or injunction
of a court of competent jurisdiction or governmental entity shall have been
entered against the DOT, B&M, or the Company that prohibits or restricts the
consummation of the Merger or imposes criminal or material civil penalties or
unreimbursed damages by any governmental entity, on the officers or directors of
the Company.
ARTICLE IX
CLOSING
Section 9.1 Time and Place. Subject to the provisions of Articles VI,
VII, VIII and X, the closing of the Merger and all related transactions
contemplated hereby (the "Closing") shall take place at the offices of Smith
Helms Mulliss & Moore, L.L.P., 2800 Two Hannover Square, Raleigh, North
Carolina, 27601, as soon as practicable after the day the Merger is adopted and
authorized by the shareholders of the Company pursuant to Section 1.4, and all
other conditions to the Closing are satisfied or waived, or on such other date
or at such other place as the DOT and the Company may mutually agree. The date
on which the Closing actually occurs is herein referred to as the "Closing
Date."
Section 9.2 Filings at the Closing. Subject to the provisions of
Articles VI, VII, VIII and X hereof, B&M and the Company shall file at the
Closing the Articles of Merger and shall cause the Articles of Merger to be
recorded in accordance with the applicable provisions of North Carolina
Corporate Law and shall take any and all other lawful actions and do any and all
other lawful things necessary to cause the Merger to become effective.
ARTICLE X
TERMINATION AND ABANDONMENT
Section 10.1 Termination. This Agreement may be terminated and
abandoned at any time prior to the Effective Time, whether before or after
approval by the shareholders of the Company:
(a) by mutual written consent of the DOT and the Company;
(b) by the DOT or the Company if, other than due to the
willful failure of the party seeking to terminate this Agreement to
perform its material obligations hereunder required to be performed at
or prior to the Effective Time, the Merger shall not have been
consummated on or before May 5, 1998 (the "Outside Date"), which date
may be extended by mutual consent of the parties hereto;
(c) by the DOT or the Company, if any court of competent
jurisdiction in the United States or other governmental body in the
United States shall have issued a final order, decree, or ruling or
taken any other action permanently restraining, enjoining or
16
otherwise prohibiting the Merger, and such order, decree, ruling or
other action shall have become final and nonappealable; or
(d) by the DOT or the Company, if a vote of the shareholders
of the Company at the Shareholders' Meeting results in the rejection of
the adoption or authorization of this Agreement by the shareholders of
the Company or if the Company attempts to hold a Shareholders' meeting
but fails to obtain a quorum at such meeting.
Section 10.2 Procedure for Termination. In the event of termination and
abandonment of the Merger by the DOT or the Company pursuant to this Article X,
written notice thereof shall forthwith be given to the other.
Section 10.3 Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article, no party hereto (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Nonsurvival of Representations, Etc. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time or the termination of this Agreement pursuant to Article X, as the case may
be, except that the agreements contained in Section 1.7, Article II and Section
5.6 shall survive the Effective Time and the agreements contained in Sections
5.2(b), 10.3, 11.6, 11.8, 11.10, 11.11 and 11.12 shall survive any termination.
Section 11.2 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified or supplemented only by written
agreement of the DOT, B&M and the Company at any time prior to the Effective
Time with respect to any of the terms contained herein; provided, however, that
after this Agreement is adopted by the shareholders of the Company pursuant to
Section 1.4, no such amendment or modification shall reduce the Merger
Consideration or change the kind of the Merger Consideration or rights to be
received in exchange for or on conversion of all or any of the Shares, or alter
or change any of the terms and conditions of the Agreement if such alteration or
change would adversely affect the holder of any stock of any of the Constituent
Corporations.
Section 11.3 Waiver of Compliance; Consents. Any failure of the DOT,
B&M or the Company to comply with any obligation, covenant, agreement or
condition herein may be waived by the Company, on the one hand, or the DOT, and
B&M, on the other hand, only by a written instrument signed by the party or
parties granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be
17
given in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 11.3.
Section 11.4 Investigations. The respective representations and
warranties of the DOT and the Company contained herein or in any certificates or
other documents delivered prior to or at the Closing shall not be deemed waived
or otherwise affected by any investigation made by any party hereto.
Section 11.5 Reasonable Efforts. Subject to the terms and conditions
herein provided and, in the case of the Company, subject to the fiduciary duties
of the Board of Directors to the shareholders of the Company, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
and advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement.
Section 11.6 Notices. All notices and other communications hereunder
shall be in writing and shall be delivered personally or mailed by registered or
certified mail (return receipt requested), first class postage prepaid, or
telecopied with confirmation of receipt, to the parties at the addresses
specified below (or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address shall be effective
only upon receipt thereof). Any such notice shall be effective upon receipt, if
personally delivered or telecopied, or three days after mailing, if deposited in
the U.S. mail, first class postage prepaid.
(a) if to the Company, to
North Carolina Railroad Company
3200 Atlantic Avenue, Suite 110
Raleigh, North Carolina 27604
Attention: Scott M. Saylor
with copies to
Kilpatrick Stockton LLP
4101 Lake Boone Trail, Suite 400
Raleigh, North Carolina 27607-6519
Attention: James F. Verdonik
Womble, Carlyle Sandridge & Rice PLLC
P. O. Drawer 84
Winston-Salem, NC 27102
Attention: Murray Greason
and
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Mr. P. C. Barwick
Chairman, Special Committee
Post Office Box 3557
131 S. Queen Street
Kinston, North Carolina 28501
(b) if to the DOT, or B&M to
Department of Transportation
P. O. Box 25201
Raleigh, North Carolina 27611-5201
Attention: David D. King
with a copy to
Smith Helms Mulliss & Moore, L.L.P.
214 North Church Street
Charlotte, North Carolina 28202
Attention: Larry J. Dagenhart
Section 11.7 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
operation of law or otherwise by any of the parties hereto without the prior
written consent of the other parties (and any such assignment that is not so
consented to shall be null and void, ab initio).
Section 11.8 Governing Law. This Agreement shall be governed by the
laws of the State of North Carolina (regardless of the laws that might otherwise
govern under applicable North Carolina principles of conflicts of law) as to all
matters, including but not limited to matters of validity, construction, effect,
performance and remedies.
Section 11.9 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.10 Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, such invalidity, illegality or unenforceability
shall only apply as to such party in the specific jurisdiction where such
judgment shall be made, and the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby, except that this Agreement shall not be reformed in any way
that will deny to any party the essential benefits of this Agreement, unless
such party waives in writing its rights to such benefits.
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Section 11.11 Parties in Interest. Nothing in this Agreement, express
or implied, other than the right to receive the consideration payable in the
Merger pursuant to Article II hereof, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
Section 11.12 Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
Section 11.13 Entire Agreement. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and supersedes all prior agreements and understandings,
written and oral, among the parties with respect to such subject matter. There
are no representations, promises, warranties, covenants, or undertakings, other
than those expressly set forth or referred to herein and therein.
IN WITNESS WHEREOF, the DOT, B&M and the Company have caused this
Agreement to be signed by their respective duly authorized officers or
representatives as of the date first above written.
NORTH CAROLINA RAILROAD COMPANY
By: R. Samuel Hunt, III
--------------------------------
President
NORTH CAROLINA DEPARTMENT OF
TRANSPORTATION
By: Garland B. Garrett, Jr.
--------------------------------
Secretary of Transportation
BEAUFORT AND MOREHEAD RAILROAD
COMPANY
By: Garland B. Garrett, Jr.
--------------------------------
President
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