EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
dated as of
July 21, 1999
between
FIRSTGROUP PLC
and
RYDER SYSTEM, INC.
relating to the purchase and sale
of
RYDER PUBLIC TRANSPORTATION
SERVICES, INC.
TABLE OF CONTENTS
PAGE
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ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS......................................................................1
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE................................................................9
SECTION 2.02. CERTAIN PRE-CLOSING TRANSACTIONS.................................................9
SECTION 2.03. CLOSING..........................................................................9
SECTION 2.04. CLOSING BALANCE SHEET...........................................................10
SECTION 2.05. ADJUSTMENT OF PURCHASE PRICE; PAYMENT OF OTHER
ADJUSTMENTS...........................................................................12
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 3.01. CORPORATE EXISTENCE AND POWER...................................................13
SECTION 3.02. CORPORATE AUTHORIZATION.........................................................13
SECTION 3.03. GOVERNMENTAL AUTHORIZATION......................................................13
SECTION 3.04. NONCONTRAVENTION................................................................14
SECTION 3.05. CAPITALIZATION..................................................................14
SECTION 3.06. OWNERSHIP OF SHARES.............................................................14
SECTION 3.07. SUBSIDIARIES....................................................................15
SECTION 3.08. FINANCIAL STATEMENTS............................................................15
SECTION 3.09. ABSENCE OF CERTAIN CHANGES......................................................16
SECTION 3.10. NO UNDISCLOSED MATERIAL LIABILITIES.............................................17
SECTION 3.11. MATERIAL CONTRACTS..............................................................18
SECTION 3.12. LITIGATION......................................................................20
SECTION 3.13. COMPLIANCE WITH LAWS AND COURT ORDERS...........................................20
SECTION 3.14. PROPERTIES......................................................................21
SECTION 3.15. SUFFICIENCY OF ASSETS...........................................................22
SECTION 3.16. INTELLECTUAL PROPERTY...........................................................22
SECTION 3.17. INSURANCE COVERAGE..............................................................23
SECTION 3.18. LICENSES AND PERMITS............................................................23
SECTION 3.19. INFORMATION FOR BUYER OFFERING DOCUMENTS........................................24
SECTION 3.20. FINDERS' FEES...................................................................24
SECTION 3.21. EMPLOYEES.......................................................................24
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SECTION 3.22. LABOR MATTERS...................................................................24
SECTION 3.23. EMPLOYEE BENEFIT PLANS..........................................................25
SECTION 3.24. ENVIRONMENTAL MATTERS...........................................................28
SECTION 3.25. YEAR 2000 COMPLIANCE............................................................29
SECTION 3.26. REPRESENTATIONS AND WARRANTIES IN BUYER CREDIT FACILITY.........................30
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01. CORPORATE EXISTENCE AND POWER...................................................30
SECTION 4.02. CORPORATE AUTHORIZATION.........................................................30
SECTION 4.03. GOVERNMENTAL AUTHORIZATION......................................................30
SECTION 4.04. NONCONTRAVENTION................................................................31
SECTION 4.05. PURCHASE FOR INVESTMENT.........................................................31
SECTION 4.06. LITIGATION......................................................................31
SECTION 4.07. FINDERS' FEES...................................................................31
SECTION 4.08. FINANCING COMMITMENTS...........................................................31
ARTICLE 5
COVENANTS OF SELLER
SECTION 5.01. CONDUCT OF THE COMPANY..........................................................32
SECTION 5.02. ACCESS TO INFORMATION; CONFIDENTIALITY..........................................32
SECTION 5.03. CEP FILINGS.....................................................................34
SECTION 5.04. NJDEP FILINGS...................................................................34
SECTION 5.05. NOTICES OF CERTAIN EVENTS.......................................................34
SECTION 5.06. RESIGNATIONS....................................................................35
SECTION 5.07. NONCOMPETITION..................................................................35
SECTION 5.08. AUDIT OPINION...................................................................37
SECTION 5.09. REMOVAL OF CERTAIN LIENS........................................................37
SECTION 5.10. FINANCING COMMITMENT............................................................37
ARTICLE 6
COVENANTS OF BUYER
SECTION 6.01. CONDUCT OF BUYER................................................................37
SECTION 6.02. ACCESS..........................................................................38
SECTION 6.03. NOTICE OF CERTAIN EVENTS........................................................38
SECTION 6.04. FINANCING.......................................................................38
SECTION 6.05. LA TAXI RECEIVABLE..............................................................38
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ARTICLE 7
COVENANTS OF BUYER AND SELLER
SECTION 7.01. BEST EFFORTS; FURTHER ASSURANCES................................................39
SECTION 7.02. CERTAIN FILINGS.................................................................39
SECTION 7.03. PUBLIC ANNOUNCEMENTS............................................................40
SECTION 7.04. ANCILLARY AGREEMENTS............................................................40
SECTION 7.05. INTERCOMPANY ACCOUNTS...........................................................40
SECTION 7.06. BUYER OFFERING DOCUMENTS........................................................40
SECTION 7.07. BUYER SHAREHOLDER MEETING.......................................................41
SECTION 7.08. REPLACEMENT OF SURETY BONDS; GUARANTIES; LETTERS OF
CREDIT................................................................................41
ARTICLE 8
TAX MATTERS
SECTION 8.01. TAX DEFINITIONS.................................................................42
SECTION 8.02. TAX REPRESENTATIONS.............................................................43
SECTION 8.03. COVENANTS.......................................................................46
SECTION 8.04. REFUNDS.........................................................................48
SECTION 8.05. TAX SHARING.....................................................................48
SECTION 8.06. COOPERATION ON TAX MATTERS......................................................49
SECTION 8.07. TAX INDEMNIFICATION.............................................................49
SECTION 8.08. PURCHASE PRICE ADJUSTMENT AND INTEREST..........................................52
ARTICLE 9
EMPLOYEE BENEFITS
SECTION 9.01. COMPENSATION AND BENEFITS.......................................................53
SECTION 9.02. PENSION PLAN....................................................................54
SECTION 9.03. INDIVIDUAL ACCOUNT PLAN.........................................................57
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10.01. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER..................................59
SECTION 10.02. CONDITIONS TO OBLIGATION OF BUYER..............................................59
SECTION 10.03. CONDITIONS TO OBLIGATION OF SELLER.............................................61
ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11.01. SURVIVAL.......................................................................61
SECTION 11.02. INDEMNIFICATION................................................................62
SECTION 11.03. PROCEDURES.....................................................................63
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ARTICLE 12
TERMINATION
SECTION 12.01. GROUNDS FOR TERMINATION........................................................64
SECTION 12.02. EFFECT OF TERMINATION..........................................................64
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. NOTICES........................................................................66
SECTION 13.02. AMENDMENTS AND WAIVERS.........................................................67
SECTION 13.03. EXPENSES.......................................................................68
SECTION 13.04. SUCCESSORS AND ASSIGNS.........................................................68
SECTION 13.05. GOVERNING LAW..................................................................68
SECTION 13.06. JURISDICTION...................................................................68
SECTION 13.07. WAIVER OF JURY TRIAL...........................................................69
SECTION 13.08. COUNTERPARTS; THIRD PARTY BENEFICIARIES........................................69
SECTION 13.09. ENTIRE AGREEMENT...............................................................69
SECTION 13.10. CAPTIONS.......................................................................69
SECTION 13.11. CERTAIN INTERPRETIVE MATTERS AND DEFINITIONS...................................69
SECTION 13.12. CERTAIN LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND
THE RIGHTS OF THE PARTIES.............................................................70
SECTION 13.13. BUYER DUE DILIGENCE ADJUSTMENTS................................................70
SCHEDULES
----------------------
Schedule 2.02 Restructuring
Schedule 3.04 Noncontravention
Schedule 3.07 Subsidiaries
Schedule 3.08 Financial Statements
Schedule 3.09 Absence of Certain Changes
Schedule 3.10 No Undisclosed Material Liabilities
Schedule 3.11 Material Contracts
Schedule 3.12 Litigation
Schedule 3.13 Compliance with Laws and Court Orders
Schedule 3.14 Properties
Schedule 3.16 Intellectual Property
Schedule 3.18 Licenses and Permits
Schedule 3.22 Labor Matters
Schedule 3.23 Employee Benefit Plans
Schedule 3.24 Environmental Matters
Schedule 3.25 Year 2000 Compliance
Schedule 8.02(a) Filing and Payment of Taxes
Schedule 8.02(b) Procedure and Compliance
Schedule 8.02(c) Taxing Jurisdictions
Schedule 8.02(d) Tax Sharing, Consolidation and Similar Arrangements.
Schedule 8.02(e) Certain Agreements and Arrangements
Schedule 8.02(f) Property and Leases
Schedule 8.02(g) Certain Elections
Schedule 8.02(h) Insurance/Reinsurance
Schedule 9.01 Extended Option Exercise Periods
Schedule 13.11 Seller's Knowledge
Schedule 13.13 Buyer Due Diligence Adjustments
APPENDICES
----------------------
APPENDIX I Base Stockholder's Equity
APPENDIX II Annual Financial Statements
APPENDIX III Form of KPMG Audit Opinion
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of July 21, 1999 between FIRSTGROUP PLC, a public
limited company organized under the laws of Scotland ("BUYER"), and RYDER
SYSTEM, INC., a Florida corporation ("SELLER").
W I T N E S S E T H :
WHEREAS, Seller is the record and beneficial owner of all of the
outstanding shares of capital stock of Ryder Truck Rental, Inc. ("SELLER SUB"),
and Seller Sub is the record and beneficial owner of the Shares; and
WHEREAS, Seller desires to cause the Shares to be sold to Buyer, and
Buyer desires to purchase the Shares from Seller Sub, upon the terms and subject
to the conditions hereinafter set forth.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS. (a) The following terms, as used herein,
have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person; PROVIDED that neither the Company nor any Subsidiary shall be
considered an Affiliate of Seller.
"ANCILLARY AGREEMENTS" means the Transitional Services Agreement, the
Trademark License Agreement, the Maintenance Agreement and the Inspection
Services Agreement.
"BALANCE SHEET" means the unaudited pro forma consolidated balance
sheet of the Company and the Subsidiaries as adjusted to give effect to the
Restructuring as of May 31, 1999.
"BASE STOCKHOLDER'S EQUITY" means $341,799,000.00, which has been
calculated based upon the Balance Sheet as adjusted as described in Appendix I
hereto; PROVIDED THAT such Base Stockholder's Equity amount shall be further
adjusted as follows: (i) to exclude any of the items referred to in clauses (A)
through (G) of the definition of Closing Stockholder's Equity to the extent any
such items are reflected in the Balance Sheet but not already reflected in the
adjustments set forth on Appendix I; and (ii) to the extent not already treated
as such in the calculation of Base Stockholder's Equity on Appendix I, all
intercompany accounts between Seller or its Affiliates, on the one hand, and the
Company or any Subsidiary, on the other hand, reflected on the Balance Sheet
shall be treated as settled by netting such balances against each other with any
resulting balance due to Seller and its Affiliates being treated as having being
contributed to the stockholder's equity of the Company.
"BALANCE SHEET DATE" means May 31, 1999.
"BENEFIT ARRANGEMENT" means any employment, severance or similar
contract or arrangement (whether or not written) or any plan, policy, fund,
program or contract or arrangement (whether or not written) providing for
compensation, bonus, profit-sharing, stock option, or other stock related rights
or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, workers' compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance or other
benefits) that (i) is not an Employee Plan, (ii) is not governmentally mandated,
(iii) is entered into, maintained, administered or contributed to, as the case
may be, by Seller, any of its Affiliates or the Company or any Subsidiary and
(iv) covers any employee or former employee of or any independent contractor or
consultant providing services for the Company or any Subsidiary.
"BUYER OFFERING DOCUMENTS" means (i) in connection with the first
posting, the prospectus, the provisional allotment letter and the related press
release, (ii) in connection with the second posting, the Class 1 circular and
the additional press release, and (iii) in connection with (i) or (ii) above,
any supplementary prospectus.
"BUYER SHAREHOLDER RESOLUTIONS" means the resolutions to be proposed to
the shareholders of Buyer (i) to approve the transactions contemplated hereby,
(ii) to increase the authorized share capital of Buyer, (iii) to grant authority
to allot securities pursuant to Section 80, U.K. Companies Act of 1985, and (iv)
to increase the permitted borrowing limit of Buyer.
"CEP" means the Connecticut Commissioner of Environmental
Protection.
2
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and any rules or regulations promulgated
thereunder.
"CLOSING DATE" means the date of the Closing.
"COMMON STOCK" means the common stock, par value $1.00 per share, of
the Company.
"COMPANY" means Ryder Public Transportation Services, Inc., a Florida
corporation.
"CONNECTICUT TRANSFER FORM" means CTA Form I, II, III or IV, as
appropriate, and any attachments thereto or filings made therewith.
"CTA" means the Connecticut Hazardous Waste Establishment Transfer Act
(General Statutes sections 22a-134, ET SEQ.), as amended, and any rules or
regulations promulgated thereunder.
"EMPLOYEE PLAN" means any "employee benefit plan", as defined in
Section 3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is
not governmentally mandated, (iii) is maintained, administered or contributed to
by Seller, any of its Affiliates or the Company or any Subsidiary and (iv)
covers any employee or former employee of the Company or any Subsidiary.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any Governmental Authority or
other third party in effect as of the date hereof relating to the environment or
to pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.
"ENVIRONMENTAL PERMITS" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of Governmental
Authorities required by Environmental Laws to operate the business of the
Company or any Subsidiary as currently conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the rules and regulations promulgated thereunder.
3
"ERISA AFFILIATE" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"FINAL NET DEBT" means an amount equal to (x) the aggregate amount of
all cash and cash equivalents, less (y) the aggregate amount of all Indebtedness
for Borrowed Money, in each case, as such items are set forth in (or, if not set
forth in, determined by reference to) the Final Closing Balance Sheet. If the
amount in clause (x) exceeds the amount in clause (y), Final Net Debt shall be a
positive number, and if the amount in clause (y) exceeds the amount in clause
(x), Final Net Debt shall be a negative number.
"GOVERNMENTAL AUTHORITY" means any governmental authority,
quasi-governmental authority, instrumentality, court, government or
self-regulatory organization, commission, tribunal or organization or any
regulatory, administrative or other agency, or any political or other
subdivision, department or branch of any of the foregoing; PROVIDED that for
purposes of this Agreement no such entity shall be considered a Governmental
Authority solely in its capacity as a party to any contract with the Company or
any Subsidiary for transportation, maintenance, management or other services,
but such entity shall be considered a Governmental Authority in all other
respects for purposes of this Agreement.
"HAZARDOUS SUBSTANCES" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise
hazardous substance, waste or material, or any substance, waste or material
having any constituent elements displaying any of the foregoing characteristics,
including, without limitation, petroleum, its derivatives, by-products and other
hydrocarbons, in each case, which are regulated under or form the basis of
liability under any Environmental Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INSPECTION SERVICES AGREEMENT" means an agreement between Buyer and
Seller relating to inspection and related services to be provided by the Company
or a Subsidiary to Seller or an Affiliate of Seller.
"INDEBTEDNESS FOR BORROWED MONEY" means all obligations for borrowed
money, all obligations evidenced by bonds (other than contingent obligations
under performance bonds), debentures, promissory notes or other similar
instruments, bank overdrafts, all obligations to pay the deferred purchase price
of property or services (except trade accounts payable arising in the ordinary
course of business) required to be reflected on a balance sheet prepared in
accordance
4
with U.S. GAAP, obligations under leases that are capitalized in accordance with
U.S. GAAP, and all non-contingent obligations to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument; PROVIDED that "Indebtedness for Borrowed Money" shall not include
obligations under non-competition agreements and checks drawn but not paid.
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service mark, trade
name, mask work, invention, patent, trade secret, copyright, know-how (including
any registrations or applications for registration of any of the foregoing) or
any other similar type of proprietary intellectual property right.
"ISRA" means the New Jersey Industrial Site Recovery Act, as amended,
and any rules or regulations promulgated thereunder.
"LACMTA ARBITRATION" means the pending arbitration proceeding by the
Company against the Los Angeles County Metropolitan Transit Authority relating
to a claim for recovery of maintenance costs from the Los Angeles County
Metropolitan Transit Authority.
"LACMTA ARBITRATION AMOUNT" means the aggregate amount received by the
Company or any Subsidiary on or prior to the Closing Date from the Los Angeles
County Metropolitan Transit Authority in respect of the LACMTA Arbitration; it
being understood and agreed that an amount shall be deemed received if (i) such
amount has been paid to the Company or any Subsidiary by cash, check, wire
transfer or otherwise on or prior to the Closing Date, or (ii) such amount is or
should be reflected as a receivable on the Closing Balance Sheet in accordance
with U.S. GAAP. If such amount has not been received on or prior to the Closing
Date, the LACMTA Arbitration Amount shall be zero.
"LIEN" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest or similar encumbrance in respect of
such property or asset. For the purposes of this Agreement, a Person shall be
deemed to own subject to a Lien any property or asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
property or asset.
"LSE" means the London Stock Exchange Limited.
"MAINTENANCE AGREEMENT" means an agreement between Buyer and Seller
relating to maintenance services to be provided at certain Seller Sub facilities
identified on Schedule 2.02.
5
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, financial condition, assets or results of operations of the Company
and the Subsidiaries, taken as a whole, other than a material adverse effect
resulting from events, changes or developments relating to the U.S. economy in
general or resulting from industry-wide developments affecting companies in
similar businesses; PROVIDED, that any determination of whether any state of
facts, event, change or development has had or could reasonably be expected to
have a Material Adverse Effect on the Company and the Subsidiaries, taken as a
whole, will be made giving effect to the Restructuring.
"MULTIEMPLOYER PLAN" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
"NJDEP" means the New Jersey Department of Environmental Protection.
"1934 ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"PUERTO RICO BUSINESS" means the business conducted by Ryder Puerto
Rico, Inc. pursuant to the contracts identified on item 5 of Schedule 2.02.
"RETAINED LIABILITIES" includes (a) all liabilities, obligations and
expenses arising from claims of bodily injury or property damage (including
workers' compensation claims) relating to accidents or occurrences (and diseases
that would be covered by Seller's Workers' Compensation and Employers' Liability
Insurance Policy or Specific Excess Workers' Compensation and Employers'
Liability Policy, giving effect to any exclusions under such insurance policy
but disregarding any deductible or other limitation on the amount payable for
claims under such insurance policy) which occurred in connection with the
operations of the Company and its Subsidiaries prior to the Closing Date,
regardless of whether such claims were asserted before, on or after the Closing
Date and (b) all amounts included in the calculation of Final Net Debt as cash
or cash equivalents arising from checks payable to the Company or any Subsidiary
which, after the Closing Date, are returned to the Company or any Subsidiary for
insufficient funds or otherwise dishonored, except to the extent such amounts
are deducted from assets in the Closing Balance Sheet. Retained Liabilities do
not include, without
6
limitation, (i) claims for which the Company or its Subsidiaries are entitled to
receive indemnification in a contract or agreement or (ii) matters that are the
subject matter of Section 3.24.
"SHARES" means 1,000 shares of Common Stock.
"SUBSIDIARY" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by the Company.
"TITLE IV PLAN" means an Employee Plan subject to Title IV of ERISA
other than any Multiemployer Plan.
"TRADEMARK LICENSE AGREEMENT" means an agreement between Seller and
Buyer with respect to the licensing of the Ryder tradename and trademark to the
Company and its Subsidiaries for one year following the Closing.
"TRANSITIONAL SERVICES AGREEMENT" means an agreement between Seller and
Buyer with respect to the provision of transitional services to the Company and
its Subsidiaries by Seller and Affiliates of Seller.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
Accounting Referee 8.01
Allocation Statement 8.03
Annual Financial Statements 3.08
Business 5.07
Buyer Preamble
Buyer Companies 13.12
Buyer Indemnitee 8.01
Buyer's Stockholder Approval 4.02
Closing 2.03
Closing Balance Sheet 2.04
Closing Stockholder's Equity 2.04
Code 8.01
Company Accounting Policies 2.04
Company Intellectual Property Rights 3.16
Company Securities 3.05
7
TERM SECTION
Confidentiality Agreement 5.02
Damages 11.02
Deal 13.12
DOJ 7.02
Federal Tax 8.01
Final Closing Balance Sheet 2.05
Final Determination 8.08
Final Stockholder's Equity 2.05
Financing Commitments 4.08
FTC 7.02
Funding Conditions 6.04
Indemnified Party 11.03
Indemnifying Party 11.03
Independent Arbiter 12.03
Individual Account Plan 9.03
Last Offer 2.04
Loss 8.07
Modified Aggregate Deemed Sales Price 8.03
1996 Financial Statements 5.08
1999 Other Taxes 8.07
Other Income Tax 8.01
Other Taxes 8.01
Pension Plan 9.02
Permits 3.18
Permitted Liens 3.14
Post-Closing Tax 8.07
Post-Closing Tax Period 8.01
Preliminary Payment 9.02
Pre-Closing Tax Period 8.01
Purchase Price 2.01
Restructuring 2.02
Returns 8.02
Section 338(h)(10) Election 8.03
Section 338 Tax 8.01
Seller Preamble
Seller Group 8.01
Seller Sub Recitals
Subsidiary Securities 3.07
8
TERM SECTION
Successor Individual Account Plan 9.03
Successor Pension Plan 9.02
System 3.25
Tax 8.01
Tax Asset 8.01
Tax Benefit 8.07
Tax Sharing Agreements 8.01
Taxing Authority 8.01
Termination Amount 12.02
Transfer Amount 9.02
Transfer Taxes 8.03
Transferred Employees 9.02
Transit Arrangement 3.23
Transit Plan 3.23
U.S. GAAP 3.08
Vehicles 8.02
Year 2000 Compliant 3.25
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to cause Seller Sub to sell to
Buyer, and Buyer agrees to purchase, or cause a subsidiary of Buyer to purchase
in accordance with Section 13.04, from Seller Sub, the Shares at the Closing.
The purchase price for the Shares (the "PURCHASE PRICE") is $940,000,000.00 in
cash. The Purchase Price shall be paid as provided in Section 2.03 and shall be
subject to adjustment as provided in Section 2.05.
SECTION 2.02. CERTAIN PRE-CLOSING TRANSACTIONS. Prior to the Closing,
Seller and Affiliates of Seller shall contribute to the Company or one of the
Subsidiaries, as determined in consultation with Buyer, certain assets that are
part of or necessary for the Business, and shall transfer to the payroll of the
Company or a Subsidiary the employees associated with such transferred assets,
as set forth on Schedule 2.02, and the parties identified on Schedule 2.02 will
take the additional actions specified thereon. The transactions described in
this Section 2.02 are collectively referred to as the "RESTRUCTURING".
9
SECTION 2.03. CLOSING. The closing (the "CLOSING") of the purchase and
sale of the Shares hereunder shall take place at the offices of Davis Polk &
Wardwell, 450 Lexington Avenue, New York, New York, as soon as possible, but in
no event later than eight business days (or, if applicable, such shorter time
(not less than two business days) as funding may be available to Buyer under the
Financing Commitments), after satisfaction of the conditions set forth in
Article 10, or at such other time or place as Buyer and Seller may agree. At the
Closing:
(a) Buyer shall deliver to Seller $940,000,000.00 in immediately
available funds by wire transfer to an account of Seller with a bank in
New York City designated by Seller, by notice to Buyer, not later than
two business days prior to the Closing Date (or if not so designated,
then by certified or official bank check payable in immediately
available funds to the order of Seller in such amount).
(b) Seller shall deliver to Buyer certificates for the Shares duly
endorsed or accompanied by stock powers duly endorsed in blank, with
any required transfer stamps affixed thereto.
(c) Seller and Buyer shall enter into the Ancillary Agreements.
SECTION 2.04. CLOSING BALANCE SHEET. (a) During the period ending 90
days after the Closing Date, Buyer and Seller will cooperate with the objective
of agreeing to and preparing the Closing Balance Sheet together with an agreed
to calculation of Closing Stockholder's Equity. If the parties are unable to
agree thereon, Buyer will cause the Company to prepare the Closing Balance Sheet
and to calculate Closing Stockholder's Equity and to deliver the same to Buyer
and Seller. In all events, the Closing Balance Sheet (the "CLOSING BALANCE
SHEET") shall reflect the consolidated financial position of the Company and the
Subsidiaries as at the close of business on the Closing Date determined using
the same accounting principles, policies, practices and methodologies used in
the preparation of the Balance Sheet and (recognizing that they are not adjusted
to give effect to the Restructuring) the unaudited pro forma balance sheets of
the Company and the Subsidiaries as of December 31, 1997 and 1998 (the "COMPANY
ACCOUNTING POLICIES") and shall include the same line items as in the Balance
Sheet and (recognizing that they are not adjusted to give effect to the
Restructuring) the unaudited pro forma balance sheets of the Company and the
Subsidiaries as of December 31, 1997 and 1998. "CLOSING STOCKHOLDER'S EQUITY"
means the consolidated stockholder's equity of the Company and the Subsidiaries
as shown on the Closing Balance Sheet, with the following adjustments: excluding
(A) the effect (including the Section 338 Tax effect) of the Section 338(h)(10)
Election except to the extent that Buyer is liable for Taxes
10
under Section 8.03(e), (B) any provision for assets (including refunds) or
liabilities attributable to Federal Taxes or Other Income Taxes, (C) any
provision for assets or liabilities attributable to contingent Federal Taxes and
Other Income Taxes, (D) any assets or liabilities attributable to deferred
income taxes reflecting either differences between the treatment of items or
amounts for accounting and income tax purposes or carryforwards, (E) any
provision for Retained Liabilities, (F) cash, cash equivalents and Indebtedness
for Borrowed Money, and (G) any other liabilities retained by Seller pursuant to
the terms of this Agreement.
(b) If the parties are unable to agree upon the Closing Balance Sheet
and the calculation of Closing Stockholder's Equity as contemplated by the first
sentence of Section 2.04(a) and as calculated by the Company, Seller or Buyer
may, within 30 days after the deliveries referred to in Section 2.04(a), deliver
a notice to the other disagreeing with such calculation and setting forth its
calculation of such amount. Any such notice of disagreement shall specify in
reasonable detail those items or amounts as to which Seller or Buyer disagrees,
and Seller or Buyer, as the case may be, shall be deemed to have agreed with all
other items and amounts contained in the Closing Balance Sheet and the
calculation of Closing Stockholder's Equity delivered pursuant to Section
2.04(a)
(c) If a notice of disagreement shall be duly delivered pursuant to
Section 2.04(b), Buyer and Seller shall jointly cause Ernst & Young (New York
Office) or, if Ernst & Young is unable or unwilling to so act, another firm of
independent accountants of nationally recognized standing reasonably
satisfactory to Buyer and Seller (who shall not have any material relationship
with Buyer or Seller), promptly to review this Agreement and the disputed items
or amounts for the purpose of preparing the Closing Balance Sheet and
calculating Closing Stockholder's Equity. In making such calculation, such
independent accountants shall consider only those items or amounts in the
Closing Balance Sheet or Buyer's calculation of Closing Stockholder's Equity as
to which Seller has disagreed. Such independent accountants shall deliver to
Buyer and Seller, as promptly as practicable, a report setting forth such
calculation. Such report shall be final and binding upon Buyer and Seller. The
independent accountants will not have the authority to review or make a
determination with respect to any matter except the items in dispute, it being
understood that the independent accountants will not be retained to conduct
their own independent audit or review, but rather will be retained only to
resolve specific differences between Buyer and Seller and within the range of
such difference as stated in the last written settlement offers of Buyer and
Seller related to all disputed items submitted to the independent accountants
(each, a "LAST OFFER"); PROVIDED, HOWEVER, that, to the extent that any change
in the Closing Balance Sheet deemed appropriate by the independent accountants
requires for consistency under the Company Accounting Principles a
11
corresponding change in any other item included in the Closing Balance Sheet,
the independent accountants will make such change. The cost of such review and
report shall be borne (i) by Buyer if the difference between Final Stockholder's
Equity and Buyer's Last Offer is greater than the difference between Final
Stockholder's Equity and Seller's Last Offer, (ii) by Seller if the first such
difference is less than the second such difference and (iii) otherwise equally
by Buyer and Seller.
(d) Buyer and Seller agree that they will, and agree to cause their
respective independent accountants and the Company and each Subsidiary to,
reasonably cooperate and assist in the preparation of the Closing Balance Sheet
and the calculation of Closing Stockholder's Equity and in the conduct of the
reviews referred to in this Section 2.04, including without limitation, the
making available to the extent necessary of books, records, accountants work
papers (subject to such limitations as such accountants may impose in accordance
with customary practice) and personnel.
SECTION 2.05. ADJUSTMENT OF PURCHASE PRICE; PAYMENT OF OTHER
ADJUSTMENTS. (a) If Base Stockholder's Equity exceeds Final Stockholder's
Equity, Seller shall pay to Buyer, as an adjustment to the Purchase Price, in
the manner and with interest as provided in Section 2.05(d), the amount of such
excess. If Final Stockholder's Equity exceeds Base Stockholder's Equity, Buyer
shall pay to Seller, in the manner and with interest as provided in Section
2.05(d) , the amount of such excess. "FINAL STOCKHOLDER'S EQUITY" means the
Closing Stockholder's Equity (i) as agreed to by Seller and Buyer; (ii) as shown
in the Company's calculation delivered pursuant to Section 2.04(a), if no notice
of disagreement with respect thereto is subsequently duly delivered pursuant to
Section 2.04(b); or (iii) if such a notice of disagreement is delivered, as
shown in the independent accountant's calculation delivered pursuant to Section
2.04(c); PROVIDED that in no event shall Final Stockholder's Equity be less than
Buyer's Last Offer or more than Seller's Last Offer. "FINAL CLOSING BALANCE
SHEET" means the Closing Balance Sheet (i) as agreed to by Seller and Buyer;
(ii) as prepared by the Company and delivered pursuant to Section 2.04(a), if no
notice of disagreement with respect thereto is subsequently delivered pursuant
to Section 2.04(b); or (iii) if such a notice of disagreement is delivered, as
prepared by the independent accountants and delivered pursuant to Section
2.04(c).
(b) If Final Net Debt is a negative number, Seller shall pay to Buyer,
in the manner and with interest as provided in Section 2.05(d), the Final Net
Debt amount, expressed as a positive number. If Final Net Debt is a positive
number, Buyer shall pay to Seller, in the manner and with interest as provided
in Section 2.05(d), the Final Net Debt amount.
12
(c) Seller shall pay to Buyer, in the manner and with interest as
provided in Section 2.05(d), the LACMTA Arbitration Amount.
(d) Any payments pursuant to Section 2.05(a) or 2.05(b) or 2.05(c)
shall be made in U.S. dollars at a mutually convenient time and place within two
business days after the Final Stockholder's Equity has been determined by
delivery by Buyer or Seller, as the case may be, of a certified or official bank
check payable in immediately available funds to the other party or by transfer
of immediately available funds to such account of such other party as may be
designated by such other party. The amount of any payment to be made pursuant to
this Section 2.05 shall bear interest from and including the Closing Date to but
excluding the date of payment at a rate per annum equal to the Prime Rate as
published in the WALL STREET JOURNAL, Eastern Edition in effect from time to
time during the period from the Closing Date to the date of payment. Such
interest shall be payable at the same time as the payment to which it relates
and shall be calculated daily on the basis of a year of 365 days and the actual
number of days elapsed.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof and as of
the Closing Date that:
SECTION 3.01. CORPORATE EXISTENCE AND POWER. Each of Seller and the
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and authority to conduct its business as now conducted. The
Company is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where such qualification is necessary, except
where the failure to be so qualified would not be materially adverse to the
Company's business. Seller has heretofore delivered to Buyer true and complete
copies of the articles of incorporation and bylaws of Seller and the Company as
currently in effect.
SECTION 3.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Seller of this Agreement and each of the Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby are within
Seller's corporate powers and have been duly authorized by all necessary
13
corporate action on the part of Seller. This Agreement constitutes a valid and
binding agreement of Seller.
SECTION 3.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Seller of this Agreement and each of the Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby require no
action by or in respect of, or filing with, any Governmental Authority other
than (i) compliance with any applicable requirements of the HSR Act; (ii)
compliance with any applicable requirements of the 1934 Act; (iii) compliance
with any applicable requirements of CTA; (iv) compliance with any applicable
requirements of ISRA; and (v) such other consents, approvals, orders or
authorizations the failure of which to be made or obtained, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Company.
SECTION 3.04. NONCONTRAVENTION. Except as set forth on Schedule 3.04,
the execution, delivery and performance by Seller of this Agreement and each of
the Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby by Seller do not and will not (i) violate the articles or
certificate of incorporation or bylaws of Seller or the Company or any
Subsidiary, (ii) assuming compliance with the matters referred to in Section
3.03, violate any applicable law, rule, regulation, judgment, injunction, order
or decree, (iii) require any consent or other action by any Person under,
constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any material right or obligation of Seller or
the Company or any Subsidiary or to a loss of any material benefit to which
Seller or the Company or any Subsidiary is entitled under any provision of any
agreement or other instrument binding upon Seller or the Company or any
Subsidiary or (iv) result in the creation or imposition of any Lien on any asset
of the Company or any Subsidiary, other than, in the case of clauses (ii)
through (iv) hereof, such of the foregoing as could not reasonably be expected
to be material to the business of the Company and its Subsidiaries.
SECTION 3.05. CAPITALIZATION. (a) The authorized capital stock of the
Company consists of 1,000 shares of Common Stock. There are outstanding 1,000
shares of Common Stock.
(b) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable. Except
as set forth in this Section 3.05, there are no outstanding (i) shares of
capital stock or voting securities of the Company, (ii) securities of the
Company convertible into or exchangeable for shares of capital stock or voting
securities of the Company or (iii) options or other rights to acquire from the
Company, or other
14
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company (the items in clauses 3.05(b)(i), 3.05(b)(ii) and
3.05(b)(iii) being referred to collectively as the "COMPANY SECURITIES"). There
are no outstanding obligations of the Company or any Subsidiary to repurchase,
redeem or otherwise acquire any Company Securities.
SECTION 3.06. OWNERSHIP OF SHARES. Seller Sub is the record and
beneficial owner of the Shares, free and clear of any Lien and any restriction
on the right to vote, sell or otherwise dispose of the Shares (excluding
restrictions arising under applicable law), and will transfer and deliver to
Buyer at the Closing valid title to the Shares free and clear of any Lien or any
such restriction.
SECTION 3.07. SUBSIDIARIES. (a) Each Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and authority to conduct
its business as now conducted, is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except where the failure to be so qualified would
not be materially adverse to the business of the Company. All Subsidiaries and
their respective jurisdictions of incorporation are identified on Schedule 3.07.
(b) All of the outstanding capital stock or other voting securities of
each Subsidiary is owned by the Company, directly or indirectly, free and clear
of any Lien and free of any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other voting securities (excluding restrictions
arising under applicable law). There are no outstanding (i) securities of the
Company or any Subsidiary convertible into or exchangeable for shares of capital
stock or voting securities of any Subsidiary or (ii) options or other rights to
acquire from the Company or any Subsidiary, or other obligation of the Company
or any Subsidiary to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of any
Subsidiary (the items in clauses 3.07(b)(i) and 3.07(b)(ii) being referred to
collectively as the "SUBSIDIARY SECURITIES"). There are no outstanding
obligations of the Company or any Subsidiary to repurchase, redeem or otherwise
acquire any outstanding Subsidiary Securities.
SECTION 3.08. FINANCIAL STATEMENTS. The unaudited pro forma
consolidated balance sheets of the Company and the Subsidiaries as of December
31, 1997 and 1998 and the related unaudited pro forma consolidated statements of
income and cash flows for each of the years ended December 31, 1997 and 1998
attached hereto as Appendix II (collectively, the "ANNUAL
15
FINANCIAL STATEMENTS") and the unaudited interim pro forma consolidated balance
sheet as of May 31, 1999 and the related unaudited interim pro forma
consolidated statements of income and cash flows for the five months ended May
31, 1999 of the Company and the Subsidiaries fairly present, in all material
respects, in conformity with United States generally accepted accounting
principles ("U.S. GAAP") applied on a consistent basis (except as may be
indicated in the notes thereto or specifically set forth on Schedule 3.08), the
consolidated financial position of the Company and the 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
any unaudited interim financial statements), in each case, as adjusted to give
effect to the Restructuring.
SECTION 3.09. ABSENCE OF CERTAIN CHANGES. Except as set forth on
Schedule 3.09, since the Balance Sheet Date, the business of the Company and its
Subsidiaries has been conducted in the ordinary course consistent in all
material respects with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances or
facts which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect;
(b) any amendment of any material term of any outstanding security of
the Company or any Subsidiary;
(c) any incurrence, assumption or guarantee by the Company or any
Subsidiary of any Indebtedness for Borrowed Money other than any such
indebtedness which is either (i) not outstanding as of the Closing
Date, (ii) may be prepaid on not more than 10 days' notice without the
payment of any penalty or premium or (iii) incurred, assumed or
guaranteed and permitted by Buyer pursuant to Section 5.01;
(d) any creation or other incurrence by the Company or any Subsidiary
of any Lien on any asset other than Permitted Liens and other liens
arising in the ordinary course of business consistent in all material
respects with past practices;
(e) any making of any loan, advance or capital contributions to or
investment in any Person other than (i) loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries and (ii)
loans and advances to employees for travel and other business-related
16
expenses, in each case made in the ordinary course of business
consistent in all material respects with past practices;
(f) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any Subsidiary relating to its assets
or business (including the acquisition or disposition of any assets) or
any relinquishment by the Company or any Subsidiary of any contract or
other right, in either case, material to the Company and the
Subsidiaries, taken as a whole, other than (i) transactions and
commitments in the ordinary course of business consistent in all
material respects with past practices, (ii) those contemplated by this
Agreement, (iii) any of the foregoing involving less than any specified
dollar threshold or other express exclusion in any other provision of
this Section or in Section 3.11 or 5.01, or (iv) any transaction
effected as part of the Restructuring;
(g) any change in any method of accounting or accounting practice by
the Company or any Subsidiary except for any such change after the date
hereof required by reason of a concurrent change in U.S. GAAP;
(h) any (i) employment, deferred compensation, severance, retirement
or other similar agreement entered into with any director, officer or
employee of the Company or any Subsidiary (or any amendment to any such
existing agreement), (ii) grant of any severance or termination pay to
any director or officer of the Company or any Subsidiary or to any
employee of the Company or any Subsidiary receiving annual base
compensation of more than $50,000, or (iii) change in compensation or
other benefits payable to any director, officer or employee of the
Company or any Subsidiary pursuant to any severance or retirement plans
or policies thereof other than (i) in the ordinary course of business
consistent in all material respects with past practices or (ii) such
agreements, grants or changes involving less than $50,000;
(i) any material labor dispute, other than routine individual
grievances, or, to the Knowledge of Seller, any material activity or
proceeding by a labor union or representative thereof to organize any
employees of the Company or any Subsidiary, which employees were not
subject to a collective bargaining agreement at the Balance Sheet Date,
or any material lockouts, strikes, slowdowns, work stoppages or, to the
Knowledge of Seller, threats thereof by or with respect to any
employees of the Company or any Subsidiary; or
17
(j) any capital expenditure, or commitment for a capital expenditure,
for additions or improvements to property, plant and equipment, other
than (i) for the acquisition of buses, vans and service vehicles in the
ordinary course of business consistent in all material respects with
past practices, (ii) such individual expenditures involving less than
$250,000, or (iii) aggregate expenditures (other than expenditures
covered by clause (i) of this Section 3.09(j)) that do not exceed
$3,000,000 in any one month.
SECTION 3.10. NO UNDISCLOSED MATERIAL LIABILITIES. (a) There are no
liabilities of the Company or any Subsidiary of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, other
than:
(i) liabilities provided for in the Balance Sheet or disclosed in the
notes thereto;
(ii) liabilities disclosed on Schedule 3.10;
(iii) liabilities which, to the extent not discharged, will be
reflected in the Final Closing Balance Sheet; and
(iv) other undisclosed liabilities which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(b) As of the date hereof, to the Knowledge of Seller, there are no
material liabilities of the Company or any Subsidiary of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
other than those described in Sections 3.10(a)(i), (ii) and (iii) above.
SECTION 3.11. MATERIAL CONTRACTS. (a) Except as disclosed in Schedule
3.11, neither the Company nor any Subsidiary is a party to or bound by:
(i) any lease (whether of real or personal property) providing for
annual rentals of $50,000 or more;
(ii) any agreement (other than open purchase orders for amounts not
exceeding $100,000 in the aggregate) for the purchase of materials,
supplies, goods, services, equipment or other assets providing for
either (A) annual payments by the Company and the Subsidiaries of
$100,000 or more or (B) aggregate payments by the Company and the
Subsidiaries of $500,000 or more;
18
(iii) any services or other similar agreement providing for either (A)
annual payments to the Company and the Subsidiaries of $100,000 or more
or (B) aggregate payments to the Company and the Subsidiaries of
$500,000 or more during the stated term of the agreement;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) other than pursuant to the Restructuring, any agreement relating
to the acquisition or disposition of any business (whether by merger,
sale of stock, sale of assets or otherwise), other than the purchase or
disposition of assets in the ordinary course of business consistent in
all material respects with past practices;
(vi) any agreement creating or evidencing Indebtedness for Borrowed
Money (whether incurred, assumed, guaranteed or secured by any asset),
except any such agreement (A) with an aggregate outstanding principal
amount not exceeding $100,000, (B) which may be prepaid on not more
than 10 days notice without the payment of any penalty, (C) which is
fully paid prior to the Closing or (D) entered into subsequent to the
date of this Agreement as permitted by Buyer pursuant to Section 5.01;
(vii) any option, license, franchise or similar agreement providing
for annual payments in excess of $50,000;
(viii) any agency, dealer, sales representative, marketing or other
similar agreement providing for annual payments in excess of $50,000;
(ix) any agreement that limits the freedom of the Company or any
Subsidiary to compete in any line of business or with any Person or in
any area or which would so limit the freedom of the Company or any
Subsidiary after the Closing Date;
(x) any agreement with (A) Seller or any of its Affiliates, other than
for services that will be provided by Seller after the Closing pursuant
to the Transitional Services Agreement or the Maintenance Agreement,
(B) any Person directly or indirectly owning, controlling or holding
with power to vote, 5% or more of the outstanding voting securities of
Seller or any of its Subsidiaries, (C) any Person (other than the
Company and its Subsidiaries) 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held with
power to vote by
19
Seller or any of its Subsidiaries or (D) any director or officer of
Seller or any of its Affiliates or any "associates" or members of the
"immediate family" (as such terms are respectively defined in Rule
12b-2 and Rule 16a-1 of the 1934 Act) of any such director or officer;
(xi) any agreement with any director or officer of the Company or any
Subsidiary or with any "associate" or any member of the "immediate
family" (as such terms are respectively defined in Rules 12b-2 and
16a-1 of the 1934 Act) of any such director or officer; or
(xii) any other agreement, commitment, arrangement or plan not made in
the ordinary course of business that is material to the Company and the
Subsidiaries, taken as a whole.
(b) Each agreement, contract, plan, lease, arrangement or commitment
disclosed in any Schedule to this Agreement or required to be disclosed pursuant
to this Section is a valid and binding agreement of the Company or a Subsidiary,
as the case may be, and assuming each is a valid and binding agreement of the
other parties thereto is in full force and effect. None of the Company, any
Subsidiary or, to the Knowledge of Seller, any other party thereto is in default
or breach in any material respect under the terms of any such agreement,
contract, plan, lease, arrangement or commitment, and, to the Knowledge of
Seller, no event or circumstance has occurred that, with notice or lapse of time
or both, would constitute an event of default or breach in any material respect
thereunder, except for such events of default or breaches that could not
reasonably be expected to be material to the business of the Company and the
Subsidiaries. True and complete copies of each such agreement, contract, plan,
lease, arrangement or commitment have been made available to Buyer.
SECTION 3.12. LITIGATION. Schedule 3.12 contains a complete list of all
actions, suits, investigations or proceedings involving claims in excess of
$50,000 pending against (i) Seller and relating to or affecting the Company or
the Business or (ii) the Company or any Subsidiary or any of their respective
properties, in each case as of the date hereof; PROVIDED, that in determining
whether any such actions, suits, investigations or proceedings involves a claim
that exceeds $50,000, the extent to which Seller (in respect of Retained
Liabilities) or any third Person is liable to indemnify the Company or its
Subsidiaries against such actions, suits, investigations or proceedings shall be
taken into account to reduce the amount of liabilities of the Company and its
Subsidiaries. There is no action, suit, investigation or proceeding pending or,
to the Knowledge of Seller, threatened against Seller, the Company or any
Subsidiary or any of their respective properties before any court or arbitrator
or any governmental body,
20
agency or official which (i) individually or in the aggregate, if determined or
resolved adversely in accordance with the plaintiff's demands, could reasonably
be expected to have a Material Adverse Effect or which in any manner challenges
or seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement, or (ii) to the Knowledge of Seller, is or could
reasonably be expected to be material; PROVIDED, that in determining whether any
such actions, suits, investigations or proceedings are material, the extent to
which Seller (in respect of Retained Liabilities) or any third Person is liable
to indemnify the Company or its Subsidiaries against such actions, suits,
investigations or proceedings shall be taken into account to reduce the amount
of liabilities of the Company and its Subsidiaries.
SECTION 3.13. COMPLIANCE WITH LAWS AND COURT ORDERS. (a) Except as set
forth on Schedule 3.13, neither the Company nor any Subsidiary is in violation
of, and has not since June 30, 1996 violated, and to the Knowledge of Seller is
not under investigation with respect to and has not been threatened to be
charged with or given notice of any violation of, any applicable law, rule,
regulation (including, without limitation, all applicable statutes and
regulations of the United States Government governing the operation of
transportation services), judgment, injunction, order or decree, except for
violations that could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(b) To the Knowledge of Seller, neither the Company nor any Subsidiary
is in violation of, and has not since June 30, 1996 been in violation of, and is
not under investigation with respect to and has not been threatened to be
charged with or given notice of any violation of, any applicable law, rule,
regulation (including, without limitation, all applicable statutes and
regulations of the United States Government governing the operation of
transportation services), judgment, injunction, order or decree that could
reasonably be expected to be material to the Company.
SECTION 3.14. PROPERTIES. (a) Except as set forth on Schedule 3.14, the
Company and the Subsidiaries own fee simple title to, or in the case of leased
property and assets have valid leasehold interests in, all property and assets
(whether real, personal, tangible or intangible) reflected on the Balance Sheet
or acquired after the Balance Sheet Date, except for properties and assets sold
since the Balance Sheet Date in the ordinary course of business consistent in
all material respects with past practices. None of such property or assets is
subject to any Lien, except:
(i) Liens disclosed on the Balance Sheet;
21
(ii) Liens for taxes not yet due or being contested in good faith;
(iii) mechanics', carriers', workers', repairmen's or other similar
Liens arising or incurred in the ordinary course of business relating
to liabilities that are not overdue;
(iv) Liens that arise under zoning, land use and other similar laws;
(v) easements, covenants, conditions, restrictions of record and
similar matters of record;
(vi) easements, covenants, conditions and restrictions not of record as
to which no material violation or encroachment exists or, if such
violation or encroachment exists, as to which the cure of such
violation or encroachment would not materially interfere with the
conduct of the business of the Company; or
(vii) Liens which do not materially interfere with any present or
intended use of such property or assets (clauses (i)-(vii) of this
Section 3.14(a) are, collectively, the "PERMITTED LIENS").
(b) All leases of such real property and personal property are valid,
binding and enforceable in accordance with their respective terms and there does
not exist under any such lease any default or, to the Knowledge of Seller, any
event which with notice or lapse of time or both would constitute a default that
would be material to the Company.
(c) The plants, buildings, structures and equipment owned by the
Company or any Subsidiary have been reasonably maintained consistent in all
material respects with the Company's normal practice (giving due account to the
age and length of use of same, ordinary wear and tear excepted).
SECTION 3.15. SUFFICIENCY OF ASSETS. After giving effect to the
Restructuring, except for assets that will be used in providing the services
that will be provided by Seller after the Closing pursuant to the Transitional
Services Agreement and the Maintenance Agreement, (i) there are no assets,
properties, rights, licenses, Permits, causes of action or businesses of any
kind or description, real, personal or mixed, tangible or intangible owned, held
or used in the conduct of the Business that are not owned by the Company or a
Subsidiary or held by valid and existing leases or licenses and (ii) the
property and assets owned or leased by the Company or any Subsidiary, or which
they otherwise have the right
22
to use, constitute all of the property and assets used or held for use in
connection with the businesses of the Company or any Subsidiary and are adequate
to conduct such businesses as currently conducted; it being understood that
"adequate to conduct such businesses as currently conducted" shall not be
construed as a representation or warranty with respect to the qualitative
condition of the property and assets themselves.
SECTION 3.16. INTELLECTUAL PROPERTY. (a) Schedule 3.16 contains a list
of all patents, trademarks and service marks owned or licensed and used or held
for use by the Company or any Subsidiary and all other Intellectual Property
Rights (other than know-how) that are material to the conduct of the business of
the Company and its Subsidiaries as presently conducted (other than
"shrink-wrap" software commercially available) ("COMPANY INTELLECTUAL PROPERTY
RIGHTS"), specifying in reasonable detail as to all Company Intellectual
Property Rights owned by the Company, as applicable: (i) the nature of such
Intellectual Property Right, (ii) the owner of such Intellectual Property Right,
(iii) the jurisdictions by or in which such Intellectual Property Right (A) is
recognized (without regard to registration) or (B) has been issued or registered
or in which an application for such issuance or registration has been filed,
(iv) the registration or application numbers and (v) the termination or
expiration dates.
(b) Schedule 3.16 sets forth a list of all licenses, sublicenses and
other agreements as to which the Company or any Subsidiary is a party and
pursuant to which any Person is authorized to use any Company Intellectual
Property Right.
(c) (i) Except as set forth on Schedule 3.16, since June 30, 1994,
neither the Company nor any Subsidiary has been a defendant in any action, suit,
investigation or proceeding relating to, or otherwise has been notified in
writing of, any alleged claim of infringement of any Intellectual Property
Right, and Seller has no Knowledge of any other such infringement by the Company
or any Subsidiary and (ii) Seller has no outstanding claim or suit for, and has
no Knowledge of, any continuing infringement by any other Person of any Company
Intellectual Property Rights. No Company Intellectual Property Right owned by
the Company or any Subsidiary or, to the Knowledge of Seller, any other Company
Intellectual Property Right is subject to any outstanding judgment, injunction,
order, decree or agreement restricting the use thereof by the Company or any
Subsidiary or restricting the licensing thereof by the Company or any Subsidiary
to any Person. Neither the Company nor any Subsidiary has entered into any
material agreement to indemnify any other Person against any charge of
infringement of any Intellectual Property Right.
23
SECTION 3.17. INSURANCE COVERAGE. Seller has furnished to Buyer a list
of all material insurance policies and fidelity bonds currently in force
relating to the assets, business, operations, employees, officers or directors
of the Company and the Subsidiaries, other than policies of insurance maintained
by transit management companies. All premiums payable under all material
policies and bonds have been timely paid and the Company and the Subsidiaries
have otherwise complied in all material respects with the terms and conditions
of all material policies and bonds. Such policies of insurance and bonds (or
other policies and bonds providing substantially similar insurance coverage)
have been in effect since June 30, 1994 and remain in full force and effect.
SECTION 3.18. LICENSES AND PERMITS. Schedule 3.18 lists each license,
franchise, permit, certificate, approval or other similar authorization of the
Company and its Subsidiaries (the "PERMITS") together with the name of the
government agency or entity issuing such Permit. Except as set forth on the
Schedule 3.18, (i) the Permits are valid and in full force and effect, (ii)
neither the Company nor any Subsidiary is in default under, and, to the
Knowledge of Seller, no condition exists that with notice or lapse of time or
both would constitute a default under, the Permits, except for such defaults
that could not reasonably be expected to be material to the Company, and (iii)
none of the Permits will be terminated or impaired or become terminable, in
whole or in part, as a result of the transactions contemplated hereby.
SECTION 3.19. INFORMATION FOR BUYER OFFERING DOCUMENTS. The written
information supplied by Seller (including any corrected information supplied by
Seller) for inclusion in each Buyer Offering Document, or any amendment thereof
or supplement thereto, at the date filed with the LSE or distributed to Buyer's
shareholders or at the time of any meeting of the shareholders of Buyer to
approve the matters contemplated therein, will be true and accurate in all
material respects and will not omit to state any fact necessary to make the
information contained therein not materially misleading; PROVIDED that, without
prejudice to Buyer's claims under the other representations and warranties, (i)
Seller shall not be in breach of this representation and warranty in the absence
of shareholder litigation against Buyer or any of its representatives based upon
such information (and in such event Buyer's Damages under Article 11 for
breaches of this representation and warranty will be limited to liabilities
relating to such litigation) and (ii) Buyer hereby agrees that nothing in this
Section 3.19 will be deemed to apply to any projection or forecast supplied by
or on behalf of Seller, whether or not included in the Buyer Offering Documents.
SECTION 3.20. FINDERS' FEES. Except for Morgan Stanley Dean Witter &
Co., whose fees will be paid by Seller, there is no investment banker, broker,
24
finder or other similar intermediary which has been retained by or is authorized
to act on behalf of Seller or the Company or any Subsidiary who might be
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
SECTION 3.21. EMPLOYEES. Seller has previously delivered to Buyer a
true and complete list of (a) the names, titles, annual salaries and other
compensation of all officers of the Company and its Subsidiaries and all other
employees of or independent contractors or consultants to the Company and its
Subsidiaries whose annual base salary or annual service or consulting fees as of
the date hereof exceeds $100,000 and (b) the present wage rates for non-salaried
employees of the Company and its Subsidiaries (by classification). To the
Knowledge of Seller, no officer or other key employee of the Company and its
Subsidiaries has indicated as of the date hereof that he intends to resign or
retire as a result of the transactions contemplated by this Agreement, except
for the resignations disclosed to Buyer pursuant to Section 5.06.
SECTION 3.22. LABOR MATTERS. Except as set forth on Schedule 3.22, (a)
the Company and the Subsidiaries are in compliance with all currently applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, and are not engaged in any unfair labor
practice, failure to comply with which or engagement in which, as the case may
be, (i) could reasonably be expected to have a Material Adverse Effect, or (ii)
to the Knowledge of Seller, is material, and (b) there is no unfair labor
practice complaint pending or, to the Knowledge of Seller, threatened against
the Company or any Subsidiary before the National Labor Relations Board which
(i) could reasonably be expected to have a Material Adverse Effect, or (ii) to
the Knowledge of Seller, is material.
SECTION 3.23. EMPLOYEE BENEFIT PLANS. (a) Schedule 3.23 identifies each
Employee Plan, other than an Employee Plan maintained, administered or
contributed to by the Company or a Subsidiary for employees or former employees
in connection with a transit management contract or a transit contract under the
terms of which the Company or the Subsidiary is reimbursed or indemnified for
all employee, compensation and employee benefit costs and liabilities (a
"TRANSIT PLAN"). Seller has made available to Buyer copies of each Employee Plan
that is not a Multiemployer Plan (and, if applicable, any related trust
agreements) and all amendments thereto together with the most recent annual
report (Form 5500 including, if applicable, Schedule B thereto) and the most
recent actuarial valuation report prepared in connection with any such Employee
Plan. Schedule 3.23 identifies each such Employee Plan which is (i) a
Multiemployer Plan, (ii) a Title IV Plan or (iii) maintained in connection with
any
25
trust described in Section 501(c)(9) of the Code. Seller will provide a
supplemental schedule within 60 days of the date of this Agreement that
identifies to the Knowledge of Seller each Transit Plan.
(b) As of December 31, 1998, the fair market value of the assets of
each Title IV Plan (excluding for these purposes any accrued but unpaid
contributions) exceeded the present value of all benefits accrued under such
Title IV Plan, as determined for purposes of SFAS 87. The aggregate unfunded
liability, as of the most recent practicable date, of the Company and any
Subsidiary in respect of all Employee Plans or Benefit Arrangements described
under Sections 4(b)(5) or 401(a)(1) of ERISA, computed using the same
assumptions as used in Seller's financial statements to value such liability and
determined as if all benefits under such plans were vested and payable as of
such date, will be reflected on the Closing Balance Sheet.
(c) No transaction prohibited by Section 406 of ERISA or Section 4975
of the Code has occurred with respect to any employee benefit plan or
arrangement which is covered by Title I of ERISA, which transaction has or will
cause the Company or any of its Subsidiaries to incur any material liability
under ERISA, the Code or otherwise, excluding transactions effected pursuant to
and in compliance with a statutory or administrative exemption. No "accumulated
funding deficiency", as defined in Section 412 of the Code, has been incurred
with respect to any Employee Plan that is not a Multiemployer Plan subject to
such Section 412, whether or not waived. To the Knowledge of Seller, no
Multiemployer Plan is "insolvent" or in "reorganization", within the meaning of
Sections 4245 and 4241 of ERISA, respectively. No "reportable event", within the
meaning of Section 4043 of ERISA, other than a "reportable event" that could
reasonably be expected not to have a Material Adverse Effect, and no event
described in Section 4062 or 4063 of ERISA, has occurred in connection with any
Title IV Plan. Neither the Company nor any ERISA Affiliate of the Company has
(i) engaged in, or is a successor or parent corporation to an entity that has
engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA or (ii)
incurred, or reasonably expects to incur, (A) any liability under Title IV of
ERISA arising in connection with the termination of, or a complete or partial
withdrawal from, any plan covered or previously covered by Title IV of ERISA or
(B) any liability under Section 4971 of the Code that in either case could
become a liability of the Company or any Subsidiary or the Buyer or any of its
ERISA Affiliates after the Closing Date. The assets of the Company and all of
its Subsidiaries are not now, nor will they after the passage of time be,
subject to any lien imposed under Code Section 412(n) by reason of a failure of
any of Seller, its Affiliates, the Company or any Subsidiary to make timely
installments or other payments required under Code Section 412.
26
(d) Each Employee Plan that is not a Multiemployer Plan and that is
intended to be qualified under Section 401(a) of the Code is so qualified and
has been so qualified during the period since its adoption; each trust created
under any such Plan is exempt from tax under Section 501(a) of the Code and has
been so exempt since its creation. Seller has provided Buyer with the most
recent determination letter of the Internal Revenue Service relating to each
such Employee Plan. Each such Employee Plan has been maintained in compliance
with its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, except for such failures to comply or be so maintained as individually
or in the aggregate would not have a Material Adverse Effect.
(e) Schedule 3.23 identifies each Benefit Arrangement, other than a
Benefit Arrangement maintained, administered or contributed to by the Company or
a Subsidiary for employees or former employees in connection with a transit
management contract or a transit contract under the terms of which the Company
or the Subsidiary is reimbursed or indemnified for all employee, compensation
and employee benefit costs and liabilities (a "TRANSIT ARRANGEMENT"). Seller has
furnished to Buyer copies or descriptions of each such Benefit Arrangement (and,
if applicable, related trust agreements) and all amendments thereto. Each
Benefit Arrangement has been maintained in compliance with its terms and with
the requirements prescribed by any and all applicable statutes, orders, rules
and regulations and has been maintained in good standing with applicable
regulatory authorities, except for such failures to comply or be so maintained
as individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. Seller will provide a supplemental schedule within 60
days of the date of this Agreement that identifies to the Knowledge of Seller
each Transit Arrangement.
(f) To the Knowledge of Seller, no condition exists that would prevent
the Company or any Subsidiary from discontinuing post-employment or
post-retirement health or medical or life insurance benefits under any Employee
Plan (other than a Multiemployer Plan) or Benefit Arrangement in respect of any
active employee of the Company or any Subsidiary other than limitations imposed
under the terms of a collective bargaining agreement or under Section 4980B of
the Code.
(g) All contributions and payments accrued under each Employee Plan
(other than a Multiemployer Plan) and Benefit Arrangement, determined in
accordance with prior funding and accrual practices, as adjusted to include
proportional accruals for the period ending on the Closing Date, will be
27
discharged and paid on or prior to the Closing Date except to the extent (i)
reflected as a liability on the Closing Balance Sheet or (ii) retained by
Seller. Except as disclosed on Schedule 3.23, there has been no amendment to,
written interpretation of or announcement (whether or not written) by Seller or
any of its Affiliates or the Company or any Subsidiary relating to, or change in
employee participation or coverage under, any Employee Plan (to the Seller's
Knowledge, in the case of any Multiemployer Plan) or Benefit Arrangement that
would increase materially the expense to the Company or any Subsidiary of
maintaining such Employee Plan or Benefit Arrangement above the level of the
expense incurred in respect thereof for the most recent fiscal year ended prior
to the date hereof.
(h) There is no contract, plan or arrangement (written or otherwise)
covering any employee or former employee of the Company or any Subsidiary that,
individually or collectively, could give rise to the payment of any amount by
the Company or any Subsidiary that would not be deductible pursuant to the terms
of Section 280G of the Code.
(i) Except as disclosed in Schedule 3.09, no employee or former
employee of, or independent contractor or consultant providing services to, the
Company or any Subsidiary will become entitled to any bonus, retirement,
severance, job security or similar benefit or enhanced such benefit (including
acceleration of vesting or exercise of an incentive award) solely as a result of
the Restructuring, or the purchase and sale of the Shares hereunder or other
transactions contemplated hereby other than any such entitlement that would not
result in any material liability to the Company or any Subsidiary, or other than
any such entitlement that will be disclosed in Schedule 3.23 and reflected in
the Closing Balance Sheet.
SECTION 3.24. ENVIRONMENTAL MATTERS. (a) Except as disclosed on
Schedule 3.24(a), or except as could not reasonably be expected to have a
Material Adverse Effect:
(i) no written notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been
filed, no penalty has been assessed and no investigation, action,
claim, suit, proceeding or review is pending, or to Seller's Knowledge,
threatened by any Governmental Authority or other Person with respect
to any matters relating to the Company or any Subsidiary and relating
to or arising out of any Environmental Law;
28
(ii) there are no liabilities of or relating to the Company or any
Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, arising under or
relating to any Environmental Law and there are no facts, conditions,
situations or set of circumstances which could reasonably be expected
to result in or be the basis for any such liability;
(iii) no polychlorinated biphenyls, radioactive material, lead,
asbestos-containing material, incinerator, sump, surface impoundment,
lagoon, landfill, septic, wastewater treatment or other disposal system
or underground storage tank (active or inactive) is or has been present
at, on or under any property now or previously owned, leased or
operated by the Company or any Subsidiary;
(iv) 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
the Company or any Subsidiary;
(v) as of the date hereof, no property now or previously owned, leased
or operated by the Company or any Subsidiary or any property to which
the Company or any Subsidiary has, directly or indirectly, transported
or arranged for the transportation of any Hazardous Substances is
listed or, to Seller's Knowledge, proposed for listing, on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined
in CERCLA) or on any similar federal, state or foreign list of sites
requiring investigation or clean-up; and
(vi) the Company and its Subsidiaries are in compliance with all
Environmental Laws and have obtained and are in compliance with all
Environmental Permits; such Environmental Permits are valid and in full
force and effect and, assuming compliance by Buyer after the Closing
Date with the applicable requirements thereunder, will not be
terminated or impaired or become terminable, in whole or in part, as a
result of the transactions contemplated hereby;
PROVIDED that if Seller has Knowledge of any matter that could reasonably be
expected to result in a material liability to the Company or any Subsidiary or a
material non-compliance of any Environmental Law or Environmental Permit,
Seller's failure to disclose such matter on Schedule 3.24(b) will constitute a
breach of the representations and warranties in this Section 3.24 that will be
deemed to have a Material Adverse Effect. The Balance Sheet contains adequate
reserves in accordance with U.S.
29
GAAP to remediate all material environmental liabilities of the Company and the
Subsidiaries Known to Seller.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which Seller has Knowledge in relation to
the current or prior business of the Company or any Subsidiary or any property
or facility now or previously owned, leased or operated by the Company or any
Subsidiary which has not been made available to Buyer prior to the date hereof.
(c) No property owned, leased or operated by the Company or any
Subsidiary is subject to the requirements of ISRA as a result of the
transactions contemplated hereby.
(d) Except as set forth on Schedule 3.24(d), neither the Company nor
any Subsidiary owns, leases or operates or, to the knowledge of Seller, has
owned, leased or operated any property or has conducted any operations in New
Jersey or Connecticut.
(e) For purposes of this Section and Section 3.24, the terms "COMPANY"
and "SUBSIDIARY" shall include any entity which is, in whole or in part, a
predecessor of the Company or any Subsidiary.
SECTION 3.25. YEAR 2000 COMPLIANCE. To the Knowledge of Seller, except
as disclosed on Schedule 3.25, all material hardware, software or firmware (a
"SYSTEM") that is, or is part of, an asset of, or any product or service
designed, manufactured, sold or provided by, or that is used in connection with
the business of the Company or its Subsidiaries, is Year 2000 Compliant. For
purposes of this Section 3.25, "YEAR 2000 COMPLIANT" means that the System shall
be able accurately to process (including, without limitation, calculate, compare
and sequence) date and time data from, into and between the years 1999 and 2000
and thereafter into the reasonable future.
SECTION 3.26. REPRESENTATIONS AND WARRANTIES IN BUYER CREDIT FACILITY.
The representations and warranties set forth in Section 17.13 of the Term and
Revolving Credit and Guarantee Facility for Buyer arranged by Warburg Dillon
Read, dated the date hereof, are true and correct.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
30
Buyer represents and warrants to Seller as of the date hereof and as of
the Closing Date that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. Buyer is a corporation
duly incorporated and validly existing under the laws of Scotland and has all
corporate powers and authority to conduct its business as now conducted.
SECTION 4.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement and each of the Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby are within
the corporate powers of Buyer and, except for any required approval by Buyer's
stockholders of the Buyer Shareholder Resolutions ("BUYER'S STOCKHOLDER
APPROVAL"), have been duly authorized by all necessary corporate action on the
part of Buyer. This Agreement constitutes a valid and binding agreement of
Buyer.
SECTION 4.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement and each of the Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby by Buyer
require no material action by or in respect of, or material filing with, any
Governmental Authority other than (i) compliance with any applicable
requirements of the HSR Act; (ii) compliance with any applicable requirements of
the U.S. securities laws; (iii) compliance with the requirements of the LSE; and
(iv) such other consents, approvals, orders or authorizations the failure of
which to be made or obtained individually or in the aggregate could not
reasonably be expected to materially prevent or delay the transactions
contemplated hereby.
SECTION 4.04. NONCONTRAVENTION. The execution, delivery and performance
by Buyer of this Agreement and each of the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby by Buyer do not
and will not (i) assuming Buyer's Stockholder Approval is obtained, violate the
Memorandum and Articles of Association of Buyer or (ii) assuming compliance with
the matters referred to in Section 4.03, violate any applicable material law,
rule, regulation, judgment, injunction, order or decree.
SECTION 4.05. PURCHASE FOR INVESTMENT. Buyer is purchasing the Shares
for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof. Buyer (either alone or together with
its advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Shares and is capable of bearing the economic risks of such investment.
31
SECTION 4.06. LITIGATION. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against
Buyer before any court or arbitrator or any governmental body, agency or
official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
SECTION 4.07. FINDERS' FEES. Except for Warburg Dillon Read, whose fees
will be paid by Buyer, there is no investment banker, broker, finder or other
similar intermediary which has been retained by or is authorized to act on
behalf of Buyer who might be entitled to any fee or commission from Seller or
any of its Affiliates upon consummation of the transactions contemplated by this
Agreement.
SECTION 4.08. FINANCING COMMITMENTS. Buyer has previously furnished to
Seller copies of financing commitments from Warburg Dillon Read relating to the
transactions contemplated hereby (the "FINANCING COMMITMENTS"). All fees and
other amounts required to be paid by Buyer or its Affiliates on or prior to the
date hereof have been or will promptly be paid by Buyer or such Affiliates. The
representations and warranties of Buyer in the Financing Commitments were true
and correct when made. As of the date hereof, Buyer knows of no reason why the
financing contemplated thereby will not be available to it as of the Closing.
ARTICLE 5
COVENANTS OF SELLER
Seller agrees that:
SECTION 5.01. CONDUCT OF THE COMPANY. From the date hereof until the
Closing Date, Seller shall cause the Company and each Subsidiary to conduct its
businesses in all material respects in the ordinary course consistent with past
practice and to use its commercially reasonable efforts to preserve intact its
business organizations and relationships with third parties and to keep
available the services of its present officers and employees. Without limiting
the generality of the foregoing, from the date hereof until the Closing Date,
without the express prior written consent of Buyer, Seller will not permit the
Company or any Subsidiary to:
(a) adopt or propose any change in its certificate of incorporation or
bylaws;
32
(b) (i) merge or consolidate with any other Person or (ii) acquire
assets from any other Person except (x) in the ordinary course of
business consistent in all material respects with past practices, (y)
pursuant to the Restructuring or (z) capital expenditures less than the
amounts specified in Section 3.09(j);
(c) sell, lease, license or otherwise dispose of any assets or
property except (i) in the ordinary course consistent in all material
respects with past practices or (ii) pursuant to the Restructuring; or
(d) agree or commit to do any of the foregoing.
Seller will not, and will not permit the Company or any Subsidiary to (i)
voluntarily take or agree or commit to take any action that would make any
representation or warranty of Seller hereunder inaccurate in any material
respect at, or as of any time prior to, the Closing Date or (ii) omit or agree
or commit to omit to take any action within Seller's control necessary to
prevent any such representation or warranty from being inaccurate in any
material respect at any such time.
SECTION 5.02. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From the date
hereof until the Closing Date, Seller will (i) give, and will cause the Company
and each Subsidiary to give, Buyer, its counsel, financial advisors, auditors
and other authorized representatives reasonable access during normal business
hours to the offices, properties, books and records of the Company and the
Subsidiaries and to the books and records of Seller relating to the Company and
the Subsidiaries, (ii) furnish, and will cause the Company and each Subsidiary
to furnish, to Buyer, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information relating to the Company or any Subsidiary as such Persons may
reasonably request and (iii) instruct the employees, counsel and financial
advisors of Seller or the Company or any Subsidiary to reasonably cooperate with
Buyer in its investigation of the Company or any Subsidiary. Any investigation
pursuant to this Section shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of Seller, the Company or any of
its Subsidiaries. Notwithstanding the foregoing, Buyer shall not have access to
personnel records of Seller, the Company and the Subsidiaries relating to
individual performance or evaluation records, medical histories or other
information which in Seller's good faith opinion is sensitive or the disclosure
of which could subject the Company or any Subsidiary to risk of liability. No
investigation by Buyer or other information received by Buyer shall operate as a
waiver or otherwise affect any representation, warranty or agreement given or
made by Seller hereunder. Buyer will hold, and will cause its respective
officers, employees, counsel, financial advisors, auditors
33
and other authorized representatives to hold, any nonpublic information provided
pursuant to this Section 5.02 in accordance with the terms of the letter
agreement, dated June 23, 1999, between Buyer and Seller (the "CONFIDENTIALITY
AGREEMENT"); PROVIDED that such obligations of Buyer shall terminate upon the
Closing. All requests for access to the offices, properties, books and records
of Seller shall be made to such representatives of Seller as Seller may
designate, who will be solely authorized to coordinate all such requests.
(b) For a period of ten full years following the Closing Date, Seller
and its Affiliates will hold, and will instruct its officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless in their reasonable judgment they are compelled to disclose
by judicial or administrative process or by other requirements of law, all
confidential documents and information concerning the Company and the
Subsidiaries, except to the extent that such information can be shown to have
been (i) previously known on a nonconfidential basis by Seller, (ii) in the
public domain through no fault of Seller or its Affiliates or (iii) later
lawfully acquired by Seller from sources other than those related to its prior
ownership of the Company and the Subsidiaries. The obligation of Seller to hold
any such information in confidence shall be satisfied if it exercises the same
care with respect to such information as Seller would take to preserve the
confidentiality of its own similar information.
(c) On and after the Closing Date, Seller will afford promptly to Buyer
and its agents reasonable access to its non-privileged books of account,
financial and other records (including, without limitation, accountant's work
papers, subject to such limitations as such accountants may impose in accordance
with customary practice), information, employees and auditors to the extent
necessary or useful for Buyer in connection with any audit, investigation,
dispute or litigation or any other reasonable business purpose relating to the
Company or any Subsidiary; PROVIDED that any such access by Buyer shall not
unreasonably interfere with the conduct of the business of Seller. Buyer shall
bear all of the out-of-pocket costs and expenses (including, without limitation,
attorneys' fees, but excluding reimbursement for general overhead, salaries and
employee benefits) reasonably incurred in connection with the foregoing.
SECTION 5.03. CEP FILINGS. Seller agrees that it shall, with respect to
any facility or real property which is owned, leased or operated by the Company
or any Subsidiary and which is located in the State of Connecticut, comply with
any requirements of CTA that are applicable as a result of the transactions
contemplated hereby, including, without limitation, the submission of any
Connecticut Transfer Forms, as necessary, to the CEP. Seller also agrees that,
prior to providing any documents or information to the CEP with respect to this
34
Agreement or the transactions contemplated hereby, Buyer shall have the right to
review and approve the form and substance of any such documents or information
(such approval not to be unreasonably withheld or delayed).
SECTION 5.04. NJDEP FILINGS. Seller agrees that it shall, with respect
to any facility or real property that is owned, leased or operated by the
Company or any Subsidiary and which is located in the State of New Jersey,
comply with any requirements of ISRA that are applicable as a result of the
transactions contemplated hereby or provide evidence that the requirements of
ISRA are not applicable as a result of the transactions contemplated hereby.
Seller also agrees that, prior to providing any documents or other information
to the NJDEP with respect to this Agreement or the transactions contemplated
hereby, Buyer shall have the right to review and approve the form and substance
of any such documents and other information (such approval not to be
unreasonably withheld or delayed).
SECTION 5.05. NOTICES OF CERTAIN EVENTS. Seller shall promptly notify
Buyer of:
(a) 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;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its Knowledge, threatened against, relating to or
involving or otherwise affecting Seller or the Company or any
Subsidiary that, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Section 3.12 or that
relate to the consummation of the transactions contemplated by this
Agreement.
SECTION 5.06. RESIGNATIONS. Seller will deliver to Buyer the
resignations of all officers and directors of the Company and each Subsidiary
who will be officers, directors or employees of Seller or any of its Affiliates
after the Closing Date from their positions with the Company or any Subsidiary
at or prior to the Closing Date.
SECTION 5.07. NONCOMPETITION. (a) Seller and Buyer agree that:
(i) for a period of five years from the Closing Date, Seller will not,
and will cause its current subsidiaries (so long as they are such) and
35
any future subsidiaries (so long as they are such) not to, engage,
either directly or indirectly, as a principal or for its own account or
solely or jointly with others, or as stockholders in any corporation or
joint stock association, in any business that competes with the
Business as it exists on the Closing Date within the United States and
Puerto Rico; PROVIDED that nothing herein shall prohibit the
acquisition by Seller or any of its subsidiaries of a diversified
company engaged in the Business if Seller shall, within 18 months after
the date of the closing of such acquisition, have disposed of the
assets constituting the Business or ceased to engage in the Business
such that Seller would no longer be in breach of this Section
5.07(a)(i); provided that prior to any such disposition, Seller shall
have first offered to Buyer the assets constituting such Business for a
cash price equal to the fair market value thereof as agreed to by the
parties or, if the parties cannot agree, by an investment banking firm
jointly selected by the parties and Buyer shall have 30 days to accept
such offer;
(ii) for a period of two years from Closing Date, Seller will not, and
will cause its subsidiaries not to, employ or solicit, or receive or
accept the performance of services by any current employee of the
Company or any Subsidiary (a) whose annual base compensation as of the
date hereof exceeds $50,000 or (b) who is a technician;
(iii) for a period of two years from the Closing Date, Buyer will not,
and will cause its subsidiaries not to, employ or solicit, or receive
or accept the performance of services by any employee of Seller as of
the Closing Date who is a technician;
PROVIDED, that this Section 5.07(a)(ii) and Section 5.07(a)(iii) shall not
prohibit Seller, Buyer or any of their respective subsidiaries from general
solicitation or advertising activities not targeted to any current employee
described in this Section 5.07(a)(ii) or Section 5.07(a)(iii) and shall not
apply to any person whose employment is terminated by Seller, Buyer or their
respective subsidiaries without cause; and
(iv) within five days after the Closing Date, Seller will deliver to
Buyer a list of all employees of Seller as of the Closing Date who are
technicians.
(b) For the purposes of this Agreement, "BUSINESS" means (i) the
provision of services related to (and including) the operation, leasing or
maintenance of school buses and other transportation requirements of public and
private school authorities and the operation or leasing of passenger-related
vehicles for commercial hire; (ii) the operation of passenger transit systems
and
36
provision of transit management, transportation and transit consulting services
to or for governmental and quasi-governmental authorities or any political or
other subdivision, department or branch thereof, utility companies, education
authorities and municipal service providers; and (iii) the maintenance of
equipment and vehicles and the provision of related consulting services,
directly or indirectly, to or for governmental and quasi-governmental
authorities or any political or other subdivision, department or branch thereof
and utility companies and education authorities, except that this clause (iii)
shall not apply to (1) military agencies and (2) the existing maintenance
agreement between Ryder and the City of Tucson, Arizona. Notwithstanding the
foregoing, the definition of Business shall not include the provision of
services described in subsections (i), (ii) and (iii) of this subsection, (A)
at, for or relating to airports and airport-related facilities (including ground
fleet and airport passenger and car rental shuttle services) other than, to the
extent permitted by law, entities with whom either the Company or a Subsidiary
has a contract at Closing; or (B) to non-governmental entities or, to the extent
permitted by law, utility companies with whom neither the Company nor any of the
Subsidiaries has any contract at Closing.
(c) If any provision contained in this Section shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Section, but this Section shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. It is the intention of
the parties that if any of the restrictions or covenants contained herein is
held to cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad or to any
extent invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe and interpret
or reform this Section to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than those
contained herein) as shall be valid and enforceable under such applicable law.
Seller acknowledges that Buyer would be irreparably harmed by any breach of this
Section and that there would be no adequate remedy at law or in damages to
compensate Buyer for any such breach. Seller agrees that Buyer shall be entitled
to injunctive relief requiring specific performance by Seller of this Section,
and Seller consents to the entry thereof.
SECTION 5.08. AUDIT OPINION. Seller shall use its commercially
reasonable efforts to cause to be delivered to Buyer an unqualified audit
opinion in the form attached as Appendix II from KPMG Peat Marwick with respect
to (i) the Annual Financial Statements and (ii) the pro forma consolidated
balance sheet as of December 31, 1996 and the related statements of income and
cash flows for the
37
year ended December 31, 1996 of the Company and the Subsidiaries, as adjusted to
give effect to the Restructuring (the "1996 FINANCIAL STATEMENTS").
SECTION 5.09. REMOVAL OF CERTAIN LIENS. Prior to the Closing, Seller
shall have caused any and all Liens on receivables of the Company or any
Subsidiary to be fully released, removed or otherwise extinguished.
SECTION 5.10. FINANCING COMMITMENT. Seller will use its reasonable best
efforts to cause to be satisfied all Funding Conditions to the extent within the
control of Seller or any of its Affiliates or the Company or any Subsidiary.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
SECTION 6.01. CONDUCT OF BUYER. Buyer will not, and will not permit any
of its subsidiaries to (i) take or agree or commit to take any action that would
make any representation or warranty of Buyer hereunder inaccurate in any
material respect at, or as of any time prior to, the Closing Date or (ii) omit
or agree or commit to or omit to take any action within Buyer's control
necessary to prevent any such representation or warranty from being inaccurate
in any material respect at any such time.
SECTION 6.02. ACCESS. Buyer will cause the Company and each Subsidiary,
on and after the Closing Date, to afford promptly to Seller and its agents
reasonable access to their properties, non-privileged books and records,
employees and auditors to the extent necessary to permit Seller to determine any
matter relating to its rights and obligations hereunder or to any period ending
on or before the Closing Date; PROVIDED that any such access by Seller shall not
unreasonably interfere with the conduct of the business of Buyer. Seller will
hold, and will use its best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Company or any Subsidiary provided to it pursuant to this Section.
SECTION 6.03. NOTICE OF CERTAIN EVENTS. Buyer shall promptly notify
Seller of:
38
(a) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(b) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or
otherwise affecting Buyer that, if pending on the date hereof, would
have been required to have been disclosed pursuant to Section 4.06 or
that relate to the consummation of the transactions contemplated by
this Agreement.
SECTION 6.04. FINANCING. Subject to Section 7.07, Buyer will use its
reasonable best efforts to cause to be satisfied all conditions to funding under
the Financing Commitments (the "FUNDING CONDITIONS") to the extent within the
control of Buyer or any of its Affiliates. Without limiting the generality or
effect of the foregoing, in the event that the financing contemplated by any of
the Financing Commitments is not so available to Buyer and such non-availability
is not the result of a material breach by Seller of its obligations under this
Agreement, Buyer will use its reasonable best efforts to obtain substitute
financing on substantially the same terms and conditions as set forth in the
Financing Commitments as promptly as practicable.
SECTION 6.05. LA TAXI RECEIVABLE. After the Closing Date, Buyer will
pay to Seller promptly following receipt all amounts paid by LA Taxi with
respect to all amounts owing to the Company or its Subsidiaries, PROVIDED,
HOWEVER, that in the event that the discount rate required to be applied under
Section 9.02(b) is higher than 6.5%, an equitable adjustment to such amounts
will be made to reflect the financial effect on Buyer of such increased discount
rate.
ARTICLE 7
COVENANTS OF BUYER AND SELLER
Buyer and Seller agree that:
SECTION 7.01. BEST EFFORTS; FURTHER ASSURANCES. Subject to the terms
and conditions of this Agreement, Buyer and Seller will use their best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. Seller and Buyer
agree, and Seller, prior to the Closing, and Buyer, after the Closing, agree to
cause the Company and each
39
Subsidiary, to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be necessary
or desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
SECTION 7.02. CERTAIN FILINGS. (a) Seller and Buyer shall cooperate
with one another (i) 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 (ii) in taking such actions or making any such filings,
furnishing information required in connection therewith and seeking timely to
obtain any such actions, consents, approvals or waivers.
(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 Regulatory Law (as defined below) 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 and any other Regulatory Law and to use its reasonable best efforts to take
all other actions necessary to cause the expiration or termination of the
applicable waiting period under the HSR Act as soon as practicable. Each of
Buyer and Seller shall 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) promptly inform the other party of any
communication received by such party from, or given by such party to, the
Antitrust Division of the Department of Justice (the "DOJ") or the Federal Trade
Commission (the "FTC") or any other governmental entity 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) permit the other party to review any communication given by it to, and
consult with each other in advance of any meeting or conference with, the DOJ,
the FTC or any such other governmental entity or, in connection with any
proceeding by a private party, with any other person, and to the extent
permitted by the DOJ, the FTC or such other applicable governmental entity or
other person, give the other party the opportunity to attend and participate in
such meetings and conferences. For purposes of this Agreement, "Regulatory 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
40
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening of competition.
SECTION 7.03. PUBLIC ANNOUNCEMENTS. The parties agree to consult with
each other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except as
either party may reasonably determine to be required by applicable law or any
listing agreement with any national securities exchange, will not issue any such
press release or make any such public statement prior to such consultation.
SECTION 7.04. ANCILLARY AGREEMENTS. Promptly after the date of this
Agreement, the parties will negotiate in good faith the terms and conditions of
each of the Ancillary Agreements to be entered into as of the Closing Date.
SECTION 7.05. INTERCOMPANY ACCOUNTS. All intercompany accounts between
Seller or its Affiliates, on the one hand, and the Company or any Subsidiary, on
the other hand, as of the Closing shall be settled (irrespective of the terms of
payment of such intercompany accounts) in full at or prior to the Closing by
netting such balances against each other, and the resultant balance contributed
to capital or paid by cash or dividend, as the case may be, and deemed without
further action to be fully discharged.
SECTION 7.06. BUYER OFFERING DOCUMENTS. As soon as practicable
following (i) the date of this Agreement, and (ii) delivery of the audit opinion
referred to in Section 5.08, provided that Seller is not in material breach of
its obligations under this Agreement, Buyer shall prepare and seek the approval
of the LSE of the Buyer Offering Documents. Seller shall reasonably cooperate
with Buyer in the preparation of the Buyer Offering Documents and shall promptly
furnish to Buyer for inclusion in the Buyer Offering Documents all information
relating to the Seller, the Company and its Subsidiaries and the Business as may
be in Seller's possession or able to be produced without undue expense required
by United Kingdom statutory law and other legal provisions (including, without
limitation, the Companies Act of 1985 of the United Kingdom, as amended, the
Financial Services Act of 1986 and the rules and regulation made thereunder, and
the rules and requirements of the LSE). Buyer shall give Seller and its counsel
a reasonable opportunity to review the Buyer Offering Documents prior to their
filing with the LSE for approval and shall give Seller and its counsel a
reasonable opportunity to review all amendments and supplements to the Buyer
Offering Documents and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the LSE.
41
SECTION 7.07. BUYER SHAREHOLDER MEETING. As soon as practicable
following (i) the date of this Agreement, and (ii) delivery of the audit opinion
referred to in Section 5.08, PROVIDED that Seller is not in material breach of
its obligations under this Agreement, Buyer will duly call, give notice of,
convene and hold a meeting of its shareholders for the purpose of obtaining
Buyer's Shareholder Approval. Subject to it being consistent with the fiduciary
duties of the Board of Directors of Buyer, Buyer will use its reasonable best
efforts to obtain Buyer's Shareholder Approval.
SECTION 7.08. REPLACEMENT OF SURETY BONDS; GUARANTIES; LETTERS OF
CREDIT. Buyer will use its reasonable best efforts to cause itself or one of its
Affiliates to be substituted in all respects for Seller or its Affiliates,
effective as of the Closing, in respect of all obligations of Seller and its
Affiliates under all guaranties, letters of credit, bid bonds, performance and
other similar bonds obtained by Seller or any of its Affiliates for the benefit
of the Company and its Subsidiaries. If Buyer is unable to effect such a
substitution, it will use its reasonable best efforts to obtain and have issued,
effective as of the Closing, replacements for each such guaranty, letter of
credit, bid bond, performance or other similar bond, each of which shall be
substantially similar to that being so replaced and to obtain any amendments,
novations, releases, waivers, consents or approvals necessary to release Seller
and its Affiliates. The Company will be responsible for, and Buyer will
indemnify Seller and its Affiliates from, any costs or liabilities arising
subsequent to the Closing Date under all such guaranties, letters of credit, bid
bonds, performance and other similar bonds until all such guaranties, letters of
credit and bonds have been replaced and all obligations thereunder have been
released. Promptly after the date hereof, Seller will furnish to Buyer such
information with respect to such guaranties, letters of credit, bid bonds,
performance and other similar bonds as Buyer may require in order to fulfill its
obligations under this Section 7.08.
ARTICLE 8
TAX MATTERS
SECTION 8.01. TAX DEFINITIONS. The following terms, as used herein,
have the following meanings:
"ACCOUNTING REFEREE" means independent accountants of nationally
recognized standing reasonably satisfactory to Buyer and Seller (who shall not
have any material relationship with Buyer or Seller).
42
"BUYER INDEMNITEE" means Buyer and any of its Affiliates and, effective
upon the Closing, the Company and its Subsidiaries.
"CODE" means the Internal Revenue Code of 1986, as amended.
"FEDERAL TAX" means any Tax imposed under Subtitle A of the Code.
"OTHER INCOME TAX" means any income or franchise Tax payable to any
state, local or foreign taxing jurisdiction in which the Company or any
Subsidiary has filed or will file a Return (a "STATE TAX RETURN").
"OTHER TAXES" means any Taxes EXCLUDING Other Income Taxes or Federal
Taxes.
"POST-CLOSING TAX PERIOD" means any Tax period beginning after the
Closing Date; and with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period beginning after
the Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax period ending on or before the
Closing Date; and, with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period ending on the
Closing Date.
"SECTION 338(H)(10) ELECTION" is defined in Section 8.03(a).
"SECTION 338 TAX" means any Federal or Other Income Tax resulting
directly or indirectly from the Section 338(h)(10) Election or as a consequence
of Section 338 as applied by any state or local jurisdiction.
"SELLER GROUP" means, with respect to Federal Taxes, the affiliated
group of corporations (as defined in Section 1504(a) of the Code) of which
Seller is a member, and with respect to Taxes other than Federal Taxes, the
affiliated, consolidated, combined or unitary group of which Seller or any of
its Affiliates is a member.
"TAX" means (i) any tax, governmental fee or other like assessment or
charge of any kind whatsoever (including, but not limited to, withholding on
amounts paid to or by any Person), together with any interest, penalty, addition
to tax or additional amount (including any obligation arising under Section 6675
of the Code) imposed by any governmental authority (a "TAXING AUTHORITY")
responsible for the imposition of any such tax (domestic or foreign), (ii) in
the case of the Company or any Subsidiary, liability for the payment of any
amount of
43
the type described in clause (i) as a result of being or having been before the
Closing Date a member of an affiliated, consolidated, combined or unitary group,
or a party to any agreement or arrangement, whereby liability of the Company or
any Subsidiary for payments of such amounts was determined or taken into account
with reference to the liability of any other Person, and (iii) liability of the
Company or any Subsidiary for the payment of any amount as a result of being
party to any Tax Sharing Agreement or with respect to the payment of any amounts
of the type described in (i) or (ii) as a result of any existing express or
implied agreement or arrangement (including, but not limited to, an
indemnification agreement or arrangement).
"TAX SHARING AGREEMENTS" means all existing agreements or arrangements
(whether or not written) binding the Company or any Subsidiaries that provide
for the allocation, apportionment, sharing or assignment of any Tax liability or
benefit, or the transfer or assignment of income, revenues, receipts, or gains
for the principal purpose of determining any person's Tax liability (including,
without limitation, the document referred in Section 8.02(d)).
SECTION 8.02. TAX REPRESENTATIONS. Seller represents and warrants to
Buyer as of the date hereof and as of the Closing Date that:
(a) FILING AND PAYMENT. Except (x) as set forth on Schedule 8.02(a) or
(y) with respect to circumstances which involve the lesser of (i) penalties of
no more than $1,000 per Return (as defined below) or (ii) $25,000 in the
aggregate for all Returns due with respect to all Pre-Closing Tax Periods, (i)
all Tax returns, statements, reports and forms (including estimated tax or
information returns and reports) required to be filed with any Taxing Authority
with respect to any Pre-Closing Tax Period by or on behalf of the Company or any
Subsidiary or any Affiliate which conducts the Puerto Rico Business
(collectively, the "Returns"), have, to the extent required to be filed on or
before the date hereof, been filed when due (or will be filed on or before the
due date giving effect to extensions) in accordance with all applicable laws in
all material respects; (ii) as of the time of filing, the Returns were or will
be when filed true and complete in all material respects; and (iii) all Taxes
shown as due and payable on the Returns that have been filed have been timely
paid, or withheld and remitted to the appropriate Taxing Authority. For purposes
of this section, the term "material" shall mean amounts in excess of those set
forth in clause (y) of this section.
(b) PROCEDURE AND COMPLIANCE. Except as set forth on Schedule 8.02(b)
or with respect to circumstances which involve the lesser of (i) penalties of no
more than $1,000 per Return or (ii) $25,000 in the aggregate for all Returns due
with respect to all Pre-Closing Tax Periods, (i) all Returns filed with respect
to
44
Tax years of the Company and its Subsidiaries through the Tax year ended
December 31, 1989 have been examined and closed or are Returns with respect to
which the applicable period for assessment under applicable law, after giving
effect to extensions or waivers, has expired; (ii) neither the Company nor any
Subsidiary or any Affiliate which conducts the Puerto Rico Business is
delinquent in the payment of any Tax or has failed to file any Return in a
timely fashion after giving effect to extensions; (iii) neither the Company nor
any Subsidiary (or any member of any affiliated, consolidated, combined or
unitary group of which the Company or any Subsidiary is or has been a member)
has granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such extension or
waiver) has not yet expired; (iv) there is no claim, audit, action, suit,
proceeding, or investigation involving claims in excess of $50,000 now pending
or threatened against or with respect to the Company, any Subsidiary or any
member of the Seller Group in respect of any Tax; (v) there are no requests for
rulings or determinations in respect of any Tax pending between the Company or
any Subsidiary and any Taxing Authority; and (vi) during the five-year period
ending on the date hereof, none of Seller, the Company, any Subsidiary or any
Affiliate of Seller has made or changed any tax election, changed any annual tax
accounting period, or adopted or changed any method of tax accounting (to the
extent that any such action may materially affect any Post-Closing Tax Period of
the Company or any Subsidiary), nor has it, to the extent it may affect or
relate to any Post-Closing Tax Period of the Company or any Subsidiary, filed
any amended Return, entered into any closing agreement, settled any Tax claim or
assessment, or surrendered any right to claim a Tax refund.
(c) TAXING JURISDICTIONS. Schedule 8.02(c) contains a list of all
jurisdictions in which the Company and any Subsidiary (i) has paid any material
amount of Tax since January 1, 1996 or (ii) the Seller, the Company, any
Subsidiary or any Affiliate of Seller has been advised in writing since January
1, 1996 by a Taxing Authority that any Tax is properly payable by the Company or
any Subsidiary, or has Knowledge of any audit or proceeding to which any such
entity is a party now pending or threatened in such jurisdiction.
(d) TAX SHARING, CONSOLIDATION AND SIMILAR ARRANGEMENTS. Except as set
forth on Schedule 8.02(d), (i) neither the Company nor any Subsidiary has been a
member of an affiliated, consolidated, combined or unitary group other than one
of which Seller was the common parent; (ii) neither the Company nor any
Subsidiary is a party to any Tax Sharing Agreement or to any other agreement or
arrangement referred to in clause (i) or (iii) of the definition of "Tax"; (iii)
neither the Company nor any Subsidiary is currently under any obligation to pay
any amounts of the type described in clause (ii) or (iii) of the definition of
"Tax",
45
regardless of whether such Tax is imposed on the Company or any Subsidiary; and
(iv) neither the Company nor any Subsidiary has entered into any closing
agreement or arrangement with any Taxing Authority with regard to the Tax
liability of the Company or any Subsidiary affecting any Post-Closing Tax
Period.
(e) CERTAIN AGREEMENTS AND ARRANGEMENTS. Except as set forth on
Schedule 8.02(e), (i) neither the Company nor any Subsidiary is a direct or
indirect beneficiary of a guarantee of tax benefits or any other arrangement
that has the same economic effect (including tax opinion or other insurance)
with respect to any transaction or tax opinion relating to the Company or any
Subsidiary; (ii) neither the Company nor any Subsidiary is a party to any
understanding or arrangement described in Section 6111(d) or Section
6662(d)(2)(C)(iii) of the Code; and (iii) neither the Company nor any Subsidiary
has participated in or cooperated with an international boycott within the
meaning of Section 999 of the Code or has been requested to do so in connection
with any transaction or proposed transaction.
(f) PROPERTY AND LEASES. Except as set forth on Schedule 8.02(f), (i)
neither the Company nor any Subsidiary owns an interest in real property in any
jurisdiction in which a Tax is imposed on the transfer of an interest in real
property and which treats the transfer of an interest in an entity that owns an
interest in real property as a transfer of the interest in real property; (ii)
none of the property owned or used by the Company or any Subsidiary is subject
to a tax benefit transfer lease executed in accordance with Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended; (iii) none of the Company, any of
its Subsidiaries, or any other entity in which the Company or any Subsidiary
owns an interest, is a party to one or more leases with any lessor (or Affiliate
of such lessor) covering in the aggregate more than 100 buses, trucks or vans
(collectively, or individually, "VEHICLES"), other than a lease that is, for
federal income tax purposes, a "true" lease under which the Company, the
Subsidiary or the other entity in which the Company or any Subsidiary owns an
interest owns or uses the property subject to the lease; (iv) none of the
Company, any of its Subsidiaries, any of its Affiliates or any other entity in
which the Company or any Subsidiary owns an interest is a party to a lease-in,
lease-out arrangement in which the lessee's or lessor's obligations under such
an arrangement are substantially defeased; and (v) none of the property owned by
the Company or any Subsidiary is "tax-exempt use property" within the meaning of
Section 168(h) of the Code.
(g) CERTAIN ELECTIONS. Except as set forth on Schedule 8.02(g), (i) no
election has been made under Treasury Regulations Section 1.7701-3 or any
similar provision of Tax law to treat the Company, any Subsidiary or any other
46
entity in which the Company or any Subsidiary owns an interest as an
association, corporation or partnership; (ii) none of the Company, any
Subsidiary or any other entity in which the Company or any Subsidiary owns an
interest is disregarded as an entity for Tax purposes; (iii) a protective
carryover election has been filed in connection with each transaction
consummated by the Company or any Subsidiary prior to January 20, 1994 that
constituted a "qualified stock purchase" within the meaning of Section 338 of
the Code; (iv) Seller is qualified to make the Section 338(h)(10) Election; and
(v) none of Seller, the Company, any Subsidiary, and any other person on behalf
of the Company or any Subsidiary, has entered into any agreement or consent
pursuant to Section 341(f) of the Code.
(h) INSURANCE/REINSURANCE. Except as set forth on Schedule 8.02(h),
none of the Company or any Subsidiary is a party to an agreement or an
arrangement for insurance or reinsurance that is placed with a Subsidiary or any
other entity in which the Company or any Subsidiary owns an interest.
SECTION 8.03. COVENANTS. (a) Buyer and Seller will make a timely,
effective and irrevocable election under Section 338(h)(10) of the Code and
under any comparable statutes in any other jurisdiction with respect to the
purchase of the Shares of the Company and each of its Subsidiaries (the "SECTION
338(H)(10) ELECTION"), and to file such election in accordance with applicable
regulations. The Section 338(h)(10) Election shall properly reflect the Price
Allocation (as hereinafter defined). Within 120 days after the Closing Date,
Buyer shall deliver to Seller a draft statement (the "ALLOCATION STATEMENT")
proposing to allocate the modified ADSP (as such term is defined in Treasury
Regulations Section 1.338(h)(10)-1(f)) (the "MODIFIED AGGREGATE DEEMED SALES
PRICE") of the assets of the Company and its Subsidiaries in accordance with the
Treasury regulations promulgated under Section 338(h)(10). For this purpose,
Buyer and Seller hereby agree that all tangible and intangible assets (other
than goodwill) reflected on the Final Closing Balance Sheet shall be treated as
having a fair market value equal to the respective amounts contained therein,
and that the excess of the Modified Aggregate Deemed Sales Price over the
aggregate amount thereof shall be allocated to goodwill within the meaning of
Section 197 of the Code. Seller shall have the right to approve the Allocation
Statement. If within 30 days after receipt of the Allocation Statement Seller
notifies Buyer in writing that Seller disagrees with such allocation, Buyer and
Seller will negotiate in good faith to resolve such dispute. If Buyer and Seller
fail to resolve such dispute within 30 days, an Accounting Referee chosen and
mutually acceptable to both Buyer and Seller shall determine whether the
allocation was reasonable and, if not reasonable, shall appropriately revise the
Allocation Statement. Seller shall have the right to submit a proposed
allocation to the Accounting Referee which the Accounting Referee may consider
in revising the Allocation Statement. If Seller does not
47
respond within 30 days, or upon resolution of the disputed items, the allocation
reflected on the Allocation Statement (as such may have been revised) shall be
the "Price Allocation" and shall be binding on the parties hereto. Seller and
Buyer agree to (i) act in accordance with the Price Allocation in the
preparation, filing and audit of any Tax return and (ii) cooperate fully, as and
to the extent reasonably requested by the other party, in connection with making
the Section 338(h)(10) Election. Other disputes arising under this Article 8 and
not resolved by mutual agreement shall also be resolved by an Accounting Referee
chosen and mutually acceptable to both Buyer and Seller within five days of the
date on which the need to choose the Accounting Referee arises. The Accounting
Referee shall resolve any disputed items within 30 days of having the item
referred to it pursuant to such procedures as it may require. The costs, fees
and expenses of the Accounting Referee shall be borne equally by Buyer and
Seller.
(b) Without the prior written consent of Buyer, neither Seller nor the
Company, any Subsidiary or any Affiliate of Seller shall, to the extent it may
have the effect of increasing the Tax liability of the Company, any Subsidiary,
Buyer or any Affiliate of Buyer during any Post-Closing Tax Period, make or
change any tax election (other than the Section 338(h)(10) Election), change an
annual tax accounting period, adopt or change any method of tax accounting, file
any amended Return, enter into any closing agreement, settle any Tax claim or
assessment, surrender any right to claim a Tax refund, consent to any extension
or waiver of the limitations period applicable to any Tax claim or assessment or
take or omit to take any other action.
(c) Seller shall include the Company and its Subsidiaries in its
consolidated Federal Tax Return and shall file and pay any Federal Taxes or
Other Income Taxes due on any Federal Tax Return and any State Tax Return
through the close of business on the Closing Date. Seller shall furnish Buyer a
copy of each such Return insofar as it relates to the Company and its
Subsidiaries.
(d) Neither the Company nor any Subsidiary shall reserve any amount for
or make any payment of Other Taxes to any person or any Taxing Authority, except
for Other Taxes as are due or payable or have been properly estimated in
accordance with applicable law as applied in a manner consistent with past
practice of Seller.
(e) All transfer, documentary, sales, use, stamp, registration, value
added and other such Taxes and fees (including any penalties and interest)
incurred in connection with (a) transactions contemplated by this Agreement, and
(b) the acquisition of the Puerto Rico Business ("TRANSFER TAXES") shall be
borne equally by Seller, on the one hand, and Buyer, on the other hand. Seller
and Buyer will, each at its own expense, file all necessary Tax returns and
other
48
documentation with respect to such Transfer Taxes required to be filed by each
of them. Upon receipt of any bill for such Transfer Taxes, each of Seller and
Buyer shall present a statement to the other setting forth the amount of
reimbursement to which each is entitled under this Section 8.03(e) together with
such supporting evidence as is reasonably necessary to calculate the proration
amount. In the event that either Seller or Buyer shall make any payment for such
it is entitled to reimbursement under this Section 8.03(e), the other party
shall make such reimbursement promptly but in no event later than 10 days after
the presentation of a statement setting forth the amount of reimbursement to
which the presenting party is entitled along with such supporting evidence as is
reasonably necessary to calculate the amount of reimbursement.
SECTION 8.04. REFUNDS. Buyer shall promptly pay or cause to be paid
promptly to Seller the amount of any refund of Federal Tax or Other Income Tax
attributable to a Pre-Closing Tax Period with respect to the Company or any
Subsidiaries upon receipt by Buyer or any of its Affiliates (or any successor of
Buyer or any of its Affiliates), which is not reflected in Final Stockholder's
Equity.
SECTION 8.05. TAX SHARING. Any and all existing Tax Sharing Agreements
shall be terminated as of the date hereof. After the date hereof, neither the
Company nor any Subsidiary shall have any further rights or liabilities
thereunder. This Agreement shall be the sole Tax sharing agreement relating to
the Company or any Subsidiary for all Pre-Closing Tax Periods. Seller shall
compensate Buyer for and hold the Company and any Subsidiary harmless against
any Tax resulting from such termination.
SECTION 8.06. COOPERATION ON TAX MATTERS. (a) Buyer and Seller shall
cooperate reasonably in connection with the preparation and filing of any Tax
return, statement, report or form (including any report required pursuant to
Section 6043 of the Code and all Treasury Regulations promulgated thereunder),
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Company, Seller and Buyer agree (i) to
retain all books and records with respect to Tax matters pertinent to the
Company and the Subsidiaries relating to any Pre-Closing Tax Period, and to
abide by all record retention agreements entered into with any Taxing Authority,
and (ii) to give the other party reasonable written notice prior to destroying
or discarding any such books and
49
records and, if the other party so requests, the Company or Seller, as the case
may be, shall allow the other party to take possession of such books and
records.
(b) Buyer and Seller further agree, upon request, to use reasonable
efforts to obtain any certificate or other document from any governmental
authority or customer of the Company or any Subsidiary or any other person as
may be necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including but not limited to with respect to the transactions contemplated
hereby).
SECTION 8.07. TAX INDEMNIFICATION. (a) Seller hereby indemnifies each
Buyer Indemnitee against and agrees to hold each Buyer Indemnitee harmless from
any (t) Tax of the Company or any Subsidiary described in clause (i) of the
definition of Tax related to a Pre-Closing Tax Period, (u) Tax described in
clause (ii) or (iii) of the definition of Tax, (v) Tax of the Company or any
Subsidiary resulting from a breach of the provisions of Section 8.02 or Section
8.03, (w) Tax related or attributable to the assets purchased in the Puerto Rico
Business, (x) Section 338 Tax, (y) any Tax arising out of or related to the
Restructuring contemplated by Section 2.02, and (z) liabilities, costs, expenses
(including, without limitation, reasonable expenses of investigation and
attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax described in (t), (u), (v), (w), (x) or (y), and any liability as
transferee for which Taxes (the sum of (t), (u), (v), (w), (x), (y), and (z)
being referred to herein as a "Loss"); PROVIDED Seller shall have no liability
for the payment of any Loss to the extent that such Loss is reflected as a Tax
liability in computing Closing Stockholder's Equity and PROVIDED FURTHER that
Seller shall not be liable in respect of Other Taxes described in (t), (u) and
(v) attributable to any Pre-Closing Tax Period commencing on or after January 1,
1999, but excluding any Transfer Taxes described in Section 8.03(e) ("1999 OTHER
TAXES"). Buyer hereby indemnifies Seller against and agrees to hold Seller
harmless from any Federal Tax or Other Income Tax imposed for a Post-Closing Tax
Period on the Company, its Subsidiaries or any Affiliate of the Buyer
(hereinafter a "POST-CLOSING TAX").
(b) If an indemnification obligation under this 8.07 or Article 11
arises in respect of an adjustment which makes allowable to any Indemnified
Party any deduction, amortization, exclusion from income or other allowance (a
"TAX BENEFIT") which would not, but for such adjustment, be allowable, then the
Indemnified Party shall pay to the Indemnifying Party an amount equal to the
actual Tax saving produced by such Tax Benefit at the time such Tax saving is
realized by the Indemnified Party. The amount of any such Tax saving for a
Taxable period shall be the amount of the reduction in Taxes payable to a Taxing
50
Authority with respect to such Tax period as compared to the Taxes that would
have been payable to a Taxing Authority by the Indemnified Party in the absence
of such Tax Benefit, taking into account the effect, if any, of the receipt of
the indemnity payment on the MADSP.
(c) For purposes of this Section, in the case of any Taxes that are
imposed on a periodic basis and are payable for a Tax period that includes (but
does not end on) the Closing Date, the portion of such Tax related to the
portion of such Tax period ending on and including the Closing Date shall (x) in
the case of any Taxes other than gross receipts, sales or use Taxes and Taxes
based upon or related to income, be deemed to be the amount of such Tax for the
entire Tax period multiplied by a fraction the numerator of which is the number
of days in the Tax period ending on and including the Closing Date and the
denominator of which is the number of days in the entire Tax period, and (y) in
the case of any Tax based upon or related to income and gross receipts, sales or
use Tax be deemed equal to the amount which would be payable if the relevant Tax
period ended on and included the Closing Date. All determinations necessary to
give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of the Company and the Subsidiaries. In the case of an
interest in an entity that is fiscally transparent for Tax purposes, items shall
be deemed to flow through on a daily basis rather than at the close of the
entity's Tax year.
(d) Upon payment by any Buyer Indemnitee of any Loss, Seller shall
discharge its obligation to indemnify the Buyer Indemnitee against such Loss by
paying to Buyer an amount equal to the amount of such Loss; PROVIDED, HOWEVER,
that if Buyer provides Seller with written notice of a Loss at least 30 days
prior to the date on which the relevant Loss is required to be paid by any Buyer
Indemnitee, Seller shall, if and to the extent that it is liable therefore
hereunder, discharge its obligation to indemnify the Buyer Indemnitee against
such Loss by paying an amount equal to the amount of such Loss to the relevant
Taxing Authority. Any payment required to be made under this Section 8.07 shall
be made not later than 30 days after receipt by Seller of written notice from
Buyer in accordance with the foregoing proviso or stating that any Loss has been
incurred by a Buyer Indemnitee and the amount thereof and of the indemnity
payment requested. The payment by a Buyer Indemnitee of any Loss shall not
relieve Seller of its obligation under this Section 8.07.
(e) Buyer agrees to give prompt notice to Seller of any Loss or the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought hereunder which Buyer deems to be
within the ambit of this Section 8.07 (specifying with reasonable particularity
the basis therefor) and will give Seller such information with respect thereto
as Seller
51
may reasonably request. Seller may, at its own expense, (i) participate in and
(ii) except in the case of claims that relate to Taxes described in Section
8.07(c), upon notice to Buyer, assume the defense of any such suit, action or
proceeding (including any Tax audit); PROVIDED that (i) Seller shall thereafter
consult with Buyer upon Buyer's reasonable request for such consultation from
time to time with respect to such suit, action or proceeding (including any Tax
audit) and (ii) Seller shall not, without Buyer's consent, agree to any
settlement with respect to any Tax if such settlement could adversely affect the
Tax liability of Buyer, any of its Affiliates or, upon the Closing, the Company
or any Subsidiary. If Seller assumes such defense, (i) Buyer shall have the
right (but not the duty) to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by Seller and
(ii) Seller shall not assert that the Loss, or any portion thereof, with respect
to which Buyer seeks indemnification is not within the ambit of this Section
8.07. If Seller elects not to assume such defense, Buyer may pay, compromise or
contest the Tax at issue. Seller shall be liable for the fees and expenses of
counsel employed by Buyer for any period during which Seller has not assumed the
defense thereof. Whether or not Seller chooses to defend or prosecute any claim,
all of the parties hereto shall cooperate in the defense or prosecution thereof.
(f) Seller shall not be liable under this Section 8.07 with respect to
any Tax resulting from a claim or demand the defense of which Seller was not
offered the opportunity to assume as provided under Section 8.07(e) to the
extent Seller's liability under this Section is materially adversely affected as
a result thereof. No investigation by Buyer or any of its Affiliates at or prior
to the Closing Date shall relieve Seller of any liability hereunder.
(g) Any claim of any Buyer Indemnitee (other than Buyer) under this
Section may be made and enforced by Buyer on behalf of such Buyer Indemnitee.
(h) Upon payment by Seller of any Post-Closing Tax, Buyer shall
discharge its obligation to indemnify the Seller against such Post-Closing Tax
by paying to Seller an amount equal to the amount of such Post-Closing Tax not
later than 30 days after receipt by Buyer of written notice from Seller. The
payment by Seller of any Post-Closing Tax shall not relieve Buyer of its
obligation under this Section 8.07.
(i) Seller agrees to give prompt notice to Buyer of the assertion of
any claim, or the commencement of any suit, action or proceeding in which a
Taxing Authority seeks to recover from Seller any Post-Closing Tax and will give
Buyer such information with respect thereto as Buyer may reasonably request.
Buyer may, at its own expense, (i) participate in and (ii) upon notice to
Seller, assume
52
the defense of any such suit, action or proceeding. If Buyer assumes such
defense, (i) Seller shall have the right (but not the duty) to participate in
the defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by Buyer and (ii) Buyer shall not assert that the Post-Closing
Tax, or any portion thereof, with respect to which Seller seeks indemnification
is not within the ambit of this Section 8.07. If Buyer elects not to assume such
defense, Seller may pay, compromise or contest the Post-Closing Tax, and Buyer
shall be liable for the fees and expenses of counsel employed by Seller for any
period during which Buyer has not assumed the defense thereof. Whether or not
Buyer chooses to defend or prosecute any claim, all of the parties hereto shall
cooperate in the defense or prosecution thereof.
(j) Buyer shall not be liable under this Section 8.07 with respect to
any Post-Closing Tax resulting from a claim or demand the defense of which Buyer
was not offered the opportunity to assume as provided under Section 8.07(i) to
the extent Buyer's liability is materially adversely affected as a result
thereof.
SECTION 8.08. PURCHASE PRICE ADJUSTMENT AND INTEREST. Any amount paid
by Seller or Buyer under Article 8 or Article 11 will be treated as an
adjustment to the Modified Aggregate Deemed Sales Price unless a Final
Determination causes any such amount not to constitute an adjustment to the
Modified Aggregate Deemed Sales Price for Federal Tax purposes. In the event of
such a Final Determination, Buyer or Seller, as the case may be, shall pay a
grossed-up amount that reflects the hypothetical Tax consequences of the receipt
or accrual of such payment, using the maximum statutory rate (or rates, in the
case of an item that affects more than one Tax) applicable to the recipient of
such payment for the relevant year, reflecting the effect of deductions or
credits available (including for interest and Taxes); PROVIDED that Buyer shall
be required to pay to Seller only the excess of the amount so calculated over
the additional Tax or Taxes that would have been imposed on any member of the
Seller Group if such payment had been treated as an adjustment to the Purchase
Price, and that Seller shall be required to pay to Buyer only the excess of the
amount so calculated over the net present value of the additional Tax or Taxes
that would have been incurred by the Buyer Indemnitees if such payment had been
treated as an adjustment to the Purchase Price. Any payment required to be made
by Buyer or Seller under Article 8 or Article 11 that is not made when due shall
bear interest at Prime Rate for each day until paid. "FINAL DETERMINATION" shall
mean (i) with respect to Federal Taxes, a "determination" as defined in Section
1313(a) of the Code or execution of an Internal Revenue Service Form 870AD and,
with respect to Taxes other than Federal Taxes, any final determination of
liability in respect of a Tax that, under applicable law, is not subject to
further appeal, review or modification through proceedings or otherwise
(including the expiration of a statute of limitations or a
53
period for the filing of claims for refunds, amended returns or appeals from
adverse determinations) or (ii) the payment of Tax by such Buyer Indemnitee with
respect to any item disallowed or adjusted by a Taxing Authority.
ARTICLE 9
EMPLOYEE BENEFITS
SECTION 9.01. COMPENSATION AND BENEFITS. (a) For a period of at least
one year beginning on the Closing Date, Buyer will, or will cause one of its
Affiliates to, provide employees and former employees of the Company or any
Subsidiary with compensation and employee benefits that in the aggregate are at
least equal to the compensation and employee benefits provided to each such
employee and former employee under Employee Plans and Benefit Arrangements in
effect on the Closing Date, including without limitation severance benefits
provided under any severance plan, guideline, policy or agreement listed on
Schedule 3.23 (other than the Stay-on and Assist Agreements), subject, however,
to the terms of any applicable collective bargaining agreements.
(b) Seller will retain and assume all liabilities and obligations of
the Company or any Subsidiary for any amounts that become payable to any
employee or independent contractor of the Company or any Subsidiary under the
terms of any Stay-on and Assist Agreement as in effect immediately prior to the
Closing Date. In addition, Seller will retain all liabilities and obligations
for retiree medical and life insurance benefits under any Employee Plan of
Seller with respect to former employees of the Company or any Subsidiary who
retire prior to the Closing Date, except that Buyer will assume all liabilities
and obligations of Seller and its Affiliates for retiree medical and life
insurance benefits with respect to former employees of Ryder/ATE, Inc. (or any
predecessor employer) who participate in the Ryder System, Inc. Board of
Directors Retiree Medical Plan.
(c) Effective as of the Closing Date, Seller will take, or will cause
to be taken, all actions necessary to cause the Company and each Subsidiary to
cease to participate in the Employee Plans and Benefit Arrangements sponsored by
Seller or any of its Affiliates, subject to the provisions of Sections 9.02 and
9.03. Except as provided in Sections 9.02 and 9.03, no assets or liabilities of
any such Employee Plan or Benefit Arrangement will be transferred to Buyer or
any Affiliate of Buyer or any employee benefit plan sponsored by Buyer or any of
its Affiliates, except for any such transfers that occur by operation of law and
subject to the terms of any applicable collective bargaining agreement.
54
(d) Buyer agrees that, under any employee benefit plan continued, made
available or established after the Closing for employees or former employees of
the Company or any Subsidiary, such employees and former employees will receive
credit for the years of service credited to them by Seller, any of its
Affiliates, the Company or any Subsidiary prior to the Closing in determining
eligibility and vesting thereunder and in determining the amount of benefits
under any applicable sick leave, vacation, severance or other welfare plan.
Buyer will, or will cause one of its Affiliates to, cover such employees and
former employees as of the Closing under a group health plan and waive any
preexisting condition limitations applicable to such employees or former
employees under any group health plan made available to them, and Buyer will, or
will cause one of its Affiliates to, take all action necessary to ensure that
such employees and former employees are given full credit for all co-payments
and deductibles incurred under any group health plan for the plan year that
includes the Closing Date.
(e) Seller will retain all obligations and liabilities in respect of
any options outstanding under Seller's employee and director stock option plans.
Seller shall take such actions as shall be required to fully vest any options
held by option holders employed by Buyer, the Company or any Subsidiary
following the Closing and to provide that the employees listed on Schedule 9.01
shall have the period of time set forth on such Schedule after the Closing to
exercise any such option.
SECTION 9.02. PENSION PLAN. (a) With respect to the Ryder System, Inc.
Retirement Plan (the "PENSION PLAN"), as soon as practicable after the Closing
Date, Seller shall cause the trustee of the Pension Plan to segregate, in
accordance with the spin-off provisions set forth under Section 414(l) of the
Code and in accordance with the provisions set forth below, the assets of the
Pension Plan allocable to active employees of the Company and any Subsidiary
(including employees on authorized leave of absence, military service or lay-off
with recall rights) who become employees of Buyer or any of its Affiliates as of
the Closing Date (the "TRANSFERRED EMPLOYEES") and shall make any and all
filings and submissions to the appropriate governmental agencies arising in
connection with such segregation of assets and all necessary amendments to the
Pension Plan and related trust agreement to provide for such segregation of
assets and the transfer of assets as described below.
(b) The amount of such assets (the "TRANSFER AMOUNT") shall be equal to
the accrued benefit obligation "ABO" under the Pension Plan for Transferred
Employees, including without limitation any portion thereof attributable to
early retirement subsidies or other "growing" benefits, determined as of the
Closing
55
Date in accordance with SAS 87. The Transfer Amount shall be calculated, subject
to the requirements of Section 414(l) of the Code, using the assumptions as to
mortality, participant withdrawal rate, disability incidence and retirement age
used by the Pension Plan as set forth in Table XI of the Pension Plan's
actuarial valuation report for the year ending 12/31/98, and using a discount
rate of 6.5%. Seller and Seller's actuary shall provide the actuary designated
by Buyer with all information reasonably requested by Buyer's actuary in order
to verify and agree with the calculation of the Transfer Amount. If, on or
before December 31, 1999, Seller's Board of Directors approves an ad hoc
increase in the accrued benefits of employees of Seller and its Affiliates who
participate in the Pension Plan, Seller will take all necessary action to apply
such ad hoc increase to the accrued benefits under the Pension Plan of
Transferred Employees, and the amount of such increase will be included in the
ABO for Transferred Employees and in the Transfer Amount determined in
accordance with the provisions of this Section 9.02(b).
(c) As soon as practicable after the date hereof, Buyer shall establish
or designate a defined benefit pension plan for the benefit of Transferred
Employees (the "SUCCESSOR PENSION PLAN"), shall take all necessary action to
qualify such Plan under the applicable provisions of the Code and shall make any
and all filings and submissions to the appropriate governmental agencies
required to be made by it in connection with the transfer of assets described in
this Section 9.02. Promptly following the date hereof, actuaries for Buyer and
Seller shall jointly estimate the Transfer Amount. As soon as practicable (but
in any event not later than the end of the month following the month in which
the Closing occurs), subject to the receipt of a favorable determination letter
from the Internal Revenue Service regarding the qualified status of the
Successor Pension Plan as amended to the date of transfer, or in lieu thereof
the issuance of indemnities satisfactory to Seller and Buyer, Seller shall cause
the trustee of the Pension Plan to transfer 80% of the estimated Transfer Amount
(the "PRELIMINARY PAYMENT"), increased by earnings calculated at a rate equal to
the Pension Plan's return on investment for the period from the Closing Date to
the date of such transfer, as determined by the Seller or an advisor thereto,
and reduced by any required benefit payments made to or in respect of any
Transferred Employee who retired or otherwise terminated service after the
Closing Date and prior to the date of such transfer, to the appropriate trustee
designated by Buyer under the trust agreement forming a part of the Successor
Pension Plan. As soon as practicable following the calculation of the Transfer
Amount, Seller shall cause the trustee of the Pension Plan to segregate in
accordance with Section 9.02(a) and transfer to the Successor Pension Plan the
excess of the Transfer Amount over the Preliminary Payment, such excess to be
increased by earnings (i) for the period from the Closing Date to and including
the date of such determination and segregation, at a rate equal to the
56
Pension Plan's return on investment for such period, as determined by the Seller
or an advisor thereto; and (ii) for the period from the date of such
determination and segregation to and including the date of such transfer, at a
rate equal to the 13-week Treasury Bill rate as published in The Wall Street
Journal from time to time throughout such period. The Preliminary Payment shall
be transferred in the form of cash and marketable securities other than
securities issued by Seller and its Affiliates. A list of any marketable
securities proposed to be transferred shall be provided to Buyer not less than
10 business days prior to the date of transfer. Seller shall, or shall cause the
trustee of the Pension Plan to, provide to Buyer's actuary any information
reasonably requested by Buyer's actuary concerning the calculation of investment
returns and the assets proposed to be transferred in accordance with this
Section 9.02. In the event that the Preliminary Payment exceeds the Transfer
Amount, Buyer and Seller will cooperate to take such actions as may be necessary
or appropriate to eliminate consequences to Buyer, Seller, the Pension Plan and
the Successor Pension Plan that were not intended by this Section 9.02.
Notwithstanding the foregoing provisions of this Section 9.02, in the event that
the PBGC, the U.S. Department of Labor, the Internal Revenue Service or any
other governmental agency refuses to consent to the transfer of assets from the
Pension Plan to the Successor Pension Plan unless Seller agrees to any condition
that would increase the Transfer Amount, accelerate contributions to the Pension
Plan or otherwise increase the cost to Seller, Buyer, the Pension Plan or the
Successor Pension Plan, of the transfer of assets to the Successor Pension Plan,
and the satisfaction of such condition cannot be accomplished without material
incremental cost or regulatory or administrative burden for the Seller or the
Pension Plan (as determined by Seller in the exercise of Seller's reasonable
judgement) or for the Buyer or the Successor Pension Plan (as determined by
Buyer in the exercise of Buyer's reasonable judgement), then Seller in its sole
discretion (with respect to Seller and the Pension Plan) and Buyer in its sole
discretion (with respect to Buyer and the Successor Pension Plan) may elect not
to proceed with such transfer, and the Pension Plan will retain all assets and
liabilities with respect to Transferred Employees. In addition, if any
segregation or transfer of assets has occurred at the time of such refusal to
consent, Buyer shall cooperate with Seller to take all action necessary to
completely unwind any segregation or transfer of assets pursuant to this Section
9.02.
(d) In consideration for the transfer of the Preliminary Payment
described in Section 9.02(c), Buyer shall, effective as of the date of the
transfer of the Preliminary Payment, assume all of the obligations of Seller and
any of its affiliates in respect of benefits accrued by Transferred Employees
under the Pension Plan (exclusive of benefits paid prior to the date of such
transfer) on or
57
prior to the Closing Date. Neither Buyer nor any of its Affiliates shall assume
any other obligations or liabilities arising under or attributable to the
Pension Plan.
(e) Upon the determination and segregation referred to in Section
9.02(a) and 9.02(c), the portion of the Pension Plan attributable to Transferred
Employees shall bear its pro rata share of the Pension Plan's administrative
costs for the period from the date of such determination and segregation to the
date of transfer of the final Transfer Amount.
(f) In further consideration of the transfer of assets described in
this Section 9.02, Buyer shall assume, effective as of the Closing Date, all of
the obligations of Seller and any of its Affiliates in respect of benefits
accrued by Transferred Employees under the Ryder System, Inc. Benefit
Restoration Plan.
SECTION 9.03. INDIVIDUAL ACCOUNT PLAN. (a) With respect to the Ryder
System, Inc. Employee Savings Plan A, and the Ryder System, Inc. Employee
Savings Plan B (collectively, the "INDIVIDUAL ACCOUNT PLAN"), as soon as
practicable after the Closing Date, Seller shall (i) cause the trustee of the
Individual Account Plan to segregate or otherwise identify the assets of the
Individual Account Plan representing the full account balances of Transferred
Employees as of the Closing Date, in accordance with the requirements of Section
414(l) of the Code, (ii) make any and all filings and submissions to the
appropriate governmental agencies arising in connection with such segregation of
assets and (iii) make all necessary amendments to the Individual Account Plan
and related trust agreement to provide for such segregation of assets and the
transfer of assets as described below. The manner in which the account balances
of Transferred Employees under the Individual Account Plans are invested shall
not be affected by such segregation or identification of assets.
(b) As soon as practicable, but not later than six months, after the
Closing Date, Buyer shall establish or designate an individual account plan for
the benefit of Transferred Employees (the "SUCCESSOR INDIVIDUAL ACCOUNT PLAN"),
shall take all necessary action, if any, to qualify such plan under the
applicable provisions of the Code and shall make any and all filings and
submissions to the appropriate governmental agencies required to be made by it
in connection with the transfer of assets described below. As soon as
practicable following the earlier of the delivery to Seller of a favorable
determination letter from the Internal Revenue Service regarding the qualified
status of the Successor Individual Account Plan as amended to the date of
transfer, or the issuance of indemnities satisfactory to Seller and Buyer,
Seller shall cause the trustee of the Individual Account Plan to transfer in the
form of cash (or such other form as may be agreed by Buyer and Seller) the full
account balances of Transferred
58
Employees under the Individual Account Plan (which account balances will (i)
have been credited with appropriate earnings attributable to the period from the
Closing Date to the date of transfer described herein and (ii) bear their pro
rata share of the Individual Account Plan's expenses charged to participants'
accounts for such period), reduced by any necessary benefit or withdrawal
payments to or in respect of Transferred Employees occurring during the period
from the Closing Date to the date of transfer described herein, to the
appropriate trustee as designated by Buyer under the trust agreement forming a
part of the Successor Individual Account Plan. To the extent that certain
expenses of Transferred Employee accounts are subsidized by Seller during the
period prior to transfer, the cost of such subsidiaries will be reimbursed by
Buyer.
(c) In consideration for the transfer of assets described in Section
9.03, Buyer shall, effective as of the date of transfer described herein, assume
all of the obligations of Seller and any of its Affiliates in respect of the
account balances accumulated by Transferred Employees under the Individual
Account Plan (exclusive of any portion of such account balances which are paid
or otherwise withdrawn prior to the date of transfer described herein) on or
prior to the Closing Date. Neither Buyer nor any of its Affiliates shall assume
any other obligations or liabilities arising under or attributable to the
Individual Account Plan.
(d) In lieu of the trust to trust transfer provided for by the
foregoing portions of Section 9.03, Seller may, with Buyer's consent, elect
within sixty days following the Closing Date to treat the purchase and sale of
the Shares under this Agreement as an event described in Section 401(k)(10) of
the Code, to the extent consistent with applicable law and regulations, and to
distribute the accrued balances of Transferred Employees under the Individual
Account Plan in accordance with the provisions of the Individual Account Plan
and applicable law and regulations. If Buyer withholds its consent to such
election, Buyer agrees to indemnify and hold Seller harmless, in accordance with
the indemnification procedures set forth in Section 11.03, against any claims
made by Transferred Employees for distribution of such accounts.
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10.01. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER. The
obligations of Buyer and Seller to consummate the Closing are subject to the
satisfaction of the following conditions:
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(a) Any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated.
(b) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the
Closing.
(c) Buyer and Seller shall have entered into the Ancillary Agreements,
each in form and substance reasonably satisfactory to both parties
hereto.
(d) Buyer and Seller shall each deliver a signed Form 8023 in
connection with the election under 338(h)(10) of the Code with respect
to the Company and its Subsidiaries which reflect amounts shown on the
Balance Sheet in accordance with the principles governing the
Allocation Statement as set forth in Section 8.03(a), together with all
schedules and attachments required thereby and documents in connection
therewith as either Buyer or Seller may reasonably request; PROVIDED
that such Form 8023 will not be filed with the Internal Revenue Service
until Section 8.03(a) has been complied with; and PROVIDED FURTHER that
each of Buyer and Seller agree to provide revised Forms 8023 to reflect
any adjustments made pursuant to Sections 2.05 or 8.03(a).
SECTION 10.02. CONDITIONS TO OBLIGATION OF BUYER. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) (i) Seller shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to
the Closing Date, (ii) the representations and warranties of Seller
contained in this Agreement and in any certificate delivered by Seller
pursuant hereto and made as of the date hereof that are qualified by
materiality or Material Adverse Effect shall be true and correct, and
all other such representations and warranties of Seller made as of the
date hereof shall be true and correct in all material respects, as if
made at and as of such date and (iii) Buyer shall have received a
certificate signed by an Executive Vice President of Seller to the
foregoing effect.
(b) (i) The representations and warranties of Seller contained in this
Agreement and in any certificate delivered by Seller pursuant hereto
that are qualified by materiality or Material Adverse Effect shall be
true
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and correct, and all other such representation and warranties of Seller
shall be true and correct in all material respects, in each case at and
as of the Closing Date, as if made at and as of such date, with only
such exceptions that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, and (ii)
Buyer shall have received a certificate signed by an Executive Vice
President of Seller to the foregoing effect.
(c) There shall not be threatened, instituted or pending any action or
proceeding by any Governmental Authority before any court or
governmental authority or agency, domestic or foreign, (i) seeking to
restrain, prohibit or otherwise interfere with the ownership or
operation by Buyer or any of its Affiliates of all or any material
portion of the business or assets of the Company or any Subsidiary or
of Buyer or any of their Affiliates or to compel Buyer or any of its
Affiliates to dispose of all or any material portion of the business or
assets of the Company or any Subsidiary or of Buyer or any of their
Affiliates, (ii) seeking to impose or confirm limitations on the
ability of Buyer or any of its Affiliates effectively to exercise full
rights of ownership of the Shares, including without limitation, the
right to vote any Shares acquired or owned by Seller or any of its
Affiliates on all matters properly presented to the Company's
stockholders or (iii) seeking to require divestiture by Buyer or any of
its Affiliates of any Shares.
(d) There shall not be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the purchase of the Shares,
by any court or other Governmental Authority, other than the
application of the waiting period provisions of the HSR Act to the
purchase of the Shares, that could reasonably be expected to prohibit
the purchase of the Shares or impose a material limitation on the
ability of the Buyer effectively to exercise full rights of ownership
of the Shares, including without limitation, the right to vote any
Shares acquired or owned by Seller or any of its Affiliates on all
matters properly presented to the Company's stockholders.
(e) Buyer shall have received all documents it may reasonably request
relating to the existence of Seller, the Company and the Subsidiaries
and the authority of Seller for this Agreement, all in form and
substance reasonably satisfactory to Buyer.
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(f) Buyer shall have received a certification signed by Seller to the
effect that Seller is not a "foreign person" as defined in Section 1445
of the Code.
(g) The Restructuring transactions shall have been consummated.
(h) The Buyer Shareholder Resolutions shall have been duly approved by
the shareholders of Buyer as required by applicable law.
(i) Buyer shall have obtained funds necessary to consummate the
transactions contemplated by this Agreement on substantially the same
terms and conditions as set forth in the Financing Commitments.
SECTION 10.03. CONDITIONS TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) (i) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Closing Date, (ii) the representations and warranties of Buyer
contained in this Agreement and in any certificate delivered by Buyer
pursuant hereto shall be true and correct in all material respects at
and as of the Closing Date, as if made at and as of such date and (iii)
Seller shall have received a certificate signed by the Group Finance
Director of Buyer to the foregoing effect.
(b) Seller shall have received all documents it may reasonably request
relating to the existence of Buyer and the authority of Buyer for this
Agreement, all in form and substance reasonably satisfactory to Seller.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11.01. SURVIVAL. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement shall survive the
Closing for a period of eighteen months after the Closing Date; PROVIDED that
(i) the representations and warranties contained in Section 3.24 shall survive
the Closing until the third anniversary of the Closing Date, (ii) the covenants
and agreements contained in Sections 5.02(b) and 5.07 shall survive for the
period set forth therein, (iii) the covenants and agreements contained in
Sections 5.02(c), 5.03, 5.04, 5.09, 6.02, 6.05, 7.01, 7.08 and Article 13 shall
survive indefinitely,
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(iv) the covenants, agreements, representations and warranties contained in
Articles 8 and 9 shall survive until expiration of the statute of limitations
applicable to the matters covered thereby (giving effect to any waiver,
mitigation or extension thereof), if later, and (v) the representations and
warranties contained in Sections 3.01, 3.02, 3.06, 3.14(a), 4.01 and 4.02 shall
survive indefinitely. Notwithstanding the preceding sentence, any covenant,
agreement, representation or warranty in respect of which indemnity may be
sought under this Agreement shall survive the time at which it would otherwise
terminate pursuant to the preceding sentence, if notice of the inaccuracy or
breach thereof giving rise to such right of indemnity specifying in reasonable
detail the particulars thereof shall have been given to the party against whom
such indemnity may be sought prior to such time.
SECTION 11.02. INDEMNIFICATION. (a) Seller hereby indemnifies Buyer and
its Affiliates and, effective at the Closing, without duplication, the Company
and each Subsidiary, against and agrees to hold each of them harmless from any
and all damage, loss, liability and expense (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding and punitive damages to the
extent awarded in a third party claim) ("DAMAGES") incurred or suffered by
Buyer, any Affiliate of Buyer, the Company or any Subsidiary arising out of (i)
the Retained Liabilities and (ii) any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by Seller pursuant to this
Agreement (other than pursuant to Article 8); PROVIDED, that (i) Seller shall
not be liable under this Section 11.02(a) for misrepresentations or breaches of
warranty unless the aggregate amount of Damages with respect to such
misrepresentations and breaches of warranty exceeds $10,000,000.00 (and then
only for the amount of such excess) and (ii) Seller's maximum liability under
this Section 11.02(a) for misrepresentations and breaches of warranty shall not
exceed $470,000,000.00.
(b) Buyer hereby indemnifies Seller and its Affiliates against and
agrees to hold each of them harmless from any and all Damages incurred or
suffered by Seller or any of its Affiliates arising out of any misrepresentation
or breach of warranty, covenant or agreement made or to be performed by Buyer
pursuant to this Agreement (other than pursuant to Article 8); PROVIDED that (i)
Buyer shall not be liable under this Section 11.02(b) for misrepresentations or
breaches of warranty unless the aggregate amount of Damages with respect to such
misrepresentations and breaches of warranty exceeds $10,000,000.00 (and then
only for the amount of such excess) and (ii) Buyer's maximum liability under
this Section 11.02(b) for misrepresentations and breaches of warranty shall not
exceed $470,000,000.00.
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SECTION 11.03. PROCEDURES. The party seeking indemnification under
Section 11.02 (the "INDEMNIFIED PARTY") agrees to give prompt notice to the
party against whom indemnity is sought (the "INDEMNIFYING PARTY") of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought under such Section. Such notice by the
Indemnified Party will describe the claim in reasonable detail, will include
copies of all available material written evidence thereof and will indicate the
estimated amount, if reasonably practicable, of the Damages that has been or may
be sustained by the Indemnified Party. The Indemnifying Party will have the
right to participate in, or, by giving written notice to the Indemnified Party
(which notice shall constitute an acknowledgment by the Indemnifying Party that
the Indemnified Party is entitled to indemnification under this Section) to
assume, the defense of any such claim at such Indemnifying Party's own expense
and by such Indemnifying Party's own counsel (reasonably satisfactory to the
Indemnified Party), and the Indemnified Party will cooperate in good faith in
such defense. Following such notice, the Indemnifying Party will not be liable
for any legal expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof. If a firm offer is made to settle a claim
without leading to liability or the creation of a financial or other obligation
on the part of the Indemnified Party for which the Indemnified Party is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party will give written notice
to the Indemnified Party to that effect. If the Indemnified Party fails to
consent to such firm offer within ten days after its receipt of such notice, the
Indemnified Party will assume the defense of such claim and the Indemnified
Party's cost and expense and the Indemnifying Party will immediately place in
escrow cash equal to the amount of such offer and, in such event, the maximum
liability of the Indemnifying Party as to such claim will not exceed the amount
of such settlement offer. The Indemnifying Party shall not be liable under
Section 11.02 for any settlement effected without its consent of any claim,
litigation or proceeding in respect of which indemnity may be sought hereunder.
ARTICLE 12
TERMINATION
SECTION 12.01. GROUNDS FOR TERMINATION. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of Seller and Buyer;
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(b) by either Seller or Buyer if the Closing shall not have been
consummated on or before December 31, 1999;
(c) by either Seller or Buyer if there shall be any law or regulation
that makes consummation of the transactions contemplated hereby illegal
or otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree
or judgment of any court or governmental body having competent
jurisdiction;
(d) by Buyer, if (i) prior to September 7, 1999 Seller shall not have
delivered or caused to be delivered to Buyer the unqualified audit
opinion referred to in Section 5.08 with respect to the Annual
Financial Statements and the 1996 Financial Statements or (ii) such
audit opinion is delivered and there is a material discrepancy between
the financial statements to which such audit opinion relates and the
Annual Financial Statements; or
(e) by Seller, if (i) the shareholders of Buyer fail to approve the
Buyer Shareholder Resolutions at the meeting of Buyer's shareholders
contemplated by Section 7.07, or (ii) the Board of Directors of Buyer
withdraws, modifies or materially qualifies in any manner adverse to
Seller its recommendation of the transactions contemplated by this
Agreement or takes any action or makes any statement in connection with
the shareholders meeting contemplated by Section 7.07 materially
inconsistent with such recommendation.
The party desiring to terminate this Agreement pursuant to clauses
12.01(b) through 12.01(e) shall give written notice of such termination to the
other party.
SECTION 12.02. EFFECT OF TERMINATION. (a) If this Agreement is
terminated as permitted by Section 12.01, except as otherwise provided herein,
such termination shall be without liability of either party (or any stockholder,
director, officer, employee, agent, consultant or representative of such party)
to the other party to this Agreement; PROVIDED that if such termination shall
result from the (i) willful failure of either party to fulfill a condition to
the performance of the obligations of the other party, (ii) failure to perform a
covenant of this Agreement or (iii) breach by either party hereto of any
representation or warranty or agreement contained herein, such party shall be
fully liable for any and all Damages incurred or suffered by the other party as
a result of such failure or
65
breach. The provisions of Articles 11 and 13 shall survive any termination
hereof pursuant to Section 12.01.
(b) In the event this Agreement is terminated pursuant to Section
12.01(b), and all of the conditions set forth in Sections 10.01 and 10.02(a)-(h)
have been satisfied, but the condition set forth in Section 10.02(i) shall not
have been satisfied, then Buyer shall pay to Seller a fee in immediately
available funds equal to $18,000,000 (the "TERMINATION AMOUNT") promptly, but in
no event later than two business days, after such termination.
(c) In the event this Agreement is terminated by Buyer pursuant to
Section 12.01(d), then Seller shall pay to Buyer the Termination Amount
promptly, but in no event later than two business days, after such termination,
provided that Buyer is not in material breach of Section 4.08 (other than the
penultimate sentence) or in material non-compliance with the first sentence of
Section 6.04 which could not reasonably be expected to be cured prior to the
Closing.
(d) In the event this Agreement is terminated by Seller pursuant to
Section 12.01(e), and all of the conditions set forth in Sections 10.01(a) and
(b) and 10.02(a)-(d) have been satisfied, then Buyer shall pay to Seller the
Termination Amount promptly, but in no event later than two business days, after
such termination.
(e) Notwithstanding any other provision hereof, in the event that the
Termination Amount is payable under 12.02(b), (c) or (d), such Termination
Amount shall be the sole and exclusive remedy of Buyer or Seller, as the case
may be. Each party acknowledges and agrees that the agreements contained in this
Section 12.02 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, neither party would enter into
this Agreement. Accordingly, if either party fails promptly to pay any
Termination Amount due pursuant to this Section 12.02, and, in order to obtain
such payment, the party to whom the Termination Amount is payable commences a
suit which results in a judgment against the other party for the Termination
Amount, the party obligated to pay such Termination Amount will pay to the other
party its documented expenses (including attorney's fees and expenses) in
connection with such suit, together with interest on the Termination Amount at a
rate per annum equal to the Prime Rate as published in the Wall Street Journal,
Eastern Edition in effect from time to time during the period from the date such
payment is due to the date of payment. Such interest shall be payable at the
same time as the payment to which it relates and shall be calculated daily on
the basis of a year of 365 days and the actual number of days elapsed.
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SECTION 12.03. AUDIT OPINION DISCREPANCY DETERMINATION. If the audit
opinion delivered pursuant to Section 5.08 discloses any discrepancy between the
financial statements to which such audit opinion relates and the Annual
Financial Statements, Buyer and Seller will seek to agree upon whether or not
such discrepancy constitutes a material discrepancy for purposes of Section
12.01(d). If the Buyer and the Seller are unable to so agree within ten business
days after delivery of the audit opinion to Buyer, Buyer and Seller shall
jointly cause a firm of independent accountants of internationally recognized
standing reasonably acceptable to Buyer and Seller who shall not have any
material relationship with Buyer or Seller (or if Buyer and Seller are unable to
agree upon such firm then the decision shall be made by such firm or person as
may be selected by the American Arbitration Association) (the "INDEPENDENT
ARBITER"). In making such determination, the Independent Arbiter shall consider
written submissions from both Buyer and Seller (which shall be made within 10
business days after appointment of the Independent Arbiter) together with a
submission in reply by each of Buyer and Seller in response to the submission of
the other (which shall be made within 5 business days after the original
submissions of each party are made). The Independent Arbiter shall be instructed
to render its decision as promptly as practicable and in any event within five
business days after receipt of the submissions in reply to each party's original
submissions to the Independent Arbiter. The report of the Independent Arbiter
shall be final and binding upon Buyer and Seller. The cost of the Independent
Arbiter's review shall be borne equally by Buyer and Seller. The date referred
to in Section 12.01(b) shall be extended by the period from the date of receipt
by Buyer of an audit opinion reflecting any such discrepancy until the date of
determination or agreement on whether such discrepancy is or is not a material
discrepancy.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to Buyer, to:
FirstGroup plc
32A Weymouth Street
London W1N 3FA
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England
Attention: Company Secretary
Fax: 011-44-207-636-4399
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Phillip R. Mills
Fax: (212) 450-4800
if to Seller, to:
Ryder System, Inc.
3600 N.W. 82nd Avenue
Miami, FL 33166
Attention: Dwight D. Denny
Fax: (305) 500-3454
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert A. Profusek
Fax: (212) 755-7306
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
SECTION 13.02. AMENDMENTS AND WAIVERS. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(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
68
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 13.03. EXPENSES. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
SECTION 13.04. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of 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
(including by operation of law) without the consent of each other party hereto,
except that Buyer may transfer or assign, in whole or from time to time in part,
to one or more of its subsidiaries, the right to purchase all or a portion of
the Shares, but no such transfer or assignment will relieve Buyer of any of its
obligations hereunder. Any assignment in violation of the preceding sentence
will be void.
SECTION 13.05. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the law of the State of New York, without
regard to the conflict of laws rules of such state.
SECTION 13.06. JURISDICTION. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that 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 hereby shall be
brought only in the United States District Court for the Southern District of
New York or any other New York State court sitting in New York City, and each of
the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 13.01 shall be deemed
effective service of process on such party.
SECTION 13.07. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR
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RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 13.08. COUNTERPARTS; THIRD PARTY BENEFICIARIES. 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 (i) each party hereto
shall have received a counterpart hereof signed by the other party hereto, and
(ii) the Underwriting Agreement, dated as of the date hereof, between Warburg
Dillon Read and Buyer, shall have become effective. No provision of this
Agreement is intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
SECTION 13.09. ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties with respect to
the subject matter of this Agreement and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement.
SECTION 13.10. CAPTIONS. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 13.11. CERTAIN INTERPRETIVE MATTERS AND DEFINITIONS. (a) Unless
the context otherwise requires, (i) all references to Sections, Schedules or
Appendices are to Sections, Schedules or Appendices of or to this Agreement,
(ii) each term defined in this Agreement has the meaning assigned to it, (iii)
each accounting term not otherwise defined in this Agreement has the meaning
assigned to it in accordance with U.S. GAAP, (iv) "or" is disjunctive but not
necessarily exclusive, (v) words in the singular include the plural and VICE
VERSA, (vi) all references to "$" or dollar amounts will be to lawful currency
of the United States of America, and (vii) "Knowledge of Seller" and words of
similar import mean the actual knowledge of the persons listed on Schedule 13.11
without independent inquiry or investigation.
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
SECTION 13.12. CERTAIN LIMITATIONS ON REPRESENTATIONS, WARRANTIES AND
THE RIGHTS OF THE PARTIES. (a) Each of the parties is a sophisticated legal
entity that was advised by experienced counsel and, to the extent it deemed
necessary, other
70
advisors in connection with this Agreement, the events giving rise hereto and
the transactions contemplated hereby (collectively, the "DEAL"). There are no
representations or warranties by or on behalf of any party hereto, the Company,
or any of their respective Affiliates in respect of the Deal other than those
expressly set forth in this Agreement.
(b) The inclusion of any information on any schedule to this Agreement
shall not be deemed to be an admission or acknowledgment by Seller, in and of
itself, that such information is required to be listed on such schedule or is
material to or outside the ordinary course of the business of the Seller or the
Company.
(c) As between Seller and any Affiliate, on the one hand, and Buyer and
any Affiliate thereof (collectively, the "BUYER COMPANIES"), on the other hand,
to the extent permitted by applicable law, except as contemplated in the
Ancillary Agreement, the rights and obligations set forth in this Agreement will
be the sole and exclusive rights, obligations and remedies with respect to the
Deal.
SECTION 13.13. BUYER DUE DILIGENCE ADJUSTMENTS. Notwithstanding
anything in this Agreement to the contrary, for purposes of determining (i)
whether Seller is in breach of its representations and warranties in Section
3.08 and 3.19 and (ii) whether there is a material discrepancy in the Annual
Financial Statements referred to in Section 12.01(d), such determination shall
be made without regard to the items referred to in Schedule 13.13.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
FIRSTGROUP PLC
By: ______________________________________
Name:
Title:
RYDER SYSTEM, INC.
By: ______________________________________
Name:
Title:
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