|
<PAGE>
EXECUTION COPY
---------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INSURANCE AUTO AUCTIONS, INC.
AXLE HOLDINGS, INC.
AND
AXLE MERGER SUB, INC.
DATED AS OF FEBRUARY 22, 2005
---------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
THE MERGER
<S> <C>
1.1 The
Merger............................................................2
1.2 Closing; Effective Time: Filing of Articles of
Merger.................2
1.3 Effect of the
Merger..................................................2
1.4 Additional
Actions....................................................2
ARTICLE II
THE SURVIVING CORPORATION
2.1 Name of Surviving
Corporation.........................................3
2.2 Articles of
Incorporation.............................................3
2.3
By-Laws...............................................................3
2.4 Directors and
Officers................................................3
ARTICLE III
CONVERSION AND CANCELLATION OF SECURITIES;
MERGER CONSIDERATION
3.1 Conversion of Axle Common
Stock.......................................3
3.2 Payment for the Axle Common
Stock.....................................4
3.3 Stock Transfer
Books..................................................5
3.4 Dissenting
Shares.....................................................5
3.5 Disposition of Axle Options and ESPP Purchase
Rights..................5
3.6 Escheatment of
Funds..................................................6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF AXLE
4.1 Organization and
Qualification........................................7
4.2 Authorization;
Enforceability.........................................7
4.3 Required Vote of Axle
Shareholders....................................7
4.4 State Takeover
Statutes...............................................8
4.5 Organizational
Documents..............................................8
4.6 Capitalization;
Subsidiaries..........................................8
4.7
Options...............................................................9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.8 SEC Filings; Financial
Statements.....................................9
4.9 Proxy
Statement......................................................11
4.10
Taxes................................................................11
4.11 Material
Contracts...................................................12
4.12 Real
Property........................................................13
4.13
Litigation...........................................................14
4.14 Compliance with Applicable
Laws......................................14
4.15 No
Violation.........................................................15
4.16 Intellectual
Property................................................15
4.17 Absence of Certain
Changes...........................................16
4.18 Insurance
Policies...................................................16
4.19 Licenses and
Permits.................................................16
4.20 Employee Benefit
Plans...............................................17
4.21 Environmental, Health and Safety
Matters.............................18
4.22 Labor
Matters........................................................19
4.23 Opinion of Financial
Advisor.........................................19
4.24
Brokers..............................................................19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE BUYER PARENT
5.1 Organization and
Standing............................................19
5.2 Authorization;
Enforceability........................................19
5.3 No
Violation.........................................................20
5.4
Financing............................................................20
5.5
Litigation...........................................................20
5.6 Governmental Approvals and
Filings...................................21
5.7
Brokers..............................................................21
ARTICLE VI
COVENANTS OF AXLE
6.1 Conduct of
Business..................................................21
6.2 Proxy
Statement......................................................23
6.3 Axle Shareholders'
Meeting...........................................24
6.4 Filings; Consents;
Etc...............................................24
6.5 No
Solicitation......................................................24
6.6 Schedules Update; Certain
Notices....................................25
6.7 Financial
Statements.................................................26
6.8 Regulatory
Filings...................................................26
6.9 Certain Real Estate
Matters..........................................27
6.10 Financing
Cooperation................................................27
6.11 Access to
Information................................................27
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII
COVENANTS OF THE BUYER AND THE BUYER PARENT
7.1 Filings; Consents;
Etc...............................................28
7.2 Director and Officer Liability and
Indemnification...................28
7.3 Regulatory
Filing....................................................29
7.4
Financing............................................................29
ARTICLE VIII
CONDITIONS PRECEDENT TO THE CLOSING
8.1 Conditions Precedent to Each Party's
Obligations.....................31
8.2 Conditions Precedent to Obligations of the Buyer and the
Buyer
Parent...............................................................31
8.3 Conditions Precedent to Obligations of
Axle..........................32
ARTICLE IX
CLOSING
9.1 Deliveries by
Axle...................................................33
9.2 Deliveries by the Buyer and the Buyer
Parent.........................33
ARTICLE X
TERMINATION
10.1
Termination..........................................................34
10.2 Effect of
Termination................................................35
10.3 Termination
Payments.................................................35
ARTICLE XI
MISCELLANEOUS
11.1 Notices, Consents,
etc...............................................37
11.2
Severability.........................................................38
11.3 Assignment;
Successors...............................................38
11.4 Counterparts; Facsimile
Signatures...................................39
11.5 Expenses; Transfer
Taxes.............................................39
11.6 Governing
Law........................................................39
11.7 Table of Contents and
Headings.......................................39
11.8
Definitions..........................................................39
11.9 Entire
Agreement.....................................................45
11.10 No Survival of Representations, Warranties, Covenants
and
Agreements...........................................................45
11.11 Third
Parties........................................................45
11.12 Disclosure
Generally.................................................46
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
11.13 Acknowledgment by the Buyer and the Buyer
Parent.....................46
11.14 Interpretive
Matters.................................................46
11.15 Amendments, Modification and
Waiver..................................47
11.16 Submission to
Jurisdiction...........................................47
11.17 Waiver of Jury
Trial.................................................47
11.18 Specific
Performance.................................................47
11.19 Public
Announcements.................................................47
</TABLE>
iv
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1991
Plan......................................................................5
2003
Plan......................................................................5
Acquired
Companies............................................................39
Acquired Companies'
Knowledge.................................................39
Acquisition
Proposal..........................................................40
Acquisition
Transaction.......................................................40
Actions.......................................................................14
Affiliate.....................................................................40
Aggregate ESPP Redemption
Amount..............................................40
Aggregate Merger
Consideration................................................40
Agreement......................................................................1
Announcement
Date.............................................................40
Articles of
Merger.............................................................2
Axle...........................................................................1
Axle
Board.....................................................................1
Axle Common
Stock.............................................................40
Axle Indemnified
Parties......................................................28
Axle
Option....................................................................5
Axle Preferred
Stock..........................................................40
Axle SEC
Documents.............................................................9
Axle Shareholder
Approval......................................................8
Axle
Shareholders.............................................................40
Axle Shareholders'
Meeting....................................................11
Axle
Subsidiaries.............................................................40
Business......................................................................41
Business
Day..................................................................41
Buyer..........................................................................1
Buyer
Parent...................................................................1
Buyer Parent Common
Stock......................................................6
Buyer's
Representatives.......................................................27
Certificates...................................................................4
Change in
Recommendation......................................................25
Closing........................................................................2
Closing
Date...................................................................2
Code..........................................................................41
Company Licensed Intellectual
Property........................................15
Company Owned Intellectual
Property...........................................15
Confidentiality
Agreement.....................................................41
Consent.......................................................................41
Contract......................................................................41
Disclosure
Schedule............................................................7
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
Dissenting
Shares..............................................................5
Draft Financial
Statements....................................................11
Effective
Time.................................................................2
Employee
Plan.................................................................41
Environmental
Claim...........................................................41
Environmental Health and Safety
Requirements..................................41
Equity Commitment
Letter......................................................20
ERISA.........................................................................42
Escrow Breakage
Amount........................................................30
Escrow Breakage
Cap...........................................................42
Escrow
Closing................................................................30
EscrowCo......................................................................30
EscrowCo
Debt.................................................................30
ESPP...........................................................................6
ESPP
Notice....................................................................6
ESPP Purchase
Period..........................................................42
ESPP Purchase
Price...........................................................42
ESPP Purchase
Right...........................................................42
ESPP Redemption
Amount........................................................42
Exchange
Act..................................................................42
Expiration
Date...............................................................42
Financing.....................................................................20
Financing
Letters.............................................................20
First
Person..................................................................44
FTC...........................................................................26
GAAP..........................................................................42
Governmental
Authority........................................................42
Governmental
Order............................................................42
HSR
Act.......................................................................42
Illinois
Law..................................................................42
Indebtedness Commitment
Letters...............................................20
Insurance
Policies............................................................16
Intellectual
Property.........................................................43
Last ESPP Issuance
Date........................................................9
Law...........................................................................43
Lease.........................................................................14
Leased
Property...............................................................14
Lenders.......................................................................20
Letter of
Transmittal..........................................................4
Liability.....................................................................43
Licenses and
Permits..........................................................43
Lien..........................................................................43
Material Adverse
Effect.......................................................43
Material
Contracts............................................................12
Material of Environmental
Concern.............................................43
Merger.........................................................................1
</TABLE>
vi
<PAGE>
<TABLE>
<S> <C>
Merger
Consideration...........................................................3
Option
Amount.................................................................44
Option
Consent.................................................................6
Option
Notice..................................................................5
Option Payment
Amount.........................................................44
Option
Price..................................................................44
Organizational
Documents......................................................44
Outside
Date..................................................................34
Owned
Property................................................................13
Parties........................................................................1
Party..........................................................................1
Paying
Agent...................................................................4
PBGC..........................................................................18
Permitted
Liens...............................................................44
Person........................................................................44
Plan
Affiliate................................................................44
Proxy
Statement...............................................................11
Real
Property.................................................................14
Reasonable
Efforts............................................................44
Required Cash
Amount..........................................................20
SEC...........................................................................44
Securities
Act................................................................44
Senior Debt
Letter............................................................20
Stock Option
Plan..............................................................5
Subordinated Debt
Letter......................................................20
Substitute Debt
Financing.....................................................29
Superior
Proposal.............................................................44
Supplemental
Plan..............................................................5
Surviving
Corporation..........................................................2
Tax
Return....................................................................45
Taxes.........................................................................45
Threatened....................................................................45
Title IV
Plan.................................................................17
Transaction
Expenses..........................................................45
Updated Financial
Statements..................................................26
Voting
Agreement...............................................................1
Voting
Group...................................................................1
</TABLE>
vii
<PAGE>
EXHIBITS
EXHIBITS:
Exhibit 1.2 - Articles of Merger
viii
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and
entered into as of February 22, 2005, by and among Axle
Holdings, Inc., a
Delaware corporation (the "Buyer Parent"), Axle Merger Sub,
Inc., an Illinois
corporation and wholly owned subsidiary of the Buyer Parent (the
"Buyer") and
Insurance Auto Auctions, Inc., an Illinois corporation ("Axle").
Each of the
parties named above may be referred to as a "Party" and
collectively as the
"Parties." Capitalized terms used, but not otherwise defined,
herein shall have
the meanings set forth in Section 11.8.
RECITALS
A. The Parties hereto desire to enter into this Agreement and,
subject
to the conditions hereof and in accordance with the provisions
of Illinois Law,
consummate the transactions contemplated hereby pursuant to
which the Buyer
Parent will acquire all of the capital stock of Axle through a
merger of the
Buyer with and into Axle (the "Merger"), following which Axle
shall continue as
the surviving corporation.
B. The Board of Directors of Axle (the "Axle Board") has
approved and
adopted the terms and conditions of this Agreement and the
consummation of the
transactions contemplated hereby, including the Merger, and has
determined to
submit the execution and delivery of this Agreement, and the
consummation of the
transactions contemplated hereby to the Axle Shareholders for
their approval and
adoption by the consents required under Illinois Law and Axle's
Articles of
Incorporation.
C. The Axle Board has determined that the terms and conditions
of this
Agreement and the consummation of the transactions contemplated
hereby,
including the Merger, are fair to and in the best interests of,
and are
advisable to, Axle and the Axle Shareholders, and the Axle Board
recommends that
the Axle Shareholders vote to approve and adopt the execution
and delivery of
this Agreement and the consummation of the transactions
contemplated hereby.
D. Axle, on the one hand, and the Buyer and the Buyer Parent, on
the
other hand, desire to make certain representations, warranties,
covenants and
agreements in connection with the Merger and also prescribe
various conditions
to the Merger.
E. Concurrently with the execution of this Agreement, ValueAct
Capital
Partners, L.P. and certain of its affiliated entities
(collectively, the "Voting
Group") are entering into a Voting Agreement (the "Voting
Agreement") with the
Buyer Parent providing, among other things, that, subject to the
terms and
conditions thereof, each of the members of the Voting Group will
vote its shares
of Axle Common Stock (as hereinafter defined) in favor of the
Merger and the
approval and adoption of this Agreement.
AGREEMENT
In consideration of the foregoing and the respective
representations,
warranties, covenants and agreements set forth herein, and other
good and
valuable consideration, the receipt and sufficiency of which are
hereby
acknowledged, the Parties hereby agree as follows:
<PAGE>
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the satisfaction
of the
conditions set forth in this Agreement and in accordance with
Illinois Law, at
the Effective Time (as defined below), the Buyer shall be merged
with and into
Axle and as a result of the Merger, the separate corporate
existence of the
Buyer shall cease and Axle shall continue as the surviving
corporation (in such
capacity, the "Surviving Corporation") of the Merger.
1.2 Closing; Effective Time: Filing of Articles of Merger.
Subject to
the fulfillment or waiver of each of the conditions contained in
Article VIII,
as soon as it is reasonably practicable on or after the later of
May 2, 2005 or
three (3) Business Days following the satisfaction or waiver of
all of the
conditions contained in Article VIII, other than those
conditions which by their
terms are to be satisfied or waived at Closing (but subject to
the satisfaction
or waiver of such conditions), a closing (the "Closing") shall
take place at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times
Square, New York,
New York (or such other place as the Parties may agree). The
"Closing Date"
shall be the date on which the Closing shall actually occur.
Subject to the
terms of this Agreement, the Parties shall, on the Closing Date,
cause the
Merger to be consummated by filing a properly executed articles
of merger, in
the form attached hereto as Exhibit 1.2, or other appropriate
documents (the
"Articles of Merger"), with the Secretary of State of the State
of Illinois in
accordance with the provisions of Illinois Law. When used
herein, the term
"Effective Time" shall mean the date and time when the Articles
of Merger have
been accepted for filing by the Secretary of the State of
Illinois or on such
date and time as otherwise specified in the Articles of
Merger.
1.3 Effect of the Merger. At the Effective Time, the effect of
the
Merger shall be as provided in the Articles of Merger and as
provided by the
applicable provisions of Illinois Law. Without limiting the
generality of the
foregoing, and subject thereto, upon and following consummation
of the Merger,
all of the property, rights, privileges, powers and franchises
of Axle and the
Buyer shall vest in the Surviving Corporation, and all of the
debts,
liabilities, obligations, restrictions and duties of Axle and
the Buyer shall
become the debts, liabilities, obligations, restrictions and
duties of the
Surviving Corporation.
1.4 Additional Actions. If, at any time after the Effective
Time, the
Surviving Corporation shall consider or be advised that
consistent with the
terms of this Agreement any further assignments or assurances in
Law or any
other acts are necessary or desirable (a) to vest, perfect or
confirm, of record
or otherwise, in the Surviving Corporation, title to and
possession of any
property or right of either of Axle or the Buyer acquired or to
be acquired by
reason of, or as a result of, the Merger, or (b) otherwise to
carry out the
purposes of this Agreement, then, subject to the terms and
conditions of this
Agreement, each of Axle or the Buyer and its officers and
directors shall be
deemed to have granted to the Surviving Corporation an
irrevocable power of
attorney to execute and deliver all such deeds, assignments and
assurances in
Law and to do all acts necessary or proper to vest, perfect or
confirm title to
and possession of such property or rights in the Surviving
Corporation and
otherwise to carry out the purposes of this Agreement; and the
officers and
directors of the Surviving Corporation are fully authorized in
the name of
either of Axle or the Buyer to take any and all such action.
2
<PAGE>
ARTICLE II
THE SURVIVING CORPORATION
2.1 Name of Surviving Corporation. The name of the Surviving
Corporation
shall be Axle, Inc.
2.2 Articles of Incorporation. The Articles of Merger shall
include such
amendments, schedules or supplements as may be required under
Illinois Law to
provide that the Articles of Incorporation of the Surviving
Corporation from and
after the Effective Time shall be, or be the same as, the
Articles of
Incorporation of the Buyer as in effect immediately prior to the
Effective Time,
until thereafter changed or amended as provided therein or by
applicable Law.
2.3 By-Laws. The By-Laws of the Buyer as in effect immediately
prior to
the Effective Time shall be the By-Laws of the Surviving
Corporation from and
after the Effective Time, until thereafter changed or amended as
provided
therein or by applicable Law.
2.4 Directors and Officers. The board of directors of the
Buyer
immediately prior to the Effective Time shall be the initial
board of directors
of the Surviving Corporation, and the officers of Axle
immediately prior to the
Effective Time shall be the initial officers of the Surviving
Corporation, in
each case until their respective successors are duly elected or
appointed and
qualified. If, at the Effective Time, a vacancy shall exist on
the board of
directors of the Surviving Corporation or in any office of the
Surviving
Corporation, such vacancy may thereafter be filled in the manner
provided by
Law.
ARTICLE III
CONVERSION AND CANCELLATION OF SECURITIES;
MERGER CONSIDERATION
3.1 Conversion of Axle Common Stock. As of the Effective Time,
by virtue
of the Merger and without any action on the part of the
Parties:
(a) Each share of Axle Common Stock issued and outstanding
immediately prior to the Effective Time shall be cancelled and
extinguished and
converted into the right to receive an amount of cash equal to
$28.25 per Share
(the "Merger Consideration").
(b) Each issued and outstanding share of Axle Common Stock
that
is held in Axle's treasury or in the treasury of any subsidiary
of Axle
immediately prior to the Effective Time, if any, shall be
cancelled and
extinguished without the payment of any consideration
therefor.
(c) Each share of capital stock of the Buyer issued and
outstanding immediately prior to the Effective Time shall be
converted into and
become one validly issued, fully paid and non-assessable share
of common stock,
par value $.01, of the Surviving Corporation.
3
<PAGE>
3.2 Payment for the Axle Common Stock.
(a) The Buyer, with the consent of Axle (which consent shall
not be unreasonably withheld), shall select an entity to act as
paying agent
(the "Paying Agent") in effecting the payment of the Aggregate
Merger
Consideration in respect of (i) stock certificates (the
"Certificates") that,
prior to the Effective Time, represented Axle Common Stock and
exercised Axle
Options, and (ii) ESPP Purchase Rights remaining in effect as of
the Effective
Time, entitled to payment of the Aggregate Merger Consideration.
At the
Effective Time, the Buyer Parent shall deposit, or cause to be
deposited, with
the Paying Agent the Aggregate Merger Consideration. The
expenses of and any
indemnification obligations to the Paying Agent shall be the
sole responsibility
of the Buyer Parent and the Surviving Corporation. On or
simultaneously with the
Closing Date, Axle, the Buyer, the Buyer Parent and the Paying
Agent shall enter
into a paying agent agreement, on terms and conditions that are
reasonably
satisfactory to the parties thereto.
(b) Within a reasonable period prior to the Effective Time,
Axle shall provide to the Paying Agent a form of letter of
transmittal in a
customary form mutually agreed upon by the Parties (the "Letter
of Transmittal")
which shall, among other things, specify that delivery shall be
effected, and
risk of loss and title to the Certificates shall pass, only upon
proper delivery
of the Certificates to the Paying Agent, and instructions for
surrendering such
Certificates and receiving the Merger Consideration in respect
thereof. The
Surviving Corporation shall cause the Paying Agent to mail, as
soon as
reasonably practicable after the Effective Time, the Letter of
Transmittal to
each Axle Shareholder of record at the Effective Time. Upon the
surrender of
each such Certificate for cancellation, together with such
Letter of
Transmittal, duly completed and validly executed, the Paying
Agent shall, as
promptly as practicable, (x) pay to the holder of such
Certificate an aggregate
amount equal to (i) the Merger Consideration multiplied by (ii)
the number of
shares of Axle Common Stock formerly represented by such
Certificate, in
consideration therefor, and such Certificate representing the
Axle Common Stock
shall forthwith be cancelled. Until so surrendered, each such
Certificate (other
than Certificates representing Axle Common Stock held by Axle or
held in the
treasury of Axle) shall represent solely the right to receive
the Merger
Consideration multiplied by the number of shares of Axle Common
Stock
represented thereby. No interest or dividends shall be paid or
accrued on the
Merger Consideration. If the Merger Consideration (or any
portion thereof) is to
be delivered to any Person other than the Person in whose name
the Certificate
formerly representing Axle Common Stock surrendered thereof is
registered, it
shall be a condition to such right to receive payment of such
Merger
Consideration that the Certificate so surrendered shall be
properly endorsed or
otherwise be in proper form for transfer and that the Person
requesting such
payment shall pay to the Paying Agent the transfer or other
similar Taxes
required by reason of payment of the Merger Consideration to a
Person other than
the registered holder of the Certificate so surrendered, or
shall establish to
the satisfaction of the Paying Agent that such Tax has been paid
or is not
applicable. The Paying Agent shall withhold or deduct for Taxes
as required
under applicable Law.
(c) In the event that any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that
fact by the Person
claiming such Certificate to be lost, stolen or destroyed and,
if required by
the Surviving Corporation, the posting by such Person of a bond,
in such
reasonable amount, and otherwise in such substance and form, as
the Surviving
4
<PAGE>
Corporation may reasonably direct, as indemnity against any
claim that may be
made against the Surviving Corporation, the Buyer Parent and the
Paying Agent
with respect to such Certificate, the Paying Agent will issue in
exchange for
such lost, stolen or destroyed Certificate the Merger
Consideration to which
such Person is entitled pursuant to this Article III.
3.3 Stock Transfer Books. After the Effective Time, there shall
be no
transfers on the stock transfer books of the Surviving
Corporation of any shares
of Axle Common Stock which were outstanding immediately prior to
the Effective
Time. If, after the Effective Time, Certificates formerly
representing shares of
Axle Common Stock are presented to the Surviving Corporation or
the Paying
Agent, they shall be surrendered and cancelled in return for the
payment of the
Merger Consideration.
3.4 Dissenting Shares. Notwithstanding any provision of this
Agreement
to the contrary, shares of Axle Common Stock that are
outstanding immediately
prior to the Effective Time and which are held by Axle
Shareholders who shall
not have voted in favor of the Merger or consented thereto in
writing and who
shall have properly exercised dissenters' rights or rights of
appraisal for such
shares of Axle Common Stock in accordance with Illinois Law and
who, as of the
Effective Time, have not effectively withdrawn or lost such
dissenters' rights
(collectively, the "Dissenting Shares"), shall not be converted
into or
represent the right to receive any portion of the amounts to be
paid pursuant to
Section 3.1, but the holders thereof shall only be entitled to
such rights as
are granted by Illinois Law. All Dissenting Shares held by Axle
Shareholders who
shall have failed to perfect or who effectively shall have
withdrawn or lost
their dissenters' rights shall thereupon be deemed to have been
converted into,
and to have become exchangeable for, as of the later of the
Effective Time or
the occurrence of such event, the right to receive the Merger
Consideration to
be paid pursuant to this Article III, without any interest
thereon, upon
surrender, in the manner provided in Section 3.2, for the
Certificates that
formerly evidenced such shares. Axle shall not take any action
relating to the
Dissenting Shares prior to the Effective Time without the
consent of the Buyer
Parent, which consent shall not be unreasonably withheld or
delayed.
3.5 Disposition of Axle Options and ESPP Purchase Rights.
(a) Except as set forth below, the Buyer Parent shall not
assume any options to purchase shares of Axle Common Stock
(except for any ESPP
Purchase Right, each an "Axle Option") issued under Axle's 1991
Stock Option
Plan, as amended (the "1991 Plan"), Axle's Supplemental Stock
Option Plan, as
amended (the "Supplemental Plan"), and Axle's 2003 Stock
Incentive Plan, as
amended (the "2003 Plan," and together with the 1991 Plan and
the Supplemental
Plan, collectively, the "Stock Option Plan"), or any other
options, warrants or
other rights to acquire Axle Common Stock and as of the
Effective Time all
outstanding Axle Options shall terminate, unless validly
exercised prior
thereto. Except as set forth below, no less than twenty (20)
days prior to the
Effective Time, Axle shall notify each holder of an Axle Option
in writing (the
"Option Notice") of the terms of the Merger and that all Axle
Options shall be
immediately and fully vested and exercisable, and that (i) all
outstanding
unexercised Axle Options granted under the 1991 Plan and the
Supplemental Plan
shall terminate as of the Effective Time, unless validly
exercised prior
thereto, and (ii) all outstanding unexercised Axle Options
granted under the
2003 Plan shall be cancelled as of the Effective Time in
exchange for a cash
payment equal to, with respect to each such Axle Option, the
excess of the
Merger
5
<PAGE>
Consideration, if any, over the Option Price. The Axle
Shareholders who have
elected to exercise their Axle Options prior to the Expiration
Date shall have
the option to either (i) deliver the Option Amount to the Paying
Agent pursuant
to the terms of the Option Notice, or (ii) receive an amount
equal to the Option
Payment Amount from the Paying Agent, so long as the Merger
Consideration is
greater than the Option Price. Notwithstanding the foregoing,
upon the Merger,
each Axle Option set forth on Schedule 3.5(a) of the Disclosure
Schedule shall
be converted into an option to acquire common stock, par value
$0.01 per share
of the Buyer Parent ("Buyer Parent Common Stock") upon
substantially the same
terms and conditions (including per share exercise price) as
were in effect
immediately prior to the Merger, provided such option holder
executes a Consent
to such conversion (the "Option Consent") in a form satisfactory
to the Buyer
Parent.
(b) As of the Announcement Date, the Axle Board shall cause
Axle's Employee Stock Purchase Plan, as amended and restated as
of June 16, 2004
(the "ESPP"), to be amended to provide that no future
contributions to the ESPP
shall be allowed following such date. At such time, Axle shall
cause
contributions to the ESPP to be discontinued and shall notify
each participant
in the ESPP of such discontinuation. To the extent any ESPP
Purchase Right
exists for any participant in the ESPP as of the Effective Time,
then, in lieu
of such participant receiving Axle Common Stock pursuant to the
exercise of an
ESPP Purchase Right, such ESPP Purchase Right shall be purchased
from such
participant (through a payment from the Paying Agent) in an
amount equal to the
ESPP Redemption Amount. Within a reasonable period prior to the
Effective Time,
Axle shall provide to the Paying Agent a form of letter of
transmittal in a
customary form mutually agreed upon by the Parties (the "ESPP
Notice") which
shall, among other things, notify each participant who has an
ESPP Purchase
Right of the terms of the Merger, and of such participant's ESPP
Redemption
Amount. The Buyer Parent shall cause the Paying Agent to mail on
or immediately
following the Effective Time the ESPP Notice and the ESPP
Redemption Amount to
each participant who has an ESPP Purchase Right. As of the
Effective Time, the
ESPP shall be terminated by the Surviving Corporation.
Notwithstanding anything
to the contrary in this Section 3.5(b), to the extent this
Agreement is
terminated and the Merger is not consummated pursuant to the
terms set forth
herein, Axle, shall have the right, in its sole discretion, to
reinstate or
terminate the ESPP.
(c) Axle shall use Reasonable Efforts to obtain all Consents
required from any third party or option holder and take, or
cause to be done,
all things necessary and proper or advisable in compliance with
the terms and
conditions of the Stock Option Plan and the ESPP (including
obtaining the Option
Consents referred to in Section 3.5(a) and the Consents of
holders of Axle
Options under the 2003 Plan to the treatment described in
Section 3.5(a)) to
consummate and make effective, as soon as practicable, the
transactions
contemplated by Sections 3.5(a) and 3.5(b) hereof.
3.6 Escheatment of Funds. None of the Parties nor any other
Person shall
be liable to any former Axle Shareholder for any amount properly
delivered to a
public official pursuant to applicable abandoned property,
escheat or similar
Laws. Any such amounts remaining unclaimed by any Axle
Shareholder immediately
prior to such time when such amounts would otherwise escheat to
or become the
property of any Governmental Authority, shall, to the extent
permitted by
applicable Laws, become the property of the Buyer Parent, free
and clear of all
claims or interest of any Person previously entitled
thereto.
6
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF AXLE
Except as set forth in the corresponding numbered sections of
Axle's
disclosure schedule delivered concurrently with the delivery of
this Agreement,
after giving effect to Section 11.12 (the "Disclosure
Schedule"), Axle hereby
represents and warrants to the Buyer and the Buyer Parent with
respect to the
matters specified in this Article IV as follows:
4.1 Organization and Qualification. Each of the Acquired
Companies is an
entity duly organized, validly existing and in good standing
under the Laws of
its jurisdiction of formation. Each of the Acquired Companies
has the requisite
entity power and authority to carry on its business as it is now
being
conducted. Each of the Acquired Companies is duly qualified to
conduct business
as a foreign entity and is in good standing under the Laws of
each jurisdiction
where the nature of its business or the ownership or leasing of
its property
requires such qualification, except for such jurisdictions where
the failure to
be qualified would not, individually or in the aggregate,
reasonably be expected
to have a Material Adverse Effect.
4.2 Authorization; Enforceability.
(a) Axle has the requisite corporate power and authority to
execute and deliver this Agreement and to perform its
obligations under this
Agreement and to consummate the transactions contemplated by
this Agreement;
provided, that, the Axle Shareholder Approval is required for
Axle to consummate
the Merger. The execution and delivery of this Agreement and the
performance of
Axle's obligations hereunder have been duly and validly
authorized by all
necessary corporate action on the part of Axle, and no other
corporate
proceedings on the part of Axle are necessary to authorize the
execution,
delivery and performance of this Agreement (subject to, in the
case of the
Merger, obtaining the Axle Shareholder Approval). This Agreement
has been duly
executed and delivered by Axle and, assuming the due
authorization, execution
and delivery in each case by the other Parties hereto, will
constitute, upon
such execution and delivery, legal, valid and binding
obligations of Axle,
enforceable against Axle in accordance with its terms and
conditions, except as
such enforceability may be limited by applicable bankruptcy,
insolvency,
reorganization, moratorium or other similar Laws affecting the
enforcement of
creditors rights generally, and general principles of equity
(regardless of
whether such enforceability is considered in a proceeding in Law
or equity).
(b) The Axle Board, at a meeting duly called and held, and
not
rescinded or modified in any way, has by unanimous vote of all
its members
(other than any recused members) duly (i) approved this
Agreement and determined
that this Agreement and the transactions contemplated hereby,
including the
Merger, are advisable in the best interests of, the holders of
Axle Common
Stock, and (ii) resolved to recommend that the holders of Axle
Common Stock vote
for approval and adoption of this Agreement.
4.3 Required Vote of Axle Shareholders. The affirmative vote
of
two-thirds (2/3) of the votes of the shares of the Axle Common
Stock entitled to
vote thereon is the only vote of any
7
<PAGE>
class or series of capital stock of Axle required by Illinois
Law or Axle's
Organizational Documents to adopt this Agreement (the "Axle
Shareholder
Approval").
4.4 State Takeover Statutes. The Axle Board has taken all
actions
necessary so that the restrictions contained in Section 7.85 and
Section 11.75
of the Illinois Law applicable to a business combination (as
defined in Section
11.75 thereof) will not apply to the execution, delivery or
performance of this
Agreement or the Voting Agreement, the consummation of the
Merger or other
transactions contemplated by this Agreement or the Voting
Agreement. True,
correct and complete copies of all resolutions of the Axle Board
reflecting such
actions have been provided to the Buyer Parent. No other state
takeover statute
or similar statue or regulation is applicable to or purports to
be applicable to
the Merger or any of the transactions contemplated by this
Agreement.
4.5 Organizational Documents. Axle has made available to the
Buyer
Parent copies of each of the Acquired Companies respective
Organizational
Documents as currently in effect, and such copies are true and
complete as of
the date hereof.
4.6 Capitalization; Subsidiaries.
(a) The authorized capital stock of Axle consists of
20,000,000
shares of Axle Common Stock and 5,000,000 shares of Axle
Preferred Stock. As of
the close of business on February 18, 2005, (a) 11,850,796
shares of Axle Common
Stock were issued and outstanding, all of which are validly
issued, fully paid
and nonassessable; (b) no shares of Axle Preferred Stock were
issued or
outstanding; (c) 906,514 shares of Axle Common Stock were held
in the treasury
of Axle; (d) 484,846 shares of Axle Common Stock were reserved
for issuance upon
the exercise of outstanding options to purchase Axle Common
Stock under the 2003
Plan; (e) 1,216,410 shares of Axle Common Stock were reserved
for issuance upon
the exercise of outstanding options to purchase Axle Common
Stock under the 1991
Plan; (f) 7,000 shares of Axle Common Stock were reserved for
issuance upon the
exercise of outstanding options to purchase Axle Common Stock
under the
Supplemental Plan; (g) 133,007 shares of Axle Common Stock were
available for
future grant under the 2003 Plan; (h) no shares of Axle Common
Stock were
available for future grant under the 1991 Plan; (i) 39,390
shares of Axle Common
Stock were available for future grant under the Supplemental
Plan; and (j)
83,524 shares of Axle Common Stock were available for future
purchase under the
ESPP. All of the outstanding shares of Axle Common Stock are,
and all of the
shares of Axle Common Stock issuable pursuant to the exercise of
outstanding
Axle Options and ESPP Purchase Rights will be, when issued in
accordance with
the respective terms thereof, issued and granted in compliance
with all
applicable securities laws and other applicable Laws, and are,
or will be, duly
authorized, validly issued, fully paid and nonassessable and
free and clear of
any and all Liens. Except as set expressly forth in this Section
4.6(a), there
are no other shares of common stock or equity interests or other
ownership
interests of any class of Axle or any Axle Subsidiary, or any
security
exchangeable into or exercisable for such equity securities or
other ownership
interests, issued, reserved for issuance or outstanding. Since
February 18,
2005, no shares of Axle Common Stock have been issued or agreed
to have been
issued by any Acquired Company, except (A) upon the exercise of
Axle Options
issued and outstanding as of the close of business on February
18, 2005 or (B)
if the Effective Time occurs on or after July 1, 2005, as a
result of the
exercise of ESPP Purchase Rights outstanding on the Announcement
Date in a
manner
8
<PAGE>
consistent with past operation of the ESPP. The weighted average
exercise price
of all Axle Options set forth on Schedule 4.6 of the Disclosure
Schedule is
$13.5235. As of the date hereof, $75,878.94 has been contributed
to the ESPP
since the last bi-annual date that shares of Axle Common Stock
were issued
pursuant to the ESPP (the "Last ESPP Issuance Date") and
following the Last ESPP
Issuance Date no funds remained in the ESPP with respect to
contributions prior
to the Last ESPP Issuance Date. Assuming that the fair market
value of Axle
Common Stock at the end of the ESPP purchase period in which
this Agreement has
been executed is greater than the fair market value of Axle
Common Stock at the
beginning of such purchase period, no more than 4,076 shares of
Axle Common
Stock will be issuable under the ESPP in respect of funds
contributed to the
ESPP if the Effective Time were to occur on or after July 1,
2005, and the
aggregate ESPP Redemption Amount (with respect to all ESPP
Purchase Rights),
pursuant to Section 3.5(b), shall not exceed $39,275. Except as
set forth on
Schedule 4.6 of the Disclosure Schedule, Axle has no
subsidiaries and owns no
equity securities or other ownership interest of any other
corporation,
partnership or other entity. Axle is not a participant in any
joint venture or
similar arrangement. Schedule 4.6(a)(ii) of the Disclosure
Schedule is a true
and complete schedule of Axle's outstanding indebtedness
(including letters of
credit, capitalized leases and maximum amounts payable pursuant
to earnout
obligations) as of the close of business on February 18,
2005.
(b) Exhibit 21.1 to Axle's Annual Report on Form 10-K for
the
fiscal year ended December 28, 2003 sets forth a list of all of
the Axle
Subsidiaries and their respective jurisdictions of
incorporation. All of the
issued and outstanding shares of capital stock or other equity
interests of each
Axle Subsidiary are validly issued, fully paid and
non-assessable, are owned by
Axle or one or more Axle Subsidiaries, free and clear of any and
all Liens.
4.7 Options. Except as set forth on Schedule 4.6 of the
Disclosure
Schedule, there are no outstanding options, rights (preemptive
or otherwise), or
warrants to acquire capital stock from any of the Acquired
Companies, and no
calls, convertible or exchangeable securities, commitments,
subscriptions or
other rights or any other arrangements to which any of the
Acquired Companies is
a party requiring the issuance, sale or transfer of any equity
securities of
such entities, voting securities or any securities convertible
directly or
indirectly into equity securities or exchangeable for capital
stock of any of
such entities, or evidencing the right to subscribe for any
equity securities of
any of the Acquired Companies, or giving any Person (other than
the Buyer Parent
and the Buyer) any rights with respect to any equity securities
of any of the
Acquired Companies.
4.8 SEC Filings; Financial Statements.
(a) Axle has timely filed with the SEC all forms, reports,
schedules, statements and other documents required to be filed
by it since
January 1, 2002 under the Exchange Act or the Securities Act (as
such documents
have been amended since the time of their filing and all
documents incorporated
by reference therein, collectively, the "Axle SEC Documents").
No Axle
Subsidiary is required to file any form, report, schedule,
statement or other
document with the SEC. As of their respective dates and if
amended prior to the
date hereof, as of the date of the last such amendment, the Axle
SEC Documents
including, without limitation, any financial statements or
schedules included
therein (i) did not contain any untrue statement of a material
fact or omit to
state a material fact required to be stated therein or
9
<PAGE>
necessary in order to make the statements therein, in the light
of the
circumstances under which they were made, not misleading, and
(ii) complied in
all material respects with the applicable requirements of the
Exchange Act and
the Securities Act, as the case may be, at such time of
filing.
(b) Axle and each of its officers and directors are in
compliance with, and have complied, in all material respects
with (i) the
applicable provisions of the Sarbanes-Oxley Act of 2002 and the
related rules
and regulations promulgated thereunder, and (ii) the applicable
listing and
corporate governance rules and regulations of NASDAQ. The
management of Axle has
(i) implemented disclosure controls and procedures (as defined
in Rule 13a-15(e)
of the Exchange Act) to ensure that material information
relating to the
Acquired Companies is made known to the management of Axle by
others within
those entities, and (ii) disclosed, based on its most recent
evaluation, to
Axle's outside auditors, the audit committee of the Axle Board
and the Buyer
Parent (A) all significant deficiencies and material weaknesses
in the design or
operation of internal control over financial reporting (as
defined in Rule
13a-15(f) of the Exchange Act) that are reasonably likely to
materially affect
Axle's ability to record, process, summarize and report
financial data, and (B)
any fraud, whether or not material, known to management that
involves management
or other employees who, in each case, have a significant role in
Axle's internal
control over financial reporting. There have been no material
changes since
December 26, 2004 in Axle's internal controls or in other
factors that could
significantly affect Axle's internal controls, or any
significant deficiencies
or material weaknesses in such internal controls requiring
corrective actions.
Axle has delivered to the Buyer Parent complete and accurate
copies of notices
received from its independent auditor prior to the date hereof
of any
significant deficiencies or material weaknesses in Axle's
internal control over
financial reporting since December 28, 2003 and any other
management letter or
similar correspondence from any independent auditor of Axle or
any Axle
Subsidiary received since December 28, 2003. Axle is
implementing such programs
and is taking such steps as it believes are necessary to effect
compliance (not
later than the relevant statutory and regulatory deadline
therefor) with all
provisions of Section 404 of the Sarbanes-Oxley Act that will
become applicable
to Axle and has not received, orally or in writing, any
notification that its
independent auditor (i) believes that Axle will not be able to
complete its
assessment before the reporting deadline, or, if completed, that
it will not be
completed in sufficient time for the independent auditor to
complete its
assessment, or (ii) will not be able to issue unqualified
attestation reports
with respect thereto. As of December 26, 2004, there were not,
and as of the
date hereof there are not, any significant deficiencies or
material weaknesses
(as such terms are defined in PCAOB Audit Standard No.2) in
Axle's internal
controls with respect to financial reporting requiring
corrective action, and
neither Axle's independent auditor nor any accounting firm, if
any, which have
reviewed Axle's internal controls have indicated to Axle that
such auditor or
firm believes any significant deficiencies or material
weaknesses in internal
controls with respect to financial reporting exist.
(c) Each set of consolidated financial statements (including
in
each case, any related notes thereto), contained in the Axle SEC
Documents (i)
was prepared from the books and records of Axle and the Axle
Subsidiaries, (ii)
was prepared in accordance with GAAP applied on a consistent
basis throughout
the periods involved (except as may be indicated therein or in
the notes thereto
or, in the case of unaudited statements, do not contain
footnotes as permitted
by Form 10-Q of the Exchange Act), (iii) complied in all
material respects with
all applicable accounting requirements and with the published
rules and
regulations of the SEC with
10
<PAGE>
respect thereto as in effect on the date of filing, (iv) except
with respect to
the unaudited financial statements contained in the Axle SEC
Documents filed on
form 10-Q of the Exchange Act, was accompanied by unqualified
reports from the
independent auditor opining on the same as to the financial
statements contained
therein and (v) fairly presents, in all material respects, the
consolidated
financial position of Axle and the consolidated Axle
Subsidiaries as of their
respective dates and the consolidated results of their
respective operations and
cash flows for the periods indicated therein, except that the
unaudited interim
financial statements were or are subject to normal year end
adjustments which
were not or are not expected to be material in amount.
(d) Prior to the date hereof, Axle has delivered to the
Buyer
Parent a draft consolidated balance sheet of Axle and the Axle
Subsidiaries as
of December 26, 2004 and drafts of the consolidated income
statement and
statement of cash flows for the year ended December 26, 2004
(collectively, the
"Draft Financial Statements"). The Draft Financial Statements
were prepared from
the books and records of Axle and the Axle Subsidiaries, and
fairly present, in
all material respects, the consolidated financial position of
Axle and the
consolidated Axle Subsidiaries as of date indicated therein and
the consolidated
results of their respective operations and cash flows for the
period then ended,
subject to any audit by Axle's auditor.
(e) Except (i) as reserved against in the consolidated
balance
sheet (including the notes thereto) of Axle included in its
Annual Report on
Form 10-K for the fiscal year ended December 28, 2003, and (ii)
for Liabilities
incurred since December 28, 2003 in the ordinary course of
business consistent
with past practice, to the Acquired Companies' Knowledge,
neither Axle nor any
of the Axle Subsidiaries have any Liabilities of any nature
(whether or not
required by GAAP to be reflected in the audited financial
statements of Axle and
the Axle Subsidiaries) except for such Liabilities which would
not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
4.9 Proxy Statement. The proxy statement or information
statement to be
sent to the Axle Shareholders in connection with the meeting of
Axle
Shareholders to consider the adoption of this Agreement,
including any
adjournment or postponement thereof (the "Axle Shareholders'
Meeting") (such
proxy statement or information statement, as amended or
supplemented, is herein
referred to as the "Proxy Statement"), on the date first mailed
to the Axle
Shareholders, at the time of any amendment or supplement thereto
and at the time
of Axle Shareholders' Meeting, will not contain any untrue
statement of a
material fact or omit to state a material fact necessary in
order to make the
statements therein, in the light of the circumstances under
which they were
made, not misleading. The Proxy Statement will, when filed by
Axle with the SEC,
comply in all material respects with the applicable provisions
of the Exchange
Act, and the rules and regulations thereunder. Notwithstanding
the foregoing,
Axle makes no representation or warranty with respect to
information supplied by
or on behalf of the Buyer Parent or the Buyer specifically for
inclusion in the
Proxy Statement or any amendment or supplement thereto.
4.10 Taxes. Except where the failure to do so would not have or
result
in a Material Adverse Effect or except as set forth on Schedule
4.10 of the
Disclosure Schedule:
(a) The Acquired Companies have timely filed, or have timely
filed for extensions to file, all Federal income and other
material Tax Returns
required to be filed by them
11
<PAGE>
through the date hereof. Such Tax Returns are true, correct and
complete in all
material respects. The Acquired Companies have timely paid and
discharged all
Taxes due and payable by them (whether or not shown on such Tax
Returns). The
Acquired Companies have withheld, collected and paid over to the
appropriate
Governmental Authorities or are properly holding for such
payment all Taxes
required by Law to be withheld or collected.
(b) None of the Acquired Companies is a party to any Tax
allocation or sharing agreement.
(c) None of the Acquired Companies is a member of an
affiliated
group within the meaning of Section 1504(a) of the Code (or any
similar group
defined under a similar provision of state, local, or foreign
Law) filing a
consolidated Federal income Tax Return or has any Liability for
the Taxes of any
Person (other than any of the Acquired Companies) under Treasury
Regulation
Section 1.1502-6 or any analogous or similar provision of Law
(other than the
affiliated group of which Axle is the common parent).
(d) There are not being conducted or Threatened any material
audits, examinations, investigations, litigation or other
proceedings in respect
of Taxes of the Acquired Companies.
(e) No Acquired Company has consented to extend the time in
which any Tax may be assessed or collected by any taxing
authority.
4.11 Material Contracts. Except as filed as exhibits to the Axle
SEC
Documents filed prior to the date hereof or as listed or
described on Schedule
4.11 of the Disclosure Schedule, as of the date hereof, none of
the Acquired
Companies is a party to or bound by (i) any "material contract"
(as such term is
defined in Item 601(b)(10) of Regulation S-K) or (ii) any
Contract of the type
described below (such Contracts of the type described in (i) and
(ii), are
herein referred to as the "Material Contracts"):
(a) any consulting agreement or employment agreement that
provides for annual compensation exceeding $150,000 per year and
which cannot be
terminated by the Acquired Companies without penalty on notice
of thirty (30)
days or less, and any collective bargaining arrangement with any
labor union and
any such agreements currently in negotiation or proposed;
(b) any Contract for capital expenditures or the acquisition
of
fixed assets in excess of $500,000;
(c) any Contract for the purchase, maintenance or
acquisition,
or the sale or furnishing of materials, supplies, merchandise,
equipment, parts
or other property or services requiring remaining aggregate
future payments in
excess of $250,000;
(d) any Contract that restricts or purports to restrict the
right of any Acquired Company, or, to Acquired Companies'
Knowledge, any officer
or key executive of any of the Acquired Companies, to engage in
any line of
business or in any geographic area, compete with any Person or
sell any product;
12
<PAGE>
(e) any Contract relating to the acquisition or disposition
of
any material assets or Real Property;
(f) any Contract relating to the borrowing of money, or the
guaranty of another Person's borrowing of money or other
obligation, including,
without limitation, all notes, mortgages, indentures and other
obligations,
guarantees of performance, agreements and instruments for or
relating to any
lending or borrowing, including assumed indebtedness;
(g) any Contract granting any Person a material Lien on all
or
any part of the material assets of the Acquired Companies, taken
as a whole,
other than Liens which will be released at the Closing;
(h) any Contract between Axle and any of the Axle
Subsidiaries,
on the one hand, and any of their respective officers or
directors (or
Affiliates) on the other hand, except for such Contracts that
are made in the
ordinary course of business or that are de minims in value or
effect;
(i) any voting or other Contract governing how any shares of
Axle Common Stock shall be voted; or
(j) any Contract under which any of the Acquired Companies
(i)
has granted or received a material license or sublicense, (ii)
under which it is
obligated to pay or has the right to receive a royalty, license
fee or similar
payment in an amount in excess of $250,000, other than licenses
for commercially
available prepackaged software, or (iii) restricting the
Acquired Companies
rights to use or register any intellectual property owned or
purported to be
owned by the Acquired Companies.
The Acquired Companies have made available to the Buyer Parent a
true
and complete copy of each written Material Contract. Except as
set forth on
Schedule 4.11 of the Disclosure Schedule, each Material Contract
is in full
force and effect, represents a valid and binding obligation of
the applicable
Acquired Company, and, to Acquired Companies' Knowledge, a valid
and binding
obligation of each other party thereto, and is enforceable
against each party
thereto in accordance with its terms, except as such
enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or
other similar Laws affecting the enforcement of creditors rights
generally, and
general principles of equity (regardless of whether such
enforceability is
considered in a proceeding in Law or equity). Each of the
Acquired Companies has
performed in all material respects all obligations required to
be performed by
it under each Material Contract, and to Acquired Companies'
Knowledge, each
other party to each Material Contract has performed in all
material respects all
obligations required to be performed by it under such Material
Contract.
4.12 Real Property
(a) Schedule 4.12 of the Disclosure Schedule sets forth a
true
and complete list of all real estate (i) in which any of the
Acquired Companies
have an ownership interest (such real estate owned by the
Acquired Companies is
herein referred to as the "Owned Property") and (ii) all real
property leased or
subleased by any of the Acquired Companies (such real property
leased or
subleased by any of the Acquired Companies is herein referred to
as the
13
<PAGE>
"Leased Property"; the Owned Property and the Leased Property
being referred to
collectively herein as the "Real Property"). Each Acquired
Company has good,
valid and marketable fee simple title to each parcel of Owned
Property owned by
such Acquired Company, free and clear of all Liens except for
Permitted Liens.
Each Acquired Company has a valid unencumbered leasehold
interest in the Leased
Property leased or subleased by such Acquired Company, in each
case free and
clear of all Liens, except for (i) Liens listed or described on
Schedule 4.12 of
the Disclosure Schedule, or (ii) Permitted Liens. Except as set
forth on
Schedule 4.12 of the Disclosure Schedule, the Real Property
constitutes all real
properties currently used or occupied by the Acquired Companies
in connection
with the Business.
(b) The Acquired Companies have made available to the Buyer
Parent true and
complete copies of each underlying lease or sublease with
respect to each Leased
Property (each, a "Lease") and all other material agreements
pertaining to the
Real Property. With respect to each of the Leases: (i) there are
no existing
monetary defaults or material non-monetary defaults under any
Lease by any
Acquired Company or, to Acquired Companies' Knowledge, the
lessor thereof; (ii)
to Acquired Companies' Knowledge, no event has occurred which
(with notice,
lapse of time or both) would constitute a monetary breach or
default or material
non-monetary breach or default under any Lease by any party;
(iii) each Acquired
Company's possession and quiet enjoyment of any Leased Property
under such Lease
has not been disturbed in any material respect; and (iv) except
as set forth on
Schedule 4.12 of the Disclosure Schedule, no Acquired Company
has assigned its
interest under any Lease or sublet any part of the premises
covered thereby or
exercised any right or option thereunder.
4.13 Litigation.
(a) Except as disclosed in the Axle SEC Documents filed prior to
the
date hereof or as set forth on Schedule 4.13(a) of the
Disclosure Schedule, (i)
there are no suits, actions, proceedings, investigations, claims
or orders
(collectively, "Actions") pending or, to Acquired Companies'
Knowledge,
Threatened, against, the Acquired Companies or any of their
respective
properties, officers or directors, or for which any of the
Acquired Companies is
obligated to indemnify a third party, before any court or
Governmental
Authority, agency or official, which, if the relief request is
granted, would,
individually or in the aggregate, reasonably be expected to have
a Material
Adverse Effect, and (ii) no Acquired Company is subject to any
Governmental
Order.
(b) Except as set forth on Schedule 4.13(b) of the Disclosure
Schedule
(which shall be updated prior to Closing as required by Section
6.6(a)), there
are no Actions pending or, to Acquired Companies' Knowledge,
Threatened, against
or otherwise affecting Axle or any of the Axle Subsidiaries
relating to "clean
title" matters (including the types of claims which are the
subject of dispute
in the matter captioned Gridley v. State Farm Automobile
Insurance Company) or
any claim or Action brought under the Racketeer Influenced and
Corrupt
Organizations Act.
4.14 Compliance with Applicable Laws. Except as disclosed in the
Axle SEC
Documents filed prior to the date hereof or as set forth or
referred to on
Schedule 4.14 of the Disclosure Schedule and except where any
such violation or
failure to comply would not, individually or in the aggregate,
reasonably be
expected to have a Material Adverse Effect, since January 1,
2002, each of the
Acquired Companies has complied in all material respects with
all
14
<PAGE>
Laws applicable to it or to the operation of the Business, or by
which any
property or asset of any of the Acquired Companies is bound or
affected.
4.15 No Violation.
(a) Except as set forth on Schedule 4.15 of the Disclosure
Schedule,
neither the execution and delivery of this Agreement, nor the
performance by
Axle of the transactions contemplated hereby will (i) constitute
a default
under, or violate any provision of, the Organizational Documents
of any of the
Acquired Companies, (ii) result in a default (or an event which
with notice or
lapse of time or both would become a default) or breach, or give
rise to any
right of termination, cancellation or acceleration, or require
any Consent
under, or result in the creation of a Lien on any property or
asset of any of
the Acquired Companies pursuant to the terms, conditions or
provisions of any
Contract or other instrument or obligation to which an Acquired
Company is a
party, or (iii) conflict with or violate any Laws applicable to
an Acquired
Company or by which any of its respective properties or assets
is bound, except
with respect to clauses (ii) and (iii), for any such conflicts,
violations,
breaches, defaults or other occurrences which would not,
individually or in the
aggregate, reasonably be expected to (x) have a Material Adverse
Effect or (y)
prevent or materially delay the performance of this Agreement by
Axle or the
ability of Axle to take any action necessary to consummate the
Merger.
(b) The execution and delivery of this Agreement by Axle does
not, and
the performance of this Agreement by Axle will not, require any
Consent or
permit of, or filing with, or notification to, any Governmental
Authority or any
other Person (assuming the Axle Shareholder Approval is
obtained), except (i)
under the Exchange Act, the Securities Act, any applicable blue
sky laws, or the
rules and regulations of NASDAQ, (ii) under the HSR Act, (iii)
the filing and
recordation of the Articles of Merger as required under Illinois
Law and (iv)
for such other Consents, filings or notifications, the failure
of which to make
or obtain, would not, individually or in the aggregate,
reasonably be expected
to (x) have a Material Adverse Effect or (y) prevent or
materially delay the
performance of this Agreement by Axle or the ability of Axle to
take any action
necessary to consummate the Merger.
4.16 Intellectual Property.
(a) Schedule 4.16(a) of the Disclosure Schedule sets forth a
list of
all (i) trademark and service mark registrations and pending
registration
applications, trade names, Acquired Companies names, and domain
names, (ii)
patents and pending patent applications, (iii) copyright
registrations and
registration applications, and (iv) computer software (other
than commercially
available prepackaged computer software generally available to
the public
pursuant to non-exclusive end-user licenses with an acquisition
price of less
than $10,000), which are, in each case, either (x) owned or
purported to be
owned by one or more of the Acquired Companies (the "Company
Owned Intellectual
Property") or (y) material to the operation of the Business and
are owned by
third parties and used or held for use pursuant to a valid
license by one or
more of the Acquired Companies (the "Company Licensed
Intellectual Property").
Schedule 4.16 of the Disclosure Schedule additionally sets forth
a list of all
material license agreements and arrangements with respect to any
of the
Intellectual Property to which any of the Acquired Companies is
a party, whether
as licensee, licensor or otherwise (other than non-exclusive
end-user licenses
for commercially available prepackaged computer software
15
<PAGE>
generally available to the public). The Acquired Companies are
the sole and
exclusive owners of all Company Owned Intellectual Property.
(b) Except as set forth on S
| 
