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Agreement and Plan of Merger

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PROVIDENCE WORCESTER RAILROAD CO/RI/ | ERISA Affiliate | GENESEE WYOMING INC | PROVIDENCE AND WORCESTER RAILROAD COMPANY | PULLMAN ACQUISITION SUB INC | Rhode Island Business Corporation

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Title: MERGER AGREEMENT
Governing Law: Delaware     Date: 8/16/2016
Industry: Railroads     Law Firm: Simpson Thacher     Sector: Transportation

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MERGER AGREEMENT

 

BY AND AMONG

 

GENESEE & WYOMING INC.

 

PULLMAN ACQUISITION SUB INC.

 

AND

 

PROVIDENCE AND WORCESTER RAILROAD COMPANY

 

DATED AS OF AUGUST 12, 2016

 

 


 

 

TABLE OF CONTENTS

 

 

Article I. - THE MERGER

2

Section 1.1 The Merger.

2

Section 1.2 Closing.

2

Section 1.3 Effective Time; Effect of the Merger.

2

Section 1.4 Conversion of the Shares.

2

Section 1.5 Organizational Documents.

3

Section 1.6 Directors and Officers of the Surviving Corporation.

4

Section 1.7 Options and Restricted Share Units.

4

Section 1.8 Dissenter Shares.

4

Section 1.9 Adjustments to Prevent Dilution.

5

Article II. EXCHANGE OF CERTIFICATES

5

Section 2.1 Paying Agent.

5

Section 2.2 Exchange Procedures.

5

Section 2.3 No Further Ownership Rights.

6

Section 2.4 Termination of Exchange Fund.

6

Section 2.5 No Liability.

7

Section 2.6 Lost, Stolen or Destroyed Certificates.

7

Section 2.7 Withholding of Tax.

7

Article III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

7

Section 3.1 Organization and Good Standing; Charter Documents.

8

Section 3.2 Authority for Agreement.

8

Section 3.3 Capitalization.

9

Section 3.4 Company Subsidiaries.

10

Section 3.5 No Conflict; Required Filings and Consents.

10

Section 3.6 Compliance.

11

Section 3.7 Litigation.

11

Section 3.8 Company Reports; Financial Statements.

11

Section 3.9 Absence of Certain Changes or Events.

13

Section 3.10 Taxes.

13

Section 3.11 Title to Properties.

15

Section 3.12 Related Party Transactions.

16

Section 3.13 Employee Benefit Plans.

16

Section 3.14 Labor Relations.

18

Section 3.15 Intellectual Property.

19

 


Section 3.16 Insurance Policies.

19

Section 3.17 Brokers.

19

Section 3.18 Company Financial Advisor Opinion.

20

Section 3.19 Proxy Statement.

20

Section 3.20 Environmental Matters.

20

Section 3.21 Anti-Takeover Provisions.

21

Section 3.22 Contracts.

21

Section 3.23 Board Recommendation.

22

Section 3.24 Rail Facilities and Railroad Assets.

22

Section 3.25 Certain Business Practices.

22

Section 3.26 No Other Representation or Warranty.

23

Article IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

23

Section 4.1 Organization and Good Standing.

23

Section 4.2 Authority for Agreement.

23

Section 4.3 No Conflict; Required Filings and Consents.

24

Section 4.4 Litigation.

25

Section 4.5 Financing.

25

Section 4.6 Brokers.

25

Section 4.7 Interim Operations of Merger Sub.

25

Section 4.8 Ownership of Shares; Interested Shareholder.

25

Section 4.9 Proxy Statement.

26

Section 4.10 Solvency of the Surviving Corporation Following Merger.

26

Section 4.11 No Other Representation or Warranty.

26

Article V. COVENANTS

27

Section 5.1 Conduct of Business by the Company Pending the Merger.

27

Section 5.2 Access to Information and Employees; Confidentiality.

31

Section 5.3 Reasonable Best Efforts to Consummate Merger; Notification.

32

Section 5.4 Proxy Statement.

34

Section 5.5 Company Shareholders Meeting.

35

Section 5.6 No Solicitation of Transactions.

36

Section 5.7 Public Announcements.

38

Section 5.8 Employee Benefit Matters.

39

Section 5.9 Directors' and Officers' Indemnification and Insurance.

40

Section 5.10 No Control of the Other Party's Business.

42

Section 5.11 Anti-Takeover Statutes.

42

Section 5.12 Resignation of Directors.

42


 

Section 5.13 Credit Agreement Matters.

42

Section 5.14 Stock Exchange De-Listing.

42

Section 5.15 FCC Radio License.

43

Section 5.16 Affiliate Agreements.

43

Article VI. CONDITIONS PRECEDENT

43

Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.

43

Section 6.2 Additional Conditions to Obligations of Parent and Merger Sub.

44

Section 6.3 Additional Conditions to Obligation of the Company.

44

Article VII. TERMINATION, AMENDMENT AND WAIVER

45

Section 7.1 Termination.

45

Section 7.2 Fees and Expenses.

46

Section 7.3 Effect of Termination.

47

Section 7.4 Amendment.

47

Section 7.5 Extension; Waiver.

47

Article VIII. GENERAL PROVISIONS

48

Section 8.1 Nonsurvival of Representations and Warranties.

48

Section 8.2 Notices.

48

Section 8.3 Interpretation.

49

Section 8.4 Counterparts.

49

Section 8.5 Entire Agreement; No Third-Party Beneficiaries.

49

Section 8.6 Governing Law.

49

Section 8.7 Assignment.

50

Section 8.8 Enforcement.

50

Section 8.9 Consent to Jurisdiction; Venue.

50

Section 8.10 Waiver of Trial by Jury.

50

Section 8.11 Severability.

51

Article IX. CERTAIN DEFINITIONS

51


 

Exhibit A    Plan of Merger

Exhibit B    Amended and Restated Articles of Incorporation of the Surviving Corporation


 

MERGER AGREEMENT

 

THIS MERGER AGREEMENT (together with all annexes, letters, schedules and exhibits hereto, hereinafter this " Agreement "), dated as of August 12, 2016, is by and among Genesee & Wyoming Inc., a Delaware corporation (" Parent "), Pullman Acquisition Sub Inc., a Rhode Island corporation and a wholly owned direct subsidiary of Parent (" Merger Sub "), and Providence and Worcester Railroad Company, a Rhode Island corporation (the " Company ").

 

RECITALS

 

A. The Board of Directors of the Company (the " Company Board of Directors ") has unanimously (i) determined that this Agreement, the plan of merger attached as Exhibit A (the " Plan of Merger "), and the merger of Merger Sub with and into the Company (the " Merger ") pursuant to the Rhode Island Business Corporation Act, R.I.G.L § 7-1.2 et seq. , as amended (the " RIBCA ") upon the terms and subject to the conditions set forth in this Agreement and the other transactions contemplated hereby, taken together, are at a price and on terms that are fair to, advisable and in the best interests of the Company and its shareholders (the " Company Shareholders "), (ii) adopted resolutions approving and declaring advisable the execution, delivery and performance of this Agreement (including all terms and conditions set forth herein) and the transactions contemplated hereby, including the Merger and the Plan of Merger, (iii) directed that this Agreement be submitted to the Company Shareholders for approval and (iv) resolved to recommend that the Company Shareholders approve this Agreement, and the transactions contemplated hereby, including the Merger and the Plan of Merger at the Company Shareholder Meeting.

 

B. The Board of Directors of Merger Sub has (i) determined that this Agreement, the Plan of Merger, and the transactions contemplated hereby, including the Merger, taken together, are at a price and on terms that are fair to, advisable and in the best interests of Merger Sub and its sole shareholder and (ii) adopted resolutions approving and declaring advisable this Agreement, the Plan of Merger and the transactions contemplated hereby, including the Merger. The sole shareholder of Merger Sub has approved this Agreement.

 

C. The Board of Directors of Parent, and Parent, as the sole shareholder of Merger Sub, in each case has approved this Agreement, the Plan of Merger, the Merger and the other transactions contemplated hereby.

 

D. As an inducement to Parent's willingness to enter into this Agreement, Parent and the Robert H. Eder Trust and the Linda Eder Trust (collectively, the " Trusts ") are entering into a Voting Agreement, dated as of the date of this Agreement, with respect to the issued and outstanding shares of Company Preferred Stock and Company Common Stock beneficially owned by the Trusts (the " Voting Agreement ").

 

E. The Company, Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with this Agreement.

 

F. Certain capitalized terms used in this Agreement are defined in Article IX , and Annex I includes an index of all capitalized terms used in this Agreement.

 

1


AGREEMENT

 

In consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties agree as follows:

 

Article I. - THE MERGER

 

Section 1.1

The Merger.

 

(a)

Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, Merger Sub shall be merged with and into the Company in accordance with the RIBCA, whereupon the separate existence of Merger Sub shall cease and the Company shall continue as the Surviving Corporation under the Laws of the State of Rhode Island.

 

(b)

The Merger shall have the effects set forth in this Agreement, Section 7-1.2-1005 of the RIBCA and other applicable Law. Accordingly, from and after the Effective Time: (a) the Surviving Corporation shall have all the rights, privileges, immunities and powers and shall be subject to all the duties and liabilities of a corporation organized under the RIBCA; (b) the Surviving Corporation shall possess all rights, privileges, immunities and franchises of each of the Company and Merger Sub; and (c) the Surviving Corporation shall be responsible and liable for all liabilities and obligations of the Company and Merger Sub.

 

 

Section 1.2

Closing.

 

Subject to the terms and conditions of this Agreement, the Closing will take place at 10:00 a.m., local time, on the date that is the fifth (5th) Business Day after the satisfaction or waiver of the conditions (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) set forth in Article VI (the " Closing Date "), at the offices of Hinckley, Allen & Snyder, LLP, 100 Westminster Street, Suite 1500, Providence, Rhode Island, unless another time, date or place is agreed to in writing by the parties.

 

 

Section 1.3

Effective Time; Effect of the Merger.

 

On the Closing Date and subject to the terms and conditions hereof, the Articles of Merger with the Plan of Merger attached thereto shall be filed with the Rhode Island Secretary. The Merger shall become effective upon the issuance of a certificate of merger by the Rhode Island Secretary subsequent to the filing of the Articles of Merger with the Rhode Island Secretary, or such later time as agreed by the parties hereto and specified in such Articles of Merger (the " Effective Time "). The Merger shall have the effects set forth herein and in the applicable provisions of the RIBCA.

 

 

Section 1.4

Conversion of the Shares.

 

At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any of the following securities:

 

(a)

Each share of preferred stock, par value $50.00 per share, of the Company (" Company Preferred Stock ") issued and outstanding immediately prior to the Effective Time (the " Preferred Shares ") (excluding Dissenter Shares) shall be deemed to be automatically converted, along with the aggregate accrued or accumulated and unpaid dividends thereon, into 100 shares of the common stock, par value $0.50 per share of the Company (" Company Common Stock ") without any further action by the relevant holder of such Preferred Shares or the Company.  All Preferred Shares, when so deemed converted, shall no longer be outstanding and shall automatically be retired and shall cease to exist, and each holder of a Certificate representing Preferred Shares (each, a " Preferred Certificate ") or Book-Entry Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration payable with respect to the Company Common Stock into which such Preferred Shares have been deemed converted (the " Converted Shares "), as provided in Section 1.4(b) hereof.  From and after the Effective Time, (i) each Preferred Certificate (excluding a Preferred Certificate representing Dissenter Shares) shall be deemed to represent the number of Converted Shares into which the Preferred Shares represented by such Preferred Certificate have been deemed converted and (ii) all references to "Certificate" herein shall include any Preferred Certificate.

 

2


 

(b)

Except as provided in Section 1.4(c) , each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (including any Converted Shares, but excluding Dissenters Shares) (the " Shares ") shall be canceled and shall be converted automatically into the right to receive, in cash without interest, $25.00 (the " Merger Consideration "), upon surrender of the Certificate and/or Letter of Transmittal representing such Shares as provided in Article II. All Shares, when so converted, shall no longer be outstanding and shall automatically be retired and shall cease to exist, and each holder of a Certificate representing Shares (including a Preferred Certificate representing Converted Shares) or Book-Entry Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration into which such Shares have been converted, as provided herein.

 

(c)

Each Share that is owned by the Company as treasury stock and each Share owned by Parent, Merger Sub or any other Subsidiary of Parent immediately prior to the Effective Time shall be canceled and retired and cease to exist and no payment or distribution shall be made with respect thereto. Each Share owned by any wholly owned Subsidiary of the Company immediately prior to the Effective Time shall remain outstanding following the Effective Time and no Merger Consideration shall be payable with respect thereto.

 

(d)

Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation and shall constitute the only outstanding shares of capital stock of the Surviving Corporation.

 

 

Section 1.5

Organizational Documents.

 

(a)

At the Effective Time, pursuant to the Merger, the Company Articles of Incorporation shall be amended and restated so as to read as set forth in Exhibit B and, as so amended and restated, shall be the articles of incorporation of the Surviving Corporation. Thereafter, the articles of incorporation of the Surviving Corporation may be amended in accordance with their terms and as provided by Law.

 

(b)

At the Effective Time, pursuant to the Merger, the Company Bylaws shall be amended and restated at the Effective Time to read as did the bylaws of Merger Sub immediately prior to the Effective Time, except the name of the Company shall remain unchanged. Thereafter, the bylaws of the Surviving Corporation may be amended in accordance with their terms and the articles of incorporation of the Surviving Corporation and as provided by Law.

 

 

3


 

Section 1.6

Directors and Officers of the Surviving Corporation.

 

At the Effective Time, the directors of Merger Sub shall continue in office as the directors of the Surviving Corporation and the officers of the Company (other than the Company's current Chief Executive Officer) shall continue in office as the officers of the Surviving Corporation, and such directors and officers shall hold office until successors are duly elected or appointed and qualified in accordance with and subject to applicable Law and the articles of incorporation and bylaws of the Surviving Corporation.

 

 

Section 1.7

Options and Restricted Share Units.

 

(a)

Each option to purchase Company Common Stock (collectively, the " Options ") granted under the Company Equity Plans, whether vested or unvested, which is outstanding immediately prior to the Effective Time and which has not been exercised or canceled prior thereto shall, at the Effective Time, be canceled and, as of the Effective Time, the Company shall pay to the holder thereof cash in an amount equal to the product of (i) the number of shares of Company Common Stock provided for in such Option and (ii) the excess, if any, of the Merger Consideration over the exercise price per share of Company Common Stock provided for in such Option, which cash payment shall be made without interest and shall be net of all applicable withholding taxes.

 

(b)

Each restricted share unit granted under any Company Equity Plan, agreement or arrangement of the Company, or otherwise (each, a " Restricted Share Unit "), whether vested or unvested, which is outstanding immediately prior to the Effective Time shall be canceled and shall be converted automatically into the right to receive the Merger Consideration for each share of Company Common Stock covered by such Restricted Share Units, less any required withholdings. As of the Effective Time, each holder of Restricted Share Units shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration.

 

(c)

At the Effective Time, the Company Equity Plans shall terminate and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company shall be of no further force and effect and shall be deemed to be deleted.  The Company shall take all actions necessary in order to effect the provisions of this Section 1.7 , including adopting all necessary resolutions, reimbursing employees for applicable payroll withholdings authorized under the ESPP, seeking all necessary approvals and providing any notices required under the Company Equity Plans.

 

 

Section 1.8

Dissenter Shares.

 

Notwithstanding anything in this Agreement to the contrary, any Dissenter Shares shall not be deemed converted into Company Common Stock and converted into the right to receive the Merger Consideration as provided in Section 1.4(a) , but instead holders of Dissenter Shares shall be entitled to payment of the fair value of such shares in accordance with the provisions of Part 12. Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose such holder's dissenters' rights under Part 12 or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Part 12, then the right of such holder to be paid the fair value of such holder's Dissenter Shares under Part 12 shall cease and such Dissenter Shares shall be deemed to have been converted at the Effective Time into, and shall have become, the right to receive the Merger Consideration payable with respect to the Converted Shares represented thereby as provided in Section 1.4(a) , without interest. At the Effective Time, the Dissenter Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of

4


 Dissenter Shares shall cease to have any rights with respect thereto, except such rights provided in the preceding two sentences. The Company shall serve prompt notice to Parent of any demands for dissenters' rights under Part 12 of any holder of the Preferred Shares, attempted withdrawals of such demands and any other instruments served pursuant to the RIBCA received by the Company, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. The Company shall not, without the prior written consent of Parent, or as otherwise required under the RIBCA, waive any failure by a holder of Dissenter Shares to timely deliver a written demand or to perform any other act perfecting dissenter's rights in accordance with the RIBCA, make any payment (or offer to make any payment) with respect to, or settle or offer to settle, any such demands, or agree to do or commit to do any of the foregoing.

 

Section 1.9

Adjustments to Prevent Dilution.

 

Subject to the restrictions contained in Section 5.1 , in the event that the Company changes the number of Shares issued and outstanding prior to the Effective Time as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, subdivision, issuer tender or exchange offer, or other similar transaction, the Merger Consideration shall be proportionately adjusted to reflect such change.

 

Article II.   EXCHANGE OF CERTIFICATES

 

 

Section 2.1

Paying Agent.

 

Prior to the Effective Time, Parent shall appoint the Paying Agent to act as paying agent for the payment of the Merger Consideration upon surrender of the Certificates pursuant to this Article II , in the case of certificated Shares, and automatically, in the case of Book-Entry Shares. Immediately following the Effective Time, Parent shall deposit, or cause to be deposited, with the Paying Agent cash in the aggregate amount required to pay the Merger Consideration in respect of the Shares pursuant to Section 1.4 (such cash amount being referred to herein as the " Exchange Fund "). The Exchange Fund shall be used solely for purposes of paying the Merger Consideration in accordance with this Article II and shall not be used to satisfy any other obligation of the Company or any of its Subsidiaries. Pending distribution of the Exchange Fund in accordance with this Article II , Parent may direct the Paying Agent to invest such cash, provided that such investments (i) shall be obligations of or guaranteed by the United States of America, commercial paper obligations receiving the highest rating from either Moody's Investors Services, Inc. or Standard & Poor's Corporation, or certificates of deposit, bank repurchase agreements or bankers acceptances of domestic commercial banks with capital exceeding $500,000,000 (collectively " Permitted Investments ") or money market funds that are invested solely in Permitted Investments and (ii) shall have maturities that will not prevent or delay payments to be made pursuant to this Article II . Any income from investment of the Exchange Fund will be payable solely to Parent (or its designee).

 

 

Section 2.2

Exchange Procedures.

 

(a)

As soon as practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a Certificate or Certificates that, immediately prior to the Effective Time, represented outstanding Shares subsequently converted into the right to receive the Merger Consideration, as set forth in Section 1.4: (i) a letter of transmittal (a "Letter of Transmittal") that (A) shall specify that delivery shall be effected and risk of loss and title to the Certificates shall pass only upon proper delivery of the Certificates to the Paying Agent (or an affidavit of loss in lieu thereof, together with any bond or indemnity agreement, as contemplated by Section 2.6) and (B) shall be in such form and have such other provisions as Parent may reasonably specify; and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the applicable Merger Consideration.

 

5


(b)

Upon surrender of a Certificate for cancellation to the Paying Agent, together with a Letter of Transmittal, duly completed and validly executed in accordance with the instructions thereto, and any other documents reasonably required by the Paying Agent or the Surviving Corporation, (i) the holder of such Certificate shall be entitled to receive in exchange therefor a check representing the applicable amount of cash that such holder has the right to receive pursuant to Section 1.4 and (ii) the Certificate so surrendered shall forthwith be canceled. No interest will be paid or accrued on the cash payable upon surrender of the Certificates. Until surrendered as contemplated by this Section 2.2 , each such Certificate shall be deemed at any time after the Effective Time to represent only the right to receive, upon such surrender, the applicable Merger Consideration.

 

(c)

Notwithstanding anything to the contrary contained in this Agreement, any holder of Book-Entry Shares shall not be required to deliver a Certificate but may, if required by the Paying Agent, be required to deliver an executed Letter of Transmittal to the Paying Agent to receive the Merger Consideration that such holder is entitled to receive pursuant to this Article II . Each holder of record of one or more Book-Entry Shares whose Shares were converted into the right to receive the Merger Consideration shall automatically upon the Effective Time or following the Paying Agent's receipt of the applicable Letter of Transmittal (or, at any later time at which such Book-Entry Shares shall be so converted) be entitled to receive, and Parent shall cause the Paying Agent to pay and deliver as promptly as practicable after such time, the Merger Consideration to which such holder is entitled pursuant to this Article II and the Book-Entry Shares of such holder shall immediately be canceled.

 

(d)

In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company maintained by its transfer agent, the appropriate amount of the Merger Consideration may be paid to a transferee if the Certificate representing such Shares is presented to the Paying Agent properly endorsed or accompanied by appropriate stock powers and otherwise in proper form for transfer and accompanied by all documents reasonably required by the Paying Agent to evidence and effect such transfer and to evidence that any applicable Taxes have been paid.

 

 

Section 2.3

No Further Ownership Rights.

 

All Merger Consideration paid upon the surrender for exchange of the Certificates or Book-Entry Shares representing Shares in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such Shares and, after the Effective Time, there shall be no further registration of transfers on the transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article II , subject to applicable Law in the case of Dissenter Shares.

 

 

Section 2.4

Termination of Exchange Fund.

 

Any portion of the Exchange Fund (including any interest and other income received with respect thereto) that remains undistributed to the former Company Shareholders on the date that is twelve (12) months after the Effective Time shall be delivered to Parent (or its designee) upon demand, and any former holder of Shares who has not theretofore received any applicable Merger Consideration to which such Company Shareholder is entitled under this Article II shall thereafter look only to the Surviving Corporation (subject to abandoned property, escheat or other similar Laws) for payment of claims with respect thereto and only as a general creditor thereof.

6


 

 

Section 2.5

No Liability.

 

None of Parent, the Surviving Corporation or Merger Sub shall be liable to any holder of Shares for any part of the Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any amounts remaining unclaimed by holders of any such Shares two years after the Effective Time or at such earlier date as is immediately prior to the time at which such amounts would otherwise escheat to, or become property of, any Governmental Entity shall, to the extent permitted by applicable Law or Order, become the property of Parent (or its designee) free and clear of any claims or interest of any such holders or their successors, assigns or personal representatives previously entitled thereto.

 

 

Section 2.6

Lost, Stolen or Destroyed Certificates.

 

If 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 and at the discretion of Parent or the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as Parent or the Surviving Corporation may direct, or the execution and delivery by such Person of an indemnity agreement in such form as Parent or the Surviving Corporation may direct, in each case as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificate the appropriate amount of the Merger Consideration.

 

 

Section 2.7

Withholding of Tax.

 

Notwithstanding anything to the contrary in this Agreement or the Plan of Merger, Parent, the Surviving Corporation, any Affiliate thereof or the Paying Agent shall be entitled to deduct and withhold from amounts otherwise payable pursuant to this Agreement to any holder of Shares, Dissenter Shares, Restricted Share Units or Options, such amounts as Parent, the Surviving Corporation, any Affiliate thereof or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign Tax Law. To the extent that amounts are so withheld by Parent, the Surviving Corporation, any Affiliate thereof, or the Paying Agent, such withheld amounts shall be (a) paid over to the applicable Governmental Entity in accordance with applicable Law and (b) treated for all purposes of this Agreement and the Plan of Merger as having been paid to the Person in respect of which such deduction and withholding was made by Parent, the Surviving Corporation, any Affiliate thereof, or the Paying Agent, as the case may be.

 

Article III.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as (i) disclosed in any Company Report filed with, or furnished to, the SEC by the Company since January 1, 2015 and publicly available prior to the date of this Agreement (collectively, the " Filed SEC Documents ") (excluding, in each case, any disclosure set forth in any risk factor section, in any section relating to forward-looking statements and any other disclosures included therein, to the extent that they are cautionary, predictive or forward-looking) (it being acknowledged that clause (i) shall not apply to Sections 3.3(a) , 3.3(b) , 3.8(a) , 3.8(b) and 3.9(b)(ii)) or (ii) as set forth in the Company Disclosure Letter (it being understood that any information set forth in one section

7


or subsection of the Company Disclosure Letter shall be deemed to apply to and qualify the Section or subsection of this Agreement to which it corresponds in number and each other Section or subsection of this Agreement to the extent that it is reasonably apparent on its face that such information is relevant to such other Section or subsection), the Company represents and warrants to each of the other parties hereto as follows:

 

 

Section 3.1

Organization and Good Standing; Charter Documents.

 

(a)

Each of the Company and its Subsidiaries (i) is a corporation or other legal entity, duly organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the Laws of its jurisdiction of incorporation, except where any failure of any such Subsidiary to be in good standing has not had and would not reasonably be expected to have a Company Material Adverse Effect, (ii) has full corporate or similar power and authority to own, lease and operate its properties and assets and to conduct its business as presently conducted, except where any failure to have such power or authority would not be, individually or in the aggregate, material to the Company and its Subsidiaries, taken as a whole, and (iii) is duly qualified or licensed to do business as a foreign corporation and is in good standing (with respect to jurisdictions that recognize such concept) in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

(b)

The Company has heretofore furnished or otherwise made available to Parent a complete and correct copy of the Company Articles of Incorporation and Company Bylaws.  The Company is not in violation of any of the provisions of the Company Articles of Incorporation or the Company Bylaws and will not be in violation of any of the provisions of the Company Articles of Incorporation or Company Bylaws, as such Company Articles of Incorporation and Company Bylaws may be amended (subject to Section 5.1 ) between the date hereof and the Closing Date.

 

(c)

The Company has heretofore furnished or otherwise made available to Parent a complete and correct copy of the organizational or governing documents of each Subsidiary, and such organizational or governing documents for each Subsidiary of the Company are in full force and effect. The Subsidiaries are not in violation of any provisions of such organizational or governing documents, except where such failure would not reasonably be expected to have a Company Material Adverse Effect.

 

 

Section 3.2

Authority for Agreement.

 

The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger and the other transactions contemplated by this Agreement. The execution, delivery and performance by the Company of this Agreement, and the consummation by the Company of the Merger and the other transactions contemplated by this Agreement, have been duly and validly authorized by all necessary corporate action (including the approval of the Company Board of Directors) and no other corporate proceedings on the part of the Company, and no other votes or approvals of any class or series of capital stock of the Company, are necessary to authorize this Agreement or to consummate the Merger or the other transactions contemplated hereby (other than, with respect to the consummation of the Merger and the approval of this Agreement, the Company Required Vote). This Agreement has been duly and validly executed and delivered by the

8


Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited against the Company by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing, or remedies in general, as from time to time in effect, or (ii) the exercise by courts of equity powers.

 

 

Section 3.3

Capitalization.

 

(a)

The authorized capital stock of the Company consists of 15,000,000 shares of Company Common Stock and 653 shares of Company Preferred Stock. As of August 11, 2016 (the " Measurement Date "), 4,866,593 shares of Company Common Stock are issued and outstanding, 640 shares of Company Preferred Stock (which are convertible into 64,000 shares of Company Common Stock, in the aggregate) are issued and outstanding, and no shares of Company Common Stock or Company Preferred Stock are held in the Company's treasury or held by a Subsidiary of the Company. All outstanding Company Common Stock and Company Preferred Stock are, and any additional shares of Company Common Stock and Company Preferred Stock issued by the Company after the date hereof and prior to the Effective Time will be, duly authorized and validly issued, fully paid and nonassessable, and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right. Except as set forth in this Section 3.3(a) and for changes after the date hereof resulting from (i) the vesting of awards described in Section 3.3(b) and granted pursuant to Company Equity Plans outstanding on the date hereof or (ii) the issuance of Company Common Stock under the Anniversary Plan after the date hereof, there are no outstanding shares of capital stock of or other voting securities or ownership interests in the Company. From the Measurement Date until the date of this Agreement, no shares of Company Common Stock or Company Preferred Stock, or Options, Restricted Share Units or the Company Stock Rights have been issued, other than those shares issuable upon exercise of outstanding awards granted pursuant to the Company Equity Plans outstanding as of the Measurement Date or stock bonus awards issuable under the Anniversary Plan in accordance with the terms of the Anniversary Plan as set forth in Section 3.3(b)(III) of the Company Disclosure Letter.

 

(b)

As of the Measurement Date, (i) 103,465 Options are outstanding pursuant to the Company Equity Plans, (ii) 70,500 Restricted Share Units are outstanding pursuant to the Company Equity Plans, and (iii) 173,965 shares of Company Common Stock are reserved for future issuance pursuant to outstanding Options and Restricted Share Units and 169,500 shares of Company Common Stock remain authorized and reserved for future awards pursuant to the Company 2015 Equity Plan.  Section 3.3(b) of the Company Disclosure Letter contains a complete and correct list (which shall be updated not later than five days prior to the Effective Time) of each outstanding award granted pursuant to the Company Equity Plans, including, as applicable, the holder, date of grant, vesting schedule and number of shares of Company Common Stock subject thereto. Section 3.3(b) of the Company Disclosure Letter also sets forth the number of shares of Company Common Stock that may be issued under the Anniversary Plan prior to December 31, 2016.  Except as set forth above in this Section 3.3(b) , there are no Company Stock Rights.

 

(c)

There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Shares or Company Stock Rights or to pay any dividend or make any other distribution in respect thereof. There are no stockholder agreements, voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting, redemption, repurchase or disposition of, or that restricts the transfer of, any capital stock or other voting securities or equity interests of the Company or any of its Subsidiaries.

 

9


(d)

There are not any bonds, debentures, notes or other indebtedness of the Company or any Subsidiary of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Company Common Stock or of the capital stock or other equity interest of any Subsidiary of the Company may vote.

 

 

Section 3.4

Company Subsidiaries.

 

A true and complete list of all the Subsidiaries of the Company is set forth in Section 3.4 of the Company Disclosure Letter. The Company is the owner of all outstanding shares of capital stock of each Subsidiary of the Company and all such shares are duly authorized, validly issued, fully paid and nonassessable. All of the outstanding shares of capital stock of each Subsidiary of the Company are owned by the Company free and clear of all Encumbrances. There are no outstanding Subsidiary Stock Rights. There are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of any Subsidiary of the Company or any Subsidiary Stock Rights or to pay any dividend or make any other distribution in respect thereof. Except for the capital stock of its Subsidiaries, the Company does not own, directly or indirectly, any capital stock or other equity or voting interests of any Person.

 

 

Section 3.5

No Conflict; Required Filings and Consents.

 

(a)

The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company and the consummation of the Merger (subject to the approval of this Agreement and the Plan of Merger by the Company Required Vote) and the other transactions contemplated by this Agreement will not, (i) conflict with or violate any provision of the Company Articles of Incorporation or Company Bylaws, or the equivalent charter documents of any Subsidiary of the Company, (ii) assuming that all consents, approvals and authorizations contemplated by Section 3.5(b) below have been obtained, and all filings described therein have been made, conflict with or violate any Law or Order applicable to the Company or its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, (iii) assuming that all consents, approvals and authorizations set forth in Section 3.5(a) of the Company Disclosure Letter have been obtained, require any consent or other action by any Person under, result in a breach or violation of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, give to others (immediately or with notice or lapse of time or both) any right of termination, amendment, acceleration or cancellation of, result (immediately or with notice or lapse of time or both) in triggering any payment or other obligations under, result in the loss of any right or benefit to which the Company or any of its Subsidiaries is entitled under any Contract or authorization to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries, or any property or asset of the Company or any of its Subsidiaries, is bound or affected or (iv) result (immediately or with notice or lapse of time or both) in the creation of an Encumbrance on any property or asset of the Company or its Subsidiaries, except in the case of clauses (ii), (iii) and (iv) above for any such conflicts, violations, breaches, defaults or other occurrences that would not reasonably be expected to have a Company Material Adverse Effect.

 

(b)

The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company and the consummation of the Merger and the other transactions contemplated by this Agreement will not, require any action, consent, approval, authorization or permit of, or filing with or notification to, or registration or qualification with, any Governmental Entity, except for applicable requirements, if any, of the Securities Act, the Exchange Act, the NASDAQ, any national or regional securities exchange or market system on which the securities of Parent are listed, state securities laws or "blue sky" laws, the HSR Act, the STB, and filing and recordation of the Articles of Merger (including the Plan of Merger) as required by the RIBCA, the Federal Communications Commission and such other consents, approvals, authorizations, permits, filings and notifications that would not reasonably be expected to have a Company Material Adverse Effect.

 

10


 

Section 3.6

Compliance.

 

(a)

The Company and its Subsidiaries hold all Company Permits and are in compliance with the terms of such Company Permits, except where the failure to hold or be in compliance with such Company Permits would not reasonably be expected to have a Company Material Adverse Effect.  All such Company Permits are in full force and effect.  No such Company Permit will be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated by this Agreement. The business of the Company and its Subsidiaries has not since January 1, 2015 and is not being conducted in violation of any Law or Order, except for violations that would not reasonably be expected to have a Company Material Adverse Effect.

 

(b)

No investigation or review by any Governmental Entity with respect to the Company or any of its Subsidiaries or their respective businesses is pending or, to the Knowledge of the Company, threatened and, to the Knowledge of the Company, no basis exists for any such investigation or review that reasonably would be expected to have a Company Material Adverse Effect.

 

 

Section 3.7

Litigation.

 

(a)

There is no claim, suit, action, proceeding, administrative charge, investigation or arbitration (or, to the Knowledge of the Company, any basis therefor) pending, or any accident or incident that is likely to give rise to any of the aforementioned, or, to the Knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, their respective businesses, assets, properties, or rights or their respective directors, officers or employees in their capacities as such, or, to the Knowledge of the Company, any other Person for whom the Company or any of its Subsidiaries may be liable, which, if determined adversely, would reasonably be expected to have a Company Material Adverse Effect.

 

(b)

There are no Orders, solely or in the aggregate, outstanding against the Company or any of its Subsidiaries or their respective businesses, assets, properties or rights that would reasonably be expected to have a Company Material Adverse Effect.

 

 

Section 3.8

Company Reports; Financial Statements.

 

(a)

The Company has timely filed all Company Reports required to be filed with the SEC, and has paid all fees and assessments due and payable in connection therewith. Each Company Report has complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as applicable, and the rules and regulations of the SEC thereunder applicable to such Company Report, each as in effect on the date so filed. None of the Company Reports (including any financial statements or schedules included or incorporated by reference therein) contained when filed (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of mailing, respectively) any untrue statement of a material fact or omitted or omits or will omit, as the case may be, to state a material fact required to be stated or incorporated by reference therein or necessary to make the statements therein, in light of the circumstances under which they were or are made, not misleading. As of the date hereof, there are no material outstanding or unresolved comments received by the Company from the SEC with respect to any Company Reports. To the Knowledge of the Company, as of the date of this Agreement, none of the Company Reports is subject to ongoing SEC review. None of the Subsidiaries of the Company is required to file any form, report or other document with the SEC.

 

11


(b)

The Company has made available (including via the SEC's EDGAR system, as applicable) to Parent all of the Company Financial Statements. All of the Company Financial Statements comply, as of their respective dates of filing with the SEC, in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, and have been prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto), and fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries at the respective dates thereof and the consolidated results of its operations, changes in shareholders' equity and cash flows for the periods indicated (subject, in the case of unaudited financial statements, to normal year-end audit adjustments consistent with GAAP, none of which are, individually or in the aggregate, material to the Company and its Subsidiaries taken as a whole).

 

(c)

There are no Liabilities of the Company or any of its Subsidiaries that, if known, would be required by GAAP to be reflected on a consolidated balance sheet of the Company and its Subsidiaries (or in the notes thereto), other than (i) Liabilities disclosed and provided for in the Company Balance Sheet or in the notes thereto or in the Company's consolidated balance sheet as at June 30, 2016 (or the notes thereto) included in the Company's 10-Q filed prior to the date of this Agreement for the fiscal quarter ended June 30, 2016, (ii) Liabilities incurred on behalf of the Company in connection with the transactions contemplated by this Agreement and (iii) Liabilities incurred in the ordinary course of business since June 30, 2016, none of which has had or reasonably would be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

(d)

Since January 1, 2014, the Company has been and is in compliance in all material respects with (A) the applicable provisions of the Sarbanes Oxley Act of 2002 and the rules and regulations promulgated thereunder and (B) the applicable listing and corporate governance rules and regulations of the NASDAQ.

 

(e)

The Company has established and maintains disclosure controls and procedures and internal controls over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act. The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed in the Company's periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the required time period and that all such information is accumulated and communicated to the Company's management as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended. The Company's management has completed an assessment of the effectiveness of the Company's internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, for the year ended December 31, 2015, and such assessment concluded that such controls were effective.

 

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(f)

The Company has disclosed to the Company's auditors and the audit committee of the Company Board of Directors, based on its most recent evaluation prior to the date hereof, (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect in any material respect the Company's ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting. The Company has not received any credible and material complaints since January 1, 2014 regarding accounting, internal accounting controls or auditing matters, including any such complaint regarding questionable accounting or auditing matters. Since January 1, 2014, none of the independent public accountants of the Company or any Subsidiary has resigned or been dismissed as independent public accountants of the Company or any Subsidiary as a result of or in connection with any disagreement with the Company or any Subsidiary on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. Since January 1, 2014, neither the Company nor any of its Subsidiaries has made any loans to any executive officer of the Company (as defined in Rule 3b-7 under the Exchange Act) or director of the Company.

 

(g)

As of the date hereof, the Company has not identified any material weaknesses in the design or operation of its internal controls over financial reporting.

 

 

Section 3.9

Absence of Certain Changes or Events.

 

(a)

Since March 31, 2016, except as contemplated by, or as disclosed in, this Agreement and the Company Disclosure Letter, the Company and its Subsidiaries have conducted their businesses in the ordinary course consistent with past practice.

 

(b)

There has not been (i) since March 31, 2016 and prior to the date of this Agreement, any action taken by the Company or any of its Subsidiaries that, if taken during the period from the date of this Agreement through the Effective Time without the consent of Parent, would constitute a breach of Section 5.1(b) (other than as set forth in Section 3.9(b) of the Company Disclosure Letter), or (ii) since December 31, 2015 any Effect that has had or would reasonably be expected to have a Company Material Adverse Effect.

 

 

Section 3.10

Taxes.

 

(a)

Except as would not, individually or in the aggregate, be material to the Company and its Subsidiaries, taken as a whole, the Company and each of its Subsidiaries:

 

(i)

have timely paid or caused to be paid all Taxes required to be paid by it, and have made adequate provision in their financial statements (in accordance with GAAP) for all obligations for Taxes not yet due and payable, other than Taxes being contested in good faith by appropriate procedures and for which adequate reserves have been established in accordance with GAAP; and

 

(ii)

have filed or caused to be filed in a timely and proper manner (taking into account any extension of time within which to file) all Tax Returns required to be filed by such entities with the appropriate Governmental Entity in all jurisdictions in which Tax Returns are required to be filed, and all such Tax Returns are complete and correct in all material respects.

 

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(b)

The Company has made available to Parent complete and correct copies of all United States federal Tax Returns and material state Tax Returns filed by or on behalf of the Company or any of its Subsidiaries for all taxable periods beginning on or after December 31, 2012.

 

(c)

There are no pending audits, assessments, disputes or claims with respect to any material Tax Returns or Taxes of the Company or any of its Subsidiaries and no waivers of statutes of limitations in respect of material Taxes have been given or requested by the Company or any of its Subsidiaries that are currently outstanding.

 

(d)

Except as would not, individually or in the aggregate, be reasonably expected to result in a Company Material Adverse Effect, no Encumbrances for Taxes have been filed against the Company or any of its Subsidiaries, except for Encumbrances for Taxes (i) not yet due and payable or (ii) being contested in good faith by appropriate procedures.

 

(e)

No material unresolved deficiencies or additions to Taxes have been proposed, asserted, or assessed in writing against the Company or any of its Subsidiaries.

 

(f)

Since December 31, 2009, neither the Company nor any of its Subsidiaries has received written notice from any Governmental Entity in a jurisdiction in which the Company or any of its Subsidiaries does not file Tax Returns that the Company or any of its Subsidiaries is or may be subject to taxation by that jurisdiction.

 

(g)

There are no agreements relating to the allocation, indemnification or sharing of Taxes to which the Company or any of its Subsidiaries is a party or has a material liability.

 

(h)

Since December 31, 2009, neither the Company nor any of its Subsidiaries has entered into any closing agreement pursuant to Section 7121 of the Code (or any predecessor provision) or any similar provision of any state, local or foreign law.

 

(i)

Since December 31, 2009, neither the Company nor any of its Subsidiaries has constituted either a "distributing corporation" or a "controlled corporation" within the meaning of Section 355(a)(1)(A) of the Code.

 

(j)

Since December 31, 2009, neither the Company nor any of its Subsidiaries (i) is or has ever been a member of an affiliated group (other than a group the common parent of which is the Company) filing a consolidated federal income Tax Return, or (ii) has any liability for Taxes of any person arising from the application of Treasury Regulation Section 1.1502-6 or any analogous provision of state, local or foreign Law, or as a transferee or successor, by contract or otherwise.

 

(k)

Since December 31, 2009, all material Taxes required to be withheld, collected or deposited by or with respect to the Company and each of its Subsidiaries have been timely withheld, collected or deposited, as the case may be, and to the extent required, have been paid to the relevant Governmental Entity.

 

(l)

Neither the Company nor any of its Subsidiaries has engaged in a "listed transaction" as set forth in Treasury Regulation Section 1.6011-4(b)(2).

 

(m)

Neither the Company nor any of its Subsidiaries, on a consolidated basis, will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period or portion thereof ending after the Closing Date as a result of any (i) change in or incorrect method of accounting for a taxable period or portion thereof ending on or prior to the Closing Date, (ii) intercompany transaction entered into on or prior to the Closing Date, or (iii) deferred gains arising prior to the Closing Date, or (vi) election under Section 108(i) of the Code (or any similar provision of state, local or foreign Law).

 

14


 

Section 3.11

Title to Properties.

 

(a)

Section 3.11(a) of the Company Disclosure Letter sets forth (i) a list of all real property comprising the Company's main line and secondary line tracks and right-of-way (including all real property owned in fee simple, all easements and all trackage rights and other rights of use) with milepost summaries, railroad yards and terminal facilities, on which the Company conducts rail freight operations, (ii) any other real property that is not listed under clause (i) (whether or not used in connection with railroad operations) owned by the Company or any of its Subsidiaries that is material to the Company or its operations and (iii) expiration dates (if any) with respect to real property referred to in clause (i) which is not Owned Real Property.

 

(b)

Except as has not had and reasonably would not be expected to have, individually or in the aggregate, a Company Material Adverse Effect, either the Company or a Subsidiary of the Company has, with respect to each parcel or segment of real property owned by the Company or any of its Subsidiaries (" Owned Real Property "), good and valid title, and, with respect to real property otherwise used by the Company or any of its Subsidiaries (" Other Real Property Interests "), a good and valid leasehold, easement, right of way, trackage rights, license or other interest or otherwise has a valid right of possession, use or access, in each case, which is sufficient to permit such Persons to operate as railroads or conduct such business as is currently conducted or carried on without undue charge or expense, in each case free and clear of all Encumbrances, except for (i) mechanics', carriers', workmen's, warehousemen's, repairmen's or other like Encumbrances imposed by applicable Law arising or incurred in the ordinary course of business for amounts not overdue, (ii) Encumbrances for taxes, assessments and other governmental charges and levies that are not due and payable or that may thereafter be paid without interest or penalty, (iii) Encumbrances affecting the interest of the grantor of any easements benefiting any Owned Real Property which were not granted by or consented to by the Company or any of its Subsidiaries, (iv) Encumbrances, imperfections, minor defects or irregularities in title, easements, claims, liens, charges, security interests, rights-of-way, rights-of-refusal, covenants, restrictions, reversionary interests, and other, similar matters that would not, individually or in the aggregate, reasonably be expected to materially impair the continued use and operation of the assets to which they relate in the business of the Company and its Subsidiaries as presently conducted, (v) zoning, building and other similar codes and regulations, (vi) Encumbrances arising in the ordinary course of business under worker's compensation, unemployment insurance, social security, retirement and similar legislation, (vii) other statutory liens securing payments not yet due, (viii) purchase money liens and liens securing rental payments under capital lease arrangements reflected in the Company's 10-Q filed prior to the date of this Agreement for the fiscal quarter ended June 30, 2016, (ix) Encumbrances, covenants, restrictions and other, similar matters set forth in those Company Permits and other agreements set forth in Section 3.11(b) of the Company Disclosure Letter and (x) any matters of public record in the applicable county recorder's office or that would be disclosed by a current, accurate survey, a railroad valuation map or physical inspection of the assets to which they relate, provided any such matters would not, individually or in the aggregate, reasonably be expected to materially impair the continued use and operation of the assets to which they relate in the business of the Company and its Subsidiaries as presently conducted (collectively, " Permitted Encumbrances ").

 

15


(c)

Neither the Company nor any of its Subsidiaries has received written notice of any condemnation proceeding or proposed action or agreement for taking in lieu of condemnation, nor is any such proceeding, action or agreement pending, or, to the Company's Knowledge, threatened, with respect to any portion of any Owned Real Property or Other Real Property Interests, which proceeding, action or agreement would not be, individually or in the aggregate, material to the Company and its Subsidiaries, taken as a whole.

 

(d)

Each of the Company and its Subsidiaries has good title to, or a valid leasehold interest in, all of its tangible personal properties and assets, in each case free and clear of all Encumbrances, except Encumbrances that would not, individually or in the aggregate, reasonably be expected to materially impair the continued use and operation of the tangible personal properties and assets to which they relate in the business of the Company and its Subsidiaries as presently conducted.

 

 

Section 3.12

Related Party Transactions.

 

Since January 1, 2015, there has been no transaction, or series of similar transactions, agreements, arrangements or understandings, nor are there any agreements, arrangements or understandings currently in effect (regardless of when entered into), or any currently proposed transactions, or series of similar transactions, agreements, arrangements or understandings to which the Company or any of its Subsidiaries was or is to be a party, with any Person owning 5% or more of the Shares or any Affiliate of such Person or any director or officer of the Company or any of its Subsidiaries (or any relative thereof) (other than the Company Equity Plans or Benefit Plans) or that would otherwise be required to be disclosed under Item 404 of Regulation S-K promulgated under the Securities Act.

 

 

Section 3.13

Employee Benefit Plans.

 

(a)

Section 3.13(a) of the Company Disclosure Letter contains a true and complete list of (i) each "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) (whether or not subject to ERISA) that the Company or any of its Subsidiaries sponsors, maintains, participates in, is a party or contributes to (or is required to contribute to), or with respect to which the Company or any of its Subsidiaries could reasonably be expected to have any liability; and (ii) each other employee benefit plan, program, policy or arrangement, whether written or oral, including any stock option, stock purchase, stock appreciation right, phantom stock or other stock or stock-based incentive plan, cash bonus or incentive compensation arrangement, retirement, pension, vacation, holiday, cafeteria, medical, life insurance, disability, retiree healthcare, retiree life insurance, deferred compensation, profit sharing, change in control, retention, unemployment, or severance compensation plan, program, policy or arrangement; and each employment, severance, change in control or consulting agreement, in each case, for any current, retired or former employee or director, or other individual service provider (or for any dependent or beneficiary thereof), of the Company or any of its Subsidiaries (each such current, retired or former employee, director, or other individual service provider, a " Company Employee ") that does not constitute an "employee benefit plan" (as defined in Section 3(3) of ERISA), that the Company or any of its Subsidiaries presently sponsors, participates in, is a party or contributes to (or is required to contribute to), or with respect to which the Company or any of its Subsidiaries could reasonably be expected to have any liability (whether or not material, each, a " Benefit Plan "). Each of the Benefit Plans that is subject to Section 302 or Title IV of ERISA or Section 412 of the Code is hereinafter referred to in this Section 3.13 as a " Title IV Plan ".

 

16


(b)

With respect to each Benefit Plan, the Company has made available to Parent a true and complete copy of each Benefit Plan, including any amendments thereto, and a true and complete copy of the following items (in each case, only if applicable) (i) each trust or other funding arrangement, (ii) each summary plan description and summary of material modifications, (iii) the most recently filed annual report on IRS Form 5500, (iv) the most recent financial statements and actuarial or other valuation reports prepared with respect thereto, and (v) the most recently received IRS determination or opinion letter.

 

(c)

Except as disclosed in Section 3.13(c) of the Company Disclosure Letter, neither the Company nor any Person that is a member of a "controlled group of corporations" with, or is under "common control" with, or is a member of the same "affiliated service group" with the Company, in each case, as defined in Sections 414(b), (c), (m) or (o) of the Code (each, an " ERISA Affiliate ") maintains, contributes to, or sponsors (or has in the past six years maintained, contributed to, or sponsored) a multiemployer plan as defined in Section 3(37) of ERISA (a " Multiemployer Plan "). All required contributions that the Company or any ERISA Affiliate have been obligated to make to any Multiemployer Plan have been duly and timely made. Neither the Company nor any ERISA Affiliate has incurred any withdrawal liability with respect to any Multiemployer Plan. No Multiemployer Plan is a Title IV Plan.

 

(d)

With regard to each Title IV Plan that is not a Multiemployer Plan, no liability under Title IV or Section 302 of ERISA has been incurred by the Company, its Subsidiaries or any of its or their ERISA Affiliates that has not been satisfied in full, and, to the Knowledge of the Company, no condition exists that presents a material risk to the Company, its Subsidiaries or its or their ERISA Affiliates of incurring any such liability, other than liability for premiums due the Pension Benefit Guaranty Corporation (which premiums have been paid when due). With respect to each Title IV Plan set forth on Section 3.13(a) of the Company Disclosure Letter that is not a Multiemployer Plan: (i) there has not been any failure to satisfy the minimum funding standards within the meaning of Section 412 of the Code or Section 302 of ERISA, whether or not waived, and no such plan is in "at risk," "endangered" or "critical" status within the meaning of Sections 430 and 432 of the Code; (ii) there has been no "reportable event" within the meaning of Section 4043 of ERISA and the regulations thereunder which has not been fully and accurately reported in a timely fashion, as required by applicable Law; and (iii) there has not been a partial termination.

 

(e)

Other than with respect to any Multiemployer Plan (as to which the Company makes no representation or warranty), each Benefit Plan has been operated and administered in all material respects in accordance with its terms and applicable law, including but not limited to ERISA and the Code. There are no pending, or to the Knowledge of the Company, threatened actions, suits, disputes or claims by or on behalf of any Benefit Plan, by any Company Employee or beneficiary covered under any such Benefit Plan, as applicable, or otherwise involving any such Benefit Plan (other than routine claims for benefits). Each Benefit Plan that constitutes a "nonqualified deferred compensation plan" within the meaning of Section 409A of the Code is in documentary and operational compliance with Section 409A of the Code and all applicable IRS guidance thereunder so as to avoid any interest, penalty or Tax under Section 409A(a)(1) of the Code.

 

(f)

With respect to each Benefit Plan intended to be "qualified" within the meaning of Section 401(a) of the Code (other than any Multiemployer Plan as to which the Company makes no representation or warranty), (i) each such Benefit Plan has been determined to be so qualified and has received a favorable determination or opinion letter from the Internal Revenue Service with respect to its qualification, (ii) the trusts maintained thereunder have been determined to be exempt from taxation under Section 501(a) of the Code, and (iii) no event has occurred that could reasonably be expected to result in disqualification or adversely affect such exemption.

 

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(g)

Other than with respect to any Multiemployer Plan (as to which the Company makes no representation or warranty), no Benefit Plan provides welfare benefits, including death or medical benefits (whether or not insured), beyond retirement or termination of service, other than coverage mandated solely by applicable Law.

 

(h)

The consummation of the transactions contemplated by this Agreement and the Plan of Merger will not, either alone or in combination with another event, (i) entitle any Company Employee to severance pay, unemployment compensation or any other payment, except as expressly provided in this Agreement, or (ii) result in the acceleration of the time of payment, vesting, or funding, or increase the amount of compensation due any such Company Employee.

 

(i)

No amounts payable under the Benefit Plans will fail to be deductible for federal income tax purposes by virtue of Section 280G of the Code as a result of the occurrence of the transactions contemplated by this Agreement, either alone or in combination with another event.

 

 

Section 3.14

Labor Relations.

 

(a)

There is no labor strike, dispute, slowdown, stoppage or lockout actually pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries and, since January 1, 2014, there has not been any such action. Except as listed in Section 3.14(a) of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries are (a) party to any collective bargaining agreements or similar labor agreements, (b) subject to any action, complaint, charge, inquiry, proceeding or investigation brought, or to the Knowledge of the Company, threatened by or on behalf of any employee, prospective employee, former employee, labor organization or other representative of the Company's employees, which action, complaint, charge, inquiry, proceeding or investigation, if adversely decided, may reasonably, individually or in the aggregate, create a Liability material to the Company and its Subsidiaries taken as a whole, (c) any grievance or arbitration proceeding whether pending or, to the Knowledge of the Company, threatened which, if adversely decided, may reasonably, individually or in the aggregate, create a Liability material to the Company and its Subsidiaries taken as a whole, or cause the Company to incur expenses or forego operating savings which would be, individually or in the aggregate, material to the Company and its Subsidiaries taken as a whole, or (d) a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Entity relating to employees or employment practices. The Company and its Subsidiaries are, and have at all times been, in material compliance with all applicable Laws respecting employment and employment practices, terms and conditions of employment, wages, hours of work and occupational safety and health, and are not engaged in any unfair labor practices as defined in the National Labor Relations Act, the Railway Labor Act or other applicable Law. To the Knowledge of the Company, no Governmental Entity responsible for the enforcement of labor or employment Laws intends to conduct an investigation with respect to or relating to the Company and its Subsidiaries and no such investigation is in progress.

 

(b)

Since January 1, 2015, the Company and its Subsidiaries have not effectuated (i) a "plant closing" as defined in the Worker Adjustment and Retraining Notification Act of 1988 (or similar state or local laws) (the " WARN Act ") affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company or any Subsidiary, or (ii) a "mass layoff" as defined in the WARN Act affecting any site of employment or facility of the Company or any of its Subsidiaries. Since January 1, 2014, neither the Company nor any of its Subsidiaries have been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any Law similar to the WARN Act.

 

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Section 3.15

Intellectual Property.

 

Section 3.15 of the Company Disclosure Letter sets forth, as of the date of this Agreement, a true and complete list of all patents, patent applications, trademarks, trademark applications, trade names, service marks, service mark applications, domain name registrations and registered copyrights and applications therefor (collectively, and together with unregistered intellectual property rights, " Intellectual Property Rights ") that, in each case, are material to the conduct of the business of the Company and its Subsidiaries, taken as a whole, as presently conducted and, each of the Intellectual Property Rights is subsisting and, to the Knowledge of the Company, valid and enforceable. Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company or a Subsidiary of the Company owns, or is licensed or otherwise has the right to use, each such scheduled Intellectual Property Right that is used in the conduct of the business of the Company and its Subsidiaries, as presently conducted.  To the Knowledge of the Company, the conduct of the business of the Company and its Subsidiaries as currently conducted does not infringe, misappropriate or otherwise violate any Intellectual Property Rights of any Person, and no claims are pending, or, to the Knowledge of the Company, threatened that the Company or any of its Subsidiaries is infringing the rights of any Person with regard to any Intellectual Property Right, except for such infringements, misappropriations, violations and claims which have not had and reasonably would not be expected to have, individually or in the aggregate, a Company Material Adverse Effect. To the Knowledge of the Company, as of the date of this Agreement, no Person is infringing the rights of the Company or any of its Subsidiaries with respect to any Intellectual Property Right, in a manner that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

 

Section 3.16

Insurance Policies.

 

The Company and its Subsidiaries maintain insurance with reputable insurers for the business and assets of the Company and its Subsidiaries against all risks normally insured against, and in amounts normally carried by, corporations of similar size engaged in similar lines of business. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, all insurance policies and bonds with respect to the business and assets of the Company and its Subsidiaries are in full force and effect and will be maintained by the Company and its Subsidiaries in full force and effect as they apply to any matter, action or event relating to the Company or its Subsidiaries occurring through the Effective Time, and the Company and its Subsidiaries have not reached or exceeded their policy limits for any insurance policies in effect at any time during the past five years. Except as set forth in Section 3.16 of the Company Disclosure Letter, no insurance provider has issued any reservation of rights letters for any claims pending, or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries.

 

 

Section 3.17

Brokers.

 

No broker, finder or investment banker (other than the Company Financial Advisor) is entitled to any brokerage, finder's or other fee or commission in connection with this Agreement, the Plan of Merger, the Merger or the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company, its Subsidiaries or any of their respective directors, officers or employees. The Company has furnished or otherwise made available to Parent a true and complete copy of any agreement between the Company or any of its Subsidiaries, as applicable, and the Company Financial Advisor pursuant to which the Company Financial Advisor could be

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entitled to any payment from the Company relating to the transactions contemplated by this Agreement.

 

 

Section 3.18

Company Financial Advisor Opinion.

 

The Company Financial Advisor has delivered to the Company Board of Directors its opinion, dated as of the date of this Agreement, to the effect that, as of the date of such opinion, and based on and subject to the assumptions, qualifications, limitations and other matters set forth in such opinion, the Merger Consideration to be received by the holders (other than Parent and its Affiliates) of shares of Company Common Stock pursuant to this Agreement and the Plan of Merger is fair, from a financial point of view, to such holders (other than the Trusts). A signed copy of the written opinion will be made available to Parent solely for informational purposes as soon as practicable after the date of this Agreement.

 

Section 3.19

Proxy Statement.

 

The Proxy Statement will, when filed and at the time of the Company Shareholders Meeting, comply as to form in all material respects with the applicable requirements of the Exchange Act. The Proxy Statement, at the time it (and any amendment or supplement thereto) is filed with the SEC, at the date the Proxy Statement is first mailed to the Company Shareholders, and at the time of the Company Shareholders Meeting, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If at any time prior to the Effective Time any event with respect to the Company or any of its Subsidiaries shall occur which is required to be described in the Proxy Statement, such event shall be so described, and an amendment or supplement shall be filed with the SEC and, if required by law, disseminated to the Company Shareholders. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Parent or Merger Sub for the express purpose of being included in any of the foregoing documents.

 

 

Section 3.20

Environmental Matters.

 

(a)

Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect: (i) no 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 (or any basis therefor) is pending, or, to the Knowledge of the Company, threatened by any Governmental Entity or other Person relating to the Company or any Subsidiary and relating to or arising out of any Environmental Law or relating to Hazardous Substances; (ii) the Company and its Subsidiaries are in compliance with all Environmental Laws and all Environmental Permits necessary for the business of the Company; (iii) there are no Liabilities of the Company or any of its Subsidiaries arising under or relating to any Environmental Law or any Hazardous Substance not reflected in the Company Financial Statements and there is no condition, occurrence, situation or set of circumstances, including the release of any Hazardous Substance, that reasonably would be expected to result in or be the basis for any such Liabilities; (iv) neither the Company nor any of its Subsidiaries are obligated to conduct or pay for, and are not conducting or paying for, any response or corrective action under any Environmental Law at any location; and (v) neither the Company nor any of its Subsidiaries are party to any order, judgment or decree that imposes any obligations under any Environmental Law.

 

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(b)

To the Knowledge of the Company, there has been no environmental investigation, study, audit, test, review or other analysis conducted in relation to the current or prior business of the Company or any of its Subsidiaries or any property or facility now or previously owned or leased by the Company or any of its Subsidiaries that has not been made available to Parent.

 

 

Section 3.21

Anti-Takeover Provisions.

 

Assuming the accuracy of the representations and warranties set forth in Section 4.9 , the approval of the Company Board of Directors of this Agreement, the Plan of Merger, the Merger, the Voting Agreement and the other transactions contemplated by this Agreement represents all the action necessary to render inapplicable to this Agreement, the Plan of Merger, the Merger, the Voting Agreement and the other transactions contemplated by this Agreement, the provisions of Section 7-5.2-4 of the Business Combination Act to the extent, if any, such Section would otherwise be applicable to this Agreement, the Plan of Merger, the Merger, the Voting Agreement and the other transactions contemplated by this Agreement. To the Knowledge of the Company, no other state takeover statute applies to this Agreement, the Plan of Merger, the Merger, the Voting Agreement or the other transactions contemplated by this Agreement. The Company and the Company Board of Directors have taken all necessary action to ensure that any other similar anti-takeover provision under the Company Articles of Incorporation and Company Bylaws are not applicable to, or will not otherwise become effective as a result of, the transactions contemplated by this Agreement.

 

 

Section 3.22

Contracts.

 

(a)

Except for this Agreement and Contracts filed as exhibits to the Filed SEC Documents and as set forth on Section 3.22(a) of the Company Disclosure Letter (each, a " Company Material Contract "), there are no (i) Contracts that would be required to be filed by the Company as a "material contract" pursuant to Item 601(b)(10) of Regulation S-K or disclosed by the Company on a Current Report on Form 8-K that has not been filed or incorporated by reference in the Company Reports, (ii) leases with respect to real property (including real property relating to rail lines or rail segments) that, individually, are material to the operation of the Company's business (" Material Leases "), or (iii) Other Material Contracts.

 

(b)

 Each of such Company Material Contracts, Material Leases and Other Material Contracts is valid and binding on the Company or its Subsidiary party thereto and to the Knowledge of the Company, each other party thereto, and is in full force and effect. Neither the Company nor any of its Subsidiaries (i) is in violation or default under any Company Material Contract, Material Lease or Other Material Contract or (ii) has received notice of any asserted violation or default by the Company or its Subsidiary party thereto under any Company Material Contract, Material Lease or Other Material Contract. No event or condition exists which constitutes, or after notice or lapse of time or both would constitute, a default on the part of the Company or any of its Subsidiaries under any Company Material Contract, Material Lease or Other Material Contract and no other party to such Company Material Contract, Material Lease or Other Material Contract is, to the Knowledge of the Company, in default in any respect thereunder. Except as would not reasonably be expected to have a Company Material Adverse Effect, neither the Company nor any of its Subsidiaries has received written notice from any other party to a Company Material Contract, Material Lease or Other Material Contract that such other party intends to terminate, not renew, or renegotiate in any material respects the terms of, any such Company Material Contract, Material Lease or Other Material Contract.

 

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(c)

The Company has furnished or otherwise made available to Parent true and complete copies of each Company Material Contract, Material Lease and Other Material Contract.

 

 

Section 3.23

Board Recommendation.

 

The Board of Directors of the Company, at a meeting duly called and held, has duly (A) approved and declared advisable, the execution, delivery and performance of this Agreement (including all terms and conditions set forth herein) and the transactions contemplated hereby, including the Merger and the Plan of Merger, (B) determined that the terms of this Agreement and the Merger are advisable and fair to, and in the best interests of, the Company and the Company Shareholders, (C) directed that this Agreement be submitted to the Company Shareholders for approval and (D) resolved to recommend that the Company Shareholders approve this Agreement and the transactions contemplated hereby, including the Merger and the Plan of Merger at the Company Shareholders Meeting.

 

 

Section 3.24

Rail Facilities and Railroad Assets.

 

(a)

The Company or one of its Subsidiaries hold valid and sufficient property interests and operating rights in and to the rail lines depicted on the maps referenced in Section 3.24(a) of the Company Disclosure Letter, and to the adjacent yards, spur tracks and other rail facility appurtenances thereto (collectively, the " Rail Facilities ") to permit the Company and its Subsidiaries to conduct rail freight operations on and over the Rail Facilities as such operations are conducted by the Company and its Subsidiaries on the date of this Agreement.  The individual parcels of land that constitute the Rail Facilities of each line are contiguous to each other, with no gaps or strips, from one end point of each line to the other end point of each such line. None of the Company or any of its Subsidiaries is a party to any Contract or subject to any Order that would deprive any of the Company or its Subsidiaries of the ability to operate substantially as the Company and its Subsidiaries operate over the Rail Facilities on the date of this Agreement, or that would deprive the Company and its Subsidiaries of the ability to serve directly all customers that may be served directly by them on the date of this Agreement.

 

(b)

The Company or one of its Subsidiaries owns, leases or has the legal right to use all assets, properties, and rights (whether real, personal or intangible, and including the Rail Facilities) (the " Railroad Assets ") used in the conduct of the business of the Company and its Subsidiaries as currently conducted.  All the Railroad Assets material to the operation of the business of the Company and its Subsidiaries are in good operating condition and repair (subject to reasonable wear and tear) and are suitable for the purposes for which they are used.

 

Section 3.25

Certain Business Practices.

 

Since January 1, 2014, none of the Company or any of its Subsidiaries or any of their respective directors, officers, agents representatives or employees (in their capacity as directors, officers, agents representatives or employees) has (a) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity in respect of the business of the Company and its Subsidiaries, (b) directly or indirectly, paid or delivered any fee, commission or other sum of money or item of property, however characterized, to any finder, agent, or other party acting on behalf of or under the auspices of a governmental official or Governmental Entity, in the United States or any other country, that is in any manner illegal under any Law of the United States or any other country having jurisdiction or (c) made any payment to any customer or supplier of the Company or any of its Subsidiaries or any officer, director, partner, employee or agent of any such customer or supplier for an unlawful reciprocal practice, or made any other unlawful payment or given any other unlawful consideration to any such customer or supplier or any such officer, director, partner, employee or agent, in respect of the business of the Company and its Subsidiaries.

22


 

Section 3.26

No Other Representation or Warranty.

 

Except for the representations and warranties expressly set forth in this Article III , as qualified by the Company Disclosure Letter, neither the Company nor any other Person on behalf of the Company makes any express or implied representation or warranty with respect to the Company, its Subsidiaries or their respective businesses or with respect to any other information provided to Parent, Merger Sub or their Representatives or Affiliates in connection with the transactions contemplated hereby.  Neither the Company nor any other Person will have or be subject to any liability, except with respect to fraud, to Parent, Merger Sub or any other Person resulting from the distribution to Parent, Merger Sub or their respective Representatives or Affiliates, or Parent's, Merger Sub's or their Representatives' or Affiliates' use of, any such information, including any information, documents, projections, forecasts or any other material made available to Parent, Merger Sub or their Representatives or Affiliates in certain "data rooms" or management presentations in connection with Parent's and Merger Sub's consideration and review of the transactions contemplated hereby, unless and then only to the extent that any such information is expressly included in a representation or warranty contained in this Article III, as qualified by the Company Disclosure Letter.  Except for the representations and warranties contained in Article IV below, or in any certificates delivered by Parent in connection with the Closing, the Company acknowledges that none of Parent, Merger Sub or any Person on behalf of Parent or Merger Sub makes any other express or implied representation or warranty with respect to Parent or Merger Sub or with respect to any other information provided or made available to the Company in connection with the transactions contemplated by this Agreement.

 

Article IV.  REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

 

Parent and Merger Sub jointly and severally represent and warrant to the Company as follows:

 

 

Section 4.1

Organization and Good Standing.

 

Each of Parent and Merger Sub, (i) is a corporation duly organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the Laws of its jurisdiction of incorporation, except where any failure to be so organized, existing or in good standing would not reasonably be expected to have a Parent Material Adverse Effect, (ii) has full corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and assets and to conduct its business as presently conducted, except where any failure to have such power or authority would not reasonably be expected to have a Parent Material Adverse Effect, and (iii) is duly qualified or licensed to do business as a foreign corporation and is in good standing (with respect to jurisdictions that recognize such concept) in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not reasonably be expected to have a Parent Material Adverse Effect.

 

 

Section 4.2

Authority for Agreement.

 

Each of Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger and the other transactions contemplated by this Agreement. The execution, delivery and performance by Parent and Merger Sub of this Agreement, and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated by this Agreement and the Plan of Merger, have been duly and

23


validly authorized by all necessary corporate action and no other corporate proceedings on the part of Parent or Merger Sub, and no other votes or approvals of any class or series of capital stock of Parent or Merger Sub, are necessary to authorize this Agreement and the Plan of Merger or to consummate the Merger or the other transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and Merger Sub and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of Parent and Merger Sub enforceable against Parent and Merger Sub in accordance with its terms, except as enforcement thereof may be limited against Parent or Merger Sub by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing, or remedies in general, as from time to time in effect, or (ii) the exercise by courts of equity powers.

 

 

Section 4.3

No Conflict; Required Filings and Consents.

 

(a)

The execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement by Parent and Merger Sub and the consummation of the Merger and the other transactions contemplated by this Agreement will not, (i) conflict with or violate Parent's certificate of incorporation or the Parent Bylaws, or the equivalent charter documents of Merger Sub, (ii) assuming that all consents, approvals and authorizations contemplated by Section 4.3(b) below have been obtained, and all filings described therein have been made, conflict with or violate any Law or Order applicable to Parent or its Subsidiaries or by which any material property or asset of Parent or any of its Subsidiaries is bound or affected, (iii) require any consent or other action by any Person under, result in a breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, give to others (immediately or with notice or lapse of time or both) any right of termination, amendment, acceleration or cancellation of, result (immediately or with notice or lapse of time or both) in triggering any payment or other obligations pursuant to, or result in the loss of any right or benefit to which Parent or any of its Subsidiaries is entitled under, any Contract to which Parent or any of its Subsidiaries is a party or by which Parent or any of its Subsidiaries, or any material property or asset of Parent or any of its Subsidiaries, is bound or affected or (iv) result (immediately or with notice or lapse of time or both) in the creation of an Encumbrance on any material property or asset of Parent or its Subsidiaries, except in the case of clauses (ii), (iii) and (iv) above for any such conflicts, violations, breaches, defaults or other occurrences that would not reasonably be expected to have a Parent Material Adverse Effect.

 

(b)

The execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement by Parent and Merger Sub will not, require any consent, approval, authorization or permit of, or filing with or notification to, or registration or qualification with, any Governmental Entity, except for applicable requirements, if any, of the Securities Act, the Exchange Act, state securities laws or "blue sky" laws or the New York Stock Exchange, the HSR Act, the STB, the Federal Communications Commission and filing and recordation of the Articles of Merger as required by the RIBCA and such other consents, approvals, authorizations, permits, filings and notifications that would not reasonably be expected have a Parent Material Adverse Effect.

 

24


 

Section 4.4

Litigation.

 

(a)

There are no suits, actions or proceedings pending or, to the knowledge of Parent, threatened against Parent or any of its Subsidiaries, including Merger Sub, that would reasonably be expected to have a Parent Material Adverse Effect.

 

(b)

There is no Order outstanding against Parent or Merger Sub, or their respective businesses that would reasonably be expected to have a Parent Material Adverse Effect.

 

 

Section 4.5

Financing.

 

(a)

Parent has, and will have at the Effective Time, sufficient funds to consummate the transactions contemplated by this Agreement on a timely basis, and to: (i) pay the aggregate Merger Consideration set forth in Section 1.4 and the consideration to be paid to the holders of Restricted Share Units, Options and other Company stock-based awards in accordance with Section 1.7 , (ii) effect, as required, the repayment or refinancing of any outstanding Indebtedness that may become due and payable as a result of the Merger, (iii) pay any and all fees and expenses required to be paid by Parent and Merger Sub in connection with the Merger as contemplated hereunder and (iv) satisfy all of the other payment obligations of Parent and Merger Sub contemplated hereunder.  Neither Parent nor Merger Sub requires the approval or consent of any financing source to consummate the transactions contemplated by this Agreement.

 

Section 4.6

Brokers.

 

No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with this Agreement, the Merger or the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Merger Sub or any of their respective directors, officers or employees, for which the Company may become liable prior to the Effective Time.

 

 

Section 4.7

Interim Operations of Merger Sub.

 

Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, and Merger Sub has, and immediately prior to the Effective Time will have, engaged in no business or incurred any liabilities or obligations other than in connection with the transactions contemplated by this Agreement.

 

 

Section 4.8

Ownership of Shares; Interested Shareholder.

 

(a)

Neither Parent nor any of its Subsidiaries, including Merger Sub, beneficially owns (within the meaning of Section 13 of the Exchange Act and the rules and regulations promulgated thereunder), or will prior to the Closing Date beneficially own, any shares of Company Common Stock or Company Preferred Stock, or is a party, or, except as contemplated by this Agreement and the Transaction Documents, will prior to the Closing Date become a party, to any contract, arrangement or understanding (other than this Agreement and the Transaction Documents) for the purpose of acquiring, holding, voting or disposing of any shares of Company Common Stock or Company Preferred Stock.

 

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(b)

During the three years prior to the date hereof (other than by reason of the execution, delivery and performance of this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby), neither Parent nor any of its Subsidiaries, including Merger Sub was an "interested shareholder" of the Company, as such term is defined in 7-5.2-3 of the Business Combination Act.

 

 

Section 4.9

  Proxy Statement.

 

The information supplied by Parent for inclusion in the Proxy Statement to be sent to the Company Shareholders in connection with the Company Shareholders Meeting, at the date the Proxy Statement is first mailed to the Company Shareholders, and at the time of the Company Shareholders Meeting, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, Parent makes no representation or warranty with respect to any information supplied by the Company for the express purpose of being included in any of the foregoing documents.

 

 

Section 4.10

Solvency of the Surviving Corporation Following Merger.

 

As of the Effective Time, assuming (i) satisfaction of the conditions to Parent's obligation to consummate the Merger, or waiver of such conditions, (ii) the accuracy of the representations and warranties of the Company in this Agreement (without giving effect to any materiality or "Company Material Adverse Effect" qualifiers) and compliance by the Company with the covenants contained in this Agreement and (iii) any estimates, projections or forecasts of the Company and its Subsidiaries have been prepared in good faith based upon assumptions that were and continue to be reasonable, immediately after giving effect to the transactions contemplated by this Agreement, including payment of the aggregate Merger Consideration, repayment or refinancing of debt contemplated in this Agreement, and payment of all related fees and expenses, the Surviving Corporation will be Solvent. For the purposes of this Section 4.10 , the term " Solvent ", when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "fair saleable value" of the assets of such Person will, as of such date, exceed (i) the value of all "liabilities of such Person, including contingent and other liabilities," as of such date, as such quoted terms are generally determined in accordance with applicable federal laws governing determinations of the insolvency of debtors, and (ii) the amount that will be required to pay the probable liabilities of such Person on its existing debts (including contingent liabilities) as such debts become absolute and matured, (b) such Person will not have, as of such date, an unreasonably small amount of capital for the operation of the businesses in which it is engaged or proposed to be engaged following such date, and (c) such Person will be able to pay its liabilities, including contingent and other liabilities, as they mature. For purposes of this definition, (i) "not have an unreasonably small amount of capital for the operation of the businesses in which it is engaged or proposed to be engaged" and "able to pay its liabilities, including contingent and other liabilities, as they mature" means that such Person will be able to generate enough cash from operations, asset dispositions or refinancing, or a combination thereof, to meet its obligations as they become due.

 

 

Section 4.11

No Other Representation or Warranty.

 

Except for the representations and warranties expressly set forth in this Article IV , neither Parent nor Merger Sub nor any other Person on behalf of Parent or Merger Sub makes any express or implied representation or warranty with respect to Parent, Merger Sub, or their respective Subsidiaries or their respective businesses or with respect to any other information provided to the Company or its Representatives or Affiliates in connection with the transactions contemplated hereby. None of Parent, Merger Sub or

26


any other Person will have or be subject to any liability or indemnification obligation, except with respect to fraud, to the Company or any other Person resulting from the distribution to the Company or its Representatives or Affiliates, or the Company's or its Representatives' or Affiliates' use of, any such information, including any information, documents, projections, forecasts or other material made available to the Company or its Representatives or Affiliates in connection with the Company's consideration and review of the transactions contemplated hereby, unless and then only to the extent that any such information is expressly included in a representation or warranty contained in this Article IV . Except for the representations and warranties contained in Article III above, as qualified by the Company Disclosure Letter, or in any certificates delivered by the Company in connection with the Closing, each of Parent and Merger Sub acknowledges that neither the Company nor any Person on behalf of the Company makes any other express or implied representation or warranty with respect to the Company or any of its Subsidiaries or with respect to any other information provided or made available to Parent or Merger Sub in connection with the transactions contemplated by this Agreement.

 

Article V.  COVENANTS

 

 

Section 5.1

Conduct of Business by the Company Pending the Merger.

 

(a)

The Company covenants and agrees that between the date of this Agreement and the Effective Time, unless Parent shall otherwise agree in writing (and except as set forth in Section 5.1 of the Company Disclosure Letter or as otherwise expressly contemplated, permitted or required by this Agreement), the Company shall and shall cause each of its Subsidiaries to, (i) maintain its existence in good standing under applicable Law, (ii) subject to the restrictions and exceptions set forth in Section 5.1(b) or elsewhere in this Agreement, conduct its business and operations in the ordinary and usual course of business and in a manner consistent with prior practice, and (iii) use reasonable best efforts to preserve substantially intact its business organizations, to keep available the services of its current officers and employees and to preserve the current relationships of the Company and its Subsidiaries with customers, suppliers, distributors and other Persons with which the Company or any of its Subsidiaries has business relations that are material to the Company.

 

(b)

Without limiting the foregoing, the Company covenants and agrees that between the date of this Agreement and the Effective Time, the Company shall not and shall cause each of its Subsidiaries not to (except as expressly contemplated, permitted or required by this Agreement, as set forth in the applicable subsection of Section 5.1(b) of the Company Disclosure Letter or with the prior written approval of Parent, such approval not to be unreasonably withheld or delayed):

 

(i)

declare, set aside, make or pay any dividends or other distributions (whether in cash, stock or property) in respect of any of its or its Subsidiaries' capital stock, other than regular quarterly dividends on Company Common Stock not in excess of $0.04 per share, and the regular annual dividend on Company Preferred Stock not in excess of $5.00 per share, in each case consistent with past practice and with declaration, record and payment dates consistent with the timing of declaration, record and payment dates in the most recent comparable prior year fiscal quarter or prior fiscal year, as applicable, prior to the date of this Agreement;

 

(ii)

adjust, split, combine, subdivide or reclassify any of its capital stock or that of its Subsidiaries or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock or that of its Subsidiaries;

 

27


(iii)

repurchase, redeem or otherwise acquire or offer to repurchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock, capital stock or interests in any of its Subsidiaries or any Company Stock Rights or Subsidiary Stock Rights (other than (A) the withholding of shares of Company Common Stock to satisfy tax obligations with respect to awards granted pursuant to the Company Equity Plans and (B) the acquisition by the Company of Company Common Stock in connection with the forfeiture of awards granted under Company Equity Plans);

 

(iv)

issue, deliver or sell any shares of its capital stock, capital stock or interests in any of its Subsidiaries or Company Stock Rights or Subsidiary Stock Rights, other than the issuance of shares of Company Common Stock (A) in accordance with the Anniversary Plan in amounts not to exceed the number of shares set forth in Section 3.3(b) of the Company Disclosure Letter, (B) upon the settlement of Options or vesting of Restricted Share Units outstanding as of the date of this Agreement in accordance with the terms thereof, or (C) upon conversion of the outstanding shares of Company Preferred Stock in accordance with its terms;

 

(v)

amend or otherwise change the Company Articles of Incorporation or Company Bylaws or equivalent organizational documents of the Company's Subsidiaries (whether by merger, consolidation or otherwise);

 

(vi)

(A) purchase an equity interest in any Person or any division or business thereof, or (B) purchase the asset


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