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AGREEMENT AND PLAN OF MERGER
by and among
KEY ENERGY GROUP, INC.
MIDLAND ACQUISITION CORP.,
and
XXXXXX PRODUCTION SERVICES, INC.
dated as of
August 11, 1998
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 11, 1998, by and
among Key Energy Group, Inc., a Maryland corporation ("Parent"), Midland
Acquisition Corp., a New Jersey corporation and a direct, wholly owned
subsidiary of Parent (the "Purchaser"), and Xxxxxx Production Services, Inc., a
Texas corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, the Purchaser and the
Company have approved, and deem it advisable and in the best interests of their
respective shareholders to consummate, the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. (a) As promptly as practicable (but in no event
later than five business days after the public announcement of the execution
hereof), the Purchaser shall commence (within the meaning of Rule 14d2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) an offer (the
"Offer") to purchase for cash all shares of the issued and outstanding common
stock, par value $.01 per share (referred to herein as either the "Shares" or
"Company Common Stock"), of the Company (including the associated Common Stock
Purchase Rights (the "Rights") issued pursuant to the Rights Agreement between
the Company and Xxxxxx Trust Company of New York, as Rights Agent, dated as of
September 11, 1997 (the "Rights Agreement")), at a price of $17.50 per Share,
net to the seller in cash (such price, or such higher price per Share as may be
paid in the Offer, being referred to herein as the "Offer Price"), subject to
there being validly tendered and not withdrawn prior to the expiration of the
Offer, that number of Shares which, together with the Shares beneficially owned
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by Parent or the Purchaser, represents at least a majority of the Shares
outstanding on a fully diluted basis (the "Minimum Condition") and to the other
conditions set forth in Annex A hereto. The Purchaser shall, on the terms and
subject to the prior satisfaction or waiver (except that the Minimum Condition
may not be waived) of the conditions of the Offer, accept for payment and pay
for Shares tendered as soon as it is legally permitted to do so under applicable
law. The obligations of the Purchaser to commence the Offer and to accept for
payment and to pay for any Shares validly tendered on or prior to the expiration
of the Offer and not withdrawn shall be subject only to the Minimum Condition
and the other conditions set forth in Annex A hereto. The Offer shall be made by
means of an offer to purchase (the "Offer to Purchase") containing the terms set
forth in this Agreement, the Minimum Condition and the other conditions set
forth in Annex A hereto. The Purchaser shall not amend or waive the Minimum
Condition and shall not decrease the Offer Price or decrease the number of
Shares sought, or amend any other condition of the Offer in any manner adverse
to the holders of the Shares (other than with respect to insignificant changes
or amendments) without the written consent of the Company (such consent to be
authorized by the Board of Directors of the Company or a duly authorized
committee thereof), provided, however, that if on the initial scheduled
expiration date of the Offer (as it may be extended), all conditions to the
Offer shall not have been satisfied or waived, the Offer may be extended from
the time to time until December 31, 1998. In addition, the Offer Price may be
increased and the Offer may be extended to the extent required by law in
connection with such increase in each case without the consent of the Company.
(b) As soon as practicable on the date the Offer is commenced,
Parent and the Purchaser shall file with the United States Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will
include, as exhibits, the Offer to Purchase and a form of letter of transmittal
and summary advertisement (collectively, together with any amendments and
supplements thereto, the "Offer Documents"). The Offer Documents will comply in
all material respects with the provisions
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of applicable federal securities laws and, on the date filed with the SEC and on
the date first published, sent or given to the Company's shareholders, shall 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, except that no representation is made by Parent or the Purchaser
with respect to information supplied by the Company in writing for inclusion in
the Offer Documents. Each of Parent and the Purchaser further agrees to take all
steps necessary to cause the Offer Documents to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Each of Parent and the Purchaser, on the one
hand, and the Company, on the other hand, agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall have become false and misleading in any material respect and the
Purchaser further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given the
opportunity to review the Schedule 14D-1 before it is filed with the SEC. In
addition, Parent and the Purchaser agree to provide the Company and its counsel
in writing with any comments Parent, the Purchaser or their counsel may receive
from time to time from the SEC or its staff with respect to the Offer Documents
promptly after the receipt of such comments, and any written or oral responses
thereto.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors, at a meeting duly called and held, has,
subject to the terms and conditions set forth herein, unanimously (i) approved
this Agreement and the transactions contemplated hereby, including the Offer and
the Merger (collectively, the "Transactions"), and such approval constitutes all
requisite approvals for purposes of Article 13.03 A.(1) of the Texas Business
Corporation Act (the "TBCA") and (ii) resolved to recommend that the
shareholders of the Company accept the Offer, tender
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their Shares thereunder to the Purchaser and approve and adopt this Agreement
and the Merger. The Company represents that the actions set forth in this
Section 1.2(a) and all other actions it has taken in connection therewith are
sufficient to render the provisions of Part Thirteen of the TBCA restricting
business combinations with certain persons inapplicable to the Offer and the
Merger.
(b) Concurrently with the commencement of the Offer, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-9") which shall, subject to the fiduciary
duties of the Company's directors under applicable law and to the provisions of
this Agreement, contain the recommendation referred to in clause (ii) of Section
1.2(a) hereof. The Schedule 14D-9 will comply in all material respects with the
provisions of applicable federal securities laws and, on the date filed with the
SEC and on the date first published, sent or given to the Company's
shareholders, shall 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, except that no representation is made by the Company
with respect to information supplied by Parent or the Purchaser in writing for
inclusion in the Offer Documents. The Company further agrees to take all steps
necessary to cause the Schedule 14D-9 to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Each of the Company, on the one hand, and
Parent and the Purchaser, on the other hand, agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false and misleading in any material respect and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and to be disseminated to holders of
the Shares, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given the opportunity to review
the Schedule 14D-9 before it is filed with the SEC. In addition, the Company
agrees to provide Parent, the Purchaser and their counsel in writing with
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any comments the Company or its counsel may receive from time to time from the
SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt
of such comments, and any written or oral responses thereto.
(c) In connection with the Offer, the Company will promptly
furnish or cause to be furnished to the Purchaser mailing labels, security
position listings and any available listing or computer file containing the
names and addresses of the record holders of the Shares as of a recent date, and
shall furnish the Purchaser with such information and assistance as the
Purchaser or its agents may reasonably request in communicating the Offer to the
shareholders of the Company. Except for such steps as are necessary to
disseminate the Offer Documents, Parent and the Purchaser shall hold in
confidence the information contained in any of such labels and lists and the
additional information referred to in the preceding sentence, will use such
information only in connection with the Offer, and, if this Agreement is
terminated, will upon request of the Company deliver or cause to be delivered to
the Company all copies of such information then in its possession or the
possession of its agents or representatives.
(d) As promptly as practicable on or after the date hereof, but
in no event later than five days following announcement of the Offer, the
Company will amend the Rights Agreement, as necessary (the "Rights Amendment"),
(i) to prevent this Agreement or the consummation of any of the transactions
contemplated hereby or thereby, including without limitation, the publication or
other announcement of the Offer and the consummation of the Offer and the
Merger, from resulting in the distribution of separate rights certificates or
the occurrence of a Distribution Date (as defined in the Rights Agreement) or
being deemed a Triggering Event (as defined in the Rights Agreement) and (ii) to
provide that neither Parent nor the Purchaser shall be deemed to be an Acquiring
Person (as defined in the Rights Agreement) by reason of the transactions
expressly provided for in this Agreement. The Company represents that the Rights
Amendment will be sufficient to render the Rights inoperative with respect to
any acquisition of Shares by Parent, the Purchaser or any of their affiliates
pursuant to this Agreement. The Company represents that as a result of the
Rights Amendment, the Rights will not be
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exercisable upon or at any time after, the acceptance for payment of Shares
pursuant to the Offer.
Section 1.3 Directors.
(a) Promptly upon the purchase of and payment for any Shares by
Parent or any of its subsidiaries which represents at least a majority of the
outstanding shares of Company Common Stock (on a fully diluted basis), Parent
shall be entitled to designate such number of directors, rounded up to the next
whole number, on the Board of Directors of the Company as is equal to the
product of the total number of directors on such Board (giving effect to the
directors designated by Parent pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially owned by the
Purchaser, Parent and any of their affiliates bears to the total number of
shares of Company Common Stock then outstanding. The Company shall, upon request
of the Purchaser, use its best efforts promptly either to increase the size of
its Board of Directors or, at the Company's election, secure the resignations of
such number of its incumbent directors as is necessary to enable Parent's
designees to be so elected to the Company's Board, and shall cause Parent's
designees to be so elected. At such time, the Company shall also cause persons
designated by Parent to constitute the same percentage (rounded up to the next
whole number) as is on the Company's Board of Directors of (i) each committee of
the Company's Board of Directors, (ii) each board of directors (or similar body)
of each Subsidiary (as defined in Section 3.1) of the Company and (iii) each
committee (or similar body) of each such board, in each case only to the extent
permitted by applicable law or the rules of any stock exchange on which the
Company Common Stock is listed. Notwithstanding the foregoing, until the
Effective Time (as defined in Section 1.5 hereof), the Company shall use all
reasonable efforts to retain as a member of its Board of Directors at least two
directors who are directors of the Company on the date hereof; provided, that
subsequent to the purchase of and payment for Shares pursuant to the Offer,
Parent shall always have its designees represent at least a majority of the
entire Board of Directors of the Company. The Company's obligations under this
Section 1.3(a) shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. The Company shall promptly
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take all actions required pursuant to such Section 14(f) and Rule 14f-1 in order
to fulfill its obligations under this Section 1.3(a), including mailing to
shareholders the information required by such Section 14(f) and Rule 14f-1 as is
necessary to enable Parent's designees to be elected to the Company's Board of
Directors. Parent or the Purchaser will supply the Company any information with
respect to either of them and their nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1. The provisions of this Section
1.3(a) are in addition to and shall not limit any rights which the Purchaser,
Parent or any of their affiliates may have as a holder or beneficial owner of
Shares as a matter of law with respect to the election of directors or
otherwise.
(b) From and after the time, if any, that Parent's designees
constitute a majority of the Company's Board of Directors, any amendment of this
Agreement, any termination of this Agreement by the Company, any extension of
time for performance of any of the obligations of Parent or the Purchaser
hereunder, any waiver of any condition or any of the Company's rights hereunder
or other action by the Company hereunder may be effected only by the action of a
majority of the directors of the Company then in office who were directors of
the Company on the date hereof, which action shall be deemed to constitute the
action of the full Board of Directors; provided, that if there shall be no such
directors, such actions may be effected by majority vote of the entire Board of
Directors of the Company.
Section 1.4 The Merger.
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 1.5 hereof), the Company and the Purchaser
shall consummate a merger (the "Merger") pursuant to which (i) the Purchaser
shall be merged with and into the Company and the separate corporate existence
of the Purchaser shall thereupon cease, (ii) the Company shall be the successor
or surviving corporation in the Merger and shall continue to be governed by the
laws of the State of Texas, and (iii) the separate corporate existence of the
Company with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger. At Parent's election, the Merger may
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alternatively be structured so that (x) the Company is merged with and into
Parent, the Purchaser or any other direct or indirect subsidiary of Parent or
(y) any direct or indirect subsidiary of Parent other than the Purchaser is
merged with and into the Company. In the event of such an election, the parties
agree to execute an appropriate amendment to this Agreement in order to reflect
such election. The corporation surviving the Merger is sometimes hereinafter
referred to as the "Surviving Corporation." The Merger shall have the effects
set forth in the TBCA and the New Jersey Business Corporation Act (the "NJBCA").
(b) Unless otherwise determined by Parent prior to the Effective
Time, the Articles of Incorporation of the Surviving Corporation shall, as a
result of the Merger, be changed so as to read in their entirety as closely as
possible to the Certificate of Incorporation of Purchaser immediately prior to
the Effective Time, except as to the name of the Surviving Corporation (in the
case of a merger where the Company is the Surviving Corporation) and except to
the extent necessary (in the case of a merger where the Company is the Surviving
Corporation) to comply with or conform to Texas law until thereafter amended as
provided by law and such Articles of Incorporation.
(c) Unless otherwise determined by Parent prior to the Effective
Time, the By-laws of the Surviving Corporation shall, as a result of the Merger,
be changed so as to read in their entirety as closely as possible to the By-laws
of Purchaser immediately prior to the Effective Time, except to the extent
necessary (in the case of a merger where the Company is the Surviving
Corporation) to comply with or conform to Texas law until thereafter amended as
provided by law, the Articles of Incorporation of the Surviving Corporation and
such By-laws.
Section 1.5 Effective Time. Parent, the Purchaser and the Company will
cause appropriate Articles of Merger (the "Articles of Merger") to be executed
and filed on the date of the Closing (as defined in Section 1.6 hereof) (or on
such other date as Parent and the Company may agree) with the Secretary of State
of the State of Texas as provided in the TBCA and an appropriate Certificate of
Merger (the "Certificate of Merger") to be
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executed and filed on the date of the Closing (or on such other date as Parent
and the Company may agree) with the Secretary of State of the State of New
Jersey as provided in the NJBCA. The Merger shall become effective on the date
on which the Articles of Merger and the Certificate of Merger have been duly
filed with the appropriate Secretaries of State or such time as is agreed upon
by the parties and specified in the Articles of Merger and the Certificate of
Merger, and such time is hereinafter referred to as the "Effective Time."
Section 1.6 Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. on a date to be specified by the parties, which shall
be no later than the second business day after satisfaction or waiver of all of
the conditions set forth in Article VI hereof (the "Closing Date"), at the
offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 0000 Xxx Xxxx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000, unless another date or place is agreed to in writing by
the parties hereto.
Section 1.7 Directors and Officers of the Surviving Corporation. The
directors and officers of the Purchaser at the Effective Time shall, from and
after the Effective Time, be the directors and officers, respectively, of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
Bylaws.
Section 1.8 Shareholders' Meeting.
(a) If required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Special Meeting") as soon as
practicable following the acceptance for payment and purchase of
Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon this Agreement;
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(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and
use its reasonable efforts (x) to obtain and furnish the information
required to be included by the SEC in the Proxy Statement (as
hereinafter defined) and, after consultation with Parent, to respond
promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive
proxy or information statement (the "Proxy Statement") to be mailed to
its shareholders and (y) to obtain the necessary approvals of the
Merger and this Agreement by its shareholders; and
(iii) subject to the fiduciary obligations of the Board under
applicable law as advised by independent counsel, include in the
Proxy Statement the recommendation of the Board that shareholders of
the Company vote in favor of the approval of the Merger and the
adoption of this Agreement.
(b) Parent agrees that it will vote, or cause to be voted, all of
the Shares then owned by it, the Purchaser or any of its other subsidiaries and
affiliates in favor of the approval of the Merger and the adoption of this
Agreement.
Section 1.9 Merger Without Meeting of Shareholders. Notwithstanding
Section 1.8 hereof, in the event that Parent, the Purchaser or any other
subsidiary of Parent shall acquire at least 90% of the outstanding shares of
each class of capital stock of the Company, pursuant to the Offer or otherwise,
the parties hereto agree, at the request of Parent and subject to Article VI
hereof, to take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after such acquisition, without a
meeting of shareholders of the Company, in accordance with Article 5.16 of the
TBCA and Section 14A:10-5.1 of the NJBCA.
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ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of Company Common Stock or common stock, par value $.01 per share, of the
Purchaser (the "Purchaser Common Stock"):
(a) Purchaser Common Stock. Each issued and outstanding share of
the Purchaser Common Stock shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All
shares of Company Common Stock that are owned by the Company as treasury stock
and any shares of Company Common Stock owned by Parent, the Purchaser or any
other wholly owned Subsidiary (as defined in Section 3.1 hereof) of Parent shall
be cancelled and retired and shall cease to exist and no stock of Parent or
other consideration shall be delivered in exchange therefor.
(c) Exchange of Shares. Each issued and outstanding share of
Company Common Stock, including the associated Rights (other than shares to be
cancelled in accordance with Section 2.1(b) hereof) shall be converted into the
right to receive the Offer Price, payable to the holder thereof, without
interest (the "Merger Consideration"), upon surrender of the certificate
formerly representing such share of Company Common Stock in the manner provided
in Section 2.2 hereof. All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon the
surrender of such certificate in accordance with Section 2.2 hereof, without
interest.
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Section 2.2 Exchange of Certificates.
(a) Paying Agent. Parent shall designate a bank or trust company
to act as agent for the holders of shares of Company Common Stock in connection
with the Merger (the "Paying Agent") to receive the funds to which holders of
shares of Company Common Stock shall become entitled pursuant to Section
2.1(c)hereof. Such funds shall be invested by the Paying Agent as directed by
Parent or the Surviving Corporation.
(b) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"),
whose shares were converted pursuant to Section 2.1 hereof into the right to
receive the Merger Consideration (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in such form and have such other provisions as Parent and the
Company may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration for
each share of Company Common Stock formerly represented by such Certificate and
the Certificate so surrendered shall forthwith be cancelled. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by
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this Section 2.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration
in cash as contemplated by this Section 2.2, without interest thereon.
(c) Transfer Books; No Further Ownership Rights in Company Common
Stock. At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
shares of Company Common Stock on the records of the Company. From and after the
Effective Time, the holders of Certificates evidencing ownership of shares of
Company Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares, except as otherwise
provided for herein or by applicable law. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. At any time following six
months after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Paying Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 2.3 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger or consented
thereto in writing and who has demanded appraisal for such Shares in accordance
with the TBCA ("Dissenting Shares") shall not be converted into a right to
receive the Merger Consideration, unless such holder fails to perfect or
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withdraws or otherwise loses his or her right to appraisal. A holder of
Dissenting Shares shall be entitled to receive payment of the appraised value of
such Shares held by him or her in accordance with the provisions of Article 5.12
or 5.16 of the TBCA, unless, after the Effective Time, such holder fails to
perfect or withdraws or loses his or her right to appraisal, in which case such
Shares shall be treated as if they had been converted as of the Effective Time
into a right to receive the Merger Consideration, without interest thereon.
Section 2.4 Company Option Plans.
(a) Parent and the Company shall take all actions necessary to
provide that, effective as of the Effective Time, (i) each outstanding employee
stock option to purchase Shares (an "Employee Option"), whether or not granted
under the Xxxxxx Production Services, Inc. Amended and Restated 1995 Incentive
Plan (the "Option Plan") and each outstanding non-employee director option to
purchase Shares, whether or not granted under the Option Plan ("Director
Options" and collectively with Employee Options, "Options"), whether or not then
exercisable or vested, shall become fully exercisable and vested, and (ii) each
Option that, pursuant to its terms, can be cancelled by the Company without the
holder's consent shall be cancelled, and each other Option which its holder
elects to cancel shall be cancelled, and in consideration of such cancellation,
and except to the extent that Parent or the Purchaser and the holder of any such
Option otherwise agree, the Company shall pay to such holders of such cancelled
Options an amount in respect thereof equal to the product of (A) the excess, if
any, of the Offer Price over the exercise price thereof and (B) the number of
Shares subject thereto (such payment to be net of applicable withholding and
excise taxes). Notwithstanding the foregoing, any payment to the holders of
Options contemplated by this Section 2.3 may be withheld in respect of any
Option until any necessary consents or releases are obtained.
(b) Except as provided herein or as otherwise agreed to by the
parties, (i) the Option Plan shall terminate as of the Effective Time and the
provisions in any other plan, program or arrangement providing for the issuance
or grant of any other interest in
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respect of the capital stock of the Company or any of its subsidiaries shall be
terminated as of the Effective Time and (ii) the Company shall, as soon as
practicable after the date hereof, use its best efforts to ensure that following
the Effective Time no holder of Options or any participant in the Option Plan or
any other plans, programs or arrangements shall have any right thereunder to
acquire any equity securities of the Company, the Surviving Corporation or any
subsidiary thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser as
follows:
Section 3.1 Organization. Each of the Company and its Subsidiaries is
a corporation, partnership or other entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate or other power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority,
and governmental approvals would not have a material adverse effect on the
Company and its Subsidiaries taken as a whole. As used in this Agreement, the
word "Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding such
partnerships where such party or any Subsidiary of such party do not have a
majority of the voting interest in such partnership) or (ii) at least a majority
of the securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries. As used in
this Agreement, any reference to any event, change or effect being material or
having a material adverse effect on or with respect to
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any entity (or group of entities taken as a whole) means such event, change or
effect is materially adverse to the consolidated financial condition, businesses
or results of operations of such entity (or, if used with respect thereto, of
such group of entities taken as a whole). The Company and each of its
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not in the aggregate have a material adverse effect on the
Company and its Subsidiaries taken as a whole. Exhibit 21.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1998 sets forth a
complete list of the Company's active Subsidiaries. The Company's inactive
subsidiaries have no operations or liabilities.
Section 3.2 Capitalization. (a) The authorized capital stock of the
Company consists of 20,000,000 shares of Company Common Stock, 60,000 shares of
Series A 10% Cumulative Convertible Preferred Stock, without par value (the
"Series A Preferred Stock"), and 500,000 preferred shares, without par value
(together with the Series A Preferred Stock, the "Preferred Stock"). As of the
date hereof, (i) 11,202,965 shares of Company Common Stock are issued and
outstanding, (ii) 102,500 shares of Company Common Stock are issued and held in
the treasury of the Company and (iii) 812,766 shares of Company Common Stock are
reserved for issuance upon exercise of outstanding Options. As of the date
hereof, there are no shares of Preferred Stock issued and outstanding. All the
outstanding shares of the Company's capital stock are, and all shares which may
be issued pursuant to the exercise of outstanding Options or Rights will be,
when issued in accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and non-assessable. Other than a $1.5 million
Subordinated Convertible Debenture, dated December 1, 1994, there are no bonds,
debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any of its Subsidiaries issued and outstanding. Except as set forth above and
except for the transactions contemplated by this Agreement, as of the date
hereof, (i) there are no shares of capital stock of the Company
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authorized, issued or outstanding and (ii) there are no existing options,
warrants, calls, pre-emptive rights, subscriptions or other rights, agreements,
arrangements or commitments of any character, relating to the issued or unissued
capital stock of the Company or any of its Subsidiaries, obligating the Company
or any of its Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligations of the Company or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment. Except as contemplated by this Agreement, there are
no outstanding contractual obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any Shares, or the capital stock of
the Company or any Subsidiary or affiliate of the Company or to provide funds to
make any investment (in the form of a loan, capital contribution or otherwise)
in any Subsidiary or any other entity.
(b) All of the outstanding shares of capital stock of each of the
Subsidiaries are beneficially owned by the Company, directly or indirectly, and
all such shares have been validly issued and are fully paid and nonassessable
and are owned by either the Company or one of its Subsidiaries free and clear of
all liens, charges, claims or encumbrances.
(c) Except for an agreement relating to the election of directors
between the Company and RIMCO Partners, L.P., RIMCO Partners, X.X. XX, RIMCO
Partners L.P. III and RIMCO Partners X.X. XX, dated November 21, 1996, there are
no voting trusts or other agreements or understandings to which the Company or
any of its Subsidiaries is a party with respect to the voting of the capital
stock of the Company or any of the Subsidiaries. None of the Company or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of the Company, or any of its Subsidiaries, respectively, as a
result of the transactions contemplated by this Agreement.
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Section 3.3 Authorization; Validity of Agreement; Company Action. (a)
The Company has full corporate power and authority to execute and deliver this
Agreement and, subject to obtaining the necessary approval of its shareholders,
to consummate the transactions contemplated hereby. The execution, delivery and
performance by the Company of this Agreement, and the consummation by it of the
transactions contemplated hereby, have been duly authorized by its Board of
Directors and, except for obtaining the approval of its shareholders as
contemplated by Section 1.8 hereof, no other corporate action on the part of the
Company is necessary to authorize the execution and delivery by the Company of
this Agreement and the consummation by it of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and
is a valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) The Board of Directors of the Company has duly and validly
approved and taken all corporate action required to be taken by the Board of
Directors for the consummation of the transactions contemplated by this
Agreement, including the Offer, the acquisition of Shares pursuant to the Offer
and the Merger, including, but not limited to, all actions required to render
the provisions of Part Thirteen of the TBCA restricting business combinations
with certain persons inapplicable to such transactions.
Section 3.4 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), state securities
or blue sky laws, the TBCA and the NJBCA, neither the execution, delivery or
performance of this Agreement by the Company nor the consummation by the Company
of the transactions contemplated hereby nor compliance by the Company with
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any of the provisions hereof will (i) conflict with or result in any breach of
any provision of the articles of incorporation or by-laws or similar
organizational documents of the Company or of any of its Subsidiaries, (ii)
require any filing with, or permit, authorization, consent or approval of, any
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental Entity"),
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not have a material adverse effect on
the Company and its Subsidiaries taken as a whole, (iii) except for the 9 3/8%
Senior Notes due February 1, 2007 (the "Senior Notes") and the Credit Agreement
between the Company and The Frost National Bank, dated February 20, 1997
(relating to a $50.0 million working capital revolving facility), result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound and which has been (or was required by law to have been) filed as an
exhibit to the Company SEC Documents (as defined in Section 3.5 hereof) filed
prior to the date hereof (the "Material Agreements") or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company,
any of its Subsidiaries or any of their properties or assets, excluding from the
foregoing clauses (iii) and (iv), violations, breaches or defaults which would
not, individually or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries taken as a whole, and which will not materially
impair the ability of the Company to consummate the transactions contemplated
hereby.
Section 3.5 SEC Reports and Financial Statements. The Company has
filed with the SEC all forms, reports, schedules, statements and other documents
required to be filed by it since January 1, 1996 under the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act")(as such documents have
been amended since the time of their filing,
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collectively, the "Company SEC Documents"). As of their respective dates or, if
amended, as of the date of the last such amendment, the Company SEC Documents,
including, without limitation, any financial statements or schedules included
therein (a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. None of
the Subsidiaries is required to file any forms, reports or other documents with
the SEC pursuant to Section 12 or 15 of the Exchange Act. The financial
statements of the Company (the "1998 Financial Statements") included in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998,
as amended (including the related notes thereto) (the "1998 Form 10-K") have
been prepared from and are in accordance with, the books and records of the
Company and its consolidated subsidiaries, comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto and subject, in the case of quarterly financial statements, to normal
and recurring year-end adjustments) and fairly present the consolidated
financial position and the consolidated results of operations and cash flows
(and changes in financial position, if any) of the Company and its consolidated
subsidiaries as at the dates thereof or for the periods presented therein.
Section 3.6 Absence of Certain Changes or Events. Except as set forth
on Schedule 3.6 or as disclosed in the Company SEC Documents filed prior to the
date hereof, since March 31, 1998, the Company and its Subsidiaries have
conducted their respective businesses only in the ordinary and usual course and
there has not occurred (i) any events, changes, or effects (including the
incurrence of any liabilities of any nature, whether or not accrued, contingent
or otherwise) having, individually or in the aggregate, a material adverse
effect on the Company and its Subsidiaries, taken as a whole; (ii)
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any declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of the
Company or of any of its Subsidiaries; (iii) any change by the Company or any of
its Subsidiaries in accounting principles or methods, except insofar as may be
required by a change in GAAP; (iv) any entry by the Company or any of its
Subsidiaries into any commitment or transaction material to the Company and its
Subsidiaries, taken as a whole; or (v) any increase in or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan or agreement or
arrangement, or any other increase in the compensation payable or to become
payable to any officers or key employees of the Company or its Subsidiaries,
except in the ordinary course of business consistent with past practice.
Section 3.7 No Undisclosed Liabilities. Except (a) as set forth on
Schedule 3.7, (b) as disclosed in the Company SEC Documents filed prior to the
date hereof and (c) for liabilities and obligations incurred in the ordinary
course of business and consistent with past practice, since March 31, 1998,
neither the Company nor any of its Subsidiaries has incurred any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
have, or would be reasonably likely to have, a material adverse effect on the
Company and its Subsidiaries taken as a whole or would be required by GAAP to be
reflected on a consolidated balance sheet of the Company and its Subsidiaries
(including the notes thereto).
Section 3.8 Information in Proxy Statement. The Proxy Statement (or
any amendment thereof or supplement thereto) will, at the date mailed to Company
shareholders and at the time of the meeting of Company shareholders to be held
in connection with the Merger, 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 are made, not misleading, except that no representation is made
by the Company with respect to statements made therein based on
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information supplied by Parent or the Purchaser in writing for inclusion in the
Proxy Statement. The Proxy Statement will comply in all material respects with
the provisions of the Exchange Act and the rules and regulations thereunder.
Section 3.9 Employee Benefit Plans; ERISA.
Except as set forth on Schedule 3.9, to the Company's best knowledge:
(a) There are no material employee benefit plans, arrangements,
contracts or agreements (including employment agreements and severance
agreements) of any type (including but not limited to plans described in section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), maintained by the Company, any of its Subsidiaries or any trade or
business, whether or not incorporated (an "ERISA Affiliate"), that together with
the Company would be deemed a "single employer" within the meaning of section
4001(b)(15) of ERISA, or with respect to which the Company or any of its
Subsidiaries has or may have a liability, other than those listed on Schedule
3.9 ("Benefit Plans"). Neither the Company nor any ERISA Affiliate has any
formal plan or commitment, whether legally binding or not, to create any
additional Benefit Plan or modify or change any existing Benefit Plan that would
affect any employee or terminated employee of the Company or any Subsidiary.
(b) With respect to each Benefit Plan: (i) if intended to qualify
under section 401(a), 401(k) or 403(a) of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the "Code"), such
plan so qualifies, and its trust is exempt from taxation under section 501(a) of
the Code; (ii) such plan has been administered in all material respects in
accordance with its terms and applicable law; (iii) no breaches of fiduciary
duty have occurred which might reasonably be expected to give rise to material
liability on the part of the Company; (iv) no disputes are pending, or, to the
knowledge of the Company, threatened that might reasonably be expected to give
rise to material liability on the part of the Company; (v) no prohibited
transaction (within the meaning of Section 406 of ERISA) has occurred that might
reasonably be expected to give rise to material liability on the part of the
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Company; and (vi) all contributions due as of the date hereof (including any
extensions for such contributions) have been made in full.
(c) Neither the Company nor any ERISA Affiliate maintains or has
maintained or contributed to or been required to contribute to within the last
six years, any employee benefit plan that is subject to Title IV of ERISA.
(d) With respect to each Benefit Plan that is a "welfare plan"
(as defined in section 3(1) of ERISA): except as disclosed in Schedule 3.9, no
such plan provides medical or death benefits with respect to current or former
employees of the Company or any of its Subsidiaries beyond their termination of
employment, other than on an employee-pay-all basis.
(e) Except as set forth on Schedule 3.9, the consummation of the
transactions contemplated by this Agreement, either alone or in connection with
a related event, will not entitle any individual to severance pay or accelerate
the time of payment or vesting, or increase the amount, of compensation or
benefits due to any individual (other than as disclosed in writing).
(f) The maximum amount that could be payable by the Company under
all Benefit Plans (excluding Options and restricted stock) and any other plan,
policy, agreement or arrangement to which the Company or any Subsidiary is a
party, as a result (in whole or in part) of the transactions contemplated hereby
shall not exceed $3,000,000, excluding payments to be made under the Employee
Severance Pay Plan and employer contributions under tax qualified plans.
(g) With respect to each Benefit Plan, the Company has delivered
to Parent accurate and complete copies of all plan texts, summary plan
descriptions, summary of material modifications, trust agreements and other
related agreements including all amendments to the foregoing; the most recent
annual report; the most recent annual and periodic accounting of plan assets;
the most recent determination letter received from the United States Internal
Revenue Service (the "Service"); and the most recent actuarial valuation, to the
extent any of the foregoing may be applicable to a particular Benefit Plan.
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(h) Except for certain agreements disclosed to Parent on Schedule
3.9, neither the Company nor its Subsidiaries is a party to any agreement,
contract or arrangement that could result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
Section 3.10 Litigation. Except as set forth on Schedule 3.10 and as
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, there is no suit, claim, action, proceeding or investigation pending
or, to the best knowledge of the Company, threatened against or affecting, the
Company or any of its Subsidiaries which, individually or in the aggregate, is
reasonably likely to have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, or a material adverse effect on the ability of
the Company to consummate the transactions contemplated by this Agreement.
Section 3.11 Conduct of Business. The business of the Company and each
of its Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (i) its respective articles of incorporation or
by-laws or similar organizational documents, (ii) any Material Agreement or
(iii) any federal, state, local or foreign statute, law, ordinance, rule,
regulation, judgment, decree, order, concession, grant, franchise, permit or
license or other governmental authorization or approval applicable to the
Company or any of its Subsidiaries, excluding from the foregoing clauses (ii)
and (iii), defaults or violations that would not, individually or in the
aggregate, have a material adverse effect on the Company and its Subsidiaries,
taken as a whole. Except as previously disclosed to Parent in writing, as of the
date of this Agreement, no investigation or review by any Governmental Entity or
other entity with respect to the Company or any of its Subsidiaries is pending
or, to the best knowledge of the Company, threatened, nor has any Governmental
Entity or other entity indicated an intention to conduct the same, other than,
in each case, those the outcome of which, as far as reasonably can be foreseen,
in the future will not, individually or in the aggregate have a material adverse
effect on the Company and its Subsidiaries, taken as a whole.
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Section 3.12 Environmental Protection.
(a) Except as set forth on Schedule 3.12 or in the Company SEC
Documents filed prior to the date hereof:
(i) The Company and each of its Subsidiaries are in
compliance with all applicable Environmental Laws (as defined in Section
3.12(b)(ii) hereof) except where the failure to comply, individually or in the
aggregate, would not be reasonably likely to have a material adverse effect on
the Company and its Subsidiaries, taken as a whole, and neither the Company nor
any of its Subsidiaries has received any communication (written or oral) from
any person or Governmental Entity that alleges that the Company or any of its
Subsidiaries is not in such compliance with applicable Environmental Laws. To
the knowledge of the Company, future compliance with all applicable
Environmental Laws will not require the Company or its Subsidiaries to incur
costs, beyond those currently budgeted for the three Company fiscal years
beginning with April 1, 1998, that, individually or in the aggregate, would be
reasonably likely to have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
(ii) (A) The Company and each of its Subsidiaries have
obtained or have applied for all environmental, health and safety permits and
governmental authorizations (collectively, the "Environmental Permits")
necessary for the conduct of their operations except where the failure to so
obtain, individually or in the aggregate, would not be reasonably likely to have
a material adverse effect on the Company and its Subsidiaries, taken as a whole,
(B) all such Environmental Permits are in full force and effect or, where
applicable, a renewal application has been timely filed and is pending agency
approval except where the failure of such Environmental Permits to be in full
force and effect or to have filed a renewal application on a timely basis would
not be reasonably likely to have, individually or in the aggregate, a material
adverse effect on the Company and its Subsidiaries, taken as a whole, (C) the
Company and its Subsidiaries are in material compliance with all terms and
conditions of the Environmental Permits, except where failure to so comply,
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individually or in the aggregate, would not be reasonably likely to have a
material adverse effect on the Company and its Subsidiaries, taken as a whole,
and (D) neither the Company nor any of its Subsidiaries has been advised by any
Governmental Entity of any potential change in the terms and conditions of the
Environmental Permits either prior to or upon their renewal, except for such
potential changes as would not be reasonably likely to have, individually or in
the aggregate, a material adverse effect.
(iii) There are no Environmental Claims (as defined in
Section 3.12(b)(i) hereof) that would be reasonably likely to have, individually
or in the aggregate, a material adverse effect on the Company and its
Subsidiaries, taken as a whole, pending or, to the knowledge of the Company,
threatened, (A) against the Company or any of its Subsidiaries, (B) to the
knowledge of the Company, against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law, or (C) against
any currently owned, leased or managed, in whole or in part, real or personal
property or operations of the Company or any of its Subsidiaries or, to the
knowledge of the Company, against any formerly owned, leased or managed, in
whole or in part, real or personal property or operations of the Company or any
of its Subsidiaries.
(iv) The Company has no knowledge of any Releases (as
defined in Section 3.12(b)(iv) hereof) of any Hazardous Material (as defined in
Section 3.12(b)(iii) hereof) that would be reasonably likely to form the basis
of any Environmental Claim against the Company or any of its Subsidiaries, or
against any person or entity whose liability for any Environmental Claim the
Company or any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law except for any Environmental Claim which,
individually or in the aggregate, would not be reasonably likely to have a
material adverse effect on the Company and its Subsidiaries, taken as a whole.
(v) The Company has no knowledge, with respect to any
predecessor of the Company or any of its Subsidiaries, of any Environmental
Claim which,
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individually or in the aggregate, would be reasonably likely to have a material
adverse effect on the Company and its Subsidiaries, taken as a whole, pending or
threatened, or of any Release of Hazardous Materials that would be reasonably
likely to form the basis of any Environmental Claim which, individually or in
the aggregate, would be reasonably likely to have a material adverse effect on
the Company and its Subsidiaries, taken as a whole.
(b) As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of noncompliance or
violation (written or oral) by any person or entity (including any Governmental
Entity), alleging potential liability (including, without limitation, potential
responsibility for or liability for enforcement, investigatory costs, cleanup
costs, governmental response costs, removal costs, remedial costs, natural
resources damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from (A) the presence, Release or threatened Release
into the environment of any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by the Company or any of its Subsidiaries; or
(B) circumstances forming the basis of any violation or alleged violation of any
Environmental Law or (C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials or the
presence of or exposure to any electromagnetic fields.
(ii) "Environmental Laws" means all federal, state and local
laws, rules, regulations, orders, decrees, judgments or binding agreements
issued, promulgated or entered into by or with any Governmental Entity, relating
to pollution, the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) or protection of
human health as it relates to the environment including, without limitation,
laws and regulations relating to noise levels, Releases or threatened Releases
of Hazardous Materials, or otherwise
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relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid containing polychlorinated biphenyls
("PCBs"); (B) any chemicals, materials or substances which are now defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import
under any Environmental Law and (C) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated under any
Environmental Law in a jurisdiction in which the Company or any of its
Subsidiaries operates.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the atmosphere, soil, surface water, groundwater or property.
Section 3.13 Taxes. Except as set forth on Schedule 3.13:
(a) The Company and each of its Subsidiaries have (i) duly filed
(or there has been filed on their behalf or appropriate extensions have been
obtained) with the appropriate governmental authorities all Tax Returns (as
hereinafter defined) required to be filed by them on or prior to the date
hereof, and such Tax Returns are true, correct and complete in all material
respects, and (ii) duly paid in full or made provision in accordance with
generally accepted accounting principles (or there has been paid or provision
has been made on their behalf) for the payment of all Taxes (as hereinafter
defined) for all periods ending through the date hereof, and will do so through
the Effective Time.
(b) There are no material liens for Taxes upon any property or
assets of the Company or any Subsidiary thereof, except for liens for Taxes not
yet due and
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liens for Taxes the assessment of which is being contested in good
faith.
(c) Neither the Company nor any of its Subsidiaries has made any
change in accounting methods, received a ruling from any taxing authority or
signed an agreement likely to have a material adverse effect on the Company and
its Subsidiaries taken as a whole.
(d) The Company and each of its Subsidiaries have complied in all
material respects with all applicable laws, rules and regulations relating to
the payment and withholding of Taxes (including, without limitation, withholding
of Taxes pursuant to Sections 1441 and 1442 of the Code or similar provisions
under any foreign laws) and have, within the time and the manner prescribed by
law, withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under
applicable laws.
(e) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or its Subsidiaries wherein an
adverse determination or ruling in any one such proceeding or in all such
proceedings in the aggregate could have a material adverse effect on the Company
and its Subsidiaries, taken as a whole, and neither the Company nor its
subsidiaries has received a written notice of any pending audits or proceedings.
(f) The federal income Tax Returns of the Company and its
Subsidiaries have been examined by the Service (or the applicable statutes of
limitation for the assessment of federal income Taxes for such periods have
expired) for all periods through and including March 31, 1994, and no material
deficiencies were asserted as a result of such examinations which have not been
resolved and fully paid.
(g) There are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by either
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the Company or any of its Subsidiaries with respect to any Taxes is currently in
force.
(h) Neither the Company nor any of its Subsidiaries is a party to
any agreement providing for the allocation or sharing of Taxes.
(i) Neither the Company nor any of its Subsidiaries has, with
regard to any assets or property held, acquired or to be acquired by any of
them, filed a consent to the application of Section 341(f) of the Code, or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by the Company or any of its Subsidiaries.
(j) "Taxes" shall mean any and all taxes, charges, fees, levies
or other assessments, including, without limitation, income, gross receipts,
excise, real or personal property, sales, withholding, social security,
occupation, use, service, service use, license, net worth, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the Service or any
taxing authority (whether domestic or foreign including, without limitation, any
state, county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments. "Tax Return" shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any taxing authority or jurisdiction (foreign or domestic) with respect to
Taxes, including, without limitation, information returns, any documents with
respect to or accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.
Section 3.14 Labor Relations. There is no labor strike, slowdown or
work stoppage or lockout against the Company or any of its Subsidiaries, there
is no unfair labor practice charge or complaint against or pending before the
National Labor Relations Board (the
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"NLRB") which if decided adversely could have a material adverse effect on the
Company and its Subsidiaries, taken as a whole, and there is no representation
claim or petition pending before the NLRB and no question concerning
representation exists with respect to the employees of the Company or any of its
Subsidiaries.
Section 3.15 Compliance with Laws. The Company and its Subsidiaries
have complied in a timely manner with all laws and governmental regulations and
orders relating to any of the property owned, leased or used by them, or
applicable to their business, including, but not limited to, equal employment
opportunity, discrimination, occupational safety and health, environmental and
antitrust laws, except where the failure to so comply would not, individually or
in the aggregate, have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
Section 3.16 Insurance. As of the date hereof, the Company and each of
its Subsidiaries are insured by insurers, reasonably believed by the Company to
be of recognized financial responsibility and solvency, against such losses and
risks and in such amounts as are customary in the businesses in which they are
engaged.
Section 3.17 Contracts. Except as set forth on Schedule 3.17 or as
disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1998, there are no agreements that are material to the Company and its
Subsidiaries, taken as a whole. Each Material Agreement is legally valid and
binding and in full force and effect, except where failure to be legally valid
and binding and in full force and effect would not have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, and there are no
defaults thereunder, except those defaults that would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole. The
Company has previously made available for inspection by Parent or the Purchaser
all Material Agreements.
Section 3.18 Property. The Company and each of the Subsidiaries, as
the case may be, have sufficient title or leaseholds to property to conduct
their respective businesses as currently conducted with only such exceptions as
individually or in the aggregate would
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not have a material adverse effect on the Company and the Subsidiaries, taken as
a whole.
Section 3.19 Equipment. The Company and its Subsidiaries have such
ownership of or such rights by license, lease or other agreement to all
equipment used or necessary to conduct their respective businesses as currently
conducted (the "Equipment") with only such exceptions as individually or in the
aggregate would not have a material adverse effect on the Company and the
Subsidiaries, taken as a whole. The Equipment is in good operating condition and
repair and adequate for the uses to which it is being put. None of the Equipment
is in need of maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost.
Section 3.20 Permits. The Company and each of its Subsidiaries has all
permits, licenses, franchises and other governmental authorizations necessary to
conduct their respective businesses as currently conducted with only such
exceptions as individually or in the aggregate would not have a material adverse
effect on the Company and the Subsidiaries, taken as a whole. All such permits,
licenses, franchises and authorizations are in full force and effect and the
Company is not aware of any pending or threatened suspension, cancellation or
termination of any such permit, license, franchise or authorization, with only
such exceptions as individually or in the aggregate would not have a material
adverse effect on the Company and the Subsidiaries, taken as a whole.
Section 3.21 Intellectual Property. Except as disclosed in the Company
SEC Documents filed prior to the date hereof, and except for such claims, which
individually or in the aggregate, would not have a material adverse effect on
the Company and its Subsidiaries, taken as a whole, there are no pending or
threatened claims of which the Company or any of its Subsidiaries have been
given written notice, by any person against their use of any material
trademarks, trade names, service marks, service names, xxxx registrations,
logos, assumed names and copyright registrations, patents and all applications
therefor which are owned by the Company or its Subsidiaries and used in their
respective operations as currently
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conducted (collectively, the "Intellectual Property"). The Company and each of
its Subsidiaries have such ownership of or such rights by license, lease or
other agreement to the Intellectual Property as are necessary to permit them to
conduct their respective operations as currently conducted, except where the
failure to have such rights would not have a material adverse effect on the
Company and its Subsidiaries, taken as a whole.
Section 3.22 Opinion of Financial Advisor. The Company has received an
opinion from Xxxxxx Xxxxxxx & Co. Incorporated to the effect that the
consideration to be received by the shareholders of the Company pursuant to the
Offer and the Merger is fair to such shareholders from a financial point of
view, a copy of which opinion will be delivered to Parent.
Section 3.23 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as
follows:
Section 4.1 Organization. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate or
other power and authority and all necessary governmental approvals to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have a material
adverse effect on Parent and its Subsidiaries, taken as a whole. Parent and each
of its Subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
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licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, in the aggregate, have a material
adverse effect on Parent and its Subsidiaries, taken as a whole.
Section 4.2 Authorization; Validity of Agreement; Necessary Action.
Each of Parent and the Purchaser has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the Merger and of the other transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent and the Purchaser and no other corporate proceedings on the part of
Parent and the Purchaser are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly
executed and delivered by Parent and the Purchaser, as the case may be, and,
assuming this Agreement constitutes a valid and binding obligation of the
Company, constitutes a valid and binding obligation of each of Parent and the
Purchaser, as the case may be, enforceable against them in accordance with its
respective terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 4.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the HSR Act, the TBCA, the
NJBCA, state securities or blue sky laws and, the laws of other states in which
Parent or the Purchaser is qualified to do or is doing business and applicable
state takeover laws, neither the execution, delivery or performance of this
Agreement by Parent and the Purchaser nor the consummation by Parent and the
Purchaser of the transactions contemplated hereby nor compliance by Parent and
the Purchaser with any of the provisions hereof will (i) conflict with or result
in any breach of any provision of the respective certificate of incorporation or
by-laws of Parent and the Purchaser,
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(ii) require any filing with, or permit, authorization, consent or approval of,
any Governmental Entity (except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not have a
material adverse effect on Parent and its Subsidiaries, taken as a whole), (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, lease, contract, agreement or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
or (iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, any of its Subsidiaries or any of their properties or
assets, excluding from the foregoing clauses (iii) and (iv) violations, breaches
or defaults which would not, individually or in the aggregate, have a material
adverse effect on Parent and its Subsidiaries taken as a whole.
Section 4.4 Information in Proxy Statement; Schedule 14D-9. None of
the information supplied by Parent or the Purchaser for inclusion or
incorporation by reference in the Proxy Statement or the Schedule 14D-9 will, at
the date mailed to shareholders and at the time of the meeting of shareholders
to be held in connection with the Merger, 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 are made, not misleading.
Section 4.5 Financing. Parent has received (a) a commitment letter
(the "Commitment Letter") from PNC Capital Markets, Inc. and PNC Bank, National
Association (collectively, "PNC") indicating its willingness, upon the terms and
subject to the conditions set forth therein, to lend to Parent up to
$450,000,000 and (b) proposed commitment arrangements from Bear Xxxxxxx & Co.
and Xxxxxx Brothers Inc. with respect to certain bridge financing (the "Proposed
Bridge Arrangements"). True and complete copies of the Commitment Letter and the
Proposed Bridge Arrangements received to date in connection with financing the
Offer
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and the Merger, payment of all fees and expenses in connection therewith and, if
necessary as a result of the Offer and the Merger, refinancing the Senior Notes
(collectively, the "Financing") have been delivered to the Company, and Parent
shall promptly deliver to the Company true and complete copies of all final
documentation relating to the Financing received by Parent after the date
hereof. The aggregate proceeds of the Financing, if obtained, will be in an
amount sufficient to acquire all the Shares in the Offer and the Merger, to pay
all fees and expenses in connection therewith and, if necessary, to effect a
refinancing of the Senior Notes.
Section 4.6 Purchaser's Operations. The Purchaser was formed solely
for the purpose of engaging in the transactions contemplated hereby and has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants
and agrees that, except (i) as expressly contemplated by this Agreement, or (ii)
as agreed in writing by Parent, after the date hereof, and prior to the time the
directors designated by Parent have been elected to, and shall constitute a
majority of, the Board of Directors of the Company pursuant to Section 1.3
hereof (the "Appointment Date"):
(a) the business of the Company and each of its Subsidiaries
shall be conducted only in the ordinary and usual course and, to the extent
consistent therewith, each of the Company and its Subsidiaries shall use its
best efforts to preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees, creditors and business
partners;
(b) the Company will not, directly or indirectly, (i) sell,
transfer or pledge or agree to sell, transfer or pledge any Company Common
Stock, Pre-
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ferred Stock or capital stock of any of its Subsidiaries beneficially owned by
it, either directly or indirectly; or (ii) split, combine or reclassify the
outstanding Company Common Stock or any outstanding capital stock of any of the
Subsidiaries of the Company;
(c) except for those actions contemplated in Section 1.2 hereof,
neither the Company nor any of its Subsidiaries shall: (i) amend its articles of
incorporation or by-laws or similar organizational documents; (ii) declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock; (iii) issue, sell, pledge, dispose
of or encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, any shares of capital stock of any class of the Company or any of
its Subsidiaries, other than shares of Company Common Stock reserved for
issuance on the date hereof upon exercise of outstanding Rights pursuant to the
Rights Agreement or issuances pursuant to the exercise of Options outstanding on
the date hereof; (iv) transfer, lease, license, sell, mortgage, pledge, dispose
of, or encumber any material assets other than in the ordinary and usual course
of business and consistent with past practice, or incur or modify any material
indebtedness or other liability, other than in the ordinary and usual course of
business and consistent with past practice; or (v) redeem, purchase or otherwise
acquire directly or indirectly more than 5,000 Shares of its capital stock;
(d) neither the Company nor any of its Subsidiaries shall: (i)
grant any increase in the compensation payable or to become payable by the
Company or any of its Subsidiaries to any of its executive officers or key
employees or (A) adopt any new, or (B) amend or otherwise increase, or
accelerate the payment or vesting of the amounts payable or to become payable
under any existing, bonus, incentive compensation, deferred compensation,
severance, profit sharing, stock option, stock purchase, insurance, pension,
retirement or other employee benefit plan agreement or arrangement; or (ii)
enter into any employment or severance agreement with or, except in accordance
with the existing written policies of the Company, grant any severance or
termination pay to
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any officer, director or employee of the Company or any of
its Subsidiaries;
(e) neither the Company nor any of its Subsidiaries shall modify,
amend or terminate any of its material contracts or waive, release or assign any
material rights or claims, except in the ordinary course of business and
consistent with past practice;
(f) neither the Company nor any of its Subsidiaries shall permit
any material insurance policy naming it as a beneficiary or a loss payable payee
to be cancelled or terminated without notice to Parent, except in the ordinary
course of business and consistent with past practice;
(g) neither the Company nor any of its Subsidiaries shall: (i)
incur or assume any long-term debt, or except in the ordinary course of
business, incur or assume any short-term indebtedness in amounts not consistent
with past practice; (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the obligations
of any other person, except in the ordinary course of business and consistent
with past practice; (iii) make any loans, advances or capital contributions to,
or investments in, any other person (other than to wholly owned Subsidiaries of
the Company or customary loans or advances to employees in accordance with past
practice); or (iv) except for commitments or transactions not in excess of
$500,000, enter into any material commitment or transaction (including, but not
limited to, any borrowing, capital expenditure or purchase, sale or lease of
assets);
(h) neither the Company nor any of its Subsidiaries shall change
any of the accounting principles used by it unless required by GAAP;
(i) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations, (x) in
the ordinary course of business and consistent with past practice, properly
reflected or reserved against in, the consolidated
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financial statements (or the notes thereto) as of and for the fiscal year ended
March 31, 1998 of the Company and its consolidated Subsidiaries, (y) incurred
since March 31, 1998 in the ordinary course of business and consistent with past
practice or (z) which are legally required to be paid, discharged or satisfied
(provided that if such claims, liabilities or obligations referred to in this
clause (z) are legally required to be paid and are also not otherwise payable in
accordance with clauses (x) or (y) above, the Company will notify Parent in
writing if such claims, liabilities or obligations exceed, individually or in
the aggregate, $500,000 in value, reasonably in advance of their payment).
Notwithstanding the foregoing, the Company shall be entitled to pay on a timely
basis all reasonable, documented fees and expenses related to this Agreement and
the transactions contemplated hereby;
(j) neither the Company nor any of its Subsidiaries will adopt a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries (other than the Merger);
(k) neither the Company nor any of its Subsidiaries will take, or
agree to commit to take, any action that would make any representation or
warranty of the Company contained herein inaccurate in any material respect at,
or as of any time prior to, the Effective Time; and
(l) neither the Company nor any of its Subsidiaries will enter
into an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to do
any of the foregoing.
Section 5.2 Rights Agreement. Except for the amendments contemplated
by Section 1.2(d) hereof or amendments approved in writing by Parent or the
Purchaser, the Company will not, following the date hereof, amend the Rights
Agreement in any manner. In addition the Company covenants and agrees that it
will not redeem the Rights unless such redemption is consented to in writing by
Parent prior to such redemption.
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Section 5.3 HSR Act. The Company and Parent shall take all reasonable
actions necessary to file as soon as practicable following the date hereof
notifications under the HSR Act and to respond as promptly as practicable to any
inquiries received from the Federal Trade Commission and the Antitrust Division
of the Department of Justice for additional information or documentation and to
respond as promptly as practicable to all inquiries and requests received from
any State Attorney General or other Governmental Entity in connection with
antitrust matters.
Section 5.4 Access to Information. Upon reasonable notice, the Company
shall (and shall cause each of its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financing sources and other representatives of
Parent, access, during normal business hours during the period prior to the
Appointment Date, to all its properties, books, contracts, commitments and
records and, during such period, the Company shall (and shall cause each of its
Subsidiaries to) furnish promptly to the Parent (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(b) all other information concerning its business, properties and personnel as
Parent may reasonably request. After the Appointment Date, the Company shall
provide Parent and such persons as Parent shall designate with all such
information, at such time, as Parent shall request. Unless otherwise required by
law and until the Appointment Date, Parent will hold any such information which
is nonpublic in confidence in accordance with the provisions of the letter
agreement, dated August 8, 1998 among the Company, Parent and the Purchaser (the
"Confidentiality Agreement").
Section 5.5 Consents and Approvals. Each of the Company, Parent and
the Purchaser will take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on it with respect to this Agreement
and the transactions contemplated hereby (which actions shall include, without
limitation, furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other Governmental Entity) and
will promptly cooperate with and furnish information to each other in connection
with any
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such requirements imposed upon any of them or any of their Subsidiaries in
connection with this Agreement and the transactions contemplated hereby. Each of
the Company, Parent and the Purchaser will, and will cause its Subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or private third party
required to be obtained or made by Parent, the Purchaser, the Company or any of
their Subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
Section 5.6 Employee Benefits. Parent agrees that, effective as of the
Effective Time and for a period of 18 months thereafter, the Surviving
Corporation and its Subsidiaries shall provide benefits to their employees that
are comparable with those provided by Parent to similarly situated employees of
Parent or any of its Subsidiaries, taking into account all relevant factors,
including, without limitation, the businesses in which the Surviving Corporation
and its Subsidiaries are engaged. Parent further agrees that effective as of the
Effective Time (i) all employer contributions made to the Company's 401(k) Plan
shall be fully vested and (ii) all employees of the Surviving Corporation will
be provided credit for pay and benefits purposes, by the Surviving Corporation,
for all prior service with the Company (including, as applicable, service with
any other entity which has merged into or has been acquired by the Company)
substantially comparable in all material respects to the credit for service
provided by the Company as of the date hereof; provided, however, that such
crediting shall not apply for benefit accrual purposes under any defined benefit
plan and shall not result in any duplication of benefits.
Section 5.7 No Solicitation. Neither the Company nor any of its
Subsidiaries or affiliates shall (and the Company shall use its best efforts to
cause its and each of its Subsidiaries' officers, directors, employees,
representatives and agents, including, but not limited to, investment bankers,
attorneys and accountants, not to), directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, provide any
information to, or enter into any agreement with, any corporation, partnership,
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person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any merger, tender offer, exchange offer, sale of
assets, sale of shares of capital stock or debt securities or similar
transactions involving the Company or any Subsidiary, division or operating or
principal business unit of the Company (an "Acquisition Proposal"). The Company
further agrees that it will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Notwithstanding the foregoing, the Company may,
directly or indirectly, provide access and furnish information concerning its
business, properties or assets to any corporation, partnership, person or other
entity or group pursuant to appropriate confidentiality agreements, and may
negotiate and participate in discussions and negotiations with such entity or
group if (w) such entity or group has submitted an unsolicited bona fide written
proposal to the Board of Directors of the Company relating to any such
transaction, (x) such proposal provides for the acquisition for cash and/or
publicly traded securities of all of the outstanding Shares, (y) the Board of
Directors of the Company determines in good faith, after consultation with its
independent financial advisor, that such proposal is financially superior to the
Offer and the Merger and fully financed or reasonably capable of being financed,
and (z) the Board of Directors of the Company determines in good faith, after
consultation with independent legal counsel, that the failure to provide such
information or access or to engage in such discussions or negotiations would
violate their fiduciary duties to the Company's shareholders under applicable
law. A proposal meeting all of the criteria in the preceding sentence is
referred to herein as a "Superior Proposal." Nothing contained in this Section
5.7 shall prohibit the Company or its Board of Directors from taking and
disclosing to the Company's shareholders a position with respect to a tender
offer by a third party pursuant to Rules l4d-9 and l4e-2(a) promulgated under
the Exchange Act. The Company will immediately notify Parent of any Acquisition
Proposal, or if an inquiry is made, will keep Parent fully apprised of all
developments with respect to any Acquisition Proposal, will immediately provide
to Parent copies of any written materials received by the Company in connection
with any Acquisition Proposal, discussion, negotiation or inquiry and the
identify of the party making any Acquisition
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Proposal or inquiry or engaging in such discussion or negotiation. The Company
will promptly provide to Parent any non-public information concerning the
Company provided to any other party which was not previously provided to Parent.
The Company agrees not to release any third party from, or waive any provisions
of, any confidentiality or standstill agreement to which the Company is a party.
Notwithstanding anything to the contrary contained in this Agreement, except in
connection with the valid termination of this Agreement pursuant to Section
7.1(c)(i) hereof, neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw, or modify or change in a manner adverse to
Parent or the Purchaser, or propose to withdraw, or propose to modify or change
in a manner adverse to Parent or the Purchaser, the approval or recommendation
by such Board of Directors or any such committee of the Offer, this Agreement or
the Merger, (ii) approve or recommend or propose to approve or recommend, any
Acquisition Proposal or (iii) enter into any agreement with respect to any
Acquisition Proposal.
Section 5.8 Brokers or Finders. The Company represents, as to itself,
its Subsidiaries and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any brokers'
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement except Xxxxxx Xxxxxxx & Co.,
Inc., whose fees and expenses will be paid by the Company in accordance with the
Company's agreements with such firm (a copy of which has been delivered by the
Company to Parent prior to the date of this Agreement), and each of Parent and
the Company agrees to indemnify and hold the other harmless from and against any
and all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or its affiliates.
Section 5.9 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove
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any injunctions or other impediments or delays, legal or otherwise, to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement. Parent and the Purchaser agree to use best efforts to enter
into the Financing pursuant to the Commitment Letter and on terms substantially
similar to those contained in either of the Proposed Bridge Arrangements and
to obtain the funding thereunder to the extent necessary to fund the Offer and
the Merger. Parent and the Purchaser also agree to use their best efforts to
maintain the ability to accept proposed bridge arrangements on terms
substantially similar to those contained in either of the Proposed Bridge
Arrangements. The Company agrees to cooperate with Parent and the Purchaser with
respect to consummating such financing. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of the Company and Parent
shall use all reasonable efforts to take, or cause to be taken, all such
necessary actions.
Section 5.10 Reserved.
Section 5.11 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release acceptable to Parent
and the Company. Thereafter, so long as this Agreement is in effect, neither the
Company, Parent nor any of their respective affiliates shall issue or cause the
publication of any press release or other announcement with respect to the
Merger, this Agreement or the other transactions contemplated hereby without the
prior consultation of the other party, except as may be required by law or by
any listing agreement with a national securities exchange.
Section 5.12 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Parent shall give prompt notice to the Company, of
(i) the occurrence, or non-occurrence of any event the occurrence, or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time and (ii) any material failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be
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complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.12 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section 5.13 Directors' and Officers' Indemnification. For six years
after the Effective Time, Parent shall, or shall cause the Surviving Corporation
to, indemnify, defend and hold harmless the present and former officers,
directors, employees and agents of the Company and its Subsidiaries (each an
"Indemnified Party") against all losses, claims, damages, liabilities, fees and
expenses (including reasonable fees and disbursements of counsel and judgments,
fines, losses, claims, liabilities and amounts paid in settlement (provided that
any such settlement is effected with the written consent of the Parent or the
Surviving Corporation)) in connection with any claim, suit, action, proceeding
or investigation that is, in whole or in part, based on or arising out of the
fact that such person is or was a director, officer, employee or agent of the
Company or its Subsidiaries and arising out of actions or omissions occurring at
or prior to the Effective Time, to the fullest extent permitted under Texas law.
Section 5.14 Disposition of Litigation. Each party agrees to cause a
dismissal with prejudice immediately prior to the Appointment Date of Midland
Acquisition Corp. x. Xxxxxx Production Services, Inc. et al., Civil Action No.
(W.D. Tex. Midland/Odessa), including any and all counterclaims asserted
therein, with each party bearing its own costs and expenses in connection
therewith. The Company agrees that it will not settle any litigation currently
pending, or commenced after the date hereof, against the Company or any of its
directors by any shareholder of the Company relating to the Offer or this
Agreement, without the prior written consent of Parent.
Section 5.15 Consulting Agreements. The Company shall use its best
efforts to cause Xx. Xxxxxxx X. Xxxxxx, Xx. Xxxxxx X. Xxxxxxx and Xx. Xxxxx X.
Xxxxxxxxxx to enter into consulting agreements with Parent and the Purchaser on
the terms set forth in the term sheets executed by Messrs. Little, Xxxxxxx and
Byerlotzer on the date hereof.
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ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions:
(a) Shareholder Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the holders of Company
Common Stock, if required by applicable law and the Restated Articles of
Incorporation, in order to consummate the Merger;
(b) Statutes; Consents. No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any foreign or domestic
government or any governmental agency or authority of competent jurisdiction
which prohibits the consummation of the Merger and all foreign or domestic
governmental consents, orders and approvals required for the consummation of the
Merger and the transactions contemplated hereby shall have been obtained and
shall be in effect at the Effective Time;
(c) Injunctions. There shall be no order or injunction of a
foreign or United States federal or state court or other governmental authority
of competent jurisdiction in effect precluding, restraining, enjoining or
prohibiting consummation of the Merger; and
(d) Purchase of Shares in Offer. Parent, the Purchaser or their
affiliates shall have purchased shares of Company Common Stock pursuant to the
Offer.
ARTICLE VII
TERMINATION
Section 7.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
herein may
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be abandoned at any time prior to the Effective Time, whether before
or after shareholder approval thereof:
(a) By the mutual consent of the Board of Directors of
Parent and the Board of Directors of the Company.
(b) By either of the Board of Directors of the Company or the
Board of Directors of Parent:
(i) if shares of Company Common Stock shall not have been
purchased pursuant to the Offer on or prior to [December 31, 1998];
provided, however, that the right to terminate this Agreement under
this Section 7.1(b)(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Purchaser to purchase
shares of Company Common Stock pursuant to the Offer on or prior to
such date; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use their reasonable
efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement
and such order, decree, ruling or other action shall have become final
and non-appealable.
(c) By the Board of Directors of the Company:
(i) if, prior to the purchase of shares of Company Common
Stock pursuant to the Offer, the Board of Directors of the Company
shall have withdrawn, or modified or changed in a manner adverse to
Parent or the Purchaser its approval or recommendation of the Offer,
this Agreement or the Merger in order to approve and permit the
Company to execute a definitive agreement providing for a Superior
Proposal; provided that (A) at least five (5) business days prior to
terminating this Agreement pursuant to this Section 7.1(c)(i) the
Company has provided Parent with written notice advising Parent that
the Board of Directors of the
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49
Company has received a Superior Proposal that it intends to accept,
specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal, and (B) the
Company shall have caused its financial and legal advisors to
negotiate in good faith with Parent to make such adjustments in the
terms and conditions of this Agreement as would enable the Company to
proceed with the transactions contemplated herein on such adjusted
terms; and further provided that simultaneously with any termination
of this Agreement pursuant to this Section 7.1(c)(i), the Company
shall pay to Parent the Termination Fee (as defined in Section 8.1(b)
hereof); and further provided that the Company may not terminate this
Agreement pursuant to this Section 7.1(c)(i) if the Company is in
material breach of this Agreement; or
(ii) if, prior to the purchase of shares of Company Common Stock
pursuant to the Offer, Parent or the Purchaser breaches or fails in
any material respect to perform or comply with any of its material
covenants and agreements contained herein or breaches its
representations and warranties in any material respect; or
(iii) if Parent or the Purchaser shall have terminated the Offer,
or the Offer shall have expired, without Parent or the Purchaser, as
the case may be, purchasing any shares of Company Common Stock
pursuant thereto; provided that the Company may not terminate this
Agreement pursuant to this Section 7.1(c)(iii) if the Company is in
material breach of this Agreement; or
(iv) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of
the conditions set forth in Annex A hereto, Parent, the Purchaser or
any of their affiliates shall have failed to commence the Offer on or
prior to five business days following the date of the initial public
announcement of the Offer; provided, that the Company may not
terminate this Agreement pursuant to this Section 7.1(c)(iv) if the
Company is in material breach of this Agreement.
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50
(d) By the Board of Directors of Parent:
(i) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of
the conditions set forth in Annex A hereto, Parent, the Purchaser, or
any of their affiliates shall have failed to commence the Offer on or
prior to five business days following the date of the initial public
announcement of the Offer; provided that Parent may not terminate this
Agreement pursuant to this Section 7.1(d)(i) if Parent or the
Purchaser is in material breach of this Agreement; or
(ii) if prior to the purchase of shares of Company Common Stock
pursuant to the Offer, the Board of Directors of the Company shall
have withdrawn, or modified or changed in a manner adverse to Parent
or the Purchaser its approval or recommendation of the Offer, this
Agreement or the Merger or shall have recommended an Acquisition
Proposal or offer, or shall have executed an agreement in principle
(or similar agreement) or definitive agreement providing for a tender
offer or exchange offer for any shares of capital stock of the
Company, or a merger, consolidation or other business combination with
a person or entity other than Parent, the Purchaser or their
affiliates (or the Board of Directors of the Company resolves to do
any of the foregoing); provided that Parent may not terminate this
Agreement pursuant to this Section 7.1(d)(ii) if Parent or the
Purchaser is in material breach of this Agreement; or
(iii) if Parent or the Purchaser, as the case may be, shall have
terminated the Offer, or the Offer shall have expired without Parent
or the Purchaser, as the case may be, purchasing any shares of Company
Common Stock thereunder, provided that Parent may not terminate this
Agreement pursuant to this Section 7.1(d)(iii) if it or the Purchaser
has failed to purchase shares of Company Common Stock in the Offer in
violation of the material terms thereof or hereof.
Section 7.2 Effect of Termination. In the event of the termination of
this Agreement as provided in
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Section 7.1 hereof, written notice thereof shall forthwith be given to the other
party or parties specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become null and void,
and there shall be no liability on the part of the Parent, the Purchaser or the
Company except (A) for fraud or for intentional material breach of this
Agreement and (B) as set forth in this Section 7.2 and Section 8.1.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as contemplated by this
Agreement, including Sections 8.1(b), 8.1(c) and 8.1(d) hereof, all costs and
expenses incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
(b) If (w) the Board of Directors of the Company shall terminate
this Agreement pursuant to Section 7.1(c)(i) hereof, (x) the Board of Directors
of Parent shall terminate this Agreement pursuant to Section 7.1(d)(ii) hereof,
(y) the Board of Directors of the Company shall terminate this Agreement
pursuant to Section 7.1(b)(i) or Section 7.1 (c)(iii) or the Board of Directors
of Parent shall terminate this Agreement pursuant to Section 7.1(b)(i) or
Section 7.1(d)(iii) and prior thereto there shall have been publicly announced
another Acquisition Proposal or (z) the Board of Directors of Parent shall
terminate this Agreement pursuant to Section 7.1(d)(i) or Section 7.1(d)(iii)
hereof, in each case due to a material breach of this Agreement by the Company,
then in any such case as described in clause (w), (x), (y) or (z) (each such
case of termination being referred to as a "Trigger Event"), the Company shall
pay to Parent (not later than one business day after such termination of this
Agreement or, in the case of any termination by the Company pursuant to Section
7.1(c)(i) hereof, simultaneously with such termination) an amount equal to $10
million (the "Termination Fee").
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52
(c) Upon the termination of this Agreement due to the occurrence
of a Trigger Event, the Company agrees that, in addition to the payment of the
Termination Fee provided for in Section 8.1(b) hereof, it shall promptly
reimburse Parent for all actual, documented and reasonable out-of-pocket
expenses incurred, or to be incurred by Parent, the Purchaser and their
affiliates (including the fees and expenses of legal counsel, accountants,
financial advisors, other consultants, financial printers and financing sources)
("Expenses") in connection with the Offer, the Merger and the consummation of
the transactions contemplated by this Agreement, in an amount not to exceed $5
million in the aggregate.
(d) If the Company shall terminate this Agreement pursuant to
Section 7.1(c)(ii) hereof, and the Company is not in material breach of this
Agreement at the time of such termination, or if the Purchaser fails to fund the
purchase of Shares pursuant to the Offer as a result of its failure to secure
the Financing pursuant to the Commitment Letter and/or the Proposed Bridge
Arrangements, or otherwise secure the Financing, Parent shall pay to the Company
(not later than one business day after such termination) an amount equal to the
Termination Fee, together with an amount not to exceed $5 million as
reimbursement to the Company for its actual, documented and reasonable
out-of-pocket Expenses.
Section 8.2 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the shareholders of the Company
contemplated hereby, by written agreement of the parties hereto, by action taken
by their respective Boards of Directors (which in the case of the Company shall
include approvals as contemplated in Section 1.3(b) hereof), at any time prior
to the Closing Date with respect to any of the terms contained herein; provided,
however, that after the approval of this Agreement by the shareholders of the
Company, no such amendment, modification or supplement shall reduce or change
the Merger Consideration.
Section 8.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other
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document delivered pursuant to this Agreement shall survive the
Effective Time.
Section 8.4 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
Key Energy Group, Inc.
Xxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxx, Esq.
C. Xxxxx Xxxxxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx
& Xxxx LLP
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
and
(b) if to the Company, to:
Xxxxxx Production Services, Inc.
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxx, XX, Esq.
Xxxxx & Xxxxx, L.L.P.
One Shell Plaza
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910 Louisiana
Xxxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
53
55
and:
X. Xxxxxxx Xxxx, Esq.
Jenkens & Xxxxxxxxx
2200 One American Center
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Section 8.5 Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement", "the date hereof", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to August 11, 1998. As used in this
Agreement, the term "affiliate(s)" shall have the meaning set forth in Rule
l2b-2 of the Exchange Act.
Section 8.6 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement and the Confidentiality Agreement (including the
documents and the instruments referred to herein and therein): (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Sections 5.6 and 5.13 hereof are not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
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Section 8.8 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 8.9 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas without giving
effect to the principles of conflicts of law thereof.
Section 8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
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IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
KEY ENERGY GROUP, INC.
By:
------------------------
Name:
Title:
MIDLAND ACQUISITION CORP.
By:
------------------------
Name:
Title:
XXXXXX PRODUCTION SERVICES, INC.
By:
------------------------
Name:
Title:
56
58
ANNEX A
CONDITIONS TO THE TENDER OFFER
Notwithstanding any other provisions of the Offer, and in addition to
(and not in limitation of) the Purchaser's rights to extend and amend the Offer
at any time in its sole discretion (subject to the provisions of the Merger
Agreement), the Purchaser shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay
for or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate the Offer as to any Shares not then paid for, if (i) any applicable
waiting period under the HSR Act has not expired or terminated, (ii) the Minimum
Condition has not been satisfied, (iii) the Rights Agreement shall not have been
amended in a manner which renders the Rights inoperative with respect to any
acquisition of Shares by Parent or the Purchaser, (iv) Purchaser has not
received funds under the Commitment Letter to enable the Purchaser to purchase
all Shares outstanding pursuant to the Offer and the Merger or has not obtained
a definitive financing commitment on terms substantially similar to those
contained in either of the Proposed Bridge Arrangements or (v) at any time on or
after August 11, 1998 and before the time of payment for any such Shares, any of
the following events shall occur or shall be determined by the Purchaser to have
occurred:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or applicable to the Offer or the Merger by any domestic or
foreign federal or state governmental regulatory or administrative agency or
authority or court or legislative body or commission which directly or
indirectly (l) prohibits, or imposes any material limitations on, Parent's or
the Purchaser's ownership or operation (or that of any of their respective
Subsidiaries or affiliates) of all or a material portion of their or the
Company's businesses or assets, or compels Parent or the Purchaser or their
respective Subsidiaries and affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or Parent and their
respective Subsidiaries, in each case taken
A-1
59
as a whole, (2) prohibits, or makes illegal the acceptance for payment, payment
for or purchase of Shares or the consummation of the Offer or the Merger, (3)
results in the delay in or restricts the ability of the Purchaser, or renders
the Purchaser unable, to accept for payment, pay for or purchase some or all of
the Shares, (4) imposes material limitations on the ability of the Purchaser or
Parent effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by it on
all matters properly presented to the Company's shareholders, or (5) otherwise
materially adversely affects the consolidated financial condition, businesses or
results of operations of the Company and its Subsidiaries, taken as a whole;
(b) there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange for a period in excess of three hours (excluding suspensions or
limitations resulting solely from physical damage or interference with such
exchanges not related to market conditions), (2) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (3) a commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States, (4) any limitation (whether or not mandatory) by
any foreign or United States governmental authority on the extension of credit
by banks or other financial institutions, (5) any decline in either the Dow
Xxxxx Industrial Average or the Standard & Poor's Index of 500 Industrial
Companies by an amount in excess of 20% measured from the close of business on
August 11, 1998 or (6) in the case of any of the foregoing existing at the time
of the commencement of the Offer, a material acceleration or worsening thereof;
(c) the representations and warranties of the Company set forth
in the Merger Agreement shall not be true and correct as of the date of
consummation of the Offer as though made on or as of such date, and the failure
to be true and correct has or is reasonably likely to have a material adverse
effect on the Company, except (i) for changes specifically permitted by the
Merger Agreement and (ii) those representations and warranties that address
matters only as of a particular date are true and correct as of such date, or
the Company shall have breached or failed in any material respect to perform or
comply with any obligation, agreement
A-2
60
or covenant required by the Merger Agreement to be performed or complied with by
it and such failure shall have or be reasonably likely to have a material
adverse effect on the Company;
(d) the Merger Agreement shall have been terminated in accordance
with its terms;
(e) (i) it shall have been publicly disclosed or Parent or the
Purchaser shall have otherwise learned that any person, entity or "group" (as
defined in Section 13(d)(3) of the Exchange Act), other than Parent or its
affiliates or any group of which any of them is a member, shall have acquired
beneficial ownership (determined pursuant to Rule 13d-3 promulgated under the
Exchange Act) of more than 14.9% of any class or series of capital stock of the
Company (including the Shares), through the acquisition of stock, the formation
of a group or otherwise, or shall have been granted an option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 14.9% of
any class or series of capital stock of the Company (including the Shares); or
(ii) any person or group shall have entered into a definitive agreement or
agreement in principle with the Company with respect to a merger, consolidation
or other business combination with the Company; or
(f) the Company's Board of Directors shall have withdrawn, or
modified or changed in a manner adverse to Parent or the Purchaser (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger
Agreement, or the Merger, or recommended another proposal or offer, or shall
have resolved to do any of the foregoing;
which in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser giving rise to such condition) makes it inadvisable to proceed
with the Offer or with such acceptance for payment or payments.
The foregoing conditions are for the sole benefit of the Purchaser and
Parent and may be waived by Parent or the Purchaser, in whole or in part at any
time and from time to time in the sole discretion of Parent or the Purchaser.
The failure by Parent or the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
A-3
61
Index of Defined Terms
Defined Term Section No.
------------ -----------
Acquisition Proposal ........................................................... 5.7
Appointment Date................................................................ 5.1
Articles of Merger.............................................................. 1.5(a)
Benefit Plans................................................................... 3.9(a)
Certificate of Merger........................................................... 1.5
Certificates.................................................................... 2.2(b)
Closing......................................................................... 1.6
Closing Date.................................................................... 1.6
Code............................................................................ 3.9(b)
Commitment Letter............................................................... 4.5
Company......................................................................... Recitals
Company Common Stock............................................................ 1.1(a)
Company SEC Documents........................................................... 3.5
Director Options................................................................ 2.4(a)
Dissenting Shares............................................................... 2.3
Effective Time.................................................................. 1.5
Employee Option................................................................. 2.4(a)
Environmental Claim............................................................. 3.12(b)(i)
Environmental Laws.............................................................. 3.12(b)(ii)
Environmental Permits........................................................... 3.12(a)(ii)
Equipment....................................................................... 3.19
ERISA........................................................................... 3.9(a)
ERISA Affiliate................................................................. 3.9(a)
Exchange Act.................................................................... 1.1(a)
Financing....................................................................... 4.5
GAAP............................................................................ 3.5
Governmental Entity............................................................. 3.4
Hazardous Materials............................................................. 3.12(b)(iii)
HSR Act......................................................................... 3.4
Indemnified Party............................................................... 5.13
Intellectual Property........................................................... 3.21
Material Agreements............................................................. 3.4
Merger.......................................................................... 1.4(a)
Merger Consideration............................................................ 2.1(c)
Minimum Condition............................................................... 1.1(a)
1998 Financial Statements....................................................... 3.5
1998 Form 10-K.................................................................. 3.5
NJBCA........................................................................... 1.4(a)
NLRB............................................................................ 3.14
Offer........................................................................... 1.1(a)
Offer Documents................................................................. 1.1(b)
Offer Price..................................................................... 1.1(a)
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Defined Term Section No.
------------ -----------
Offer to Purchase............................................................... 1.1(a)
Option Plan..................................................................... 2.4(a)
Options......................................................................... 2.4(a)
Parent.......................................................................... Recitals
Paying Agent.................................................................... 2.2(a)
PCBs............................................................................ 3.12(b)(iii)
PNC............................................................................. 4.5
Preferred Stock................................................................. 3.2(a)
Proposed Bridge Arrangements.................................................... 4.5
Proxy Statement................................................................. 1.8(a)(ii)
Purchaser....................................................................... Recitals
Purchaser Common Stock.......................................................... 2.1
Release......................................................................... 3.12(b)(iv)
Rights.......................................................................... 1.1(a)
Rights Agreement................................................................ 1.1(a)
Rights Amendment................................................................ 1.2(d)
Schedule 14D-1.................................................................. 1.1(b)
Schedule 14D-9.................................................................. 1.2(b)
SEC............................................................................. 1.1(b)
Securities Act.................................................................. 3.5
Senior Notes.................................................................... 3.4
Series A Preferred Stock........................................................ 3.2(a)
Service......................................................................... 3.9(h)
Shares.......................................................................... 1.1(a)
Special Meeting................................................................. 1.8(a)(i)
Subsidiary...................................................................... 3.1
Superior Proposal............................................................... 5.7
Surviving Corporation........................................................... 1.4(a)
Taxes........................................................................... 3.13(j)
Tax Return...................................................................... 3.13(j)
TBCA............................................................................ 1.2(a)
Termination Fee................................................................. 8.1(b)
Transactions.................................................................... 1.2(a)
Trigger Event................................................................... 8.1(b)
Voting Debt..................................................................... 3.2(a)
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63
ARTICLE I THE OFFER AND MERGER..............................................................1
Section 1.1 The Offer.........................................................................1
Section 1.2 Company Actions...................................................................3
Section 1.3 Directors.........................................................................6
Section 1.4 The Merger........................................................................7
Section 1.5 Effective Time....................................................................8
Section 1.6 Closing...........................................................................9
Section 1.7 Directors and Officers of the Surviving Corporation...............................9
Section 1.8 Shareholders' Meeting.............................................................9
Section 1.9 Merger Without Meeting of Shareholders...........................................10
ARTICLE II CONVERSION OF SECURITIES.........................................................11
Section 2.1 Conversion of Capital Stock......................................................11
Section 2.2 Exchange of Certificates.........................................................12
Section 2.3 Dissenting Shares................................................................13
Section 2.4 Company Option Plans.............................................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................15
Section 3.1 Organization.....................................................................15
Section 3.2 Capitalization...................................................................16
Section 3.3 Authorization; Validity of Agreement; Company Action.............................17
Section 3.4 Consents and Approvals; No Violations............................................18
Section 3.5 SEC Reports and Financial Statements.............................................19
Section 3.6 Absence of Certain Changes or Events.............................................20
Section 3.7 No Undisclosed Liabilities.......................................................21
Section 3.8 Information in Proxy Statement...................................................21
Section 3.9 Employee Benefit Plans; ERISA....................................................22
Section 3.10 Litigation.......................................................................24
Section 3.11 Conduct of Business..............................................................24
Section 3.12 Environmental Protection.........................................................24
Section 3.13 Taxes............................................................................28
Section 3.14 Labor Relations..................................................................30
Section 3.15 Compliance with Laws.............................................................31
Section 3.16 Insurance........................................................................31
Section 3.17 Contracts........................................................................31
Section 3.18 Property.........................................................................31
Section 3.19 Equipment........................................................................32
Section 3.20 Permits..........................................................................32
Section 3.21 Intellectual Property............................................................32
Section 3.22 Opinion of Financial Advisor.....................................................33
Section 3.23 Vote Required....................................................................33
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER.......................33
Section 4.1 Organization.....................................................................33
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Page
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Section 4.2 Authorization; Validity of Agreement; Necessary Action...........................34
Section 4.3 Consents and Approvals; No Violations............................................34
Section 4.4 Information in Proxy Statement...................................................35
Section 4.5 Financing........................................................................35
Section 4.6 Purchaser's Operations...........................................................36
ARTICLE V COVENANTS........................................................................36
Section 5.1 Interim Operations of the Company................................................36
Section 5.2 Rights Agreement.................................................................39
Section 5.3 HSR Act..........................................................................39
Section 5.4 Access to Information............................................................40
Section 5.5 Consents and Approvals...........................................................40
Section 5.6 Employee Benefits................................................................41
Section 5.7 No Solicitation..................................................................41
Section 5.8 Brokers or Finders...............................................................43
Section 5.9 Additional Agreements............................................................43
Section 5.10 Reserved.........................................................................44
Section 5.11 Publicity........................................................................44
Section 5.12 Notification of Certain Matters..................................................44
Section 5.13 Directors' and Officers' Indemnification........................................44
Section 5.14 Disposition of Litigation. .....................................................45
Section 5.15 Consulting Agreements. .........................................................45
ARTICLE VI CONDITIONS.......................................................................46
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger.......................46
ARTICLE VII TERMINATION......................................................................46
Section 7.1 Termination......................................................................46
Section 7.2 Effect of Termination............................................................49
ARTICLE VIII MISCELLANEOUS....................................................................50
Section 8.1 Fees and Expenses................................................................50
Section 8.2 Amendment and Modification.......................................................51
Section 8.3 Nonsurvival of Representations and Warranties....................................51
Section 8.4 Notices..........................................................................51
Section 8.5 Interpretation...................................................................53
Section 8.6 Counterparts.....................................................................53
Section 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership..............53
Section 8.8 Severability.....................................................................54
Section 8.9 Governing Law....................................................................54
Section 8.10 Assignment.......................................................................54
CONDITIONS TO THE TENDER OFFER................................................................Annex A
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