EXHIBIT 10.37
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
PAGE
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 3.10Litigation................................................24
Section 3.11Conduct of Business.......................................24
Section 3.12Environmental Protection..................................24
Section 3.13Taxes.....................................................28
Section 3.14Labor Relations...........................................30
Section 3.15Compliance with Laws......................................31
Section 3.16Insurance.................................................31
Section 3.17Contracts.................................................31
Section 3.18Property..................................................31
Section 3.19Equipment.................................................32
Section 3.20Permits...................................................32
Section 3.21Intellectual Property.....................................32
Section 3.22Opinion of Financial Advisor..............................33
Section 3.23Vote Required.............................................33
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
THE PURCHASER.............................................33
Section 4.1 Organization..............................................33
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PAGE
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 5.10Reserved..................................................44
Section 5.11Publicity.................................................44
Section 5.12Notification of Certain Matters...........................44
Section 5.13Directors' and Officers' Indemnification.................44
Section 5.14Disposition of Litigation. ..............................45
Section 5.15Consulting 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 VIIIMISCELLANEOUS.............................................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 8.10Assignment................................................54
CONDITIONS TO THE TENDER OFFER...................................Annex A
ii
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)
ii
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 "Com pany").
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 Compa ny by Parent
upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the forego ing 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
14d-2 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
out standing 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 Septem ber 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
1
by Parent or the Purchaser, represents at least a major ity 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 Agree ment, 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 re spect to insignificant changes
or amendments) without the written consent of the Company (such consent to be
autho rized 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 Com mission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer (together with all amend ments 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 (collec tively, together with any amendments and
supplements thereto, the "Offer Documents"). The Offer Documents will comply in
all material respects with the provisions
2
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 neces sary in order to make the statements
therein, in light of the circumstances under which they were made, not mis
leading, 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 Docu ments. 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 hold ers 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
informa tion provided by it for use in the Offer Documents if and to the extent
that it shall have become false and mis leading 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 Purchas er agree to provide the Company and its counsel
in writ ing 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, sub ject to the terms and conditions set forth herein, unani mously (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
3
their Shares thereunder to the Purchaser and approve and adopt this Agreement
and the Merger. The Company repre sents that the actions set forth in this
Section 1.2(a) and all other actions it has taken in connection there with 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 Solici tation/Recommendation Statement on
Schedule 14D-9 (to gether 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 sup plied 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 dissemi nated
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
opportu nity 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
4
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 Docu ments, 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 preced ing sentence, will use such
information only in connec tion with the Offer, and, if this Agreement is
terminat ed, will upon request of the Company deliver or cause to be delivered
to the Company all copies of such informa tion 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
Amend ment 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 exercisable
5
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 subsidiar ies which represents at least a majority of
the outstand ing 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 in crease 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 Com pany'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 de fined 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
6
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, offi cers, 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 exten sion 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 alterna tively 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 some times
hereinafter referred to as the "Surviving Corpora tion." 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 Incorpora tion 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 Effec tive 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 executed and filed on
the date of the Closing (or on such
7
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, respec tively, of the
Surviving Corporation until their succes sors shall have been duly elected or
appointed or quali fied or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
By-laws.
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 Agree ment;
(ii) prepare and file with the SEC a pre liminary proxy or
information statement relating to
8
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 con sultation with
Parent, to respond promptly to any comments made by the SEC with respect
to the prelim inary 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 obliga tions of the Board under
applicable law as advised by independent counsel, include in the Proxy
State ment the recommendation of the Board that sharehold ers 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 affil iates 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 practica ble after such acquisition, without a
meeting of share holders of the Company, in accordance with Article 5.16 of the
TBCA and Section 14A:10-5.1 of the NJBCA.
9
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 CONVERSION OF CAPITAL STOCK. As of the Effective Time,
by virtue of the Merger and with out 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 nonas sessable share of common stock of the Surviving Corpora tion.
(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 de fined 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 Consider ation"), 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 cancel led
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.
10
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 rea sonably practicable
after the Effective Time, the Paying Agent shall mail to each holder of record
of a certifi cate or certificates, which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"),
whose shares were con verted pursuant to Section 2.1 hereof into the right to
receive the Merger Consideration (i) a letter of trans mittal (which shall
specify that delivery shall be ef fected, 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 Certifi cate 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
pay ment 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 Surviv ing Corporation that such tax either has been paid or
is not applicable. Until surrendered as contemplated by
11
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 contem plated 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 re cords 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 Surviv ing 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 Consid eration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 2.3 DISSENTING SHARES. Notwithstand ing 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
withdraws or otherwise loses his or
12
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 ap praisal, 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 inter est 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 pay ment 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
provi sions in any other plan, program or arrangement providing for the issuance
or grant of any other interest in re spect of the capital stock of the Company
or any of its
13
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, pro grams or arrangements shall have any
right thereunder to acquire any equity securities of the Company, the Surviv ing
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 incor poration or
organization and has all requisite corporate or other power and authority and
all necessary governmen tal 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 unincorporat ed, of which (i) such party
or any other Subsidiary of such party is a general partner (excluding such
partner ships where such party or any Subsidiary of such party do not have a
majority of the voting interest in such part nership) 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 indi rectly 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 any entity
(or group of entities taken as a whole) means
14
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 quali fied 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 autho rized 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 pre ferred 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 out standing 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 contem plated by this Agreement, as of the date
hereof, (i) there are no shares of capital stock of the Company authorized,
issued or outstanding and (ii) there are no
15
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 Sub sidiaries 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 convert ible 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 contem plated by this Agreement,
there are no outstanding con tractual obligations of the Company or any of its
Subsid iaries to repurchase, redeem or otherwise acquire any Shares, or the
capital stock of the Company or any Sub sidiary 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 beneficial ly 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 Subsid iaries 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, respec tively, as a
result of the transactions contemplated by this Agreement.
Section 3.3 AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY ACTION.
(a) The Company has full
16
corporate power and authority to execute and deliver this Agreement and, subject
to obtaining the necessary approv al of its shareholders, to consummate the
transactions contemplated hereby. The execution, delivery and perfor xxxxx by
the Company of this Agreement, and the consumma tion 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
autho rize 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 exe cuted 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 equita ble
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 combi nations
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 any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the articles of
17
incorporation or by-laws or similar organizational docu ments of the Company or
of any of its Subsidiaries, (ii) require any filing with, or permit,
authorization, con sent or approval of, any court, arbitral tribunal, admin
istrative agency or commission or other governmental or other regulatory
authority or agency (a "Governmental Entity"), except where the failure to
obtain such per mits, 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 revolv ing 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 termina tion, 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 regula tion 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 aggre gate, 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 consum mate 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, collec tively, the "Company SEC
Documents"). As of their re spective dates or, if amended, as of the date of the
last such amendment, the Company SEC Documents, including,
18
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 circumstanc es 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 regula tions 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 re spects 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 state ments, 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 Compa ny 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 dis closed 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, individ ually or in the aggregate, a material adverse
effect on the Company and its Subsidiaries, taken as a whole; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or proper ty) with respect to the equity interests of
the Company
19
or of any of its Subsidiaries; (iii) any change by the Company or any of its
Subsidiaries in accounting princi ples 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 (in cluding, without limitation, the granting of stock op
tions, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other em ployee 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 reason ably 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 bal ance 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 supple ment thereto) will, at the date mailed to
Company share holders and at the time of the meeting of Company share holders 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 information supplied by Parent or the Purchaser in writ ing for
inclusion in the Proxy Statement. The Proxy Statement will comply in all
material respects with the
20
provisions of the Exchange Act and the rules and regula
tions 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 bene fit plans,
arrangements, contracts or agreements (includ ing 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 busi ness, 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 amend ed, 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, threat ened 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
Company; and (vi) all contributions due as of the date hereof (including any
extensions for such contributions) have been made in full.
21
(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 cur rent 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 indi vidual (other than as disclosed in
writing).
(f) The maximum amount that could be pay able 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.
(h) Except for certain agreements dis closed to Parent on
Schedule 3.9, neither the Company nor its Subsidiaries is a party to any
agreement, contract or
22
arrangement that could result, separately or in the aggregate, in the payment of
any "excess parachute pay ments" 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 investiga tion 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 Agree ment.
Section 3.11 CONDUCT OF BUSINESS. The busi ness 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 docu ments, (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 autho rization 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 investiga tion 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, threat ened, 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.
Section 3.12 ENVIRONMENTAL PROTECTION.
23
(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 Envi ronmental 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 Subsidiar ies, 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 Subsidiar ies, taken as a whole.
(ii) (A) The Company and each of its
Subsidiaries have obtained or have applied for all envi ronmental, health and
safety permits and governmental authorizations (collectively, the "Environmental
Per mits") 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 Subsidiar ies,
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 Environ mental 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, individually or in the aggre gate, 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
24
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 lia bility
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 knowl edge of the Company, against any formerly owned, leased or managed, in
whole or in part, real or personal prop erty or operations of the Company or any
of its Subsid iaries.
(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 re
tained or assumed either contractually or by operation of law except for any
Environmental Claim which, individu ally 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, 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
25
would be reasonably likely to form the basis of any Environmental Claim which,
individually or in the aggre gate, 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
noncom pliance 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 enforce ment,
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, indemnifica tion, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials or the presence of or exposure to any electro
magnetic fields.
(ii) "Environmental Laws" means all
federal, state and local laws, rules, regulations, or ders, decrees, judgments
or binding agreements issued, promulgated or entered into by or with any
Governmental Entity, relating to pollution, the environment (includ ing, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) or protection of human health as it relates to the environ ment
including, without limitation, laws and regulations relating to noise levels,
Releases or threatened Releases of Hazardous Materials, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
26
(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
transform ers 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 sub
stances," "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 Subsid iaries have (i) duly
filed (or there has been filed on their behalf or appropriate extensions have
been ob tained) 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 hereinaf ter
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 Subsid iary thereof, except for liens for Taxes not
yet due and liens for Taxes the assessment of which is being contest ed in good
faith.
27
(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 Sub sidiaries 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 pro ceedings 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 pro ceeding 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 the Company or any of
its Subsidiaries with respect to any Taxes is currently in force.
28
(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 securi
ty, 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 govern ment or any subdivision
or taxing agency thereof (includ ing 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 "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
29
petition pending before the NLRB and no question concern ing representation
exists with respect to the employees of the Company or any of its Subsidiaries.
Section 3.15 COMPLIANCE WITH LAWS. The Compa ny 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
anti trust 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 here of, 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 custom ary 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 Subsidiar ies, 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 respec tive 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.
30
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 con duct 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 termi nation of any such permit, license, franchise or authori
zation, 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 individu ally 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 Subsidiar ies and used in their
respective operations as currently conducted (collectively, the "Intellectual
Property"). The Company and each of its Subsidiaries have such owner ship of or
such rights by license, lease or other agree ment to the Intellectual Property
as are necessary to permit them to conduct their respective operations as
31
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
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.
32
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, deliv ery and performance of this Agreement
and the consumma tion of the Merger and of the other transactions contem plated
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 Agree ment 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,
assum ing this Agreement constitutes a valid and binding obli gation 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 proceed
ing 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, (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
33
Subsidiaries, taken as a whole), (iii) result in a xxxxx tion 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 accelera tion) 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 mate
rial 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
Associa tion (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 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
34
Parent after the date hereof. The aggregate proceeds of the Financing, if
obtained, will be in an amount suffi cient to acquire all the Shares in the
Offer and the Merger, to pay all fees and expenses in connection there with 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 ex pressly 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 ordi nary 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 organi zation 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 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;
35
(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 incorpora tion or by-laws or similar organizational documents; (ii)
declare, set aside or pay any dividend or other distribu tion 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, war rants, calls, commitments or rights of any
kind to xx xxxxx, 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 exer cise 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 indebted ness or other liability, other than in the ordinary and usual
course of business and consistent with past prac xxxx; or (v) redeem, purchase
or otherwise acquire di rectly or indirectly more than 5,000 Shares of its capi
tal stock;
(d) neither the Company nor any of its Subsidiaries shall: (i)
grant any increase in the com pensation 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 compen sation,
severance, profit sharing, stock option, stock purchase, insurance, pension,
retirement or other employ ee 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 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 mate rial 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 (wheth er directly, contingently or otherwise) for the obliga
tions 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 borrow ing, capital expenditure or purchase,
sale or lease of assets);
(h) neither the Company nor any of its Subsidiaries shall
change any of the accounting princi ples 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 xxxxx cial 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
36
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, individu ally or in the aggregate,
$500,000 in value, reasonably in advance of their payment). Notwithstanding the
fore going, the Company shall be entitled to pay on a timely basis all
reasonable, documented fees and expenses re lated 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,
restruc turing, recapitalization or other reorganization of the Company or any
of its Subsidiaries (other than the Merg er);
(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
Purchas er, 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.
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 notifica tions 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 De partment of Justice for additional information or
docu mentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attor ney 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,
commit ments 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 Appoint ment 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 re spect 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 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 Compa ny, 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)
37
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 Sub
sidiaries 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 employ ees that
are comparable with those provided by Parent to similarly situated employees of
Parent or any of its Sub sidiaries, taking into account all relevant factors,
including, without limitation, the businesses in which the Surviving Corporation
and its Subsidiaries are en gaged. 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
Com pany) 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 duplica tion 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, em ployees,
representatives and agents, including, but not limited to, investment bankers,
attorneys and accoun tants, not to), directly or indirectly, encourage, so
licit, participate in or initiate discussions or negotia tions with, provide any
information to, or enter into any agreement with, any corporation, partnership,
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
38
Company (an "Acquisition Proposal"). The Company further agrees that it will
immediately cease any existing activ ities, discussions or negotiations with any
parties conducted heretofore with respect to any of the forego ing.
Notwithstanding the foregoing, the Company may, directly or indirectly, provide
access and furnish infor mation 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 relat ing 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 consulta tion 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 immedi ately provide to Parent copies of any written
materials received by the Company in connection with any Acquisi tion Proposal,
discussion, negotiation or inquiry and the identify of the party making any
Acquisition 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 stand still agreement to which
the Company is a party. Not withstanding anything to the contrary contained in
this Agreement, except in connection with the valid termina tion 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 recom mend, 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 affil iates, that no agent, broker, investment
banker, xxxxx cial advisor or other firm or person is or will be enti tled to
any brokers' or finder's fee or any other commis sion 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 agree ments with such firm (a copy of which has
been delivered by the Company to Parent prior to the date of this Agree ment),
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 as serted by any person on
the basis of any act or statement alleged to have been made by such party or its
affili ates.
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 advis able under applicable laws and
regulations, or to remove any injunctions or other impediments or delays, legal
or otherwise, to consummate and make effective the Merger and the other
transactions contemplated by this Agree ment. 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 con tained in either of the Proposed
Bridge Arrangements and
39
to obtain the funding thereunder to the extent necessary to fund the Offer and
the Merger. Parent and the Pur chaser 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 publica tion of any press release or other announcement with
respect to the Merger, this Agreement or the other trans actions contemplated
hereby without the prior consulta tion 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 occur rence, or
non-occurrence of which would cause any repre sentation 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 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,
40
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 dis bursements of counsel and judgments, fines, losses, claims,
liabilities and amounts paid in settlement (pro vided that any such settlement
is effected with the written consent of the Parent or the Surviving Corpora
tion)) in connection with any claim, suit, action, pro ceeding 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 immedi ately prior to the Appointment Date of Midland
Acquisi tion 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.
41
ARTICLE VI
CONDITIONS
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obliga tion 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 juris diction
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 be abandoned at any time prior to the Effective Time,
whether before or after shareholder approval thereof:
42
(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, HOW EVER, 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 pur chase 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 restrain ing, enjoining or otherwise
prohibiting the transac tions 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 with drawn, or modified or changed in a manner adverse to Parent or
the Purchaser its approval or recommenda tion 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 Pro posal; 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 Company
has received a Superior Proposal that it intends to accept, speci fying
the material terms and conditions of such Superior Proposal and
identifying the person making
43
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 simulta neously
with any termination of this Agreement pur suant 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 pursu ant 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, Par ent or the Purchaser breaches or fails in
any mate rial 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 announce ment
of the Offer; provided, that the Company may not terminate this Agreement
pursuant to this Sec tion 7.1(c)(iv) if the Company is in material breach
of this Agreement.
(d) By the Board of Directors of Parent:
44
(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 announce ment
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 with drawn, or modified or changed in a manner adverse to Parent or
the Purchaser its approval or recommenda tion of the Offer, this Agreement
or the Merger or shall have recommended an Acquisition Proposal or offer,
or shall have executed an agreement in prin ciple (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
Pur chaser or their affiliates (or the Board of Direc tors 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 Pur chaser, as the case may be, purchasing any shares of Company
Common Stock thereunder, provided that Par ent 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 Section 7.1 hereof, written notice thereof
shall forth with be given to the other party or parties specifying
45
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 Agree ment 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 con summation 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 Sec tion 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 Sec tion 7.1(b)(i) or Section 7.1 (c)(iii) or the
Board of Directors of Parent shall terminate this Agreement pursu ant 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, simul taneously with such termination) an
amount equal to $10 million (the "Termination Fee").
(c) Upon the termination of this Agree ment due to the
occurrence of a Trigger Event, the Compa ny agrees that, in addition to the
payment of the Termi nation Fee provided for in Section 8.1(b) hereof, it
46
shall promptly reimburse Parent for all actual, docu mented and reasonable
out-of-pocket expenses incurred, or to be incurred by Parent, the Purchaser and
their affili ates (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
consumma tion 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
Arrange ments, 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, wheth er 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, modifica tion 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 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
47
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.
Xxx Xxxxx Xxxxx
000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
48
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 Agree ment", "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.
49
Section 8.8 SEVERABILITY. If any term, provi sion, 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 xxxxxx xxxx
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 Agree ment 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 Subsid iary 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.
50
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:
51
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 Agree ment), 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 terminat ed, (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) Pur chaser 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 simi lar 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 injunc tion promulgated, entered, enforced,
enacted, issued or applicable to the Offer or the Merger by any domestic or
foreign federal or state governmental regulatory or adminis trative 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 Pur chaser'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 Subsid iaries 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
as a whole, (2) prohibits, or makes illegal the acceptance for payment, payment
for or purchase of Shares or the consum mation 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 share holders, 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, secu rities on the New York Stock
Exchange for a period in excess of three hours (excluding suspensions or
limitations result ing solely from physical damage or interference with such
exchanges not related to market conditions), (2) a decla ration 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 indi rectly
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 specif ically 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
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 ac quired
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 (includ ing the Shares), through the acquisition of stock, the forma
tion of a group or otherwise, or shall have been granted an option, right or
warrant, conditional or otherwise, to xx xxxxx 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 Sched ule 14D-9) its recommendation of the Offer, the Merger
Agree ment, 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 exer cise any
of the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an
A-3
ongoing right which may be asserted at any time and from time to time.
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