EXHIBIT J
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AGREEMENT AND PLAN OF MERGER
by and among
KEY ENERGY GROUP, INC.
MIDLAND ACQUISITION CORP.,
and
▇▇▇▇▇▇ PRODUCTION SERVICES, INC.
dated as of
August 11, 1998
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ARTICLE I THE OFFER AND MERGER..............................1
Section 1.1 The Offer.........................................1
Section 1.2 Company Actions...................................3
Section 1.3 Directors.........................................6
Section 1.4 The Merger........................................7
Section 1.5 Effective Time....................................8
Section 1.6 Closing...........................................9
Section 1.7 Directors and Officers of the Surviving
Corporation.......................................9
Section 1.8 Shareholders' Meeting.............................9
Section 1.9 Merger Without Meeting of Shareholders............10
ARTICLE II CONVERSION OF SECURITIES..........................11
Section 2.1 Conversion of Capital Stock.......................11
Section 2.2 Exchange of Certificates..........................12
Section 2.3 Dissenting Shares.................................13
Section 2.4 Company Option Plans..............................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....15
Section 3.1 Organization......................................15
Section 3.2 Capitalization....................................16
Section 3.3 Authorization; Validity of Agreement; Company
Action............................................17
Section 3.4 Consents and Approvals; No Violations.............18
Section 3.5 SEC Reports and Financial Statements..............19
Section 3.6 Absence of Certain Changes or Events..............20
Section 3.7 No Undisclosed Liabilities........................21
Section 3.8 Information in Proxy Statement....................21
Section 3.9 Employee Benefit Plans; ERISA.....................22
Section 3.10 Litigation........................................24
Section 3.11 Conduct of Business...............................24
Section 3.12 Environmental Protection..........................24
Section 3.13 Taxes.............................................28
Section 3.14 Labor Relations...................................30
Section 3.15 Compliance with Laws..............................31
Section 3.16 Insurance.........................................31
Section 3.17 Contracts.........................................31
Section 3.18 Property..........................................31
Section 3.19 Equipment.........................................32
Section 3.20 Permits...........................................32
Section 3.21 Intellectual Property.............................32
Section 3.22 Opinion of Financial Advisor......................33
Section 3.23 Vote Required.....................................33
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
THE PURCHASER.....................................33
Section 4.1 Organization......................................33
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Section 4.2 Authorization; Validity of Agreement;
Necessary Action..................................34
Section 4.3 Consents and Approvals; No Violations.............34
Section 4.4 Information in Proxy Statement....................35
Section 4.5 Financing.........................................35
Section 4.6 Purchaser's Operations............................36
ARTICLE V COVENANTS.........................................36
Section 5.1 Interim Operations of the Company.................36
Section 5.2 Rights Agreement..................................39
Section 5.3 HSR Act...........................................39
Section 5.4 Access to Information.............................40
Section 5.5 Consents and Approvals............................40
Section 5.6 Employee Benefits.................................41
Section 5.7 No Solicitation...................................41
Section 5.8 Brokers or Finders................................43
Section 5.9 Additional Agreements.............................43
Section 5.10 Reserved..........................................44
Section 5.11 Publicity.........................................44
Section 5.12 Notification of Certain Matters...................44
Section 5.13 Directors' and Officers' Indemnification.........44
Section 5.14 Disposition of Litigation. ......................45
Section 5.15 Consulting Agreements. ..........................45
ARTICLE VI CONDITIONS........................................46
Section 6.1 Conditions to Each Party's Obligation To
Effect the Merger.................................46
ARTICLE VII TERMINATION.......................................46
Section 7.1 Termination.......................................46
Section 7.2 Effect of Termination.............................49
ARTICLE VIII MISCELLANEOUS.....................................50
Section 8.1 Fees and Expenses.................................50
Section 8.2 Amendment and Modification........................51
Section 8.3 Nonsurvival of Representations and Warranties.....51
Section 8.4 Notices...........................................51
Section 8.5 Interpretation....................................53
Section 8.6 Counterparts......................................53
Section 8.7 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership...............................53
Section 8.8 Severability......................................54
Section 8.9 Governing Law.....................................54
Section 8.10 Assignment........................................54
CONDITIONS TO THE TENDER OFFER...................................Annex A
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Index of Defined Terms
Defined Term Section No.
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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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Offer to Purchase................................................1.1(a)
Option Plan......................................................2.4(a)
Options..........................................................2.4(a)
Parent...........................................................Recitals
Paying Agent.....................................................2.2(a)
PCBs.............................................................3.12(b)(iii)
PNC..............................................................4.5
Preferred Stock..................................................3.2(a)
Proposed Bridge Arrangements.....................................4.5
Proxy Statement..................................................1.8(a)(ii)
Purchaser........................................................Recitals
Purchaser Common Stock...........................................2.1
Release..........................................................3.12(b)(iv)
Rights...........................................................1.1(a)
Rights Agreement.................................................1.1(a)
Rights Amendment.................................................1.2(d)
Schedule 14D-1...................................................1.1(b)
Schedule 14D-9...................................................1.2(b)
SEC..............................................................1.1(b)
Securities Act...................................................3.5
Senior Notes.....................................................3.4
Series A Preferred Stock.........................................3.2(a)
Service..........................................................3.9(h)
Shares...........................................................1.1(a)
Special Meeting..................................................1.8(a)(i)
Subsidiary.......................................................3.1
Superior Proposal................................................5.7
Surviving Corporation............................................1.4(a)
Taxes............................................................3.13(j)
Tax Return.......................................................3.13(j)
TBCA.............................................................1.2(a)
Termination Fee..................................................8.1(b)
Transactions.....................................................1.2(a)
Trigger Event....................................................8.1(b)
Voting Debt......................................................3.2(a)
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AGREEMENT AND PLAN OF MERGER
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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 ▇▇▇▇▇▇ Production Services,
Inc., a Texas corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, the Purchaser and the
Company have approved, and deem it advisable and in the best interests of
their respective shareholders to consummate, the acquisition of the Company
by Parent upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. (a) As promptly as practicable (but in no
event later than five business days after the public announcement of the
execution hereof), the Purchaser shall commence (within the meaning of Rule
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 outstanding common stock, par value $.01 per share (referred to herein
as either the "Shares" or "Company Common Stock"), of the Company
(including the associated Common Stock Purchase Rights (the "Rights")
issued pursuant to the Rights Agreement between the Company and ▇▇▇▇▇▇
Trust Company of New York, as Rights Agent, dated as of September 11, 1997
(the "Rights Agreement")), at a price of $17.50 per Share, net to the
seller in cash (such price, or such higher price per Share as may be paid
in the Offer, being referred to herein as the "Offer Price"), subject to
there being validly tendered and not withdrawn prior to the expiration of
the Offer, that number of Shares which, together with the Shares
beneficially owned by Parent or the Purchaser, represents at least a
majority of the Shares outstanding on a fully diluted basis (the "Minimum
Condition") and to the other conditions set forth in Annex A hereto. The
Purchaser shall, on the terms and subject to the prior satisfaction or
waiver (except that the Minimum Condition may not be waived) of the
conditions of the Offer, accept for payment and pay for Shares tendered as
soon as it is legally permitted to do so under applicable law. The
obligations of the Purchaser to commence the Offer and to accept for
payment and to pay for any Shares validly tendered on or prior to the
expiration of the Offer and not withdrawn shall be subject only to the
Minimum Condition and the other conditions set forth in Annex A hereto. The
Offer shall be made by means of an offer to purchase (the "Offer to
Purchase") containing the terms set forth in this Agreement, the Minimum
Condition and the other conditions set forth in Annex A hereto. The
Purchaser shall not amend or waive the Minimum Condition and shall not
decrease the Offer Price or decrease the number of Shares sought, or amend
any other condition of the Offer in any manner adverse to the holders of
the Shares (other than with respect to insignificant changes or amendments)
without the written consent of the Company (such consent to be authorized
by the Board of Directors of the Company or a duly authorized committee
thereof), provided, however, that if on the initial scheduled expiration
date of the Offer (as it may be extended), all conditions to the Offer
shall not have been satisfied or waived, the Offer may be extended from the
time to time until December 31, 1998. In addition, the Offer Price may be
increased and the Offer may be extended to the extent required by law in
connection with such increase in each case without the consent of the
Company.
(b) As soon as practicable on the date the Offer is commenced,
Parent and the Purchaser shall file with the United States Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1
with respect to the Offer (together with all amendments and supplements
thereto and including the exhibits thereto, the "Schedule 14D-1"). The
Schedule 14D-1 will include, as exhibits, the Offer to Purchase and a form
of letter of transmittal and summary advertisement (collectively, together
with any amendments and supplements thereto, the "Offer Documents"). The
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Offer Documents 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 Parent
or the Purchaser with respect to information supplied by the Company in
writing for inclusion in the Offer Documents. Each of Parent and the
Purchaser further agrees to take all steps necessary to cause the Offer
Documents to be filed with the SEC and to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. Each of Parent and the Purchaser, on the one hand, and the
Company, on the other hand, agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that it
shall have become false and misleading in any material respect and the
Purchaser further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated
to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. The Company and its counsel shall be
given the opportunity to review the Schedule 14D-1 before it is filed with
the SEC. In addition, Parent and the Purchaser agree to provide the Company
and its counsel in writing with any comments Parent, the Purchaser or their
counsel may receive from time to time from the SEC or its staff with
respect to the Offer Documents promptly after the receipt of such comments,
and any written or oral responses thereto.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer
and represents that the Board of Directors, at a meeting duly called and
held, has, subject to the terms and conditions set forth herein, unanimously
(i) approved this Agreement and the transactions contemplated hereby,
including the Offer and the Merger (collectively, the "Transactions"), and
such approval constitutes all requisite approvals for purposes of Article
13.03 A.(1) of the Texas Business Corporation Act (the "TBCA") and (ii)
resolved to recommend that the shareholders of the Company accept the
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Offer, tender their Shares thereunder to the Purchaser and approve and
adopt this Agreement and the Merger. The Company represents that the
actions set forth in this Section 1.2(a) and all other actions it has taken
in connection therewith are sufficient to render the provisions of Part
Thirteen of the TBCA restricting business combinations with certain persons
inapplicable to the Offer and the Merger.
(b) Concurrently with the commencement of the Offer, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto and including
the exhibits thereto, the "Schedule 14D-9") which shall, subject to the
fiduciary duties of the Company's directors under applicable law and to the
provisions of this Agreement, contain the recommendation referred to in
clause (ii) of Section 1.2(a) hereof. The Schedule 14D-9 will comply in all
material respects with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first published, sent
or given to the Company's shareholders, shall not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading,
except that no representation is made by the Company with respect to
information supplied by Parent or the Purchaser in writing for inclusion in
the Offer Documents. The Company further agrees to take all steps necessary
to cause the Schedule 14D-9 to be filed with the SEC and to be disseminated
to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Each of the Company, on the one hand,
and Parent and the Purchaser, on the other hand, agrees promptly to correct
any information provided by it for use in the Schedule 14D-9 if and to the
extent that it shall have become false and misleading in any material
respect and the Company further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. Parent and its counsel
shall be given the opportunity to review the Schedule 14D-9 before it is
filed with the SEC. In addition, the Company agrees to provide Parent, the
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Purchaser and their counsel in writing with any comments the Company or its
counsel may receive from time to time from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments,
and any written or oral responses thereto.
(c) In connection with the Offer, the Company will promptly
furnish or cause to be furnished to the Purchaser mailing labels, security
position listings and any available listing or computer file containing the
names and addresses of the record holders of the Shares as of a recent
date, and shall furnish the Purchaser with such information and assistance
as the Purchaser or its agents may reasonably request in communicating the
Offer to the shareholders of the Company. Except for such steps as are
necessary to disseminate the Offer Documents, Parent and the Purchaser
shall hold in confidence the information contained in any of such labels
and lists and the additional information referred to in the preceding
sentence, will use such information only in connection with the Offer, and,
if this Agreement is terminated, will upon request of the Company deliver
or cause to be delivered to the Company all copies of such information then
in its possession or the possession of its agents or representatives.
(d) As promptly as practicable on or after the date hereof, but
in no event later than five days following announcement of the Offer, the
Company will amend the Rights Agreement, as necessary (the "Rights
Amendment"), (i) to prevent this Agreement or the consummation of any of
the transactions contemplated hereby or thereby, including without
limitation, the publication or other announcement of the Offer and the
consummation of the Offer and the Merger, from resulting in the
distribution of separate rights certificates or the occurrence of a
Distribution Date (as defined in the Rights Agreement) or being deemed a
Triggering Event (as defined in the Rights Agreement) and (ii) to provide
that neither Parent nor the Purchaser shall be deemed to be an Acquiring
Person (as defined in the Rights Agreement) by reason of the transactions
expressly provided for in this Agreement. The Company represents that the
Rights Amendment will be sufficient to render the Rights inoperative with
respect to any acquisition of Shares by Parent, the Purchaser or any of
their affiliates pursuant to this Agreement. The Company represents that as
5
a result of the Rights Amendment, the Rights will not be exercisable upon
or at any time after, the acceptance for payment of Shares pursuant to the
Offer.
Section 1.3 Directors.
(a) Promptly upon the purchase of and payment for any Shares by
Parent or any of its subsidiaries which represents at least a majority of
the outstanding shares of Company Common Stock (on a fully diluted basis),
Parent shall be entitled to designate such number of directors, rounded up
to the next whole number, on the Board of Directors of the Company as is
equal to the product of the total number of directors on such Board (giving
effect to the directors designated by Parent pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares
beneficially owned by the Purchaser, Parent and any of their affiliates
bears to the total number of shares of Company Common Stock then
outstanding. The Company shall, upon request of the Purchaser, use its best
efforts promptly either to increase the size of its Board of Directors or,
at the Company's election, secure the resignations of such number of its
incumbent directors as is necessary to enable Parent's designees to be so
elected to the Company's Board, and shall cause Parent's designees to be so
elected. At such time, the Company shall also cause persons designated by
Parent to constitute the same percentage (rounded up to the next whole
number) as is on the Company's Board of Directors of (i) each committee of
the Company's Board of Directors, (ii) each board of directors (or similar
body) of each Subsidiary (as defined in Section 3.1) of the Company and
(iii) each committee (or similar body) of each such board, in each case
only to the extent permitted by applicable law or the rules of any stock
exchange on which the Company Common Stock is listed. Notwithstanding the
foregoing, until the Effective Time (as defined in Section 1.5 hereof), the
Company shall use all reasonable efforts to retain as a member of its Board
of Directors at least two directors who are directors of the Company on the
date hereof; provided, that subsequent to the purchase of and payment for
Shares pursuant to the Offer, Parent shall always have its designees
represent at least a majority of the entire Board of Directors of the
Company. The Company's obligations under this Section 1.3(a) shall be
6
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The Company shall promptly take all actions required pursuant
to such Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under this Section 1.3(a), including mailing to shareholders the
information required by such Section 14(f) and Rule 14f-1 as is necessary
to enable Parent's designees to be elected to the Company's Board of
Directors. Parent or the Purchaser will supply the Company any information
with respect to either of them and their nominees, officers, directors and
affiliates required by such Section 14(f) and Rule 14f-1. The provisions of
this Section 1.3(a) are in addition to and shall not limit any rights which
the Purchaser, Parent or any of their affiliates may have as a holder or
beneficial owner of Shares as a matter of law with respect to the election
of directors or otherwise.
(b) From and after the time, if any, that Parent's designees
constitute a majority of the Company's Board of Directors, any amendment of
this Agreement, any termination of this Agreement by the Company, any
extension of time for performance of any of the obligations of Parent or
the Purchaser hereunder, any waiver of any condition or any of the
Company's rights hereunder or other action by the Company hereunder may be
effected only by the action of a majority of the directors of the Company
then in office who were directors of the Company on the date hereof, which
action shall be deemed to constitute the action of the full Board of
Directors; provided, that if there shall be no such directors, such actions
may be effected by majority vote of the entire Board of Directors of the
Company.
Section 1.4 The Merger.
(a) Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.5 hereof), the Company and
the Purchaser shall consummate a merger (the "Merger") pursuant to which
(i) the Purchaser shall be merged with and into the Company and the
separate corporate existence of the Purchaser shall thereupon cease, (ii)
the Company shall be the successor or surviving corporation in the Merger
and shall continue to be governed by the laws of the State of Texas, and
(iii) the separate corporate existence of the Company with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by
7
the Merger. At Parent's election, the Merger may alternatively be
structured so that (x) the Company is merged with and into Parent, the
Purchaser or any other direct or indirect subsidiary of Parent or (y) any
direct or indirect subsidiary of Parent other than the Purchaser is merged
with and into the Company. In the event of such an election, the parties
agree to execute an appropriate amendment to this Agreement in order to
reflect such election. The corporation surviving the Merger is sometimes
hereinafter referred to as the "Surviving Corporation." The Merger shall
have the effects set forth in the TBCA and the New Jersey Business
Corporation Act (the "NJBCA").
(b) Unless otherwise determined by Parent prior to the
Effective Time, the Articles of Incorporation of the Surviving Corporation
shall, as a result of the Merger, be changed so as to read in their
entirety as closely as possible to the Certificate of Incorporation of
Purchaser immediately prior to the Effective Time, except as to the name of
the Surviving Corporation (in the case of a merger where the Company is the
Surviving Corporation) and except to the extent necessary (in the case of a
merger where the Company is the Surviving Corporation) to comply with or
conform to Texas law until thereafter amended as provided by law and such
Articles of Incorporation.
(c) Unless otherwise determined by Parent prior to the
Effective Time, the By-laws of the Surviving Corporation shall, as a result
of the Merger, be changed so as to read in their entirety as closely as
possible to the By-laws of Purchaser immediately prior to the Effective
Time, except to the extent necessary (in the case of a merger where the
Company is the Surviving Corporation) to comply with or conform to Texas
law until thereafter amended as provided by law, the Articles of
Incorporation of the Surviving Corporation and such Bylaws.
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
8
appropriate Certificate of Merger (the "Certificate of Merger") to be
executed and filed on the date of the Closing (or on such other date as
Parent and the Company may agree) with the Secretary of State of the State
of New Jersey as provided in the NJBCA. The Merger shall become effective
on the date on which the Articles of Merger and the Certificate of Merger
have been duly filed with the appropriate Secretaries of State or such time
as is agreed upon by the parties and specified in the Articles of Merger
and the Certificate of Merger, and such time is hereinafter referred to as
the "Effective Time."
Section 1.6 Closing. The closing of the Merger (the "Closing")
will take place at 10:00 a.m. on a date to be specified by the parties,
which shall be no later than the second business day after satisfaction or
waiver of all of the conditions set forth in Article VI hereof (the
"Closing Date"), at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, unless another
date or place is agreed to in writing by the parties hereto.
Section 1.7 Directors and Officers of the Surviving Corporation.
The directors and officers of the Purchaser at the Effective Time shall,
from and after the Effective Time, be the directors and officers,
respectively, of the Surviving Corporation until their successors shall
have been duly elected or appointed or qualified or until their earlier
death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and 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 Agreement;
9
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement
and use its reasonable efforts (x) to obtain and furnish the
information required to be included by the SEC in the Proxy
Statement (as hereinafter defined) and, after consultation with
Parent, to respond promptly to any comments made by the SEC with
respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement (the "Proxy
Statement") to be mailed to its shareholders and (y) to obtain
the necessary approvals of the Merger and this Agreement by its
shareholders; and
(iii) subject to the fiduciary obligations of the Board
under applicable law as advised by independent counsel, include
in the Proxy Statement the recommendation of the Board that
shareholders of the Company vote in favor of the approval of the
Merger and the adoption of this Agreement.
(b) Parent agrees that it will vote, or cause to be voted,
all of the Shares then owned by it, the Purchaser or any of its other
subsidiaries and affiliates in favor of the approval of the Merger and the
adoption of this Agreement.
Section 1.9 Merger Without Meeting of Shareholders.
Notwithstanding Section 1.8 hereof, in the event that Parent, the Purchaser
or any other subsidiary of Parent shall acquire at least 90% of the
outstanding shares of each class of capital stock of the Company, pursuant
to the Offer or otherwise, the parties hereto agree, at the request of
Parent and subject to Article VI hereof, to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of shareholders of
the Company, in accordance with Article 5.16 of the TBCA and Section
14A:10-5.1 of the NJBCA.
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ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the
holders of any shares of Company Common Stock or common stock, par value
$.01 per share, of the Purchaser (the "Purchaser Common Stock"):
(a) Purchaser Common Stock. Each issued and outstanding
share of the Purchaser Common Stock shall be converted into and become one
fully paid and nonassessable share of common stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
All shares of Company Common Stock that are owned by the Company as
treasury stock and any shares of Company Common Stock owned by Parent, the
Purchaser or any other wholly owned Subsidiary (as defined in Section 3.1
hereof) of Parent shall be cancelled and retired and shall cease to exist
and no stock of Parent or other consideration shall be delivered in
exchange therefor.
(c) Exchange of Shares. Each issued and outstanding share of
Company Common Stock, including the associated Rights (other than shares to
be cancelled in accordance with Section 2.1(b) hereof) shall be converted
into the right to receive the Offer Price, payable to the holder thereof,
without interest (the "Merger Consideration"), upon surrender of the
certificate formerly representing such share of Company Common Stock in the
manner provided in Section 2.2 hereof. All such shares of Company Common
Stock, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in accordance
with Section 2.2 hereof, without interest.
11
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Parent shall designate a bank or trust
company to act as agent for the holders of shares of Company Common Stock
in connection with the Merger (the "Paying Agent") to receive the funds to
which holders of shares of Company Common Stock shall become entitled
pursuant to Section 2.1(c)hereof. Such funds shall be invested by the
Paying Agent as directed by Parent or the Surviving Corporation.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Paying Agent shall mail to each holder of
record of a certificate or certificates, which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"Certificates"), whose shares were converted pursuant to Section 2.1 hereof
into the right to receive the Merger Consideration (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such
other provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for payment of the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration for each
share of Company Common Stock formerly represented by such Certificate and
the Certificate so surrendered shall forthwith be cancelled. If payment of
the Merger Consideration is to be made to a person other than the person in
whose name the surrendered Certificate is registered, it shall be a
condition of payment that the Certificate so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and that the
person requesting such payment shall have paid any transfer and other taxes
required by reason of the payment of the Merger Consideration to a person
other than the registered holder of the Certificate surrendered or shall
have established to the satisfaction of the Surviving Corporation that such
tax either has been paid or is not applicable. Until surrendered as
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contemplated by this Section 2.2, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive the
Merger Consideration in cash as contemplated by this Section 2.2, without
interest thereon.
(c) Transfer Books; No Further Ownership Rights in Company
Common Stock. At the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further
registration of transfers of shares of Company Common Stock on the records
of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of shares of Company Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Shares, except as otherwise provided for herein
or by applicable law. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be
cancelled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. At any time following
six months after the Effective Time, the Surviving Corporation shall be
entitled to require the Paying Agent to deliver to it any funds (including
any interest received with respect thereto) which had been made available
to the Paying Agent and which have not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to the Merger
Consideration payable upon due surrender of their Certificates, without any
interest thereon. Notwithstanding the foregoing, neither the Surviving
Corporation nor the Paying Agent shall be liable to any holder of a
Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 2.3 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the
Merger or consented thereto in writing and who has demanded appraisal for
such Shares in accordance with the TBCA ("Dissenting Shares") shall not be
13
converted into a right to receive the Merger Consideration, unless such
holder fails to perfect or withdraws or otherwise loses his or her right to
appraisal. A holder of Dissenting Shares shall be entitled to receive
payment of the appraised value of such Shares held by him or her in
accordance with the provisions of Article 5.12 or 5.16 of the TBCA, unless,
after the Effective Time, such holder fails to perfect or withdraws or
loses his or her right to appraisal, in which case such Shares shall be
treated as if they had been converted as of the Effective Time into a right
to receive the Merger Consideration, without interest thereon.
Section 2.4 Company Option Plans.
(a) Parent and the Company shall take all actions necessary
to provide that, effective as of the Effective Time, (i) each outstanding
employee stock option to purchase Shares (an "Employee Option"), whether or
not granted under the ▇▇▇▇▇▇ Production Services, Inc. Amended and Restated
1995 Incentive Plan (the "Option Plan") and each outstanding non-employee
director option to purchase Shares, whether or not granted under the Option
Plan ("Director Options" and collectively with Employee Options,
"Options"), whether or not then exercisable or vested, shall become fully
exercisable and vested, and (ii) each Option that, pursuant to its terms,
can be cancelled by the Company without the holder's consent shall be
cancelled, and each other Option which its holder elects to cancel shall be
cancelled, and in consideration of such cancellation, and except to the
extent that Parent or the Purchaser and the holder of any such Option
otherwise agree, the Company shall pay to such holders of such cancelled
Options an amount in respect thereof equal to the product of (A) the
excess, if any, of the Offer Price over the exercise price thereof and (B)
the number of Shares subject thereto (such payment to be net of applicable
withholding and excise taxes). Notwithstanding the foregoing, any payment
to the holders of Options contemplated by this Section 2.3 may be withheld
in respect of any Option until any necessary consents or releases are
obtained.
(b) Except as provided herein or as otherwise agreed to by
the parties, (i) the Option Plan shall terminate as of the Effective Time
14
and the provisions in any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock
of the Company or any of its subsidiaries shall be terminated as of the
Effective Time and (ii) the Company shall, as soon as practicable after the
date hereof, use its best efforts to ensure that following the Effective
Time no holder of Options or any participant in the Option Plan or any
other plans, programs or arrangements shall have any right thereunder to
acquire any equity securities of the Company, the Surviving Corporation or
any subsidiary thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser
as follows:
Section 3.1 Organization. Each of the Company and its
Subsidiaries is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease
and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority, and governmental approvals
would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole. As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such
party or any other Subsidiary of such party is a general partner (excluding
such partnerships where such party or any Subsidiary of such party do not
have a majority of the voting interest in such partnership) or (ii) at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and one
15
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 such event, change or effect is materially adverse to the
consolidated financial condition, businesses or results of operations of
such entity (or, if used with respect thereto, of such group of entities
taken as a whole). The Company and each of its Subsidiaries is duly
qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not in the aggregate have a material
adverse effect on the Company and its Subsidiaries taken as a whole.
Exhibit 21.1 to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1998 sets forth a complete list of the Company's
active Subsidiaries. The Company's inactive subsidiaries have no operations
or liabilities.
Section 3.2 Capitalization. (a) The authorized capital stock of
the Company consists of 20,000,000 shares of Company Common Stock, 60,000
shares of Series A 10% Cumulative Convertible Preferred Stock, without par
value (the "Series A Preferred Stock"), and 500,000 preferred shares,
without par value (together with the Series A Preferred Stock, the
"Preferred Stock"). As of the date hereof, (i) 11,202,965 shares of Company
Common Stock are issued and outstanding, (ii) 102,500 shares of Company
Common Stock are issued and held in the treasury of the Company and (iii)
812,766 shares of Company Common Stock are reserved for issuance upon
exercise of outstanding Options. As of the date hereof, there are no shares
of Preferred Stock issued and outstanding. All the outstanding shares of
the Company's capital stock are, and all shares which may be issued
pursuant to the exercise of outstanding Options or Rights will be, when
issued in accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and non-assessable. Other than a $1.5 million
Subordinated Convertible Debenture, dated December 1, 1994, there are no
bonds, debentures, notes or other indebtedness having general voting rights
(or convertible into securities having such rights) ("Voting Debt") of the
Company or any of its Subsidiaries issued and
16
outstanding. Except as set forth above and except for the transactions
contemplated by this Agreement, as of the date hereof, (i) there are no
shares of capital stock of the Company authorized, issued or outstanding
and (ii) there are no existing options, warrants, calls, pre-emptive
rights, subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital
stock of the Company or any of its Subsidiaries, obligating the Company or
any of its Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligations of the Company or any of its Subsidiaries to grant, extend or
enter into any such option, warrant, call, subscription or other right,
agreement, arrangement or commitment. Except as contemplated by this
Agreement, there are no outstanding contractual obligations of the Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
Shares, or the capital stock of the Company or any Subsidiary or affiliate
of the Company or to provide funds to make any investment (in the form of a
loan, capital contribution or otherwise) in any Subsidiary or any other
entity.
(b) All of the outstanding shares of capital stock of each
of the Subsidiaries are beneficially owned by the Company, directly or
indirectly, and all such shares have been validly issued and are fully paid
and nonassessable and are owned by either the Company or one of its
Subsidiaries free and clear of all liens, charges, claims or encumbrances.
(c) Except for an agreement relating to the election of
directors between the Company and RIMCO Partners, L.P., RIMCO Partners,
▇.▇. ▇▇, RIMCO Partners L.P. III and RIMCO Partners ▇.▇. ▇▇, dated November
21, 1996, there are no voting trusts or other agreements or understandings
to which the Company or any of its Subsidiaries is a party with respect to
the voting of the capital stock of the Company or any of the Subsidiaries.
None of the Company or its Subsidiaries is required to redeem, repurchase
or otherwise acquire shares of capital stock of the Company, or any of its
17
Subsidiaries, respectively, as a result of the transactions contemplated by
this Agreement.
Section 3.3 Authorization; Validity of Agreement; Company Action.
(a) The Company has full corporate power and authority to execute and
deliver this Agreement and, subject to obtaining the necessary approval of
its shareholders, to consummate the transactions contemplated hereby. The
execution, delivery and performance by the Company of this Agreement, and
the consummation by it of the transactions contemplated hereby, have been
duly authorized by its Board of Directors and, except for obtaining the
approval of its shareholders as contemplated by Section 1.8 hereof, no
other corporate action on the part of the Company is necessary to authorize
the execution and delivery by the Company of this Agreement and the
consummation by it of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Company and is a valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be subject
to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(b) The Board of Directors of the Company has duly and
validly approved and taken all corporate action required to be taken by the
Board of Directors for the consummation of the transactions contemplated by
this Agreement, including the Offer, the acquisition of Shares pursuant to
the Offer and the Merger, including, but not limited to, all actions
required to render the provisions of Part Thirteen of the TBCA restricting
business combinations with certain persons inapplicable to such
transactions.
Section 3.4 Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
18
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
incorporation or by-laws or similar organizational documents of the Company
or of any of its Subsidiaries, (ii) require any filing with, or permit,
authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other
regulatory authority or agency (a "Governmental Entity"), except where the
failure to obtain such permits, authorizations, consents or approvals or to
make such filings would not have a material adverse effect on the Company
and its Subsidiaries taken as a whole, (iii) except for the 9 3/8% Senior
Notes due February 1, 2007 (the "Senior Notes") and the Credit Agreement
between the Company and The Frost National Bank, dated February 20, 1997
(relating to a $50.0 million working capital revolving facility), result in
a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which any of them or
any of their properties or assets may be bound and which has been (or was
required by law to have been) filed as an exhibit to the Company SEC
Documents (as defined in Section 3.5 hereof) filed prior to the date hereof
(the "Material Agreements") or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any of its
Subsidiaries or any of their properties or assets, excluding from the
foregoing clauses (iii) and (iv), violations, breaches or defaults which
would not, individually or in the aggregate, have a material adverse effect
on the Company and its Subsidiaries taken as a whole, and which will not
materially impair the ability of the Company to consummate the transactions
contemplated hereby.
Section 3.5 SEC Reports and Financial Statements. The Company has
filed with the SEC all forms, reports, schedules, statements and other
19
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,
collectively, the "Company SEC Documents"). As of their respective dates
or, if amended, as of the date of the last such amendment, the Company SEC
Documents, including, without limitation, any financial statements or
schedules included therein (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading and (b)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. None of the Subsidiaries is
required to file any forms, reports or other documents with the SEC
pursuant to Section 12 or 15 of the Exchange Act. The financial statements
of the Company (the "1998 Financial Statements") included in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1998, as
amended (including the related notes thereto) (the "1998 Form 10-K") have
been prepared from and are in accordance with, the books and records of the
Company and its consolidated subsidiaries, comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto and subject, in the case of
quarterly financial statements, to normal and recurring year-end
adjustments) and fairly present the consolidated financial position and the
consolidated results of operations and cash flows (and changes in financial
position, if any) of the Company and its consolidated subsidiaries as at
the dates thereof or for the periods presented therein.
Section 3.6 Absence of Certain Changes or Events. Except as set
forth on Schedule 3.6 or as disclosed in the Company SEC Documents filed
prior to the date hereof, since March 31, 1998, the Company and its
Subsidiaries have conducted their respective businesses only in the
20
ordinary and usual course and there has not occurred (i) any events,
changes, or effects (including the incurrence of any liabilities of any
nature, whether or not accrued, contingent or otherwise) having,
individually or in the aggregate, a material adverse effect on the Company
and its Subsidiaries, taken as a whole; (ii) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the equity interests of the Company or of any of
its Subsidiaries; (iii) any change by the Company or any of its
Subsidiaries in accounting principles or methods, except insofar as may be
required by a change in GAAP; (iv) any entry by the Company or any of its
Subsidiaries into any commitment or transaction material to the Company and
its Subsidiaries, taken as a whole; or (v) any increase in or establishment
of any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without limitation,
the granting of stock options, stock appreciation rights, performance
awards or restricted stock awards), stock purchase or other employee
benefit plan or agreement or arrangement, or any other increase in the
compensation payable or to become payable to any officers or key employees
of the Company or its Subsidiaries, except in the ordinary course of
business consistent with past practice.
Section 3.7 No Undisclosed Liabilities. Except (a) as set forth
on Schedule 3.7, (b) as disclosed in the Company SEC Documents filed prior
to the date hereof and (c) for liabilities and obligations incurred in the
ordinary course of business and consistent with past practice, since March
31, 1998, neither the Company nor any of its Subsidiaries has incurred any
liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that have, or would be reasonably likely to have,
a material adverse effect on the Company and its Subsidiaries taken as a
whole or would be required by GAAP to be reflected on a consolidated
balance sheet of the Company and its Subsidiaries (including the notes
thereto).
Section 3.8 Information in Proxy Statement. The Proxy Statement
(or any amendment thereof or supplement thereto) will, at the date mailed
to Company shareholders and at the time of the meeting of Company
shareholders to be held in connection with the Merger, not contain any
21
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 writing for inclusion in the Proxy Statement. The Proxy
Statement will comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
Section 3.9 Employee Benefit Plans; ERISA.
Except as set forth on Schedule 3.9, to the Company's best
knowledge:
(a) There are no material employee benefit plans,
arrangements, contracts or agreements (including employment agreements and
severance agreements) of any type (including but not limited to plans
described in section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), maintained by the Company, any of its
Subsidiaries or any trade or business, whether or not incorporated (an
"ERISA Affiliate"), that together with the Company would be deemed a
"single employer" within the meaning of section 4001(b)(15) of ERISA, or
with respect to which the Company or any of its Subsidiaries has or may
have a liability, other than those listed on Schedule 3.9 ("Benefit
Plans"). Neither the Company nor any ERISA Affiliate has any formal plan or
commitment, whether legally binding or not, to create any additional
Benefit Plan or modify or change any existing Benefit Plan that would
affect any employee or terminated employee of the Company or any
Subsidiary.
(b) With respect to each Benefit Plan: (i) if intended to
qualify under section 401(a), 401(k) or 403(a) of the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated thereunder
(the "Code"), such plan so qualifies, and its trust is exempt from taxation
under section 501(a) of the Code; (ii) such plan has been administered in
all material respects in accordance with its terms and applicable law;
(iii) no breaches of fiduciary duty have occurred which might reasonably be
expected to give rise to material liability on the part of the Company;
22
(iv) no disputes are pending, or, to the knowledge of the Company,
threatened that might reasonably be expected to give rise to material
liability on the part of the Company; (v) no prohibited transaction (within
the meaning of Section 406 of ERISA) has occurred that might reasonably be
expected to give rise to material liability on the part of the Company; and
(vi) all contributions due as of the date hereof (including any extensions
for such contributions) have been made in full.
(c) Neither the Company nor any ERISA Affiliate maintains or
has maintained or contributed to or been required to contribute to within
the last six years, any employee benefit plan that is subject to Title IV
of ERISA.
(d) With respect to each Benefit Plan that is a "welfare
plan" (as defined in section 3(1) of ERISA): except as disclosed in
Schedule 3.9, no such plan provides medical or death benefits with respect
to current or former employees of the Company or any of its Subsidiaries
beyond their termination of employment, other than on an employee-pay-all
basis.
(e) Except as set forth on Schedule 3.9, the consummation of
the transactions contemplated by this Agreement, either alone or in
connection with a related event, will not entitle any individual to
severance pay or accelerate the time of payment or vesting, or increase the
amount, of compensation or benefits due to any individual (other than as
disclosed in writing).
(f) The maximum amount that could be payable by the Company
under all Benefit Plans (excluding Options and restricted stock) and any
other plan, policy, agreement or arrangement to which the Company or any
Subsidiary is a party, as a result (in whole or in part) of the
transactions contemplated hereby shall not exceed $3,000,000, excluding
payments to be made under the Employee Severance Pay Plan and employer
contributions under tax qualified plans.
(g) With respect to each Benefit Plan, the Company has
delivered to Parent accurate and complete copies of all plan texts, summary
plan descriptions, summary of material modifications, trust agreements and
23
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 disclosed to Parent on
Schedule 3.9, neither the Company nor its Subsidiaries is a party to any
agreement, contract or arrangement that could result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
Section 3.10 Litigation. Except as set forth on Schedule 3.10 and
as disclosed in the Company SEC Documents filed prior to the date of this
Agreement, there is no suit, claim, action, proceeding or investigation
pending or, to the best knowledge of the Company, threatened against or
affecting, the Company or any of its Subsidiaries which, individually or in
the aggregate, is reasonably likely to have a material adverse effect on
the Company and its Subsidiaries, taken as a whole, or a material adverse
effect on the ability of the Company to consummate the transactions
contemplated by this Agreement.
Section 3.11 Conduct of Business. The business of the Company and
each of its Subsidiaries is not being conducted in default or violation of
any term, condition or provision of (i) its respective articles of
incorporation or by-laws or similar organizational documents, (ii) any
Material Agreement or (iii) any federal, state, local or foreign statute,
law, ordinance, rule, regulation, judgment, decree, order, concession,
grant, franchise, permit or license or other governmental authorization or
approval applicable to the Company or any of its Subsidiaries, excluding
from the foregoing clauses (ii) and (iii), defaults or violations that
would not, individually or in the aggregate, have a material adverse effect
on the Company and its Subsidiaries, taken as a whole. Except as previously
disclosed to Parent in writing, as of the date of this Agreement, no
investigation or review by any Governmental Entity or other entity with
respect to the Company or any of its Subsidiaries is pending or, to the
best knowledge of the Company, threatened, nor has any Governmental Entity
24
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.
(a) Except as set forth on Schedule 3.12 or in the Company
SEC Documents filed prior to the date hereof:
(i) The Company and each of its Subsidiaries are in
compliance with all applicable Environmental Laws (as defined in Section
3.12(b)(ii) hereof) except where the failure to comply, individually or in
the aggregate, would not be reasonably likely to have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, and neither
the Company nor any of its Subsidiaries has received any communication
(written or oral) from any person or Governmental Entity that alleges that
the Company or any of its Subsidiaries is not in such compliance with
applicable Environmental Laws. To the knowledge of the Company, future
compliance with all applicable Environmental Laws will not require the
Company or its Subsidiaries to incur costs, beyond those currently budgeted
for the three Company fiscal years beginning with April 1, 1998, that,
individually or in the aggregate, would be reasonably likely to have a
material adverse effect on the Company and its Subsidiaries, taken as a
whole.
(ii) (A) The Company and each of its Subsidiaries have
obtained or have applied for all environmental, health and safety permits
and governmental authorizations (collectively, the "Environmental Permits")
necessary for the conduct of their operations except where the failure to
so obtain, individually or in the aggregate, would not be reasonably likely
to have a material adverse effect on the Company and its Subsidiaries,
taken as a whole, (B) all such Environmental Permits are in full force and
effect or, where applicable, a renewal application has been timely filed
and is pending agency approval except where the failure of such
25
Environmental Permits to be in full force and effect or to have filed a
renewal application on a timely basis would not be reasonably likely to
have, individually or in the aggregate, a material adverse effect on the
Company and its Subsidiaries, taken as a whole, (C) the Company and its
Subsidiaries are in material compliance with all terms and conditions of
the Environmental Permits, except where failure to so comply, individually
or in the aggregate, would not be reasonably likely to have a material
adverse effect on the Company and its Subsidiaries, taken as a whole, and
(D) neither the Company nor any of its Subsidiaries has been advised by any
Governmental Entity of any potential change in the terms and conditions of
the Environmental Permits either prior to or upon their renewal, except for
such potential changes as would not be reasonably likely to have,
individually or in the aggregate, a material adverse effect.
(iii) There are no Environmental Claims (as defined in
Section 3.12(b)(i) hereof) that would be reasonably likely to have,
individually or in the aggregate, a material adverse effect on the Company
and its Subsidiaries, taken as a whole, pending or, to the knowledge of the
Company, threatened, (A) against the Company or any of its Subsidiaries,
(B) to the knowledge of the Company, against any person or entity whose
liability for any Environmental Claim the Company or any of its
Subsidiaries has or may have retained or assumed either contractually or by
operation of law, or (C) against any currently owned, leased or managed, in
whole or in part, real or personal property or operations of the Company or
any of its Subsidiaries or, to the knowledge of the Company, against any
formerly owned, leased or managed, in whole or in part, real or personal
property or operations of the Company or any of its Subsidiaries.
(iv) The Company has no knowledge of any Releases (as
defined in Section 3.12(b)(iv) hereof) of any Hazardous Material (as
defined in Section 3.12(b)(iii) hereof) that would be reasonably likely to
form the basis of any Environmental Claim against the Company or any of its
Subsidiaries, or against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law except for
26
any Environmental Claim which, individually or in the aggregate, would not
be reasonably likely to have a material adverse effect on the Company and
its Subsidiaries, taken as a whole.
(v) The Company has no knowledge, with respect to any
predecessor of the Company or any of its Subsidiaries, of any Environmental
Claim which, individually or in the aggregate, would be reasonably likely
to have a material adverse effect on the Company and its Subsidiaries,
taken as a whole, pending or threatened, or of any Release of Hazardous
Materials that would be reasonably likely to form the basis of any
Environmental Claim which, individually or in the aggregate, would be
reasonably likely to have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
(b) As used in this Agreement:
(i) "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, liens, investigations, proceedings or notices
of noncompliance or violation (written or oral) by any person or entity
(including any Governmental Entity), alleging potential liability
(including, without limitation, potential responsibility for or liability
for enforcement, investigatory costs, cleanup costs, governmental response
costs, removal costs, remedial costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or
resulting from (A) the presence, Release or threatened Release into the
environment of any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by the Company or any of its
Subsidiaries; or (B) circumstances forming the basis of any violation or
alleged violation of any Environmental Law or (C) any and all claims by any
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence or Release of
any Hazardous Materials or the presence of or exposure to any
electromagnetic fields.
(ii) "Environmental Laws" means all federal, state and
local laws, rules, regulations, orders, decrees, judgments or binding
agreements issued, promulgated or entered into by or with any Governmental
27
Entity, relating to pollution, the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or protection of human health as it relates to the
environment including, without limitation, laws and regulations relating to
noise levels, Releases or threatened Releases of Hazardous Materials, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid containing polychlorinated
biphenyls ("PCBs"); (B) any chemicals, materials or substances which are
now defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants," or
words of similar import under any Environmental Law and (C) any other
chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a
jurisdiction in which the Company or any of its Subsidiaries operates.
(iv) "Release" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or
property.
Section 3.13 Taxes. Except as set forth on Schedule 3.13:
(a) The Company and each of its Subsidiaries have (i) duly
filed (or there has been filed on their behalf or appropriate extensions
have been obtained) with the appropriate governmental authorities all Tax
Returns (as hereinafter defined) required to be filed by them on or prior
to the date hereof, and such Tax Returns are true, correct and complete in
all material respects, and (ii) duly paid in full or made provision in
accordance with generally accepted accounting principles (or there has been
paid or provision has been made on their behalf) for the payment
28
of all Taxes (as hereinafter defined) for all periods ending through the
date hereof, and will do so through the Effective Time.
(b) There are no material liens for Taxes upon any property
or assets of the Company or any Subsidiary thereof, except for liens for
Taxes not yet due and liens for Taxes the assessment of which is being
contested in good faith.
(c) Neither the Company nor any of its Subsidiaries has made
any change in accounting methods, received a ruling from any taxing
authority or signed an agreement likely to have a material adverse effect
on the Company and its Subsidiaries taken as a whole.
(d) The Company and each of its Subsidiaries have complied
in all material respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441 and 1442 of the
Code or similar provisions under any foreign laws) and have, within the
time and the manner prescribed by law, withheld from employee wages and
paid over to the proper governmental authorities all amounts required to be
so withheld and paid over under applicable laws.
(e) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or its Subsidiaries
wherein an adverse determination or ruling in any one such proceeding or in
all such proceedings in the aggregate could have a material adverse effect
on the Company and its Subsidiaries, taken as a whole, and neither the
Company nor its subsidiaries has received a written notice of any pending
audits or proceedings.
(f) The federal income Tax Returns of the Company and its
Subsidiaries have been examined by the Service (or the applicable statutes
of limitation for the assessment of federal income Taxes for such periods
have expired) for all periods through and including March 31, 1994, and no
material deficiencies were asserted as a result of such examinations which
have not been resolved and fully paid.
29
(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.
(h) Neither the Company nor any of its Subsidiaries is a
party to any agreement providing for the allocation or sharing of Taxes.
(i) Neither the Company nor any of its Subsidiaries has,
with regard to any assets or property held, acquired or to be acquired by
any of them, filed a consent to the application of Section 341(f) of the
Code, or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company or any of its Subsidiaries.
(j) "Taxes" shall mean any and all taxes, charges, fees,
levies or other assessments, including, without limitation, income, gross
receipts, excise, real or personal property, sales, withholding, social
security, occupation, use, service, service use, license, net worth,
payroll, franchise, transfer and recording taxes, fees and charges, imposed
by the Service or any taxing authority (whether domestic or foreign
including, without limitation, any state, county, local or foreign
government or any subdivision or taxing agency thereof (including a United
States possession)), whether computed on a separate, consolidated, unitary,
combined or any other basis; and such term shall include any interest
whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes,
charges, fees, levies or other assessments. "Tax Return" shall mean any
report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes, including, without limitation, information
returns, any documents with respect to or accompanying payments of
estimated Taxes, or with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
30
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
petition pending before the NLRB and no question concerning representation
exists with respect to the employees of the Company or any of its
Subsidiaries.
Section 3.15 Compliance with Laws. The Company and its
Subsidiaries have complied in a timely manner with all laws and
governmental regulations and orders relating to any of the property owned,
leased or used by them, or applicable to their business, including, but not
limited to, equal employment opportunity, discrimination, occupational
safety and health, environmental and antitrust laws, except where the
failure to so comply would not, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries, taken as a
whole.
Section 3.16 Insurance. As of the date hereof, the Company and
each of its Subsidiaries are insured by insurers, reasonably believed by
the Company to be of recognized financial responsibility and solvency,
against such losses and risks and in such amounts as are customary in the
businesses in which they are engaged.
Section 3.17 Contracts. Except as set forth on Schedule 3.17 or
as disclosed in the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1998, there are no agreements that are material to the
Company and its Subsidiaries, taken as a whole. Each Material Agreement is
legally valid and binding and in full force and effect, except where
failure to be legally valid and binding and in full force and effect would
not have a material adverse effect on the Company and its Subsidiaries,
taken as a whole, and there are no defaults thereunder, except those
defaults that would not have a material adverse effect on the Company and
31
its Subsidiaries, taken as a whole. The Company has previously made
available for inspection by Parent or the Purchaser all Material
Agreements.
Section 3.18 Property. The Company and each of the Subsidiaries,
as the case may be, have sufficient title or leaseholds to property to
conduct their respective businesses as currently conducted with only such
exceptions as individually or in the aggregate would not have a material
adverse effect on the Company and the Subsidiaries, taken as a whole.
Section 3.19 Equipment. The Company and its Subsidiaries have
such ownership of or such rights by license, lease or other agreement to
all equipment used or necessary to conduct their respective businesses as
currently conducted (the "Equipment") with only such exceptions as
individually or in the aggregate would not have a material adverse effect
on the Company and the Subsidiaries, taken as a whole. The Equipment is in
good operating condition and repair and adequate for the uses to which it
is being put. None of the Equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material
in nature or cost.
Section 3.20 Permits. The Company and each of its Subsidiaries
has all permits, licenses, franchises and other governmental authorizations
necessary to conduct their respective businesses as currently conducted
with only such exceptions as individually or in the aggregate would not
have a material adverse effect on the Company and the Subsidiaries, taken
as a whole. All such permits, licenses, franchises and authorizations are
in full force and effect and the Company is not aware of any pending or
threatened suspension, cancellation or termination of any such permit,
license, franchise or authorization, with only such exceptions as
individually or in the aggregate would not have a material adverse effect
on the Company and the Subsidiaries, taken as a whole.
Section 3.21 Intellectual Property. Except as disclosed in the
Company SEC Documents filed prior to the date hereof, and except for such
claims, which individually or in the aggregate, would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole, there
32
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,
▇▇▇▇ registrations, logos, assumed names and copyright registrations,
patents and all applications therefor which are owned by the Company or its
Subsidiaries and used in their respective operations as currently conducted
(collectively, the "Intellectual Property"). The Company and each of its
Subsidiaries have such ownership of or such rights by license, lease or
other agreement to the Intellectual Property as are necessary to permit
them to conduct their respective operations as currently conducted, except
where the failure to have such rights would not have a material adverse
effect on the Company and its Subsidiaries, taken as a whole.
Section 3.22 Opinion of Financial Advisor. The Company has
received an opinion from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & 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
33
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.
Section 4.2 Authorization; Validity of Agreement; Necessary
Action. Each of Parent and the Purchaser has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance
of this Agreement and the consummation of the Merger and of the other
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and the Purchaser and no other
corporate proceedings on the part of Parent and the Purchaser are necessary
to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly executed and delivered by Parent
and the Purchaser, as the case may be, and, assuming this Agreement
constitutes a valid and binding obligation of the Company, constitutes a
valid and binding obligation of each of Parent and the Purchaser, as the
case may be, enforceable against them in accordance with its respective
terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
Section 4.3 Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the HSR Act,
the TBCA, the NJBCA, state securities or blue sky laws and, the laws of
other states in which Parent or the Purchaser is qualified to do or is
34
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 Subsidiaries, taken as a whole), (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, lease,
contract, agreement or other instrument or obligation to which Parent or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any
of its Subsidiaries or any of their properties or assets, excluding from
the foregoing clauses (iii) and (iv) violations, breaches or defaults which
would not, individually or in the aggregate, have a material adverse effect
on Parent and its Subsidiaries taken as a whole.
Section 4.4 Information in Proxy Statement; Schedule 14D-9. None
of the information supplied by Parent or the Purchaser for inclusion or
incorporation by reference in the Proxy Statement or the Schedule 14D-9
will, at the date mailed to shareholders and at the time of the meeting of
shareholders to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
Section 4.5 Financing. Parent has received (a) a commitment
letter (the "Commitment Letter") from PNC Capital Markets, Inc. and PNC
Bank, National Association (collectively, "PNC") indicating its
35
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 ▇▇▇▇▇▇▇ & Co. and ▇▇▇▇▇▇ 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
Parent after the date hereof. The aggregate proceeds of the Financing, if
obtained, will be in an amount sufficient to acquire all the Shares in the
Offer and the Merger, to pay all fees and expenses in connection therewith
and, if necessary, to effect a refinancing of the Senior Notes.
Section 4.6 Purchaser's Operations. The Purchaser was formed
solely for the purpose of engaging in the transactions contemplated hereby
and has not engaged in any business activities or conducted any operations
other than in connection with the transactions contemplated hereby.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company
covenants and agrees that, except (i) as expressly contemplated by this
Agreement, or (ii) as agreed in writing by Parent, after the date hereof,
and prior to the time the directors designated by Parent have been elected
to, and shall constitute a majority of, the Board of Directors of the
Company pursuant to Section 1.3 hereof (the "Appointment Date"):
(a) the business of the Company and each of its Subsidiaries
shall be conducted only in the ordinary and usual course and, to the extent
consistent therewith, each of the Company and its Subsidiaries shall
36
use its best efforts to preserve its business organization intact and
maintain its existing relations with customers, suppliers, employees,
creditors and business partners;
(b) the Company will not, directly or indirectly, (i) sell,
transfer or pledge or agree to sell, transfer or pledge any Company Common
Stock, Preferred Stock or capital stock of any of its Subsidiaries
beneficially owned by it, either directly or indirectly; or (ii) split,
combine or reclassify the outstanding Company Common Stock or any
outstanding capital stock of any of the Subsidiaries of the Company;
(c) except for those actions contemplated in Section 1.2
hereof, neither the Company nor any of its Subsidiaries shall: (i) amend
its articles of incorporation or by-laws or similar organizational
documents; (ii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock; (iii) issue, sell, pledge, dispose of or encumber any additional
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares
of capital stock of any class of the Company or any of its Subsidiaries,
other than shares of Company Common Stock reserved for issuance on the date
hereof upon exercise of outstanding Rights pursuant to the Rights Agreement
or issuances pursuant to the exercise of Options outstanding on the date
hereof; (iv) transfer, lease, license, sell, mortgage, pledge, dispose of,
or encumber any material assets other than in the ordinary and usual course
of business and consistent with past practice, or incur or modify any
material indebtedness or other liability, other than in the ordinary and
usual course of business and consistent with past practice; or (v) redeem,
purchase or otherwise acquire directly or indirectly more than 5,000 Shares
of its capital stock;
(d) neither the Company nor any of its Subsidiaries shall:
(i) grant any increase in the compensation payable or to become payable by
the Company or any of its Subsidiaries to any of its executive officers or
key employees or (A) adopt any new, or (B) amend or otherwise increase, or
accelerate the payment or vesting of the amounts payable or to become
37
payable under any existing, bonus, incentive compensation, deferred
compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan agreement or
arrangement; or (ii) enter into any employment or severance agreement with
or, except in accordance with the existing written policies of the Company,
grant any severance or termination pay to any officer, director or employee
of the Company or any of its Subsidiaries;
(e) neither the Company nor any of its Subsidiaries shall
modify, amend or terminate any of its material contracts or waive, release
or assign any material rights or claims, except in the ordinary course of
business and consistent with past practice;
(f) neither the Company nor any of its Subsidiaries shall
permit any material insurance policy naming it as a beneficiary or a loss
payable payee to be cancelled or terminated without notice to Parent,
except in the ordinary course of business and consistent with past
practice;
(g) neither the Company nor any of its Subsidiaries shall:
(i) incur or assume any long-term debt, or except in the ordinary course of
business, incur or assume any short-term indebtedness in amounts not
consistent with past practice; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person, except in the ordinary course of
business and consistent with past practice; (iii) make any loans, advances
or capital contributions to, or investments in, any other person (other
than to wholly owned Subsidiaries of the Company or customary loans or
advances to employees in accordance with past practice); or (iv) except for
commitments or transactions not in excess of $500,000, enter into any
material commitment or transaction (including, but not limited to, any
borrowing, capital expenditure or purchase, sale or lease of assets);
(h) neither the Company nor any of its Subsidiaries shall
change any of the accounting principles used by it unless required by GAAP;
38
(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
financial statements (or the notes thereto) as of and for the fiscal year
ended March 31, 1998 of the Company and its consolidated Subsidiaries, (y)
incurred since March 31, 1998 in the ordinary course of business and
consistent with past practice or (z) which are legally required to be paid,
discharged or satisfied (provided that if such claims, liabilities or
obligations referred to in this clause (z) are legally required to be paid
and are also not otherwise payable in accordance with clauses (x) or (y)
above, the Company will notify Parent in writing if such claims,
liabilities or obligations exceed, individually or in the aggregate,
$500,000 in value, reasonably in advance of their payment). Notwithstanding
the foregoing, the Company shall be entitled to pay on a timely basis all
reasonable, documented fees and expenses related to this Agreement and the
transactions contemplated hereby;
(j) neither the Company nor any of its Subsidiaries will
adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
the Company or any of its Subsidiaries (other than the Merger);
(k) neither the Company nor any of its Subsidiaries will
take, or agree to commit to take, any action that would make any
representation or warranty of the Company contained herein inaccurate in
any material respect at, or as of any time prior to, the Effective Time;
and
(l) neither the Company nor any of its Subsidiaries will
enter into an agreement, contract, commitment or arrangement to do any of
the foregoing, or to authorize, recommend, propose or announce an intention
to do any of the foregoing.
39
Section 5.2 Rights Agreement. Except for the amendments
contemplated by Section 1.2(d) hereof or amendments approved in writing by
Parent or the Purchaser, the Company will not, following the date hereof,
amend the Rights Agreement in any manner. In addition the Company covenants
and agrees that it will not redeem the Rights unless such redemption is
consented to in writing by Parent prior to such redemption.
Section 5.3 HSR Act. The Company and Parent shall take all
reasonable actions necessary to file as soon as practicable following the
date hereof notifications under the HSR Act and to respond as promptly as
practicable to any inquiries received from the Federal Trade Commission and
the Antitrust Division of the Department of Justice for additional
information or documentation and to respond as promptly as practicable to
all inquiries and requests received from any State Attorney General or
other Governmental Entity in connection with antitrust matters.
Section 5.4 Access to Information. Upon reasonable notice, the
Company shall (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, counsel, financing sources and other
representatives of Parent, access, during normal business hours during the
period prior to the Appointment Date, to all its properties, books,
contracts, commitments and records and, during such period, the Company
shall (and shall cause each of its Subsidiaries to) furnish promptly to the
Parent (a) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of federal securities laws and (b) all other information
concerning its business, properties and personnel as Parent may reasonably
request. After the Appointment Date, the Company shall provide Parent and
such persons as Parent shall designate with all such information, at such
time, as Parent shall request. Unless otherwise required by law and until
the Appointment Date, Parent will hold any such information which is
nonpublic in confidence in accordance with the provisions of the letter
agreement, dated August 8, 1998 among the Company, Parent and the Purchaser
(the "Confidentiality Agreement").
40
Section 5.5 Consents and Approvals. Each of the Company, Parent
and the Purchaser will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with
respect to this Agreement and the transactions contemplated hereby (which
actions shall include, without limitation, furnishing all information
required under the HSR Act and in connection with approvals of or filings
with any other Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with
this Agreement and the transactions contemplated hereby. Each of the
Company, Parent and the Purchaser will, and will cause its Subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with
each other in obtaining) any consent, authorization, order or approval of,
or any exemption by, any Governmental Entity or other public or private
third party required to be obtained or made by Parent, the Purchaser, the
Company or any of their Subsidiaries in connection with the Merger or the
taking of any action contemplated thereby or by this Agreement.
Section 5.6 Employee Benefits. Parent agrees that, effective as
of the Effective Time and for a period of 18 months thereafter, the
Surviving Corporation and its Subsidiaries shall provide benefits to their
employees that are comparable with those provided by Parent to similarly
situated employees of Parent or any of its Subsidiaries, taking into
account all relevant factors, including, without limitation, the businesses
in which the Surviving Corporation and its Subsidiaries are engaged. Parent
further agrees that effective as of the Effective Time (i) all employer
contributions made to the Company's 401(k) Plan shall be fully vested and
(ii) all employees of the Surviving Corporation will be provided credit for
pay and benefits purposes, by the Surviving Corporation, for all prior
service with the Company (including, as applicable, service with any other
entity which has merged into or has been acquired by the Company)
substantially comparable in all material respects to the credit for service
provided by the Company as of the date hereof; provided, however, that such
crediting shall not apply for benefit accrual purposes under any defined
benefit plan and shall not result in any duplication of benefits.
41
Section 5.7 No Solicitation. Neither the Company nor any of its
Subsidiaries or affiliates shall (and the Company shall use its best
efforts to cause its and each of its Subsidiaries' officers, directors,
employees, representatives and agents, including, but not limited to,
investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, provide any information to, or enter into any agreement
with, any corporation, partnership, person or other entity or group (other
than Parent, any of its affiliates or representatives) concerning any
merger, tender offer, exchange offer, sale of assets, sale of shares of
capital stock or debt securities or similar transactions involving the
Company or any Subsidiary, division or operating or principal business unit
of the Company (an "Acquisition Proposal"). The Company further agrees that
it will immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of
the foregoing. Notwithstanding the foregoing, the Company may, directly or
indirectly, provide access and furnish information concerning its business,
properties or assets to any corporation, partnership, person or other
entity or group pursuant to appropriate confidentiality agreements, and may
negotiate and participate in discussions and negotiations with such entity
or group if (w) such entity or group has submitted an unsolicited bona fide
written proposal to the Board of Directors of the Company relating to any
such transaction, (x) such proposal provides for the acquisition for cash
and/or publicly traded securities of all of the outstanding Shares, (y) the
Board of Directors of the Company determines in good faith, after
consultation with its independent financial advisor, that such proposal is
financially superior to the Offer and the Merger and fully financed or
reasonably capable of being financed, and (z) the Board of Directors of the
Company determines in good faith, after consultation with independent legal
counsel, that the failure to provide such information or access or to
engage in such discussions or negotiations would violate their fiduciary
duties to the Company's shareholders under applicable law. A proposal
meeting all of the criteria in the preceding sentence is referred to herein
as a "Superior Proposal." Nothing contained in this Section 5.7 shall
prohibit the Company or its Board of Directors from taking and disclosing
42
to the Company's shareholders a position with respect to a tender offer by
a third party pursuant to Rules l4d-9 and l4e-2(a) promulgated under the
Exchange Act. The Company will immediately notify Parent of any Acquisition
Proposal, or if an inquiry is made, will keep Parent fully apprised of all
developments with respect to any Acquisition Proposal, will immediately
provide to Parent copies of any written materials received by the Company
in connection with any Acquisition Proposal, discussion, negotiation or
inquiry and the identify of the party making any Acquisition Proposal or
inquiry or engaging in such discussion or negotiation. The Company will
promptly provide to Parent any non-public information concerning the
Company provided to any other party which was not previously provided to
Parent. The Company agrees not to release any third party from, or waive
any provisions of, any confidentiality or standstill agreement to which the
Company is a party. Notwithstanding anything to the contrary contained in
this Agreement, except in connection with the valid termination of this
Agreement pursuant to Section 7.1(c)(i) hereof, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw, or
modify or change in a manner adverse to Parent or the Purchaser, or propose
to withdraw, or propose to modify or change in a manner adverse to Parent
or the Purchaser, the approval or recommendation by such Board of Directors
or any such committee of the Offer, this Agreement or the Merger, (ii)
approve or recommend or propose to approve or recommend, any Acquisition
Proposal or (iii) enter into any agreement with respect to any Acquisition
Proposal.
Section 5.8 Brokers or Finders. The Company represents, as to
itself, its Subsidiaries and its affiliates, that no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any brokers' or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this
Agreement except ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc., whose fees and expenses will
be paid by the Company in accordance with the Company's agreements with
such firm (a copy of which has been delivered by the Company to Parent
prior to the date of this Agreement), and each of Parent and the Company
agrees to indemnify and hold the other harmless from and against any and
43
all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or its affiliates.
Section 5.9 Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, or to remove any injunctions or other
impediments or delays, legal or otherwise, to consummate and make effective
the Merger and the other transactions contemplated by this Agreement.
Parent and the Purchaser agree to use best efforts to enter into the
Financing pursuant to the Commitment Letter and on terms substantially
similar to those contained in either of the Proposed Bridge Arrangements
and to obtain the funding thereunder to the extent necessary to fund the
Offer and the Merger. Parent and the Purchaser also agree to use their best
efforts to maintain the ability to accept proposed bridge arrangements on
terms substantially similar to those contained in either of the Proposed
Bridge Arrangements. The Company agrees to cooperate with Parent and the
Purchaser with respect to consummating such financing. In case at any time
after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors
of the Company and Parent shall use all reasonable efforts to take, or
cause to be taken, all such necessary actions.
Section 5.10 Reserved.
Section 5.11 Publicity. The initial press release with respect to
the execution of this Agreement shall be a joint press release acceptable
to Parent and the Company. Thereafter, so long as this Agreement is in
effect, neither the Company, Parent nor any of their respective affiliates
shall issue or cause the publication of any press release or other
announcement with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the prior consultation of the
other party, except as may be required by law or by any listing agreement
with a national securities exchange.
44
Section 5.12 Notification of Certain Matters. The Company shall
give prompt notice to Parent and Parent shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence of any event the
occurrence, or non-occurrence of which would cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time and (ii) any material
failure of the Company or Parent, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.12 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
Section 5.13 Directors' and Officers' Indemnification. For six
years after the Effective Time, Parent shall, or shall cause the Surviving
Corporation to, indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of the Company and its
Subsidiaries (each an "Indemnified Party") against all losses, claims,
damages, liabilities, fees and expenses (including reasonable fees and
disbursements of counsel and judgments, fines, losses, claims, liabilities
and amounts paid in settlement (provided that any such settlement is
effected with the written consent of the Parent or the Surviving
Corporation)) in connection with any claim, suit, action, proceeding or
investigation that is, in whole or in part, based on or arising out of the
fact that such person is or was a director, officer, employee or agent of
the Company or its Subsidiaries and arising out of actions or omissions
occurring at or prior to the Effective Time, to the fullest extent
permitted under Texas law.
Section 5.14 Disposition of Litigation. Each party agrees to
cause a dismissal with prejudice immediately prior to the Appointment Date
of Midland Acquisition Corp. ▇. ▇▇▇▇▇▇ 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
45
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 ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ to enter into consulting agreements with Parent and the
Purchaser on the terms set forth in the term sheets executed by Messrs.
Little, ▇▇▇▇▇▇▇ and Byerlotzer on the date hereof.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction on or prior to the Closing Date of each of
the following conditions:
(a) Shareholder Approval. This Agreement and the Merger
shall have been approved and adopted by the requisite vote of the holders
of Company Common Stock, if required by applicable law and the Restated
Articles of Incorporation, in order to consummate the Merger;
(b) Statutes; Consents. No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any foreign or
domestic government or any governmental agency or authority of competent
jurisdiction which prohibits the consummation of the Merger and all foreign
or domestic governmental consents, orders and approvals required for the
consummation of the Merger and the transactions contemplated hereby shall
have been obtained and shall be in effect at the Effective Time;
(c) Injunctions. There shall be no order or injunction of a
foreign or United States federal or state court or other governmental
authority of competent jurisdiction in effect precluding, restraining,
enjoining or prohibiting consummation of the Merger; and
46
(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:
(a) By the mutual consent of the Board of Directors of
Parent and the Board of Directors of the Company.
(b) By either of the Board of Directors of the Company or
the Board of Directors of Parent:
(i) if shares of Company Common Stock shall not have been
purchased pursuant to the Offer on or prior to [December 31,
1998]; provided, however, that the right to terminate this
Agreement under this Section 7.1(b)(i) shall not be available to
any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of
the Purchaser to purchase shares of Company Common Stock pursuant
to the Offer on or prior to such date; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use their
reasonable efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable.
(c) By the Board of Directors of the Company:
47
(i) if, prior to the purchase of shares of Company Common
Stock pursuant to the Offer, the Board of Directors of the
Company shall have withdrawn, or modified or changed in a manner
adverse to Parent or the Purchaser its approval or recommendation
of the Offer, this Agreement or the Merger in order to approve
and permit the Company to execute a definitive agreement
providing for a Superior Proposal; provided that (A) at least
five (5) business days prior to terminating this Agreement
pursuant to this Section 7.1(c)(i) the Company has provided
Parent with written notice advising Parent that the Board of
Directors of the Company has received a Superior Proposal that it
intends to accept, specifying the material terms and conditions
of such Superior Proposal and identifying the person making such
Superior Proposal, and (B) the Company shall have caused its
financial and legal advisors to negotiate in good faith with
Parent to make such adjustments in the terms and conditions of
this Agreement as would enable the Company to proceed with the
transactions contemplated herein on such adjusted terms; and
further provided that simultaneously with any termination of this
Agreement pursuant to this Section 7.1(c)(i), the Company shall
pay to Parent the Termination Fee (as defined in Section 8.1(b)
hereof); and further provided that the Company may not terminate
this Agreement pursuant to this Section 7.1(c)(i) if the Company
is in material breach of this Agreement; or
(ii) if, prior to the purchase of shares of Company Common
Stock pursuant to the Offer, Parent or the Purchaser breaches or
fails in any material respect to perform or comply with any of
its material covenants and agreements contained herein or
breaches its representations and warranties in any material
respect; or
(iii) if Parent or the Purchaser shall have terminated the
Offer, or the Offer shall have expired, without Parent or the
Purchaser, as the case may be, purchasing any shares of Company
Common Stock pursuant thereto; provided that the Company may not
48
terminate this Agreement pursuant to this Section 7.1(c)(iii) if
the Company is in material breach of this Agreement; or
(iv) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy
any of the conditions set forth in Annex A hereto, Parent, the
Purchaser or any of their affiliates shall have failed to
commence the Offer on or prior to five business days following
the date of the initial public announcement of the Offer;
provided, that the Company may not terminate this Agreement
pursuant to this Section 7.1(c)(iv) if the Company is in material
breach of this Agreement.
(d) By the Board of Directors of Parent:
(i) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy
any of the conditions set forth in Annex A hereto, Parent, the
Purchaser, or any of their affiliates shall have failed to
commence the Offer on or prior to five business days following
the date of the initial public announcement of the Offer;
provided that Parent may not terminate this Agreement pursuant to
this Section 7.1(d)(i) if Parent or the Purchaser is in material
breach of this Agreement; or
(ii) if prior to the purchase of shares of Company Common
Stock pursuant to the Offer, the Board of Directors of the
Company shall have withdrawn, or modified or changed in a manner
adverse to Parent or the Purchaser its approval or recommendation
of the Offer, this Agreement or the Merger or shall have
recommended an Acquisition Proposal or offer, or shall have
executed an agreement in principle (or similar agreement) or
definitive agreement providing for a tender offer or exchange
offer for any shares of capital stock of the Company, or a
merger, consolidation or other business combination with a person
or entity other than Parent, the Purchaser or their affiliates
(or the Board of Directors of the Company resolves to do any of
the foregoing); provided that Parent may not terminate this
49
7.1(d)(ii) if Parent or the Purchaser is in material Agreement
pursuant to this Section breach of this Agreement; or
(iii) if Parent or the Purchaser, as the case may be, shall
have terminated the Offer, or the Offer shall have expired
without Parent or the Purchaser, as the case may be, purchasing
any shares of Company Common Stock thereunder, provided that
Parent may not terminate this Agreement pursuant to this Section
7.1(d)(iii) if it or the Purchaser has failed to purchase shares
of Company Common Stock in the Offer in violation of the material
terms thereof or hereof.
Section 7.2 Effect of Termination. In the event of the
termination of this Agreement as provided in Section 7.1 hereof, written
notice thereof shall forthwith be given to the other party or parties
specifying the provision hereof pursuant to which such termination is made,
and this Agreement shall forthwith become null and void, and there shall be
no liability on the part of the Parent, the Purchaser or the Company except
(A) for fraud or for intentional material breach of this Agreement and (B)
as set forth in this Section 7.2 and Section 8.1.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as contemplated by this
Agreement, including Sections 8.1(b), 8.1(c) and 8.1(d) hereof, all costs
and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the
party incurring such expenses.
(b) If (w) the Board of Directors of the Company shall
terminate this Agreement pursuant to Section 7.1(c)(i) hereof, (x) the
Board of Directors of Parent shall terminate this Agreement pursuant to
Section 7.1(d)(ii) hereof, (y) the Board of Directors of the Company shall
terminate this Agreement pursuant to Section 7.1(b)(i) or Section 7.1
(c)(iii) or the Board of Directors of Parent shall terminate this Agreement
50
pursuant to Section 7.1(b)(i) or Section 7.1(d)(iii) and prior thereto
there shall have been publicly announced another Acquisition Proposal or
(z) the Board of Directors of Parent shall terminate this Agreement
pursuant to Section 7.1(d)(i) or Section 7.1(d)(iii) hereof, in each case
due to a material breach of this Agreement by the Company, then in any such
case as described in clause (w), (x), (y) or (z) (each such case of
termination being referred to as a "Trigger Event"), the Company shall pay
to Parent (not later than one business day after such termination of this
Agreement or, in the case of any termination by the Company pursuant to
Section 7.1(c)(i) hereof, simultaneously with such termination) an amount
equal to $10 million (the "Termination Fee").
(c) Upon the termination of this Agreement due to the
occurrence of a Trigger Event, the Company agrees that, in addition to the
payment of the Termination Fee provided for in Section 8.1(b) hereof, it
shall promptly reimburse Parent for all actual, documented and reasonable
out-of-pocket expenses incurred, or to be incurred by Parent, the Purchaser
and their affiliates (including the fees and expenses of legal counsel,
accountants, financial advisors, other consultants, financial printers and
financing sources) ("Expenses") in connection with the Offer, the Merger
and the consummation of the transactions contemplated by this Agreement, in
an amount not to exceed $5 million in the aggregate.
(d) If the Company shall terminate this Agreement pursuant
to Section 7.1(c)(ii) hereof, and the Company is not in material breach of
this Agreement at the time of such termination, or if the Purchaser fails
to fund the purchase of Shares pursuant to the Offer as a result of its
failure to secure the Financing pursuant to the Commitment Letter and/or
the Proposed Bridge Arrangements, or otherwise secure the Financing, Parent
shall pay to the Company (not later than one business day after such
termination) an amount equal to the Termination Fee, together with an
amount not to exceed $5 million as reimbursement to the Company for its
actual, documented and reasonable out-of-pocket Expenses.
Section 8.2 Amendment and Modification. Subject to applicable
law, this Agreement may be amended, modified and supplemented in any and
51
all respects, whether before or after any vote of the shareholders of the
Company contemplated hereby, by written agreement of the parties hereto, by
action taken by their respective Boards of Directors (which in the case of
the Company shall include approvals as contemplated in Section 1.3(b)
hereof), at any time prior to the Closing Date with respect to any of the
terms contained herein; provided, however, that after the approval of this
Agreement by the shareholders of the Company, no such amendment,
modification or supplement shall reduce or change the Merger Consideration.
Section 8.3 Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall
survive the Effective Time.
Section 8.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or sent by an overnight courier
service, such as Federal Express, to the parties at the following addresses
(or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or the Purchaser, to:
Key Energy Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
C. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Skadden, Arps, Slate, ▇▇▇▇▇▇▇
& ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
52
(b) if to the Company, to:
▇▇▇▇▇▇ Production Services, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇, Esq.
▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
53
and:
▇. ▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
Jenkens & ▇▇▇▇▇▇▇▇▇
2200 One American Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 8.5 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. Whenever the words "include",
"includes" or "including" are used in this Agreement they shall be deemed
to be followed by the words "without limitation". The phrase "made
available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information
is to be made available. The phrases "the date of this Agreement", "the
date hereof", and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to August 11, 1998. As used in this
Agreement, the term "affiliate(s)" shall have the meaning set forth in Rule
l2b-2 of the Exchange Act.
Section 8.6 Counterparts. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have
been signed by each of the parties and delivered to the other parties, it
being understood that all parties need not sign the same counterpart.
Section 8.7 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership. This Agreement and the Confidentiality Agreement
(including the documents and the instruments referred to herein and
therein): (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) except as provided in
Sections 5.6 and 5.13 hereof are not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
54
Section 8.8 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void, unenforceable or against its
regulatory policy, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
Section 8.9 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas without giving
effect to the principles of conflicts of law thereof.
Section 8.10 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the Purchaser may assign,
in its sole discretion, any or all of its rights, interests and obligations
hereunder to Parent or to any direct or indirect wholly owned Subsidiary of
Parent. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
55
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: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name:
Title:
MIDLAND ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Name:
Title:
▇▇▇▇▇▇ PRODUCTION SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name:
Title:
56
ANNEX A
CONDITIONS TO THE TENDER OFFER
Notwithstanding any other provisions of the Offer, and in
addition to (and not in limitation of) the Purchaser's rights to extend and
amend the Offer at any time in its sole discretion (subject to the
provisions of the Merger Agreement), the Purchaser shall not be required to
accept for payment or, subject to any applicable rules and regulations of
the SEC, including Rule 14e-1(c) under the Exchange Act (relating to the
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the
acceptance for payment of or, subject to the restriction referred to above,
the payment for, any tendered Shares, and may terminate the Offer as to any
Shares not then paid for, if (i) any applicable waiting period under the
HSR Act has not expired or terminated, (ii) the Minimum Condition has not
been satisfied, (iii) the Rights Agreement shall not have been amended in a
manner which renders the Rights inoperative with respect to any acquisition
of Shares by Parent or the Purchaser, (iv) Purchaser has not received funds
under the Commitment Letter to enable the Purchaser to purchase all Shares
outstanding pursuant to the Offer and the Merger or has not obtained a
definitive financing commitment on terms substantially similar to those
contained in either of the Proposed Bridge Arrangements or (v) at any time
on or after August 11, 1998 and before the time of payment for any such
Shares, any of the following events shall occur or shall be determined by
the Purchaser to have occurred:
(a) there shall have been any action taken, or any statute,
rule, regulation, judgment, order or injunction promulgated, entered,
enforced, enacted, issued or applicable to the Offer or the Merger by any
domestic or foreign federal or state governmental regulatory or
administrative agency or authority or court or legislative body or
commission which directly or indirectly (l) prohibits, or imposes any
material limitations on, Parent's or the Purchaser's ownership or operation
(or that of any of their respective Subsidiaries or affiliates) of all or a
material portion of their or the Company's businesses or assets, or compels
Parent or the Purchaser or their respective Subsidiaries and affiliates to
dispose of or hold separate any material portion of the business or assets
A-1
of the Company or Parent and their respective Subsidiaries, in each case
taken as a whole, (2) prohibits, or makes illegal the acceptance for
payment, payment for or purchase of Shares or the consummation of the Offer
or the Merger, (3) results in the delay in or restricts the ability of the
Purchaser, or renders the Purchaser unable, to accept for payment, pay for
or purchase some or all of the Shares, (4) imposes material limitations on
the ability of the Purchaser or Parent effectively to exercise full rights
of ownership of the Shares, including, without limitation, the right to
vote the Shares purchased by it on all matters properly presented to the
Company's shareholders, or (5) otherwise materially adversely affects the
consolidated financial condition, businesses or results of operations of
the Company and its Subsidiaries, taken as a whole;
(b) there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange for a period in excess of three hours (excluding suspensions or
limitations resulting solely from physical damage or interference with such
exchanges not related to market conditions), (2) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (3) a commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States, (4) any limitation (whether or not
mandatory) by any foreign or United States governmental authority on the
extension of credit by banks or other financial institutions, (5) any
decline in either the Dow ▇▇▇▇▇ Industrial Average or the Standard & Poor's
Index of 500 Industrial Companies by an amount in excess of 20% measured
from the close of business on August 11, 1998 or (6) in the case of any of
the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof;
(c) the representations and warranties of the Company set
forth in the Merger Agreement shall not be true and correct as of the date
of consummation of the Offer as though made on or as of such date, and the
failure to be true and correct has or is reasonably likely to have a
material adverse effect on the Company, except (i) for changes specifically
permitted by the Merger Agreement and (ii) those representations and
warranties that address matters only as of a particular date are true and
correct as of such date, or the Company shall have breached or failed in
any material respect to perform or comply with any obligation, agreement
A-2
or covenant required by the Merger Agreement to be performed or complied
with by it and such failure shall have or be reasonably likely to have a
material adverse effect on the Company;
(d) the Merger Agreement shall have been terminated in
accordance with its terms;
(e) (i) it shall have been publicly disclosed or Parent or
the Purchaser shall have otherwise learned that any person, entity or
"group" (as defined in Section 13(d)(3) of the Exchange Act), other than
Parent or its affiliates or any group of which any of them is a member,
shall have acquired beneficial ownership (determined pursuant to Rule 13d-3
promulgated under the Exchange Act) of more than 14.9% of any class or
series of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have
been granted an option, right or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 14.9% of any class or series of
capital stock of the Company (including the Shares); or (ii) any person or
group shall have entered into a definitive agreement or agreement in
principle with the Company with respect to a merger, consolidation or other
business combination with the Company; or
(f) the Company's Board of Directors shall have withdrawn,
or modified or changed in a manner adverse to Parent or the Purchaser
(including by amendment of the Schedule 14D-9) its recommendation of the
Offer, the Merger Agreement, or the Merger, or recommended another proposal
or offer, or shall have resolved to do any of the foregoing;
which in the sole judgment of Parent or the Purchaser, in any such case,
and regardless of the circumstances (including any action or inaction by
Parent or the Purchaser giving rise to such condition) makes it inadvisable
to proceed with the Offer or with such acceptance for payment or payments.
The foregoing conditions are for the sole benefit of the
Purchaser and Parent and may be waived by Parent or the Purchaser, in whole
or in part at any time and from time to time in the sole discretion of
Parent or the Purchaser. The failure by Parent or the Purchaser at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any
A-3
such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
A-4