UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-27732
DAWSON PRODUCTION SERVICES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-2231546
(State or other jurisdiction (I.R.S. Employer
or organization) Identification No.)
112 E. Pecan Street, Suite 1000
San Antonio, Texas 78205
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (210) 476-0420
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of common
stock as of August 17, 1998: Common Stock, $0.01 par value per share- 11,100,465
shares.
<PAGE>
Dawson Production Services, Inc.
Index to Form 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -
March 31, 1997 and June 30, 1998...........................1
Consolidated Statements of Operations -
Three Months Ended June 30, 1997 and
June 30, 1998..............................................2
Consolidated Statements of Cash Flows -
Three Months Ended June 30, 1997 and
June 30, 1998..............................................3
Notes to Interim Condensed Consolidated Financial
Statements ................................................4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations........6
PART II. OTHER INFORMATION......................................9
SIGNATURE.......................................................11
EXHIBITS
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS(unaudited)
DAWSON PRODUCTION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
ASSETS
March 31, June 30,
1998 1998
----------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................... $ 24,964 $ 30,400
Trade receivables, substantially all pledged (net of allowance
for doubtful accounts of $966 and $922, respectively) .... 39,632 36,779
Other receivables ............................................ 848 1,281
Income taxes receivable ...................................... 1,624 224
Prepaid expenses and other ................................... 573 1,399
--------- ---------
Total current assets ............................... 67,641 70,083
Net property and equipment ........................................ 164,846 168,296
Goodwill and other assets ......................................... 57,866 59,045
--------- ---------
Total assets ....................................... $ 290,353 $ 297,424
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................. $ 8,444 $ 8,333
Accrued liabilities .......................................... 8,825 12,296
Current portion of long-term debt ............................ 353 403
Current portion of obligations under capital leases .......... 1,086 1,336
--------- ---------
Total current liabilities .......................... 18,708 22,368
--------- ---------
Long-term debt, net of current portion ............................ 4,058 4,163
Obligations under capital leases, net of current portion .......... 3,145 4,444
Senior notes ...................................................... 140,000 140,000
Deferred income taxes ............................................. 10,943 11,594
Shareholders' equity :
Preferred stock, no par value, 561 shares authorized, none
issued and outstanding ................................... -- --
Common stock, $.01 par value, 20,561 shares authorized,
11,178 and 11,203 issued and 11,078 and 11,100 ........... 112 112
outstanding, respectively
Paid-in capital ............................................... 97,707 98,001
Retained earnings ............................................. 17,069 18,156
Notes receivable from officers ................................ (142) (142)
--------- ---------
114,746 116,127
Less treasury common stock, at cost ........................... (1,247) (1,272)
--------- ---------
Total shareholders' equity ......................... 113,499 114,855
Commitments and contingencies
--------- ---------
Total liabilities and shareholders' equity ......... $ 290,353 $ 297,424
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
DAWSON PRODUCTION SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended
June 30,
---------------------
1997 1998
-------- -------
Revenues ........................................... $ 54,732 $ 51,798
-------- --------
Costs and expenses:
Operating ..................................... 36,104 35,336
General and administrative .................... 7,578 5,834
Depreciation and amortization ................. 5,181 6,362
-------- --------
Total costs and expenses ............ 48,863 47,532
-------- --------
Operating income .................. 5,869 4,266
-------- --------
Other income and expenses:
Interest expense .............................. 3,324 3,469
Other expense (income), net ................... (556) (994)
-------- --------
Total other income and expenses ..... 2,768 2,475
-------- --------
Income before income taxes ......................... 3,101 1,791
Provision for income taxes ......................... 1,225 704
-------- --------
Net income ......................................... $ 1,876 $ 1,087
======== ========
Earnings per common share:
Basic ......................................... $ 0.17 $ 0.10
Diluted ....................................... $ 0.17 $ 0.10
Weighted average common and common equivalent
shares outstanding:
Basic ......................................... 11,126 11,099
Diluted ....................................... 11,245 11,235
See accompanying notes to consolidated financial statements.
2
<PAGE>
DAWSON PRODUCTION SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------------------
1997 1998
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................. $ 1,876 $ 1,087
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization .............................. 5,181 6,362
Allowance for doubtful accounts ............................ (75) 44
(Gain) loss on sale of assets .............................. -- (686)
Increase in deferred income taxes .......................... 166 651
(Increase) decrease in receivables ......................... (14,615) 3,776
Increase in prepaid expense and other ...................... (666) (826)
Decrease (increase) in other assets ........................ (103) (124)
Decrease in accounts payable ............................... (3,747) (111)
Increase (decrease) in accrued expenses .................... 6,326 3,471
-------- --------
Net cash provided (used) by operating activities (5,657) 13,644
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions ............................................... -- (4,356)
Additions to property and equipment ........................ (2,157) (4,913)
Proceeds from sales of property ............................ -- 1,344
-------- --------
Net cash used in investing activities ......... (2,157) (7,925)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt ................................. (108) (96)
Capital lease payments ..................................... (17) (206)
Purchase of treasury stock ................................. -- (25)
Exercise of common stock options and warrants .............. -- 44
-------- --------
Net cash used in financing activities ........ (125) (283)
-------- --------
Net decrease in cash ......................... (7,939) 5,436
Cash and cash equivalents at the beginning of the period .. 42,330 24,964
-------- --------
Cash and cash equivalents at the end of the period ........ $ 34,391 $ 30,400
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID FOR:
Interest ........................................ $ 96 $ 183
Income taxes .................................... 53 90
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Assets acquired under capital lease ......................... 670 1,756
Common Stock issued to seller in acquisition ............... -- 250
Issuance of note payable for acquisition .................... -- 250
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
PART I--FINANCIAL INFORMATION
DAWSON PRODUCTION SERVICES, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The unaudited consolidated financial statements included herein have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, pursuant to such rules and
regulations. These unaudited consolidated financial statements should be read in
conjunction with Dawson Production Services, Inc. (the "Company's") audited
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended March 31, 1998.
The unaudited consolidated financial information included herein reflects
all adjustments, consisting only of normal recurring adjustments, which are
necessary, in the opinion of management, for a fair presentation of the
Company's financial position and results of operations for the interim periods
presented. The interim information contained herein is not necessarily
indicative of the results to be expected for the full year.
2. ACQUISITIONS
In April 1998, the Company acquired the assets of a small liquid
service company in Texas. The aggregate purchase price was approximately $2.2
million.
3. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
4. RECLASSIFICATION
Certain amounts, as previously presented, have been reclassified to
conform with the current period consolidated financial statement presentation.
5. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share (FAS
128)," which establishes standards for computing and presenting earnings per
share. The Company has adopted this Standard for the period ended June 30, 1998.
Prior period amounts have been recalculated to conform with the reporting
requirements of FAS 128.
4
<PAGE>
Basic earnings per share is computed by deducting preferred dividends from
net income in order to determine net income attributable to common shareholders.
This amount is then divided by the weighted average number of common shares
outstanding. Diluted earnings per share is determined by dividing net income
plus tax effected convertible debt interest by the weighted average number of
common shares outstanding during the year after giving effect for dilutive
potential common shares arising from stock options, convertible debt, and/or
preferred stock assumed converted to common stock.
The computation of shares used in diluted earnings per share is as follows:
THREE MONTHS
ENDED JUNE 30,
-------------------
1997 1998
------ ------
Weighted average outstanding common shares ........ 11,126 11,099
Effect of dilutive securities-stock options ....... 119 136
------ ------
Shares used in earnings per share computation ..... 11,245 11,235
====== ======
6. NEW PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130 "Reporting
Comprehensive Income," which establishes standards for reporting and display of
comprehensive income and its components in the financial statements. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997. The Company
had no other comprehensive income. The FASB also issued in June 1997 SFAS No.
131 "Disclosures About Segments of an Enterprise and Related Information," which
establishes new standards for the way public companies disclose information
about operating segments, products and services, geographic areas and major
customers. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. The Company believes SFAS 131 will not have
a material impact on its financial statements and disclosures.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes standards of accounting
and reporting for derivative instruments and for hedging activities. It requires
that all derivatives be recognized as either assets and liabilities in the
statement of financial position and measures these instruments at fair value.
This statement is effective for financial statements for years beginning after
June 15, 1999. The Company believes SFAS No. 133 will not have a material impact
on its financial statements and disclosures.
7. SUBSEQUENT EVENTS
On August 11, 1998, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") between the Company, Midland Acquisition Corp.
("Midland") and Key Energy Group, Inc. ("Key"). The Merger Agreement provides
for the tender offer (the "Offer") by Midland to purchase for cash all
outstanding shares of the Company's Common Stock at $17.50 per share. The Merger
Agreement also provides, among other things, that following consummation of the
Offer and satisfaction or waiver of the conditions set forth in the Merger
Agreement, Midland will be merged with and into the Company, the separate
corporate existence of Midland will cease and the Company will continue as the
surviving corporation and a directly wholly owned subsidiary of Key.
On or about August 14, 1998, the Company entered into an Asset Purchase
Agreement pursuant to which it has agreed, subject to the satisfaction of
certain post-closing covenants, including due diligence, to purchase
substantially all of the operating assets of Hellums Services II, Inc., Superior
Completion Services, Inc., South Texas Disposal, Inc. and Elsik II, Inc. (the
"Hellums Group") in exchange for $46,000,000 in cash (the "Hellums
Transaction"). The parties have agreed to close the Hellums Transaction on or
about the date of the closing of the transactions contemplated by the Merger
Agreement with Key (the "Key Transaction"); provided, however, that if the Key
Transaction does not close, the Company has the option of paying $11,000,000 of
the purchase price for the Hellums Group in the form of 880,000 shares of the
Company's common stock. If the Key Transaction does not close, the Company
anticipates that, in order to close the Hellums Transaction, it will be required
to borrow funds to pay the cash portion of the purchase price by drawing down on
its bank line of credit. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations- Liquidity and Capital Resources; -Credit
Facilities and Long Term Debt."
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Information
This Quarterly Report on Form 10-Q includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical information provided herein are
forward-looking and may contain information about financial results, economic
conditions, trends and known uncertainties. The Company cautions the reader that
actual results could differ materially from those expected by the Company
depending on the outcome of certain factors, including without limitation (i)
fluctuations in the price of oil and natural gas, competition, operating risk,
acquisition risk, liquidity and capital requirements and the effect of
government and environmental regulations and (ii) adverse changes in the market
for the Company's services. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to release publicly the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereon, including without limitation,
changes in the Company's business strategy or planned capital expenditures, or
to reflect the occurrence of unanticipated events.
Subsequent Events
On August 11, 1998, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") between the Company, Midland Acquisition Corp.
("Midland") and Key Energy Group, Inc. ("Key"). The Merger Agreement provides
for the tender offer (the "Offer") by Midland to purchase for cash all
outstanding shares of the Company's Common Stock at $17.50 per share. The Merger
Agreement also provides, among other things, that following consummation of the
Offer and satisfaction or waiver of the conditions set forth in the Merger
Agreement, Midland will be merged with and into the Company, the separate
corporate existence of Midland will cease and the Company will continue as the
surviving corporation and a directly wholly owned subsidiary of Key.
On or about August 14, 1998, the Company entered into an Asset Purchase
Agreement pursuant to which it has agreed, subject to the satisfaction of
certain post-closing covenants, including due diligence, to purchase
substantially all of the operating assets of Hellums Services II, Inc., Superior
Completion Services, Inc., South Texas Disposal, Inc. and Elsik II, Inc. (the
"Hellums Group") in exchange for $46,000,000 in cash (the "Hellums
Transaction"). The parties have agreed to close the Hellums Transaction on or
about the date of the closing of the transactions contemplated by the Merger
Agreement with Key (the "Key Transaction"); provided, however, that if the Key
Transaction does not close, the Company has the option of paying $11,000,000 of
the purchase price for the Hellums Group in the form of 880,000 shares of the
Company's common stock. If the Key Transaction does not close, the Company
anticipates that, in order to close the Hellums Transaction, it will be required
to borrow funds to pay the cash portion of the purchase price by drawing down on
its bank line of credit. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations- Liquidity and Capital Resources; -Credit
Facilities and Long Term Debt."
Results of Operations - Quarters Ended June 30, 1998 and 1997
Revenues. Revenues were $51.8 million in the quarter ended June 30, 1998, a
5% decrease compared with revenues of $54.7 million in the quarter ended June
30, 1997. Compared to the same period in 1997, revenues in the quarter ended
June 30, 1998 decreased by 11% in the workover line of business, while the
liquid and production services lines of business increased 6%. The overall
decrease in revenues is primarily attributable to the decline in the price of
crude oil. The decline in oil prices has decreased utilization primarily in the
Gulf Coast and Permian Basin Regions.
Operating Costs. Operating costs for the quarter ended June 30, 1998 were
$35.3 million, a decrease of 2% from $36.1 million for the quarter ended June
30, 1997. This decrease corresponds with the decline in revenue. Operating costs
as a percent of revenue increased to 68% for the quarter ended June 30, 1998 as
compared to 66% for the quarter ended June 30, 1997.
6
<PAGE>
General and Administrative Expenses. General and administrative expenses for
the quarter ended June 30, 1998 were $5.8 million, a decrease of 23% from $7.6
million for the quarter ended June 30, 1997. This decrease was due primarily to
the Company responding to the decrease in revenue by reducing administrative
costs. As a percentage of revenues, general and administrative expenses
decreased to 11% for the quarter ended June 30, 1998, compared to 14% for the
quarter ended June 30, 1997.
Depreciation and Amortization. Depreciation and amortization expense for the
quarter ended June 30, 1998 was $6.4 million, an increase of 23% from $5.2
million for the quarter ended June 30, 1997. This increase was due to a
substantial increase in the Company's asset base resulting from acquisitions in
fiscal 1998.
Interest Expense. Interest expense in the first quarter of 1998 was $3.5
million compared to $3.3 million in the first quarter of 1997. This increase is
substantially due to additional debt incurred for acquisitions in fiscal 1998.
Other Income. Other income and expense (net) in the first quarter of 1998,
was $1.0 million compared to $0.6 million in the first quarter of 1997. This
increase is attributable primarily to gain on sale of assets due to an auction.
Net Income. For the quarter ended June 30, 1998, the Company had net income
of $1.1 million, a 42% decrease in earnings over the $1.9 million for the
quarter ended June 30, 1997. The decrease in earnings is attributed to the
decline in the price of crude oil, which reduced utilization of the Company's
services.
Liquidity and Capital Resources
Cash Flows. The Company had cash and cash equivalents of $30.4 million at
June 30, 1998 compared to $25.0 million at March 31, 1998. Working capital was
$47.7 million and $48.9 million at June 30, 1998 and March 31, 1998,
respectively. The Company used $9.3 million and $2.1 million for investing
activities for capital expenditures for the three months ended June 30, 1998 and
1997, respectively. The Company anticipates that fiscal 1999 capital
expenditures will consist of approximately $21.7 million for improvements to its
existing equipment and expanding capital additions. Acquisitions of additional
assets and businesses are expected to continue to be an important part of the
Company's strategy for growth. The Company would, under certain circumstances,
need to obtain additional financing to fund such acquisitions. If the Company is
unable to locate suitable acquisitions or to obtain financing on acceptable
terms, the Company's growth will be adversely affected. While the Company
believes it will be able to negotiate favorable acquisitions and financing,
there can be no assurance that this will be the case.
Credit Facilities and Long-term Debt. The Company has available a bank line
of credit to finance temporary working capital requirements and to support the
issuance of letters of credit. The maximum availability is the lesser of (i)
$50.0 million or (ii) a calculated amount based on a percentage of accounts
receivable meeting a certain criteria. This line of credit is secured by a first
lien security interest on the Company's accounts receivable. Borrowings under
this line of credit mature on February 20, 1999. The Company had not drawn
against the Working Line as of June 30, 1998, but has used the line to secure
letters of credit totaling $1.8 million related to its worker's compensation
insurance program.
YEAR 2000 ISSUE
The Year 2000 issue is a result of computer programs being written using two
digits rather than four to define the applicable year. The Company has conducted
a preliminary review of its computer systems to identify those that could be
affected by the Year 2000 issue and has developed an informal implementation
plan to resolve the issue. The Company is utilizing both internal and external
resources to correct or reprogram and test the systems for the Year 2000
compliance. It is anticipated that all remediation efforts will be completed by
December 31, 1998, allowing adequate time for testing. The Company is also in
the process of communicating to primary processing vendors and customers
(including customers that utilize Electronic Data Interchange [EDI]) to help the
Company identify and resolve any Year 2000 issues. However, no estimates can be
made as to the potential adverse impact that may result from the failure of the
Company's vendors, customers and others with which it conducts business to
become Year 2000 compliant. The Company does not expect the amounts required to
be expensed for any Year 2000 issues over the next two years to have a material
effect on its financial position of results of operations.
7
<PAGE>
Inflation
Inflation has not had a significant impact on the Company's operations to
date.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See note 3 herein to the Notes to the Unaudited Consolidated
Financial Statements.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters have been submitted to a vote of security holders
during the quarter ended June 30, 1998.
ITEM 5. OTHER INFORMATION
On August 11, 1998, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") between the Company, Midland Acquisition Corp.
("Midland") and Key Energy Group, Inc. ("Key"). The Merger Agreement provides
for the tender offer (the "Offer") by Midland to purchase for cash all
outstanding shares of the Company's Common Stock at $17.50 per share. The Merger
Agreement also provides, among other things, that following consummation of the
Offer and satisfaction or waiver of the conditions set forth in the Merger
Agreement, Midland will be merged with and into the Company, the separate
corporate existence of Midland will cease and the Company will continue as the
surviving corporation and a directly wholly owned subsidiary of Key.
On or about August 14, 1998, the Company entered into an Asset Purchase
Agreement pursuant to which it has agreed, subject to the satisfaction of
certain post-closing covenants, including due diligence, to purchase
substantially all of the operating assets of Hellums Services II, Inc., Superior
Completion Services, Inc., South Texas Disposal, Inc. and Elsik II, Inc. (the
"Hellums Group") in exchange for $46,000,000 in cash (the "Hellums
Transaction"). The parties have agreed to close the Hellums Transaction on or
about the date of the closing of the transactions contemplated by the Merger
Agreement with Key (the "Key Transaction"); provided, however, that if the Key
Transaction does not close, the Company has the option of paying $11,000,000 of
the purchase price for the Hellums Group in the form of 880,000 shares of the
Company's common stock. If the Key Transaction does not close, the Company
anticipates that, in order to close the Hellums Transaction, it will be required
to borrow funds to pay the cash portion of the purchase price by drawing down on
its bank line of credit. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations- Liquidity and Capital Resources; -Credit
Facilities and Long Term Debt."
9
<PAGE>
ITEM 6. EXHIBITS
a. 10.27 Form Indemnification Agreement
10.28 Amendment No. 1 to Executive Employment Agreement dated as of
April 1, 1998 between the Company and Michael E. Little
10.29 Amendment No. 2 to Executive Employment Agreement dated
August 10, 1998 by and between the Company and Michael E.
Little
10.30 Executive Employment Agreement dated July 1, 1998 between the
Company and James J. Byerlotzer
10.31 Amendment No. 1 to Executive Employment Agreement dated as of
August 10, 1998 by and between the Company and James J.
Byerlotzer
10.32 Executive Employment Agreement dated as of April 1, 1998
between the Company and P. Mark Stark
10.33 Amendment No. 1 to Executive Employment Agreement dated as of
August 10, 1998 by and between the Company and P. Mark Stark
10.34 Amendment No. 1 to Executive Employment Agreement dated as of
August 10, 1998 by and between the Company and Joseph Eustace
10.35 Dawson Production Services, Inc. Employee Severance Pay Plan
10.36 Resolution of the Board of Directors of the Company dated
August 7, 1998 amending the Rights Agreement
10.37 Agreement and Plan of Merger dated on or about August 11,
1998 by and between the Company, Midland Acquisition Corp.
and Key Energy Group
10.38 Asset Purchase Agreement dated August 14, 1998 by and between
Dawson Production Partners, L.P., Dawson Production Services,
Inc., Hellums Services II, Inc., Superior Completion
Services, Inc., South Texas Disposal, Inc., Elsik II, Inc.
and Roger D. Hellums, Charles C. Forbes, Jr., Robert W.
Radle, Jr. Ronald D. Brieden, John E. Crisp, Charles Talley
and James J. Acker.
11.1 Earnings per share computations.
b. Reports on Form 8-K
In a Current Report on Form 8-K dated July 30, 1998, the Company
reported four resolutions amending the bylaws of the corporation.
10
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
DAWSON PRODUCTION SERVICES, INC.
By: /s/ MICHAEL E. LITTLE
Michael E. Little
Chief Executive Officer
Date: August 19, 1998
EXHIBIT 10.27
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered into
to be effective as of the 20th day of July, 1998, by and between Dawson
Production Services, Inc., a Texas corporation ("Dawson"), and
_________________, a Texas resident ("Indemnitee").
WHEREAS, competent and experienced persons are reluctant to serve or to
continue to serve corporations as directors or in other capacities unless they
are provided with adequate protection through insurance or indemnification (or
both) against claims and actions against them arising out of their service to
and activities on behalf of those corporations;
WHEREAS, the Board of Directors of Dawson has determined that the
continuation of present trends in litigation will make it more difficult to
attract and retain competent and experienced persons, that this situation is
detrimental to the best interests of the shareholders of Dawson and that such
corporation should act to assure its directors and officers that there will be
increased certainty of adequate protection in the future;
WHEREAS, the Articles of Incorporation of Dawson require Dawson to
indemnify its directors and officers to the fullest extent permitted by law;
WHEREAS, it is reasonable, prudent, and necessary for Dawson to obligate
itself contractually to indemnify its directors and officers to the fullest
extent permitted by applicable law in order to induce them to serve or continue
to serve such corporation;
WHEREAS, Indemnitee is willing to serve, continue to serve, and to take on
additional service for or on behalf of Dawson on the condition that he be
indemnified to the fullest extent permitted by law; and
WHEREAS, concurrently with the execution of this Agreement, Indemnitee is
agreeing to serve or to continue to serve as a director or officer of Dawson.
NOW, THEREFORE, in consideration of the foregoing premises, Indemnitee's
agreement to serve or continue to serve as a director or officer of Dawson, and
the covenants contained in this Agreement, the parties hereto hereby covenant
and agree as follows:
1. CERTAIN DEFINITIONS:
(a) ACQUIRING PERSON: any Person other than (i) the Company, (ii)
any of the Company's Subsidiaries, (iii) any employee benefit plan of the
Company or of a Subsidiary of the Company or of a corporation owned directly or
indirectly by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company, or (iv) any trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or of a Subsidiary of the Company or of a corporation owned directly or
indirectly by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
1
<PAGE>
(b) CHANGE IN CONTROL shall be deemed to have occurred if:
(i) any Acquiring Person, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the then
outstanding Voting Securities of the Company; or
(ii) members of the Incumbent Board cease for any reason
to constitute at least a majority of the Board of Directors of the Company; or
(iii) a public announcement is made of a tender or
exchange offer by any Acquiring Person for 50% or more of the outstanding Voting
Securities of the Company, and the Board of Directors of the Company approves or
fails to oppose that tender or exchange offer in its statements in Schedule
14D-9 under the Exchange Act; or
(iv) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, partnership or other
entity (or, if no such approval is required, the consummation of such a merger
or consolidation of the Company), other than a merger or consolidation that
would result in the Voting Securities of the Company outstanding immediately
prior to the consummation thereof continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving entity
or of a parent of the surviving entity) a majority of the combined voting power
of the Voting Securities of the surviving entity (or its parent) outstanding
immediately after that merger or consolidation; or
(v) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all the Company's assets (or, if no such
approval is required, the consummation of such a liquidation, sale, or
disposition in one transaction or series of related transactions) other than a
liquidation, sale, or disposition of all or substantially all the Company's
assets in one transaction or a series of related transactions to a corporation
owned directly or indirectly by the shareholders of the Company in substantially
the same proportions as their ownership of stock of the Company.
(c) CLAIM: any threatened, pending, or completed action, suit, or
proceeding (including, without limitation, securities laws actions, suits, and
proceedings), or any inquiry or investigation (including discovery), whether
asserted, instituted or conducted, directly or indirectly (including, without
limitation, shareholder derivative suits) by the Company or any other party,
that Indemnitee in good faith believes might lead to the institution of any
action, suit, or proceeding, whether civil, criminal, administrative,
investigative, or other.
(d) COMPANY: Dawson Production Services, Inc.
(e) EXPENSES: all costs, expenses (including attorneys' and expert
witnesses' fees), and obligations paid or incurred in connection with
investigating, defending (including
2
<PAGE>
affirmative defenses and counterclaims), being a witness in, or participating in
(including on appeal), or preparing to defend, be a witness in, or participate
in, any Claim relating to any Indemnifiable Event.
(f) INCUMBENT BOARD: individuals who, as of July 20, 1998,
constitute the Board of Directors of the Company and any other individual who
becomes a director of the Company after that date and whose election or
appointment by the Board of Directors or nomination for election by the
Company's shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board.
(g) INDEMNIFIABLE EVENT: any event or occurrence related to the fact
that Indemnitee is or was a director, officer, employee, agent, or fiduciary of
the Company, or is or was serving at the request of the Company as a director,
officer, employee, trustee, agent, or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust, or other enterprise,
or by reason of anything done or not done by Indemnitee in any such capacity.
For purposes of this Agreement, the Company agrees that Indemnitee's service on
behalf of or with respect to any Subsidiary of the Company shall be deemed to be
at the request of the Company.
(h) PERSON: any person or entity of any nature whatsoever,
specifically including an individual, a firm, a company, a corporation, a
partnership, a limited liability company, a trust, or other entity. A Person,
together with that Person's Affiliates and Associates (as those terms are
defined in Rule 12b-2 under the Exchange Act), and any Persons acting as a
partnership, limited partnership, joint venture, association, syndicate, or
other group (whether or not formally organized), or otherwise acting jointly or
in concert or in a coordinated or consciously parallel manner (whether or not
pursuant to any express agreement), for the purpose of acquiring, holding,
voting, or disposing of securities of the Company with such Person, shall be
deemed a single "Person."
(i) POTENTIAL CHANGE IN CONTROL: shall be deemed to have occurred if
(i) the Company enters into an agreement, the consummation of which would result
in the occurrence of a Change in Control; (ii) any Acquiring Person becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 15% or more of the combined voting power of the outstanding Voting
Securities of the Company; or (iii) the Board of Directors of the Company adopts
a resolution to the effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(j) REVIEWING PARTY: any appropriate person or body consisting of a
member or members of the Company's Board of Directors or any other person or
body appointed by the Board (including Special Counsel referred to in Section 3)
who is not a party to the particular Claim for which Indemnitee is seeking
indemnification.
(k) SPECIAL COUNSEL: special, independent counsel selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld), and who has not otherwise performed services for the Company or for
Indemnitee within the last three years (other than as Special Counsel under this
Agreement or similar agreements).
3
<PAGE>
(l) SUBSIDIARY: with respect to any Person, any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by that Person.
(m) VOTING SECURITIES: any securities that vote generally in the
election of directors, in the admission of general partners, or in the selection
of any other similar governing body.
2. BASIC INDEMNIFICATION AND EXPENSE REIMBURSEMENT ARRANGEMENT.
(a) If Indemnitee was, is, or becomes a party to or witness or other
participant in, or is threatened to be made a party to or witness or other
participant in, a Claim by reason of (or arising in part out of) an
Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest
extent permitted by law as soon as practicable but in any event no later than 30
days after written demand is presented to the Company, against any and all
Expenses, judgments, fines, penalties, and amounts paid in settlement (including
all interest, assessments, and other charges paid or payable in connection with
or in respect of such Expenses, judgments, fines, penalties, or amounts paid in
settlement) of or with respect to that Claim. Notwithstanding the foregoing, the
obligations of the Company under Section 2(a) shall be subject to the condition
that the Reviewing Party shall not have determined (in a written opinion, in any
case in which Special Counsel referred to in Section 3 hereof is involved) that
Indemnitee would not be permitted to be indemnified under applicable law.
Nothing contained in this Agreement shall require any determination under this
Section 2(a) to be made by the Reviewing Party prior to the disposition or
conclusion of the Claim against the Indemnitee; provided, however, that Expense
Advances (defined below) shall continue to be made by the Company pursuant to
and to the extent required by the provisions of Section 2(b).
(b) If so requested by Indemnitee, the Company shall pay any and all
Expenses incurred by Indemnitee (or, if applicable, reimburse Indemnitee for any
and all Expenses incurred by Indemnitee and previously paid by Indemnitee)
within two business days after such request (an "Expense Advance"). The Company
shall be obligated to make or pay an Expense Advance in advance of the final
disposition or conclusion of any Claim. In connection with any request for an
Expense Advance, if requested by the Company, Indemnitee or Indemnitee's counsel
shall submit an affidavit stating that the Expenses incurred were reasonable.
Any dispute as to the reasonableness of any Expense shall not delay an Expense
Advance by the Company, and the Company agrees that any such dispute shall be
resolved only upon the disposition or conclusion of the underlying Claim against
the Indemnitee. If, when, and to the extent that the Reviewing Party determines
that Indemnitee would not be permitted to be indemnified with respect to a Claim
under applicable law, the Company shall be entitled to be reimbursed by
Indemnitee and Indemnitee hereby agrees to reimburse the Company without
interest (which agreement shall be an unsecured obligation of Indemnitee) for
all related Expense Advances theretofore made or paid by the Company; provided,
however, that if Indemnitee has commenced legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not
4
<PAGE>
be required to reimburse the Company for any Expense Advance, and the Company
shall be obligated to continue to make Expense Advances, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed). If there has not been a Change in
Control, the Reviewing Party shall be selected by the Board of Directors of the
Company. If there has been a Change in Control, the Reviewing Party shall be
advised by or shall be Special Counsel referred to in Section 3 hereof, if and
as Indemnitee so requests. If there has been no determination by the Reviewing
Party or if the Reviewing Party determines that Indemnitee substantively would
not be permitted to be indemnified in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation in any court in the State
of Texas having subject matter jurisdiction thereof and in which venue is proper
seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, and the Company
hereby consents to service of process and to appear in any such proceeding. Any
determination by the Reviewing Party otherwise shall be conclusive and binding
on the Company and Indemnitee.
3. CHANGE IN CONTROL. The Company agrees that, if there is a Change in
Control and if Indemnitee requests in writing that Special Counsel advise the
Reviewing Party or be the Reviewing Party, then the Company shall not deny any
indemnification payments (and Expense Advances shall continue to be paid by the
Company pursuant to Section 2(b)) that Indemnitee requests or demands under this
Agreement or any other agreement or law now or hereafter in effect relating to
Claims for Indemnifiable Events. The Company further agrees not to request or
seek reimbursement from Indemnitee of any related Expense Advances unless, with
respect to a denied indemnification payment, Special Counsel has rendered its
written opinion to the Company and Indemnitee that the Company would not be
permitted under applicable law to pay Indemnitee such indemnification payment.
The Company agrees to pay the reasonable fees of Special Counsel referred to in
this Section 3 and to indemnify fully Special Counsel against any and all
expenses (including attorneys' fees), claims, liabilities, and damages arising
out of or relating to this Agreement or Special Counsel's engagement pursuant
hereto.
4. ESTABLISHMENT OF TRUST. In the event of a Potential Change in Control,
and in the event the Company has not maintained an insurance policy or policies
providing for directors' and officers' liability insurance for the benefit of
Indemnitee with an aggregate policy limit (for all beneficiaries of such policy
or policies) of $5,000,000 or more, the Company shall, upon written request by
Indemnitee, create a trust for the benefit of Indemnitee (the "Trust") and from
time to time upon written request of Indemnitee the Company shall fund the Trust
in an amount sufficient to satisfy any and all Expenses reasonably anticipated
at the time of each such request to be incurred in connection with
investigating, preparing for, and defending any Claim relating to an
Indemnifiable Event, and any and all judgments, fines, penalties, and settlement
amounts of any and all Claims relating to an Indemnifiable Event from time to
time actually paid or claimed, reasonably anticipated, or proposed to be paid;
provided, however, that Indemnitee may not request funding so that the amount in
the Trust exceeds $250,000 without an actual Change in Control. Upon a Change in
Control, the amount or amounts to be deposited in the Trust pursuant to the
foregoing funding obligation shall be determined by the Reviewing Party. The
terms of the Trust shall provide that, upon a Change in Control, (i) the Trust
shall not be revoked or the principal thereof invaded, without the written
consent of Indemnitee; (ii) the trustee of the Trust
5
<PAGE>
shall advance, within two business days of a request by Indemnitee, any and all
Expenses to Indemnitee (and Indemnitee hereby agrees to reimburse the Trust
under the circumstances in which Indemnitee would be required to reimburse the
Company for Expense Advances under Section 2(b) of this Agreement); (iii) the
Trust shall continue to be funded by the Company in accordance with the funding
obligation set forth above; (iv) the trustee of the Trust shall promptly pay to
Indemnitee all amounts for which Indemnitee shall be entitled to indemnification
pursuant to this Agreement or otherwise; and (v) all unexpended funds in that
Trust shall revert to the Company upon a final determination by the Reviewing
Party or a court of competent jurisdiction, as the case may be, that Indemnitee
has been fully indemnified under the terms of this Agreement. The trustee of the
Trust shall be chosen by Indemnitee. Nothing in this Section 4 shall relieve the
Company of any of its obligations under this Agreement.
5. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall indemnify
Indemnitee against any and all costs and expenses (including attorneys' and
expert witnesses' fees) and, if requested by Indemnitee, shall (within two
business days of that request) advance those costs and expenses to Indemnitee,
that are incurred by Indemnitee in connection with any claim asserted against or
action brought by Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement or provision
of the Company's Articles of Incorporation or Bylaws now or hereafter in effect
relating to Claims for Indemnifiable Events or (ii) recovery under any
directors' and officers' liability insurance policies maintained by the Company,
regardless of whether Indemnitee ultimately is determined to be entitled to that
indemnification, advance expense payment, or insurance recovery, as the case may
be.
6. PARTIAL INDEMNITY. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of the
Expenses, judgments, fines, penalties, and amounts paid in settlement of a Claim
but not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled. Moreover, notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits or otherwise in
defense of any or all Claims relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
7. CONTRIBUTION.
(a) CONTRIBUTION PAYMENT. To the extent the indemnification provided
for under any provision of this Agreement is determined (in the manner
hereinabove provided) not to be permitted under applicable law, then if
Indemnitee was, is, or becomes a party to or witness or other participant in, or
is threatened to be made a party to or witness or other participant in, a Claim
by reason of (or arising in part out of) an Indemnifiable Event, the Company, in
lieu of indemnifying Indemnitee, shall contribute to the amount of any and all
Expenses, judgments, fines, or penalties assessed against or incurred or paid by
Indemnitee on account of that Claim and any and all amounts paid in settlement
of that Claim (including all interest, assessments, and other charges paid or
payable in connection with or in respect of such Expenses, judgments, fines,
6
<PAGE>
penalties, or amounts paid in settlement) for which such indemnification is not
permitted ("Contribution Amounts"), in such proportion as is appropriate to
reflect the relative fault with respect to the Indemnifiable Event giving rise
to the Contribution Amounts of Indemnitee, on the one hand, and of the Company
and any and all other parties (including officers and directors of the Company
other than Indemnitee) who may be at fault with respect to such Indemnifiable
Event (collectively, including the Company, the "Third Parties") on the other
hand.
(b) RELATIVE FAULT. The relative fault of the Third Parties and the
Indemnitee shall be determined (i) by reference to the relative fault of
Indemnitee as determined by the court or other governmental agency assessing the
Contribution Amount, or (ii) to the extent such court or other governmental
agency does not apportion relative fault, by the Reviewing Party (which shall
include Special Counsel) after giving effect to, among other things, the
relative intent, knowledge, access to information, and opportunity to prevent or
correct the applicable Indemnifiable Event and other relevant equitable
considerations of each party. The Company and Indemnitee agree that it would not
be just and equitable if contribution pursuant to this Section 7 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in this Section 7(b).
8. BURDEN OF PROOF. In connection with any determination by the Reviewing
Party or otherwise as to whether Indemnitee is entitled to be indemnified under
any provision of this Agreement or to receive contribution pursuant to Section 7
of this Agreement, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
9. NO PRESUMPTION. For purposes of this Agreement, the termination of any
claim, action, suit, or proceeding, by judgment, order, settlement (whether with
or without court approval), or conviction, or upon a plea of nolo contendere, or
its equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law.
10. NON-EXCLUSIVITY. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Company's Articles of
Incorporation or Bylaws, the Texas Business Corporation Act or otherwise. To the
extent that a change in the Texas Business Corporation Act (whether by statute
or judicial decision) permits greater indemnification by agreement than would be
afforded currently under the Company's Articles of Incorporation or Bylaws and
this Agreement, it is the intent of the parties hereto that Indemnitee shall
enjoy by this Agreement the greater benefits so afforded by that change.
11. LIABILITY INSURANCE. Except as otherwise agreed to by the Company and
Indemnitee in a written agreement, to the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by that policy or those policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any Company director or officer.
12. PERIOD OF LIMITATIONS. No legal action shall be brought and no cause
of action shall be asserted, instituted or conducted, directly or indirectly
(including, without limitation,
7
<PAGE>
shareholder derivative suits), by or on behalf of the Company or any affiliate
of the Company against Indemnitee or Indemnitee's spouse, heirs, executors, or
personal or legal representatives after the expiration of three years from the
date of accrual of that cause of action, and any claim or cause of action of the
Company or its affiliate shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within that three-year period;
provided, however, that, if any shorter period of limitations is otherwise
applicable to any such cause of action, the shorter period shall govern.
13. TERMINATION. This Agreement, and the obligations of the Company to
indemnify Indemnitee set forth herein, shall terminate automatically six years
after the termination of Indemnitee's status as a director, officer, employee,
trustee, agent or fiduciary of the Company, a Subsidiary of the Company, or any
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise for which Indemnitee was serving at the request of the Company.
Notwithstanding the above, if there is a Claim relating to an Indemnifiable
Event pending against Indemnitee which arose prior to the end of the six-year
period stated above, the Company's obligation to indemnify Indemnitee shall
continue with respect to such Claim until the final resolution of such Claim,
even if such resolution does not occur until after the end of such six-year
period.
14. AMENDMENTS. No supplement, modification, or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall that waiver constitute a continuing waiver.
15. SUBROGATION. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of that payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure those rights, including the execution
of the documents necessary to enable the Company effectively to bring suit to
enforce those rights.
16. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Articles of
Incorporation or Bylaws or otherwise) of the amounts otherwise indemnifiable
hereunder.
17. BINDING EFFECT; MERGER. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors, assigns (including any direct or indirect successor by purchase,
merger, consolidation, or otherwise to all or substantially all of the business
or assets of the Company), spouses, heirs, and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an officer or director of the Company or
another enterprise at the Company's request.
8
<PAGE>
18. SEVERABILITY. If any provision of this Agreement is held by final
judgment of a court of competent jurisdiction to be invalid, illegal or
unenforceable, such invalid, illegal or unenforceable provision shall be severed
from the remainder of this Agreement, and the remainder of this Agreement shall
be enforced. In addition, the invalid, illegal or unenforceable provision shall
be deemed to be automatically modified, and, as so modified, to be included in
this Agreement, such modification being made to the minimum extent necessary to
render the provision valid, legal and enforceable. Notwithstanding the
foregoing, however, if the severed or modified provision concerns all or a
portion of the essential consideration to be delivered under this Agreement by
one party to the other, the remaining provisions of this Agreement shall also be
modified to the extent necessary to equitably adjust the parties' respective
rights and obligations hereunder.
19. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas applicable to
contracts made and to be performed in that state without giving effect to the
principles of conflicts of laws or choice of laws.
20. CONSTRUCTION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Pronouns shall be construed to include the
masculine, feminine, neuter, singular and plural as the contest requires.
21. SUPERSEDING PRIOR AGREEMENTS. This Agreement replaces and supersedes
any prior indemnification agreement or other arrangement, written or oral,
between Dawson and Indemnitee, expressly excluding, however, Indemnitee's rights
to indemnification under the Articles of Incorporation of the Company, the
Bylaws of the Company, and the Texas Business Corporation Act.
22. NOTICES. Whenever this Agreement requires or permits notice to be
given by one party to the other, such notice must be in writing to be effective
and shall be deemed delivered and received by the party to whom it is sent upon
actual receipt (by any means) of such notice. Receipt of a notice by any officer
of the Company shall be deemed receipt of such notice by the Company.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
9
<PAGE>
EXECUTED as of the date first written above.
DAWSON PRODUCTION SERVICES, INC.,
a Texas corporation
By: /s/ MICHAEL E. LITTLE
Michael E. Little, President
INDEMNITEE:
___________________________________
__________________________
10
EXHIBIT 10.28
AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDMENT ("Amendment") is made and entered into to be effective
April 1, 1998, by and between DAWSON PRODUCTION SERVICES, INC. (together with
its successors, the "Company") and MICHAEL E. LITTLE ("Executive").
WHEREAS, Executive and the Company entered into an Executive Employment
Agreement, dated April 1, 1996 ("Agreement"); and
WHEREAS, Executive and the Company desire to amend the Agreement; and
WHEREAS, both the Company and Executive have read and understand the terms
and provisions set forth in this Amendment, and have been afforded a reasonable
opportunity to review this Amendment with their respective legal counsel;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this Amendment, Executive and the Company agree as follows:
1. The second sentence of Section 2(a), entitled BASE SALARY, is hereby amended
as follows:
Such salary shall increase to an annual rate of $300,000.00 on April 1,
1997 and shall remain at an annual rate of $300,000 for each year
thereafter, unless modified by agreement between Executive and the
Company.
2. A new second sentence is added to Section 2(b), entitled BUSINESS EXPENSES,
as follows:
The Company shall also reimburse all reasonable automobile expenses, as
per the standard employment manual for the Company, as such manual may be
amended from time to time by the Company.
3. Section 2(c), entitled DISCRETIONARY INCENTIVE BONUS, is hereby amended in
its entirety as follows:
Executive may from time to time be awarded an annual cash bonus during the
term of his employment under this Agreement, in an amount of up to one
hundred percent (100%) of the Executive's then current Base Salary.
Executive shall be considered for this bonus under the benefit plan
entitled "Compensation Program, Board of Directors Summary" dated and
approved by the Board of Directors on July 31, 1997, or any other benefit
plan the Company may have in effect from time to time, consistent with the
terms of any such program and with Executive's status and position with
the Company.
Executive Employment Agreement - 1998 Amendment
Michael E. Little - Page 1
<PAGE>
4. The second sentence of Section 2(d), entitled EMPLOYEE BENEFITS, is hereby
amended as follows:
During the term of this Agreement, Executive shall be entitled to receive
such benefits (which shall include vacation as per the standard employment
manual for the Company, as such manual may be amended from time to time by
the Company) as are made available to other personnel of the Company in
comparable positions, with comparable duties and responsibilities.
5. A new second sentence is added to Section 3(a), entitled INITIAL TERM, as
follows:
If on March 31, 1999, this Agreement has not been replaced with a new
employment agreement between Executive and the Company or terminated in
accordance with Section 3(c), then this Agreement shall have the
termination date extended to March 31, 2000, under the same terms and
conditions which were in effect for the period from April 1, 1998 to March
31, 1999.
6. A new first sentence is added to Section 3(c)(5)(a), entitled RESIGNATION FOR
GOOD REASON, as follows:
Executive shall have the right to resign for any "Good Reason," as defined
herein, and such resignation shall be deemed to be a termination by the
Company "Without Good Cause," except as set forth in Section 5(c) with
respect to the resignation of the Executive for a "Good Reason" during the
one-year period following a Change of Control.
7. Section 3(c)(5)(a)(iv) is hereby amended in its entirety, as follows:
The Company's directing the Executive to work at a location other than San
Antonio, Texas.
8. A new Section 3(c)(5)(a)(v), is hereby added, as follows:
After a Change of Control, any material change which, in the sole but
reasonable discretion of the Executive, impacts detrimentally upon
Executive's position within the Company.
9. Section 3(c)(5)(b), entitled RESIGNATION WITHOUT GOOD REASON, is hereby
amended in its entirety, as follows:
Any resignation by the Executive for any reason other than "Good Reason,"
as defined above, shall be deemed to be a resignation "Without Good
Reason." Other than as provided in Section 5(c) with respect to the
resignation of the Executive "Without Good Reason" during the 60-day
period following a Change of Control, in the event of a Resignation
Without Good Reason, the "Change in Control"
Executive Employment Agreement - 1998 Amendment
Michael E. Little - Page 2
<PAGE>
provisions in Section 4 and the Severance provisions in Section 5 shall be
inapplicable.
10. Section 5(a) is hereby amended in its entirety, as follows:
If, during the first two years of this Agreement, the Company terminates
this Agreement Without Good Cause as that term is defined in Section
3(c)(4)(b) of this Agreement, except as provided in Section 5(b) herein,
the Company agrees to pay to Executive a cash payment equal to the sum of:
(i) 14 (if terminated during the first year) or 15 (if terminated during
the second year) months' salary of the Executive's then current,
annualized Base Salary, respectively, less statutory payroll deductions;
(ii) all accrued benefits; and (iii) a prorated amount of any incentive
compensation paid to Executive for the prior year. After the first two
years of this Agreement, if the Company terminates this Agreement Without
Good Cause as that term is defined in Section 3(c)(4)(b) of this
Agreement, except as provided in Section 5(b) herein, the Company agrees
to pay to Executive a cash payment equal to the sum of: (i) 24 months'
salary of Executive's then current, annualized Base Salary, less statutory
payroll deductions; (ii) all accrued benefits; and (iii) a prorated amount
of any incentive compensation paid to Executive for the prior year.
11. Section 5(c) is hereby amended in its entirety, as follows:
If Executive terminates this Agreement Without Good Reason within 60 days
after a Change of Control, the Company shall pay to Executive a cash
payment equal to the sum of: (i) three (3) years' salary of the
Executive's then current, annualized Base Salary less statutory payroll
deductions; (ii) all accrued benefits; and (iii) a prorated amount of any
incentive compensation paid to Executive for the prior year. If Executive
terminates this Agreement for Good Reason within 12 months after a Change
of Control, Company shall pay to Executive a cash payment equal to the sum
of: (i) three (3) years' salary of the Executive's then current,
annualized Base Salary less statutory payroll deductions; (ii) all accrued
benefits; and (iii) a prorated amount of any incentive compensation paid
to Executive for the prior year.
12. Section 5(h)(3) is hereby amended in its entirety, as follows:
In the event that Executive communicates a Notice of Resignation Without
Good Reason as defined in Section 3(c)(5)(b), other than as provided in
Section 5(c).
13. Section 6, entitled STOCK OPTIONS, is hereby amended in its entirety, as
follows:
The Company may grant Executive options to purchase from the Company
shares of the Company's common stock (the "Option Stock") during the terms
of his employment under this Agreement. Executive shall be considered for
the grant of
Executive Employment Agreement - 1998 Amendment
Michael E. Little - Page 3
<PAGE>
options under the benefit plan entitled "Compensation Program, Board of
Directors Summary" dated and approved by the Board of Directors on July
31, 1997, or any other benefit plan the Company may have in effect from
time to time, consistent with the terms of any such program and with
Executive's status and position with the Company.
14. Section 9(d) is hereby amended in its entirety, as follows:
In the event that the Executive's employment with the Company is
terminated for any reason except by the Company for Good Cause without a
Change of Control, Executive covenants and agrees not to compete with the
Company by engaging in the business of providing: (i) workover rig
services, including completion of new wells, maintenance and recompletion
of existing wells (including horizontal recompletions) and plugging and
abandonment of wells at the end of their useful lives; (ii) liquid
services, including vacuum truck services, frac tank rental and salt water
injection; and/or (iii) production services, including well test analysis,
pipe testing, slickline wireline services and fishing and rental tool
services, for the period of time by which the Executive's severance
payment, if any, is measured. The geographic scope of this non-compete
provision shall be: (i) in Texas south of a line from the following Texas
towns: Del Rio, Bryan, and Jasper; and (ii) within 50 miles from Iraan,
Texas and from Pampa, Texas.
In the event that Executive's employment with the Company is terminated by
the Company for Good Cause without a Change of Control, Executive
covenants and agrees not to compete with the Company by engaging in the
business of providing: (i) workover rig services, including completion of
new wells, maintenance and recompletion of existing wells (including
horizontal recompletions) and plugging and abandonment of wells at the end
of their useful lives; (ii) liquid services, including vacuum truck
services, frac tank rental and salt water injection; and/or (iii)
production services, including well test analysis, pipe testing, slickline
wireline services and fishing and rental tool services, for a period of
one year from the date of termination. The geographic scope of this
non-compete provision shall be: (i) in Texas south of a line from the
following Texas towns: Del Rio, Bryan, and Jasper; and (ii) within 50
miles from Iraan, Texas and from Pampa, Texas.
In the event that Executive's employment with the Company is terminated
for any reason after a Change of Control, Executive shall not be subject
to any obligation not to compete with the Company after his termination of
employment with the Company.
15. All of the provisions of the Agreement which are not amended as set forth
herein shall remain in full force and effect.
**********
Executive Employment Agreement - 1998 Amendment
Michael E. Little - Page 4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
MICHAEL E. LITTLE
/s/ MICHAEL E. LITTLE
DAWSON PRODUCTION SERVICES, INC.
By: /s/ P. MARK STARK
Name: P. Mark Stark
Title: Chief Financial Officer
Executive Employment Agreement - 1998 Amendment
Michael E. Little - Page 5
EXHIBIT 10.29
AMENDMENT NO. 2 TO EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDMENT ("Amendment") is made and entered into to be effective
August 10, 1998, by and between DAWSON PRODUCTION SERVICES, INC. (together with
its successors, the "Company") and MICHAEL E. LITTLE ("Executive").
WHEREAS, Executive and the Company entered into an Executive Employment
Agreement, dated April 1, 1996, and amended it effective April 1, 1998
("Agreement"); and
WHEREAS, Executive and the Company desire to further amend the Agreement;
and
WHEREAS, both the Company and Executive have read and understand the terms
and provisions set forth in this Amendment, and have been afforded a reasonable
opportunity to review this Amendment with their respective legal counsel;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this Amendment, Executive and the Company agree as follows:
Section 13 (and all references thereto) shall be redenominated as Section
14, and a new Section 13 shall be added as follows:
"13. EXCISE TAX GROSS-UP PAYMENTS. In the event that (i) Executive
become entitled to any payments under the provisions of Section 5
(and related sections to the extent relevant) ("Severance
Payments"), and (ii) some or all of the Severance Payments are
subject to the tax imposed by Section 4999 of the Code (the "Excise
Tax"), the Company shall pay to Executive, at the same time as it
pays to Executive all or any portion of the Severance Payments, an
amount in cash (the "Excise Tax Gross-Up Payment") which will be
equal to the sum of (iii) the Excise Tax on the Severance Payments,
and (iv) the federal, state and local income tax, and the Excise
Tax, on the total Excise Tax Gross-up Payment (which, without
limitation, will require the solving of a quadratic equation). For
purposes of determining the extent to which Severance Payments are
subject to the Excise Tax, and the amount of such Excise Tax, any
other payments or benefits received or to be received by Executive
in connection with a Change of Control, or in connection with
Executive's termination of employment (whether pursuant to the terms
of this Executive Agreement or any other plan (including stock
option plans), arrangement, or agreement with the Company)
(collectively, "Other Benefits") shall be treated in their entirety
as (v) "parachute payments" within the meaning of section 280G(b)(2)
of the Code, and (vi) "excess parachute payments" within the meaning
of section 280G(b)(1) of the Code, and thus shall be considered as
subject to the Excise Tax except to the extent, as determined in the
written opinion of tax counsel selected by the Company's independent
auditors and acceptable to Executive (who shall not unreasonably
withhold approval) such Other Benefits (vii) do not constitute
parachute payments or, without limitation (viii) do not constitute
excess parachute payments. Without limiting the generality of the
1
<PAGE>
foregoing, the amount required to be taken into account for purposes
of the forgoing determinations, considering the timing, form and
other relevant factors relating to Executive's receipt of Severance
Payments and Other Benefits, shall be determined by the Company's
independent auditors, in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. Without limitation, for purposes of
determining the amount of the Excise Tax Gross-Up Payment, the
Executive shall be deemed to pay federal, state and local income
taxes (as applicable) at the highest marginal rate in effect for the
calendar year in which the Excise Tax Gross-Up Payment is paid. In
the event that, after the Excise Tax Gross-up Payment is initially
determined and paid, it is finally determined that Executive's
excess parachute payment is more or less than the amount of excess
parachute payment on which the Excise Tax Gross-Up Payment was
based, the Company, or Executive, shall pay, or repay, to the other
the amount which will cause the Excise Tax Gross-up Payment to equal
the amount which would have been paid had the parties initially used
the amount of the finally determined excess parachute payment in
calculating such amount, plus, in each case, interest on the amount
of such payment, or repayment, at the rate provided in Section
1274(b)(2)(B) of the Code from the date of the original payment of
the Excise Tax Gross-Up Payment through the date of the payment, or
repayment."
All of the provisions of the Agreement which are not amended as set forth
herein shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
/s/ MICHAEL E. LITTLE
MICHAEL E. LITTLE
DAWSON PRODUCTION SERVICES, INC.
By: /s/ P. MARK STARK
Name: P. Mark Stark
Title: Chief Financial Officer
2
EXHIBIT 10.30
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and entered
into to be effective July 1, 1998 (the "EFFECTIVE DATE"), by and between Dawson
Production Services, Inc. (together with its successors, the "COMPANY") and
James J. Byerlotzer (the "EXECUTIVE").
WHEREAS, the Executive is an individual residing in San Antonio, Texas;
and
WHEREAS, the Company is a Texas business corporation engaged in the
well-servicing business with its principal place of business in San Antonio,
Texas; and
WHEREAS, the Executive has considerable experience, expertise and training
in management related to the types of services offered by the Company; and
WHEREAS, the Company desires and intends to employ the Executive as Chief
Operating Officer of the Company pursuant to the terms and conditions set forth
in this Agreement; and
WHEREAS, both the Company and the Executive have read and understood the
terms and provisions set forth in this Agreement, and have been afforded a
reasonable opportunity to review this Agreement with their respective legal
counsel.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this Agreement, the Executive and the Company agree as follows:
1. RESPONSIBILITIES:
a. The Executive acknowledges and agrees that he shall be employed as
Chief Operating Officer of the Company. The Executive covenants and agrees that
he will faithfully devote his best efforts and such portion of his time,
attention and skill to the business of the Company as is necessary to perform
his obligations under this Agreement.
b. The Executive acknowledges and agrees that he has a fiduciary duty of
loyalty to the Company, and that he will not engage in any activity which will
or could in any way, harm the business, business interests or reputation of the
Company.
c. The Executive acknowledges and agrees that he will not directly or
indirectly engage in competition with the Company at any time during the
existence of the employment relationship between the Company and the Executive,
and the Executive will not on his own behalf, or as another's agent, employee,
partner, shareholder or otherwise, engage in any of the same or similar duties
and/or responsibilities required by the Executive's position with the Company,
other than as an employee of the Company pursuant to this Agreement.
Executive Employment Agreement
James J. Byerlotzer - Page 1
<PAGE>
d. The Executive acknowledges and agrees that all information concerning
the Company's products, techniques, equipment, pricing, business projections,
business plans and strategies, marketing plans, sales techniques, customer
contacts, customer needs and prospective customers is highly sensitive and
confidential, and has been obtained only through significant effort and expense
to the Company; and that, as a result, the Executive must agree to treat this
information as highly confidential trade secret information at all times during
the existence of the employment relationship between the Company and the
Executive, and after the termination of the employment relationship.
2. COMPENSATION: During his employment pursuant to this Agreement, the Company
agrees to provide the Executive the following compensation:
a. BASE SALARY: From the Effective Date until changed as provided in this
Section, the Company agrees to pay the Executive an annual salary of $150,000
for each year of employment with the Company under this Agreement, payable in at
least equal monthly installments in accordance with the Company's ordinary
payroll policies and procedures for executive compensation. Such salary shall be
subject to withholding for the prescribed federal income tax, social security
and other items as required by law and for other items consistent with the
Company's policy with respect to health insurance and other benefit plans for
similarly situated employees. The above-described annual salary as in effect
from time to time hereunder is referred to herein as the "BASE SALARY" subject
to renegotiation.
b. BUSINESS EXPENSES: The Company shall reimburse all reasonable travel
and entertainment expenses incurred by the Executive in connection with the
performance of his duties pursuant to this Agreement. The Executive shall
provide the Company with a written monthly accounting of his expenses on a form
acceptable to the Company and satisfying any applicable federal income tax
reporting or record keeping requirements, within a reasonable time following the
end of each month.
c. DISCRETIONARY INCENTIVE BONUS: In the discretion of the Board of
Directors of the Company, and without implying any obligation on the Company
ever to award a bonus to the Executive, the Executive may from time to time be
awarded an annual cash bonus during the term of his employment under this
Agreement. If the Company has an executive bonus plan in effect (as any such
plan may be amended from time to time), the annual bonus to the Executive
referenced in the preceding sentence shall be in general accordance with such
plan and with the Executive's status and position with the Company; provided,
however, all such bonuses are entirely discretionary with the Board of
Directors. If and to the extent a bonus is ever considered for the Executive, it
is expected that any such bonus will be based not only on the Executive's
individual performance and his relative position, service tenure and
responsibilities with the Company, but also on the performance and profitability
of the entire business of the Company.
d. EMPLOYEE BENEFITS: The Executive acknowledges and agrees that certain
employee benefits will be provided to the Executive incident to his employment
as Chief Operating Officer of the Company. During the term of this Agreement,
the Executive shall be entitled to receive such benefits as are made available
to other personnel of the Company in comparable positions,
Executive Employment Agreement
James J. Byerlotzer - Page 2
<PAGE>
with comparable duties and responsibilities. Any benefits substantially in
excess of those granted other salaried employees of the Company shall be the
subject of prior approval of the Board of Directors. Additionally, for purposes
of determining eligibility, funding or vesting with respect to any other
benefits, the Executive's prior service with the Company and any predecessor of
the Company shall be deemed to be service with the Company.
3. DURATION: The duration of this Agreement shall be defined and determined as
follows:
a. INITIAL TERM: This Agreement shall continue in full force and effect
for two (2) years commencing on the Effective Date and expiring on June 30, 2000
(the "EXPIRATION DATE"), unless terminated prior to the Expiration Date in
accordance with Section 3(c).
b. RENEWAL: This Agreement is not subject to an automatic renewal on the
Expiration Date and is renewable only if both parties mutually agree in writing.
c. TERMINATION: This Agreement may be terminated by the Company as
follows:
(1) DEATH: In the event of the Executive's death, this Agreement
shall terminate immediately, without notice, on the date of the Executive's
death; provided, however, that the Company shall pay the Executive's estate the
Base Salary that the Executive would have earned for a period of ninety (90)
days following the date of death and a prorated amount of the discretionary
incentive bonus, if any, paid to the Executive for the prior contract year
pursuant to Section 2(c), in the time and manner in which the Executive would
have been paid such compensation. In addition, the Executive's designated
beneficiaries shall be entitled to receive any life insurance benefits provided
to the Executive in accordance with the applicable plan documents and/or
insurance policies governing such benefits.
(2) DISABILITY: In the event the Executive becomes physically or
mentally disabled, as that term is defined by 29 CFR ss.1630.2(g)(1), and is
unable to perform the essential functions of his position, with reasonable
accommodation, for a period of one hundred eighty (180) consecutive days, this
Agreement shall terminate immediately, without notice.
(3) GOOD CAUSE:
(a) This Agreement may be terminated by providing the
Executive with thirty (30) days written notice that the Company is terminating
the Agreement for Good Cause, as defined herein ("NOTICE OF TERMINATION FOR GOOD
CAUSE") at any time during his employment. In the event that Good Cause exists
for terminating this Agreement, the Company may elect to provide the Executive
with thirty (30) days pay in lieu of notice, in addition to any other amounts
due under this Agreement.
(b) For purposes of this Agreement, "GOOD CAUSE" shall be
defined as follows:
Executive Employment Agreement
James J. Byerlotzer - Page 3
<PAGE>
i) Any act or omission constituting fraud under the
law of the State of Texas; or
ii) Conviction of, or a plea of NOLO CONTENDERE to, a
felony or any misdemeanor involving moral
turpitude; or
iii) Embezzlement or theft of Company property or
funds; or
iv) The material breach of any provision of this
Agreement; or continued gross neglect of his
duties under this Agreement; or unauthorized
competition with the Company during his employment
pursuant to this Agreement; or unauthorized use of
Confidential Information (as defined in Section
9); which is materially detrimental to the
Company; or
v) Engagement in gross misconduct in the course and
scope of his employment with the Company,
including, without limitation, dishonesty,
unlawful harassment, abuse of alcohol or
controlled substances, or fighting.
(c) In the event the Company believes Good Cause exists for
terminating this Agreement pursuant to this Section, the Company shall be
required to give the Executive written notice of the acts or omissions
constituting Good Cause ("CAUSE NOTICE"), and no Notice of Termination for Good
Cause shall be communicated by the Company unless and until the Executive fails
to cure such acts or omissions within fifteen (15) days after receipt of the
Cause Notice.
(d) In the event the Company communicates Notice of
Termination for Good Cause pursuant to this Section, the Executive shall have
the right to a hearing before the Compensation Committee of the Board of
Directors within fifteen (15) days after the date such Notice is received, to
contest the alleged Good Cause for the Notice of Termination. In the event that
the Compensation Committee of the Board of Directors affirms the Good Cause for
termination, the Executive shall have the right to give an Arbitration Notice
under Section 10(a) prior to the effective date of termination of this
Agreement; provided, however, that in the event that the Executive communicates
an Arbitration Notice, the Company shall have the right to discontinue any
payments required under this Agreement (subject to the payment of such amounts
into an interest bearing account in accordance with Section 10(b)) and suspend
the Executive from performing any duties under this Agreement pending the
outcome of the arbitration proceeding.
(4) WITHOUT GOOD CAUSE:
(a) This Agreement shall terminate by the Company providing
thirty (30) days written notice to the Executive that the Company is terminating
the Agreement Without Good Cause, as defined herein ("NOTICE OF TERMINATION
WITHOUT GOOD CAUSE"), at any time
Executive Employment Agreement
James J. Byerlotzer - Page 4
<PAGE>
during his employment; provided, however, that the Company shall be required to
pay severance pay in accordance with the severance provisions in Section 5.
(b) Any termination of this Agreement which is not for Good
Cause, as defined above, or which does not result from the death or disability
of the Executive, shall be deemed to be a termination "WITHOUT GOOD CAUSE."
Furthermore, in the event that the Company communicates a Notice of Termination
for Good Cause, and the arbitrators pursuant to Section 10 determine that no
Good Cause exists or existed for the Notice of Termination that was originally
communicated, then such Notice of Termination shall be deemed to have been a
communication of a Notice of Termination Without Good Cause, as appropriate, for
all purposes under this Agreement.
(5) RESIGNATION: The Executive shall be entitled to terminate this
Agreement by providing the Company with a written notice of resignation at least
thirty (30) days prior to his intended resignation date, subject to the
following provisions:
(a) RESIGNATION FOR GOOD REASON: The Executive shall have the
right to resign for any Good Reason, as defined herein, and such resignation
shall be deemed to be a termination by the Company Without Good Cause except as
set forth in Section 5(c) with respect to a resignation by the Executive with
Good Reason during the two-year period following a Change of Control. For
purposes of this Section, the term "GOOD REASON" shall be defined as:
i) The Company's failure in any material respect to
perform any provision of this Agreement; or
ii) Any material changes in the duties and
responsibilities of the Executive under this
Agreement without the written consent of the
Executive; or
iii) The hiring or promotion by the Company of another
executive employee to a position of equal or
greater responsibility for the management of the
Company without the written consent of the
Executive; or
iv) The Company's directing the Executive to work at a
location other than San Antonio, Texas.
(b) RESIGNATION WITHOUT GOOD REASON: Any resignation by the
Executive for any reason other than Good Reason, as defined above, shall be
deemed to be a resignation "WITHOUT GOOD REASON." In the event of a resignation
Without Good Reason, the Change in Control provisions in Section 4 and the
severance provisions in Section 5 shall be inapplicable.
4. CHANGE OF CONTROL: The parties acknowledge that the Executive has agreed to
assume the position of Chief Operating Officer to enter into this Agreement
based upon his confidence
Executive Employment Agreement
James J. Byerlotzer - Page 5
<PAGE>
in the current shareholders of the Company and the support of the Board of
Directors for the development of a new strategy for the Company. Accordingly, if
the Company should undergo a Change of Control, as defined in this Section, the
parties agree as follows:
a. DEFINITIONS: For purposes of this Agreement, a "CHANGE OF CONTROL"
shall be deemed to exist in the event that any of the following occurs:
(1) a change in the ownership of the capital stock of the Company
where a corporation, person or group acting in concert (a "PERSON") as described
in Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), holds or acquires, directly or indirectly, beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a
number of shares of capital stock of the Company which constitutes 40% or more
(or, 30% or more in the event the Company is subject to the reporting
requirements of Sections 12 or 15(d) under the Exchange Act) of the combined
voting power of the Company's then outstanding capital stock then entitled to
vote generally in the election of directors; or
(2) the persons who were members of the Board of Directors
immediately prior to a tender offer, exchange offer, contested election or any
combination of the foregoing, cease to constitute a majority of the Board of
Directors of the Company; or
(3) a dissolution of the Company, or the adoption by the Company of
a plan of liquidation, or the adoption by the Company of a merger, consolidation
or reorganization involving the Company in which the Company is not the
surviving entity, or a sale of all or substantially all of the assets of the
Company (for purposes of this Agreement, a sale of all or substantially all of
the assets of the Company shall be deemed to occur if any Person acquires, or
during the 12-month period ending on the date of the most recent acquisition by
such Person, has acquired gross assets of the Company that have an aggregate
fair market value equal to 50% or more of the fair market value of all of the
gross assets of the Company immediately prior to such acquisition or
acquisitions); or
(4) a tender offer or exchange offer is made by any Person which, if
successfully completed, would result in such Person beneficially owning (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) either 50% or more
of the Company's outstanding shares of Common Stock or shares of capital stock
having 50% or more of the combined voting power of the Company's then
outstanding capital stock (other than an offer made by the Company), and
sufficient shares are acquired under the offer to cause such Person to own 30%
or more of the voting power; or
(5) a change in control is reported or is required to be reported by
the Company in response to either Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act or Item 1 of Form 8-K promulgated under the
Exchange Act, which change in control has not been approved by a majority of the
Board of Directors then in office who were directors at the beginning of the
two-year period ending on the date the reported change in control occurred; or
Executive Employment Agreement
James J. Byerlotzer - Page 6
<PAGE>
(6) during any period of two consecutive years, individuals who, at
the beginning of such period constituted the entire Board of Directors of the
Company, cease for any reason (other than death) to constitute a majority of the
directors, unless the election, or the nomination for election, by the Company's
shareholders, of each new director was approved by a vote of at least a majority
of the directors then still in office who were directors at the beginning of the
period.
For purposes of Section 4(a)(1) above, if a Person were the beneficial owner of
30% or more or 40% or more, as applicable, of the combined voting power of the
Company's then outstanding securities as of the Effective Date and such Person
thereafter accumulates more than 5% of additional voting power, a Change of
Control of the Company shall be deemed to have occurred, notwithstanding
anything in this Agreement to the contrary. A Change of Control shall include
any other transactions or series of related transactions occurring which have
substantially the same effect as the transactions specified in any of the
preceding clauses of Section 4(a)(1) through (6). However, a Change of Control
shall not be deemed to occur if a Person becomes the beneficial owner of the
applicable percentage or more (as referenced above) of the combined voting power
of the Company's then outstanding securities solely by reason of the Company's
redemption or repurchase of securities; but further acquisitions by such Person
that cause such Person to be the beneficial owner of the applicable percentage
or more (as referenced above) of the combined voting power of the Company's then
outstanding securities shall be deemed a Change of Control.
b. VESTING OF STOCK OPTIONS: In the event of a Change of Control, as
defined in this Section, all stock options then held by the Executive for the
purchase of equity securities of the Company shall immediately become vested,
effective on the date of the Change of Control.
5. SEVERANCE: Upon termination, the Executive shall be entitled to the
following:
a. Other than as provided in Section 5(b), if the Company terminates this
Agreement Without Good Cause as that term is defined in Section 3(c)(4)(b) of
this Agreement, the Company agrees to pay to the Executive a lump sum cash
payment equal to the sum of: (i) twelve (12) months' salary of the Executive's
then current, annualized Base Salary, less statutory payroll deductions; (ii)
all benefits which accrued prior to the termination of the Agreement; and (iii)
a prorated amount of any incentive compensation paid to the Executive during the
most recent fiscal year which ended prior to the termination of the Agreement,
as described in Sections 5(a)(1) and (2) below. In addition, the Company shall
provide that level of health, dental, vision, disability, and life insurance
benefits comparable to the benefits enjoyed by the Executive immediately prior
to the termination of this Agreement, if any, for a period of twelve (12) months
after termination.
(1) If the termination date occurs AFTER the incentive compensation
is paid to the Executive for the prior fiscal year, the Executive shall receive
a prorated amount of incentive compensation for the period from the end of the
prior fiscal year to the date of termination, based upon the incentive
compensation paid out to the Executive for the prior fiscal year. By way of
example only, if this Agreement is terminated pursuant to this Section on August
1, 1999, and the Executive has already received his incentive compensation for
the fiscal year April 1, 1998
Executive Employment Agreement
James J. Byerlotzer - Page 7
<PAGE>
through March 31, 1999, the Executive shall receive 4/12 (or 1/3) of the
incentive compensation he received for the fiscal year April 1, 1998 through
March 31, 1999 upon termination.
(2) If the termination date occurs BEFORE the incentive compensation
is paid to the Executive for the prior fiscal year, the Executive shall receive
his entire incentive compensation for the prior fiscal year, plus a prorated
amount of incentive compensation for the period from the end of the prior fiscal
year to the date of termination, based upon the incentive compensation paid out
to the Executive for the prior fiscal year. By way of example only, if this
Agreement is terminated pursuant to this Section on August 1, 1999, and the
Executive has NOT received his incentive compensation for the fiscal year April
1, 1998 through March 31, 1999, the Executive shall receive his entire incentive
compensation for the fiscal year April 1, 1998 through March 31, 1999, plus an
additional 4/12 (or 1/3) of such incentive compensation upon termination.
b. If this Agreement is terminated within twelve (12) months after the
date of a Change of Control as that term is defined in Section 4(a) by the
Company communicating a Notice of Termination Without Good Cause, the Company
agrees to pay the Executive a lump sum cash payment equal to the sum of: (i)
eighteen (18) months' salary of the Executive's then current, annualized Base
Salary, less statutory payroll deductions; (ii) all benefits which accrued prior
to the termination of the Agreement; and (iii) a prorated amount of any
incentive compensation paid to the Executive during the most recent fiscal year
which ended prior to the termination of the Agreement, as determined in
accordance with the provisions of Sections 5(a)(1) and 5(a)(2) above. In
addition, the Company shall provide that level of health, dental, vision,
disability, and life insurance benefits comparable to the benefits enjoyed by
the Executive immediately prior to the termination of this Agreement, if any,
for a period of eighteen (18) months after termination.
c. If the Executive terminates this Agreement for Good Reason as that term
is defined in Section 3(c)(5)(a) of this Agreement within twenty-four (24)
months after a Change of Control, the Company agrees to pay to the Executive a
lump sum cash payment equal to the sum of: (i) twelve (12) months' salary of the
Executive's then current, annualized Base Salary, less statutory payroll
deductions; (ii) all benefits which accrued prior to the termination of the
Agreement; and (iii) a prorated amount of any incentive compensation paid to the
Executive during the most recent fiscal year which ended prior to the
termination of the Agreement, as determined in accordance with the provisions of
Sections 5(a)(1) and 5(a)(2) above. In addition, the Company shall provide that
level of health, dental, vision, disability, and life insurance benefits
comparable to the benefits enjoyed by the Executive immediately prior to the
termination of this Agreement, if any, for a period of twelve (12) months after
termination.
d. If the Company terminates this Agreement for Good Cause as that term is
defined in Section 3(c)(3)(b) of this Agreement, the Executive shall not be
entitled to receive any additional salary, benefits or incentive compensation
beyond those earned or accrued as of the effective date of the termination.
Executive Employment Agreement
James J. Byerlotzer - Page 8
<PAGE>
e. Any termination of the Executive's employment shall not release either
the Company or the Executive from its or his respective obligations to the date
of termination nor from the provisions of Sections 8 and 9 hereof.
f. In the event this Agreement is terminated by the Company (i) Without
Good Cause; (ii) upon the death or disability of the Executive as those terms
are defined in Sections 3(c)(1) and (2) of this Agreement; or (iii) by the
Executive for Good Reason, all stock options then held by the Executive for the
purchase of equity securities of the Company shall immediately become vested
upon the effective date of the termination.
g. The severance payments described above shall not be payable under this
Section in any of the following circumstances:
(1) In the event that this Agreement is terminated as a result of
the death or disability of the Executive, as provided in Sections 3(c)(1) and
(2);
(2) In the event that this Agreement is terminated pursuant to a
Notice of Termination for Good Cause communicated by the Company, as provided in
Section 3(c)(3)(a), and (i) such termination is affirmed by the arbitrators
after an arbitration proceeding under Section 10 or (ii) such termination is
uncontested by the Executive; or
(3) In the event that the Executive communicates notice of
resignation Without Good Reason as defined in Section 3(c)(5)(b).
h. The Company and the Executive acknowledge and agree that the severance
payments required under this Section are intended to be exclusive and to
supersede any severance pay plans or policies adopted by the Company and that
the Executive shall not be entitled to any additional severance compensation
under any other severance plan or policy adopted by the Company.
6. STOCK OPTIONS: In the sole discretion of the Board of Directors of the
Company, and without implying any obligation on the Company, the Company may
grant the Executive options to purchase from the Company shares of the Company's
common stock (the "OPTION STOCK") during the terms of his employment under this
Agreement. The Executive shall be considered for the grant of options under any
option grant program the Company may have in effect from time to time,
consistent with the terms of any such program and with the Executive's status
and position with the Company; provided, however, the grant of any option to
purchase stock shall be entirely discretionary with the Board of Directors. If
and to the extent the Company ever considers granting the Executive an option to
purchase Option Stock, such grant will be based not only on the Executive's
individual performance and his relative position, service tenure and
responsibilities with the Company, but also on the performance and profitability
of the entire Company.
Executive Employment Agreement
James J. Byerlotzer - Page 9
<PAGE>
a. STATUS OF THE EXECUTIVE: The Executive shall not be considered a
shareholder of the Company with respect to any shares of Option Stock, except to
the extent that the shares of Option Stock have been purchased by and issued to
the Executive.
b. EXERCISE OF OPTIONS: The Executive shall have the right to exercise any
option to purchase part of the Option Stock granted to him by the Company after
such option has vested in accordance with the vesting provisions set forth in
the option agreement, if any, reflecting the grant of options by the Company.
7. SUCCESSORS AND ASSIGNS: The parties acknowledge and agree that this Agreement
may not be assigned by either party without the written consent of the other
party. In the event of a Change of Control as defined in Section 4(a), the
Company's obligations under this Agreement shall be assumed by the Person that
survives such transaction, or by the Person purchasing assets constituting such
Change of Control. In the event of the Executive's death, this Agreement shall
be enforceable by the Executive's estate, executors or legal representatives,
but only to the extent that such persons may collect any compensation (including
through the exercise of stock options) due to the Executive under this
Agreement.
8. INDEMNIFICATION: During and after the employment of the Executive pursuant to
this Agreement, the Company shall indemnify the Executive against all judgments,
penalties, fines, assessments, losses, amounts paid in settlement and reasonable
expenses (including, but not limited to, attorneys' fees) for which the
Executive may become liable as a result of his performance of his duties and
responsibilities pursuant to this Agreement, to the fullest extent permissible
under the laws of the State of Texas. This provision shall be in addition to any
other provisions of the Company's Articles of Incorporation, Bylaws or
Indemnification Agreements providing for indemnification to the Executive.
9. NON-COMPETITION AND NON-DISCLOSURE: The Company and the Executive agree as
follows:
a. During and after his employment by the Company, the Executive agrees
that he shall not directly or indirectly disclose any Confidential Information,
as defined in this Section, unless such disclosure is: (i) to an employee of the
Company or its subsidiaries; or (ii) to a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance of his
duties as an executive of the Company; or (iii) authorized in writing by the
Board of Directors; or (iv) required by any court or administrative agency.
b. In the event that this Agreement is terminated for any reason, the
Executive agrees that he shall promptly return all records, files, documents,
materials and copies relating to the business of the Company or its subsidiaries
which came into the possession of the Executive during his employment pursuant
to this Agreement.
c. For purposes of this Agreement, the term "CONFIDENTIAL INFORMATION"
shall be defined as any information relating to the business of the Company or
its subsidiaries which is not generally available to the public and which the
Company takes affirmative steps to maintain as
Executive Employment Agreement
James J. Byerlotzer - Page 10
<PAGE>
confidential. The term shall not include any information that the Executive was
aware of prior to the date of initial employment by the Company, information
that is a matter of any public record, information contained in any document
filed or submitted to any governmental entity, any information that is common
knowledge in any industry in which the Company does business, any information
that has previously been made available to persons who are not employees of the
Company or any information that is known to the Company's competitors.
d. In the event that the Executive's employment with the Company is
terminated for any reason except by the Company for Good Cause without a Change
of Control, the Executive covenants and agrees not to compete with the Company
by engaging in the business of providing: (i) workover rig services, including
completion of new wells, maintenance and recompletion of existing wells
(including horizontal recompletions) and plugging and abandonment of wells at
the end of their useful lives; (ii) liquid services, including vacuum truck
services, frac tank rental and salt water injection; and/or (iii) production
services, including well test analysis, pipe testing, slickline wireline
services and fishing and rental tool services, for the period of time by which
the Executive's severance payment, if any, is measured. The geographic scope of
this non-compete provision shall be the state of Texas, the state of Louisiana,
and the parts of California which lie south of a line drawn from San Luis Obispo
(California), through Bakersfield (California), through Ridgecrest (California)
and ending with Las Vegas (Nevada).
In the event that the Executive's employment with the Company is
terminated by the Company for Good Cause without a Change of Control, the
Executive covenants and agrees not to compete with the Company by engaging in
the business of providing: (i) workover rig services, including completion of
new wells, maintenance and recompletion of existing wells (including horizontal
recompletions) and plugging and abandonment of wells at the end of their useful
lives; (ii) liquid services, including vacuum truck services, frac tank rental
and salt water injection; and/or (iii) production services, including well test
analysis, pipe testing, slickline wireline services and fishing and rental tool
services, for a period of one (1) year from the date of termination. The
geographic scope of this non-compete provision shall be the state of Texas, the
state of Louisiana, and the parts of California which lie south of a line drawn
from San Luis Obispo (California), through Bakersfield (California), through
Ridgecrest (California) and ending with Las Vegas (Nevada).
In the event that the Executive's employment with the Company is
terminated for any reason after a Change of Control, Executive shall not be
subject to any obligation not to compete with the Company after his termination
of employment with the Company.
e. In the event that the Executive violates any of the non-competition or
non-disclosure provisions set forth in this Agreement, the Executive
acknowledges and agrees that the Company will suffer immediate and irreparable
harm which cannot accurately be calculated in monetary damages. Consequently,
the Executive agrees that the Company shall be entitled to immediate injunctive
relief, either by temporary or permanent injunction, to prevent any such
violations. The Executive agrees that this relief shall be in addition to any
other legal or equitable relief to which the Company would be legally entitled
under Texas law.
Executive Employment Agreement
James J. Byerlotzer - Page 11
<PAGE>
10. ARBITRATION: The Company and the Executive agree as follows:
a. Any claim or controversy arising out of or relating to this Agreement,
or any breach of this Agreement, shall be settled by final and binding
arbitration in the city of San Antonio, Texas in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect on the date
the claim or controversy arises. The Executive and the Company agree that either
party must request arbitration of any claim or controversy within sixty (60)
days of the date the claim or controversy first arises, by giving written notice
of the party's request for arbitration ("ARBITRATION NOTICE"). Failure to
effectively communicate the Arbitration Notice within the time limitation set
forth in this Section shall constitute a waiver of the claim or controversy.
b. In the event that any dispute arising under this Agreement concerns any
payment required to be made under any provision of this Agreement, either party
agrees to deposit the amount of the disputed payment in an interest bearing
account with a financial institution acceptable to the other party within five
(5) days after either party effectively communicates its Arbitration Notice. In
the event that any dispute arising under this Agreement concerns the amount of
any payment required to be made under any provision of this Agreement, either
party agrees to pay the undisputed portion of the payment to the other party AND
deposit the disputed portion of the payment in an interest bearing account with
a financial institution acceptable to the other party within five (5) days after
either party effectively communicates its Arbitration Notice.
c. All claims or controversies subject to arbitration under this Agreement
shall be submitted to an arbitration hearing within thirty (30) days after the
Arbitration Notice is communicated. All claims or controversies shall be
resolved by a panel of three (3) arbitrators selected in accordance with the
applicable Commercial Arbitration Rules. Either party may request that the
arbitration proceeding be stenographically recorded by a Certified Shorthand
Reporter. The arbitrators shall issue a written decision with respect to all
claims or controversies submitted under this Section within thirty (30) days
after the completion of the arbitration hearing. The parties are entitled to be
represented by legal counsel at any arbitration hearing and each party shall be
responsible for its own attorneys' fees. The Company shall be responsible for
paying for all expenses in the event of any arbitration under this Section.
d. The parties agree that this Section may be specifically enforced by
either party, and submission to arbitration compelled, by any court of competent
jurisdiction. The parties further acknowledge and agree that the decision of the
arbitrators may be specifically enforced by either party in any court of
competent jurisdiction.
11. RULES OF CONSTRUCTION: The following provisions shall govern the
interpretation and enforcement of this Agreement:
a. SEVERABILITY: The parties acknowledge and agree that each provision of
this Agreement shall be enforceable independently of every other provision.
Furthermore, the parties acknowledge and agree that, in the event any provision
of this Agreement is determined to be
Executive Employment Agreement
James J. Byerlotzer - Page 12
<PAGE>
unenforceable for any reason, the remaining covenants and/or provisions will
remain effective, binding and enforceable.
b. WAIVER: The parties acknowledge and agree that the failure of either
party to enforce any provision of this Agreement shall not constitute a waiver
of that particular provision, or of any other provisions, of this Agreement.
c. CHOICE OF LAW/VENUE: The parties acknowledge and agree that except as
specifically provided otherwise in this Agreement, the law of Texas will govern
the validity, interpretation and effect of this Agreement and any other dispute
relating to, or arising out of, the employment relationship between the Company
and the Executive. Proper venue for any litigation or arbitration concerning
this Agreement shall be in San Antonio, Texas.
d. MODIFICATION: The parties acknowledge and agree that this Agreement
constitutes the complete and entire agreement between the parties; that the
parties have executed this Agreement based upon the express terms and provisions
set forth herein; that the parties have not relied on any representations, oral
or written, which are not set forth in this Agreement; that no previous
agreement, either oral or written, shall have any effect on the terms or
provisions of this Agreement; and that all previous agreements, either oral or
written, are expressly superseded and revoked by this Agreement. In addition,
the parties acknowledge and agree that the provisions of this Agreement may not
be modified by any subsequent agreement unless the modifying agreement (i) is in
writing, (ii) contains an express provision referencing this Agreement, (iii) is
signed by the Executive, and (iv) is approved by the Board of Directors.
e. EXECUTION: The parties agree that this Agreement may be executed in
multiple counterparts, each of which shall be deemed an original for all
purposes.
f. HEADINGS: The parties agree that the subject headings set forth at the
beginning of each Section in this Agreement are provided for ease of reference
only, and shall not be utilized for any purpose in connection with the
construction, interpretation or enforcement of this Agreement.
g. SURVIVAL: Upon termination of this Agreement, all of the rights and
obligations of the parties pursuant to this Agreement shall terminate, except
that those provisions of this Agreement which expressly provide for
enforceability after termination shall continue in full force effect in
accordance with the terms hereof.
12. LEGAL CONSULTATION: The parties acknowledge and agree that both parties have
been accorded a reasonable opportunity to review this Agreement with legal
counsel prior to executing the Agreement.
13. NOTICES: The parties acknowledge and agree that any and all notices required
to be delivered under the terms of this Agreement shall be forwarded by personal
delivery or certified U.S. mail. Notices shall be deemed to be communicated and
effective on the day of receipt.
Such notices shall be addressed to each party as follows:
Executive Employment Agreement
James J. Byerlotzer - Page 13
<PAGE>
James J. Byerlotzer
125 Grant
San Antonio, Texas 78209
Dawson Production Services, Inc.
112 E. Pecan Street, Suite 1000
San Antonio, Texas 78205
With a copy to:
J. Rowland Cook, Esq.
Jenkens & Gilchrist,
A Professional Corporation
2200 One American Center
600 Congress Avenue
Austin, Texas 78701
Any party hereto may change its or his address for the purpose of receiving
notices and other communications as herein provided by a written notice given in
the manner aforesaid to the other party or parties hereto.
EXECUTED to be effective as of the Effective Date set forth above.
/s/ JAMES J. BYERLOTZER
James J. Byerlotzer
DAWSON PRODUCTION SERVICES, INC.
By:________________________________
Name:______________________________
Title:_____________________________
Executive Employment Agreement
James J. Byerlotzer - Page 14
EXHIBIT 10.31
AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDMENT ("Amendment") is made and entered into to be effective
August 10, 1998, by and between DAWSON PRODUCTION SERVICES, INC. (together with
its successors, the "Company") and JAMES J. BYERLOTZER ("Executive").
WHEREAS, Executive and the Company entered into an Executive Employment
Agreement, dated July 1, 1998 ("Agreement"); and
WHEREAS, Executive and the Company desire to amend the Agreement; and
WHEREAS, both the Company and Executive have read and understand the terms
and provisions set forth in this Amendment, and have been afforded a reasonable
opportunity to review this Amendment with their respective legal counsel;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this Amendment, Executive and the Company agree as follows:
Section 13 (and all references thereto) shall be redenominated as Section
14, and a new Section 13 shall be added as follows:
"13. EXCISE TAX GROSS-UP PAYMENTS. In the event that (i) Executive
become entitled to any payments under the provisions of Section 5
(and related sections to the extent relevant) ("Severance
Payments"), and (ii) some or all of the Severance Payments are
subject to the tax imposed by Section 4999 of the Code (the "Excise
Tax"), the Company shall pay to Executive, at the same time as it
pays to Executive all or any portion of the Severance Payments, an
amount in cash (the "Excise Tax Gross-Up Payment") which will be
equal to the sum of (iii) the Excise Tax on the Severance Payments,
and (iv) the federal, state and local income tax, and the Excise
Tax, on the total Excise Tax Gross-up Payment (which, without
limitation, will require the solving of a quadratic equation). For
purposes of determining the extent to which Severance Payments are
subject to the Excise Tax, and the amount of such Excise Tax, any
other payments or benefits received or to be received by Executive
in connection with a Change of Control, or in connection with
Executive's termination of employment (whether pursuant to the terms
of this Executive Agreement or any other plan (including stock
option plans), arrangement, or agreement with the Company)
(collectively, "Other Benefits") shall be treated in their entirety
as (v) "parachute payments" within the meaning of section 280G(b)(2)
of the Code, and (vi) "excess parachute payments" within the meaning
of section 280G(b)(1) of the Code, and thus shall be considered as
subject to the Excise Tax except to the extent, as determined in the
written opinion of tax counsel selected by the Company's independent
auditors and acceptable to Executive (who shall not unreasonably
withhold approval) such Other Benefits (vii) do not constitute
parachute payments or, without limitation (viii) do not constitute
excess parachute payments. Without limiting the generality of the
1
<PAGE>
foregoing, the amount required to be taken into account for purposes
of the forgoing determinations, considering the timing, form and
other relevant factors relating to Executive's receipt of Severance
Payments and Other Benefits, shall be determined by the Company's
independent auditors, in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. Without limitation, for purposes of
determining the amount of the Excise Tax Gross-Up Payment, the
Executive shall be deemed to pay federal, state and local income
taxes (as applicable) at the highest marginal rate in effect for the
calendar year in which the Excise Tax Gross-Up Payment is paid. In
the event that, after the Excise Tax Gross-up Payment is initially
determined and paid, it is finally determined that Executive's
excess parachute payment is more or less than the amount of excess
parachute payment on which the Excise Tax Gross-Up Payment was
based, the Company, or Executive, shall pay, or repay, to the other
the amount which will cause the Excise Tax Gross-up Payment to equal
the amount which would have been paid had the parties initially used
the amount of the finally determined excess parachute payment in
calculating such amount, plus, in each case, interest on the amount
of such payment, or repayment, at the rate provided in Section
1274(b)(2)(B) of the Code from the date of the original payment of
the Excise Tax Gross-Up Payment through the date of the payment, or
repayment."
All of the provisions of the Agreement which are not amended as set forth
herein shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
/s/ JAMES J. BYERLOTZER
JAMES J. BYERLOTZER
DAWSON PRODUCTION SERVICES, INC.
By: /s/ MICHAEL E. LITTLE
Name: Michael E. Little
Title: Chief Executive Officer and
President
2
EXHIBIT 10.32
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and entered
into to be effective April 1, 1998 (the "EFFECTIVE DATE"), by and between Dawson
Production Services, Inc. (together with its successors, the "COMPANY") and P.
Mark Stark (the "EXECUTIVE").
WHEREAS, the Executive is an individual residing in Boerne, Texas; and
WHEREAS, the Company is a Texas business corporation engaged in the
well-servicing business with its principal place of business in San Antonio,
Texas; and
WHEREAS, the Executive has considerable experience, expertise and training
in management related to the types of services offered by the Company; and
WHEREAS, the Company desires and intends to employ the Executive as Chief
Financial Officer of the Company pursuant to the terms and conditions set forth
in this Agreement; and
WHEREAS, both the Company and the Executive have read and understood the
terms and provisions set forth in this Agreement, and have been afforded a
reasonable opportunity to review this Agreement with their respective legal
counsel.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this Agreement, the Executive and the Company agree as follows:
1. RESPONSIBILITIES:
a. The Executive acknowledges and agrees that he shall be employed as
Chief Financial Officer of the Company. The Executive covenants and agrees that
he will faithfully devote his best efforts and such portion of his time,
attention and skill to the business of the Company as is necessary to perform
his obligations under this Agreement.
b. The Executive acknowledges and agrees that he has a fiduciary duty of
loyalty to the Company, and that he will not engage in any activity which will
or could in any way, harm the business, business interests or reputation of the
Company.
c. The Executive acknowledges and agrees that he will not directly or
indirectly engage in competition with the Company at any time during the
existence of the employment relationship between the Company and the Executive,
and the Executive will not on his own behalf, or as another's agent, employee,
partner, shareholder or otherwise, engage in any of the same or similar duties
and/or responsibilities required by the Executive's position with the Company,
other than as an employee of the Company pursuant to this Agreement.
Executive Employment Agreement
P. Mark Stark - Page 1
<PAGE>
d. The Executive acknowledges and agrees that all information concerning
the Company's products, techniques, equipment, pricing, business projections,
business plans and strategies, marketing plans, sales techniques, customer
contacts, customer needs and prospective customers is highly sensitive and
confidential, and has been obtained only through significant effort and expense
to the Company; and that, as a result, the Executive must agree to treat this
information as highly confidential trade secret information at all times during
the existence of the employment relationship between the Company and the
Executive, and after the termination of the employment relationship.
2. COMPENSATION: During his employment pursuant to this Agreement, the Company
agrees to provide the Executive the following compensation:
a. BASE SALARY: From the Effective Date until changed as provided in this
Section, the Company agrees to pay the Executive an annual salary of $120,000
during the first year of employment with the Company under this Agreement,
payable in at least equal monthly installments in accordance with the Company's
ordinary payroll policies and procedures for executive compensation. Such salary
shall increase to an annual rate of $140,000 on April 1, 1999. Such salary shall
be subject to withholding for the prescribed federal income tax, social security
and other items as required by law and for other items consistent with the
Company's policy with respect to health insurance and other benefit plans for
similarly situated employees. The above-described annual salary as in effect
from time to time hereunder is referred to herein as the "BASE SALARY."
b. BUSINESS EXPENSES: The Company shall reimburse all reasonable travel
and entertainment expenses incurred by the Executive in connection with the
performance of his duties pursuant to this Agreement. The Executive shall
provide the Company with a written monthly accounting of his expenses on a form
acceptable to the Company and satisfying any applicable federal income tax
reporting or record keeping requirements, within a reasonable time following the
end of each month.
c. DISCRETIONARY INCENTIVE BONUS: In the discretion of the Board of
Directors of the Company, and without implying any obligation on the Company
ever to award a bonus to the Executive, the Executive may from time to time be
awarded an annual cash bonus during the term of his employment under this
Agreement. If the Company has an executive bonus plan in effect (as any such
plan may be amended from time to time), the annual bonus to the Executive
referenced in the preceding sentence shall be in general accordance with such
plan and with the Executive's status and position with the Company; provided,
however, all such bonuses are entirely discretionary with the Board of
Directors. If and to the extent a bonus is ever considered for the Executive, it
is expected that any such bonus will be based not only on the Executive's
individual performance and his relative position, service tenure and
responsibilities with the Company, but also on the performance and profitability
of the entire business of the Company.
d. EMPLOYEE BENEFITS: The Executive acknowledges and agrees that certain
employee benefits will be provided to the Executive incident to his employment
as Chief Financial Officer of the Company. During the term of this Agreement,
the Executive shall be entitled to receive
Executive Employment Agreement
P. Mark Stark - Page 2
<PAGE>
such benefits as are made available to other personnel of the Company in
comparable positions, with comparable duties and responsibilities. Any benefits
substantially in excess of those granted other salaried employees of the Company
shall be the subject of prior approval of the Board of Directors. Additionally,
for purposes of determining eligibility, funding or vesting with respect to any
other benefits, the Executive's prior service with the Company and any
predecessor of the Company shall be deemed to be service with the Company.
3. DURATION: The duration of this Agreement shall be defined and determined as
follows:
a. INITIAL TERM: This Agreement shall continue in full force and effect
for two (2) years commencing on the Effective Date and expiring on March 31,
2000 (the "EXPIRATION DATE"), unless terminated prior to the Expiration Date in
accordance with Section 3(c).
b. RENEWAL: This Agreement is not subject to an automatic renewal on the
Expiration Date and is renewable only if both parties mutually agree in writing.
c. TERMINATION: This Agreement may be terminated by the Company as
follows:
(1) DEATH: In the event of the Executive's death, this Agreement
shall terminate immediately, without notice, on the date of the Executive's
death; provided, however, that the Company shall pay the Executive's estate the
Base Salary that the Executive would have earned for a period of ninety (90)
days following the date of death and a prorated amount of the discretionary
incentive bonus, if any, paid to the Executive for the prior contract year
pursuant to Section 2(c), in the time and manner in which the Executive would
have been paid such compensation. In addition, the Executive's designated
beneficiaries shall be entitled to receive any life insurance benefits provided
to the Executive in accordance with the applicable plan documents and/or
insurance policies governing such benefits.
(2) DISABILITY: In the event the Executive becomes physically or
mentally disabled, as that term is defined by 29 CFR ss.1630.2(g)(1), and is
unable to perform the essential functions of his position, with reasonable
accommodation, for a period of one hundred eighty (180) consecutive days, this
Agreement shall terminate immediately, without notice.
(3) GOOD CAUSE:
(a) This Agreement may be terminated by providing the
Executive with thirty (30) days written notice that the Company is terminating
the Agreement for Good Cause, as defined herein ("NOTICE OF TERMINATION FOR GOOD
CAUSE") at any time during his employment. In the event that Good Cause exists
for terminating this Agreement, the Company may elect to provide the Executive
with thirty (30) days pay in lieu of notice, in addition to any other amounts
due under this Agreement.
(b) For purposes of this Agreement, "GOOD CAUSE" shall be
defined as follows:
Executive Employment Agreement
P. Mark Stark - Page 3
<PAGE>
i) Any act or omission constituting fraud under the
law of the State of Texas; or
ii) Conviction of, or a plea of NOLO CONTENDERE to, a
felony or any misdemeanor involving moral
turpitude; or
iii) Embezzlement or theft of Company property or
funds; or
iv) The material breach of any provision of this
Agreement; or continued gross neglect of his
duties under this Agreement; or unauthorized
competition with the Company during his employment
pursuant to this Agreement; or unauthorized use of
Confidential Information (as defined in Section
9); which is materially detrimental to the
Company; or
v) Engagement in gross misconduct in the course and
scope of his employment with the Company,
including, without limitation, dishonesty,
unlawful harassment, abuse of alcohol or
controlled substances, or fighting.
(c) In the event the Company believes Good Cause exists for
terminating this Agreement pursuant to this Section, the Company shall be
required to give the Executive written notice of the acts or omissions
constituting Good Cause ("CAUSE NOTICE"), and no Notice of Termination for Good
Cause shall be communicated by the Company unless and until the Executive fails
to cure such acts or omissions within fifteen (15) days after receipt of the
Cause Notice.
(d) In the event the Company communicates Notice of
Termination for Good Cause pursuant to this Section, the Executive shall have
the right to a hearing before the Compensation Committee of the Board of
Directors within fifteen (15) days after the date such Notice is received, to
contest the alleged Good Cause for the Notice of Termination. In the event that
the Compensation Committee of the Board of Directors affirms the Good Cause for
termination, the Executive shall have the right to give an Arbitration Notice
under Section 10(a) prior to the effective date of termination of this
Agreement; provided, however, that in the event that the Executive communicates
an Arbitration Notice, the Company shall have the right to discontinue any
payments required under this Agreement (subject to the payment of such amounts
into an interest bearing account in accordance with Section 10(b)) and suspend
the Executive from performing any duties under this Agreement pending the
outcome of the arbitration proceeding.
(4) WITHOUT GOOD CAUSE:
(a) This Agreement shall terminate by the Company providing
thirty (30) days written notice to the Executive that the Company is terminating
the Agreement Without Good Cause, as defined herein ("NOTICE OF TERMINATION
WITHOUT GOOD CAUSE"), at any time
Executive Employment Agreement
P. Mark Stark - Page 4
<PAGE>
during his employment; provided, however, that the Company shall be required to
pay severance pay in accordance with the severance provisions in Section 5.
(b) Any termination of this Agreement which is not for Good
Cause, as defined above, or which does not result from the death or disability
of the Executive, shall be deemed to be a termination "WITHOUT GOOD CAUSE."
Furthermore, in the event that the Company communicates a Notice of Termination
for Good Cause, and the arbitrators pursuant to Section 10 determine that no
Good Cause exists or existed for the Notice of Termination that was originally
communicated, then such Notice of Termination shall be deemed to have been a
communication of a Notice of Termination Without Good Cause, as appropriate, for
all purposes under this Agreement.
(5) RESIGNATION: The Executive shall be entitled to terminate this
Agreement by providing the Company with a written notice of resignation at least
thirty (30) days prior to his intended resignation date, subject to the
following provisions:
(a) RESIGNATION FOR GOOD REASON: The Executive shall have the
right to resign for any Good Reason, as defined herein, and such resignation
shall be deemed to be a termination by the Company Without Good Cause except as
set forth in Section 5(c) with respect to a resignation by the Executive with
Good Reason during the two-year period following a Change of Control. For
purposes of this Section, the term "GOOD REASON" shall be defined as:
i) The Company's failure in any material respect to
perform any provision of this Agreement; or
ii) Any material changes in the duties and
responsibilities of the Executive under this
Agreement without the written consent of the
Executive; or
iii) The hiring or promotion by the Company of another
executive employee to a position of equal or
greater responsibility for the management of the
Company without the written consent of the
Executive; or
iv) The Company's directing the Executive to work at a
location other than San Antonio, Texas.
(b) RESIGNATION WITHOUT GOOD REASON: Any resignation by the
Executive for any reason other than Good Reason, as defined above, shall be
deemed to be a resignation "WITHOUT GOOD REASON." In the event of a resignation
Without Good Reason, the Change in Control provisions in Section 4 and the
severance provisions in Section 5 shall be inapplicable.
4. CHANGE OF CONTROL: The parties acknowledge that the Executive has agreed to
assume the position of Chief Financial Officer to enter into this Agreement
based upon his confidence in
Executive Employment Agreement
P. Mark Stark - Page 5
<PAGE>
the current shareholders of the Company and the support of the Board of
Directors for the development of a new strategy for the Company. Accordingly, if
the Company should undergo a Change of Control, as defined in this Section, the
parties agree as follows:
a. DEFINITIONS: For purposes of this Agreement, a "CHANGE OF CONTROL"
shall be deemed to exist in the event that any of the following occurs:
(1) a change in the ownership of the capital stock of the Company
where a corporation, person or group acting in concert (a "PERSON") as described
in Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), holds or acquires, directly or indirectly, beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a
number of shares of capital stock of the Company which constitutes 40% or more
(or, 30% or more in the event the Company is subject to the reporting
requirements of Sections 12 or 15(d) under the Exchange Act) of the combined
voting power of the Company's then outstanding capital stock then entitled to
vote generally in the election of directors; or
(2) the persons who were members of the Board of Directors
immediately prior to a tender offer, exchange offer, contested election or any
combination of the foregoing, cease to constitute a majority of the Board of
Directors of the Company; or
(3) a dissolution of the Company, or the adoption by the Company of
a plan of liquidation, or the adoption by the Company of a merger, consolidation
or reorganization involving the Company in which the Company is not the
surviving entity, or a sale of all or substantially all of the assets of the
Company (for purposes of this Agreement, a sale of all or substantially all of
the assets of the Company shall be deemed to occur if any Person acquires, or
during the 12-month period ending on the date of the most recent acquisition by
such Person, has acquired gross assets of the Company that have an aggregate
fair market value equal to 50% or more of the fair market value of all of the
gross assets of the Company immediately prior to such acquisition or
acquisitions); or
(4) a tender offer or exchange offer is made by any Person which, if
successfully completed, would result in such Person beneficially owning (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) either 50% or more
of the Company's outstanding shares of Common Stock or shares of capital stock
having 50% or more of the combined voting power of the Company's then
outstanding capital stock (other than an offer made by the Company), and
sufficient shares are acquired under the offer to cause such Person to own 30%
or more of the voting power; or
(5) a change in control is reported or is required to be reported by
the Company in response to either Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act or Item 1 of Form 8-K promulgated under the
Exchange Act, which change in control has not been approved by a majority of the
Board of Directors then in office who were directors at the beginning of the
two-year period ending on the date the reported change in control occurred; or
Executive Employment Agreement
P. Mark Stark - Page 6
<PAGE>
(6) during any period of two consecutive years, individuals who, at
the beginning of such period constituted the entire Board of Directors of the
Company, cease for any reason (other than death) to constitute a majority of the
directors, unless the election, or the nomination for election, by the Company's
shareholders, of each new director was approved by a vote of at least a majority
of the directors then still in office who were directors at the beginning of the
period.
For purposes of Section 4(a)(1) above, if a Person were the beneficial owner of
30% or more or 40% or more, as applicable, of the combined voting power of the
Company's then outstanding securities as of the Effective Date and such Person
thereafter accumulates more than 5% of additional voting power, a Change of
Control of the Company shall be deemed to have occurred, notwithstanding
anything in this Agreement to the contrary. A Change of Control shall include
any other transactions or series of related transactions occurring which have
substantially the same effect as the transactions specified in any of the
preceding clauses of Section 4(a)(1) through (6). However, a Change of Control
shall not be deemed to occur if a Person becomes the beneficial owner of the
applicable percentage or more (as referenced above) of the combined voting power
of the Company's then outstanding securities solely by reason of the Company's
redemption or repurchase of securities; but further acquisitions by such Person
that cause such Person to be the beneficial owner of the applicable percentage
or more (as referenced above) of the combined voting power of the Company's then
outstanding securities shall be deemed a Change of Control.
b. VESTING OF STOCK OPTIONS: In the event of a Change of Control, as
defined in this Section, all stock options then held by the Executive for the
purchase of equity securities of the Company shall immediately become vested,
effective on the date of the Change of Control.
5. SEVERANCE: Upon termination, the Executive shall be entitled to the
following:
a. Other than as provided in Section 5(b), if the Company terminates this
Agreement Without Good Cause as that term is defined in Section 3(c)(4)(b) of
this Agreement, the Company agrees to pay to the Executive a lump sum cash
payment equal to the sum of: (i) twelve (12) months' salary of the Executive's
then current, annualized Base Salary, less statutory payroll deductions; (ii)
all benefits which accrued prior to the termination of the Agreement; and (iii)
a prorated amount of any incentive compensation paid to the Executive during the
most recent fiscal year which ended prior to the termination of the Agreement,
as described in Sections 5(a)(1) and (2) below. In addition, the Company shall
provide that level of health, dental, vision, disability, and life insurance
benefits comparable to the benefits enjoyed by the Executive immediately prior
to the termination of this Agreement, if any, for a period of twelve (12) months
after termination.
(1) If the termination date occurs AFTER the incentive compensation
is paid to the Executive for the prior fiscal year, the Executive shall receive
a prorated amount of incentive compensation for the period from the end of the
prior fiscal year to the date of termination, based upon the incentive
compensation paid out to the Executive for the prior fiscal year. By way of
example only, if this Agreement is terminated pursuant to this Section on August
1, 1999, and the Executive has already received his incentive compensation for
the fiscal year April 1, 1998
Executive Employment Agreement
P. Mark Stark - Page 7
<PAGE>
through March 31, 1999, the Executive shall receive 4/12 (or 1/3) of the
incentive compensation he received for the fiscal year April 1, 1998 through
March 31, 1999 upon termination.
(2) If the termination date occurs BEFORE the incentive compensation
is paid to the Executive for the prior fiscal year, the Executive shall receive
his entire incentive compensation for the prior fiscal year, plus a prorated
amount of incentive compensation for the period from the end of the prior fiscal
year to the date of termination, based upon the incentive compensation paid out
to the Executive for the prior fiscal year. By way of example only, if this
Agreement is terminated pursuant to this Section on August 1, 1999, and the
Executive has NOT received his incentive compensation for the fiscal year April
1, 1998 through March 31, 1999, the Executive shall receive his entire incentive
compensation for the fiscal year April 1, 1998 through March 31, 1999, plus an
additional 4/12 (or 1/3) of such incentive compensation upon termination.
b. If this Agreement is terminated within twelve (12) months after the
date of a Change of Control as that term is defined in Section 4(a) by the
Company communicating a Notice of Termination Without Good Cause, the Company
agrees to pay the Executive a lump sum cash payment equal to the sum of: (i)
eighteen (18) months' salary of the Executive's then current, annualized Base
Salary, less statutory payroll deductions; (ii) all benefits which accrued prior
to the termination of the Agreement; and (iii) a prorated amount of any
incentive compensation paid to the Executive during the most recent fiscal year
which ended prior to the termination of the Agreement, as determined in
accordance with the provisions of Sections 5(a)(1) and 5(a)(2) above. In
addition, the Company shall provide that level of health, dental, vision,
disability, and life insurance benefits comparable to the benefits enjoyed by
the Executive immediately prior to the termination of this Agreement, if any,
for a period of eighteen (18) months after termination.
c. If the Executive terminates this Agreement for Good Reason as that term
is defined in Section 3(c)(5)(a) of this Agreement within twenty-four (24)
months after a Change of Control, the Company agrees to pay to the Executive a
lump sum cash payment equal to the sum of: (i) twelve (12) months' salary of the
Executive's then current, annualized Base Salary, less statutory payroll
deductions; (ii) all benefits which accrued prior to the termination of the
Agreement; and (iii) a prorated amount of any incentive compensation paid to the
Executive during the most recent fiscal year which ended prior to the
termination of the Agreement, as determined in accordance with the provisions of
Sections 5(a)(1) and 5(a)(2) above. In addition, the Company shall provide that
level of health, dental, vision, disability, and life insurance benefits
comparable to the benefits enjoyed by the Executive immediately prior to the
termination of this Agreement, if any, for a period of twelve (12) months after
termination.
d. If the Company terminates this Agreement for Good Cause as that term is
defined in Section 3(c)(3)(b) of this Agreement, the Executive shall not be
entitled to receive any additional salary, benefits or incentive compensation
beyond those earned or accrued as of the effective date of the termination.
Executive Employment Agreement
P. Mark Stark - Page 8
<PAGE>
e. Any termination of the Executive's employment shall not release either
the Company or the Executive from its or his respective obligations to the date
of termination nor from the provisions of Sections 8 and 9 hereof.
f. In the event this Agreement is terminated by the Company (i) Without
Good Cause; (ii) upon the death or disability of the Executive as those terms
are defined in Sections 3(c)(1) and (2) of this Agreement; or (iii) by the
Executive for Good Reason, all stock options then held by the Executive for the
purchase of equity securities of the Company shall immediately become vested
upon the effective date of the termination.
g. The severance payments described above shall not be payable under this
Section in any of the following circumstances:
(1) In the event that this Agreement is terminated as a result of
the death or disability of the Executive, as provided in Sections 3(c)(1) and
(2);
(2) In the event that this Agreement is terminated pursuant to a
Notice of Termination for Good Cause communicated by the Company, as provided in
Section 3(c)(3)(a), and (i) such termination is affirmed by the arbitrators
after an arbitration proceeding under Section 10 or (ii) such termination is
uncontested by the Executive; or
(3) In the event that the Executive communicates notice of
resignation Without Good Reason as defined in Section 3(c)(5)(b).
h. The Company and the Executive acknowledge and agree that the severance
payments required under this Section are intended to be exclusive and to
supersede any severance pay plans or policies adopted by the Company and that
the Executive shall not be entitled to any additional severance compensation
under any other severance plan or policy adopted by the Company.
6. STOCK OPTIONS: In the sole discretion of the Board of Directors of the
Company, and without implying any obligation on the Company, the Company may
grant the Executive options to purchase from the Company shares of the Company's
common stock (the "OPTION STOCK") during the terms of his employment under this
Agreement. The Executive shall be considered for the grant of options under any
option grant program the Company may have in effect from time to time,
consistent with the terms of any such program and with the Executive's status
and position with the Company; provided, however, the grant of any option to
purchase stock shall be entirely discretionary with the Board of Directors. If
and to the extent the Company ever considers granting the Executive an option to
purchase Option Stock, such grant will be based not only on the Executive's
individual performance and his relative position, service tenure and
responsibilities with the Company, but also on the performance and profitability
of the entire Company.
a. STATUS OF THE EXECUTIVE: The Executive shall not be considered a
shareholder of the Company with respect to any shares of Option Stock, except to
the extent that the shares of
Executive Employment Agreement
P. Mark Stark - Page 9
<PAGE>
Option Stock have been purchased by and issued to the Executive.
b. EXERCISE OF OPTIONS: The Executive shall have the right to exercise any
option to purchase part of the Option Stock granted to him by the Company after
such option has vested in accordance with the vesting provisions set forth in
the option agreement, if any, reflecting the grant of options by the Company.
7. SUCCESSORS AND ASSIGNS: The parties acknowledge and agree that this Agreement
may not be assigned by either party without the written consent of the other
party. In the event of a Change of Control as defined in Section 4(a), the
Company's obligations under this Agreement shall be assumed by the Person that
survives such transaction, or by the Person purchasing assets constituting such
Change of Control. In the event of the Executive's death, this Agreement shall
be enforceable by the Executive's estate, executors or legal representatives,
but only to the extent that such persons may collect any compensation (including
through the exercise of stock options) due to the Executive under this
Agreement.
8. INDEMNIFICATION: During and after the employment of the Executive pursuant to
this Agreement, the Company shall indemnify the Executive against all judgments,
penalties, fines, assessments, losses, amounts paid in settlement and reasonable
expenses (including, but not limited to, attorneys' fees) for which the
Executive may become liable as a result of his performance of his duties and
responsibilities pursuant to this Agreement, to the fullest extent permissible
under the laws of the State of Texas. This provision shall be in addition to any
other provisions of the Company's Articles of Incorporation, Bylaws or
Indemnification Agreements providing for indemnification to the Executive.
9. NON-COMPETITION AND NON-DISCLOSURE: The Company and the Executive agree as
follows:
a. During and after his employment by the Company, the Executive agrees
that he shall not directly or indirectly disclose any Confidential Information,
as defined in this Section, unless such disclosure is: (i) to an employee of the
Company or its subsidiaries; or (ii) to a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance of his
duties as an executive of the Company; or (iii) authorized in writing by the
Board of Directors; or (iv) required by any court or administrative agency.
b. In the event that this Agreement is terminated for any reason, the
Executive agrees that he shall promptly return all records, files, documents,
materials and copies relating to the business of the Company or its subsidiaries
which came into the possession of the Executive during his employment pursuant
to this Agreement.
c. For purposes of this Agreement, the term "CONFIDENTIAL INFORMATION"
shall be defined as any information relating to the business of the Company or
its subsidiaries which is not generally available to the public and which the
Company takes affirmative steps to maintain as
Executive Employment Agreement
P. Mark Stark - Page 10
<PAGE>
confidential. The term shall not include any information that the Executive was
aware of prior to the date of initial employment by the Company, information
that is a matter of any public record, information contained in any document
filed or submitted to any governmental entity, any information that is common
knowledge in any industry in which the Company does business, any information
that has previously been made available to persons who are not employees of the
Company or any information that is known to the Company's competitors.
d. In the event that the Executive's employment with the Company is
terminated for any reason except by the Company for Good Cause without a Change
of Control, the Executive covenants and agrees not to compete with the Company
by engaging in the business of providing: (i) workover rig services, including
completion of new wells, maintenance and recompletion of existing wells
(including horizontal recompletions) and plugging and abandonment of wells at
the end of their useful lives; (ii) liquid services, including vacuum truck
services, frac tank rental and salt water injection; and/or (iii) production
services, including well test analysis, pipe testing, slickline wireline
services and fishing and rental tool services, for the period of time by which
the Executive's severance payment, if any, is measured. The geographic scope of
this non-compete provision shall be the state of Texas, the state of Louisiana,
and the parts of California which lie south of a line drawn from San Luis Obispo
(California), through Bakersfield (California), through Ridgecrest (California)
and ending with Las Vegas (Nevada).
In the event that the Executive's employment with the Company is
terminated by the Company for Good Cause without a Change of Control, the
Executive covenants and agrees not to compete with the Company by engaging in
the business of providing: (i) workover rig services, including completion of
new wells, maintenance and recompletion of existing wells (including horizontal
recompletions) and plugging and abandonment of wells at the end of their useful
lives; (ii) liquid services, including vacuum truck services, frac tank rental
and salt water injection; and/or (iii) production services, including well test
analysis, pipe testing, slickline wireline services and fishing and rental tool
services, for a period of one (1) year from the date of termination. The
geographic scope of this non-compete provision shall be the state of Texas, the
state of Louisiana, and the parts of California which lie south of a line drawn
from San Luis Obispo (California), through Bakersfield (California), through
Ridgecrest (California) and ending with Las Vegas (Nevada).
In the event that the Executive's employment with the Company is
terminated for any reason after a Change of Control, the Executive shall not be
subject to any obligation not to compete with the Company after his termination
of employment with the Company.
e. In the event that the Executive violates any of the non-competition or
non-disclosure provisions set forth in this Agreement, the Executive
acknowledges and agrees that the Company will suffer immediate and irreparable
harm which cannot accurately be calculated in monetary damages. Consequently,
the Executive agrees that the Company shall be entitled to immediate injunctive
relief, either by temporary or permanent injunction, to prevent any such
violations. The Executive agrees that this relief shall be in addition to any
other legal or equitable relief to which the Company would be legally entitled
under Texas law.
Executive Employment Agreement
P. Mark Stark - Page 11
<PAGE>
10. ARBITRATION: The Company and the Executive agree as follows:
a. Any claim or controversy arising out of or relating to this Agreement,
or any breach of this Agreement, shall be settled by final and binding
arbitration in the city of San Antonio, Texas in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect on the date
the claim or controversy arises. The Executive and the Company agree that either
party must request arbitration of any claim or controversy within sixty (60)
days of the date the claim or controversy first arises, by giving written notice
of the party's request for arbitration ("ARBITRATION NOTICE"). Failure to
effectively communicate the Arbitration Notice within the time limitation set
forth in this Section shall constitute a waiver of the claim or controversy.
b. In the event that any dispute arising under this Agreement concerns any
payment required to be made under any provision of this Agreement, either party
agrees to deposit the amount of the disputed payment in an interest bearing
account with a financial institution acceptable to the other party within five
(5) days after either party effectively communicates its Arbitration Notice. In
the event that any dispute arising under this Agreement concerns the amount of
any payment required to be made under any provision of this Agreement, either
party agrees to pay the undisputed portion of the payment to the other party AND
deposit the disputed portion of the payment in an interest bearing account with
a financial institution acceptable to the other party within five (5) days after
either party effectively communicates its Arbitration Notice.
c. All claims or controversies subject to arbitration under this Agreement
shall be submitted to an arbitration hearing within thirty (30) days after the
Arbitration Notice is communicated. All claims or controversies shall be
resolved by a panel of three (3) arbitrators selected in accordance with the
applicable Commercial Arbitration Rules. Either party may request that the
arbitration proceeding be stenographically recorded by a Certified Shorthand
Reporter. The arbitrators shall issue a written decision with respect to all
claims or controversies submitted under this Section within thirty (30) days
after the completion of the arbitration hearing. The parties are entitled to be
represented by legal counsel at any arbitration hearing and each party shall be
responsible for its own attorneys' fees. The Company shall be responsible for
paying for all expenses in the event of any arbitration under this Section.
d. The parties agree that this Section may be specifically enforced by
either party, and submission to arbitration compelled, by any court of competent
jurisdiction. The parties further acknowledge and agree that the decision of the
arbitrators may be specifically enforced by either party in any court of
competent jurisdiction.
11. RULES OF CONSTRUCTION: The following provisions shall govern the
interpretation and enforcement of this Agreement:
a. SEVERABILITY: The parties acknowledge and agree that each provision of
this Agreement shall be enforceable independently of every other provision.
Furthermore, the parties acknowledge and agree that, in the event any provision
of this Agreement is determined to be
Executive Employment Agreement
P. Mark Stark - Page 12
<PAGE>
unenforceable for any reason, the remaining covenants and/or provisions will
remain effective, binding and enforceable.
b. WAIVER: The parties acknowledge and agree that the failure of either
party to enforce any provision of this Agreement shall not constitute a waiver
of that particular provision, or of any other provisions, of this Agreement.
c. CHOICE OF LAW/VENUE: The parties acknowledge and agree that except as
specifically provided otherwise in this Agreement, the law of Texas will govern
the validity, interpretation and effect of this Agreement and any other dispute
relating to, or arising out of, the employment relationship between the Company
and the Executive. Proper venue for any litigation or arbitration concerning
this Agreement shall be in San Antonio, Texas.
d. MODIFICATION: The parties acknowledge and agree that this Agreement
constitutes the complete and entire agreement between the parties; that the
parties have executed this Agreement based upon the express terms and provisions
set forth herein; that the parties have not relied on any representations, oral
or written, which are not set forth in this Agreement; that no previous
agreement, either oral or written, shall have any effect on the terms or
provisions of this Agreement; and that all previous agreements, either oral or
written, are expressly superseded and revoked by this Agreement. In addition,
the parties acknowledge and agree that the provisions of this Agreement may not
be modified by any subsequent agreement unless the modifying agreement (i) is in
writing, (ii) contains an express provision referencing this Agreement, (iii) is
signed by the Executive, and (iv) is approved by the Board of Directors.
e. EXECUTION: The parties agree that this Agreement may be executed in
multiple counterparts, each of which shall be deemed an original for all
purposes.
f. HEADINGS: The parties agree that the subject headings set forth at the
beginning of each Section in this Agreement are provided for ease of reference
only, and shall not be utilized for any purpose in connection with the
construction, interpretation or enforcement of this Agreement.
g. SURVIVAL: Upon termination of this Agreement, all of the rights and
obligations of the parties pursuant to this Agreement shall terminate, except
that those provisions of this Agreement which expressly provide for
enforceability after termination shall continue in full force effect in
accordance with the terms hereof.
12. LEGAL CONSULTATION: The parties acknowledge and agree that both parties have
been accorded a reasonable opportunity to review this Agreement with legal
counsel prior to executing the Agreement.
13. NOTICES: The parties acknowledge and agree that any and all notices required
to be delivered under the terms of this Agreement shall be forwarded by personal
delivery or certified U.S. mail. Notices shall be deemed to be communicated and
effective on the day of receipt.
Such notices shall be addressed to each party as follows:
Executive Employment Agreement
P. Mark Stark - Page 13
<PAGE>
P. Mark Stark
350 Dresden Wood
Boerne, Texas 78006
Dawson Production Services, Inc.
112 E. Pecan Street, Suite 1000
San Antonio, Texas 78205
With a copy to:
J. Rowland Cook, Esq.
Jenkens & Gilchrist,
A Professional Corporation
2200 One American Center
600 Congress Avenue
Austin, Texas 78701
Any party hereto may change its or his address for the purpose of receiving
notices and other communications as herein provided by a written notice given in
the manner aforesaid to the other party or parties hereto.
EXECUTED to be effective as of the Effective Date set forth above.
/s/ P. MARK STARK
P. Mark Stark
DAWSON PRODUCTION SERVICES, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
Executive Employment Agreement
P. Mark Stark - Page 14
EXHIBIT 10.33
AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDMENT ("Amendment") is made and entered into to be effective
August 10, 1998, by and between DAWSON PRODUCTION SERVICES, INC. (together with
its successors, the "Company") and P. MARK STARK ("Executive").
WHEREAS, Executive and the Company entered into an Executive Employment
Agreement, dated April 1, 1998 ("Agreement"); and
WHEREAS, Executive and the Company desire to amend the Agreement; and
WHEREAS, both the Company and Executive have read and understand the terms
and provisions set forth in this Amendment, and have been afforded a reasonable
opportunity to review this Amendment with their respective legal counsel;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this Amendment, Executive and the Company agree as follows:
Section 13 (and all references thereto) shall be redenominated as Section
14, and a new Section 13 shall be added as follows:
"13. EXCISE TAX GROSS-UP PAYMENTS. In the event that (i) Executive
become entitled to any payments under the provisions of Section 5
(and related sections to the extent relevant) ("Severance
Payments"), and (ii) some or all of the Severance Payments are
subject to the tax imposed by Section 4999 of the Code (the "Excise
Tax"), the Company shall pay to Executive, at the same time as it
pays to Executive all or any portion of the Severance Payments, an
amount in cash (the "Excise Tax Gross-Up Payment") which will be
equal to the sum of (iii) the Excise Tax on the Severance Payments,
and (iv) the federal, state and local income tax, and the Excise
Tax, on the total Excise Tax Gross-up Payment (which, without
limitation, will require the solving of a quadratic equation). For
purposes of determining the extent to which Severance Payments are
subject to the Excise Tax, and the amount of such Excise Tax, any
other payments or benefits received or to be received by Executive
in connection with a Change of Control, or in connection with
Executive's termination of employment (whether pursuant to the terms
of this Executive Agreement or any other plan (including stock
option plans), arrangement, or agreement with the Company)
(collectively, "Other Benefits") shall be treated in their entirety
as (v) "parachute payments" within the meaning of section 280G(b)(2)
of the Code, and (vi) "excess parachute payments" within the meaning
of section 280G(b)(1) of the Code, and thus shall be considered as
subject to the Excise Tax except to the extent, as determined in the
written opinion of tax counsel selected by the Company's independent
auditors and acceptable to Executive (who shall not unreasonably
withhold approval) such Other Benefits (vii) do not constitute
parachute payments or, without limitation (viii) do not constitute
excess parachute payments. Without limiting the generality of the
1
<PAGE>
foregoing, the amount required to be taken into account for purposes
of the forgoing determinations, considering the timing, form and
other relevant factors relating to Executive's receipt of Severance
Payments and Other Benefits, shall be determined by the Company's
independent auditors, in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. Without limitation, for purposes of
determining the amount of the Excise Tax Gross-Up Payment, the
Executive shall be deemed to pay federal, state and local income
taxes (as applicable) at the highest marginal rate in effect for the
calendar year in which the Excise Tax Gross-Up Payment is paid. In
the event that, after the Excise Tax Gross-up Payment is initially
determined and paid, it is finally determined that Executive's
excess parachute payment is more or less than the amount of excess
parachute payment on which the Excise Tax Gross-Up Payment was
based, the Company, or Executive, shall pay, or repay, to the other
the amount which will cause the Excise Tax Gross-up Payment to equal
the amount which would have been paid had the parties initially used
the amount of the finally determined excess parachute payment in
calculating such amount, plus, in each case, interest on the amount
of such payment, or repayment, at the rate provided in Section
1274(b)(2)(B) of the Code from the date of the original payment of
the Excise Tax Gross-Up Payment through the date of the payment, or
repayment."
All of the provisions of the Agreement which are not amended as set forth
herein shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
/s/ P. MARK STARK
P. MARK STARK
DAWSON PRODUCTION SERVICES, INC.
By: /s/ MICHAEL E. LITTLE
Name: Michael E. Little
Title: Chief Executive Officer and
President
2
EXHIBIT 10.34
AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDMENT ("Amendment") is made and entered into to be effective
August 10, 1998, by and between DAWSON PRODUCTION SERVICES, INC. (together with
its successors, the "Company") and JOSEPH B. EUSTACE ("Executive").
WHEREAS, Executive and the Company entered into an Executive Employment
Agreement, dated April 1, 1996 ("Agreement"); and
WHEREAS, Executive and the Company desire to amend the Agreement; and
WHEREAS, both the Company and Executive have read and understand the terms
and provisions set forth in this Amendment, and have been afforded a reasonable
opportunity to review this Amendment with their respective legal counsel;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this Amendment, Executive and the Company agree as follows:
Section 13 (and all references thereto) shall be redenominated as Section
14, and a new Section 13 shall be added as follows:
"13. EXCISE TAX GROSS-UP PAYMENTS. In the event that (i) Executive
become entitled to any payments under the provisions of Section 5
(and related sections to the extent relevant) ("Severance
Payments"), and (ii) some or all of the Severance Payments are
subject to the tax imposed by Section 4999 of the Code (the "Excise
Tax"), the Company shall pay to Executive, at the same time as it
pays to Executive all or any portion of the Severance Payments, an
amount in cash (the "Excise Tax Gross-Up Payment") which will be
equal to the sum of (iii) the Excise Tax on the Severance Payments,
and (iv) the federal, state and local income tax, and the Excise
Tax, on the total Excise Tax Gross-up Payment (which, without
limitation, will require the solving of a quadratic equation). For
purposes of determining the extent to which Severance Payments are
subject to the Excise Tax, and the amount of such Excise Tax, any
other payments or benefits received or to be received by Executive
in connection with a Change of Control, or in connection with
Executive's termination of employment (whether pursuant to the terms
of this Executive Agreement or any other plan (including stock
option plans), arrangement, or agreement with the Company)
(collectively, "Other Benefits") shall be treated in their entirety
as (v) "parachute payments" within the meaning of section 280G(b)(2)
of the Code, and (vi) "excess parachute payments" within the meaning
of section 280G(b)(1) of the Code, and thus shall be considered as
subject to the Excise Tax except to the extent, as determined in the
written opinion of tax counsel selected by the Company's independent
auditors and acceptable to Executive (who shall not unreasonably
withhold approval) such Other Benefits (vii) do not constitute
parachute payments or, without limitation (viii) do not constitute
excess parachute payments. Without limiting the generality of the
1
<PAGE>
foregoing, the amount required to be taken into account for purposes
of the forgoing determinations, considering the timing, form and
other relevant factors relating to Executive's receipt of Severance
Payments and Other Benefits, shall be determined by the Company's
independent auditors, in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. Without limitation, for purposes of
determining the amount of the Excise Tax Gross-Up Payment, the
Executive shall be deemed to pay federal, state and local income
taxes (as applicable) at the highest marginal rate in effect for the
calendar year in which the Excise Tax Gross-Up Payment is paid. In
the event that, after the Excise Tax Gross-up Payment is initially
determined and paid, it is finally determined that Executive's
excess parachute payment is more or less than the amount of excess
parachute payment on which the Excise Tax Gross-Up Payment was
based, the Company, or Executive, shall pay, or repay, to the other
the amount which will cause the Excise Tax Gross-up Payment to equal
the amount which would have been paid had the parties initially used
the amount of the finally determined excess parachute payment in
calculating such amount, plus, in each case, interest on the amount
of such payment, or repayment, at the rate provided in Section
1274(b)(2)(B) of the Code from the date of the original payment of
the Excise Tax Gross-Up Payment through the date of the payment, or
repayment."
All of the provisions of the Agreement which are not amended as set forth
herein shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
/s/ JOSEPH B. EUSTACE
JOSEPH B. EUSTACE
DAWSON PRODUCTION SERVICES, INC.
By: /s/ MICHAEL E. LITTLE
Name: Michael E. Little
Title: Chief Executive Officer and
President
2
EXHIBIT 10.35
DAWSON PRODUCTION SERVICES, INC.
EMPLOYEE SEVERANCE PAY PLAN
Effective as of August 7, 1998
<PAGE>
DAWSON PRODUCTION SERVICES, INC.
EMPLOYEE SEVERANCE PAY PLAN
AS EFFECTIVE August 7, 1998
TABLE OF CONTENTS
PAGE
ARTICLE I - PURPOSE AND SCOPE................................................1
1.1 Purpose of Plan; Capitalized Terms.........................1
1.2 Plan Status................................................1
ARTICLE II - DEFINITIONS.....................................................1
2.1 "Administrator"............................................1
2.2 "Affiliate"................................................1
2.3 "Claim Form"...............................................2
2.4 "Change of Control"........................................2
2.5 "Code".....................................................2
2.6 "Company"..................................................3
2.7 "Effective Date of a Change of Control"....................3
2.8 "Eligible Employee"........................................3
2.9 "Executive Officer"........................................3
2.10 "ERISA"....................................................3
2.11 "Hourly Employee"..........................................3
2.12 "Incumbent Board"..........................................3
2.13 "Independent Contractor"...................................3
2.14 "Office Employee"..........................................3
2.15 "Part-Time Employee".......................................3
2.16 "Person"...................................................3
2.17 "Plan".....................................................3
2.18 "Plan Year"................................................4
2.19 "Purchaser"................................................4
2.20 "Salaried Employee"........................................4
2.21 "Severance Benefits".......................................4
2.22 "Termination Date".........................................4
2.23 "Termination for Cause"....................................4
2.24 "Temporary Employee".......................................4
2.25 "Years of Service".........................................4
ARTICLE III - ELIGIBLE EMPLOYEES.............................................5
ARTICLE IV - SEVERANCE BENEFITS..............................................6
4.1 Requirements for Severance Benefits........................6
4.2 Amount of Severance Benefits...............................6
i
<PAGE>
ARTICLE V - PAYMENT OF SEVERANCE BENEFITS....................................6
5.1 Severance Benefits.........................................6
5.2 Processing of Severance Payments...........................6
5.3 Deductions From Severance Benefits.........................6
5.4 Severance Benefits Are Not Compensation for Other Benefits.7
5.5 Payment after Death........................................7
5.6 Release....................................................7
ARTICLE VI - CLAIMS AND APPEAL PROCEDURES....................................8
ARTICLE VII - PLAN ADMINISTRATION............................................8
7.1 In General.................................................8
7.2 Reimbursement and Compensation.............................9
7.3 Rulemaking Powers..........................................9
ARTICLE VIII - AMENDMENT AND TERMINATION.....................................9
ARTICLE IX - MISCELLANEOUS INFORMATION.......................................9
9.1 Limitation of Rights.......................................9
9.2 Governing Law..............................................9
9.3 Severability..............................................10
9.4 Captions..................................................10
9.5 Gender and Numbers........................................10
9.6 Spendthrift Provision.....................................10
9.7 Mistaken Payments.........................................10
9.8 Information Requested.....................................10
ii
<PAGE>
DAWSON PRODUCTION SERVICES, INC.
EMPLOYEE SEVERANCE PAY PLAN
AS EFFECTIVE August 7, 1998
WHEREAS, the Company wishes to establish the Plan effective August 7,
1998 to provide certain severance benefits to eligible persons under the terms
and conditions provided therein; and
NOW, THEREFORE, the Company hereby establishes the Plan effective
August 7, 1998 to provide certain severance benefits to eligible persons
under the terms and conditions provided herein.
ARTICLE I - PURPOSE AND SCOPE
1.1 PURPOSE OF PLAN; CAPITALIZED TERMS. The Company has established and
maintains the Plan as a severance program in connection with a potential Change
of Control of the Company. The purpose of this Plan is to provide to Eligible
Employees certain Severance Benefits under the terms and conditions specified in
Article IV of the Plan and to provide financial security to Eligible Employees
who suffer a permanent job loss due to a Change of Control. No other employee of
the Company or any other person shall have any right to benefits under this
Plan. Capitalized terms used herein are defined in Article II of the Plan.
1.2 PLAN STATUS. The Company intends for the Plan to qualify as an
"employee welfare benefit plan" within the meaning of section 3(1) of ERISA. The
Plan shall, at all times, be interpreted and administered in accordance with
ERISA and any other pertinent provisions of federal law.
ARTICLE II - DEFINITIONS
Wherever used herein, the following terms have the following meanings
unless the context clearly requires a different meaning:
2.1 "ADMINISTRATOR" means the Company or such other person or committee as
may be appointed from time to time by the Company to supervise the
administration of the Plan. The Administrator will be the named fiduciary for
purposes of section 402(a)(1) of ERISA with respect to all duties and powers
assigned to the Administrator hereunder and will be responsible for complying
with all reporting and disclosure requirements of Part I of Subtitle B of Title
I of ERISA.
2.2 "AFFILIATE" means any of the following, with regard to the Company or
the Purchaser: (i) a member of a controlled group of corporations of which the
Company or the Purchaser, respectively, is a member, or (ii) an unincorporated
trade or business which is under common control with the Company or the
Purchaser, respectively, as determined in accordance with Code Section 414(c)
and regulations issued thereunder. Subject to Code Section 415(h), a "controlled
group of corporations" shall mean a controlled group of corporations as defined
in Code Section 414(b).
1
<PAGE>
2.3 "CLAIM FORM" means the claim form attached as ATTACHMENT A or any
other form designated by the Administrator in its sole and absolute discretion
to be completed by an Eligible Employee to claim Severance Benefits under the
Plan. The Administrator in its exclusive discretion shall decide the required
content of the Claim Form and may modify such content as its deems appropriate
in its exclusive discretion from time to time.
2.4 "CHANGE OF CONTROL" shall be deemed to have occurred in any of the
following instances:
(a) any Person is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities & Exchange Act of 1934, as amended),
directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the then outstanding
voting securities of the Company; or
(b) members of the Incumbent Board cease for any reason to
constitute at least a majority of the Board of Directors; or
(c) a public announcement is made of a tender or exchange offer by
any Person for fifty percent (50%) or more of the outstanding voting
securities of the Company, and the Board of Directors approves or fails to
oppose that tender or exchange offer in its statements in Schedule 14D-9
under the Securities & Exchange Act of 1934; or
(d) the shareholders of the Company approve a merger or
consolidation of the Company with any other Person (or, if no such
approval is required, the consummation of such a merger or consolidation
of the Company), other than a merger or consolidation that would result in
the voting securities of the Company outstanding immediately before the
consummation thereof continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity or of a parent of the surviving entity) a majority of the combined
voting power of the voting securities of the surviving entity (or its
parent) outstanding immediately after that merger or consolidation; or
(e) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all the Company's assets (or, if no
such approval is required, the consummation of such a liquidation, sale,
or disposition in one transaction or series of related transactions) other
than a liquidation, sale, or disposition of all or substantially all the
Company's assets in one transaction or a series of related transactions to
a corporation owned directly or indirectly by the shareholders of the
Company in substantially the same proportions as their ownership of stock
of the Company.
2.5 "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
2
<PAGE>
2.6 "COMPANY" means Dawson Production Services, Inc.,and its subsidiaries,
or any successor thereto, which elects to continue the Plan.
2.7 "EFFECTIVE DATE OF A CHANGE OF CONTROL" means the effective date of a
Change of Control.
2.8 "ELIGIBLE EMPLOYEE" means an individual who is a Full-Time Office
Employee or a Full-Time Salaried Employee, and the Administrator determines such
individual to be qualified as an Eligible Employee under the terms and
conditions specified in Article III of the Plan, as it shall be amended from
time to time. Only Eligible Employees who satisfy all applicable terms and
conditions of the Plan may receive Severance Benefits.
2.9 "EXECUTIVE OFFICER" means the Chief Executive Officer, Chief Financial
Officer, and Chief Operating Officer of the Company.
2.10 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
2.11 "HOURLY EMPLOYEE" means an employee of the Company who does not fall
within the definition of an Office Employee or a Salaried Employee.
2.12 "INCUMBENT BOARD" means the individuals who constitute the Board of
Directors immediately prior to a Change of Control and any other individual who
becomes a director of the Corporation after that date and whose election or
appointment by the Board of Directors or nomination for election by the
Corporation's shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board.
2.13 "INDEPENDENT CONTRACTOR" means any individual contracted for a
specific assignment, for a specific duration or who is not treated as an
employee on the payroll of the records of the Company. A verbal or written
contract may be in effect.
2.14 "OFFICE EMPLOYEE" means an individual who is employed by the Company
and who is listed on the Company's regular payroll records under position codes
59, 60, 69, and 71 and whose work week is regularly scheduled to be thirty (30)
hours a week or more.
2.15 "PART-TIME EMPLOYEE" means a person whose work week is regularly
scheduled to be less than thirty (30) hours a week.
2.16 "PERSON" means any individual, corporation, limited liability
company, partnership, unincorporated association, trust, or any other legally
recognized entity.
2.17 "PLAN" means the Dawson Production Services, Inc. Employee Severance
Pay Plan as set forth herein, together with any amendments and attachments
hereto as shall be adopted from time to time.
3
<PAGE>
2.18 "PLAN YEAR" means the twelve-month period that begins on each January
1, and ends on the following December 31.
2.19 "PURCHASER" means the survivor of any merger, the resulting company
of any consolidation, or the purchaser of stock or assets in a Change in
Control.
2.20 "SALARIED EMPLOYEE" means an individual who is employed by the
Company and who is listed on the Company's regular payroll records under
position codes 57, 58, 59, 60, 61, 63, 64, 72, 73, 74, 75, and 90 and whose work
week is regularly scheduled to be thirty (30) hours a week or more.
2.21 "SEVERANCE BENEFITS" means the benefits provided under the terms and
conditions specified in Article IV of the Plan.
2.22 "TERMINATION DATE" means the date upon which the Company or the
Purchaser designates as the effective date of the Eligible Employee's
termination of employment where such termination of employment with the Company
occurs on or after the Effective Date of a Change of Control.
2.23 "TERMINATION FOR CAUSE" means an involuntary termination of
employment based upon an Employee's commission of any of the following:
(a) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment
with the Company;
(b) intentional damage of more than $1,000 worth of property of
the Company;
(c) intentional wrongful disclosure of trade secrets or
confidential information of the Company;
(d) willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease and
desist order;
(e) intentional breach of fiduciary duty owed to the Company
involving personal profit; or
(f) gross misconduct.
2.24 "TEMPORARY EMPLOYEE" means a person contracted through a temporary
service company, agency, employee leasing company, staffing company, or a person
individually who supplements the work force temporarily, to perform services as
a temporary employee, or is otherwise hired to perform services for the Company
and is not classified on the Company's books as a regular common law employee of
the Company.
2.25 "YEARS OF SERVICE" means the number of complete consecutive 12 month
periods of time for which an Eligible Employee has been on the Company payroll
on a full-time or full-time equivalent basis (as determined by the Company's
vacation policy as may be in effect from time to time), or has been on such
basis on the payroll of a company or other entity which has merged into or has
been acquired by the Company, from his last date of hire to his Termination
Date. Any breaks in service shall start a new period of service for the purpose
of determining Years of Service.
4
<PAGE>
ARTICLE III - ELIGIBLE EMPLOYEES
An individual will qualify as an Eligible Employee only if the individual
satisfies each of the following conditions:
(a) The individual was employed by the Company or the Purchaser as
a Salaried Employee or Office Employee of the Company or the
Purchaser on the date the Company or the Purchaser notified
the individual that it was involuntarily terminating his
employment;
(b) The individual was involuntarily terminated from employment by
the Company on or within eighteen (18) months after the
Effective Date of a Change of Control, and for a reason other
than: (i) a Termination for Cause; (ii) termination of
employment with the Company where the individual is
immediately offered a similar or equivalent position, with
similar duties and with no decrease in base pay at a location
within commuting distance of the individuals principal
residence, by an Affiliate of the Company or the Purchaser; or
(iii) termination due to the sale of the Company where the
individual is immediately offered a similar or equivalent
position, with similar duties and with no decrease in base pay
at a location within commuting distance of the individuals
principal residence, by an Affiliate of the Company or the
Purchaser;
(c) Prior to the date that the Company notified the individual of
his employment termination the individual did not: (1)
voluntarily terminate employment or notify the Company of his
intent or election to terminate employment at some future date
by resignation (either voluntarily or in lieu of Termination
for Cause), failure to appear for work, or retirement; or (2)
terminate employment upon the expiration of disability leave;
(d) The Employee is an Office Employee or Salaried Employee for at
least thirty (30) calendar days immediately prior to a Change
of Control and on the effective date of a Change of Control;
(e) The Administrator determines that the individual satisfies all
other conditions under the Plan required to qualify as an
Eligible Employee and that the individual is not otherwise
disqualified or excluded from eligibility under the terms of
the Plan.
If an individual does not meet these conditions and all other requirements of
the Plan, he will not be entitled to any Severance Benefits under this Plan.
Hourly Employees, Independent Contractors, Part-Time Employees and Temporary
Employees are not Eligible Employees. This means that Hourly Employees,
Independent Contractors, Temporary Employees, and Part-Time Employees are not
eligible for Severance Benefits.
5
<PAGE>
ARTICLE IV - SEVERANCE BENEFITS
4.1 REQUIREMENTS FOR SEVERANCE BENEFITS. The Plan shall pay Severance
Benefits in accordance with this Article IV only to Eligible Employees.
4.2 AMOUNT OF SEVERANCE BENEFITS. The amount of Severance Benefits will be
determined in accordance with this Paragraph.
(a) ELIGIBLE EMPLOYEES WITH THREE YEARS OF SERVICE OR FEWER. Each
Eligible Employee with three (3) Years of Service or fewer
shall be entitled to three months' salary.
(b) ELIGIBLE EMPLOYEES WITH MORE THAN THREE YEARS OF SERVICE. Each
Eligible Employee with more than three (3) Years of Service
shall be entitled to one months' salary multiplied by the
number of Years of Service for the Eligible Employee.
(c) EXECUTIVE OFFICERS. The Chief Executive Officer, Chief
Operating Officer, or Chief Financial Officer shall receive
Severance Benefits pursuant to this Plan unless they are
entitled to severance benefits from the Company through a
separate agreement between such officer and the Company, in
which case the separate agreement will control, and no
Severance Benefits will be provided to such Executive Officer.
ARTICLE V - PAYMENT OF SEVERANCE BENEFITS
Any Severance Benefits payable under the Plan shall be paid as specified
in this Article V of the Plan or in accordance with such other uniform
nondiscriminatory rules as the Administrator, in its exclusive discretion, deems
appropriate.
5.1 SEVERANCE BENEFITS. Severance Benefits, if any, under the Plan, will
be paid to an Eligible Employee on or before the next regularly scheduled
payroll date after the Termination Date of the Eligible Employee. Severance
Benefits shall be paid in a single lump sum cash payment.
5.2 DEDUCTIONS FROM SEVERANCE BENEFITS. The following items will be
deducted from any Severance Benefits payable under this Plan:
(a) All required federal, state and local taxes;
(b) To the extent permitted by law, any amounts owed to the
Company by an Eligible Employee;
(c) Any compensation or other payments that the Eligible Employee
receives (or may be entitled to receive) on termination of
employment pursuant to any rights or entitlement that the
Eligible Employee possesses or asserts pursuant to a written
or oral employment agreement with the Company or any
6
<PAGE>
successor thereto, regardless of whether the term of such
agreement is expired or unexpired as of the Eligible
Employee's Termination Date; and
(d) Any compensation or other payments that the Eligible Employee
receives (or may be entitled to receive) on termination of
employment pursuant to any rights under any severance plan of
Purchaser.
By acceptance of any Severance Benefits from the Plan the Eligible
Employee shall be deemed to have agreed to adhere to all terms of the Plan. The
Eligible Employee also shall be deemed to agree that the Eligible Employee will
repay any Severance Benefits that the Administrator determines he has received
from the Plan in excess of the amount provided under the Plan.
5.3 SEVERANCE BENEFITS ARE NOT COMPENSATION FOR OTHER BENEFITS. Severance
Benefits are not considered as covered compensation for benefit plan purposes.
The number of months of Severance Benefits provided to an Eligible Employee
shall not be considered in calculating the Eligible Employee's entitlement, if
any, to vacation, sick leave, bonus, incentive compensation, retirement or other
benefits except as is specifically provided in the Company's other employee
benefit plans. In addition, except as required by law, all employee benefits
cease as of the Eligible Employee's Termination Date.
5.4 PAYMENT AFTER DEATH. If an Eligible Employee dies before Severance
Benefits have been paid in full, the remaining Severance Benefits will be paid
to the Eligible Employee's estate. The Plan shall be discharged fully and
completely to the extent of any payment made to any such estate.
5.5 RELEASE. The Administrator, in his sole and absolute discretion, may
require an Eligible Employee to sign a release, in a form prescribed by the
Company, that releases all claims that the Eligible Employee may have, whether
known or unknown, arising out of or related to his employment with the Company
or the Purchaser, including claims arising out of Title VII of the Civil Rights
Act of 1964, as amended, the Age Discrimination in Employment Act, the Americans
with Disabilities Act, the Equal Pay Act, and any and all State and Federal
statutes concerning employment. If an Eligible Employee does not execute such a
release if requested, the Administrator shall not pay any Severance Benefits to
the otherwise Eligible Employee, and the Administrator shall withhold any
Severance Benefits until such release has been executed.
ARTICLE VI - CLAIMS AND APPEAL PROCEDURES
In the event an employee fails to receive a Severance Benefit to which he
believes he is entitled, he must make a claim for Severance Benefits in writing
to the Administrator describing the claim and asking the Administrator to rule
on the claim's validity under the terms of the Plan. With respect to any claim
for the requested Severance Benefits, the Administrator will then issue a
decision on whether the claim is denied or granted within thirty (30) days after
receiving the claim. If the claim is denied in whole or in part, the decision in
writing by the Administrator must include the specific reasons for the denial
and reference to the Plan provisions on which the denial is based. The decision
must also include a description of any additional information
7
<PAGE>
which the employee needs to submit in order to refile the claim, along with an
explanation of why such additional information is necessary and how the
procedure for reviewing claims works. If the notice of denial is not furnished
in accordance with the above procedure, the claim shall be deemed denied and the
employee is permitted to proceed with the review procedure.
If his claim is denied in whole or in part, an employee may appeal in
writing a denial of the claim, in part or in whole, and request a review by the
Administrator. The appeal must be submitted within sixty (60) days after notice
of the denial of the claim. The employee may request in writing to review copies
of pertinent Plan documents in connection with the appeal. The Administrator
will review the appeal and notify the employee of the final decision within
thirty (30) days after receiving the request for review. The notice of the final
decision must include the specific reasons for the decision and specific
references to the pertinent Plan provisions on which the Administrator's
decision is based. If the employee is dissatisfied with the Administrator's
review decision, the employee has the right to file suit.
A deceased employee's beneficiary should follow the same claims procedure
in the event of the employee's death.
ARTICLE VII - PLAN ADMINISTRATION
7.1 IN GENERAL. The general administration of the Plan and the duty to
carry out its provisions shall be vested in the Administrator, which shall be
the named fiduciary of the Plan for purposes of ERISA. The Plan and Severance
Benefits under the Plan shall be administered by the Administrator appointed
from time to time by the Company. The Administrator may, in its discretion,
secure the services of other parties, including agents and/or employees to carry
out the day-to-day functions necessary to an efficient operation of the Plan.
The Administrator shall have the exclusive right to interpret the terms of the
Plan, to determine eligibility for coverage and benefits, and to make such other
determinations and to exercise such other powers and responsibilities as shall
be provided for in the Plan or shall be necessary or helpful with respect
thereto and its good faith interpretation shall be binding and conclusive upon
all persons.
7.2 REIMBURSEMENT AND COMPENSATION. The Administrator shall receive no
compensation for its services as Administrator, but it shall be entitled to
reimbursement for all sums reasonably and necessarily expended by it in the
performance of such duties.
7.3 RULEMAKING POWERS. The Administrator shall have the power to make
reasonable rules and regulations required in the administration of the Plan, to
make all determinations necessary for the Plan's administration, except those
determinations which the Plan requires others to make, and to construe and
interpret the Plan wherever necessary to carry out its intent and purpose and to
facilitate its administration. The Administrator and the Company, with respect
to all duties assigned to such entities hereunder, shall have the exclusive
right to interpret the terms of the Plan and determine eligibility for coverage
and benefits under the Plan and its good faith interpretation shall be binding
and conclusive on all persons. In the exercise of such discretionary powers, the
Administrator shall treat all similarly-situated Eligible Employees uniformly
and equitably under the Plan. No action may be brought for benefits under the
Plan until a claim has been submitted and the appeal rights under the Plan have
been exhausted.
8
<PAGE>
ARTICLE VIII - AMENDMENT AND TERMINATION
This Plan will terminate automatically, and without any action by the
Board of Directors of the Company or the Administrator, if there has been no
Change of Control of the Company within five (5) years after the effective date
of this Plan. After such five (5) year period, the Company, acting through its
Chief Executive Officer or such other person or committee appointed by its Board
of Directors, reserves the right to amend or terminate the Plan at any time,
without the consent of any person or entity. Such amendment or termination shall
not affect benefits to which an Eligible Employee who has already been
terminated may be entitled to under the Plan prior to such amendments or
termination.
In the event of a Change of Control, this Plan may not be amended for a
period of eighteen (18) months after the Change of Control. After such eighteen
(18) month period, the Company, acting through its Chief Executive Officer or
such other person or committee appointed by its Board of Directors, reserves the
right to amend or terminate the Plan at any time, without the consent of any
person or entity. Such amendment or termination shall not affect benefits to
which an Eligible Employee who has already been terminated may be entitled to
under the Plan prior to such amendments or termination.
ARTICLE IX - MISCELLANEOUS INFORMATION
9.1 LIMITATION OF RIGHTS. Neither the establishment of the Plan nor any
amendment thereof, nor the payment of any benefits, will be construed as giving
to any Eligible Employee, or other person any legal or equitable right against
the Company or any person acting on behalf of the Company, except as expressly
provided herein. Likewise, nothing appearing in or done pursuant to the Plan
shall be held or construed to create a contract of employment with any Eligible
Employee, to obligate the Company to continue the service of the Eligible
Employee or to affect or modify his or her terms of employment in any way.
9.2 GOVERNING LAW. The provisions of the Plan shall be construed, enforced
and administered according to ERISA and any otherwise applicable Federal law
and, to the extent not preempted by federal law, the laws of the State of Texas.
9.3 SEVERABILITY. If any provision of the Plan is held invalid or
unenforceable, its validity or unenforceability shall not affect any other
provisions of the Plan, and the Plan shall be construed and enforced as if such
provision had not been included herein.
9.4 CAPTIONS. The captions contained herein are inserted only as a matter
of convenience and for reference and in no way define, limit, enlarge or
describe the scope or intent of the Plan, nor in any way shall affect the Plan
or the construction of any provision thereof.
9.5 GENDER AND NUMBERS. A pronoun or adjective in the masculine or
feminine gender include both genders, and the singular includes the plural, and
vice versa, unless the context clearly indicates otherwise.
9
<PAGE>
9.6 SPENDTHRIFT PROVISION. No benefit, right or interest of any person
hereunder shall be subject to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, seizure, attachment or legal,
equitable or other process or be liable for, or subject to, the debts,
liabilities or other obligations of such persons, except as otherwise required
by law.
9.7 MISTAKEN PAYMENTS. Any amounts paid to an Eligible Employee or other
person in excess of the amount to which he is entitled hereunder shall be repaid
by the Eligible Employee or other person promptly following receipt by the
Eligible Employee or other person of a notice of such excess payments. In the
event such repayment is not made by the Eligible Employee or other person, the
Administrator shall have right to offset such repayment amounts against any
amounts owed to the Eligible Employee or other person by the Company, unless
otherwise prohibited by law, until the entire amount of such excess payments are
recovered by the Administrator.
9.8 INFORMATION REQUESTED. Eligible Employee or other persons shall
provide the Company, the Administrator, and their authorized representatives
with such information and evidence, and shall sign such documents, as may
reasonably be requested from time to time for the purpose of administration of
the Plan.
Dawson Production Services, Inc.
By:/s/ MICHAEL E. LITTLE
Its: President and Chief Executive
Officer
10
<PAGE>
Attachment A to the Dawson Production Services, Inc.
Employee Severance Pay Plan
DAWSON PRODUCTION SERVICES, INC.
EMPLOYEE SEVERANCE PAY PLAN
CLAIM FORM
Name of Plan: Dawson Production Services, Inc. Employee Severance Pay Plan
THIS CLAIM FORM MUST BE RETURNED
WITHIN THIRTY (30) WORKING DAYS OF YOUR DATE OF TERMINATION
As explained in the Dawson Production Services, Inc., Employee Severance
Pay Plan and Summary Plan Description, you may make a claim for Severance
Benefits by completing and signing this form. If you apply for Severance
Benefits and the Administrator determines that you otherwise satisfy the
requirements to qualify for those benefits and approves your application, you
will receive Severance Benefits pursuant to the terms of the Dawson Production
Services, Inc. Severance Pay Plan. To make a claim for Severance Benefits,
return the completed form to the Administrator, c/o Human Resources Department
of Dawson Production Services, Inc.,112 East Pecan Street, Suite 1000, San
Antonio, Texas 78205 within thirty (30) days of your Termination Date.
I have read the Dawson Production Services, Inc. Employee Severance Pay
Plan Summary Plan Description, and I understand my rights under it. I understand
that my claim for Severance Benefits under the Plan will be reviewed by the
Administrator and that approval of my application for Severance Benefits will be
granted or denied based on the terms of the Dawson Production Services, Inc.
Employee Severance Pay Plan.
Your signature: _______________________________
Your Printed Name: _______________________________
Date: _______________________________
Address: _______________________________
Telephone: _______________________________
- --------------------------------------------------------------------------------
Received by Administrator:_________________________Date:__________Time:_________
Severance Claim, check only ONE:_____________Approved _____________Disapproved
By: _____________________________
Manager Human Resources
Severance Date:__________________
Reason for Disapproval (if applicable):_________________________________________
EXHIBIT 10.36
RESOLUTION
DAWSON PRODUCTION SERVICES, INC.
BOARD OF DIRECTORS MEETING
AUGUST 7, 1998
RESOLVED THAT, effective this date, the Board hereby approves and adopts
the following amendment to its Rights Agreement, dated as of September 11, 1997,
between the Corporation and Harris Trust Company of New York as Rights Agent:
Section 3(a)(ii) of the Rights Agreement is amended to read as follows:
"(ii) such date, if any, after the date of commencement or public
announcement of a tender offer or exchange offer by any Person (other than
an Exempt Person), the consummation of which would result in any Person
becoming the Beneficial Owner of Common Stock aggregating 15% or more of
the then outstanding shares of Common Stock, as is subsequently determined
by resolution of the Board of Directors . . ."
EXHIBIT 10.37
AGREEMENT AND PLAN OF MERGER
by and among
KEY ENERGY GROUP, INC.
MIDLAND ACQUISITION CORP.,
and
DAWSON PRODUCTION SERVICES, INC.
dated as of
August 11, 1998
<PAGE>
PAGE
ARTICLE I THE OFFER AND MERGER.......................................1
Section 1.1 The Offer..................................................1
Section 1.2 Company Actions............................................3
Section 1.3 Directors..................................................6
Section 1.4 The Merger.................................................7
Section 1.5 Effective Time.............................................8
Section 1.6 Closing....................................................9
Section 1.7 Directors and Officers of the Surviving
Corporation................................................9
Section 1.8 Shareholders' Meeting......................................9
Section 1.9 Merger Without Meeting of Shareholders....................10
ARTICLE II CONVERSION OF SECURITIES..................................11
Section 2.1 Conversion of Capital Stock...............................11
Section 2.2 Exchange of Certificates..................................12
Section 2.3 Dissenting Shares.........................................13
Section 2.4 Company Option Plans......................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............15
Section 3.1 Organization..............................................15
Section 3.2 Capitalization............................................16
Section 3.3 Authorization; Validity of Agreement; Company
Action....................................................17
Section 3.4 Consents and Approvals; No Violations.....................18
Section 3.5 SEC Reports and Financial Statements......................19
Section 3.6 Absence of Certain Changes or Events......................20
Section 3.7 No Undisclosed Liabilities................................21
Section 3.8 Information in Proxy Statement............................21
Section 3.9 Employee Benefit Plans; ERISA.............................22
Section 3.10Litigation................................................24
Section 3.11Conduct of Business.......................................24
Section 3.12Environmental Protection..................................24
Section 3.13Taxes.....................................................28
Section 3.14Labor Relations...........................................30
Section 3.15Compliance with Laws......................................31
Section 3.16Insurance.................................................31
Section 3.17Contracts.................................................31
Section 3.18Property..................................................31
Section 3.19Equipment.................................................32
Section 3.20Permits...................................................32
Section 3.21Intellectual Property.....................................32
Section 3.22Opinion of Financial Advisor..............................33
Section 3.23Vote Required.............................................33
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
THE PURCHASER.............................................33
Section 4.1 Organization..............................................33
i
<PAGE>
PAGE
Section 4.2 Authorization; Validity of Agreement;
Necessary Action..........................................34
Section 4.3 Consents and Approvals; No Violations.....................34
Section 4.4 Information in Proxy Statement............................35
Section 4.5 Financing.................................................35
Section 4.6 Purchaser's Operations....................................36
ARTICLE V COVENANTS...........................................36
Section 5.1 Interim Operations of the Company.........................36
Section 5.2 Rights Agreement..........................................39
Section 5.3 HSR Act...................................................39
Section 5.4 Access to Information.....................................40
Section 5.5 Consents and Approvals....................................40
Section 5.6 Employee Benefits.........................................41
Section 5.7 No Solicitation...........................................41
Section 5.8 Brokers or Finders........................................43
Section 5.9 Additional Agreements.....................................43
Section 5.10Reserved..................................................44
Section 5.11Publicity.................................................44
Section 5.12Notification of Certain Matters...........................44
Section 5.13Directors' and Officers' Indemnification.................44
Section 5.14Disposition of Litigation. ..............................45
Section 5.15Consulting Agreements. ..................................45
ARTICLE VI CONDITIONS................................................46
Section 6.1 Conditions to Each Party's Obligation To
Effect the Merger.........................................46
ARTICLE VII TERMINATION...............................................46
Section 7.1 Termination...............................................46
Section 7.2 Effect of Termination.....................................49
ARTICLE VIIIMISCELLANEOUS.............................................50
Section 8.1 Fees and Expenses.........................................50
Section 8.2 Amendment and Modification................................51
Section 8.3 Nonsurvival of Representations and Warranties.............51
Section 8.4 Notices...................................................51
Section 8.5 Interpretation............................................53
Section 8.6 Counterparts..............................................53
Section 8.7 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership.......................................53
Section 8.8 Severability..............................................54
Section 8.9 Governing Law.............................................54
Section 8.10Assignment................................................54
CONDITIONS TO THE TENDER OFFER...................................Annex A
ii
<PAGE>
INDEX OF DEFINED TERMS
DEFINED TERM SECTION NO.
Acquisition Proposal ................................. 5.7
Appointment Date ..................................... 5.1
Articles of Merger ................................... 1.5(a)
Benefit Plans......................................... 3.9(a)
Certificate of Merger................................. 1.5
Certificates.......................................... 2.2(b)
Closing............................................... 1.6
Closing Date.......................................... 1.6
Code.................................................. 3.9(b)
Commitment Letter. . . . . . . . . . . . . ........... 4.5
Company............................................... Recitals
Company Common Stock.................................. 1.1(a)
Company SEC Documents................................. 3.5
Director Options...................................... 2.4(a)
Dissenting Shares. . . . . . . . . . . . . ........... 2.3
Effective Time........................................ 1.5
Employee Option....................................... 2.4(a)
Environmental Claim................................... 3.12(b)(i)
Environmental Laws.................................... 3.12(b)(ii)
Environmental Permits................................. 3.12(a)(ii)
Equipment. . . . . . . . . . . . . . . . . ........... 3.19
ERISA................................................. 3.9(a)
ERISA Affiliate....................................... 3.9(a)
Exchange Act.......................................... 1.1(a)
Financing. . . . . . . . . . . . . . . . . ........... 4.5
GAAP.................................................. 3.5
Governmental Entity................................... 3.4
Hazardous Materials................................... 3.12(b)(iii)
HSR Act............................................... 3.4
Indemnified Party..................................... 5.13
Intellectual Property................................. 3.21
Material Agreements. . . . . . . . . . . . ........... 3.4
Merger................................................ 1.4(a)
Merger Consideration.................................. 2.1(c)
Minimum Condition..................................... 1.1(a)
1998 Financial Statements............................. 3.5
1998 Form 10-K . . . . . . . . . . . . . . ........... 3.5
NJBCA. . . . . . . . . . . . . . . . . . . ........... 1.4(a)
NLRB.................................................. 3.14
Offer................................................. 1.1(a)
Offer Documents. . . . . . . . . . . . . . ........... 1.1(b)
Offer Price........................................... 1.1(a)
i
<PAGE>
DEFINED TERM SECTION NO.
Offer to Purchase..................................... 1.1(a)
Option Plan........................................... 2.4(a)
Options............................................... 2.4(a)
Parent................................................ Recitals
Paying Agent.......................................... 2.2(a)
PCBs . . . . . . . . . . . . . . . . . . . ........... 3.12(b)(iii)
PNC. . . . . . . . . . . . . . . . . . . . ........... 4.5
Preferred Stock....................................... 3.2(a)
Proposed Bridge Arrangements.......................... 4.5
Proxy Statement....................................... 1.8(a)(ii)
Purchaser............................................. Recitals
Purchaser Common Stock................................ 2.1
Release............................................... 3.12(b)(iv)
Rights................................................ 1.1(a)
Rights Agreement...................................... 1.1(a)
Rights Amendment...................................... 1.2(d)
Schedule 14D-1........................................ 1.1(b)
Schedule 14D-9........................................ 1.2(b)
SEC................................................... 1.1(b)
Securities Act........................................ 3.5
Senior Notes . . . . . . . . . . . . . . . ........... 3.4
Series A Preferred Stock . . . . . . . . . ........... 3.2(a)
Service............................................... 3.9(h)
Shares................................................ 1.1(a)
Special Meeting....................................... 1.8(a)(i)
Subsidiary............................................ 3.1
Superior Proposal..................................... 5.7
Surviving Corporation................................. 1.4(a)
Taxes................................................. 3.13(j)
Tax Return............................................ 3.13(j)
TBCA.................................................. 1.2(a)
Termination Fee....................................... 8.1(b)
Transactions.......................................... 1.2(a)
Trigger Event......................................... 8.1(b)
Voting Debt........................................... 3.2(a)
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 11, 1998, by and
among Key Energy Group, Inc., a Maryland corporation ("Parent"), Midland
Acquisition Corp., a New Jersey corporation and a direct, wholly owned
subsidiary of Parent (the "Purchaser"), and Dawson Production Services, Inc., a
Texas corporation (the "Com pany").
WHEREAS, the Boards of Directors of Parent, the Purchaser and the
Company have approved, and deem it advisable and in the best interests of their
respective shareholders to consummate, the acquisition of the Compa ny by Parent
upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the forego ing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 THE OFFER. (a) As promptly as practicable (but in no
event later than five business days after the public announcement of the
execution hereof), the Purchaser shall commence (within the meaning of Rule
14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) an offer (the "Offer") to purchase for cash all shares of the issued and
out standing common stock, par value $.01 per share (referred to herein as
either the "Shares" or "Company Common Stock"), of the Company (including the
associated Common Stock Purchase Rights (the "Rights") issued pursuant to the
Rights Agreement between the Company and Harris Trust Company of New York, as
Rights Agent, dated as of Septem ber 11, 1997 (the "Rights Agreement")), at a
price of $17.50 per Share, net to the seller in cash (such price, or such higher
price per Share as may be paid in the Offer, being referred to herein as the
"Offer Price"), subject to there being validly tendered and not withdrawn prior
to the expiration of the Offer, that number of Shares which, together with the
Shares beneficially owned
1
<PAGE>
by Parent or the Purchaser, represents at least a major ity of the Shares
outstanding on a fully diluted basis (the "Minimum Condition") and to the other
conditions set forth in Annex A hereto. The Purchaser shall, on the terms and
subject to the prior satisfaction or waiver (except that the Minimum Condition
may not be waived) of the conditions of the Offer, accept for payment and pay
for Shares tendered as soon as it is legally permitted to do so under applicable
law. The obligations of the Purchaser to commence the Offer and to accept for
payment and to pay for any Shares validly tendered on or prior to the expiration
of the Offer and not withdrawn shall be subject only to the Minimum Condition
and the other conditions set forth in Annex A hereto. The Offer shall be made by
means of an offer to purchase (the "Offer to Purchase") containing the terms set
forth in this Agree ment, the Minimum Condition and the other conditions set
forth in Annex A hereto. The Purchaser shall not amend or waive the Minimum
Condition and shall not decrease the Offer Price or decrease the number of
Shares sought, or amend any other condition of the Offer in any manner adverse
to the holders of the Shares (other than with re spect to insignificant changes
or amendments) without the written consent of the Company (such consent to be
autho rized by the Board of Directors of the Company or a duly authorized
committee thereof), PROVIDED, HOWEVER, that if on the initial scheduled
expiration date of the Offer (as it may be extended), all conditions to the
Offer shall not have been satisfied or waived, the Offer may be extended from
the time to time until December 31, 1998. In addition, the Offer Price may be
increased and the Offer may be extended to the extent required by law in
connection with such increase in each case without the consent of the Company.
(b) As soon as practicable on the date the Offer is commenced,
Parent and the Purchaser shall file with the United States Securities and
Exchange Com mission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer (together with all amend ments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will
include, as exhibits, the Offer to Purchase and a form of letter of transmittal
and summary advertisement (collec tively, together with any amendments and
supplements thereto, the "Offer Documents"). The Offer Documents will comply in
all material respects with the provisions
2
<PAGE>
of applicable federal securities laws and, on the date filed with the SEC and on
the date first published, sent or given to the Company's shareholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or neces sary in order to make the statements
therein, in light of the circumstances under which they were made, not mis
leading, except that no representation is made by Parent or the Purchaser with
respect to information supplied by the Company in writing for inclusion in the
Offer Docu ments. Each of Parent and the Purchaser further agrees to take all
steps necessary to cause the Offer Documents to be filed with the SEC and to be
disseminated to hold ers of Shares, in each case as and to the extent required
by applicable federal securities laws. Each of Parent and the Purchaser, on the
one hand, and the Company, on the other hand, agrees promptly to correct any
informa tion provided by it for use in the Offer Documents if and to the extent
that it shall have become false and mis leading in any material respect and the
Purchaser further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given the
opportunity to review the Schedule 14D-1 before it is filed with the SEC. In
addition, Parent and the Purchas er agree to provide the Company and its counsel
in writ ing with any comments Parent, the Purchaser or their counsel may receive
from time to time from the SEC or its staff with respect to the Offer Documents
promptly after the receipt of such comments, and any written or oral responses
thereto.
Section 1.2 COMPANY ACTIONS.
(a) The Company hereby approves of and consents to the Offer
and represents that the Board of Directors, at a meeting duly called and held,
has, sub ject to the terms and conditions set forth herein, unani mously (i)
approved this Agreement and the transactions contemplated hereby, including the
Offer and the Merger (collectively, the "Transactions"), and such approval
constitutes all requisite approvals for purposes of Article 13.03 A.(1) of the
Texas Business Corporation Act (the "TBCA") and (ii) resolved to recommend that
the shareholders of the Company accept the Offer, tender
3
<PAGE>
their Shares thereunder to the Purchaser and approve and adopt this Agreement
and the Merger. The Company repre sents that the actions set forth in this
Section 1.2(a) and all other actions it has taken in connection there with are
sufficient to render the provisions of Part Thirteen of the TBCA restricting
business combinations with certain persons inapplicable to the Offer and the
Merger.
(b) Concurrently with the commencement of the Offer, the
Company shall file with the SEC a Solici tation/Recommendation Statement on
Schedule 14D-9 (to gether with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-9") which shall, subject to
the fiduciary duties of the Company's directors under applicable law and to the
provisions of this Agreement, contain the recommendation referred to in clause
(ii) of Section 1.2(a) hereof. The Schedule 14D-9 will comply in all material
respects with the provisions of applicable federal securities laws and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's shareholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information sup plied by Parent or the
Purchaser in writing for inclusion in the Offer Documents. The Company further
agrees to take all steps necessary to cause the Schedule 14D-9 to be filed with
the SEC and to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. Each of the Company, on
the one hand, and Parent and the Purchaser, on the other hand, agrees promptly
to correct any information provided by it for use in the Schedule 14D-9 if and
to the extent that it shall have become false and misleading in any material
respect and the Company further agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and to be dissemi nated
to holders of the Shares, in each case as and to the extent required by
applicable federal securities laws. Parent and its counsel shall be given the
opportu nity to review the Schedule 14D-9 before it is filed with the SEC. In
addition, the Company agrees to provide Parent, the Purchaser and their counsel
in writing with
4
<PAGE>
any comments the Company or its counsel may receive from time to time from the
SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt
of such comments, and any written or oral responses thereto.
(c) In connection with the Offer, the Company will promptly
furnish or cause to be furnished to the Purchaser mailing labels, security
position listings and any available listing or computer file containing the
names and addresses of the record holders of the Shares as of a recent date, and
shall furnish the Purchaser with such information and assistance as the
Purchaser or its agents may reasonably request in communicating the Offer to the
shareholders of the Company. Except for such steps as are necessary to
disseminate the Offer Docu ments, Parent and the Purchaser shall hold in
confidence the information contained in any of such labels and lists and the
additional information referred to in the preced ing sentence, will use such
information only in connec tion with the Offer, and, if this Agreement is
terminat ed, will upon request of the Company deliver or cause to be delivered
to the Company all copies of such informa tion then in its possession or the
possession of its agents or representatives.
(d) As promptly as practicable on or after the date hereof,
but in no event later than five days following announcement of the Offer, the
Company will amend the Rights Agreement, as necessary (the "Rights Amendment"),
(i) to prevent this Agreement or the consummation of any of the transactions
contemplated hereby or thereby, including without limitation, the publication or
other announcement of the Offer and the consummation of the Offer and the
Merger, from resulting in the distribution of separate rights certificates or
the occurrence of a Distribution Date (as defined in the Rights Agreement) or
being deemed a Triggering Event (as defined in the Rights Agreement) and (ii) to
provide that neither Parent nor the Purchaser shall be deemed to be an Acquiring
Person (as defined in the Rights Agreement) by reason of the transactions
expressly provided for in this Agreement. The Company represents that the Rights
Amend ment will be sufficient to render the Rights inoperative with respect to
any acquisition of Shares by Parent, the Purchaser or any of their affiliates
pursuant to this Agreement. The Company represents that as a result of the
Rights Amendment, the Rights will not be exercisable
5
<PAGE>
upon or at any time after, the acceptance for payment of Shares pursuant to
the Offer.
Section 1.3 DIRECTORS.
(a) Promptly upon the purchase of and payment for any Shares
by Parent or any of its subsidiar ies which represents at least a majority of
the outstand ing shares of Company Common Stock (on a fully diluted basis),
Parent shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Board of Directors of the Company as is equal to
the product of the total number of directors on such Board (giving effect to the
directors designated by Parent pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially owned by the
Purchaser, Parent and any of their affiliates bears to the total number of
shares of Company Common Stock then outstanding. The Company shall, upon request
of the Purchaser, use its best efforts promptly either to in crease the size of
its Board of Directors or, at the Company's election, secure the resignations of
such number of its incumbent directors as is necessary to enable Parent's
designees to be so elected to the Com pany's Board, and shall cause Parent's
designees to be so elected. At such time, the Company shall also cause persons
designated by Parent to constitute the same percentage (rounded up to the next
whole number) as is on the Company's Board of Directors of (i) each committee of
the Company's Board of Directors, (ii) each board of directors (or similar body)
of each Subsidiary (as de fined in Section 3.1) of the Company and (iii) each
committee (or similar body) of each such board, in each case only to the extent
permitted by applicable law or the rules of any stock exchange on which the
Company Common Stock is listed. Notwithstanding the foregoing, until the
Effective Time (as defined in Section 1.5 hereof), the Company shall use all
reasonable efforts to retain as a member of its Board of Directors at least two
directors who are directors of the Company on the date hereof; PROVIDED, THAT
subsequent to the purchase of and payment for Shares pursuant to the Offer,
Parent shall always have its designees represent at least a majority of the
entire Board of Directors of the Company. The Company's obligations under this
Section 1.3(a) shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. The Company shall promptly
6
<PAGE>
take all actions required pursuant to such Section 14(f) and Rule 14f-1 in order
to fulfill its obligations under this Section 1.3(a), including mailing to
shareholders the information required by such Section 14(f) and Rule 14f-1 as is
necessary to enable Parent's designees to be elected to the Company's Board of
Directors. Parent or the Purchaser will supply the Company any information with
respect to either of them and their nominees, offi cers, directors and
affiliates required by such Section 14(f) and Rule 14f-1. The provisions of this
Section 1.3(a) are in addition to and shall not limit any rights which the
Purchaser, Parent or any of their affiliates may have as a holder or beneficial
owner of Shares as a matter of law with respect to the election of directors or
otherwise.
(b) From and after the time, if any, that Parent's designees
constitute a majority of the Company's Board of Directors, any amendment of this
Agreement, any termination of this Agreement by the Company, any exten sion of
time for performance of any of the obligations of Parent or the Purchaser
hereunder, any waiver of any condition or any of the Company's rights hereunder
or other action by the Company hereunder may be effected only by the action of a
majority of the directors of the Company then in office who were directors of
the Company on the date hereof, which action shall be deemed to constitute the
action of the full Board of Directors; PROVIDED, THAT if there shall be no such
directors, such actions may be effected by majority vote of the entire Board of
Directors of the Company.
Section 1.4 THE MERGER.
(a) Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.5 hereof), the Company and the
Purchaser shall consummate a merger (the "Merger") pursuant to which (i) the
Purchaser shall be merged with and into the Company and the separate corporate
existence of the Purchaser shall thereupon cease, (ii) the Company shall be the
successor or surviving corporation in the Merger and shall continue to be
governed by the laws of the State of Texas, and (iii) the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. At Parent's election, the
Merger may alterna tively be structured so that (x) the Company is merged with
and into Parent, the Purchaser or any other direct or indirect subsidiary of
Parent or (y) any direct or indirect subsidiary of Parent other than the
Purchaser is merged with and into the Company. In the event of such an election,
the parties agree to execute an appropriate amendment to this Agreement in order
to reflect such election. The corporation surviving the Merger is some times
hereinafter referred to as the "Surviving Corpora tion." The Merger shall have
the effects set forth in the TBCA and the New Jersey Business Corporation Act
(the "NJBCA").
(b) Unless otherwise determined by Parent prior to the
Effective Time, the Articles of Incorpora tion of the Surviving Corporation
shall, as a result of the Merger, be changed so as to read in their entirety as
closely as possible to the Certificate of Incorporation of Purchaser immediately
prior to the Effective Time, except as to the name of the Surviving Corporation
(in the case of a merger where the Company is the Surviving Corporation) and
except to the extent necessary (in the case of a merger where the Company is the
Surviving Corporation) to comply with or conform to Texas law until thereafter
amended as provided by law and such Articles of Incorporation.
(c) Unless otherwise determined by Parent prior to the
Effective Time, the By-laws of the Surviving Corporation shall, as a result of
the Merger, be changed so as to read in their entirety as closely as possible to
the By-laws of Purchaser immediately prior to the Effec tive Time, except to the
extent necessary (in the case of a merger where the Company is the Surviving
Corporation) to comply with or conform to Texas law until thereafter amended as
provided by law, the Articles of Incorporation of the Surviving Corporation and
such By-laws.
Section 1.5 EFFECTIVE TIME. Parent, the Purchaser and the Company
will cause appropriate Articles of Merger (the "Articles of Merger") to be
executed and filed on the date of the Closing (as defined in Section 1.6 hereof)
(or on such other date as Parent and the Company may agree) with the Secretary
of State of the State of Texas as provided in the TBCA and an appropriate
Certificate of Merger (the "Certificate of Merger") to be executed and filed on
the date of the Closing (or on such
7
<PAGE>
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, Meagher & Flom LLP, 1440 New York Avenue, N.W.,
Washington, D.C. 20005, unless another date or place is agreed to in writing by
the parties hereto.
Section 1.7 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors and officers of the Purchaser at the Effective Time shall, from and
after the Effective Time, be the directors and officers, respec tively, of the
Surviving Corporation until their succes sors shall have been duly elected or
appointed or quali fied or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
By-laws.
Section 1.8 SHAREHOLDERS' MEETING.
(a) If required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Special Meeting") as soon as practicable
following the acceptance for payment and purchase of Shares by the
Purchaser pursuant to the Offer for the purpose of considering and taking
action upon this Agree ment;
(ii) prepare and file with the SEC a pre liminary proxy or
information statement relating to
8
<PAGE>
the Merger and this Agreement and use its reasonable efforts (x) to obtain
and furnish the information required to be included by the SEC in the
Proxy Statement (as hereinafter defined) and, after con sultation with
Parent, to respond promptly to any comments made by the SEC with respect
to the prelim inary proxy or information statement and cause a definitive
proxy or information statement (the "Proxy Statement") to be mailed to its
shareholders and (y) to obtain the necessary approvals of the Merger and
this Agreement by its shareholders; and
(iii) subject to the fiduciary obliga tions of the Board under
applicable law as advised by independent counsel, include in the Proxy
State ment the recommendation of the Board that sharehold ers of the
Company vote in favor of the approval of the Merger and the adoption of
this Agreement.
(b) Parent agrees that it will vote, or cause to be voted, all
of the Shares then owned by it, the Purchaser or any of its other subsidiaries
and affil iates in favor of the approval of the Merger and the adoption of this
Agreement.
Section 1.9 MERGER WITHOUT MEETING OF SHAREHOLDERS. Notwithstanding
Section 1.8 hereof, in the event that Parent, the Purchaser or any other
subsidiary of Parent shall acquire at least 90% of the outstanding shares of
each class of capital stock of the Company, pursuant to the Offer or otherwise,
the parties hereto agree, at the request of Parent and subject to Article VI
hereof, to take all necessary and appropriate action to cause the Merger to
become effective as soon as practica ble after such acquisition, without a
meeting of share holders of the Company, in accordance with Article 5.16 of the
TBCA and Section 14A:10-5.1 of the NJBCA.
9
<PAGE>
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 CONVERSION OF CAPITAL STOCK. As of the Effective Time,
by virtue of the Merger and with out any action on the part of the holders of
any shares of Company Common Stock or common stock, par value $.01 per share, of
the Purchaser (the "Purchaser Common Stock"):
(a) PURCHASER COMMON STOCK. Each issued and outstanding share
of the Purchaser Common Stock shall be converted into and become one fully paid
and nonas sessable share of common stock of the Surviving Corpora tion.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. All
shares of Company Common Stock that are owned by the Company as treasury stock
and any shares of Company Common Stock owned by Parent, the Purchaser or any
other wholly owned Subsidiary (as de fined in Section 3.1 hereof) of Parent
shall be cancelled and retired and shall cease to exist and no stock of Parent
or other consideration shall be delivered in exchange therefor.
(c) EXCHANGE OF SHARES. Each issued and outstanding share of
Company Common Stock, including the associated Rights (other than shares to be
cancelled in accordance with Section 2.1(b) hereof) shall be converted into the
right to receive the Offer Price, payable to the holder thereof, without
interest (the "Merger Consider ation"), upon surrender of the certificate
formerly representing such share of Company Common Stock in the manner provided
in Section 2.2 hereof. All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall automatically be cancel led
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon the
surrender of such certificate in accordance with Section 2.2 hereof, without
interest.
10
<PAGE>
Section 2.2 EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Parent shall designate a bank or trust
company to act as agent for the holders of shares of Company Common Stock in
connection with the Merger (the "Paying Agent") to receive the funds to which
holders of shares of Company Common Stock shall become entitled pursuant to
Section 2.1(c)hereof. Such funds shall be invested by the Paying Agent as
directed by Parent or the Surviving Corporation.
(b) EXCHANGE PROCEDURES. As soon as rea sonably practicable
after the Effective Time, the Paying Agent shall mail to each holder of record
of a certifi cate or certificates, which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"),
whose shares were con verted pursuant to Section 2.1 hereof into the right to
receive the Merger Consideration (i) a letter of trans mittal (which shall
specify that delivery shall be ef fected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in such form and have such other provisions as Parent and the
Company may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration. Upon surrender of a Certifi cate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration for
each share of Company Common Stock formerly represented by such Certificate and
the Certificate so surrendered shall forthwith be cancelled. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
pay ment of the Merger Consideration to a person other than the registered
holder of the Certificate surrendered or shall have established to the
satisfaction of the Surviv ing Corporation that such tax either has been paid or
is not applicable. Until surrendered as contemplated by
11
<PAGE>
this Section 2.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration
in cash as contem plated by this Section 2.2, without interest thereon.
(c) TRANSFER BOOKS; NO FURTHER OWNERSHIP RIGHTS IN COMPANY
COMMON STOCK. At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the re cords of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of shares of Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares, except as
otherwise provided for herein or by applicable law. If, after the Effective
Time, Certificates are presented to the Surviv ing Corporation for any reason,
they shall be cancelled and exchanged as provided in this Article II.
(d) TERMINATION OF FUND; NO LIABILITY. At any time following
six months after the Effective Time, the Surviving Corporation shall be entitled
to require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Paying Agent shall be liable to any
holder of a Certificate for Merger Consid eration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 2.3 DISSENTING SHARES. Notwithstand ing anything in this
Agreement to the contrary, Shares outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger or consented
thereto in writing and who has demanded appraisal for such Shares in accordance
with the TBCA ("Dissenting Shares") shall not be converted into a right to
receive the Merger Consideration, unless such holder fails to perfect or
withdraws or otherwise loses his or
12
<PAGE>
her right to appraisal. A holder of Dissenting Shares shall be entitled to
receive payment of the appraised value of such Shares held by him or her in
accordance with the provisions of Article 5.12 or 5.16 of the TBCA, unless,
after the Effective Time, such holder fails to perfect or withdraws or loses his
or her right to ap praisal, in which case such Shares shall be treated as if
they had been converted as of the Effective Time into a right to receive the
Merger Consideration, without inter est thereon.
Section 2.4 COMPANY OPTION PLANS.
(a) Parent and the Company shall take all actions necessary to
provide that, effective as of the Effective Time, (i) each outstanding employee
stock option to purchase Shares (an "Employee Option"), whether or not granted
under the Dawson Production Services, Inc. Amended and Restated 1995 Incentive
Plan (the "Option Plan") and each outstanding non-employee director option to
purchase Shares, whether or not granted under the Option Plan ("Director
Options" and collectively with Employee Options, "Options"), whether or not then
exercisable or vested, shall become fully exercisable and vested, and (ii) each
Option that, pursuant to its terms, can be cancelled by the Company without the
holder's consent shall be cancelled, and each other Option which its holder
elects to cancel shall be cancelled, and in consideration of such cancellation,
and except to the extent that Parent or the Purchaser and the holder of any such
Option otherwise agree, the Company shall pay to such holders of such cancelled
Options an amount in respect thereof equal to the product of (A) the excess, if
any, of the Offer Price over the exercise price thereof and (B) the number of
Shares subject thereto (such payment to be net of applicable withholding and
excise taxes). Notwithstanding the foregoing, any pay ment to the holders of
Options contemplated by this Section 2.3 may be withheld in respect of any
Option until any necessary consents or releases are obtained.
(b) Except as provided herein or as otherwise agreed to by the
parties, (i) the Option Plan shall terminate as of the Effective Time and the
provi sions in any other plan, program or arrangement providing for the issuance
or grant of any other interest in re spect of the capital stock of the Company
or any of its
13
<PAGE>
subsidiaries shall be terminated as of the Effective Time and (ii) the Company
shall, as soon as practicable after the date hereof, use its best efforts to
ensure that following the Effective Time no holder of Options or any participant
in the Option Plan or any other plans, pro grams or arrangements shall have any
right thereunder to acquire any equity securities of the Company, the Surviv ing
Corporation or any subsidiary thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser as
follows:
Section 3.1 ORGANIZATION. Each of the Company and its Subsidiaries
is a corporation, partnership or other entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incor poration or
organization and has all requisite corporate or other power and authority and
all necessary governmen tal approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority,
and governmental approvals would not have a material adverse effect on the
Company and its Subsidiaries taken as a whole. As used in this Agreement, the
word "Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporat ed, of which (i) such party
or any other Subsidiary of such party is a general partner (excluding such
partner ships where such party or any Subsidiary of such party do not have a
majority of the voting interest in such part nership) or (ii) at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indi rectly owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries. As
used in this Agreement, any reference to any event, change or effect being
material or having a material adverse effect on or with respect to any entity
(or group of entities taken as a whole) means
14
<PAGE>
such event, change or effect is materially adverse to the consolidated financial
condition, businesses or results of operations of such entity (or, if used with
respect thereto, of such group of entities taken as a whole). The Company and
each of its Subsidiaries is duly quali fied or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not in the aggregate have a
material adverse effect on the Company and its Subsidiaries taken as a whole.
Exhibit 21.1 to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998 sets forth a complete list of the Company's active
Subsidiaries. The Company's inactive subsidiaries have no operations or
liabilities.
Section 3.2 CAPITALIZATION. (a) The autho rized capital stock of the
Company consists of 20,000,000 shares of Company Common Stock, 60,000 shares of
Series A 10% Cumulative Convertible Preferred Stock, without par value (the
"Series A Preferred Stock"), and 500,000 pre ferred shares, without par value
(together with the Series A Preferred Stock, the "Preferred Stock"). As of the
date hereof, (i) 11,202,965 shares of Company Common Stock are issued and
outstanding, (ii) 102,500 shares of Company Common Stock are issued and held in
the treasury of the Company and (iii) 812,766 shares of Company Common Stock are
reserved for issuance upon exercise of out standing Options. As of the date
hereof, there are no shares of Preferred Stock issued and outstanding. All the
outstanding shares of the Company's capital stock are, and all shares which may
be issued pursuant to the exercise of outstanding Options or Rights will be,
when issued in accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and non-assessable. Other than a $1.5 million
Subordinated Convertible Debenture, dated December 1, 1994, there are no bonds,
debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any of its Subsidiaries issued and outstanding. Except as set forth above and
except for the transactions contem plated by this Agreement, as of the date
hereof, (i) there are no shares of capital stock of the Company authorized,
issued or outstanding and (ii) there are no
15
<PAGE>
existing options, warrants, calls, pre-emptive rights, subscriptions or other
rights, agreements, arrangements or commitments of any character, relating to
the issued or unissued capital stock of the Company or any of its Subsidiaries,
obligating the Company or any of its Sub sidiaries to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or Voting
Debt of, or other equity interest in, the Company or any of its Subsidiaries or
securities convert ible into or exchangeable for such shares or equity interests
or obligations of the Company or any of its Subsidiaries to grant, extend or
enter into any such option, warrant, call, subscription or other right,
agreement, arrangement or commitment. Except as contem plated by this Agreement,
there are no outstanding con tractual obligations of the Company or any of its
Subsid iaries to repurchase, redeem or otherwise acquire any Shares, or the
capital stock of the Company or any Sub sidiary or affiliate of the Company or
to provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in any Subsidiary or any other entity.
(b) All of the outstanding shares of capital stock of each of
the Subsidiaries are beneficial ly owned by the Company, directly or indirectly,
and all such shares have been validly issued and are fully paid and
nonassessable and are owned by either the Company or one of its Subsidiaries
free and clear of all liens, charges, claims or encumbrances.
(c) Except for an agreement relating to the election of
directors between the Company and RIMCO Partners, L.P., RIMCO Partners, L.P. II,
RIMCO Partners L.P. III and RIMCO Partners L.P. IV, dated November 21, 1996,
there are no voting trusts or other agreements or understandings to which the
Company or any of its Subsid iaries is a party with respect to the voting of the
capital stock of the Company or any of the Subsidiaries. None of the Company or
its Subsidiaries is required to redeem, repurchase or otherwise acquire shares
of capital stock of the Company, or any of its Subsidiaries, respec tively, as a
result of the transactions contemplated by this Agreement.
Section 3.3 AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY ACTION.
(a) The Company has full
16
<PAGE>
corporate power and authority to execute and deliver this Agreement and, subject
to obtaining the necessary approv al of its shareholders, to consummate the
transactions contemplated hereby. The execution, delivery and perfor mance by
the Company of this Agreement, and the consumma tion by it of the transactions
contemplated hereby, have been duly authorized by its Board of Directors and,
except for obtaining the approval of its shareholders as contemplated by Section
1.8 hereof, no other corporate action on the part of the Company is necessary to
autho rize the execution and delivery by the Company of this Agreement and the
consummation by it of the transactions contemplated hereby. This Agreement has
been duly exe cuted and delivered by the Company and is a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equita ble
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(b) The Board of Directors of the Company has duly and validly
approved and taken all corporate action required to be taken by the Board of
Directors for the consummation of the transactions contemplated by this
Agreement, including the Offer, the acquisition of Shares pursuant to the Offer
and the Merger, including, but not limited to, all actions required to render
the provisions of Part Thirteen of the TBCA restricting business combi nations
with certain persons inapplicable to such transactions.
Section 3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), state securities or blue sky laws, the TBCA and the NJBCA, neither the
execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the articles of
17
<PAGE>
incorporation or by-laws or similar organizational docu ments of the Company or
of any of its Subsidiaries, (ii) require any filing with, or permit,
authorization, con sent or approval of, any court, arbitral tribunal, admin
istrative agency or commission or other governmental or other regulatory
authority or agency (a "Governmental Entity"), except where the failure to
obtain such per mits, authorizations, consents or approvals or to make such
filings would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole, (iii) except for the 9 3/8% Senior Notes due
February 1, 2007 (the "Senior Notes") and the Credit Agreement between the
Company and The Frost National Bank, dated February 20, 1997 (relating to a
$50.0 million working capital revolv ing facility), result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termina tion, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
and which has been (or was required by law to have been) filed as an exhibit to
the Company SEC Documents (as defined in Section 3.5 hereof) filed prior to the
date hereof (the "Material Agreements") or (iv) violate any order, writ,
injunction, decree, statute, rule or regula tion applicable to the Company, any
of its Subsidiaries or any of their properties or assets, excluding from the
foregoing clauses (iii) and (iv), violations, breaches or defaults which would
not, individually or in the aggre gate, have a material adverse effect on the
Company and its Subsidiaries taken as a whole, and which will not materially
impair the ability of the Company to consum mate the transactions contemplated
hereby.
Section 3.5 SEC REPORTS AND FINANCIAL STATEMENTS. The Company has
filed with the SEC all forms, reports, schedules, statements and other documents
required to be filed by it since January 1, 1996 under the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act")(as such documents have
been amended since the time of their filing, collec tively, the "Company SEC
Documents"). As of their re spective dates or, if amended, as of the date of the
last such amendment, the Company SEC Documents, including,
18
<PAGE>
without limitation, any financial statements or schedules included therein (a)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstanc es under which they were made,
not misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regula tions of the SEC thereunder. None of the
Subsidiaries is required to file any forms, reports or other documents with the
SEC pursuant to Section 12 or 15 of the Exchange Act. The financial statements
of the Company (the "1998 Financial Statements") included in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1998, as amended
(including the related notes thereto) (the "1998 Form 10-K") have been prepared
from and are in accordance with, the books and records of the Company and its
consolidated subsidiaries, comply in all material re spects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto and
subject, in the case of quarterly financial state ments, to normal and recurring
year-end adjustments) and fairly present the consolidated financial position and
the consolidated results of operations and cash flows (and changes in financial
position, if any) of the Compa ny and its consolidated subsidiaries as at the
dates thereof or for the periods presented therein.
Section 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth on Schedule 3.6 or as dis closed in the Company SEC Documents filed prior
to the date hereof, since March 31, 1998, the Company and its Subsidiaries have
conducted their respective businesses only in the ordinary and usual course and
there has not occurred (i) any events, changes, or effects (including the
incurrence of any liabilities of any nature, whether or not accrued, contingent
or otherwise) having, individ ually or in the aggregate, a material adverse
effect on the Company and its Subsidiaries, taken as a whole; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or proper ty) with respect to the equity interests of
the Company
19
<PAGE>
or of any of its Subsidiaries; (iii) any change by the Company or any of its
Subsidiaries in accounting princi ples or methods, except insofar as may be
required by a change in GAAP; (iv) any entry by the Company or any of its
Subsidiaries into any commitment or transaction material to the Company and its
Subsidiaries, taken as a whole; or (v) any increase in or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (in cluding, without limitation, the granting of stock op
tions, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other em ployee benefit plan or agreement or
arrangement, or any other increase in the compensation payable or to become
payable to any officers or key employees of the Company or its Subsidiaries,
except in the ordinary course of business consistent with past practice.
Section 3.7 NO UNDISCLOSED LIABILITIES. Except (a) as set forth on
Schedule 3.7, (b) as disclosed in the Company SEC Documents filed prior to the
date hereof and (c) for liabilities and obligations incurred in the ordinary
course of business and consistent with past practice, since March 31, 1998,
neither the Company nor any of its Subsidiaries has incurred any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
have, or would be reason ably likely to have, a material adverse effect on the
Company and its Subsidiaries taken as a whole or would be required by GAAP to be
reflected on a consolidated bal ance sheet of the Company and its Subsidiaries
(including the notes thereto).
Section 3.8 INFORMATION IN PROXY STATEMENT. The Proxy Statement (or
any amendment thereof or supple ment thereto) will, at the date mailed to
Company share holders and at the time of the meeting of Company share holders to
be held in connection with the Merger, not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent or the Purchaser in writ ing for
inclusion in the Proxy Statement. The Proxy Statement will comply in all
material respects with the
20
<PAGE>
provisions of the Exchange Act and the rules and regula
tions thereunder.
Section 3.9 EMPLOYEE BENEFIT PLANS; ERISA.
Except as set forth on Schedule 3.9, to the Company's best
knowledge:
(a) There are no material employee bene fit plans,
arrangements, contracts or agreements (includ ing employment agreements and
severance agreements) of any type (including but not limited to plans described
in section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), maintained by the Company, any of its Subsidiaries or any
trade or busi ness, whether or not incorporated (an "ERISA Affiliate"), that
together with the Company would be deemed a "single employer" within the meaning
of section 4001(b)(15) of ERISA, or with respect to which the Company or any of
its Subsidiaries has or may have a liability, other than those listed on
Schedule 3.9 ("Benefit Plans"). Neither the Company nor any ERISA Affiliate has
any formal plan or commitment, whether legally binding or not, to create any
additional Benefit Plan or modify or change any existing Benefit Plan that would
affect any employee or terminated employee of the Company or any Subsidiary.
(b) With respect to each Benefit Plan: (i) if intended to
qualify under section 401(a), 401(k) or 403(a) of the Internal Revenue Code of
1986, as amend ed, and the rules and regulations promulgated thereunder (the
"Code"), such plan so qualifies, and its trust is exempt from taxation under
section 501(a) of the Code; (ii) such plan has been administered in all material
respects in accordance with its terms and applicable law; (iii) no breaches of
fiduciary duty have occurred which might reasonably be expected to give rise to
material liability on the part of the Company; (iv) no disputes are pending, or,
to the knowledge of the Company, threat ened that might reasonably be expected
to give rise to material liability on the part of the Company; (v) no prohibited
transaction (within the meaning of Section 406 of ERISA) has occurred that might
reasonably be expected to give rise to material liability on the part of the
Company; and (vi) all contributions due as of the date hereof (including any
extensions for such contributions) have been made in full.
21
<PAGE>
(c) Neither the Company nor any ERISA Affiliate maintains or
has maintained or contributed to or been required to contribute to within the
last six years, any employee benefit plan that is subject to Title IV of ERISA.
(d) With respect to each Benefit Plan that is a "welfare plan"
(as defined in section 3(1) of ERISA): except as disclosed in Schedule 3.9, no
such plan provides medical or death benefits with respect to cur rent or former
employees of the Company or any of its Subsidiaries beyond their termination of
employment, other than on an employee-pay-all basis.
(e) Except as set forth on Schedule 3.9, the consummation of
the transactions contemplated by this Agreement, either alone or in connection
with a related event, will not entitle any individual to severance pay or
accelerate the time of payment or vesting, or increase the amount, of
compensation or benefits due to any indi vidual (other than as disclosed in
writing).
(f) The maximum amount that could be pay able by the Company
under all Benefit Plans (excluding Options and restricted stock) and any other
plan, policy, agreement or arrangement to which the Company or any Subsidiary is
a party, as a result (in whole or in part) of the transactions contemplated
hereby shall not exceed $3,000,000, excluding payments to be made under the
Employee Severance Pay Plan and employer contributions under tax qualified
plans.
(g) With respect to each Benefit Plan, the Company has
delivered to Parent accurate and complete copies of all plan texts, summary plan
descriptions, summary of material modifications, trust agreements and other
related agreements including all amendments to the foregoing; the most recent
annual report; the most recent annual and periodic accounting of plan assets;
the most recent determination letter received from the United States Internal
Revenue Service (the "Service"); and the most recent actuarial valuation, to the
extent any of the foregoing may be applicable to a particular Benefit Plan.
(h) Except for certain agreements dis closed to Parent on
Schedule 3.9, neither the Company nor its Subsidiaries is a party to any
agreement, contract or
22
<PAGE>
arrangement that could result, separately or in the aggregate, in the payment of
any "excess parachute pay ments" within the meaning of Section 280G of the Code.
Section 3.10 LITIGATION. Except as set forth on Schedule 3.10 and as
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, there is no suit, claim, action, proceeding or investiga tion pending
or, to the best knowledge of the Company, threatened against or affecting, the
Company or any of its Subsidiaries which, individually or in the aggregate, is
reasonably likely to have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, or a material adverse effect on the ability of
the Company to consummate the transactions contemplated by this Agree ment.
Section 3.11 CONDUCT OF BUSINESS. The busi ness of the Company and
each of its Subsidiaries is not being conducted in default or violation of any
term, condition or provision of (i) its respective articles of incorporation or
by-laws or similar organizational docu ments, (ii) any Material Agreement or
(iii) any federal, state, local or foreign statute, law, ordinance, rule,
regulation, judgment, decree, order, concession, grant, franchise, permit or
license or other governmental autho rization or approval applicable to the
Company or any of its Subsidiaries, excluding from the foregoing clauses (ii)
and (iii), defaults or violations that would not, individually or in the
aggregate, have a material adverse effect on the Company and its Subsidiaries,
taken as a whole. Except as previously disclosed to Parent in writing, as of the
date of this Agreement, no investiga tion or review by any Governmental Entity
or other entity with respect to the Company or any of its Subsidiaries is
pending or, to the best knowledge of the Company, threat ened, nor has any
Governmental Entity or other entity indicated an intention to conduct the same,
other than, in each case, those the outcome of which, as far as reasonably can
be foreseen, in the future will not, individually or in the aggregate have a
material adverse effect on the Company and its Subsidiaries, taken as a whole.
Section 3.12 ENVIRONMENTAL PROTECTION.
23
<PAGE>
(a) Except as set forth on Schedule 3.12 or in the Company SEC
Documents filed prior to the date hereof:
(i) The Company and each of its
Subsidiaries are in compliance with all applicable Envi ronmental Laws (as
defined in Section 3.12(b)(ii) hereof) except where the failure to comply,
individually or in the aggregate, would not be reasonably likely to have a
material adverse effect on the Company and its Subsidiar ies, taken as a whole,
and neither the Company nor any of its Subsidiaries has received any
communication (written or oral) from any person or Governmental Entity that
alleges that the Company or any of its Subsidiaries is not in such compliance
with applicable Environmental Laws. To the knowledge of the Company, future
compliance with all applicable Environmental Laws will not require the Company
or its Subsidiaries to incur costs, beyond those currently budgeted for the
three Company fiscal years beginning with April 1, 1998, that, individually or
in the aggregate, would be reasonably likely to have a material adverse effect
on the Company and its Subsidiar ies, taken as a whole.
(ii) (A) The Company and each of its
Subsidiaries have obtained or have applied for all envi ronmental, health and
safety permits and governmental authorizations (collectively, the "Environmental
Per mits") necessary for the conduct of their operations except where the
failure to so obtain, individually or in the aggregate, would not be reasonably
likely to have a material adverse effect on the Company and its Subsidiar ies,
taken as a whole, (B) all such Environmental Permits are in full force and
effect or, where applicable, a renewal application has been timely filed and is
pending agency approval except where the failure of such Environ mental Permits
to be in full force and effect or to have filed a renewal application on a
timely basis would not be reasonably likely to have, individually or in the
aggregate, a material adverse effect on the Company and its Subsidiaries, taken
as a whole, (C) the Company and its Subsidiaries are in material compliance with
all terms and conditions of the Environmental Permits, except where failure to
so comply, individually or in the aggre gate, would not be reasonably likely to
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole, and (D) neither the Company nor any of its
24
<PAGE>
Subsidiaries has been advised by any Governmental Entity of any potential change
in the terms and conditions of the Environmental Permits either prior to or upon
their renewal, except for such potential changes as would not be reasonably
likely to have, individually or in the aggregate, a material adverse effect.
(iii) There are no Environmental
Claims (as defined in Section 3.12(b)(i) hereof) that would be reasonably likely
to have, individually or in the aggregate, a material adverse effect on the
Company and its Subsidiaries, taken as a whole, pending or, to the knowledge of
the Company, threatened, (A) against the Company or any of its Subsidiaries, (B)
to the knowledge of the Company, against any person or entity whose lia bility
for any Environmental Claim the Company or any of its Subsidiaries has or may
have retained or assumed either contractually or by operation of law, or (C)
against any currently owned, leased or managed, in whole or in part, real or
personal property or operations of the Company or any of its Subsidiaries or, to
the knowl edge of the Company, against any formerly owned, leased or managed, in
whole or in part, real or personal prop erty or operations of the Company or any
of its Subsid iaries.
(iv) The Company has no knowledge of
any Releases (as defined in Section 3.12(b)(iv) hereof) of any Hazardous
Material (as defined in Section 3.12(b)(iii) hereof) that would be reasonably
likely to form the basis of any Environmental Claim against the Company or any
of its Subsidiaries, or against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries has or may have re
tained or assumed either contractually or by operation of law except for any
Environmental Claim which, individu ally or in the aggregate, would not be
reasonably likely to have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
(v) The Company has no knowledge,
with respect to any predecessor of the Company or any of its Subsidiaries, of
any Environmental Claim which, individually or in the aggregate, would be
reasonably likely to have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, pending or threatened, or of any Release of
Hazardous Materials that
25
<PAGE>
would be reasonably likely to form the basis of any Environmental Claim which,
individually or in the aggre gate, would be reasonably likely to have a material
adverse effect on the Company and its Subsidiaries, taken as a whole.
(b) As used in this Agreement:
(i) "Environmental Claim" means any
and all administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, liens, investigations, proceedings or notices of
noncom pliance or violation (written or oral) by any person or entity (including
any Governmental Entity), alleging potential liability (including, without
limitation, potential responsibility for or liability for enforce ment,
investigatory costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (A) the presence,
Release or threatened Release into the environment of any Hazardous Materials at
any location, whether or not owned, operated, leased or managed by the Company
or any of its Subsidiaries; or (B) circumstances forming the basis of any
violation or alleged violation of any Environmental Law or (C) any and all
claims by any third party seeking damages, contribution, indemnifica tion, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials or the presence of or exposure to any electro
magnetic fields.
(ii) "Environmental Laws" means all
federal, state and local laws, rules, regulations, or ders, decrees, judgments
or binding agreements issued, promulgated or entered into by or with any
Governmental Entity, relating to pollution, the environment (includ ing, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) or protection of human health as it relates to the environ ment
including, without limitation, laws and regulations relating to noise levels,
Releases or threatened Releases of Hazardous Materials, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
26
<PAGE>
(iii) "Hazardous Materials" means
(A) any petroleum or petroleum products, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation and
transform ers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls ("PCBs"); (B) any chemicals, materials or substances
which are now defined as or included in the definition of "hazardous sub
stances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
or words of similar import under any Environmental Law and (C) any other
chemical, material, substance or waste, exposure to which is now prohibited,
limited or regulated under any Environmental Law in a jurisdiction in which the
Company or any of its Subsidiaries operates.
(iv) "Release" means any release,
spill, emission, leaking, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the atmosphere, soil, surface water, groundwater or
property.
Section 3.13 TAXES. Except as set forth on
Schedule 3.13:
(a) The Company and each of its Subsid iaries have (i) duly
filed (or there has been filed on their behalf or appropriate extensions have
been ob tained) with the appropriate governmental authorities all Tax Returns
(as hereinafter defined) required to be filed by them on or prior to the date
hereof, and such Tax Returns are true, correct and complete in all material
respects, and (ii) duly paid in full or made provision in accordance with
generally accepted accounting principles (or there has been paid or provision
has been made on their behalf) for the payment of all Taxes (as hereinaf ter
defined) for all periods ending through the date hereof, and will do so through
the Effective Time.
(b) There are no material liens for Taxes upon any property or
assets of the Company or any Subsid iary thereof, except for liens for Taxes not
yet due and liens for Taxes the assessment of which is being contest ed in good
faith.
27
<PAGE>
(c) Neither the Company nor any of its Subsidiaries has made
any change in accounting methods, received a ruling from any taxing authority or
signed an agreement likely to have a material adverse effect on the Company and
its Subsidiaries taken as a whole.
(d) The Company and each of its Sub sidiaries have complied in
all material respects with all applicable laws, rules and regulations relating
to the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code or similar
provisions under any foreign laws) and have, within the time and the manner
prescribed by law, withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over
under applicable laws.
(e) No federal, state, local or foreign audits or other
administrative proceedings or court pro ceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or its Subsidiaries wherein an
adverse determination or ruling in any one such pro ceeding or in all such
proceedings in the aggregate could have a material adverse effect on the Company
and its Subsidiaries, taken as a whole, and neither the Company nor its
subsidiaries has received a written notice of any pending audits or proceedings.
(f) The federal income Tax Returns of the Company and its
Subsidiaries have been examined by the Service (or the applicable statutes of
limitation for the assessment of federal income Taxes for such periods have
expired) for all periods through and including March 31, 1994, and no material
deficiencies were asserted as a result of such examinations which have not been
resolved and fully paid.
(g) There are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by either the Company or any of
its Subsidiaries with respect to any Taxes is currently in force.
28
<PAGE>
(h) Neither the Company nor any of its Subsidiaries is a party
to any agreement providing for the allocation or sharing of Taxes.
(i) Neither the Company nor any of its Subsidiaries has, with
regard to any assets or property held, acquired or to be acquired by any of
them, filed a consent to the application of Section 341(f) of the Code, or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by the Company or any of its Subsidiaries.
(j) "Taxes" shall mean any and all taxes, charges, fees,
levies or other assessments, including, without limitation, income, gross
receipts, excise, real or personal property, sales, withholding, social securi
ty, occupation, use, service, service use, license, net worth, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the
Service or any taxing authority (whether domestic or foreign including, without
limitation, any state, county, local or foreign govern ment or any subdivision
or taxing agency thereof (includ ing a United States possession)), whether
computed on a separate, consolidated, unitary, combined or any other basis; and
such term shall include any interest whether paid or received, fines, penalties
or additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments. "Tax Return" shall mean
any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes, including, without limitation, information
returns, any documents with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
Section 3.14 LABOR RELATIONS. There is no labor strike, slowdown or
work stoppage or lockout against the Company or any of its Subsidiaries, there
is no unfair labor practice charge or complaint against or pending before the
National Labor Relations Board (the "NLRB") which if decided adversely could
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole, and there is no representation claim or
29
<PAGE>
petition pending before the NLRB and no question concern ing representation
exists with respect to the employees of the Company or any of its Subsidiaries.
Section 3.15 COMPLIANCE WITH LAWS. The Compa ny and its Subsidiaries
have complied in a timely manner with all laws and governmental regulations and
orders relating to any of the property owned, leased or used by them, or
applicable to their business, including, but not limited to, equal employment
opportunity, discrimination, occupational safety and health, environmental and
anti trust laws, except where the failure to so comply would not, individually
or in the aggregate, have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
Section 3.16 INSURANCE. As of the date here of, the Company and each
of its Subsidiaries are insured by insurers, reasonably believed by the Company
to be of recognized financial responsibility and solvency, against such losses
and risks and in such amounts as are custom ary in the businesses in which they
are engaged.
Section 3.17 CONTRACTS. Except as set forth on Schedule 3.17 or as
disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1998, there are no agreements that are material to the Company and its
Subsidiaries, taken as a whole. Each Material Agreement is legally valid and
binding and in full force and effect, except where failure to be legally valid
and binding and in full force and effect would not have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, and there are no
defaults thereunder, except those defaults that would not have a material
adverse effect on the Company and its Subsidiar ies, taken as a whole. The
Company has previously made available for inspection by Parent or the Purchaser
all Material Agreements.
Section 3.18 PROPERTY. The Company and each of the Subsidiaries, as
the case may be, have sufficient title or leaseholds to property to conduct
their respec tive businesses as currently conducted with only such exceptions as
individually or in the aggregate would not have a material adverse effect on the
Company and the Subsidiaries, taken as a whole.
30
<PAGE>
Section 3.19 EQUIPMENT. The Company and its Subsidiaries have such
ownership of or such rights by license, lease or other agreement to all
equipment used or necessary to conduct their respective businesses as currently
conducted (the "Equipment") with only such exceptions as individually or in the
aggregate would not have a material adverse effect on the Company and the
Subsidiaries, taken as a whole. The Equipment is in good operating condition and
repair and adequate for the uses to which it is being put. None of the Equipment
is in need of maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost.
Section 3.20 PERMITS. The Company and each of its Subsidiaries has
all permits, licenses, franchises and other governmental authorizations
necessary to con duct their respective businesses as currently conducted with
only such exceptions as individually or in the aggregate would not have a
material adverse effect on the Company and the Subsidiaries, taken as a whole.
All such permits, licenses, franchises and authorizations are in full force and
effect and the Company is not aware of any pending or threatened suspension,
cancellation or termi nation of any such permit, license, franchise or authori
zation, with only such exceptions as individually or in the aggregate would not
have a material adverse effect on the Company and the Subsidiaries, taken as a
whole.
Section 3.21 INTELLECTUAL PROPERTY. Except as disclosed in the
Company SEC Documents filed prior to the date hereof, and except for such
claims, which individu ally or in the aggregate, would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole, there are
no pending or threatened claims of which the Company or any of its Subsidiaries
have been given written notice, by any person against their use of any material
trademarks, trade names, service marks, service names, mark registrations,
logos, assumed names and copyright registrations, patents and all applications
therefor which are owned by the Company or its Subsidiar ies and used in their
respective operations as currently conducted (collectively, the "Intellectual
Property"). The Company and each of its Subsidiaries have such owner ship of or
such rights by license, lease or other agree ment to the Intellectual Property
as are necessary to permit them to conduct their respective operations as
31
<PAGE>
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 Morgan Stanley & Co. Incorporated to the effect that the
consideration to be received by the shareholders of the Company pursuant to the
Offer and the Merger is fair to such shareholders from a financial point of
view, a copy of which opinion will be delivered to Parent.
Section 3.23 VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as
follows:
Section 4.1 ORGANIZATION. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate or
other power and authority and all necessary governmental approvals to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have a material
adverse effect on Parent and its Subsidiaries, taken as a whole. Parent and each
of its Subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, in the aggregate, have a material
adverse effect on Parent and its Subsidiaries, taken as a whole.
32
<PAGE>
Section 4.2 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION.
Each of Parent and the Purchaser has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, deliv ery and performance of this Agreement
and the consumma tion of the Merger and of the other transactions contem plated
hereby have been duly authorized by all necessary corporate action on the part
of Parent and the Purchaser and no other corporate proceedings on the part of
Parent and the Purchaser are necessary to authorize this Agree ment or to
consummate the transactions so contemplated. This Agreement has been duly
executed and delivered by Parent and the Purchaser, as the case may be, and,
assum ing this Agreement constitutes a valid and binding obli gation of the
Company, constitutes a valid and binding obligation of each of Parent and the
Purchaser, as the case may be, enforceable against them in accordance with its
respective terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any proceed
ing therefor may be brought.
Section 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the HSR Act, the
TBCA, the NJBCA, state securities or blue sky laws and, the laws of other states
in which Parent or the Purchaser is qualified to do or is doing business and
applicable state takeover laws, neither the execution, delivery or performance
of this Agreement by Parent and the Purchaser nor the consummation by Parent and
the Purchaser of the transactions contemplated hereby nor compliance by Parent
and the Purchaser with any of the provisions hereof will (i) conflict with or
result in any breach of any provision of the respective certificate of
incorporation or by-laws of Parent and the Purchaser, (ii) require any filing
with, or permit, authorization, consent or approval of, any Governmental Entity
(except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not have a material adverse effect on
Parent and its
33
<PAGE>
Subsidiaries, taken as a whole), (iii) result in a viola tion or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or accelera tion) under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, lease, contract, agreement or other instrument or obligation to which
Parent or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any of its
Subsidiaries or any of their properties or assets, excluding from the foregoing
clauses (iii) and (iv) violations, breaches or defaults which would not,
individually or in the aggregate, have a material adverse effect on Parent and
its Subsidiaries taken as a whole.
Section 4.4 INFORMATION IN PROXY STATEMENT; SCHEDULE 14D-9. None of
the information supplied by Parent or the Purchaser for inclusion or
incorporation by reference in the Proxy Statement or the Schedule 14D-9 will, at
the date mailed to shareholders and at the time of the meeting of shareholders
to be held in connection with the Merger, contain any untrue statement of a mate
rial fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
Section 4.5 FINANCING. Parent has received (a) a commitment letter
(the "Commitment Letter") from PNC Capital Markets, Inc. and PNC Bank, National
Associa tion (collectively, "PNC") indicating its willingness, upon the terms
and subject to the conditions set forth therein, to lend to Parent up to
$450,000,000 and (b) proposed commitment arrangements from Bear Stearns & Co.
and Lehman Brothers Inc. with respect to certain bridge financing (the "Proposed
Bridge Arrangements"). True and complete copies of the Commitment Letter and the
Proposed Bridge Arrangements received to date in connection with financing the
Offer and the Merger, payment of all fees and expenses in connection therewith
and, if necessary as a result of the Offer and the Merger, refinancing the
Senior Notes (collectively, the "Financing") have been delivered to the Company,
and Parent shall promptly deliver to the Company true and complete copies of all
final documentation relating to the Financing received by
34
<PAGE>
Parent after the date hereof. The aggregate proceeds of the Financing, if
obtained, will be in an amount suffi cient to acquire all the Shares in the
Offer and the Merger, to pay all fees and expenses in connection there with and,
if necessary, to effect a refinancing of the Senior Notes.
Section 4.6 PURCHASER'S OPERATIONS. The Purchaser was formed solely
for the purpose of engaging in the transactions contemplated hereby and has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.
ARTICLE V
COVENANTS
Section 5.1 INTERIM OPERATIONS OF THE COMPANY. The Company covenants
and agrees that, except (i) as ex pressly contemplated by this Agreement, or
(ii) as agreed in writing by Parent, after the date hereof, and prior to the
time the directors designated by Parent have been elected to, and shall
constitute a majority of, the Board of Directors of the Company pursuant to
Section 1.3 hereof (the "Appointment Date"):
(a) the business of the Company and each of its Subsidiaries
shall be conducted only in the ordi nary and usual course and, to the extent
consistent therewith, each of the Company and its Subsidiaries shall use its
best efforts to preserve its business organi zation intact and maintain its
existing relations with customers, suppliers, employees, creditors and business
partners;
(b) the Company will not, directly or indirectly, (i) sell,
transfer or pledge or agree to sell, transfer or pledge any Company Common
Stock, Pre ferred Stock or capital stock of any of its Subsidiaries beneficially
owned by it, either directly or indirectly; or (ii) split, combine or reclassify
the outstanding Company Common Stock or any outstanding capital stock of any of
the Subsidiaries of the Company;
35
<PAGE>
(c) except for those actions contemplated in Section 1.2
hereof, neither the Company nor any of its Subsidiaries shall: (i) amend its
articles of incorpora tion or by-laws or similar organizational documents; (ii)
declare, set aside or pay any dividend or other distribu tion payable in cash,
stock or property with respect to its capital stock; (iii) issue, sell, pledge,
dispose of or encumber any additional shares of, or securities convertible into
or exchangeable for, or options, war rants, calls, commitments or rights of any
kind to ac quire, any shares of capital stock of any class of the Company or any
of its Subsidiaries, other than shares of Company Common Stock reserved for
issuance on the date hereof upon exercise of outstanding Rights pursuant to the
Rights Agreement or issuances pursuant to the exer cise of Options outstanding
on the date hereof; (iv) transfer, lease, license, sell, mortgage, pledge,
dispose of, or encumber any material assets other than in the ordinary and usual
course of business and consistent with past practice, or incur or modify any
material indebted ness or other liability, other than in the ordinary and usual
course of business and consistent with past prac tice; or (v) redeem, purchase
or otherwise acquire di rectly or indirectly more than 5,000 Shares of its capi
tal stock;
(d) neither the Company nor any of its Subsidiaries shall: (i)
grant any increase in the com pensation payable or to become payable by the
Company or any of its Subsidiaries to any of its executive officers or key
employees or (A) adopt any new, or (B) amend or otherwise increase, or
accelerate the payment or vesting of the amounts payable or to become payable
under any existing, bonus, incentive compensation, deferred compen sation,
severance, profit sharing, stock option, stock purchase, insurance, pension,
retirement or other employ ee benefit plan agreement or arrangement; or (ii)
enter into any employment or severance agreement with or, except in accordance
with the existing written policies of the Company, grant any severance or
termination pay to any officer, director or employee of the Company or any of
its Subsidiaries;
(e) neither the Company nor any of its Subsidiaries shall
modify, amend or terminate any of its material contracts or waive, release or
assign any mate rial rights or claims, except in the ordinary course of business
and consistent with past practice;
(f) neither the Company nor any of its Subsidiaries shall
permit any material insurance policy naming it as a beneficiary or a loss
payable payee to be cancelled or terminated without notice to Parent, except in
the ordinary course of business and consistent with past practice;
(g) neither the Company nor any of its Subsidiaries shall: (i)
incur or assume any long-term debt, or except in the ordinary course of
business, incur or assume any short-term indebtedness in amounts not consistent
with past practice; (ii) assume, guarantee, endorse or otherwise become liable
or responsible (wheth er directly, contingently or otherwise) for the obliga
tions of any other person, except in the ordinary course of business and
consistent with past practice; (iii) make any loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned Subsidiaries of the Company or customary loans or advances to employees in
accordance with past practice); or (iv) except for commitments or transactions
not in excess of $500,000, enter into any material commitment or transaction
(including, but not limited to, any borrow ing, capital expenditure or purchase,
sale or lease of assets);
(h) neither the Company nor any of its Subsidiaries shall
change any of the accounting princi ples used by it unless required by GAAP;
(i) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations, (x) in
the ordinary course of business and consistent with past practice, properly
reflected or reserved against in, the consolidated finan cial statements (or the
notes thereto) as of and for the fiscal year ended March 31, 1998 of the Company
and its consolidated Subsidiaries, (y) incurred since March 31, 1998 in the
ordinary course of business and consistent with past practice or (z) which are
legally required to be paid, discharged or satisfied (provided that if such
36
<PAGE>
claims, liabilities or obligations referred to in this clause (z) are legally
required to be paid and are also not otherwise payable in accordance with
clauses (x) or (y) above, the Company will notify Parent in writing if such
claims, liabilities or obligations exceed, individu ally or in the aggregate,
$500,000 in value, reasonably in advance of their payment). Notwithstanding the
fore going, the Company shall be entitled to pay on a timely basis all
reasonable, documented fees and expenses re lated to this Agreement and the
transactions contemplated hereby;
(j) neither the Company nor any of its Subsidiaries will adopt
a plan of complete or partial liquidation, dissolution, merger, consolidation,
restruc turing, recapitalization or other reorganization of the Company or any
of its Subsidiaries (other than the Merg er);
(k) neither the Company nor any of its Subsidiaries will take,
or agree to commit to take, any action that would make any representation or
warranty of the Company contained herein inaccurate in any material respect at,
or as of any time prior to, the Effective Time; and
(l) neither the Company nor any of its Subsidiaries will enter
into an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to do
any of the foregoing.
Section 5.2 RIGHTS AGREEMENT. Except for the amendments contemplated
by Section 1.2(d) hereof or amendments approved in writing by Parent or the
Purchas er, the Company will not, following the date hereof, amend the Rights
Agreement in any manner. In addition the Company covenants and agrees that it
will not redeem the Rights unless such redemption is consented to in writing by
Parent prior to such redemption.
Section 5.3 HSR ACT. The Company and Parent shall take all
reasonable actions necessary to file as soon as practicable following the date
hereof notifica tions under the HSR Act and to respond as promptly as
practicable to any inquiries received from the Federal Trade Commission and the
Antitrust Division of the De partment of Justice for additional information or
docu mentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attor ney General or other Governmental Entity
in connection with antitrust matters.
Section 5.4 ACCESS TO INFORMATION. Upon reasonable notice, the
Company shall (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, counsel, financing sources and other
representatives of Parent, access, during normal business hours during the
period prior to the Appointment Date, to all its properties, books, contracts,
commit ments and records and, during such period, the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to the Parent (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. After the Appointment
Date, the Company shall provide Parent and such persons as Parent shall
designate with all such information, at such time, as Parent shall request.
Unless otherwise required by law and until the Appoint ment Date, Parent will
hold any such information which is nonpublic in confidence in accordance with
the provisions of the letter agreement, dated August 8, 1998 among the Company,
Parent and the Purchaser (the "Confidentiality Agreement").
Section 5.5 CONSENTS AND APPROVALS. Each of the Company, Parent and
the Purchaser will take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on it with re spect to this
Agreement and the transactions contemplated hereby (which actions shall include,
without limitation, furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other Governmental Entity) and
will promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon any of them or any of their Subsidiaries
in connection with this Agreement and the transactions contemplated hereby. Each
of the Compa ny, Parent and the Purchaser will, and will cause its Subsidiaries
to, take all reasonable actions necessary to obtain (and will cooperate with
each other in obtaining)
37
<PAGE>
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party required to be
obtained or made by Parent, the Purchaser, the Company or any of their Sub
sidiaries in connection with the Merger or the taking of any action contemplated
thereby or by this Agreement.
Section 5.6 EMPLOYEE BENEFITS. Parent agrees that, effective as of
the Effective Time and for a period of 18 months thereafter, the Surviving
Corporation and its Subsidiaries shall provide benefits to their employ ees that
are comparable with those provided by Parent to similarly situated employees of
Parent or any of its Sub sidiaries, taking into account all relevant factors,
including, without limitation, the businesses in which the Surviving Corporation
and its Subsidiaries are en gaged. Parent further agrees that effective as of
the Effective Time (i) all employer contributions made to the Company's 401(k)
Plan shall be fully vested and (ii) all employees of the Surviving Corporation
will be provided credit for pay and benefits purposes, by the Surviving
Corporation, for all prior service with the Company (including, as applicable,
service with any other entity which has merged into or has been acquired by the
Com pany) substantially comparable in all material respects to the credit for
service provided by the Company as of the date hereof; provided, however, that
such crediting shall not apply for benefit accrual purposes under any defined
benefit plan and shall not result in any duplica tion of benefits.
Section 5.7 NO SOLICITATION. Neither the Company nor any of its
Subsidiaries or affiliates shall (and the Company shall use its best efforts to
cause its and each of its Subsidiaries' officers, directors, em ployees,
representatives and agents, including, but not limited to, investment bankers,
attorneys and accoun tants, not to), directly or indirectly, encourage, so
licit, participate in or initiate discussions or negotia tions with, provide any
information to, or enter into any agreement with, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any merger, tender offer, exchange offer, sale of
assets, sale of shares of capital stock or debt securities or similar
transactions involving the Company or any Subsidiary, division or operating or
principal business unit of the
38
<PAGE>
Company (an "Acquisition Proposal"). The Company further agrees that it will
immediately cease any existing activ ities, discussions or negotiations with any
parties conducted heretofore with respect to any of the forego ing.
Notwithstanding the foregoing, the Company may, directly or indirectly, provide
access and furnish infor mation concerning its business, properties or assets to
any corporation, partnership, person or other entity or group pursuant to
appropriate confidentiality agreements, and may negotiate and participate in
discussions and negotiations with such entity or group if (w) such entity or
group has submitted an unsolicited bona fide written proposal to the Board of
Directors of the Company relat ing to any such transaction, (x) such proposal
provides for the acquisition for cash and/or publicly traded securities of all
of the outstanding Shares, (y) the Board of Directors of the Company determines
in good faith, after consultation with its independent financial advisor, that
such proposal is financially superior to the Offer and the Merger and fully
financed or reasonably capable of being financed, and (z) the Board of Directors
of the Company determines in good faith, after consulta tion with independent
legal counsel, that the failure to provide such information or access or to
engage in such discussions or negotiations would violate their fiduciary duties
to the Company's shareholders under applicable law. A proposal meeting all of
the criteria in the preceding sentence is referred to herein as a "Superior
Proposal." Nothing contained in this Section 5.7 shall prohibit the Company or
its Board of Directors from taking and disclosing to the Company's shareholders
a position with respect to a tender offer by a third party pursuant to Rules
l4d-9 and l4e-2(a) promulgated under the Exchange Act. The Company will
immediately notify Parent of any Acquisition Proposal, or if an inquiry is made,
will keep Parent fully apprised of all developments with respect to any
Acquisition Proposal, will immedi ately provide to Parent copies of any written
materials received by the Company in connection with any Acquisi tion Proposal,
discussion, negotiation or inquiry and the identify of the party making any
Acquisition Proposal or inquiry or engaging in such discussion or negotiation.
The Company will promptly provide to Parent any non-public information
concerning the Company provided to any other party which was not previously
provided to Parent. The Company agrees not to release any third party from, or
waive any provisions of, any confidentiality or stand still agreement to which
the Company is a party. Not withstanding anything to the contrary contained in
this Agreement, except in connection with the valid termina tion of this
Agreement pursuant to Section 7.1(c)(i) hereof, neither the Board of Directors
of the Company nor any committee thereof shall (i) withdraw, or modify or change
in a manner adverse to Parent or the Purchaser, or propose to withdraw, or
propose to modify or change in a manner adverse to Parent or the Purchaser, the
approval or recommendation by such Board of Directors or any such committee of
the Offer, this Agreement or the Merger, (ii) approve or recommend or propose to
approve or recom mend, any Acquisition Proposal or (iii) enter into any
agreement with respect to any Acquisition Proposal.
Section 5.8 BROKERS OR FINDERS. The Company represents, as to
itself, its Subsidiaries and its affil iates, that no agent, broker, investment
banker, finan cial advisor or other firm or person is or will be enti tled to
any brokers' or finder's fee or any other commis sion or similar fee in
connection with any of the transactions contemplated by this Agreement except
Morgan Stanley & Co., Inc., whose fees and expenses will be paid by the Company
in accordance with the Company's agree ments with such firm (a copy of which has
been delivered by the Company to Parent prior to the date of this Agree ment),
and each of Parent and the Company agrees to indemnify and hold the other
harmless from and against any and all claims, liabilities or obligations with
respect to any other fees, commissions or expenses as serted by any person on
the basis of any act or statement alleged to have been made by such party or its
affili ates.
Section 5.9 ADDITIONAL AGREEMENTS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advis able under applicable laws and
regulations, or to remove any injunctions or other impediments or delays, legal
or otherwise, to consummate and make effective the Merger and the other
transactions contemplated by this Agree ment. Parent and the Purchaser agree to
use best efforts to enter into the Financing pursuant to the Commitment Letter
and on terms substantially similar to those con tained in either of the Proposed
Bridge Arrangements and
39
<PAGE>
to obtain the funding thereunder to the extent necessary to fund the Offer and
the Merger. Parent and the Pur chaser also agree to use their best efforts to
maintain the ability to accept proposed bridge arrangements on terms
substantially similar to those contained in either of the Proposed Bridge
Arrangements. The Company agrees to cooperate with Parent and the Purchaser with
respect to consummating such financing. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of the Company and Parent
shall use all reasonable efforts to take, or cause to be taken, all such
necessary actions.
Section 5.10 Reserved.
Section 5.11 PUBLICITY. The initial press release with respect to
the execution of this Agreement shall be a joint press release acceptable to
Parent and the Company. Thereafter, so long as this Agreement is in effect,
neither the Company, Parent nor any of their respective affiliates shall issue
or cause the publica tion of any press release or other announcement with
respect to the Merger, this Agreement or the other trans actions contemplated
hereby without the prior consulta tion of the other party, except as may be
required by law or by any listing agreement with a national securities exchange.
Section 5.12 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent and Parent shall give prompt notice to the Company, of
(i) the occurrence, or non-occurrence of any event the occur rence, or
non-occurrence of which would cause any repre sentation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time and (ii) any material failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the
delivery of any notice pursuant to this Section 5.12 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section 5.13 DIRECTORS' AND OFFICERS' INDEMNIFICATION. For six
years after the Effective Time,
40
<PAGE>
Parent shall, or shall cause the Surviving Corporation to, indemnify, defend and
hold harmless the present and former officers, directors, employees and agents
of the Company and its Subsidiaries (each an "Indemnified Party") against all
losses, claims, damages, liabilities, fees and expenses (including reasonable
fees and dis bursements of counsel and judgments, fines, losses, claims,
liabilities and amounts paid in settlement (pro vided that any such settlement
is effected with the written consent of the Parent or the Surviving Corpora
tion)) in connection with any claim, suit, action, pro ceeding or investigation
that is, in whole or in part, based on or arising out of the fact that such
person is or was a director, officer, employee or agent of the Company or its
Subsidiaries and arising out of actions or omissions occurring at or prior to
the Effective Time, to the fullest extent permitted under Texas law.
Section 5.14 DISPOSITION OF LITIGATION. Each party agrees to cause a
dismissal with prejudice immedi ately prior to the Appointment Date of Midland
Acquisi tion Corp. v. Dawson Production Services, Inc. et al., Civil Action No.
(W.D. Tex. Midland/Odessa), including any and all counterclaims asserted
therein, with each party bearing its own costs and expenses in connection
therewith. The Company agrees that it will not settle any litigation currently
pending, or commenced after the date hereof, against the Company or any of its
directors by any shareholder of the Company relating to the Offer or this
Agreement, without the prior written consent of Parent.
Section 5.15 CONSULTING AGREEMENTS. The Company shall use its best
efforts to cause Mr. Michael E. Little, Mr. Joseph B. Eustice and Mr. James J.
Byerlotzer to enter into consulting agreements with Parent and the Purchaser on
the terms set forth in the term sheets executed by Messrs. Little, Eustice and
Byerlotzer on the date hereof.
41
<PAGE>
ARTICLE VI
CONDITIONS
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obliga tion of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions:
(a) SHAREHOLDER APPROVAL. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the holders of Company
Common Stock, if required by applicable law and the Restated Articles of
Incorporation, in order to consummate the Merger;
(b) STATUTES; CONSENTS. No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any foreign or domestic
government or any governmental agency or authority of competent juris diction
which prohibits the consummation of the Merger and all foreign or domestic
governmental consents, orders and approvals required for the consummation of the
Merger and the transactions contemplated hereby shall have been obtained and
shall be in effect at the Effective Time;
(c) INJUNCTIONS. There shall be no order or injunction of a
foreign or United States federal or state court or other governmental authority
of competent jurisdiction in effect precluding, restraining, enjoining or
prohibiting consummation of the Merger; and
(d) PURCHASE OF SHARES IN OFFER. Parent, the Purchaser or
their affiliates shall have purchased shares of Company Common Stock pursuant to
the Offer.
ARTICLE VII
TERMINATION
Section 7.1 TERMINATION. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after shareholder approval thereof:
42
<PAGE>
(a) By the mutual consent of the Board of Directors of Parent
and the Board of Directors of the Company.
(b) By either of the Board of Directors of the Company or the
Board of Directors of Parent:
(i) if shares of Company Common Stock shall not have been
purchased pursuant to the Offer on or prior to [December 31, 1998];
PROVIDED, HOW EVER, that the right to terminate this Agreement under this
Section 7.1(b)(i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Purchaser to pur chase shares of Company
Common Stock pursuant to the Offer on or prior to such date; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling or
other action the parties hereto shall use their reasonable efforts to
lift), in each case permanently restrain ing, enjoining or otherwise
prohibiting the transac tions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable.
(c) By the Board of Directors of the Company:
(i) if, prior to the purchase of shares of Company Common
Stock pursuant to the Offer, the Board of Directors of the Company shall
have with drawn, or modified or changed in a manner adverse to Parent or
the Purchaser its approval or recommenda tion of the Offer, this Agreement
or the Merger in order to approve and permit the Company to execute a
definitive agreement providing for a Superior Pro posal; provided that (A)
at least five (5) business days prior to terminating this Agreement
pursuant to this Section 7.1(c)(i) the Company has provided Parent with
written notice advising Parent that the Board of Directors of the Company
has received a Superior Proposal that it intends to accept, speci fying
the material terms and conditions of such Superior Proposal and
identifying the person making
43
<PAGE>
such Superior Proposal, and (B) the Company shall have caused its
financial and legal advisors to negotiate in good faith with Parent to
make such adjustments in the terms and conditions of this Agreement as
would enable the Company to proceed with the transactions contemplated
herein on such adjusted terms; and further provided that simulta neously
with any termination of this Agreement pur suant to this Section
7.1(c)(i), the Company shall pay to Parent the Termination Fee (as defined
in Section 8.1(b) hereof); and further provided that the Company may not
terminate this Agreement pursu ant to this Section 7.1(c)(i) if the
Company is in material breach of this Agreement; or
(ii) if, prior to the purchase of shares of Company Common
Stock pursuant to the Offer, Par ent or the Purchaser breaches or fails in
any mate rial respect to perform or comply with any of its material
covenants and agreements contained herein or breaches its representations
and warranties in any material respect; or
(iii) if Parent or the Purchaser shall have terminated the
Offer, or the Offer shall have expired, without Parent or the Purchaser,
as the case may be, purchasing any shares of Company Common Stock pursuant
thereto; provided that the Company may not terminate this Agreement
pursuant to this Section 7.1(c)(iii) if the Company is in material breach
of this Agreement; or
(iv) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, Parent, the Purchaser or any of
their affiliates shall have failed to commence the Offer on or prior to
five business days following the date of the initial public announce ment
of the Offer; provided, that the Company may not terminate this Agreement
pursuant to this Sec tion 7.1(c)(iv) if the Company is in material breach
of this Agreement.
(d) By the Board of Directors of Parent:
44
<PAGE>
(i) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, Parent, the Purchaser, or any of
their affiliates shall have failed to commence the Offer on or prior to
five business days following the date of the initial public announce ment
of the Offer; provided that Parent may not terminate this Agreement
pursuant to this Section 7.1(d)(i) if Parent or the Purchaser is in
material breach of this Agreement; or
(ii) if prior to the purchase of shares of Company Common
Stock pursuant to the Offer, the Board of Directors of the Company shall
have with drawn, or modified or changed in a manner adverse to Parent or
the Purchaser its approval or recommenda tion of the Offer, this Agreement
or the Merger or shall have recommended an Acquisition Proposal or offer,
or shall have executed an agreement in prin ciple (or similar agreement)
or definitive agreement providing for a tender offer or exchange offer for
any shares of capital stock of the Company, or a merger, consolidation or
other business combination with a person or entity other than Parent, the
Pur chaser or their affiliates (or the Board of Direc tors of the Company
resolves to do any of the foregoing); provided that Parent may not
terminate this Agreement pursuant to this Section 7.1(d)(ii) if Parent or
the Purchaser is in material breach of this Agreement; or
(iii) if Parent or the Purchaser, as the case may be, shall
have terminated the Offer, or the Offer shall have expired without Parent
or the Pur chaser, as the case may be, purchasing any shares of Company
Common Stock thereunder, provided that Par ent may not terminate this
Agreement pursuant to this Section 7.1(d)(iii) if it or the Purchaser has
failed to purchase shares of Company Common Stock in the Offer in
violation of the material terms thereof or hereof.
Section 7.2 EFFECT OF TERMINATION. In the event of the termination
of this Agreement as provided in Section 7.1 hereof, written notice thereof
shall forth with be given to the other party or parties specifying
45
<PAGE>
the provision hereof pursuant to which such termination is made, and this
Agreement shall forthwith become null and void, and there shall be no liability
on the part of the Parent, the Purchaser or the Company except (A) for fraud or
for intentional material breach of this Agree ment and (B) as set forth in this
Section 7.2 and Section 8.1.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 FEES AND EXPENSES. (a) Except as contemplated by this
Agreement, including Sections 8.1(b), 8.1(c) and 8.1(d) hereof, all costs and
expenses incurred in connection with this Agreement and the con summation of the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
(b) If (w) the Board of Directors of the Company shall
terminate this Agreement pursuant to Sec tion 7.1(c)(i) hereof, (x) the Board of
Directors of Parent shall terminate this Agreement pursuant to Section
7.1(d)(ii) hereof, (y) the Board of Directors of the Company shall terminate
this Agreement pursuant to Sec tion 7.1(b)(i) or Section 7.1 (c)(iii) or the
Board of Directors of Parent shall terminate this Agreement pursu ant to Section
7.1(b)(i) or Section 7.1(d)(iii) and prior thereto there shall have been
publicly announced another Acquisition Proposal or (z) the Board of Directors of
Parent shall terminate this Agreement pursuant to Section 7.1(d)(i) or Section
7.1(d)(iii) hereof, in each case due to a material breach of this Agreement by
the Company, then in any such case as described in clause (w), (x), (y) or (z)
(each such case of termination being referred to as a "Trigger Event"), the
Company shall pay to Parent (not later than one business day after such
termination of this Agreement or, in the case of any termination by the Company
pursuant to Section 7.1(c)(i) hereof, simul taneously with such termination) an
amount equal to $10 million (the "Termination Fee").
(c) Upon the termination of this Agree ment due to the
occurrence of a Trigger Event, the Compa ny agrees that, in addition to the
payment of the Termi nation Fee provided for in Section 8.1(b) hereof, it
46
<PAGE>
shall promptly reimburse Parent for all actual, docu mented and reasonable
out-of-pocket expenses incurred, or to be incurred by Parent, the Purchaser and
their affili ates (including the fees and expenses of legal counsel,
accountants, financial advisors, other consultants, financial printers and
financing sources) ("Expenses") in connection with the Offer, the Merger and the
consumma tion of the transactions contemplated by this Agreement, in an amount
not to exceed $5 million in the aggregate.
(d) If the Company shall terminate this Agreement pursuant to
Section 7.1(c)(ii) hereof, and the Company is not in material breach of this
Agreement at the time of such termination, or if the Purchaser fails to fund the
purchase of Shares pursuant to the Offer as a result of its failure to secure
the Financing pursuant to the Commitment Letter and/or the Proposed Bridge
Arrange ments, or otherwise secure the Financing, Parent shall pay to the
Company (not later than one business day after such termination) an amount equal
to the Termination Fee, together with an amount not to exceed $5 million as
reimbursement to the Company for its actual, documented and reasonable
out-of-pocket Expenses.
Section 8.2 AMENDMENT AND MODIFICATION. Subject to applicable law,
this Agreement may be amended, modified and supplemented in any and all
respects, wheth er before or after any vote of the shareholders of the Company
contemplated hereby, by written agreement of the parties hereto, by action taken
by their respective Boards of Directors (which in the case of the Company shall
include approvals as contemplated in Section 1.3(b) hereof), at any time prior
to the Closing Date with respect to any of the terms contained herein; PROVIDED,
HOWEVER, that after the approval of this Agreement by the shareholders of the
Company, no such amendment, modifica tion or supplement shall reduce or change
the Merger Consideration.
Section 8.3 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time.
Section 8.4 NOTICES. All notices and other
communications hereunder shall be in writing and shall be
47
<PAGE>
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.
Two Tower Center, 20th Floor
East Brunswick, New Jersey 08816
Attention: General Counsel
Telephone No.: (732) 247-4822
Telecopy No.: (732) 247-5148
with a copy to:
Michael P. Rogan, Esq.
C. Kevin Barnette, Esq.
Skadden, Arps, Slate, Meagher
& Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Telephone No.: (202) 371-7000
Telecopy No.: (202) 393-5760
and
(b) if to the Company, to:
Dawson Production Services, Inc.
112 E. Pecan Street, Suite 1000
San Antonio, Texas 78205
Attention: Mark Stark
Telephone No.: (210) 476-0420
Telecopy No.: (210) 354-1041
with a copy to:
Joseph A. Cialone, II, Esq.
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002
Telephone No.: (713) 229-1234
Telecopy No.: (713) 229-1522
48
<PAGE>
and:
J. Rowland Cook, Esq.
Jenkens & Gilchrist
2200 One American Center
600 Congress Avenue
Austin, Texas 78701-3215
Telephone No.: (512) 499-3800
Telecopy No.: (512) 404-3520
Section 8.5 INTERPRETATION. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available. The phrases "the
date of this Agree ment", "the date hereof", and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to August 11, 1998. As
used in this Agreement, the term "affiliate(s)" shall have the meaning set forth
in Rule l2b-2 of the Exchange Act.
Section 8.6 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 8.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS
OF OWNERSHIP. This Agreement and the Confidentiality Agreement (including the
documents and the instruments referred to herein and therein): (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Sections 5.6 and 5.13 hereof are not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
49
<PAGE>
Section 8.8 SEVERABILITY. If any term, provi sion, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regula tory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 8.9 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas without giving
effect to the principles of conflicts of law thereof.
Section 8.10 ASSIGNMENT. Neither this Agree ment nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the Purchaser may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to Parent or to any direct or indirect wholly owned Subsid iary of
Parent. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
50
<PAGE>
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
KEY ENERGY GROUP, INC.
By:
Name:
Title:
MIDLAND ACQUISITION CORP.
By:
Name:
Title:
DAWSON PRODUCTION SERVICES, INC.
By:
Name:
Title:
51
<PAGE>
ANNEX A
CONDITIONS TO THE TENDER OFFER
Notwithstanding any other provisions of the Offer, and in addition
to (and not in limitation of) the Purchaser's rights to extend and amend the
Offer at any time in its sole discretion (subject to the provisions of the
Merger Agree ment), the Purchaser shall not be required to accept for payment
or, subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay
for or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate the Offer as to any Shares not then paid for, if (i) any applicable
waiting period under the HSR Act has not expired or terminat ed, (ii) the
Minimum Condition has not been satisfied, (iii) the Rights Agreement shall not
have been amended in a manner which renders the Rights inoperative with respect
to any acquisition of Shares by Parent or the Purchaser, (iv) Pur chaser has not
received funds under the Commitment Letter to enable the Purchaser to purchase
all Shares outstanding pursuant to the Offer and the Merger or has not obtained
a definitive financing commitment on terms substantially simi lar to those
contained in either of the Proposed Bridge Arrangements or (v) at any time on or
after August 11, 1998 and before the time of payment for any such Shares, any of
the following events shall occur or shall be determined by the Purchaser to have
occurred:
(a) there shall have been any action taken, or any statute,
rule, regulation, judgment, order or injunc tion promulgated, entered, enforced,
enacted, issued or applicable to the Offer or the Merger by any domestic or
foreign federal or state governmental regulatory or adminis trative agency or
authority or court or legislative body or commission which directly or
indirectly (l) prohibits, or imposes any material limitations on, Parent's or
the Pur chaser's ownership or operation (or that of any of their respective
Subsidiaries or affiliates) of all or a material portion of their or the
Company's businesses or assets, or compels Parent or the Purchaser or their
respective Subsid iaries and affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or Parent and their
respective Subsidiaries, in each case taken
A-1
<PAGE>
as a whole, (2) prohibits, or makes illegal the acceptance for payment, payment
for or purchase of Shares or the consum mation of the Offer or the Merger, (3)
results in the delay in or restricts the ability of the Purchaser, or renders
the Purchaser unable, to accept for payment, pay for or purchase some or all of
the Shares, (4) imposes material limitations on the ability of the Purchaser or
Parent effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by it on
all matters properly presented to the Company's share holders, or (5) otherwise
materially adversely affects the consolidated financial condition, businesses or
results of operations of the Company and its Subsidiaries, taken as a whole;
(b) there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, secu rities on the New York Stock
Exchange for a period in excess of three hours (excluding suspensions or
limitations result ing solely from physical damage or interference with such
exchanges not related to market conditions), (2) a decla ration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (3) a commencement of a war, armed
hostilities or other international or national calamity directly or indi rectly
involving the United States, (4) any limitation (whether or not mandatory) by
any foreign or United States governmental authority on the extension of credit
by banks or other financial institutions, (5) any decline in either the Dow
Jones Industrial Average or the Standard & Poor's Index of 500 Industrial
Companies by an amount in excess of 20% measured from the close of business on
August 11, 1998 or (6) in the case of any of the foregoing existing at the time
of the commencement of the Offer, a material acceleration or worsening thereof;
(c) the representations and warranties of the Company set
forth in the Merger Agreement shall not be true and correct as of the date of
consummation of the Offer as though made on or as of such date, and the failure
to be true and correct has or is reasonably likely to have a material adverse
effect on the Company, except (i) for changes specif ically permitted by the
Merger Agreement and (ii) those representations and warranties that address
matters only as of a particular date are true and correct as of such date, or
the Company shall have breached or failed in any material respect to perform or
comply with any obligation, agreement
A-2
<PAGE>
or covenant required by the Merger Agreement to be performed or complied with by
it and such failure shall have or be reasonably likely to have a material
adverse effect on the Company;
(d) the Merger Agreement shall have been terminated in
accordance with its terms;
(e) (i) it shall have been publicly disclosed or Parent or the
Purchaser shall have otherwise learned that any person, entity or "group" (as
defined in Section 13(d)(3) of the Exchange Act), other than Parent or its
affiliates or any group of which any of them is a member, shall have ac quired
beneficial ownership (determined pursuant to Rule 13d- 3 promulgated under the
Exchange Act) of more than 14.9% of any class or series of capital stock of the
Company (includ ing the Shares), through the acquisition of stock, the forma
tion of a group or otherwise, or shall have been granted an option, right or
warrant, conditional or otherwise, to ac quire beneficial ownership of more than
14.9% of any class or series of capital stock of the Company (including the
Shares); or (ii) any person or group shall have entered into a definitive
agreement or agreement in principle with the Company with respect to a merger,
consolidation or other business combination with the Company; or
(f) the Company's Board of Directors shall have withdrawn, or
modified or changed in a manner adverse to Parent or the Purchaser (including by
amendment of the Sched ule 14D-9) its recommendation of the Offer, the Merger
Agree ment, or the Merger, or recommended another proposal or offer, or shall
have resolved to do any of the foregoing;
which in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser giving rise to such condition) makes it inadvisable to proceed
with the Offer or with such acceptance for payment or payments.
The foregoing conditions are for the sole benefit of the Purchaser
and Parent and may be waived by Parent or the Purchaser, in whole or in part at
any time and from time to time in the sole discretion of Parent or the
Purchaser. The failure by Parent or the Purchaser at any time to exer cise any
of the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an
A-3
<PAGE>
ongoing right which may be asserted at any time and from time to time.
A-4
EXHIBIT 10.38
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
DAWSON PRODUCTION PARTNERS, L.P.,
A DELAWARE LIMITED PARTNERSHIP
("PURCHASER")
DAWSON PRODUCTION SERVICES, INC.
A TEXAS CORPORATION
("DPS")
AND
HELLUMS SERVICES II, INC.
SUPERIOR COMPLETION SERVICES, INC.
SOUTH TEXAS DISPOSAL, INC.
ELSIK II, INC.,
ALL TEXAS CORPORATIONS
("SELLERS"),
AND
ROGER D. HELLUMS
CHARLES C. FORBES, JR.
ROBERT W. RADLE, JR.
RONALD D. BRIEDEN
JOHN E. CRISP
CHARLES TALLEY
AND
JAMES J. ACKER
(THE "SELLER SHAREHOLDERS")
AUGUST 14, 1998
THIS AGREEMENT CONTAINS IMPORTANT INDEMNITY PROVISIONS.
SEE PARTICULARLY ARTICLE VI.
==============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - PURCHASE AND SALE................................................1
1.1 Agreement to Sell................................................1
(a) Included Assets............................................2
(b) Excluded Assets............................................3
1.2 Agreement to Purchase............................................3
1.3 The Purchase Price; Tax Basis....................................3
1.4 Assumption of Liabilities........................................4
1.5 Prorations.......................................................4
1.6 Transfer Taxes; Recording Fees...................................5
ARTICLE II - CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS
AND FURTHER ASSURANCES..........................................5
2.1 Closing..........................................................5
2.2 Items to be Delivered at Closing.................................6
2.3 Release of Liens.................................................7
2.4 Third Party Consents.............................................7
2.5 Further Assurances...............................................7
2.6 No Equitable Conversion..........................................8
ARTICLE III - REPRESENTATIONS AND WARRANTIES.................................8
3.1 Representations and Warranties of Seller.........................8
(a) Corporate Existence........................................8
(b) Corporate Power; Authorization; Enforceable Obligations....8
(c) Validity of Contemplated Transactions, Etc.................8
(d) No Third Party Options.....................................9
(e) Financial Statements.......................................9
(f) Taxes; Tax and Other Returns and Reports..................10
(g) Books of Account..........................................10
(h) Existing Condition. ......................................10
(i) Title to Properties.......................................11
(j) Compliance with Laws; Authorizations......................11
(k) Transactions With Affiliates..............................11
(l) Litigation................................................12
(m) Equipment.................................................12
(n) Contracts and Commitments.................................12
(o) Environmental Matters.....................................13
(p) Availability of Documents.................................15
(q) Assets....................................................16
(r) Restrictions..............................................16
(s) Conditions Affecting Seller...............................16
(t) Employee Benefit Plans....................................16
(u) Personnel.................................................17
(v) Legal Compliance; Undisclosed Liabilities.................18
<PAGE>
(w) Inventory.................................................18
(x) Warranty..................................................18
(y) Investment................................................18
(z) Disclosure................................................19
3.2 Representations and Warranties of Purchaser.....................19
(a) Partnership...............................................19
(b) Power and Authorization...................................19
(c) Noncontravention..........................................19
3.3 Survival........................................................19
ARTICLE IV - AGREEMENTS PENDING CLOSING.....................................20
4.1 Agreements of Seller Pending the Closing........................20
(a) Business in the Ordinary Course...........................20
(b) Conduct of Business.......................................20
(c) Exclusive Dealing.........................................20
(d) Access....................................................20
(e) Press Release.............................................21
(f) Actions of Directors and Shareholders.....................21
(g) Employee Matters. .......................................21
(h) Actions of Seller.........................................21
4.2 Agreements of Purchaser Pending the Closing.....................21
(a) Press Release.............................................21
(b) Actions of Directors of Purchaser.........................22
(c) Actions of Purchaser......................................22
ARTICLE V - CONDITIONS PRECEDENT TO THE CLOSING.............................22
5.1 Conditions Precedent to Purchaser's Obligations.................22
(a) Representations and Warranties True as of the Closing Date22
(b) Compliance with this Agreement............................22
(c) Closing Certificate.......................................22
(d) Opinion of Counsel for Seller.............................22
(e) No Threatened or Pending Litigation.......................22
(f) Consents and Approvals....................................23
(g) Material Adverse Changes..................................23
(h) Approval of Counsel; Corporate Matters....................23
(i) Physical Inventory........................................23
(j) Employment Contracts......................................23
(k) SWD Lease.................................................23
(l) Frac Tanks................................................23
5.2 Conditions Precedent to the Obligations of Seller...............23
(a) Representations and Warranties True as of the Closing Date23
(b) Compliance with this Agreement............................24
(c) Closing Certificates......................................24
(d) No Threatened or Pending Litigation.......................24
(e) Consent of Shareholders...................................24
<PAGE>
ARTICLE VI - INDEMNIFICATION................................................24
6.1 Definitions.....................................................24
6.2 Indemnification by Seller and the Seller Shareholders...........24
6.3 Indemnification by Purchaser....................................25
6.4 Procedure.......................................................26
6.5 Payment and Offset..............................................26
6.6 Failure to Pay Indemnification..................................27
6.7 Express Negligence..............................................27
6.8 Other Rights and Remedies Not Affected..........................27
ARTICLE VII - POST CLOSING MATTERS..........................................27
7.1 Arbitration.....................................................27
(a) Negotiation Period........................................27
(b) Commencement of Arbitration...............................27
(c) Consolidation of Hearings. ...............................28
(d) Discovery.................................................28
(e) Conclusion of Arbitration.................................28
(f) Expenses of Arbitrators. .................................28
7.2 Discharge of Business Obligations...............................28
7.3 Maintenance of Books and Records................................28
7.4 Payments Received...............................................29
7.5 Inquiries.......................................................29
7.6 Covenant Not to Compete.........................................29
7.7 Transition Period...............................................30
(a) Collections...............................................30
(b) Accounting................................................30
(c) Licenses and Permits......................................30
7.8 Accounting Records..............................................30
7.9 Nondisclosure of Proprietary Information........................30
7.10 Contact with Former Employees...................................31
7.11 Registration of Buyer Common Stock..............................31
(a) Registration Obligation...................................31
(b) Blue Sky..................................................31
(c) Suspension Period.........................................31
(d) Registration Expenses.....................................31
7.12 Health Insurance................................................31
ARTICLE VIII - TERMINATION..................................................32
8.1 Events of Termination...........................................32
8.2 Liability Upon Termination......................................32
8.3 Notice of Termination...........................................32
ARTICLE IX - MISCELLANEOUS..................................................32
9.1 Finders' Fees...................................................32
9.2 Expenses........................................................33
9.3 Assignment and Binding Effect...................................33
<PAGE>
9.4 Notices.........................................................33
9.5 Governing Law...................................................34
9.6 No Benefit to Others............................................34
9.7 Entire Agreement................................................34
9.8 Headings........................................................34
9.9 Severability....................................................34
9.10 Counterparts....................................................34
9.11 Construction....................................................35
9.12 Waiver..........................................................35
9.13 Specific Performance............................................35
9.14 Submission to Jurisdiction......................................35
9.15 Good Faith......................................................35
9.16 Attorneys' Fees.................................................35
DEFINITIONS:
The definition of "AFFECTED EMPLOYEES" can be found in Section 3.1(t).
The definition of "AGREEMENT" can be found on page 1.
The definition of "ASSETS" can be found in Section 1.1.
The definition of "ASSIGNED CONTRACTS" can be found in Section 1.1(a)(i).
The definition of "ASSUMED LIABILITIES" can be found in Section 1.4(a).
The definition of "AUTHORIZATIONS" can be found in Section 3.1(j).
The definition of "BUSINESS" can be found on page 1.
The definition of "CLOSING" can be found in Section 2.1.
The definition of "CLOSING DATE" can be found in Section 2.1.
The definition of "CONTAMINATION" can be found in Section 3.1(o)(i)(A).
The definition of "CONTRACTS" can be found in Section 3.1(c)(iv).
The definition of "DAMAGES" can be found in Section 6.2.
The definition of "DISPUTE NOTICE" can be found in Section 7.1(a).
The definition of "EFFECTIVE DATE" can be found on page 1.
The definition of "EMPLOYEE BENEFIT PLAN" can be found in Section 3.1(t)(i).
The definition of "ENVIRONMENTAL, HEALTH AND SAFETY LAWS" can be found in
Section 3.1(o)(i)(B).
The definition of "ENVIRONMENTAL LOSS" can be found in Section 3.1(o)(i)(C).
The definition of "EQUIPMENT" can be found in Section 1.1(a)(v).
The definition of "EQUIPMENT LEASES" can be found in Section 1.1(a)(ii).
The definition of "ERISA" can be found in Section 3.1(t).
The definition of "EXCLUDED ASSETS" can be found in Section 1.1(b).
The definition of "FUEL AND INVENTORY" can be found in Section 1.1(a)(ix).
The definition of "GOVERNMENTAL ENTITY" can be found in Section 6.1(a).
The definition of "HAZARDOUS SUBSTANCE" can be found in Section 3.1(o)(i)(D).
The definition of "INDEMNITEE" can be found in Section 6.1(b).
The definition of "INDEMNITOR" can be found in Section 6.1(c).
The definition of "NEGOTIATION PERIOD" can be found in Section 7.1(a).
<PAGE>
The definition of "OPERATING ASSETS" can be found in Section 1.1(a)(iii).
The definition of "PERMITS" can be found in Section 1.1(a)(viii).
The definition of "PERMITTED LIENS" can be found in Section 3.1(i).
The definition of "PERSON" can be found in Section 9.11.
The definition of "PERSONAL PROPERTY" can be found in Section 1.1(a)(vii).
The definition of "PROPERTY TAXES" can be found in Section 1.5.
The definition of "PROPRIETARY INFORMATION" can be found in Section 7.9.
The definition of "PURCHASE PRICE" can be found in Section 1.3(a).
The definition of "PURCHASER" can be found on page 1.
The definition of "PURCHASER LOSSES" can be found in Section 6.2.
The definition of "RECORDS" can be found in Section 1.1(a)(vi).
The definition of "REGULATIONS" can be found in Section 3.1(j).
The definition of "RELEASE" can be found in Section 3.1(o)(i)(E).
The definition of "REMEDIATION" can be found in Section 3.1(o)(i)(F).
The definition of "SELLER" can be found on page 1.
The definition of "SELLER LOSSES" can be found in Section 6.3.
The definition of "SELLER SHAREHOLDERS" can be found on page 1.
The definition of "TAX RETURNS" can be found in Section 3.1(f).
The definition of "TAXES" can be found in Section 3.1(f).
The definition of "THIRD PARTY CLAIMS" can be found in Section 6.4(b).
The definition of "TRANSITION PERIOD" can be found in Section 7.7.
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "AGREEMENT"), dated as of August 14,
1998 (the "EFFECTIVE DATE"), is entered into by and among Hellums Services II,
Inc. ("HELLUMS"), Superior Completion Services, Inc. ("SUPERIOR"), South Texas
Disposal, Inc. ("SOUTH TEXAS"), and Elsik II, Inc. ("ELSIK"), each of which is a
Texas corporation (together, the "SELLERS"), and Roger D. Hellums, Charles C.
Forbes, Jr., Robert W. Radle, Jr., Ronald D. Brieden, John E. Crisp, Charles
Talley and James J. Acker (together, the "SELLER SHAREHOLDERS"), Dawson
Production Services, Inc., a Texas corporation ("DPS"), and Dawson Production
Partners, L.P., a Delaware limited partnership (the "PURCHASER").
RECITALS:
A. The Sellers are engaged in the following aspects of the oil field
servicing business (collectively, the "BUSINESS"): Hellums is engaged in the
business of supplying vacuum truck, frac tank, open top tank and related
services; Superior is in workover rig business; South Texas is in the business
of operating salt water disposal wells; and Elsik is in the business of
supplying camp rental equipment, including trailer houses and satellite
antennas.
B. The Seller Shareholders own 79.4% of the outstanding stock of Hellums
and South Texas; the Seller Shareholders own 84.5% of the outstanding stock of
Elsik; and Hellums owns 100% of the outstanding stock of Superior;
C. DPS owns all of the issued and outstanding stock of Dawson Production
Management, Inc., a Delaware corporation ("MANAGEMENT"), Dawson Production
Acquisition Corp., a Delaware corporation ("ACQUISITION CORP."), and Dawson
Production Taylor, Inc., a Delaware corporation ("TAYLOR"); Management is the
sole general partner of Purchaser, and Acquisition Corp. and Taylor own all of
the limited partnership interests of Purchaser.
D. Each of the Boards of Directors of the Sellers and DPS, and the General
Partner of Purchaser has approved this Agreement and the transactions
contemplated by this Agreement;
E. Subject to the limitations and exclusions contained in this Agreement
and on the terms and conditions hereinafter set forth, the Sellers desire to
sell and Purchaser desires to purchase, and DPS desires to cause Purchaser to
purchase the Business including all of the oil field servicing operations and
substantially all of the oil field servicing assets of the Sellers.
F. It is the intention of the Purchaser and the Sellers that, unless
otherwise specified in this Agreement, all damages, liabilities and losses not
in the ordinary course of business that result from events or conditions that
occur or exist prior to the Closing (whether or not reported prior to the
Closing) shall be the financial responsibility of the Sellers and subject to the
indemnification provisions provided in Section 6.2 of this Agreement, and that
all such damages, liabilities and losses that result from events or conditions
that occur or first exist after the Closing
1
<PAGE>
shall be the financial responsibility of the Purchaser and subject to the
indemnification provisions provided in Section 6.3 of this Agreement.
NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements contained in this
Agreement, and intending to be legally bound by this Agreement, the parties
agree as follows:
ARTICLE I - PURCHASE AND SALE
1.1 AGREEMENT TO SELL. At the Closing (as defined in Section 2.1), and
except as otherwise specifically provided in this Section 1.1, the Sellers shall
grant, sell, convey, assign, transfer and deliver to Purchaser, upon and subject
to the terms and conditions of this Agreement, all right, title and interest of
the Sellers in and to (a) the Business as a going concern, and (b) all of the
assets, properties and rights of the Sellers constituting the Business or used
therein, of every kind and description, real, personal and mixed, tangible and
intangible, wherever situated (which Business, assets, properties and rights,
together with the Vehicle Sub Stock as hereinafter defined, are herein sometimes
collectively referred to as the "ASSETS"), free and clear of all mortgages,
liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature whatsoever, except Permitted Liens (as defined in
Section 3.1(i)).
(a) INCLUDED ASSETS. The Assets shall include, without limitation,
the following assets, properties and rights of the Sellers used directly or
indirectly in the conduct of, or generated by or constituting the Business:
(i) all Contracts (as hereinafter defined) to which any one or
more of the Sellers is a party all of which are described in SCHEDULE 1.1(A)(I)
(collectively, the "ASSIGNED CONTRACTS");
(ii) all of the Sellers' rights in and to operating leases of
personal property including vehicles, all of which are described in SCHEDULE
1.1(A)(II) (the "EQUIPMENT LEASES"), subject to the consents of lessors, if
required;
(iii) all of Sellers' interest in equipment material to the
operation of the Business, all of which is described on SCHEDULE 1.1(A)(III)
(the "OPERATING ASSETS");
(iv) all of the issued and outstanding stock of Hellums
Vehicle Corporation, a Texas corporation (the "VEHICLE SUB STOCK"), which, as of
the Closing Date, will own all of the vehicles of the Sellers (the "VEHICLES")
all of which are listed in SCHEDULE 1.1(A)(IV);
(v) all office furniture, fixtures and equipment owned by the
Sellers and all other equipment, parts, materials, supplies, furniture and
fixtures owned by the Sellers including, without limitation, the equipment,
furniture, fixtures, computers, servers, local area network systems, intranet
systems, financial accounting equipment, and systems described on SCHEDULE
1.1(A)(V) (collectively, the "EQUIPMENT");
2
<PAGE>
(vi) all books, records, correspondence, files, plans and
other documents and instruments of the Sellers, including but not limited to
customer and supplier information and sales information relating to the Business
or to the Assets (collectively, the "RECORDS") subject to a continuing right of
the Sellers and the Seller Shareholders to access and copy the Records for tax
reporting purposes;
(vii) all other intangible and tangible personal property, all
technologies, methods, formulations, data bases, trade secrets, customer lists,
know-how, inventions and other intellectual property used in the Business or
under development, and owned, leased or licensed by the Sellers, all of which is
described on SCHEDULE 1.1(A)(VII) (collectively, the "PERSONAL PROPERTY");
(viii)all permits, authorizations, certificates, approvals,
registrations, or other approvals and licenses granted by any federal, state,
local or foreign court, arbitrator or administrative or Governmental Entity (as
hereinafter defined) in connection with the Business, which are described on
SCHEDULE 1.1(A)(VIII) (collectively, the "PERMITS") to the extent that they may
be legally assigned by the Sellers; and
(ix) all motor fuel and inventory on hand on the Closing Date,
including without limitation, all motor fuel, oil, lubricants, drilling mud and
other items of tangible personal property of similar character (collectively,
the "FUEL AND INVENTORY");
(x) all other personal property not listed in this Section
1.1(a) or excluded by Section 1.1(b), which is owned by any of the Seller or the
Seller Shareholders and is reasonably necessary to operate the Business.
(b) EXCLUDED ASSETS. The Assets shall not include the corporate
seals, certificates of incorporation, minute books, stock books, or other
records having to do with the corporate organization of the Sellers, cash, the
Sellers' prepaid items and the deposits not subject to proration under Section
1.5; the Assets additionally shall not include the rights which accrue or will
accrue to the Sellers under this Agreement, the Sellers' customers' accounts
receivable and un-invoiced work relating to the Business in existence on the
Closing Date (whether billed or unbilled as of the Closing), the rights to any
of the Sellers' claims for any federal, state, local, or foreign tax refunds,
the Sellers' financial and accounting records not relating to the Business,
Sellers' tax returns, or any items listed on SCHEDULE 1.1(B) all of which are
referred to in this Agreement as the "EXCLUDED ASSETS."
1.2 AGREEMENT TO PURCHASE. At the Closing, Purchaser shall purchase the
Assets from the Sellers upon and subject to the terms and conditions of this
Agreement and in reliance on the representations, warranties and covenants of
the Sellers contained herein, in exchange for the Purchase Price (as defined in
Section 1.3). In addition, Purchaser shall assume, and DPS shall cause Purchaser
to assume, at the Closing and agree to pay, discharge or perform, as
appropriate, certain liabilities and obligations of the Sellers, but only to the
extent expressly provided in Section 1.4. Except as expressly provided in
Section 1.4, Purchaser shall not assume or be responsible for any liabilities or
obligations based on events occurring prior to Closing relative to the Assets,
the Business or the Sellers.
3
<PAGE>
1.3 THE PURCHASE PRICE; TAX BASIS.
(a) THE PURCHASE PRICE. In consideration of the transfer to
Purchaser of the Assets and the undertakings of the Seller Shareholders, and
subject to adjustment as provided below, Purchaser shall pay (and DPS shall
cause Purchaser to pay) Forty-Six Million Dollars ($46,000,000) (the "PURCHASE
PRICE"), as follows: (i) Thirty-Nine Million Eight Hundred Twenty Thousand
Dollars ($39,820,000) shall be paid to the individual Sellers in the amounts
set forth on Schedule 1.3(a) by wire transfer at the Closing, and (ii) Six
Million One Hundred Eighty Thousand Dollars ($6,180,000) shall be delivered
into escrow (together, the "CASH") to be held pursuant to the escrow agreement
in the form of EXHIBIT A (the "ESCROW AGREEMENT").
The foregoing form of payment of the Purchase Price is predicated on the
presumption that DPS shall be merged with Key Energy Group, Inc., a Maryland
corporation ("KEY"), or its wholly owned subsidiary (the "MERGER"). If, at the
time of the Closing, Key has not completed the Merger, or, in the reasonable
judgment of Purchaser, it is unlikely that the Merger will be completed, then
Purchaser shall have the right to pay Eleven Million Dollars ($11,000,000) of
the Purchaser Price by delivering 880,000 shares of unregistered common stock,
$0.01 par value per share, of DPS in the names and in the amounts set forth on
Schedule 1.3(a) (the "SHARES"). The Shares shall be subject to a Registration
Rights Agreement in the form of EXHIBIT B (the "REGISTRATION RIGHTS AGREEMENT").
Notwithstanding the foregoing, the Purchase Price shall be reduced (by a
reduction in the amount wire transferred to the Sellers at the Closing) by the
amount, if any, (i) determined in accordance with Section 1.5 of this Agreement
and (ii) by the amount of accrued vacation shown on SCHEDULE 3.1(U). In
addition, the Purchaser Price shall be adjusted after the Closing in accordance
with Sections 1.3(b) and 1.3(c).
(b) SELLER TAX BASIS AND FAIR MARKET VALUE OF ASSETS. The fair
market value and the tax basis for federal income tax purposes of the Assets of
the Sellers being transferred to Purchaser shall be set forth on SCHEDULE
1.3(B). The Sellers and Purchaser each hereby covenant and agree that such
amounts reflect the fair market value of the Assets and that none of them,
directly or indirectly, through a subsidiary or affiliate or otherwise, will
take a position on any income tax return, before any governmental agency charged
with the collection of any income tax, or in any judicial proceeding that is in
any way inconsistent with the tax basis and fair market value of the Assets set
forth on SCHEDULE 1.3(B). Such allocations will be reflected in Forms 8594 to be
signed and filed by Seller and Purchaser in accordance with Section 1060 of the
Internal Revenue Code of 1986, as amended (the "CODE"). In addition, the
Purchase Price payable under Section 1.2 shall be allocated in the manner set
forth on SCHEDULE 1.3(B).
1.4 ASSUMPTION OF LIABILITIES.
(a) At the Closing and except as otherwise specifically provided in
this Section 1.4, Purchaser shall assume and agree to pay, discharge or perform,
as appropriate, the liabilities and obligations of the Sellers set forth on
SCHEDULE 1.4(A) (the "ASSUMED LIABILITIES"); provided, however, that the
aggregate amount of any debt and leases included in the Assumed Liabilities
shall not exceed $150,000.
4
<PAGE>
(b) Notwithstanding Section 1.4(a), it is expressly understood that,
other than obligations and liabilities expressly assumed in Section 1.4(a),
Purchaser shall not be liable for, and shall not assume, any of the Sellers' or
the Seller Shareholders' obligations or liabilities, whether known or unknown,
matured or unmatured, or fixed or contingent, including but not limited to
liabilities relating to events occurring prior to the Closing, any Taxes (as
hereinafter defined, other than those pro rated as of the Closing Date), or any
liabilities under any Employee Benefit Plans of the Sellers. The Sellers shall
remain obligated to pay and discharge any liabilities and obligations not
expressly assumed by Purchaser hereby. The Sellers and the Seller Shareholders
hereby agree that they will indemnify Purchaser for any liabilities of the
Sellers not expressly assumed pursuant to Section 1.4(a) by Purchaser and
Purchaser and DPS agree that they will indemnify the Sellers and the Seller
Shareholders with respect to the Assumed Liabilities.
1.5 PRORATIONS. All annual or periodic ad valorem fees, taxes and
assessments, licensing fees and vehicle use fees, and similar charges imposed by
taxing authorities on the Assets (collectively, "PROPERTY TAXES") shall be borne
and paid (a) by Seller for all full tax years or periods ending before the date
of the Closing and for that portion of any tax year or period ending on or after
the effective date of Closing from the date of commencement of such year or
period to the date immediately preceding the effective date of the Closing and
(b) by Purchaser for all full tax years or periods beginning on or after the
effective date of Closing and for that portion of any tax year or period ending
on or after the effective date of the Closing from and including the effective
date of Closing to the final date of such year or period, regardless of when or
by which party such Property Taxes are actually paid to the applicable taxing
authority. In addition, all rents and other lease charges, power and utility
charges, license or other fees, Assigned Contracts, and similar items shall be
allocated between Purchaser and the Sellers effective as of 12:01 a.m. on the
effective date of the Closing. Such allocations shall be determined and payment
accordingly made from one party to the other, as the case may be, on the date of
the Closing to the extent they are known and agreed to by Purchaser and Seller;
otherwise such allocations shall be determined and payment made (effective as of
12:01 a.m. on the effective date of the Closing) as soon as practicable but not
later than the date 30 days thereafter.
ARTICLE II - CLOSING, ITEMS TO BE DELIVERED,
THIRD PARTY CONSENTS AND FURTHER ASSURANCES
2.1 CLOSING. Subject to the terms and conditions of this Agreement, the
execution of documents relative to the sale and purchase of the Assets shall be
held at Jenkens & Gilchrist, A Professional Corporation, in Austin, Texas on or
about the date of the closing of the Merger. The effective date and time of the
Closing (referred to herein as the "CLOSING" or "CLOSING DATE") shall be 12:01
a.m., the Closing Date, and all risk of loss shall be borne by the Sellers until
the Closing, and thereafter all such risk of loss shall be borne by Purchaser.
2.2 ITEMS TO BE DELIVERED AT CLOSING. At the Closing and subject to the
terms and conditions contained in this Agreement,
(a) the Sellers shall deliver to Purchaser the following:
5
<PAGE>
(i) bills of sale with covenants of warranty of title and
assignments of contracts in a form reasonable acceptable to the parties, stock
certificates representing the Vehicle Sub Stock, together with executed stock
powers, and other good and sufficient instruments and documents of conveyance
and transfer, in a form reasonably satisfactory to Purchaser and its counsel, as
shall be necessary and effective to transfer and assign to and vest in Purchaser
all of the Sellers' right, title and interest in and to the Assets;
(ii) all of the certificates, certificates of title,
Contracts, customer lists, supplier lists, Equipment Leases assumed by
Purchaser, all correspondence, files, plans and other documents and instruments,
books, Records, and data belonging to the Sellers which are part of the Assets;
(iii) a Closing and Secretary's Certificate from each of the
Sellers, dated as of the Closing Date, certifying, among other items, that all
representations and warranties of the Sellers and the Seller Shareholders
contained in this Agreement or in any Schedule, certificate or document
delivered by the Sellers to Purchaser pursuant to the provisions of this
Agreement are true on the Closing Date and that the applicable Seller has
performed and complied in all material respects with all of its obligations
under this Agreement to be performed or complied with by it prior to or at the
Closing and certifying that the Sellers and the Seller Shareholders have
obtained all consents and approvals required with respect to the Sellers or the
Business except as otherwise set forth on a Schedule hereto;
(iv) a certificate of existence issued by the Secretary of
State of the State of Texas, and a certificate of good standing issued by the
Comptroller of Public Accounts of the State of Texas, as of a date not more than
ten calendar days prior to the Closing Date;
(v) Employment Agreements, Non-Competition Agreements and
Mutual Agreements to Arbitrate Claims in substantially the form attached hereto
as EXHIBIT C executed by each of the Selling Shareholders (the "EMPLOYMENT,
NON-COMPETITION AND ARBITRATION AGREEMENT"); and
(vi) the Escrow Agreement; and
(vii) a Form P-4 executed by the applicable Sellers showing a
change in the operator of each of the Assets that is a salt water disposal well;
simultaneously with such delivery, the Sellers shall take all steps as may be
reasonably required to put Purchaser in actual possession and operating control
of the Assets.
(b) Purchaser shall deliver (and DPS shall cause Purchaser to
deliver) to the Sellers the following:
(i) the wire transfer of the Cash less adjustments, if any, in
accordance with Section 1.3 and less the amount delivered into escrow;
6
<PAGE>
(ii) the Escrow Agreement;
(iii) the Non-Competition Payment (defined below);
(iv) a copy of a letter addressed to the DPS transfer agent
providing for the issuance of the Shares to the Sellers; and
(v) the Registration Rights Agreement.
In addition, Purchaser shall deliver (and DPS shall cause Purchaser to deliver)
that portion of the Cash subject to the Escrow Agreement to the escrow agent.
2.3 RELEASE OF LIENS. The Sellers shall cause all liens and other
encumbrances other than Permitted Liens affecting the Assets to be released and
discharged prior to Closing and shall provide Purchaser with proof thereof
including but not limited to copies of UCC-3 filings.
2.4 THIRD PARTY CONSENTS. To the extent that any of the Sellers' rights
under any Contracts, Authorizations (as defined in Section 3.1(j)), Permits or
Equipment Leases assumed by Purchaser, or other Assets to be assigned to
Purchaser may not be assigned without the consent of another person, which
consent has not been obtained prior to the Closing, this Agreement shall not
constitute an agreement to assign the same if an attempted assignment would
constitute a breach thereof or be unlawful, and the applicable Seller, at such
Seller's expense, shall use reasonable commercial efforts to obtain any such
required consent(s) as promptly as possible after Closing. If any consent is not
obtained or if any attempted assignment would be ineffective or would impair
Purchaser's rights under or to the Asset in question so that Purchaser would not
acquire the benefit of all such rights, the applicable Seller, to the maximum
extent permitted by law and by the terms of any documents affecting the Asset,
at such Seller's expense, shall act for one year after the Closing as
Purchaser's agent in order to obtain for Purchaser the benefits thereunder and
shall cooperate, to the maximum extent permitted by law and by the terms of any
document affecting the Asset, with Purchaser in any other reasonable arrangement
designed to provide such benefits to Purchaser.
2.5 FURTHER ASSURANCES. Each Seller from time to time after the Closing,
at Purchaser's request, will execute, acknowledge and deliver to Purchaser such
other instruments of conveyance and transfer and will take such other actions
and execute and deliver such other documents, certifications and further
assurances as Purchaser may reasonably request in order to vest more effectively
in Purchaser, or to put Purchaser more fully in possession of, any of the
Assets, or to better enable Purchaser to complete, perform or discharge any of
the liabilities or obligations assumed by Purchaser at the Closing pursuant to
Section 1.4. Each of the parties will cooperate with the other and execute and
deliver to the other parties such other instruments and documents and take such
other actions as may be reasonably requested from time to time by any other
party as necessary to carry out, evidence and confirm the intended purposes of
this Agreement. If any of the Sellers dissolves within one year following the
Closing Date, effective as of the dissolution of such Seller, such Seller hereby
irrevocably appoints Purchaser or Purchaser's substitute as its attorney-in-fact
coupled with an interest and with full power of substitution to carry out the
provisions of this Section 2.5.
7
<PAGE>
2.6 NO EQUITABLE CONVERSION. Prior to the Closing, neither the execution
of this Agreement nor the performance of any provision contained herein shall
cause Purchaser to become liable for any aspect or obligation of relating to the
Assets or the Business.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE SELLER
SHAREHOLDERS. Each of the Sellers and the Seller Shareholders, jointly and
severally, hereby represent and warrant to Purchaser and to DPS that the
following statements are true and correct, except as set forth on the Schedules,
each of which scheduled exceptions shall specifically identify the relevant
section of this Agreement to which it relates and shall be deemed to be
representations and warranties as if made hereunder; provided, however, that the
representations and warranties made regarding the Seller Shareholders (as
opposed to the Sellers) shall be deemed to be made by each Seller Shareholder
severally and not jointly, wholly with respect to such Seller Shareholder
individually.
(a) CORPORATE EXISTENCE. Each of the Sellers is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Each of the Sellers is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the conduct of the
Business requires it to be so qualified, all of which jurisdictions are listed
on SCHEDULE 3.1(A). None of the Sellers is nor has ever been an investment
company within the meaning of the Investment Company Act of 1940.
(b) CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each of
the Sellers has the corporate power, authority and legal right to execute,
deliver and perform this Agreement. The execution, delivery and performance of
this Agreement by each of the Sellers has been duly authorized by all necessary
corporate action as of the Closing Date. This Agreement has been, and the other
agreements, documents and instruments required to be delivered by the Sellers in
accordance with the provisions hereof (collectively, the "SELLER DOCUMENTS")
will be duly executed and delivered on behalf of each Seller by duly authorized
officers or directors of each Seller and this Agreement constitutes, and the
Seller Documents when executed and delivered will constitute, the legal, valid
and binding obligation of each of the Sellers enforceable against each of the
Sellers in accordance with their respective terms except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, or other laws
affecting the enforcement of creditors' rights generally and the application of
general principles of equity. The Board of Directors of each of the Sellers has
approved this Agreement and the transactions contemplated hereby.
(c) VALIDITY OF CONTEMPLATED TRANSACTIONS, ETC. Except as identified
on SCHEDULE 3.1(C), the execution, delivery and performance of this Agreement by
each of the Sellers and the Seller Shareholders does not and will not violate,
conflict with or result in the breach of any material term, condition or
provision of, require notice to or the consent of any other person, result in
the acceleration of or give any party a right to terminate, modify, accelerate
or change the terms, rights or obligations under any of the following:
(i) any Regulation (as hereinafter defined);
8
<PAGE>
(ii) any judgment, order, writ, injunction, decree or award of
any court, arbitrator or Governmental Entity;
(iii) the charter documents of any of the Sellers or any
securities issued by any Seller; or
(iv) any material mortgage, indenture, undertaking, note,
bond, debenture, letter of credit, commitment, agreement, contract, lease,
Authorization, Assigned Contract (including but not limited to Vehicle Operating
Leases and Equipment Leases) or other instrument, or understanding, whether or
not assigned hereby (collectively, the "CONTRACTS"), by which any of the Sellers
may have rights or by which any of the Assets may be bound or affected.
As of the Effective Date and as of the Closing Date, no fact or condition
exists or will exist which would result in the termination of or give any party
to a Contract the right to terminate, modify, accelerate or otherwise change the
existing rights or obligations of the Sellers in or to the Assets or the
Business. Except as otherwise identified on SCHEDULE 3.1(C), no Authorization,
approval or consent of, and no registration or filing with, any Governmental
Entity is required in connection with the execution, delivery or performance of
this Agreement by any of the Sellers or by any Seller Shareholder.
(d) NO THIRD PARTY OPTIONS. No person has any existing agreements,
options, commitments or rights to acquire any of the Assets or any interest
therein.
(e) FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 3.1(E) are the
following financial statements (collectively, the "FINANCIAL STATEMENTS") for
the Sellers: (i) unaudited consolidated and consolidating balance sheet and
statement of income, changes in shareholders' equity and cash flows, and
unaudited earnings before interest, taxes, depreciation and amortization
("ADJUSTED EBITDA") as of and for the fiscal years ended December 31, 1995, and
December 31, 1996, and December 31, 1997 (the "MOST RECENT FISCAL YEAR END") and
as of and for the 12 month period ended June 30, 1998; and (ii) the unaudited
consolidated balance sheet and statement of income, changes in shareholders'
equity and cash flow and Adjusted EBITDA (the "MOST RECENT FINANCIAL
STATEMENTS") as of and for the six month period ended June 30, 1998 (the "MOST
RECENT FISCAL MONTH END") for the Sellers. The Financial Statements (including
the notes thereto) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Sellers as of
such dates and the results of operations of the Sellers for such periods, are
correct and complete, and are consistent with the books and records of the
Sellers (which books and records are correct and complete); provided, however,
that the Most Recent Financial Statements are subject to normal year-end
adjustments (which will not be material, individually or in the aggregate) and
lack footnotes. The Financial Statements fairly present all of the activities of
the Sellers that will be part of the operations and Business of the Sellers at
Closing, and all assets, tangible or intangible, and all Contracts, formal or
informal whether or not in writing, necessary to conduct the Business, as
actually operating as of the Effective Date and as set forth in the Financial
Statements, will be owned by the Sellers (in the case of such assets) and will
be in full force and effect (in the case of such Contracts) immediately prior to
the Closing.
9
<PAGE>
(f) TAXES; TAX AND OTHER RETURNS AND REPORTS. All federal, state,
local and foreign tax returns, reports, statements and other similar filings
required to be filed by the Sellers and affecting the Assets or the Business
(the "TAX RETURNS") with respect to any federal, state, local or foreign taxes,
assessments, interest, penalties, deficiencies, fees, duties and other
governmental charges or impositions (including without limitation all income
tax, unemployment compensation, social security, payroll, sales and use, excise,
gross receipts, value-added, privilege, property, ad valorem, franchise,
license, school transfer, mortgage recording, customs, withholding, estimated
and other tax or similar governmental charge or imposition under laws of the
United States or any state, county, or municipal entity, agency or
instrumentality or political subdivision thereof or any foreign country or
political subdivision thereof) insofar as same may affect the Assets or the
Business (the "TAXES") have been timely filed with the appropriate governmental
agencies in all jurisdictions in which such Tax Returns are required to be
filed, and all such Tax Returns properly reflect the liabilities of Sellers for
Taxes for the periods, property and events covered thereby. All Taxes, including
without limitation, those which are called for by the Tax Returns, have been
properly accrued or timely paid. Purchaser will have no liability to any person
or taxing authority for Taxes relating to actions or events occurring prior to
12:01 a.m. on the Closing Date, except as otherwise provided by Section 1.5. The
Sellers' warranties and representations under this Section 3.1(f) shall be
construed consistently with Section 1.5.
(g) BOOKS OF ACCOUNT. The books, records and accounts of the Sellers
maintained with respect to the Business and the Assets fairly reflect, in all
material respects and in reasonable detail, the transactions and the assets and
liabilities of each of the Sellers with respect to the Business.
(h) EXISTING CONDITION. Except as set forth on SCHEDULE 3.1(H), and
except for such changes as have affected the oil field services business
generally, since December 31, 1997, there has not been, and through the date of
the Closing there will not have been, any material adverse change in the Assets
or the Business or the financial condition, operations, results of operations,
or future prospects of the Business. Without limiting the generality of the
foregoing, since that date, except as otherwise stated on SCHEDULE 3.1(H), none
of the Sellers has (i) entered into any transaction or agreement affecting the
Business or the Assets except in the ordinary course of business, consistent
with past practice; (ii) encumbered, leased, licensed or transferred any
tangible or intangible assets which would have been included in the Assets if
the Closing had been held on December 31, 1997 or on any date since then; (iii)
subjected any of the Assets to any lien or other encumbrance of any nature
whatsoever, except in the ordinary course of business, consistent with past
practices, and except for Permitted Liens (defined in Section 3.1(i)); (iv)
entered into any agreement, Contract, lease, or license (or series of related
agreements, Contracts, leases, and licenses) outside the ordinary course of
business, made any amendment to or terminated any material agreement affecting
the Business or the Assets, or canceled, modified or waived any rights affecting
the Business or the Assets, whether or not in the ordinary course of business;
(v) changed any of the accounting principles followed by it or the methods of
applying such principles; (vi) increased the compensation of any employee other
than in the ordinary course of business, entered into any employment Contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing Contract or agreement, made any other change in employment terms for
any of its directors, officers, or employees outside the ordinary course of
business, or adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, retirement, employee benefit plan,
employee pension benefit plan, or other plan, Contract, or
10
<PAGE>
commitment relating to its directors, officers, and employees; (vii) suffered
any damage, destruction or loss to its property or other loss, whether or not
covered by insurance, (a) materially and adversely affecting the Business or
Assets or (b) of any items which amount to $20,000 or more in the aggregate;
(vii) granted any license or sublicense of any rights under or with respect to
any of Seller's intellectual property or other proprietary rights; (viii)
canceled, compromised, waived, or released any right or claim (or series of
related rights and claims) outside of the ordinary course of business; (ix)
delayed or postponed the payment of accounts payable or any other liabilities
outside the ordinary course of business; or (x) committed to any of the
foregoing. In addition, no party (including the Sellers) has accelerated,
terminated, modified, or canceled any agreement, Contract, lease, or license (or
series of related agreements, Contracts, leases, and licenses) to which any of
the Sellers is or was a party or by which any of them is or was bound.
(i) TITLE TO PROPERTIES. Notwithstanding anything herein to the
contrary, each of the Sellers has good, valid and marketable title (or in the
case of real property, indefeasible title) to all of its assets, real, personal
and mixed, which would be included in the Assets if the Closing took place on
the Effective Date, which it purports to own, including without limitation all
assets reflected on the Schedules hereto, free and clear of all liens (including
but not limited to tax liens), claims, restrictions and other encumbrances and
defects of title of any nature whatsoever, except for (i) liens for current real
or personal property taxes not yet due and payable; (ii) Personal Properties as
to which the applicable Seller is the lessee; and (iii) liens and other
exceptions to title as disclosed in SCHEDULES 3.1(I) (collectively, "PERMITTED
LIENS").
(j) COMPLIANCE WITH LAWS; AUTHORIZATIONS. Each of the Sellers has
complied in all material respects with each, and is not in material violation of
any, law, ordinance or governmental or regulatory rule or regulation, whether
federal, state, local or foreign, to which the Business or Assets is subject
("REGULATIONS"). Each of the Sellers owns, holds, possesses or lawfully uses in
the operation of the Business all permits, franchises, licenses, easements,
rights, applications, filings, registrations and other authorizations
("AUTHORIZATIONS") which are in any material respect necessary for it to conduct
the Business as now conducted or for the ownership and use of the Assets in the
conduct of the Business. Each of the Sellers is in compliance with all
Regulations related to the Authorizations. All such Authorizations are listed
and described in SCHEDULE 3.1(J). None of the Sellers is not in default, nor has
any of the Sellers received any notice of any claim of default, with respect to
any such Authorization. None of the Sellers has received any notice that any of
the Authorizations used by a Seller in the operation of the Business would not
or cannot be renewed or continued in the ordinary course of business, and all
such Authorizations are renewable by the Sellers by their terms or in the
ordinary course of business. No person other than the Sellers owns or has any
proprietary, financial or other interest (direct or indirect) in any
Authorization.
(k) TRANSACTIONS WITH AFFILIATES. Any and all material transactions
between each of the Sellers and its Affiliates (as defined herein) affecting the
Business or the Assets have been upon terms substantially comparable to those
that would have been available to such Seller from third parties in arms length
transactions.
11
<PAGE>
(l) LITIGATION. Except as set forth on SCHEDULE 3.1(L), no
litigation or administrative proceeding, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
Governmental Entity is pending or, to the best knowledge of the Sellers,
threatened against any Seller, which relates to the Business or Assets or the
transactions contemplated by this Agreement, nor do the Sellers know of any
reasonably likely basis for any such litigation, arbitration, investigation or
proceeding, the result of which could reasonably be expected to adversely affect
the Assets or Business, or the transactions contemplated hereby. None of the
Sellers is a party to or subject to the provisions of any judgment, order, writ,
injunction, decree or award of any court, arbitrator or Governmental Entity
which may materially adversely affect the Assets or Business, or the
transactions contemplated hereby. The Sellers shall reimburse and indemnify
Purchaser for any damages, liabilities or other losses incurred by Purchaser in
connection with any and all matters identified on SCHEDULE 3.1(L).
(m) EQUIPMENT. The Operating Assets are at the execution of this
Agreement, and will be at Closing, in good working condition and sufficient to
maintain the operation of the Business.
(n) CONTRACTS AND COMMITMENTS. Except as set forth on SCHEDULE
3.1(N), none of the Sellers is a party to any written or oral:
(i) lease under which it is either lessor or lessee relating
to the Assets or any property at which the Assets are located other than those
set forth on the Schedules to this Agreement;
(ii) Contract or agreement for any capital expenditure or
leasehold improvement relating to the Assets or Business;
(iii) Contract or agreement limiting or restraining such
Seller, its successor or assigns, from engaging or competing in any manner in
the Business, or any agreement concerning confidentiality, nor is any employee
of any Seller subject to any such Contract;
(iv) agreement (or group of related agreements) for the
purchase or sale of raw materials, supplies, products, or other personal
property or for the furnishing or receipt of services, the performance of which
will extend over a period of one year or result in a material loss to such
Seller;
(v) collective bargaining agreement;
(vi) agreement for the employment of any individual on a
full-time, part-time, consulting or other basis, other than an oral Contract for
employment at will; or
(vii) agreement under which the consequences of a default or
termination could have a material adverse effect on the Business or the
financial condition, operations, results of operations, or future prospects of
any Seller.
12
<PAGE>
Each of the Contracts and agreements listed in SCHEDULE 3.1(N), and each other
Assigned Contract, including but not limited to Equipment Leases under which
Purchaser is to acquire rights or obligations, is valid and enforceable in
accordance with its terms; each of the Sellers is, and to each Seller's
knowledge all other parties thereto are, in compliance with the provisions
thereof; none of the Sellers is, and to each of the Seller's knowledge, no other
party is, in default in the performance, observance or fulfillment of any
material obligation, covenant or condition contained therein; and to each of the
Seller's knowledge, no event has occurred which with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder.
Furthermore, no such Contract or agreement, in the reasonable opinion of the
Sellers contains any requirement with which there is a reasonable likelihood a
Seller or, to the Sellers' knowledge, any other party thereto will be unable to
comply.
(o) ENVIRONMENTAL MATTERS.
(i) DEFINITIONS. For purposes of this Agreement the following
terms shall have the following meanings:
A. "CONTAMINATION" shall mean the Release, in violation
of Environmental, Health and Safety Laws, of Hazardous Substances in, on,
underlying or surrounding (including into air, soils, surface water or
groundwater) any real property, including migration of or depositing of
Hazardous Substances onto or from adjoining or neighboring properties or the
Release or presence of Hazardous Substances from or associated with the
operations conducted on any real property when such Hazardous Substances have
been transported to any other offsite location.
B. "ENVIRONMENTAL, HEALTH AND SAFETY LAWS" shall mean
any and all federal, state or local laws (including common law), rules,
Regulations, orders, agreements, ordinances, writs, judgments, injunctions,
decrees or determinations, or similar requirements, whether issued by a court or
a Governmental Entity, relating to the protection of the environment, the
Release of any Hazardous Substances into the environment, the generation,
management, transportation, storage, treatment and disposal of Hazardous
Substances, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, Releases, or threatened releases of
pollutants, Contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into ambient air, soils, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes (including,
without limitation, the Clean Air Act, the Toxic Substance Control Act, the
Clean Water Act, the Oil Pollution Act of 1990, the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource Conservation and Recovery
Act, and the Occupational Safety and Health Act of 1970, all as amended,
including similar state or local laws).
C. "ENVIRONMENTAL LOSS" shall mean any and all claims,
damages, losses, expenses, costs, deficiencies, penalties, liens, interests,
fines, assessments, charges, compensation, obligations and liabilities of any
kind, whether known or unknown,
13
<PAGE>
imposed by private parties or Governmental Entities in civil, criminal or
administrative proceedings, and which are incurred by, under or pursuant to
Environmental, Health and Safety Laws, whether based on negligence, strict
liability or otherwise, under any theory or process of recovery or relief, at
law or at equity, including Remediation, restoration, abatement, investigation,
testing, monitoring, personal injury, death and property damage costs,
contribution for, or recovery of such costs under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, or similar
state or federal laws, and reasonable attorneys' fees, court costs and interest
paid or accrued, related to Contamination or the presence of Hazardous
Substances at offsite locations arising from Seller's operations or activities,
including but not limited to transportation or disposal activities.
D. "HAZARDOUS SUBSTANCE" shall mean any toxic or
hazardous substance, material or waste, pollutant, petroleum or petroleum
derived substance or waste, salt water, oil and gas waste, radioactive
substance, material or waste, asbestos containing materials, or any constituent
of any such substance or waste regulated under or pursuant to any Environmental,
Health and Safety Law.
E. "RELEASE" shall mean any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the environment or into or out of any real property, including
the movement of Hazardous Substances through or in the air, soil, surface water
or groundwater of any real properties or adjoining properties.
F. "REMEDIATION" shall mean all actions, whether
undertaken pursuant to judicial or administrative order or otherwise, reasonably
necessary to comply with applicable Environmental, Health and Safety Laws, (a)
to investigate, clean up, remediate, remove, treat, cover or in any other way
adjust the levels of Hazardous Substances in or around the real properties; or
(b) to prevent or control the Release of Hazardous Substances so that they do
not migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment.
(ii) REPRESENTATIONS AND WARRANTIES. The parties agree that
the following representations and warranties shall govern in the event of any
conflict between the provisions of this Section 3.1(o) and any other provision
of this Agreement or of the other agreements or conveyance instruments
contemplated hereby. The Sellers and the Seller Shareholders, jointly and
severally, represent and warrant that, except as otherwise set forth on SCHEDULE
3.1(O), the following statements are true and correct in all material respects:
A. Each of the Sellers has obtained all Authorizations,
including permits, which are required in connection with the conduct of the
Business under Environmental, Health and Safety Laws;
B. Each of the Sellers is in compliance in all material
respects in the conduct of the Business with all terms and conditions of the
required Authorizations, and is also in compliance in all material respects with
all Environmental, Health and Safety Laws and
14
<PAGE>
with any plan required by law, order, decree, judgment, or injunction entered,
promulgated or approved thereunder, and, with any notice or demand letter issued
thereunder;
C. None of the Sellers is aware of, nor has any Seller
received notice of, any past or present circumstances that, if continued, are
reasonably likely to interfere with or prevent compliance or continued
compliance in the conduct of the Business with any Environmental, Health and
Safety Laws or with any plan required by law, order, decree, judgment or
injunction entered, promulgated or approved thereunder, or, with any notice or
demand letter, or which may otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation, based on or related
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any Hazardous Substance;
D. There is no civil, criminal or administrative action,
suit, order, demand, claim, hearing, notice or demand letter, notice of
violation, investigation, or proceeding pending or, to the Sellers' knowledge,
threatened against any Seller in connection with the conduct of the Business
relating in any way to any Environmental, Health and Safety Laws;
E. Each of the Sellers agrees to cooperate with
Purchaser, both prior to and following the Closing, in connection with
Purchaser's application for the transfer, renewal or issuance of any
Authorizations or Purchaser's efforts to satisfy any Environmental, Health and
Safety Laws involving the Business, (provided, however, that the Sellers shall
not be required to incur any material expense in connection therewith);
F. None of the Sellers, in connection with the operation
of the Business, has handled or disposed of any Hazardous Substance in violation
of Environmental, Health and Safety Laws, arranged for the disposal of any
Hazardous Substance in violation of Environmental, Health and Safety Laws,
exposed any employee or other individual to any Hazardous Substance or condition
in violation of Environmental, Health and Safety Laws, or operated any Assets in
any manner that could form the basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand for
damage to, or for investigation and Remediation of, any site, location, or body
of water (surface or subsurface), for any illness of or personal injury to any
employee or other individual, or for any reason under any Environmental, Health
and Safety Laws or Authorizations;
G. Each of the Sellers has provided Purchaser all
material information in such Seller's control or possession relating to: (1) the
existence of Contamination on or affecting all Assets; (2) compliance with all
Environmental, Health and Safety Laws; and (3) any alleged or actual
Environmental Losses; and
H. No oral or written agreements, including but not
limited to indemnity or cleanup agreements, exist between the Sellers or the
Seller Shareholders and any third parties, relating to or concerning the
environmental, safety or health conditions of the Assets.
15
<PAGE>
(p) AVAILABILITY OF DOCUMENTS. Each of the Sellers has provided
Purchaser with copies of all material documents, including without limitation
all of the Contracts, permits, licenses, patents, trademarks, copyrights and
applications therefor listed in the Schedules. Each of the Sellers will use its
best efforts to obtain any such documents not in its possession and promptly
deliver same to Purchaser. Such copies are true and complete and include all
amendments, supplements and modifications thereto or waivers currently in effect
thereunder.
(q) ASSETS. Except as set forth in SCHEDULE 3.1(Q), the Assets
include all rights and property, other than real property, reasonably necessary
for the conduct of the Business by Purchaser in the manner in which it has been
conducted by the Sellers for the period of time reflected in the Financial
Statements and for the conduct of the Business as presently conducted by each of
the Sellers, and no property excluded from the Assets under Section 1.1(b),
other than real property, constitutes property or rights material to the
Business. Each such tangible Asset is structurally sound, has been maintained in
accordance with normal industry practice, is in good operating condition and
repair, subject to normal wear and tear, is suitable for the purposes for which
it presently is used and for use in the continued conduct of the Business in
substantially the same manner as conducted prior to the Closing. None of the
tangible Assets is in need of maintenance or repairs except for ordinary routine
maintenance and repairs that are not material in nature or cost. Any
modifications that have been made to any of the tangible Assets prior to
Closing, have been made in accordance with normal industry practice.
(r) RESTRICTIONS. None of the Sellers is a party to any material
agreement, license, Permit, Authorization or other instrument or any
understanding or oral agreement, and none of the Sellers is subject to any
charter or other corporate restriction or any judgment, order, writ, injunction,
decree or award, which materially adversely affects or materially restricts the
Business or Assets.
(s) CONDITIONS AFFECTING THE SELLERS. Except as provided in this
Agreement or disclosed in the Schedules, and except for conditions that affect
as a whole the oil field servicing industry generally, there is no fact known to
the Sellers which may reasonably be expected to materially adversely affect the
Business considered as a whole. Notwithstanding the foregoing, the Sellers and
the Seller Shareholders shall not be deemed to have made to Purchaser or DPS any
representation or warranty other than as expressly made in this Article II.
Without limiting the generality of the foregoing, the Sellers and the Seller
Shareholders make no representations or warranties to Purchaser or DPS with
respect to (i) any projections, estimates or budgets heretofore delivered to or
made available to Purchaser or DPS of future revenues, expenses or expenditures
or future results of operations; or (ii) except as expressly covered by a
representation and warranty contained in this Article II, any other information
or documents (financial or otherwise) made available to Purchaser or DPS or its
counsel, accountants or other advisors with respect to the Sellers, the Business
or the Assets.
(t) EMPLOYEE BENEFIT PLANS. SCHEDULE 3.1(T) lists all of the
Sellers' Employee Benefit Plans. None of the Sellers is now and for the
preceding five years has not been, a party to any "employee pension benefit
plan" as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). None of the Sellers is under any legal
16
<PAGE>
obligation to create a new Employee Benefit Plan, or amend an existing Employee
Benefit Plan, that would affect any of the employees of the Sellers who are
employed or otherwise compensated for activities involving the Assets or the
Business ("AFFECTED EMPLOYEES").
(i) Purchaser shall have no responsibility or liability with
respect to benefits which may have accrued or been promised to any Affected
Employee under any "Employee Benefit Plan" of the Sellers or any member of a
Seller's control group as determined under Sections 414(b) or (c) of the Code,
or which form an affiliated service group with any of the Sellers or the Seller
Shareholders within the meaning of Section 414(m) of the Code. The term
"EMPLOYEE BENEFIT PLAN" includes, but is not limited to any profit sharing,
stock, bonus, 401(k), nonqualified deferred compensation, medical, dental,
workers' compensation, life insurance, incentive, vacation benefits, and fringe
benefits plan or program and each "employee benefit plan" described in Section
3(3) of ERISA. The Sellers shall indemnify Purchaser as provided in Section VI
of this Agreement against and in respect of any Damages (as hereinafter defined)
which arise directly or indirectly with respect to an Employee Benefit Plan.
None of the Sellers contributes to any "multiemployer plan" as defined in
Section 3(37) or 4001(o)(3) of ERISA.
(ii) The Sellers shall pay and be liable to Purchaser, and
shall indemnify Purchaser as provided in Section VI of this Agreement, from and
against and in respect of any and all Damages that arise under section 4980B of
the Code, imposed upon, incurred by, or assessed against Purchaser or any of its
employees arising by reason of or relating (x) to any failure to comply with the
continuation health care coverage requirements of section 4980B of the Code,
which failure occurred with respect to any current or prior employee of Seller
or any "qualified beneficiary" of such employee (as defined in section
4980B(g)(I) of the Code) on or prior to the Closing Date, and (y) to the extent,
if any, of any amounts paid by Purchaser under its health plan to any current or
prior employee of the Sellers as a result of a "qualifying event" (as defined in
Section 4980B(f)(3) of the Code) which occurred prior to the Closing Date, over
the amount of the "applicable premium" (as defined in section 4980B(f)(4) of the
Code) paid to Purchaser or Purchaser's health plan, by such current or prior
employee. References to the Code include any amendments that may be made to the
Code from time to time.
(u) PERSONNEL. SCHEDULE 3.1(U) lists the names and monthly or, as
applicable, hourly rates of compensation (including base salary, bonus,
commissions, and incentive pay) of the Affected Employees and summarizes the
bonus, profit sharing, percentage compensation, auto mobile, club membership and
other benefits, if any, paid or payable to the Affected Employees during the
Sellers' 1997 fiscal year and from the beginning of each of the Seller's current
fiscal year to the Effective Date and identifies all accrued vacation relating
to the Affected Employees. SCHEDULE 3.1(U) also contains a brief description of
all material terms of all written or oral employment agreements, severance
agreements, confidentiality agreements, noncompete agreements or similar
agreements to which any Affected Employee is or may be subject. The Sellers have
delivered to Purchaser accurate and complete copies of all such agreements, and
all other agreements, plans and other instruments to which any of the Sellers is
a party and under which the Affected Employees are entitled to receive benefits
of any nature. To the Sellers' knowledge, and except as set forth on SCHEDULE
3.1(U), the employee relations of each of the
17
<PAGE>
Sellers are good and there is no pending or threatened controversy, labor
dispute or union organization campaign between any Seller and any of its
employees or former employees. None of the Affected Employees are represented by
any labor union or organization nor is any Seller a party to any collective
bargaining agreement. Except as set forth on SCHEDULE 3.1(U), each of the
Sellers is in compliance in all material respects with all federal and state
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours and is not engaged in any unfair labor practices.
There is no unfair labor practices complaint or charge of employment
discrimination pending, or threatened with respect to an Affected Employee
before the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any other state, federal or local court or Governmental Entity,
or any strike, labor dispute, work slowdown or work stoppage pending or, to the
Sellers' knowledge, threatened against or involving any Seller, and none of the
Sellers has experienced any material labor difficulty during the last three
years. Except as otherwise specifically provided in this Agreement, Purchaser
shall have no liability for any severance or termination expenses of any Seller
or Seller Shareholder, including accrued vacation and sick leave time, in
connection with the termination of employment by Seller of any Affected
Employee, whether or not such person is employed by Purchaser. None of the
Sellers nor any Seller Shareholder shall have any such liability in connection
with the termination of employment by Purchaser of any Affected Employee who has
been employed by Purchaser and subsequently terminated by Purchaser after the
Closing.
(v) LEGAL COMPLIANCE; UNDISCLOSED LIABILITIES. Each of the Sellers
and each of their predecessors and "AFFILIATES" (as defined in Rule 12b-2
promulgated under the Securities Exchange Act of 1934) has complied with all
applicable laws (including rules, Regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure so to
comply. None of the Sellers has any liability and there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against Seller), except for (i) liabilities set
forth on the face of the Financial Statements, (ii) liabilities which have
arisen in the ordinary course of business (none of which results from, arises
out of, relates to, is in the nature of, or was caused by any breach of
Contract, breach of warranty, tort, infringement, or violation of law), and
(iii) liabilities listed on SCHEDULE 3.1(L).
(w) INVENTORY. All inventory of the Sellers, whether or not
reflected in the balance sheets, consists of a quality and quantity usable and
where applicable, salable in the ordinary course of business.
(x) WARRANTY. SCHEDULE 3.1(X) includes copies of the standard terms
and conditions of sale or lease for each of the products and services of the
Sellers (containing applicable guaranty, warranty, and indemnity provisions).
The products and services provided by the Sellers have, in each case, been in
conformity with all applicable contractual commitments and all express and
implied warranties, and none of the Sellers has any liability (and there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any liability) for replacement or repair or other damages in connection
18
<PAGE>
therewith, subject only to the reserve for warranty claims set forth on the face
of the Financial Statements (rather than in any notes thereto) as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Sellers. No service provided by any of the Sellers is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease listed in SCHEDULE 3.1(X).
(y) INVESTMENT. The Sellers and the Seller Shareholders understand
that the Shares have not been, nor will be, registered under the Securities Act
of 1933 or under any state securities laws and are being offered and sold in
reliance upon federal and state exemptions for transactions not involving any
public offering. Each of the Sellers is acquiring the Shares solely for its own
account for investment purposes, and not with a view to the distribution
thereof. The Sellers and Seller Shareholders are sophisticated investors, with
knowledge and experience in business and financial matters, and are able to bear
the economic risk and lack of liquidity inherent in holding the Shares. The
Sellers and Seller Shareholders acknowledge and agree that (i) they have fully
reviewed all periodic reports filed with the Securities and Exchange Commission
by DPS within the past 12 months, (ii) they have had the opportunity to ask
questions of and receive information from representatives of DPS and have
received all information necessary for each of them to evaluate the merits and
risks inherent in holding the Shares, (iii) the stock certificates issued to
each Seller shall bear a restrictive legend indicating that the Shares have not
been registered under the Securities Act or any other state securities laws.
3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser and DPS,
jointly and severally, represent and warrant to the Sellers and the Seller
Shareholders as follows:
(a) EXISTENCE. Purchaser is a limited partnership validly existing
and in good standing under the laws of the State of Delaware. DPS is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas.
(b) POWER AND AUTHORIZATION. Purchaser and DPS each has the power,
authority and legal right to execute, deliver and perform this Agreement. The
execution, delivery and performance of this Agreement by Purchaser and by DPS
have been duly authorized by all necessary corporate and partnership action.
This Agreement has been duly executed and delivered by Purchaser and DPS and
constitutes the legal, valid and binding obligation of Purchaser and DPS,
enforceable against Purchaser and DPS in accordance with its terms except as the
same may be limited by applicable bankruptcy, insolvency, reorganization, or
other laws affecting the enforcement of creditors' rights generally and the
application of general principles of equity.
(c) NONCONTRAVENTION. The execution, delivery and performance of
this Agreement by Purchaser and DPS does not and will not violate, conflict with
or result in the breach of any material term, condition or provision of, or
require the consent of any other party which has not already been obtained
under, (i) any existing law, ordinance, or governmental rule or regulation to
which Purchaser or DPS is subject, (ii) any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental or regulatory official,
body or authority which is applicable to Purchaser or DPS, (iii) the Limited
Partnership Agreement, Articles of Incorporation or Bylaws or equivalent
organizational documents, or any securities issued by Purchaser, its general
partner, or DPS as the case may be, or (iv) any Contract to which Purchaser or
DPS is a party or by which
19
<PAGE>
Purchaser or DPS is otherwise bound. Except as otherwise contemplated by this
Agreement, no Authorization, approval or consent of, and no registration or
filing with, any Governmental Entity is required in connection with the
execution, delivery and performance of this Agreement by Purchaser or DPS.
(d) SHARES. The Shares, if issued and delivered in accordance with
the terms of this Agreement for the consideration expressed herein, will be duly
and validly issued, fully paid and nonassessable and will be free of
restrictions on transfer other than restrictions on transfer set forth in this
Agreement and under applicable state and federal securities laws.
(e) NO MATERIAL MISSTATEMENTS. The documents filed by DPS pursuant
to the Securities Exchange Act of 1934 do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading.
3.3 SURVIVAL. All statements of fact contained in any written statement
(including financial statements), certificate, instrument or document delivered
by or on behalf of any party hereto pursuant to this Agreement shall be deemed
representations and warranties of such party. All covenants, agreements,
representations and warranties of the parties to this Agreement shall survive
and remain in full force and effect after the Closing Date and shall not be
affected by any investigation heretofore or hereafter made by and on behalf of
any of them or be deemed merged into any instruments or agreements delivered in
connection with this Agreement or otherwise in connection with the transactions
contemplated hereby. Subject to the limitations on indemnification obligations
set forth in Article VI, the representations and warranties set forth in this
Article III and in any schedule, certificate or instrument delivered by or on
behalf of any party hereto in connection with this Agreement, shall terminate on
the close of business on the fifth anniversary of the Closing Date, following
which all the parties shall cease to have any right to bring any action or
present any claim for a breach of such representations and warranties; provided
that there shall be no termination of any such representation and warranty as to
which a bona fide claim has been asserted and notice of such claim has been
delivered prior to such termination date. Nothing in this Section 3.3 shall at
any time relieve any party hereto from the performance of such party's
agreements, covenants and undertakings set forth in the Agreement or in any
other agreement executed and delivered by or on behalf of any party hereto at or
prior to the Closing pursuant to this Agreement.
ARTICLE IV - AGREEMENTS PENDING CLOSING
4.1 AGREEMENTS OF THE SELLERS AND THE SELLER SHAREHOLDERS PENDING THE
CLOSING. The Sellers and the Seller Shareholders covenant and agree that,
pending the Closing and except as otherwise agreed to in writing by Purchaser,
they shall take the following actions:
(a) BUSINESS IN THE ORDINARY COURSE. The Business shall be conducted
solely in the ordinary course consistent with past practice. The Sellers shall
continue to maintain and service the physical Assets used in the conduct of the
Business in good working condition consistent with past practices. The Sellers
shall not cause or permit to occur any of the events or occurrences described in
Section 3.1(h) (Existing Condition). Each of the Sellers shall use its
reasonable
20
<PAGE>
commercial efforts to maintain in full force and effect all Authorizations
currently in effect and used in the conduct of the Business, and shall comply
with all Regulations applicable to the Business, the noncompliance with which
might materially and adversely affect the Business or the Assets. The Sellers
shall not (i) sell, lease, license, assign or otherwise transfer any of the
Assets, (ii) enter into any Contract outside of the ordinary course of business,
(iii) amend, modify, terminate, waive any material provision of, or breach any
material Contract, or (iv) cancel, terminate or cause or allow to lapse any
insurance coverage affecting the Business or the Assets.
(b) CONDUCT OF BUSINESS. Each of the Sellers shall use its best
efforts to conduct the Business in such a manner that on the Closing Date the
representations and warranties contained in this Agreement shall be true, except
as specifically contemplated by this Article IV, as though such representations
and warranties were made on and as of such date. Furthermore, each of the
Sellers shall cooperate with Purchaser and use its reasonable commercial efforts
to cause all of the conditions to the obligations of Purchaser under this
Agreement to be satisfied on or prior to the Closing Date.
(c) EXCLUSIVE DEALING. Until such time, if any, as this Agreement is
terminated pursuant to Article VIII, none of the Sellers shall (nor shall any
Seller cause its representatives and agents directly or indirectly, through any
third party or otherwise to), sell or encumber any part of the Assets, or
solicit, initiate, encourage or entertain any inquiries, proposals or offers
from, discuss or negotiate with, provide any non-public information to or
consider the merits of any inquiries or proposals from any person (other than
Purchaser) relating to any transaction involving the sale of the Business or
Assets, in whole or in part (other than sales of inventory in the ordinary
course of business), or any of the capital stock of the Sellers, or any merger,
consolidation, business combination or similar transaction involving any of the
Sellers.
(d) ACCESS. Each of the Sellers shall give to Purchaser's officers,
employees, counsel, accountants and other representatives free and full access
to and the right to inspect, during normal business hours, all of the premises,
properties, assets, records, Contracts and other documents relating to the
Business and the Assets and shall permit them to consult with the officers,
employees, accountants, counsel and agents of Seller for the purpose of making
such investigation of the Business and the Assets as Purchaser shall desire to
make, provided that such investigation shall be at Purchaser's sole cost and
expense and shall not unreasonably interfere with the Sellers' business
operations. Furthermore, each Seller shall furnish to Purchaser all such
documents and copies of documents and Records and information with respect to
the Business and the Assets and copies of any internal financial records
relating thereto as Purchaser shall from time to time reasonably request and
shall permit Purchaser and its agents to make such physical inventories and
inspections of the Assets as Purchaser may reasonably request from time to time.
(e) PRESS RELEASE. Except for such press release and discussions
with employees and customers as mutually agreed to by the Sellers and Purchaser
and except as required by applicable law, the Sellers shall not give notice to
third parties or otherwise make any public statement or releases concerning this
Agreement or the transactions contemplated hereby except for such written
information as shall have been approved in writing as to form and content by
Purchaser, which approval shall not be unreasonably withheld.
21
<PAGE>
(f) ACTIONS OF DIRECTORS AND SHAREHOLDERS. Each of the Sellers shall
promptly and diligently take all action necessary in accordance with law and its
Articles of Incorporation, Bylaws and other organizational documents to approve
this Agreement and to consummate the transactions contemplated hereby.
(g) EMPLOYEE MATTERS. Each of the Sellers shall give its employees
all notices required by law, including but not limited to notices of their
rights under the Comprehensive Omnibus Budget Reconciliation Act of 1986. Each
of the Sellers shall terminate all of such Seller's Employee Benefit Plans, as
listed on SCHEDULE 3.1(U), as of the Closing.
(h) ACTIONS OF SELLERS AND SELLER SHAREHOLDERS. None of the Sellers
or the Seller Shareholders will intentionally take any action which would result
in a breach of any of its representations and warranties.
(i) REQUIRED APPROVALS; HSR. As promptly as practicable after the
Effective Date, the Sellers and the Seller Shareholders will make all filings
required to be made by them in order to consummate the transactions contemplated
by this Agreement, including any filings required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR ACT") and will use reasonable
commercial efforts to cause the early termination of any applicable waiting
period under the HSR Act.
4.2 AGREEMENTS OF PURCHASER PENDING THE CLOSING. Purchaser and DPS
covenant and agree that, pending the Closing and except as otherwise agreed to
in writing by the Sellers, they shall take the following actions:
(a) PRESS RELEASE. Except for such press release and discussions
with employees and customers as mutually agreed to by the Sellers and Purchaser
and except as required by applicable law, Purchaser will not give notice to
third parties or otherwise make any public statement or releases concerning this
Agreement or the transactions contemplated hereby except for such written
information as shall have been approved in writing as to form and content by
Seller, which approval shall not be unreasonably withheld.
(b) ACTIONS OF DPS AND PURCHASER. Each of DPS and Purchaser shall
promptly and diligently take all action necessary in accordance with law and its
Articles of Incorporation, Bylaws, Limited Partnership Agreement, or other
organizational documents, as the case may be, to approve this Agreement and to
consummate the transactions contemplated hereby.
(c) ACTIONS OF PURCHASER AND DPS. Neither Purchaser nor DPS will
intentionally take any action which would result in a breach of any of its
representations and warranties hereunder.
(d) REQUIRED APPROVALS; HSR. As promptly as practicable after the
Effective Date, Purchaser and DPS will make all filings required to be made by
them in order to consummate the transactions contemplated by this Agreement,
including any filings required by the HSR Act and will use reasonable commercial
efforts to cause the early termination of any applicable waiting period under
the HSR Act.
22
<PAGE>
ARTICLE V - CONDITIONS PRECEDENT TO THE CLOSING
5.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER AND DPS. All
obligations of Purchaser and DPS under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING DATE. The
representations and warranties of the Sellers and the Seller Shareholders
contained in this Agreement or in any Schedule, certificate or document
delivered by the Sellers to Purchaser pursuant to the provisions hereof shall
have been true on the date hereof and shall be true on the Closing Date as
though such representations and warranties were made as of such date.
(b) COMPLIANCE WITH THIS AGREEMENT. Each of the Sellers shall have
performed and complied in all material respects with all of its obligations
under this Agreement to be performed or complied with by it prior to or at the
Closing.
(c) NO THREATENED OR PENDING LITIGATION. Except as otherwise
provided on SCHEDULE 5.1(C), on the Closing Date, no suit, action or other
proceeding, or injunction or final judgment relating thereto, shall be
threatened or be pending before any Governmental Entity in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with
this Agreement or the consummation of the transactions contemplated hereby, and
no investigation that might result in any such suit, action or proceeding shall
be pending or threatened.
(d) CONSENTS AND APPROVALS. The Sellers and the Seller Shareholders
shall have obtained all third party consents required for the assignment or
transfer of the Assets from the Sellers to Purchaser which are material to the
continued operations of the Business after the Closing, all of which are listed
on SCHEDULE 5.1(D).
(e) MATERIAL ADVERSE CHANGES. Neither the Assets nor the Business in
the aggregate shall have been or shall be threatened to be materially adversely
affected in any way as a result of any event or occurrence other than such
conditions as may affect the well servicing industry as a whole.
(f) CLOSING CERTIFICATE. Purchaser shall have received certificates
from the Sellers, dated the Closing Date, certifying in such detail as Purchaser
may reasonably request that the conditions specified in Sections 5.1(a) through
5.1(e) have been fulfilled.
(g) APPROVAL OF COUNSEL; CORPORATE MATTERS. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved on the Closing Date by Jenkens & Gilchrist, A Professional
Corporation, counsel for Purchaser, in the exercise of its reasonable judgment.
The Sellers also shall have delivered to Purchaser such other documents,
instruments, certifications and further assurances as such counsel may
reasonably require.
23
<PAGE>
(h) PHYSICAL INVENTORY. Purchaser shall be entitled to conduct an
inventory of the Assets immediately prior to Closing to determine, among other
matters, whether a Purchase Price adjustment will be required.
(i) EMPLOYMENT CONTRACTS. The Selling Shareholders shall have
executed and delivered to Purchaser the Employment, Non-Competition and
Arbitration Agreements.
(j) HART-SCOTT-RODINO APPROVAL. The waiting period (including any
extension thereof) applicable to the consummation of the transactions
contemplated by this Agreement under the HSR Act shall have expired or
terminated or the transaction shall have been approved thereunder.
(k) EBITDA. Purchaser's auditors shall have confirmed that Sellers'
EBITDA for the 12-month period beginning June 1, 1997 through May 31, 1998 is
not less than $9,400,000 determined on a basis consistent with that certain
report dated July 24, 1998 prepared by Simmons & Co. for Purchaser attached as
SCHEDULE 5.1(K) and that Sellers' EBITDA for each of the months of June 1998 and
July 1998 is not less than $800,000 for each such month.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS AND THE SELLER
SHAREHOLDERS. All obligations of the Sellers and the Seller Shareholders under
this Agreement are subject to the fulfillment or satisfaction, prior to or at
the Closing, of each of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING DATE. The
representations and warranties of Purchaser and DPS contained in this Agreement
or in any list, certificate or document delivered by Purchaser or DPS to the
Sellers pursuant to the provisions of this Agreement shall be true on the
Closing Date as though such representations and warranties were made as of such
date.
(b) COMPLIANCE WITH THIS AGREEMENT. Purchaser and DPS shall have
performed and complied with all obligations required by this Agreement to be
performed or complied with by it prior to or at the Closing.
(c) NO THREATENED OR PENDING LITIGATION. Except as otherwise
provided on SCHEDULE 5.1(C), on the Closing Date, no suit, action or other
proceeding, or injunction or final judgment relating thereto, shall be
threatened or be pending before any Governmental Entity in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with
this Agreement or the consummation of the transactions contemplated hereby, and
no investigations that might result in any such suit, action or proceeding shall
be pending or threatened.
(d) CLOSING CERTIFICATES. The Sellers shall have received a
certificate from Purchaser and DPS, dated the Closing Date, certifying in such
detail as the Sellers may reasonably request that the conditions specified in
Sections 5.2(a) through 5.2(c) have been fulfilled.
(e) CONSENT OF SHAREHOLDERS. If required, the requisite percentage
of each of the Seller's shareholders shall have approved the consummation of the
transactions contemplated in accordance with the requirements of applicable law.
24
<PAGE>
(f) APPROVAL OF COUNSEL; CORPORATE MATTERS. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved on the Closing Date by Baker & Botts, L.L.P., counsel for the
Sellers, in the exercise of its reasonable judgment. Purchaser and DPS also
shall have delivered to the Sellers such other documents, instruments,
certifications and further assurances as such counsel may reasonably require.
(g) EMPLOYMENT CONTRACTS. Purchaser shall have executed and
delivered to the Selling Shareholders, the Employment, Non-Competition and
Arbitration Agreements, and DPS shall have executed and delivered to the Sellers
the Registration Rights Agreement.
(h) HART-SCOTT-RODINO APPROVAL. The waiting period (including any
extension thereof) applicable to the consummation of the transactions
contemplated by this Agreement under the HSR Act shall have expired or
terminated or the transaction shall have been approved thereunder.
ARTICLE VI - INDEMNIFICATION
THE FOLLOWING SECTIONS ARE IMPORTANT
AND SHOULD BE READ CAREFULLY.
6.1 DEFINITIONS.
(a) "GOVERNMENTAL ENTITY" shall mean any arbitrator, court,
administrative or regulatory agency, commission, department, board or bureau or
body or other government or authority or instrumentality or any entity or person
exercising, executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
(b) "INDEMNITEE" shall mean the person or persons indemnified, or
entitled or claiming to be entitled to be indemnified, pursuant to the
provisions of Article VI.
(c) "INDEMNITOR" shall mean the person or persons having the
obligation to indemnify pursuant to the provisions of Article VI.
6.2 INDEMNIFICATION BY THE SELLERS AND THE SELLER SHAREHOLDERS. Except as
otherwise limited by this Article VI, (and subject to the limitations set forth
in Section 3.1 regarding the several, as opposed to joint, liability of the
Seller Shareholders for representations and warranties made regarding the Seller
Shareholders), the Sellers and the Seller Shareholders, jointly and severally,
agree to indemnify, defend and hold harmless DPS, Purchaser and each of their
officers, directors, employees, agents, shareholders and controlling persons,
and their respective successors and assigns (the "PURCHASER INDEMNIFIED
PARTIES"), separate consideration for which is hereby acknowledged, of, from and
against and in respect of any and all liabilities, losses, damages, demands,
assessments, claims, costs and expenses (including interest, awards, judgments,
penalties, settlements, fines, costs of Remediation, costs and expenses incurred
in connection with investigating and defending any
25
<PAGE>
claims or causes of action including attorneys' fees and expenses and all fees
and expenses of consultants and other professionals) ("DAMAGES") actually
suffered, incurred or realized by the Purchaser Indemnified Parties
(collectively, "PURCHASER LOSSES") arising out of or resulting from or relating
to any of the following:
(a) any misrepresentation, breach of warranty or breach of any
covenant or agreement made or undertaken by the Sellers or the Seller
Shareholders in this Agreement or any misrepresentation in or omission from any
other agreement, certificate, exhibit or writing delivered to Purchaser pursuant
to this Agreement, including the Schedules;
(b) any liability other than the Assumed Liabilities relating to the
Assets or the Business, whether known or unknown, now existing or hereafter
arising, contingent or liquidated, including without limitation, any Tax
liabilities of the Sellers prior to the Closing;
(c) any products manufactured, sold or distributed or services
provided by or on behalf of the Sellers on or prior to the Closing or with
respect to any claims made pursuant to warranties to third persons in connection
with products manufactured, sold or distributed or services provided by or on
behalf of the Sellers on or prior to the Closing;
(d) any Environmental Losses in connection with, relating to, or
arising from acts or omissions of any of the Sellers or Seller Shareholders or
conditions in existence on or prior to the Closing which relate to the Assets or
the operations of the Business; and
(e) any claims arising from, in connection with, or relating to, any
breach of this Agreement by any of the Sellers or Seller Shareholders.
6.3 INDEMNIFICATION BY PURCHASER AND DPS. Except as otherwise limited by
this Article VI, Purchaser and DPS, jointly and severally, agree to indemnify,
defend and hold each of the Sellers and the Seller Shareholders and each of
their officers, directors, employees, agents, shareholders and controlling
persons and their successors and assigns (the "SELLER INDEMNIFIED PARTIES")
harmless, separate consideration for which is hereby acknowledged, of, from and
against and in respect of Damages actually suffered, incurred or realized by the
Seller Indemnified Parties (collectively, "SELLER LOSSES") arising out of or
resulting from any of the following:
(a) any misrepresentation, breach of warranty or breach of any
covenant or agreement made or undertaken by Purchaser or DPS in this Agreement
or any misrepresentation in or omission from any other agreement, certificate,
exhibit or writing delivered to the Sellers pursuant to this Agreement;
(b) (i) any Assumed Liability and (ii) any other liability relating
to the Assets or the Business that arises out of the operation of the Business
by Purchaser or DPS after the Closing, whether contingent or liquidated,
including without limitation, any Tax liabilities of Purchaser or DPS pertaining
to the Assets or the Business arising subsequent to the Closing;
(c) any products manufactured, sold or distributed or services
provided by or on behalf of Purchaser after the Closing or with respect to any
claims made pursuant to warranties to
26
<PAGE>
third persons in connection with products manufactured, sold or distributed or
services provided by or on behalf of Purchaser after the Closing;
(d) any Environmental Losses in connection with, relating to, or
arising from acts or omissions of Purchaser or DPS subsequent to the Closing
which relate to the Assets or the operations of the Business; and
(e) any claims arising from, in connection with, or relating to, any
breach of this Agreement by Purchaser or DPS.
6.4 PROCEDURE. All claims for indemnification pursuant to Article VI of
this Agreement shall be asserted and resolved as follows:
(a) An Indemnitee promptly shall give the Indemnitor notice of any
matter that an Indemnitee has determined has given or could give rise to a right
of indemnification under this Agreement, stating the amount of the Damages, if
known, and method of computation thereof, all with reasonable particularity, and
stating with particularity the nature of such matter. Failure to provide such
notice shall not affect the right of an Indemnitee to indemnification except to
the extent such failure shall have resulted in liability to the Indemnitor that
actually could have been avoided had such notice been provided.
(b) The obligations and liabilities of an Indemnitor with respect to
Damages arising from claims of any third party that are subject to the
indemnification provided for in this Article VI ("THIRD PARTY CLAIMS") shall be
governed by and contingent upon the following additional terms and conditions.
If an Indemnitee receives notice of any Third Party Claim, the Indemnitee shall
give the Indemnitor written notice of such Third Party Claim and the Indemnitor
may, at its option, assume and control the defense of such Third Party Claim at
the Indemnitor's expense and through counsel of the Indemnitor's choice
reasonably acceptable to the Indemnitee. If the Indemnitor assumes the defense
against any such Third Party Claim as provided above, the Indemnitee shall have
the right to participate at its own expense in the defense of such asserted
liability, shall cooperate with the Indemnitor in such defense and will attempt
to make available on a reasonable basis to the Indemnitor all witnesses,
pertinent records, materials and information in its possession or under its
control relating thereto as reasonably required by the Indemnitor. If the
Indemnitor does not elect to conduct the defense against any such Third Party
Claim, the Indemnitor shall pay all reasonable costs and expenses of such
defense as incurred and shall cooperate with the Indemnitee (and be entitled to
participate) in such defense and attempt to make available to it on a reasonable
basis all such witnesses, records, materials and information in its possession
or under its control relating thereto as reasonably required by the Indemnitee.
Except for the settlement of a Third Party Claim that involves the payment of
money only and for which the Indemnitee is totally indemnified by the
Indemnitor, no Third Party Claim may be settled without the written consent of
the Indemnitee.
6.5 SURVIVAL; LIMITATIONS ON AMOUNT. All of the representations and
warranties of the parties contained in this Agreement shall survive until the
fifth anniversary of the Closing (even if the damaged party knew or had reason
to know of any misrepresentation or breach of warranty at the time of Closing
except as disclosed on the Schedules). No party who is a Purchaser Indemnified
Party shall make a claim for indemnification with respect to a claim based upon
a breach of a
27
<PAGE>
representation or warranty until the aggregate amount of the Purchaser Losses
attributable to claims for breach of representations or warranties is at least
$50,000, at which time, all such amounts may be claimed. No party who is Seller
Indemnified Party shall make a claim for indemnification with respect to a claim
based upon a breach of a representation or warranty until the aggregate amount
of the Seller Losses attributable to claims for breach of representations or
warranties is at least $50,000 at which time, all such amounts may be claimed.
However, neither the Sellers and the Seller Shareholders on the one hand, nor
Purchaser or DPS on the other hand, shall be required to pay in the aggregate
more than $25,000,000 to satisfy claims made pursuant to this Article 6 for
claims based upon breaches of the representations and warranties.
6.6 PAYMENT; FAILURE TO PAY INDEMNIFICATION. Payment of any amount due
pursuant to this Article VI shall be made by the Indemnitor within 30 business
days after notice is sent by the Indemnitee. If and to the extent an Indemnitee
makes written demand upon an Indemnitor for indemnification pursuant to this
Article VI and the Indemnitor refuses or fails to pay in full within 30 business
days of such written demand, then the Indemnitee after arbitration of the matter
may use any legal or equitable remedy to collect from the Indemnitor the amount
of its Damages. Nothing contained herein is intended to limit or constrain an
Indemnitee's rights against an Indemnitor for indemnity, the remedies herein
being cumulative and in addition to all other rights and remedies of the
Indemnitee.
6.7 EXPRESS NEGLIGENCE. THE FOREGOING INDEMNITIES ARE INTENDED TO BE
ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE
THEREOF NOTWITHSTANDING TEXAS' EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE
THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF THE NEGLIGENCE
(WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE) OR OTHER FAULT OR STRICT LIABILITY
OF ANY OF THE INDEMNIFIED PARTIES.
6.8 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The indemnification rights of
the parties under this Agreement are independent of and in addition to such
rights and remedies as the parties may have at law or in equity or otherwise for
any misrepresentation, breach of warranty or failure to fulfill any agreement or
covenant hereunder on the part of any party hereto, including without limitation
the right to seek specific performance, rescission or restitution, none of which
rights or remedies shall be affected or diminished hereby.
ARTICLE VII - POST CLOSING MATTERS
7.1 ARBITRATION.
(a) NEGOTIATION PERIOD. All disputes arising under this Agreement
(other than a suit for injunctive relief) or arising with respect to any
transaction contemplated hereby will be subject to binding arbitration in
accordance with this Section 7.1 If such a dispute exists, the parties shall
attempt for a thirty-day period (the "NEGOTIATION PERIOD") from the date any
party gives any one or more of the other parties notice (the "DISPUTE NOTICE")
pursuant to this Section, to negotiate in good faith, a resolution of the
dispute. The Dispute Notice shall set forth with specificity the basis
28
<PAGE>
of the dispute and shall be delivered to each party to this Agreement to whom
the dispute relates. During the Negotiation Period, representatives of each
party involved in the dispute who have authority to settle the dispute shall
meet at mutually convenient times and places and use their best efforts to
resolve the dispute.
(b) COMMENCEMENT OF ARBITRATION. If a resolution is not reached by
the parties prior to the end of the Negotiation Period, the parties agree to
submit to binding arbitration in San Antonio, Texas with an arbitrator or
arbitrators experienced in the arbitration of complex commercial disputes.
(c) CONSOLIDATION OF HEARINGS. If more than one party delivers a
Dispute Notice to one or more other parties pursuant to this Section 7.1, the
arbitrators selected with respect to each such Dispute Notice may elect, in
their sole discretion, to combine the matters set forth in one or more, but not
necessarily all, of the Dispute Notices into one or more hearings, in which
case, the arbitrators shall adjust the time deadlines set forth herein as they
determine appropriate, and shall decide which one of them will hear the evidence
and render a final determination with respect to each hearing.
(d) CONCLUSION OF ARBITRATION. The arbitrator shall make the final
decision as to the parties' respective rights and obligations. The arbitrator
may determine that a party is entitled to damages hereunder from one or more
other parties, and the manner in which such damages shall be assessed against
the other parties. However, the arbitrator may not award emotional distress or
punitive damages.
(e) EXPENSES OF ARBITRATORS. The expenses of the arbitrator(s) shall
be shared equally by the parties to the arbitration.
7.2 DISCHARGE OF BUSINESS OBLIGATIONS. Following the Closing Date, the
Sellers shall pay and discharge, in accordance with past practice but not more
than 30 days within receipt of an invoice, all obligations and liabilities
incurred prior to the Closing Date relating to the Business and the Assets
(except for those expressly assumed by Purchaser hereunder and except to the
extent prorated pursuant to Section 1.5), including without limitation any
liabilities or obligations to employees, trade creditors and clients of the
Business. The Sellers, Seller Shareholders, Purchaser and DPS shall each use
commercially reasonable efforts following the Closing to ensure a smooth
transition of the Business to Purchaser.
7.3 MAINTENANCE OF BOOKS AND RECORDS. The Sellers and Purchaser shall each
preserve all records possessed by such party relating to the Business or Assets
prior to the Closing Date for a period of at least six years following the
fiscal year to which the records relate. After the Closing Date, where there is
a legitimate purpose, such party shall provide the other parties and their
representatives with access, upon prior reasonable written request specifying
the need therefor, during regular business hours, to (a) the officers, employees
and other duly appointed representatives of such party and (b) the books of
account and records of such party, but, in each case, only to the extent
relating to the Assets or Business prior to the Closing Date, and the other
parties and their representatives shall have the right to make copies of such
books and records; provided, however, that the foregoing right of access shall
not be exercisable in such a manner
29
<PAGE>
as to interfere unreasonably with the normal operations and business of such
party; and further, provided that, as to so much of such information as
constitutes trade secrets or confidential business information of such party,
the requesting party and its officers, directors and representatives will use
due care to not disclose such information except (x) as required by law, (y)
with the prior written consent of such party, which consent shall not be
unreasonably withheld, or (z) where such information becomes available to the
public generally, or becomes generally known to competitors of such party
through sources other than the requesting party, its Affiliates or its officers,
directors or representatives. Such records may nevertheless be destroyed by a
party if such party sends to the other parties written notice of its intent to
destroy the records, specifying with particularity the contents of the records
to be destroyed. Such records may then be destroyed after the 30th day after
such notice is given unless another party objects to the destruction in which
case the party seeking to destroy the records shall deliver such records to the
objecting party.
7.4 PAYMENTS RECEIVED. The Sellers and Purchaser after the Closing shall
hold and will promptly transfer and deliver to the other, from time to time as
and when received by them, any cash, checks with appropriate endorsements (using
their best efforts not to convert such checks into cash), or other property that
they may receive on or after the Closing which properly belongs to the other
party, including without limitation any insurance proceeds, and will account to
the other for all such receipts. Following the Closing, Purchaser shall have the
right and authority to endorse without recourse the name of the Sellers on any
check or any other evidences of indebtedness received by Purchaser on account of
the Business and the Assets transferred to Purchaser hereunder, for the sole
purpose of depositing such items into accounts over which the Sellers have
signatory authority.
7.5 INQUIRIES. Following the Closing Date, the Sellers will promptly refer
all inquiries with respect to ownership of the Assets or the Business to
Purchaser. The Sellers will execute such documents and financing statements as
Purchaser may reasonably request from time to time to evidence the transfer of
the Assets to Purchaser, including any necessary assignments of financing
statements. In addition, the Sellers shall take all reasonable steps necessary
to convey to Purchaser any Assets used in the normal course of the Business
which are not listed in the Schedules set forth in Section 1.1(a) of this
Agreement.
7.6 COVENANT NOT TO COMPETE. In exchange for the payment by Purchaser to
the Seller Shareholders of Two Million Dollars ($2,000,000) in immediately
available funds (the "NON- COMPETITION PAYMENT") in accordance with SCHEDULE
7.6, and as part of the transactions described in this Agreement, the Sellers
and the Seller Shareholders each separately agree, for a period of five years
after the Closing Date, not to, directly or indirectly, own, manage, operate,
join or control, or participate in ownership, management, operation or control
of, any business whether in corporate, proprietorship or partnership form or
otherwise as more than a one percent owner in such business where such business
is competitive with the Business and is within a 300-mile radius of the Sellers'
facilities used in the Business or in the operation of the Assets as of the
Closing Date. The parties hereto specifically acknowledge and agree that the
remedy at law for any breach of the foregoing will be inadequate and that
Purchaser, in addition to any other relief available to it, shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
actual damage. The Seller and the Seller Shareholders acknowledge that this
covenant not to
30
<PAGE>
compete is being provided as an inducement to Purchaser to acquire the Business
and the Assets and that this Section 7.6 contains reasonable limitations as to
time, geographical area and scope of activity to be restrained that do not
impose a greater restraint than is necessary to protect the goodwill or other
business interest of Purchaser in the Business. Whenever possible, each
provision of this Section 7.6 shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Section
7.6 is prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Section 7.6. If any provision of
this Section 7.6 is, for any reason, judged by any court of competent
jurisdiction to be invalid or unenforceable, such judgment shall not affect,
impair or invalidate the remainder of this Section 7.6 but shall be confined in
its operation to the provision of this Section 7.6 directly involved in the
controversy in which such judgment has been rendered. If the provisions of this
Section 7.6 are ever deemed to exceed the time or geographic limitations
permitted by applicable laws, then such provisions shall be reformed to the
maximum time or geographic limitations permitted by applicable law.
7.7 TRANSITION PERIOD. During the six-month period following the Closing
(the "TRANSITION PERIOD"), the parties shall operate the Business in the
following manner:
(a) COLLECTIONS. Purchaser's employees shall issue invoices for work
in process as of the Closing Date for both the portion of the work completed by
the Sellers prior to the Closing and the portion of the work completed by
Purchaser thereafter.
(b) ACCOUNTING. Purchaser's employees will assist Seller as
reasonably necessary to close out the Sellers' books and records relating to the
Business.
(c) LICENSES AND PERMITS. The Sellers will continue to cooperate
with Purchaser in connection with Purchaser's applications for the transfer,
renewal or issuance of any permits, licenses, approvals or other Authorizations
and as required to satisfy any regulatory requirements arising as a result of
the sale of the Business pursuant to this Agreement, provided that all
out-of-pocket expenses incurred in connection therewith shall be paid by
Purchaser.
7.8 ACCOUNTING RECORDS. For a five year period following the Closing, each
of the Sellers will use commercially reasonable efforts to take all action
necessary or appropriate to allow Purchaser to obtain access to audit work
papers of the Sellers' accountants for the immediately preceding five years, if
Purchaser requests such access in connection with the audit by Purchaser of the
Business for periods preceding the Closing.
7.9 NONDISCLOSURE OF PROPRIETARY INFORMATION. The Sellers and the Seller
Shareholders agree that, from and after the Closing Date, they and all of their
Affiliates shall hold in confidence and will not directly or indirectly at any
time reveal, report, publish, disclose or transfer to any person other than
Purchaser any proprietary information relating to the Business or the Assets
(the "PROPRIETARY INFORMATION") that is not generally known to the public or use
any Proprietary Information for any purpose. The Sellers and the Seller
Shareholders acknowledge that all documents and objects containing or reflecting
any Proprietary Information whether developed by any of the
31
<PAGE>
Sellers or by a third party for any of the Sellers, will after the Closing Date
become the exclusive property of Purchaser and be delivered to Purchaser.
7.10 CONTACT WITH FORMER EMPLOYEES. The Sellers and the Seller
Shareholders agree that for a period of five years following the Closing Date,
they will not solicit for employment, directly or indirectly, any of Purchaser's
employees, or employees of Purchaser's Affiliates or related companies, or any
person who has been so employed within one year prior to such solicitation.
ARTICLE VIII - TERMINATION
8.1 EVENTS OF TERMINATION. The obligation to close the transactions
contemplated by this Agreement may be terminated as follows:
(a) by mutual agreement of Purchaser and Sellers;
(b) by Purchaser, if a material default is made by the Sellers or
the Seller Shareholders in the observance or in the due and timely performance
by the Sellers or the Seller Shareholders of any agreements and covenants of the
Sellers or the Seller Shareholders herein contained, or if there has been a
breach by the Sellers or the Seller Shareholders of any of the warranties and
representations of the Sellers or the Seller Shareholders herein contained, and
such default or breach has not been cured or waived within 20 days of written
notice thereof;
(c) by the Sellers, if a material default is made by Purchaser or
DPS in the observance or in the due and timely performance by Purchaser or DPS
of any agreements and covenants of Purchaser or DPS herein contained, or if
there has been a breach by Purchaser or DPS of any of the warranties and
representations of Purchaser or DPS herein contained, and such default or breach
has not been cured or has not been waived within 20 days of written notice
thereof;
(d) by Purchaser or the Sellers (provided the terminating party has
not materially breached any of its agreements, covenants or representations and
warranties), if the Closing has not occurred on or before October 15, 1998.
8.2 LIABILITY UPON TERMINATION. If the obligation to consummate the
transactions contemplated by this Agreement is terminated pursuant to any
provision of this Article VIII, then this Agreement shall forthwith become void
and there shall not be any liability or obligation with respect to this
Agreement on the part of Seller or Purchaser except and to the extent such
termination results from the willful breach by a party of any of its
representations, warranties or agreements hereunder.
8.3 NOTICE OF TERMINATION. The parties hereto may exercise their
respective rights of termination under this Article VIII only by delivering
written notice to that effect to the other party on or before the Closing Date,
specifically describing the factual basis and provisions of this Agreement
relied upon for such termination.
32
<PAGE>
ARTICLE IX - MISCELLANEOUS
9.1 FINDERS' FEES. Neither the Sellers nor the Seller Shareholders have
engaged any person to act on their behalf in connection with the transactions
contemplated by this Agreement who would have any claim against Purchaser or DPS
or any of their respective Affiliates for brokerage or finders' fees or agent
commissions or similar payments.
9.2 EXPENSES. Except as otherwise provided in this Agreement, each party
hereto shall pay its own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby.
9.3 ASSIGNMENT AND BINDING EFFECT. This Agreement may not be assigned
prior to the Closing by any party hereto without the prior written consent of
the other party; provided, however, Purchaser and DPS may assign their rights
but not their obligations hereunder to any other entity that is controlling,
controlled by or under common control with Purchaser or DPS. Purchaser shall
give Sellers prompt written notice of any such assignment. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of the Sellers, the Seller Shareholders, Purchaser and DPS.
9.4 NOTICES. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telegram,
facsimile, first class mail, postage prepaid, or overnight courier as follows:
If to Purchaser or DPS, to: With a copy to:
Dawson Production Partners, L.P. Jenkens & Gilchrist,
112 E. Pecan Street, Suite 1000 A Professional Corporation
San Antonio, Texas 78205 600 Congress Avenue, Suite 2200
ATTN: Michael E. Little Austin, Texas 78701
Facsimile Number: (210) 354-1041 ATTN: J. Rowland Cook
Facsimile Number: (512) 404-3520
If to the Sellers or
the Seller Shareholders, to: With a copy to:
Mr. Roger Hellums Baker & Botts, L.L.P.
P.O. Drawer 330 One Shell Plaza
Freer, Texas 78357 910 Louisiana Street
Houston, Texas 77002
ATTN: L. Proctor Thomas, III
Facsimile Number: (713) 229-1522
33
<PAGE>
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as of
the date so delivered, telegraphed or faxed or five business days after the date
so mailed, or on the day after the date delivered to Federal Express or another
similar courier marked for next day delivery if delivered within the continental
United States, and, if delivered overseas, two business days after the date so
delivered to DHL, Federal Express or another similar overseas delivery service.
9.5 GOVERNING LAW. This Agreement shall be governed by, interpreted and
enforced in accordance with the laws of the State of Texas (without regard to
the choice or conflicts of law provisions of Texas law).
9.6 NO BENEFIT TO OTHERS. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and, in the case of Article VI hereof, certain other indemnified parties,
and their heirs, executors, administrators, legal representatives, successors
and assigns, and they shall not be construed as conferring any rights on any
other persons.
9.7 ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements, or representations by or among the parties,
written or oral, to the extent they related in any way to the subject matter
hereof. All Exhibits and Schedules referred to herein are incorporated herein in
full and are specifically made a part of this Agreement.
9.8 HEADINGS. All Section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement and shall
not affect in any way the meaning or interpretation of this Agreement.
9.9 SEVERABILITY. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or enforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction; provided if any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the effective period of this Agreement, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of each illegal, invalid, or unenforceable provision there shall be added
automatically as part of this Agreement a provision as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible and be legal,
valid, and enforceable.
9.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and
34
<PAGE>
the same instrument. This Agreement shall become binding when all counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement as to a party to produce or
account for any of the other counterparts signed by another party not joined in
the action.
9.11 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
Regulations promulgated thereunder, unless the context requires otherwise. The
word "INCLUDING" shall mean including without limitation. Words used herein,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context requires. Any reference to a
"PERSON" herein shall include an individual, firm, corporation, partnership,
trust, Governmental Entity, association, unincorporated organization and any
other entity. Any references to a Section, Article, Schedule or Exhibit are to
sections, articles, schedule and exhibits to this Agreement, unless otherwise
specifically stated.
9.12 WAIVER. No waiver by any party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
9.13 SPECIFIC PERFORMANCE. The Sellers and the Seller Shareholders
acknowledge and agree that Purchaser and DPS would be damaged irreparably if any
of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, the Sellers agree that
Purchaser and DPS shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions of this Agreement in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter (subject to the provisions set
forth in Section __), in addition to any other remedy to which they may be
entitled, at law or in equity.
9.14 SUBMISSION TO JURISDICTION. Each of the parties submits to the
jurisdiction of any state or federal court sitting in San Antonio, Texas, in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims or proceedings will be heard and determined in any such court.
Each party also agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other party with respect thereto. Each party agrees that a final judgment in
any action or proceeding so brought shall be conclusive and may be enforced by
suit on the judgment or in any other manner provided by law or at equity.
9.15 GOOD FAITH. The parties agree to act in good faith in the performance
and enforcement of this Agreement.
35
<PAGE>
9.16 ATTORNEYS' FEES. If any arbitration or action at law or in equity,
including an action for declaratory relief, is brought to enforce or interpret
the provisions of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees and costs from the other party; provided,
however, that no party shall be a prevailing party unless such party has
recovered more or paid less as a result of arbitration or a final order
resulting from judicial proceedings than the amount offered in writing by an
opposing party to settle the dispute.
9.17 APPOINTMENT OF SELLER SHAREHOLDERS' REPRESENTATIVE. Each of the
Seller Shareholders hereby constitutes and appoints Roger D. Hellums as such
Seller Shareholder's duly authorized representative and attorney-in-fact (the
"REPRESENTATIVE") for all purposes of this Agreement, the Escrow Agreement, the
Registration Rights Agreement and all actions to be taken hereunder and
thereunder, having the power and authority, without limitation, (i) to execute
and deliver, for and on behalf of such Seller Shareholder, the Escrow Agreement,
the Registration Rights Agreement and any other documents, certificates or
instruments required to be executed in connection with the transactions
contemplated by this Agreement; (ii) to act for and on behalf of such Seller
Shareholder with respect to any dispute arising under this Agreement, the Escrow
Agreement or the Registration Rights Agreement; (iii) to exercise any investment
authority conferred upon any of the Seller Shareholders individually or as a
group by the Escrow Agreement; and (iv) to execute and deliver, for and on
behalf of such Seller Shareholder, all certificates, confirmations and other
documents as shall be necessary and appropriate to consummate the transactions
provided for in this Agreement and to fulfill any and all of such Seller
Shareholder obligations hereunder. Such power and authority of the
Representative shall be irrevocable. Each Seller Shareholder expressly
acknowledges and agrees that the Representative shall have no liability to such
Seller Shareholder for error in judgment or acts or omissions in connection
herewith, whether or not disclosed and whether or not due to his negligence,
unless caused by his willful misconduct.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the date first written.
* * * * * *
36
<PAGE>
PURCHASER:
DAWSON PRODUCTION PARTNERS, L.P.
By: Dawson Production Management, Inc.
its General Partner
By: /s/ P. MARK STARK
P. Mark Stark, Vice President
DPS:
DAWSON PRODUCTION SERVICES, INC.
By: /s/ P. MARK STARK
P. Mark Stark, Chief Financial Officer
SELLERS:
HELLUMS SERVICES II, INC.
By: /s/ ROGER D. HELLUMS
Roger D. Hellums, President
SUPERIOR COMPLETION SERVICES, INC.
By: /s/ CHARLES C. FORBES
Charles C. Forbes, President
37
<PAGE>
SOUTH TEXAS DISPOSAL, INC.
By: /s/ ROGER D. HELLUMS
Roger D. Hellums, President
ELSIK, II, INC.
By: /s/ ROGER D. HELLUMS
Roger D. Hellums, President
SELLER SHAREHOLDERS:
/s/ ROGER D. HELLUMS
Roger D. Hellums
/s/ CHARLES C. FORBES, JR.
Charles C. Forbes, Jr.
/s/ ROBERT W. RADLE, JR.
Robert W. Radle, Jr.
/s/RONALD D. BRIEDEN
Ronald D. Brieden
/s/ JOHN E. CRISP
John E. Crisp
/s/ CHARLES TALLEY
Charles Talley
/s/ JAMES J. ACKER
James J. Acker
38
<PAGE>
SCHEDULES
Schedule 1.1(a)(i) Assigned Contracts
Schedule 1.1(a)(ii) Equipment Leases
Schedule 1.1(a)(iii) Operating Assets
Schedule 1.1(a)(iv) Vehicles
Schedule 1.1(a)(v) Equipment
Schedule 1.1(a)(vii) Personal Property
Schedule 1.1(a)(viii) Permits
Schedule 1.1(b) Excluded Assets
Schedule 1.3(a) Purchase Price
Schedule 1.3(b) Seller Tax Basis and Fair Market Value of Assets
Schedule 1.4(a) Assumed Liabilities
Schedule 3.1(a) Corporate Jurisdiction
Schedule 3.1(c) Validity of Contemplated Transactions
Schedule 3.1(e) Financial Statements
Schedule 3.1(h) Existing Condition
Schedule 3.1(i) Permitted Liens
Schedule 3.1(j) Compliance with Laws; Authorizations
Schedule 3.1(l) Litigation
Schedule 3.1(n) Contracts and Commitments
Schedule 3.1(o) Environmental Matters
Schedule 3.1(q) Assets
Schedule 3.1(t) Employee Benefit Plans
Schedule 3.1(u) Personnel
Schedule 3.1(x) Warranty
Schedule 5.1(c) No Threatened or Pending Litigation
Schedule 5.1(f) Consents and Approvals
Schedule 7.6 Covenant Not to Compete
Schedule 9.1 Finders' Fees
EXHIBITS:
Exhibit A Escrow Agreement
Exhibit B Registration Rights Agreement
Exhibit C Employment Agreement, Non-Competition Agreement and Mutual
Agreement to Arbitrate Claims
39
EXHIBIT 11.1
DAWSON PRODUCTION SERVICES, INC.
EARNINGS PER SHARE COMPUTATIONS
THREE MONTHS ENDED JUNE 30,
---------------------------
1997 1998
------- -------
Basic Earnings Per Share
Net Income ............................................. $ 1,876 $ 1,087
------- -------
Shares used in earnings per share computattion ......... 11,126 11,099
------- -------
Earnings per share ..................................... $ 0.17 $ 0.10
------- -------
Diluted Earnings Per Share
Net Income ............................................. $ 1,876 $ 1,087
------- -------
Shares used in earnings per share computation .......... 11,245 11,235
------- -------
Earnings per share ..................................... $ 0.17 $ 0.10
------- -------
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS-BASIC
Weighted average outstanding common shares ............. 11,126 11,099
------- -------
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS-DILUTED
Weighted average outstanding common shares ............. 11,126 11,099
Effect of dilutive securities-stock options ............ 119 136
------- -------
Shares used in earnings per share computation .......... 11,245 11,235
------- -------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINNCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 30400
<SECURITIES> 0
<RECEIVABLES> 37701
<ALLOWANCES> 922
<INVENTORY> 254
<CURRENT-ASSETS> 70083
<PP&E> 209501
<DEPRECIATION> 41205
<TOTAL-ASSETS> 297424
<CURRENT-LIABILITIES> 22368
<BONDS> 0
0
0
<COMMON> 112
<OTHER-SE> 114743
<TOTAL-LIABILITY-AND-EQUITY> 297424
<SALES> 51798
<TOTAL-REVENUES> 51798
<CGS> 35336
<TOTAL-COSTS> 35336
<OTHER-EXPENSES> (994)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3469
<INCOME-PRETAX> 0
<INCOME-TAX> 704
<INCOME-CONTINUING> 1087
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1087
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
