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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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PRIME SERVICE, INC.
(Name of Subject Company)
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PRIME SERVICE, INC.
(Name of Person filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
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00074157E1
(CUSIP Number of Class of Securities)
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STANTON P. EIGENBRODT, ESQ.
PRIME SERVICE, INC.
16225 PARK TEN PLACE
SUITE 200
HOUSTON, TEXAS 77084
(281) 578-5600
(Name, address and telephone number of person
authorized to receive notices and communications
on behalf of the person filing Statement)
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COPIES TO:
E. MICHAEL GREANEY, ESQ.
GIBSON, DUNN & CRUTCHER LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166-0193
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Prime Service, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 16225 Park Ten Place, Houston, Texas, 77084. The title of the
class of equity securities to which this Statement relates is Common Stock, par
value $.01 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to a tender offer (the "Offer") disclosed in a
Schedule 14D-1, dated June 9, 1997 (the "Schedule 14D-1"), by PS Acquisition
Corp., a Delaware corporation ("Offeror"), and a wholly-owned subsidiary of
Atlas Copco North America Inc., a Delaware corporation ("Parent"), to purchase
all outstanding Shares at a price of $32 per Share, net to the seller in cash,
without interest (as paid pursuant to the Offer) (the "Offer Consideration"), on
the terms and subject to the conditions set forth in the Offer to Purchase,
dated June 9, 1997 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together, as amended and supplemented from time to time,
constitute the "Offer Documents"). The Offer to Purchase states that the address
and principal executive offices of Parent and Offeror are Atlas Copco North
America Inc., 1211 Hamburg Turnpike, Suite 214, Wayne, NJ, 07470.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 8, 1997 (the "Merger Agreement"), among the Company, Parent and
Offeror. See Item 3(b)(2) for a description of the Merger Agreement. A copy of
the Merger Agreement is filed as Exhibit 99.1 hereto and is incorporated herein
by this reference. A copy of the press release issued by the Company and Parent
on June 9, 1997 is filed as Exhibit 99.2 hereto and is incorporated herein by
this reference.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
as of the date hereof, there are no material contracts, agreements,
arrangements, understandings or actual or potential conflicts of interest
between the Company or its affiliates and (i) the Company, its executive
officers, directors or affiliates; or (ii) Parent or Offeror or any of their
respective executive officers, directors or affiliates.
(b)(1) CERTAIN CONTRACTS, ETC. Certain contracts, agreements, arrangements
or understandings between the Company and certain of its directors, executive
officers and affiliates are described under the headings "Compensation of
Directors", "Executive Compensation", "Employee Benefit Plans", "Employment
Arrangements" and "Certain Transactions" in the Company's Proxy Statement dated
April 18, 1997 (the "1997 Proxy Statement"), which was previously furnished to
stockholders. A copy of the 1997 Proxy Statement is filed as Exhibit 99.3
hereto, and other than the information contained under the headings
"Compensation Committee Report on Executive Compensation" and the "Performance
Graph" is incorporated herein by this reference.
On February 3, 1997, the Company and Stanton P. Eigenbrodt entered into an
Employment Agreement (the "Eigenbrodt Employment Agreement") which is attached
hereto as Exhibit 99.4. The Eigenbrodt Employment Agreement provides that Mr.
Eigenbrodt shall serve as Corporate General Counsel until December 31, 1999,
subject to any extension as may be agreed or any earlier termination as provided
for in Section 6 of the Eigenbrodt Employment Agreement. Upon the expiration of
the initial term, Mr. Eigenbrodt's agreement shall automatically be extended for
an additional term of one year, unless either party has notified the other party
of its election to terminate the agreement, not later than 90 days prior to the
scheduled expiration date. During the term of employment, the agreement provides
for an annual base salary of $140,000 subject to annual review by the Board,
provided that the level of base salary
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shall not be subject to reduction. Mr. Eigenbrodt is entitled to participate in
the management cash incentive bonus program and in all fringe benefit programs
maintained by the Company. The Eigenbrodt Employment Agreement also provides
that in the event that the Company terminates his employment or elects to not
renew the agreement other than for cause, Mr. Eigenbrodt will receive monthly
one-twelfth of his annual base salary at the time of such termination for the
period ending on the earlier of the expiration date of the employment agreement
or the first anniversary of the date of termination. Such severance provisions
have been amended, as described in the following paragraph. If Mr. Eigenbrodt's
employment is terminated by death, the Company shall pay to Mr. Eigenbrodt's
estate or legal representative a lump sum payment equal to 25% of Mr.
Eigenbrodt's annual base salary in effect at such time. If Mr. Eigenbrodt's
employment is terminated based upon a permanent disability, the Company Prime
shall pay to Mr. Eigenbrodt a lump sum of 50% of Mr. Eigenbrodt's annual base
salary in effect at such time.
As described in the 1997 Proxy Statement, the Company is presently party to
employment agreements with the following executive officers of the Company:
Thomas E. Bennett, Chairman, President and Chief Executive Officer; Brian
Fontana, Executive Vice President and Chief Financial Officer, Kevin L.
Loughlin, Director of Finance, Secretary and Treasurer; Peter A. Post, Vice
President of Operations; and James O. York, Vice President of Sales and
Marketing (each such Employment agreement, together with the Eigenbrodt
Employment Agreement, the "Employment Agreements"). Effective June 8, 1997, each
of the Employment Agreements were amended, copies of which amendments are
attached hereto as Exhibits 99.5-99.10 and are incorporated herein by this
reference. Among other things, the amendments provide, subject to a "Change in
Control" occurring prior to January 1, 1998, for the payment of severance
benefits in the event an executive's employment is terminated without cause or
for "Good Reason" (each as defined in the amended Employment Agreements),
following the occurrence of a Change of Control. The consummation of the Offer
and the Merger would constitute a "Change of Control" under the amended
Employment Agreements. The severance benefits would include, in the case of Mr.
Bennett, salary and bonus payments for the lesser of three years or the period
remaining on the initial term of his Employment Agreement. For Messrs. Fontana,
Loughlin, Post and York, severance benefits would include salary and bonus
payments for the lesser of two years or the period remaining on the initial term
of their Employment Agreements. For Mr. Eigenbrodt, severance benefits would
include salary and bonus payments through the period remaining on the initial
term of his Employment Agreement. In addition, if any of the executives listed
herein is terminated in 1997 without cause or for Good Reason, such executive
would be entitled to a prorated 1997 bonus, based on the amount of the year such
executive was employed by the Company.
In addition, certain other contracts, agreements, arrangements or
understandings between the Company and certain of its directors, executive
officers and affiliates are described under the heading "Certain Transactions"
located at page number 53 in the Company's Prospectus, dated October 31, 1996. A
copy of page number 53 from the Prospectus is attached hereto as Exhibit 99.11
and is incorporated herein by this reference.
EMPLOYEE BENEFITS. Pursuant to the Merger Agreement, Parent has agreed that
during the period commencing at the Effective Time (capitalized terms used
herein, but not defined herein, shall have the meanings set forth in the Merger
Agreement) of the Merger Agreement, and ending on the first anniversary thereof,
the employees of the Company will continue to be provided (whether by Parent,
the Surviving Corporation or otherwise) with employee benefit plans (other than
stock option or other plans involving the potential issuance of securities of
the Company) which in the aggregate are not materially less favorable to those
currently provided by the Company, to the extent permitted under laws and
regulations in force from time to time. In addition, if any salaried employee of
the Company becomes a participant in any employee benefit plan, practice or
policy of Parent (or any of its subsidiaries), such employee shall be given
credit under such plan, practice or policy for all service prior to the
Effective Time with the Company or any predecessor employer (to the extent such
credit was given by the Company), and all service after the Effective Time and
prior to the time such employee becomes such a participant, for
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purposes of eligibility and vesting and for all other purposes for which such
service is either taken into account or recognized; PROVIDED, HOWEVER, such
service need not be credited to the extent it would violate the terms of
Parent's defined benefit plans or result in a duplication of benefits,
including, without limitation, benefit accrual service under defined benefit
plans.
STOCK OPTIONS. Pursuant to the Merger Agreement, immediately prior to the
Effective Time, each outstanding stock option to purchase shares of Company
Common Stock held by a current or former employee or director of Company or any
Subsidiary thereof (a "Company Stock Option") granted under any stock option or
stock purchase plan, program or arrangement of Company, including without
limitation, the Management Incentive Stock Plan and the 1996 Management
Incentive Stock Plan (collectively, the "Stock Plans"), whether or not then
exercisable, shall be canceled by Company, and at the Effective Time or as soon
as practicable thereafter, the holder thereof shall be entitled to receive from
Company in consideration for such cancellation an amount in cash equal to the
product of (i) the number of shares of Company Common Stock previously subject
to such Company Stock Option and (ii) the excess, if any, of the Merger
Consideration over the exercise price per share previously specified in such
Company Stock Option, reduced by the amount of withholding or other taxes
required by law to be withheld.
(b)(2) On June 8, 1997, the Company, Parent and Offeror entered into the
Merger Agreement. Concurrently therewith, Parent and the stockholder parties
thereto (the "International Investors") entered into a Stockholder Agreement
(the "Stockholder Agreement"). A copy of the Stockholder Agreement is filed as
Exhibit 99.12 hereto and is incorporated herein by this reference.
The following summaries of certain provisions of the Merger Agreement, the
Stockholder Agreement, the Guaranties of Investcorp Bank E.C. and Atlas Copco AB
(attached hereto as Exhibits 99.13 and 99.14, respectively) and the
Confidentiality Agreement (as defined below), are qualified in their entirety by
reference to the full text of the Merger Agreement, the Stockholder Agreement,
the Guaranties and the Confidentiality Agreement, respectively.
THE MERGER AGREEMENT. The Offeror commenced the Offer in accordance with
the terms of the Merger Agreement. Pursuant to the Merger Agreement, the Offeror
expressly reserves the right to modify the terms of the Offer, except that,
without the prior written consent of the Company, the Offeror shall not (i)
decrease the Offer Consideration, (ii) change the form of consideration to be
paid pursuant to the Offer, (iii) decrease the number of Shares being sought
pursuant to the Offer, (iv) amend or modify any of the conditions to the Offer,
(v) impose any additional conditions to the Offer, (vi) extend the Offer, if all
of the Offer conditions have been satisfied or waived or (vii) amend any other
term or condition of the Offer. Notwithstanding the foregoing, the Offeror may,
in its sole discretion and without the consent of the Company, extend the Offer
at any time and from time to time (i) if at the Expiration Date (as defined
below) of the Offer, any of the conditions to the Offer shall not be satisfied,
(ii) for any period required by applicable law, including, without limitation,
any rule, regulation, interpretation or position of the United States Securities
and Exchange Commission (the "Commission") or the Commission staff applicable to
the Offer or (iii) if on the Expiration Date of the Offer all of the conditions
to the Offer shall have been satisfied or waived but the number of Shares that
have been validly tendered and not withdrawn is less than 90% of the then
outstanding Shares for an aggregate period of not more than five business days
(for all such extensions under this clause (iii)) beyond the latest expiration
date permitted under clause (i) or (ii) of this sentence; provided that, in the
event of any such extension, all of the conditions to the Offer and to Parent's
and the Offeror's obligations to consummate the Merger which would have been
satisfied if the Offer had been consummated on the date of such extension shall
be deemed irrevocably waived by Parent and the Offeror. So long as the Merger
Agreement is in effect and the conditions to the Offer have not been satisfied
or waived, at the request of the Company, the Offeror will extend the Offer for
an aggregate period of not more than five business days (for all such
extensions) beyond the originally scheduled Expiration Date of the Offer. The
term "Expiration Date" means 12:00 Midnight, New York City time, on Monday, July
7, 1997, unless the Offeror shall have extended the period of time for which the
offer is open,
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in which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by the Offeror, shall expire.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the DGCL, the
Offeror shall be merged with and into the Company at the Effective Time. At the
Effective Time, the separate existence of the Offeror shall cease and the
Company shall continue as the Surviving Corporation under the laws of the State
of Delaware and as a wholly owned subsidiary of Parent. The Merger shall have
the effects set forth in the applicable provisions of the DGCL. At the Effective
Time, and without any further action on the part of the Offeror or the Company,
the Certificate of Incorporation of the Company and the By-laws of the Offeror,
each as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation and By-laws of the Company following the Merger
until thereafter amended as provided therein and under the DGCL or applicable
law.
Subject to the provisions described herein under "--REPRESENTATION ON THE
BOARD OF DIRECTORS," the directors of the Company at the Effective Time shall be
the directors of the Company following the Merger, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified. The officers of the Company at the Effective Time shall be the
officers of the Company following the Merger, until the earlier of their
resignation or removal or until their respective successors are duly elected or
appointed and qualified.
CONVERSION OF SECURITIES. As of the Effective Time, by virtue of the Merger
and without any action on the part of the Offeror, the Company or the holders of
any securities of the Offeror or the Company, each Share (other than Shares
owned by the Company, any subsidiary of the Company, Parent, the Offeror, any
other subsidiary of Parent or by stockholders, if any, who are entitled to and
who properly exercise appraisal rights under the DGCL) shall be converted into
the right to receive in cash from the Company following the Merger an amount
equal to the highest price paid per Share pursuant to the Offer without
interest. As of the Effective Time, each share of common stock of the Offeror
issued and outstanding immediately prior to the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any Shares of the
Offeror, shall be converted into one fully paid and non-assessable share of
common stock of the Surviving Corporation.
TREATMENT OF OPTIONS. Except as otherwise agreed to in writing between the
Company and the holder of any Company Stock Option, and as consented to by
Parent, immediately prior to the Effective Time, each outstanding Company Stock
Option, granted under any stock option or stock purchase plan, program or
arrangement of the Company, whether or not then exercisable, shall be canceled
by the Company, and at the Effective Time or as soon as practicable thereafter,
the holder thereof shall be entitled to receive from the Company in
consideration for such cancellation an amount in cash equal to the product of
(i) the number of Shares previously subject to such Company Stock Option and
(ii) the excess, if any, of the Offer Consideration over the exercise price per
Share, reduced by the amount of withholding or other taxes required by law to be
withheld. Except as provided in the Merger Agreement or as otherwise agreed by
Parent and the Company, the stock option plans of the Company and any other
plan, program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company shall terminate as of
the Effective Time.
REPRESENTATION ON THE BOARD OF DIRECTORS. Promptly upon the acquisition by
the Offeror of such number of Shares constituting a majority of the outstanding
Shares pursuant to the Offer, Parent shall be entitled to designate a majority
of the members of the Company's Board of Directors, subject to compliance with
Section 14(f) of the Exchange Act. The Company, upon request by Parent, shall
promptly increase the size of the Board of Directors and/or secure resignations
of such number of directors as is necessary to enable Parent's designees to be
so elected to the Board of Directors and shall cause Parent's designees to be so
elected. Following the election or appointment of Parent's designees and prior
to the Effective Time, any amendment or termination of the Merger Agreement,
extension for performance or
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waiver of the obligations or other acts of Parent or the Offeror or waiver of
any of the Company's rights thereunder, shall require the concurrence of a
majority of the Company's directors then in office who were directors on the
date of the Merger Agreement (or directors designated by such persons to fill
any vacancy).
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Offeror. The
representations and warranties of the Company relate to, among other things, (i)
organization, corporate power and authority and qualification; (ii) subsidiaries
and investments; (iii) capital structure; (iv) corporate power and authority to
enter into the Merger Agreement and to consummate the transactions contemplated
thereby; (v) required consents and approvals; (vi) filings made by the Company
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act") and the Exchange Act (including financial statements included
therein); (vii) the accuracy and adequacy of the information supplied or to be
supplied by the Company contained in the Offer Documents, the proxy statement
required to be filed with the Commission in connection with the Merger, the
Schedule 14D-9 required to be filed with the Commission, and any amendment or
supplement thereto; (viii) absence of any material adverse change; (ix)
compliance with laws; (x) litigation; (xi) labor matters; (xii) employee benefit
plans; (xiii) tax matters; (xiv) real property; (xv) environmental matters;
(xvi) material contracts; (xvii) brokers' and finders' fees; (xviii) the opinion
of First Boston, as financial advisor to the Company; (xix) the recommendation
of the Board of Directors of the Company; (xx) the required vote of stockholders
of the Company; (xxi) stockholder rights plans; (xxii) intellectual property;
and (xxiii) non-qualification of the Company for "pooling-of-interests"
accounting.
The Offeror and Parent have also made customary representations and
warranties to the Company. Representations and warranties of the Offeror and
Parent relate, among other things, to: (i) organization, corporate power and
authority and qualification, (ii) subsidiaries of the Offeror, (iii) capital
structure of the Offeror, (iv) corporate power and authority to enter into the
Merger Agreement and to consummate the transactions contemplated thereby, (v)
required consents and approvals, (vi) brokers' and finders' fees, (vii) the
accuracy and adequacy of the information contained in the Offer Documents, the
Schedule 14D-1 required to be filed with the Commission, and any amendment or
supplement thereto, the Schedule 14f-1 and the accuracy of information supplied
in writing by Parent or the Offeror specifically for inclusion in the proxy
statement and the Schedule 14D-9, (viii) ability to finance the transaction and
(ix) the interim operations of the Offeror.
COVENANTS RELATING TO THE CONDUCT OF BUSINESS. During the period from the
date of the Merger Agreement to the Effective Time, the Company has agreed that
it will act and carry on its business in the usual, regular and ordinary course
of its business consistent with past practice, use reasonable efforts to
preserve substantially intact its current business organizations, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees, advertisers,
distributors and others having significant business dealings with it. The
Company has agreed that during such period, the Company will not, without the
prior consent of Parent or except as disclosed by the Company in the schedule to
the Merger Agreement:
(a) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares
of its capital stock, or (z) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any other securities thereof or
any rights, warrants or options to acquire any such shares or other
securities;
(b) authorize for issuance, issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to acquire,
any such shares, voting securities or convertible securities or any other
securities or equity securities other than the issuance of Shares upon the
exercise of stock options awarded but unexercised on the date of the Merger
Agreement and in accordance with their present terms;
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(c) amend its Certificate of Incorporation or By-laws or other
comparable charter or organizational documents;
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof;
(e) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any of its properties or assets other than
any such properties or assets the value of which does not exceed $250,000
individually and $2,000,000 in the aggregate, except sales of inventory,
rental equipment and receivables in the ordinary course of business
consistent with past practice;
(f) except in the ordinary course of business consistent with past
practice incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company,
guarantee any debt securities of another person, enter into any "keep well"
or other agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any of
the foregoing, or make any loans, advances or capital contributions to, or
other investments in, any other person;
(g) acquire or agree to acquire any assets, other than in the ordinary
course of business consistent with past practice, that are material,
individually or in the aggregate, to the Company, or make or agree to make
any capital expenditures except capital expenditures which, individually or
in the aggregate, do not exceed the amount budgeted therefor in the
Company's annual capital expenditures budget for 1997 previously provided to
Parent;
(h) pay, discharge or satisfy any claims (including claims of
stockholders), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction of (i) liabilities and obligations in the ordinary course of
business consistent with past practice or in accordance with their terms as
in effect on the date of the Merger Agreement or (ii) claims settled or
compromised to the extent permitted by the Merger Agreement, or waive,
release, grant or transfer any rights of material value or modify or change
in any material respect any existing material license, lease, contract or
other document, other than in the ordinary course of business consistent
with past practice;
(i) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(j) enter into any collective bargaining agreement;
(k) change any material accounting principle used by the Company, except
as required by the Commission or applicable law;
(l) settle or compromise any litigation or settle a dispute under any
contract or other agreement (whether or not commenced prior to the date of
the Merger Agreement) other than settlements or compromises of litigation
where the amount paid (after giving effect to insurance proceeds actually
received) by the Company in settlement or compromise does not exceed
$100,000, provided that the aggregate amount paid in connection with the
settlement or compromise of all such matters shall not exceed $250,000;
(m) engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any of the
Company's affiliates, including, without limitation, any transactions,
agreements, arrangements or understandings with any affiliate or other
person covered under Item 404 of Regulation S-K of the Commission that would
be required to be disclosed under such Item 404; or
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(n) authorize, or commit or agree to take, any of the foregoing actions.
Pursuant to the Merger Agreement, the Company has also agreed, subject to
certain exceptions, that it will not adopt or amend (except as required by law)
any bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or other arrangement for the benefit or welfare of any employee,
director or former director or employee or, other than increases for individuals
(other than officers and directors) in the ordinary course of business
consistent with past practice, increase the compensation or fringe benefits of
any director, employee or former director or employee or pay any benefit not
required by an existing plan, arrangement or agreement.
Pursuant to the Merger Agreement, the Company has also agreed that it will
not (i) grant any new or modified severance or termination arrangement or
increase or accelerate any benefits payable under its severance or termination
pay policies in effect on the date of the Merger Agreement, (ii) effectuate a
"plant closing" or "mass layoff," as defined in the Worker Adjustment and
Retraining Notification Act of 1988, affecting in whole or in part any site of
employment, facility, operating unit or employee of the Company or (iii) except
in the ordinary course of business and consistent with past practice, make any
tax election change or request to change its method of accounting or settle or
compromise any federal, state, local or foreign tax liability.
ACCESS TO INFORMATION. The Company has agreed to, and to cause its
officers, employees, counsel, financial advisors and other representatives to,
afford to Parent and its representative and to potential financing sources
reasonable access during normal business hours to its properties, books,
contracts, commitments, personnel and records, including security position
listings and other information which may be relevant to the Merger or the Offer.
The Offeror, the Company and Parent have each agreed to hold and cause its
respective representatives to hold any nonpublic information in confidence in
accordance with the Confidentiality Agreement, dated May 6, 1997, between
Parent, the Company and Investcorp International, Inc. (the "Confidentiality
Agreement").
NO SOLICITATION. The Merger Agreement provides that the Company will not
(whether directly or indirectly through advisors, agents or other
intermediaries), nor will it authorize or permit any of its officers, directors,
agents, representatives or advisors to (a) solicit, initiate or take any action
knowingly to facilitate the submission of inquiries, proposals or offers from
any person (other than the Offeror or Parent) relating to (i) any acquisition or
purchase of 20% or more of the consolidated assets of the Company or of over 20%
of any class of equity securities of the Company, (ii) any tender offer
(including a self tender offer) or exchange offer that if consummated would
result in any person beneficially owning 20% or more of any class of equity
securities of the Company, (iii) any merger, consolidation, business
combination, sale of substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company other than the
transactions contemplated by the Merger Agreement or (iv) any other transaction
the consummation of which would or could reasonably be expected to impede,
interfere with, prevent or materially delay the Merger or the Offer or which
would or could reasonably be expected to materially dilute the benefits to
Parent of the transactions contemplated by the Merger Agreement (collectively,
"Transaction Proposals"), (b) agree to or endorse any Transaction Proposal or
(c) enter into or participate in any discussions or negotiations regarding any
of the foregoing, or furnish to any other person any information with respect to
its business, properties or assets or any of the foregoing, or otherwise
cooperate in any way with, or knowingly assist or participate in, facilitate or
encourage, any effort or attempt by any other person (other than the Offeror or
Parent) to do or seek any of the foregoing. By the terms of the Merger
Agreement, nothing set forth therein will prohibit the Company (either directly
or indirectly through advisors, agents or other intermediaries) from (i)
furnishing information pursuant to an appropriate confidentiality letter (which
letter may not be less favorable to the Company in any material respect than the
confidentiality letter agreement entered into between the Company and Parent)
concerning the Company and its business, properties or assets to a third party
who has offered to make a bona fide Transaction Proposal, (ii) engaging in
discussions or negotiations with such a third party,
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(iii) following receipt of a bona fide Transaction Proposal, taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a) under
the Exchange Act or otherwise making disclosure to its stockholders, (iv)
following receipt of a bona fide Transaction Proposal, failing to make or
withdrawing or modifying its recommendation that the holders of Shares approve
the Merger Agreement, the Merger and the transactions contemplated thereby
and/or (v) taking any non-appealable, final action ordered to be taken by the
Company by any court of competent jurisdiction, but in each case referred to in
the foregoing clauses (i) through (iv) only to the extent that the Board of
Directors of the Company shall have concluded in good faith after consulting
with its outside counsel and financial advisors that such action is consistent
with the discharge of its fiduciary duties to the stockholders of the Company
under applicable law; PROVIDED, that the Board of Directors of the Company is
not permitted to take any of the foregoing actions referred to in clauses (i)
through (v) until after reasonable notice to Parent with respect to such action.
The Company's Board of Directors is further required, to the extent it may do so
without breaching such fiduciary duties, to continue to advise Parent after
taking such action and, in addition, if the Board of Directors of the Company
receives a Transaction Proposal, then the Company is to promptly inform Parent
of the terms and conditions of such proposal and the identity of the person
making it. The Company is required to immediately cease and cause its advisors,
agents and other intermediaries to cease any and all then existing activities,
discussions or negotiations with any parties conducted prior to entering into
the Merger Agreement with respect to any of the foregoing and to use its
reasonable best efforts to cause any such parties in possession of confidential
information about the Company that was furnished by or on behalf of the Company
to return or destroy all such information.
THIRD PARTY CONFIDENTIALITY AND STANDSTILL AGREEMENTS. Under the Merger
Agreement, the Company has agreed that it will not waive or fail to enforce any
provision of any confidentiality or standstill or similar agreement to which it
is a party without the prior written consent of Parent.
INDEMNIFICATION. The Merger Agreement provides that the Certificate of
Incorporation and the By-Laws of the Surviving Corporation shall contain the
provisions with respect to indemnification and exculpation from liability set
forth in the Company's Certificate of Incorporation and By-Laws on the date of
the Merger Agreement, which provisions will not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who on
or prior to the Effective Time were directors, officers, employees or agents of
Company, unless such modification is required by law.
The Merger Agreement provides that the Company shall maintain in effect for
three years from the Effective Time policies of directors' and officers'
liability insurance containing terms and conditions which are not less
advantageous to the insureds than those policies currently in effect on the date
of the Merger Agreement ("Company Insurance"), with respect to matters occurring
prior to the Effective Time, to the extent available, and having the maximum
available coverage under any such Company Insurance; provided that (i) the
Company following the Merger shall not be required to spend in excess of 150% of
the amount spent by the Company on current annual premiums for Company Insurance
(the "Premium Limit"); provided further that if the Company following the Merger
would be required to spend in excess of the Premium Limit per year to obtain
insurance having the maximum available coverage under the Company Insurance, the
Company will be required to spend up to such amount to maintain or procure
insurance coverage pursuant to the Merger Agreement, subject to availability of
such (or similar) coverage, and (ii) such policies may in the sole discretion of
the Company be one or more "tail" policies for all or any portion of the full
three year period provided that such "tail" policies contain terms and
conditions and provide coverage no less advantageous to the insureds than the
terms, conditions and coverage in the Company Insurance. The Company has agreed
that, in the event it would be required to spend in excess of the Premium Limit
per year to obtain insurance having such maximum available coverage, the Company
would notify the beneficiaries of such policies and permit them to pay any
excess which may be necessary to maintain such policies.
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Parent has agreed that, from and after the purchase of any Shares pursuant
to the Offer, Parent will indemnify and cause the Surviving Corporation to
indemnify all persons who are covered on the date of the Merger Agreement by the
Company Insurance (the "Indemnified Parties") to the fullest extent permitted by
applicable law with respect to all acts and omissions arising out of such
individuals' services as officers, directors, employees or agents of the Company
or as trustees or fiduciaries of any plan for the benefit of employees of the
Company, occurring prior to the Effective Time including, without limitation,
the transactions contemplated by the Merger Agreement. In the event any such
Indemnified Party is or becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter, including without
limitation, the transactions contemplated by the Merger Agreement, occurring
prior to, and including the Effective Time, Parent has agreed that, from and
after the purchase of any Shares pursuant to the Offer, it will pay as incurred,
from and after the date of purchase of any Shares, such person's reasonable
legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith. Subject to the provisions of the
Merger Agreement, Parent has agreed to advance (in reasonable amounts) and pay
all reasonable expenses, including attorneys' fees, that may be incurred by any
Indemnified Party in enforcing such Indemnified Party's indemnification rights
under the Merger Agreement or any action involving any such Indemnified Party
resulting from the transactions contemplated by the Merger Agreement.
Notwithstanding anything to the contrary contained in the Merger Agreement,
Parent will not have any obligation under the Merger Agreement to any
Indemnified Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated by the
Merger Agreement is prohibited by applicable law.
CONDITIONS PRECEDENT. The respective obligations of the Company, the
Offeror and Parent to effect the Merger are subject to various conditions which
include, in addition to certain other customary closing conditions, the
following: (a) the Merger Agreement shall have been approved by the requisite
vote of holders of outstanding Shares; (b) the waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have been terminated
or shall have expired; and (c) no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger shall be in effect; provided that the Company, the Offeror and
Parent are required to use their best efforts to have any such injunction,
order, restraint or prohibition vacated.
The Offeror's and Parent's obligations to effect the Merger are further
subject to the following additional conditions: (a) Parent shall have received a
certificate signed on behalf of the Company by an authorized officer of the
Company certifying that the representations and warranties of the Company are
true and correct as of the date of the Merger Agreement except where the failure
of such would not individually or in the aggregate have a Material Adverse
Effect with respect to the Company, (b) the Company shall have performed its
obligations under the Merger Agreement except where such failures to perform
either individually or in the aggregate would not have a Material Adverse Effect
with respect to the Company or materially adversely affect the ability of the
Company to consummate the transactions contemplated in, or perform its
obligations under, the Merger Agreement; (c) the Offeror shall have received
evidence, in form and substance reasonably satisfactory to it, that such
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental entities and other third parties as are necessary in
connection with the transactions contemplated by the Merger Agreement have been
obtained, except such licenses, permits, consents, approvals, authorizations,
qualifications and orders which would not, individually or in the aggregate,
have a material adverse affect with respect to the Company; and (d) there shall
not be pending any suit, action or proceeding by any governmental entity or by
any other person which has a reasonable likelihood of success, and which, if
successful, would have a material adverse effect with respect to the Company or
Parent, or materially adversely affect the ability of Parent, the Offeror or the
Company to consummate the transactions contemplated by the Merger Agreement. The
obligations of Parent and the Offeror to effect the Merger shall not be relieved
by the failure of any of the
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listed conditions if such failure is the result, direct or indirect, of any
breach by Parent or Offeror of any of their obligations under the Merger
Agreement.
The obligations of the Company to effect the Merger are further subject to
the following conditions: (a) the Company shall have received a certificate
signed on behalf of Parent by an authorized officer of Parent certifying that
the representations and warranties of Parent and the Offeror are true and
correct as of the date of the Merger Agreement except where the failure of such
would not individually or in the aggregate have a Material Adverse Effect with
respect to Parent and the Offeror, (b) Parent and the Offeror shall have
performed its obligations under the Merger Agreement except where such failures
to perform either individually or in the aggregate would not have a Material
Adverse Effect with respect to Parent and the Offeror or materially adversely
affect the ability of Parent and the Offeror to consummate the transactions
contemplated in, or perform its obligations under, the Merger Agreement. The
obligations of the Company to effect the Merger shall not be relieved by the
failure of any of the listed conditions if such failure is the result, direct or
indirect, of any breach by the Company of any of their obligations under the
Merger Agreement.
TERMINATION. The Merger Agreement may be terminated and abandoned at any
time prior to the Effective Time of the Merger, whether before or after approval
of the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if:
(i) any governmental entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Merger or the Offer and such order, decree,
ruling or other action shall have become final and nonappealable; or
(ii) if the Merger shall not have been consummated on or before
October 31, 1997 (other than due to the failure of the party seeking to
terminate the Merger Agreement to perform its obligations under the
Merger Agreement required to be performed at or prior to the Effective
Time of the Merger); or
(iii) in the event the approval of the stockholders of the Company is
required, at a duly held meeting of the stockholders of the Company
(including any adjournment thereof) held for the purpose of voting on the
Merger, the Merger Agreement and the consummation of the transactions
contemplated thereby, the holders of a majority of the outstanding Shares
shall not have approved the Merger, the Merger Agreement and the
consummation of the transactions contemplated thereby;
(c) by Parent, if the Company or its Board of Directors shall have (i)
withdrawn, modified or amended in any respect adverse to Parent its approval
or recommendation of the Merger Agreement or any of the transactions
contemplated therein, (ii) failed as promptly as practicable to mail the
Proxy Statement to its stockholders or failed to include in such statement
such recommendation in accordance with the Merger Agreement, (iii)
recommended any Transaction Proposal from a person other than Parent or the
Offeror or any of their affiliates or (iv) resolved to do any of the
foregoing; or
(d) by the Company, if pursuant to and in compliance with the Merger
Agreement, the Board of Directors of the Company does not make or withdraws
or modifies its recommendation to stockholders to approve the Merger
Agreement, the Merger and the transactions contemplated thereby.
FEES AND EXPENSES. The Company has agreed that, if the Merger Agreement is
terminated in accordance with the provisions of the Merger Agreement described
in paragraphs (c) or (d) under "--TERMINATION," then the Company will (provided
that Parent or the Officer is not then in material breach of its obligations
under the Merger Agreement) promptly, but in no event later than one business
day after the termination of the Merger Agreement, reimburse Parent and the
Offeror for all their documented
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Expenses (as defined below), whether incurred prior to, on or after the date of
the Merger Agreement, in connection with the Offer, the Merger and the
consummation of all transactions contemplated by the Merger Agreement and the
financing thereof, provided that in no event will the Company be required to pay
in excess of an aggregate of $5 million pursuant to such provision. The term
"Expenses" means all out-of-pocket expenses and fees, including, without
limitation, fees payable to all banks, investment banking firms and other
financial institutions, and their respective agents and counsel, and all fees of
counsel, accountants, financial printers, experts and consultants to the Offeror
and its affiliates.
Under the Merger Agreement, if the Merger Agreement shall have been
terminated in accordance with the provisions of the Merger Agreement described
in paragraphs (c) or (d) under "--TERMINATION," and within twelve months
following the date of such termination the Company either (i) consummates with
any corporation (including the Company or any of its affiliates), partnership,
person, or other entity or "group" (as referred to in Section 13(d)(3) of the
Exchange Act) other than Parent, the Offeror or any of their affiliates
(collectively, "Third Party") a transaction the proposal of which would
otherwise qualify as a Transaction Proposal under the Merger Agreement or (ii)
enters into an agreement with a Third Party with respect to a transaction the
proposal of which would otherwise qualify as a Transaction Proposal under the
Merger Agreement (whether or not such Third Party is the Third Party referred to
in clause (i) above); then the Company will promptly, but in no event later than
one business day after the Company consummates the transaction referred to in
clause (i) or (ii) above, pay to Parent, in same day funds, a fee of $27.2
million less any amount paid pursuant to the provisions described in the
previous paragraph.
In addition to the foregoing, in the event a payment is or becomes payable
pursuant to the provisions described in the two immediately preceding
paragraphs, the Company has agreed to promptly, but in no event later than two
business days following written notice thereof, together with related bills or
receipts, reimburse Parent and the Offeror for all reasonable out-of-pocket
costs, fees and expenses, including, without limitation, the reasonable fees and
disbursements of counsel and the expenses of litigation, incurred in connection
with collecting the Expenses and fees described in two immediately preceding
paragraphs as a result of any breach by the Company of its obligations described
above.
Except as otherwise provided above, all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such expenses.
THE STOCKHOLDER AGREEMENT. The International Investors have agreed that,
until the Termination Date (as defined below), at any meeting of the
stockholders of the Company, however called, or in connection with any written
consent of the stockholders of the Company, each of the International Investors
will vote (or cause to be voted) any Shares to which such International Investor
is the record and/or beneficial owner, including any shares of Company Common
Stock acquired by such International Investor after the date of the Stockholder
Agreement and prior to the termination thereof, whether upon exercise of
options, conversion of convertible securities, purchase, exchange or otherwise
(the "International Shares") (i) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval of the terms
thereof and each of the other actions contemplated by the Merger Agreement and
the Stockholder Agreement and any actions required in furtherance thereof; (ii)
against any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or the Stockholder Agreement; and (iii) except as
specifically requested in writing by Parent in advance, against the following
actions (other than the Merger and the transactions contemplated by the Merger
Agreement): (1) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company; (2) a sale,
lease or transfer of a material amount of assets of the Company or a
reorganization, recapitalization, dissolution or liquidation of the Company; (3)
(a) any change in the majority of the Board of Directors of the Company; (b) any
material change in the present capitalization of the Company or any amendment of
the Company's Certificate of Incorporation or By-Laws; (c) any other material
change in the Company's corporate structure or business; or (d) any other action
which is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, discourage or adversely affect the
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Offer, the Merger or the transactions contemplated by the Merger Agreement or
the Stockholder Agreement or the contemplated economic benefits of any of the
foregoing. Pursuant to the Stockholder Agreement, none of the International
Investors will enter into any agreement or understanding with any person or
entity prior to the Termination Date to vote or give instructions after the
Termination Date in any manner inconsistent with clauses (i), (ii) or (iii) of
the preceding sentence.
Pursuant to the Stockholder Agreement, each of the International Investors
has granted to, and appointed, Parent and Mr. Mark Cohen, Executive Vice
President of Parent, and Mr. Sixten Nordmark, General Counsel of Parent, in
their respective capacities as officers of Parent, and any individual who
succeeds to any such office of Parent, and any other designee of Parent, each of
them individually, such International Investor's irrevocable (until the
Termination Date) proxy and attorney-in-fact (with full power of substitution)
to vote the International Shares as indicated in the preceding paragraph. Each
of the International Investors has agreed that such proxy will be irrevocable
(until the Termination Date) and coupled with an interest and will take such
further action and execute such other instruments as may be necessary to
effectuate the intent of such proxy and has revoked any proxy previously granted
by any International Investor with respect to such International Shares.
REPRESENTATIONS AND WARRANTIES. In the Stockholder Agreement, the
International Investors have made customary representations and warranties to
Parent and the Offeror. The representations and warranties of the International
Investors relate, among other things, to: (i) organization and corporate power
and authority to enter the Stockholder Agreement; (ii) required consents and
approvals; (iii) ownership of the International Shares; (iv) no encumbrances
with respect to the International Shares; (v) brokers' and finders' fees and
(vi) reliance.
Parent also has made customary representations and warranties to the
International Investors. Representations and warranties of Parent relate, among
other things, to: (i) organization and corporate authority to enter into the
Stockholder Agreement and (ii) required consents and approvals.
TENDER OF SHARES. Pursuant to the Stockholder Agreement, each of the
International Investors has agreed to tender and sell to the Offeror all of the
International Shares (representing approximately 74.0% of the outstanding
Shares) pursuant to and in accordance with the Offer. In addition,
notwithstanding any term of the Offer to the contrary, each of the International
Investors has agreed not to withdraw any International Shares tendered into the
Offer pursuant to the terms of the Stockholder Agreement. Each of the
International Investors has acknowledged and agreed that the Offeror's
obligations to accept for payment and pay for the International Shares in the
Offer is subject to the terms and conditions of the Offer. The International
Investors have also waived any rights of appraisal or rights to dissent from the
Merger that any of the International Investors may have.
THIRD PARTY BUSINESS COMBINATION; REMEDY. Pursuant to the Stockholder
Agreement, Parent and each of the International Investors has agreed that (a) if
the Merger Agreement is terminated in the circumstances described in paragraph
(c) or (d) under "THE MERGER AGREEMENT--TERMINATION," and, upon or following any
such termination, any International Investor receives from any person (other
than Parent, the Offeror or any of their affiliates) any cash or non-cash
consideration in an amount greater than $32.00 per share in respect of all or
any portion of the International Shares in connection with or following any
public announcement of a Third Party Business Combination (as defined below)
during the period commencing on the date of the Stockholder Agreement and ending
one year from the date the Merger Agreement is terminated (provided that the
contract or agreement relating to such Third Party Business Combination is
entered into within six months after the date the Merger Agreement is
terminated), then the International Investors shall within two business days of
receipt thereof pay to Parent or its designee an aggregate amount equal to 100%
of the excess of such other consideration up to and including $36.00 over $32.00
multiplied by the number of the International Shares with respect to which such
consideration was received or (b) if any International Investor receives from
Parent, the Offeror or any of their affiliates any cash or non-cash
consideration pursuant to the Offer or otherwise in an amount greater than
$32.00 per
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share in respect of all or any portion of the International Shares following any
public announcement of a Third Party Business Combination during the period
commencing on the date of the Stockholder Agreement and ending one year from the
date of such public announcement, then the International Investors will within
two business days of receipt thereof pay to Parent or its designee an aggregate
amount equal to (A) 100% of the excess of (1) such consideration up to and
including $34.00 over (2) $32.00; and (B) 50% of the excess, if any, of (1) such
consideration up to and including $36.00 over (2) $34.00; in each case
multiplied by the number of International Shares with respect to which such
consideration was received; PROVIDED that, (i) if the consideration received by
the International Investors shall be securities listed on a national securities
exchange or traded on the NASDAQ National Market ("NASDAQ"), the per share value
of such consideration will be equal to the closing price per share listed on
such national securities exchange or NASDAQ on the date such transaction is
consummated and (ii) if the consideration received by the International
Investors shall be in a form other than such listed securities, the per share
value shall be determined in good faith as of the date such transaction is
consummated by Parent or its designee and the International Investors, or, if
the Parent or its designee and the International Investors cannot reach
agreement, by a nationally recognized investment banking firm reasonably
acceptable to the parties. According to the Stockholder Agreement the term
"Third Party Business Combination" means the occurrence of any of the following
events: (i) the Company or any subsidiary of the Company whose assets constitute
twenty percent or more of the Company's consolidated assets is acquired by
merger or otherwise by any person or group, other than Parent or any affiliate
thereof (a "Third Party"); (ii) the Company or any subsidiary of the Company
enters into an agreement with a Third Party which contemplates the acquisition
of twenty percent or more of the total assets of the Company and its
subsidiaries, taken as a whole; (iii) the Company, or any International Investor
enters into a merger or other agreement with a Third Party which contemplates
the acquisition of more than twenty percent of the outstanding shares of the
Company's Common Stock; or (iv) a Third Party acquires more than twenty percent
of the outstanding Common Stock of the Company.
NO SOLICITATION. Under the terms of the Stockholder Agreement, each of the
International Investors has agreed that, prior to the Termination Date, the
International Investors will not (directly or indirectly through advisors,
agents or other intermediaries, nor will the International Investors authorize
or permit any of their officers, directors, agents, representatives or advisors
to (a) solicit, initiate or take any action knowingly to facilitate the
submission of inquiries, proposals or offers from any Person (other than Parent
or any of its affiliates) relating to any Transaction Proposal or (b) enter into
or participate in any discussions or negotiations regarding any of the
foregoing, or furnish to any other Person any information with respect to the
business, properties or assets or any of the foregoing, or otherwise cooperate
in any way with, or knowingly assist or participate in, facilitate or encourage,
any effort or attempt by any other Person (other than Parent or any of its
affiliates) to do or seek any of the foregoing; PROVIDED, HOWEVER, that the
foregoing will not restrict any director, officer or employee of Investcorp S.A.
who is also a director of the Company from taking actions in such person's
capacity as a director of the Company to the extent and in the circumstances
permitted by the Merger Agreement. If any International Investor receives any
such inquiry or proposal, the International Investors have agreed that such
party will promptly inform Parent of the terms and conditions, if any, of such
inquiry or proposal and the identity of the person making it. In addition, the
International Investors have agreed that they will immediately cease and cause
its advisors, agents and other intermediaries to cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing, and will use their reasonable best efforts
to cause any such parties in possession of confidential information about the
Company that was furnished by or on behalf of the Company to return or destroy
all such information in the possession of any such party or in the possession of
any agent or advisor of such party.
TRANSFER RESTRICTIONS. Pursuant to the Stockholder Agreement, each of the
International Investors has agreed that, prior to the Termination Date, the
International Investors will not, directly or indirectly: (i) except pursuant to
the terms of the Offer or the Merger Agreement, and to Parent pursuant to the
Stockholder Agreement, offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose
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of, enforce or permit the execution of the provisions of any redemption
agreement with the Company or enter into any contract, option or other
arrangement or understanding with respect to or consent to the offer for sale,
sale, transfer, tender, pledge, encumbrance, or other disposition of, or
exercise any discretionary powers to distribute, any or all the International
Shares or any interest therein; (ii) except as contemplated by the Stockholder
Agreement, grant any proxies or powers of attorney with respect to any of the
International Shares, deposit any International Shares into a voting trust or
enter into a voting agreement with respect to any International Shares; or (iii)
take any action that would make any representation or warranty of any
International Investor contained in the Stockholder Agreement untrue or
incorrect or have the effect of preventing or disabling any International
Investor from performing its obligations under the Stockholder Agreement.
TERMINATION. The obligations of the International Investors described under
"--Voting," "--Tender of Shares," "--No Solicitation" and "--Transfer
Restrictions" will terminate upon the first to occur of (a) the Effective Time
of the Merger and (b) the date the Merger Agreement is terminated in accordance
with its terms (such earlier date being the "Termination Date"). All other
agreements and obligations of the parties to the Stockholder Agreement will
survive the Effective Time of the Merger and/or the Termination Date except as
otherwise set forth in the Stockholder Agreement.
GUARANTIES.
INVESTCORP GUARANTY. Pursuant to the Investcorp Bank E.C. Guaranty, dated
June 8, 1997, Investcorp Bank E.C., an affiliate of Investcorp S.A., has
guaranteed that each of the International Investors will perform each of their
respective obligations and agreements under the Stockholder Agreement, and has
further agreed that it will be liable in the event any of the International
Investors fails to perform such obligations or agreements.
ATLAS COPCO GUARANTY. Pursuant to the Atlas Copco AB Guaranty, dated June
8, 1997, Atlas Copco AB ("Atlas Copco") has undertaken and agreed to cause each
of Parent and the Offeror to perform their respective obligations and agreements
under the Merger Agreement, and has further agreed that it will be liable in the
event Parent or the Offeror fails to perform such obligations or agreements.
THE CONFIDENTIALITY AGREEMENT. On May 6, 1997, Atlas Copco AB, the parent
corporation of Parent, entered into a confidentiality agreement with the Company
and Investcorp International, Inc. (the "Confidentiality Agreement"), pursuant
to which, among other things, Parent agreed to treat as confidential certain
information provided to it by or on behalf of the Company, and agreed that,
without the consent of the Board of Directors of the Company, for a period of
one year not to (A) acquire, agree to acquire or make any proposal to acquire,
directly or indirectly, any securities, assets or property of the Company or any
of its affiliates (except in the ordinary course of business), (B) propose to
enter into, directly or indirectly, any merger, consolidation, business
combination or other similar transaction involving the Company or any of its
affiliates, (C) make, or in any way participate in, any "solicitation" of
"proxies" (as such terms are used in the proxy rules of the Securities and
Exchange Commission) to vote, or seek to advise or influence any person with
respect to the voting of, any voting securities of the Company or any of its
affiliates, (D) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting
securities of the Company or any of its affiliates, (E) otherwise act, alone or
in concert with others, to seek to control or influence the management, Board of
Directors or policies of the Company, (F) disclose any intention, plan or
arrangement inconsistent with the foregoing, or (G) advise, assist or encourage
or facilitate any other persons in connection with any of the foregoing. A copy
of the Confidentiality Agreement is filed as Exhibit 99.15 hereto, and is
incorporated herein by this reference.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) BOARD RECOMMENDATION. On June 8, 1997, based in part on prior approvals
by the Special Committee (as defined below), the Board of Directors of the
Company, by unanimous vote (i) determined that the Offer and Merger and the
transactions contemplated thereby were fair to and in the best interests of the
Company and the stockholders of the Company, (ii) approved the Stockholders
Agreement, the Merger Agreement, the Offer, and the Merger, (iii) resolved to
recommend acceptance of the Offer and adoption of the Merger Agreement by
holders of the Shares, and (iv) with Mr. Bennett recusing himself, approved the
amended Employment Agreements referred to in Item 3(b)(i) above. Accordingly,
the Board unanimously recommends that all stockholders of the Company accept the
Offer and tender their Shares pursuant to the Offer.
(B) BACKGROUND OF AND REASONS FOR THE BOARD RECOMMENDATION
BACKGROUND OF THE OFFER; PAST CONTACTS; TRANSACTIONS OR NEGOTIATIONS
WITH THE COMPANY.
Beginning in late 1996 Atlas Copco, acting principally through Merrill
Lynch, began to explore the possibility of expanding Parent's (a subsidiary of
Atlas Copco) equipment rental business in the United States through a strategic
acquisition. In February, 1997, Merrill Lynch and Atlas Copco executed an
engagement letter pursuant to which Merrill Lynch was retained by Atlas Copco to
assist in identifying acquisition candidates and in analyzing, structuring,
negotiating and effecting such an acquisition.
From late 1996 through April 1997, the Board of Directors of Atlas Copco was
presented with status reports by its management and by Merrill Lynch on a number
of potential acquisition candidates, and after evaluating various of these
alternatives, in early March 1997 the Company was identified as being well
suited to enable Atlas Copco to achieve its strategic objectives regarding its
equipment rental business.
At a meeting of the Board of Directors of Atlas Copco in April 1997, Merrill
Lynch was authorized to approach Investcorp S.A. ("Investcorp"), as
representative of the International Investors, to discuss a possible acquisition
of the Company by Parent.
On April 28, 1997, representatives of Merrill Lynch met with Mr. Christopher
J. O'Brien, a director of the Company and a member of the Management Committee
of Investcorp, as well as other representatives of Investcorp, to discuss a
possible acquisition of the Company by Parent, and to solicit Investcorp's
interest in such a transaction. Merrill Lynch advised Investcorp that Atlas
Copco was interested in acquiring 100% of the outstanding Shares of the Company
for cash at a per Share price of $30.00.
At a meeting of the Board of Directors of the Company on April 30, 1997, Mr.
O'Brien briefed the Company's directors on Atlas Copco's expression of interest.
Following a discussion of the Atlas Copco expression of interest, the Company's
Board authorized the retention of Credit Suisse First Boston Corporation ("First
Boston") as the Company's financial advisor in evaluating a potential
transaction between the Company and Parent. On May 2, 1997, another meeting of
the Company's Board of Directors, with representatives of First Boston
participating, was held to discuss the potential transaction with Atlas Copco.
At this meeting, a special committee (the "Special Committee") of the Board,
consisting of Mr. Robert M. Howe as the only director of the Company who is
neither a member of Company management nor affiliated with Investcorp, was
formed to assist the Board in its evaluation of the potential transaction.
During the week of May 5, 1997, representatives of First Boston contacted
representatives of Merrill Lynch and indicated that the Company's Board would
consider an acquisition proposal from Atlas Copco for the Company at $34.00 per
share. In connection with these discussions, it was agreed that certain
information would be provided to Parent for purposes of further evaluating the
Company, and a Confidentiality Agreement was entered into between the Company
and Atlas Copco covering all proprietary and confidential information of the
Company provided or to be provided by or on behalf of the
16
<PAGE>
Company to Atlas Copco in connection with the potential transaction. The
Confidentiality Agreement also contained customary standstill provisions.
On May 14, 1997, Atlas Copco entered into a second engagement letter with
Merrill Lynch pursuant to which Merrill Lynch was retained to assist Atlas Copco
and Parent in connection with a proposed acquisition of the Company.
On May 14 and 15, 1997, representatives of Atlas Copco and Parent attended
meetings at which presentations were made by the Company's management concerning
the Company's business and operations.
On May 26, 1997, Merrill Lynch was authorized by Atlas Copco to explore with
the Company's financial advisors, First Boston, a possible acquisition of the
Company by Atlas Copco or one of its affiliates for cash at a price of $32.00
per share, such proposed acquisition being subject to the prior approval of the
Board of Directors of Atlas Copco and Parent, as well as the completion by
Parent and its financial and legal advisors of certain due diligence
investigative procedures. Merrill Lynch also communicated to First Boston at
such time that, as a part of any such acquisition, Parent would request
nonsolicitation commitments from both the Company and the International
Investors, an option to purchase from the International Investors all of the
International Investor Shares, an irrevocable proxy relating to such Shares, an
option to purchase from the Company additional new Shares equaling 19.9% of the
currently outstanding Shares and the payment by the Company to Parent of certain
fees and expenses of up to four percent of the total equity value of the
transaction in the event that the proposed transaction were to be terminated
prior to completion due to a competing bid. This proposal was communicated by
Merrill Lynch to First Boston on May 27, 1997.
Representatives of the Company, Investcorp and First Boston discussed and
analyzed Atlas Copco's May 27 proposal telephonically and at meetings on May 27
and 28. These discussions included a review of the business and prospects of the
Company, financial and valuation analyses by First Boston and consideration of
the potential that any superior alternative to the Atlas Copco proposal would be
available. In addition to discussions during this time frame among Company
directors which included Mr. Howe, First Boston communicated by telephone
separately with Mr. Howe, as the Special Committee, and with counsel for the
Special Committee, with respect to the status of negotiations and the results of
First Boston's financial and valuation analyses to date.
On May 28, 1997, the Company and Investcorp, through First Boston,
communicated their unwillingness to accept the terms outlined in the May 27
proposal. In the alternative, First Boston proposed to Merrill Lynch a purchase
price of $33.00 per share. First Boston also advised Merrill Lynch that, while
the Company and the International Investors would be willing to consider making
nonsolicitation commitments in connection with a proposed transaction with Atlas
Copco, any proposed agreement on the part of the International Investors to
tender the International Investor Shares in connection with such a transaction
should be subject to a right to terminate such agreement and withdraw such
Shares if the Board of Directors of the Company were to withdraw its
recommendation of the proposed Atlas Copco transaction consistent with its
fiduciary duties. First Boston also noted that the option to purchase additional
shares from the Company was not acceptable and proposed that any termination
fees and expenses payable by the Company to Parent be limited to an aggregate of
three percent of the total equity value of the proposed transaction.
Telephonic conferences were held on May 29, 1997, involving various
representatives and advisors of Atlas Copco, the Company and Investcorp during
which Merrill Lynch stated that Atlas Copco was not prepared to pay more than
$32.00 per share, but was willing to forgo the previously requested options to
purchase the International Investor Shares or any Shares from the Company in
favor of an alternative proposal which would call for the International
Investors to pay over to Parent all proceeds above $32.00 per Share of any sale
of the International Investor Shares in any other transaction. Thereafter, First
Boston proposed that the payment to be made by the International Investors for
amounts in excess of $32.00 be
17
<PAGE>
limited to amounts less than or equal to $36.00 per Share and that a sharing of
proceeds above $32.00 be negotiated.
Telephonic conferences again were held on May 30, 1997 between
representatives of Atlas Copco, the Company, Investcorp, and their respective
financial and legal advisors regarding the terms and conditions of the proposed
acquisition. In the evening of May 30, Atlas Copco, the Company and Investcorp
each expressed a willingness to proceed in the negotiation of the terms and
conditions of the definitive transaction agreements incorporating a per Share
purchase price of $32.00. In addition, such parties each expressed a willingness
to include in the proposed merger agreement a nonsolicitation covenant subject
to the Company Board's right to consider an alternative transaction proposal
consistent with its fiduciary duties and a limitation of three percent of the
total transaction equity value on the fees and expenses payable by the Company
to Parent in the event the proposed transaction were not consummated by reason
of a competitive transaction. Investcorp, on behalf of the International
Investors, also indicated a willingness to negotiate an agreement which would
call for the International Investors to tender the International Investor Shares
in connection with a tender offer by Parent (or one of its subsidiaries) and to
grant to Parent an irrevocable proxy with respect to such Shares, in each case
subject to certain termination rights, and to make certain payments to Parent in
the event the International Investor Shares were to be sold for a per share
price in excess of $32.00 but only up to $36.00 per share (with a sharing of
such excess in the event Atlas Copco or one of its affiliates were to purchase
the Company at a price above $32.00 due to the presence of a competing
transaction). In addition to the negotiation of the definitive transaction
documents, the execution and delivery of such documents by the parties remained
subject to the approval of the Boards of Directors of Atlas Copco, Parent and
the Company, as well as the completion by representatives and advisors of Atlas
Copco and Parent of their due diligence investigation.
On May 31, 1997, Parent's legal advisors delivered to the Company,
Investcorp, and their respective representatives and advisors initial drafts of
the proposed merger agreement and stockholder agreement incorporating the terms
and conditions discussed on the evening of Friday, May 30.
During the period from May 31, through June 5, 1997, representatives of
Atlas Copco and Parent conducted and completed their due diligence investigation
concerning the Company.
During the period June 2 through June 6, 1997, the respective financial and
legal advisors of Parent, the Company and Investcorp held numerous discussions
regarding the economic and contractual terms of the proposed transactions.
Throughout this period, revised forms of the proposed merger agreement and
stockholder agreement were distributed, reviewed and negotiated by Parent, the
Company, Investcorp and their respective representatives and financial and legal
advisors. Also during this period, in addition to discussions among Company
directors which included Mr. Howe, First Boston updated Mr. Howe, as the Special
Committee, and counsel for the Special Committee regarding the transaction
negotiations and First Boston's continuing financial and valuation analyses.
On June 6, 1997, the Board of Directors of the Company held a meeting during
which it reviewed and unanimously approved, based in part on prior approvals by
the Special Committee on such date , the Stockholder Agreement, the Merger
Agreement and the Offer, subject to confirmation from Atlas Copco on June 8,
1997 that the Board of Directors of Atlas Copco has approved the Stockholder
Agreement, the Merger Agreement and the Offer at an Atlas Copco Board meeting
scheduled for such date. At the June 6, 1997 Company Board meeting, the Board
received and considered reports from the Company's financial advisors, and also
reviewed, considered and discussed the terms of the Stockholder Agreement and
the Merger Agreement, including provisions relating to the ability of the
Company to consider unsolicited third party proposals and to terminate the
Merger Agreement Also at this meeting, First Boston advised the Board that it
was prepared to render its fairness opinion on June 8, 1997 at a Company Board
meeting scheduled to occur promptly after the Atlas Copco Board meeting on that
date.
On June 8, 1997, the Board of Directors of Atlas Copco held a meeting during
which it reviewed and approved the Offer, the Merger Agreement and the
Stockholder Agreement. On the same day, after the
18
<PAGE>
Atlas Copco Board approvals, the Company's Board met and received the written
opinion of First Boston to the effect that, as of the date of such opinion and
subject to certain matters set forth therein, the consideration to be received
by the stockholders of the Company in the Offer and the Merger is fair to such
stockholders from a financial point of view. The Special Committee and the Board
of Directors of the Company then unanimously re-confirmed their prior approvals
of the Stockholder Agreement, the Merger Agreement and the Offer. After the
respective June 8 meetings of the Board of Directors of Atlas Copco and the
Company, Parent, the Offeror and the Company executed and delivered the Merger
Agreement, and Parent and the International Investors executed and delivered the
Stockholder Agreement.
Before the opening of trading on the New York Stock Exchange on the morning
of June 9, 1997, Parent and the Company issued a joint press release announcing
the signing of the definitive Merger Agreement.
In making the determination and recommendations described in paragraph (a)
above, the Board considered a number of factors, including, without limitation,
the matters referred to above and the following:
(i) The Company's existing competitive and market position.
(ii) The alternatives available to the Company in light of the
consideration proposed to be received for the Shares pursuant to the Offer
and the Merger, including continuing to maintain the Company as an
independent company and not engaging in any extraordinary transaction.
(iii) The fact that the Offer Price represents a substantial premium over
the $24.875 per Share market price on June 6, 1997 (the last full trading
day prior to the public announcement of the Offer and Merger).
(iv) The financial and valuation analyses and presentations of First
Boston and the opinion of First Boston dated June 8, 1997 to the effect
that, as of such date, and subject to certain matters set forth therein, the
consideration to be received in the Offer and the Merger by the Company's
stockholders is fair to such holders from a financial point of view (the
"First Boston Opinion"). Stockholders are urged to read the First Boston
Opinion in its entirety for an understanding of the assumptions and
limitations therein. A copy of the First Boston Opinion is attached hereto
as Exhibit 99.16 and is incorporated herein by this reference.
(v) The Board's view regarding the likelihood of a superior transaction.
(vi) The willingness of the International Investors to enter into the
Stockholder Agreement, pursuant to which, among other things, the
International Investors agreed to tender the Shares owned by them for
purchase by Offeror pursuant to the Offer.
(vii) The fact that Parent and Offeror's obligations under the Offer were
not subject to any financing condition, the representation of Parent and the
Offeror that they have sufficient funds available to them to consummate the
Offer and the Merger, and the guaranty by Atlas Copco AB of the purchase
obligations of Parent and Offeror under the Offer and the Merger Agreement.
(viii) Presentations by management of the Company relating to the
financial position, results of operations, business and prospects of the
Company.
(ix) The terms and provisions of the Offer, the Merger, the Merger
Agreement and the Stockholder Agreement.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive.
19
<PAGE>
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained First Boston to act as financial advisor to the
Company in connection with the acquisition of the Company and to render a
fairness opinion. Pursuant to the terms of the Engagement Letter dated as of May
1, 1997 (the "Engagement Agreement") between First Boston and the Company, the
Company has agreed to pay First Boston as follows: (i) a financial advisory fee
of $100,000 payable upon execution of the Engagement Letter, (ii) a transaction
fee of 0.50% of the Aggregate Consideration (as defined below), provided that
the Company in its sole discretion may reduce such fee to 0.40% of the Aggregate
Consideration, with such fee payable upon the first closing in connection with
any Transaction (as defined in the Engagement Agreement), and (iii)
reimbursement of all out-of-pocket expenses, including the fees and expenses of
its legal counsel, if any, and any other advisor retained by First Boston.
For purposes of the Engagement Agreement, the term "Aggregate Consideration"
means the total fair market value of all consideration (including cash,
securities, property, all debt remaining on the Company's financial statements
and other indebtedness and obligations assumed or refinanced or paid down for
the benefit of the Offeror, any dividend or distribution paid by the Company to
its shareholders in connection with the Transaction, and any other form of
consideration, contingent, held in escrow, or otherwise) paid or payable, or
otherwise to be distributed, directly or indirectly, to either the Company or
its security holders in connection with any Transaction.
The Company has also agreed to indemnify First Boston against certain
liabilities related to or arising out its engagement.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained, or compensated any person to make solicitations
or recommendations to the Company's stockholders with respect to the Offer or
the Merger.
ITEM 6. RECENT TRANSACTIONS WITH RESPECT TO SECURITIES.
(A) SHARE TRANSACTIONS IN LAST 60 DAYS. There have been no transactions in
Shares which were effected during the last 60 days by the Company, or, to the
knowledge of the Company, any executive officer, director, affiliate, or
subsidiary of the Company, except that Stanton P. Eigenbrodt purchased 100
Shares on April 25, 1997 through his IRA account.
(B) INTENT TO TENDER SHARES. To the best knowledge of the Company, and
subject to possible retention for regulatory considerations, each of its
executive officers and directors presently intends to tender Shares to Offeror
pursuant to the Offer. For information concerning the commitment of the
International Investors to tender their shares, see Item 3(b)(2) hereof. The
foregoing does not include any Shares over which, or with respect to which, any
such person acts in a fiduciary or representative capacity or is subject to
instructions from a third party, as to which Shares, to the Company's knowledge,
no determination has been made.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(A) CERTAIN NEGOTIATIONS. Except as set forth in this Schedule 14D-9, as of
the date hereof, no negotiation is being undertaken or is underway by the
Company in response to the Offer which relates to or would result in (i) an
extraordinary transaction such as a merger or reorganization involving the
Company or any subsidiary of the Company, (ii) a purchase, sale, or transfer of
a material amount of assets by the Company or any subsidiary of the Company,
(iii) a tender offer for or other acquisition of Securities by or of the
Company, or (iv) any material change in the present capitalization or dividend
policy of the Company.
20
<PAGE>
(B) CERTAIN TRANSACTIONS. There are presently no transactions, board
resolutions, agreements in principle, or signed contracts in response to the
Offer, other than as described in or incorporated by reference into Item 3(b),
which relate to or would result in one or more of the matters referred to in
Item 7(a).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
ANTITRUST. Under the HSR Act, and the rules and regulations promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the United States Department of Justice
(the "Antitrust Division") and the FTC and certain waiting period requirements
have been satisfied. The acquisition of Shares pursuant to the Offer is subject
to such requirements.
Pursuant to the requirements of the HSR Act, Parent and the Company intend
to file the required Notification and Report Forms (the "Forms") with the
Antitrust Division and the FTC shortly. The statutory waiting period applicable
to the purchase of Shares pursuant to the Offer will expire at 11:59 P.M., New
York City time, fifteen days after the filing of the Forms by Offeror. However,
prior to such date, the Antitrust Division of the FTC may extend the waiting
periods by requesting additional information or documentary material relevant to
the acquisition.
SECTION 203 OF THE DGCL. Section 203 of the DGCL purports to regulate
certain business combinations of a corporation organized under Delaware law,
such as the Company, with a stockholder beneficially owning 15% or more of the
outstanding stock of such corporation (an "Interested Stockholder"). Section 203
provides, among other things, that the corporation shall not engage in any
business combination with any Interested Stockholder for a period of three years
following the time that such stockholder first becomes an Interested Stockholder
unless prior to such time the stockholder first becomes an Interested
Stockholder, the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an Interested Stockholder. The Company's Board of Directors approved
the Stockholder Agreement, the Merger Agreement and the transactions
contemplated thereby at its meeting on June 8, 1997, and, therefore, Section 203
of the DGCL is not applicable to such transactions.
21
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
Exhibit 99.1 Agreement and Plan of Merger, dated as of June 8, 1997 by and among Parent,
Offeror and the Company.
Exhibit 99.2 Press Release issued jointly by the Company and Parent dated June 9, 1997.
Exhibit 99.3 Proxy Statement of the Company dated as of April 18, 1997 relating to May 16,
1997 Annual Meeting.
Exhibit 99.4 Employment Agreement dated as of February 3, 1997 by and between the Company
(as successor to Primeco Inc.) and Stanton P. Eigenbrodt.
Exhibit 99.5 Amendment No. 3 to Employment Agreement, dated as of June 8, 1997, between
the Company and Thomas E. Bennett.
Exhibit 99.6 Amendment No 2 to Employment Agreement, dated as of June 8, 1997, between the
Company and Brian Fontana.
Exhibit 99.7 Amendment No. 2 to Employment Agreement, dated as of June 8, 1997, between
the Company and Kevin L. Loughlin.
Exhibit 99.8 Amendment No. 2 to Employment Agreement, dated as of June 8, 1997, between
the Company and Peter A. Post.
Exhibit 99.9 Amendment No 1 to Employment Agreement, dated as of June 8, 1997, between the
Company and James O. York.
Exhibit 99.10 Amendment No. 1 to Employment Agreement, dated as of June 8, 1997, between
the Company and Stanton P. Eigenbrodt.
Exhibit 99.11 Information under the caption "Certain Transactions" as set forth in the
Company's Prospectus, dated as of October 31, 1996.
Exhibit 99.12 Stockholder Agreement, dated as of June 8, 1997 by and between Parent and the
International Investor parties thereto.
Exhibit 99.13 Investcorp Bank E.C. Guaranty, dated as of June 8, 1997.
Exhibit 99.14 Atlas Copco AB Guaranty, dated as of June 8, 1997.
Exhibit 99.15 Confidentiality Agreement, dated as of May 6, 1997 by and between the
Company, Atlas Copco AB and Investcorp International, Inc.
Exhibit 99.16 Opinion of First Boston, dated June 8, 1997.*
Exhibit 99.17 Letter to Stockholders of the Company, dated June 9, 1997.*
</TABLE>
- ------------------------
* Included in the materials sent to stockholders of the Company.
22
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
PRIME SERVICE, INC.
By /s/ THOMAS E. BENNETT
-----------------------------------------
Thomas E. Bennett
Chairman of the Board,
President and Chief Executive Officer
Dated: June 9, 1997
23
<PAGE>
Exhibit 99.1
AGREEMENT AND PLAN OF MERGER
Dated as of June 8, 1997,
Among
ATLAS COPCO NORTH AMERICA INC.,
PS ACQUISITION CORP.
And
PRIME SERVICE, INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.
THE OFFER
SECTION 1.01. The Offer....................................... 1
SECTION 1.02. Company Actions................................. 3
SECTION 1.03. Directors....................................... 4
ARTICLE II.
The Merger
SECTION 2.01. The Merger...................................... 5
SECTION 2.02. Closing......................................... 5
SECTION 2.03. Effective Time.................................. 6
SECTION 2.04. Effects of the Merger........................... 6
SECTION 2.05. Certificate of Incorporation; By-Laws........... 6
SECTION 2.06. Directors....................................... 6
SECTION 2.07. Officers........................................ 6
ARTICLE III.
Effect of the Merger on the
Capital Stock of the Constituent Corporations
SECTION 3.01. Effect on Capital Stock......................... 6
SECTION 3.02. Treatment of Options............................ 7
SECTION 3.03. Exchange of Certificates........................ 8
<PAGE>
ARTICLE IV.
Representations and Warranties
SECTION 4.01. Representations and Warranties of Company....... 10
SECTION 4.02. Representations and Warranties of Parent and
Newco.......................................... 24
ARTICLE V.
Covenants Relating to Conduct of Business Prior to Merger
SECTION 5.01. Conduct of Business of Company.................. 26
ARTICLE VI.
Additional Agreements
SECTION 6.01. Proxy Statement; Stockholder Meeting............ 29
SECTION 6.02. Access to Information; Confidentiality.......... 29
SECTION 6.03. Reasonable Best Efforts......................... 30
SECTION 6.04. Indemnification................................. 30
SECTION 6.05. Public Announcements............................ 32
SECTION 6.06. Employee Benefits............................... 32
SECTION 6.07. No Solicitation................................. 32
SECTION 6.08. Resignation of Directors........................ 34
SECTION 6.09. Certain Agreements.............................. 34
SECTION 6.10 Newco Obligations............................... 34
ARTICLE VII.
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation To Effect
the Merger..................................... 34
SECTION 7.02. Conditions to Obligations of Parent and Newco... 34
<PAGE>
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination..................................... 36
SECTION 8.02. Effect of Termination........................... 36
SECTION 8.03. Amendment....................................... 37
SECTION 8.04. Extension; Waiver............................... 37
SECTION 8.05. Procedure for Termination, Amendment, Extension
or Waiver....................................... 37
ARTICLE IX.
General Provisions
SECTION 9.01. Nonsurvival of Representations and Warranties... 37
SECTION 9.02. Fees and Expenses............................... 37
SECTION 9.03. Notices......................................... 38
SECTION 9.04. Definitions..................................... 39
SECTION 9.05. Interpretation.................................. 40
SECTION 9.06. Counterparts.................................... 40
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries.. 40
SECTION 9.08. GOVERNING LAW................................... 41
SECTION 9.09. Assignment...................................... 41
SECTION 9.10 Enforcement..................................... 41
SECTION 9.11 Consent to Jurisdiction......................... 41
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 8, 1997, by and among
ATLAS COPCO NORTH AMERICA INC., a Delaware corporation ("Parent"), PS
ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Newco"), and PRIME SERVICE, INC., a Delaware corporation ("Company").
WHEREAS, the respective Boards of Directors of Parent, Newco and
Company have approved, and deem it advisable and in the best interests of
their respective stockholders to consummate, the business combination
contemplated hereby upon the terms and subject to the conditions set forth
herein;
WHEREAS, it is intended that the business combination contemplated
hereby be accomplished by Newco commencing a cash tender offer to purchase
all of the issued and outstanding shares of common stock, par value $0.01 per
share, of Company (the "Company Common Stock"), to be followed by a merger of
Newco with and into Company, with Company being the surviving corporation and
a wholly-owned subsidiary of Parent, all upon the terms and subject to the
conditions set forth herein;
WHEREAS, Parent, Newco and Company desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby and also to prescribe various conditions to
the transactions contemplated hereby;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent is entering into an agreement with certain stockholders of
Company (the "Stockholder Agreement") pursuant to which, among other things,
such stockholders shall agree to take certain actions to support the
transactions contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
ARTICLE I.
THE OFFER
SECTION 1.01. The Offer.
(a) Subject to the provisions of this Agreement, as soon as
practicable, but in no event later than five (5) business days from the date
hereof, Newco shall commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended
<PAGE>
(the "Exchange Act")) an offer to purchase all outstanding shares of Company
Common Stock at a price per share of $32.00 net to the seller in cash,
without interest, subject only to all of the conditions set forth herein and
in Annex I (together with any amendments or supplements thereto, the
"Offer"). The per share amount shall be net to the seller in cash, upon the
terms and subject to the conditions of the Offer and subject to reduction for
any applicable federal, state, local or foreign back-up or other applicable
withholding or stock transfer taxes. Subject to the provisions of this
Agreement and the conditions set forth in Annex I, Newco shall keep the Offer
open until at least midnight, New York City time, on the date twenty (20)
business days from the date of its commencement. As soon as legally
permissible after such date and time, Newco will accept for payment all
shares of Company Common Stock validly tendered pursuant to the Offer and not
withdrawn and pay for all such shares of Company Common Stock as promptly as
practicable thereafter, in each case upon the terms and subject to the
conditions of the Offer. The obligations of Newco to accept for payment and
to pay for any shares of Company Common Stock validly tendered shall be
subject only to the conditions set forth in Annex I. The Offer shall be made
by means of an offer to purchase (the "Offer to Purchase") containing the
terms set forth in this Agreement and the conditions set forth in Annex I.
(b) Newco expressly reserves the right to waive any conditions to
the Offer, in whole or in part at any time or from time to time, in its sole
discretion (other than the conditions set forth in clauses (i) and (iii)(D)
of Annex I), to increase the price per share payable in the Offer, to extend
the duration of the Offer, or to make any other changes in the terms and
conditions of the Offer; provided, however, that without the prior written
consent of Company, Newco shall not (i) decrease the price per share of
Company Common Stock being offered pursuant to the Offer, (ii) change the
form of consideration to be paid pursuant to the Offer, (iii) decrease the
number of shares of Company Common Stock being sought pursuant to the Offer,
(iv) amend or modify any of the conditions to the Offer set forth in Annex I,
(v) impose any additional conditions to the Offer, (vi) extend the Offer, if
all of the Offer conditions are satisfied or waived, or (vii) amend any other
term or condition of the Offer. Notwithstanding anything to the contrary
contained herein, Newco may, in its sole discretion and without the consent
of Company, extend the Offer at any time and from time to time (A) if at the
then scheduled expiration date of the Offer any of the conditions set forth
in Annex I have not been satisfied, (B) for any period required by applicable
law, including, without limitation, any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or its staff
applicable to the Offer and (C) if all Offer conditions are satisfied or
waived but the number of shares of Company Common Stock tendered is less than
90% of the then outstanding number of shares of Company Common Stock, for an
aggregate period of not more than 5 business days (for all such extensions
under this clause (C)) beyond the latest expiration date that would be
permitted under clause (A) or (B) of this sentence; provided, however, that
in the event of any extension pursuant to clause (C), all conditions set
forth in Annex I which would have been satisfied if the Offer had been
consummated on the date of such extension shall be deemed irrevocably waived
by Parent and Newco. So long as this Agreement is in effect and the
conditions to the Offer have not been satisfied or waived, at the request of
Company, Newco shall extend the Offer for an aggregate period of not more
than five business days (for all such extensions) beyond the originally
scheduled expiration
-2-
<PAGE>
date of the Offer. It is agreed that the conditions to the Offer are for the
benefit of Parent and Newco and may be asserted by Parent or Newco regardless
of the circumstances giving rise to any such condition (including any action
or inaction by Parent or Newco not inconsistent with the terms hereof).
(c) Parent and Newco shall file with the SEC as soon as practicable
on the date the Offer is commenced, a Tender Offer Statement on Schedule
14D-1 with respect to the Offer (together with all amendments and supplements
thereto and including the exhibits thereto, the "Schedule 14D-1") which shall
include, as exhibits, the Offer to Purchase and a form of letter of
transmittal and summary advertisement, and other ancillary Offer documents
and instruments pursuant to which the Offer will be made (the Schedule 14D-1,
together with any amendments and supplements thereto, the "Offer Documents").
Each of Parent and Newco agrees to take all steps necessary to cause the
Offer Documents to be filed with the SEC and to be disseminated to Company's
stockholders, in each case as and to the extent required by applicable
federal securities laws and any other applicable law. Each of Parent and
Newco, on the one hand, and Company, on the other hand, agrees promptly to
correct any information provided by it for use in the Offer Documents if and
to the extent that it shall have become false and misleading in any material
respect, and Parent and Newco further agree to take all steps necessary to
cause the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to Company's stockholders, in each case as and to the extent
required by applicable federal securities laws and any other applicable law.
Company and its counsel shall be given the opportunity to review the Offer
Documents before they are filed with the SEC. In addition, Parent and Newco
agree to provide Company and its counsel in writing with any comments Parent,
Newco 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. Company shall cooperate with Parent and Newco in responding to any
comments received from the SEC with respect to the Offer and amending the
Offer in response to any such comments.
(d) Subject to the terms and conditions of the Offer, Parent shall
provide or cause to be provided to Newco on a timely basis the funds
necessary to accept for payment, and pay for, shares of Company Common Stock
that Newco becomes obligated to accept for payment, and pay for, pursuant to
the Offer.
SECTION 1.02. Company Actions.
(a) Company hereby approves of and consents to the Offer and
represents that (i) its Board of Directors, at a meeting duly called and
held, has (A) determined that this Agreement and the transactions
contemplated hereby (including the Offer and the Merger) are fair to and in
the best interests of Company and Company's stockholders, (B) approved this
Agreement and the transactions contemplated hereby (including the Offer and
the Merger), (C) assuming that neither Parent nor Newco is an Interested
Stockholder (as such term is defined in Section 203 of the Delaware General
Corporation Law (the "DGCL"), immediately prior to the Board of Directors of
Company taking the actions described in this Section 1.02, taken all other
actions necessary to render the restrictions on business combinations
contained in Section
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203 of the DGCL inapplicable to the Offer, the Merger, this Agreement and the
Stockholder Agreement, and the transactions contemplated hereby and thereby
and (D) resolved to recommend that the stockholders of Company accept the
Offer, tender all their shares of Company Common Stock pursuant to the Offer
and approve and adopt this Agreement and the transactions contemplated hereby
(provided, however, that such recommendation may be modified, withdrawn or
amended, but only to the extent that Company complies with the provisions of
Section 6.07) and (ii) Credit Suisse First Boston Corporation ("First
Boston") has rendered to the Board of Directors of Company its opinion, as
described in Section 4.01(o). Company hereby consents to the inclusion in
the Offer Documents of the recommendations of Company's Board of Directors
described in clause (i)(D) above, and has obtained the consent of First
Boston to the inclusion in the Schedule 14D-9 (as defined in Section 1.02(b))
of a copy of the written opinion referred to in clause (ii) above.
(b) Upon commencement of the Offer, Company shall promptly file
with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9
(together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-9") which shall contain the
recommendation referred to in clause (i)(D) of Section 1.2(a); provided,
however, that such recommendation may be modified, withdrawn or amended, but
only to the extent that Company complies with the provisions of Section 6.07.
Company agrees to take all steps necessary to cause the Schedule 14D-9 to be
filed with the SEC and to be disseminated to Company's stockholders, in each
case as and to the extent required by applicable federal securities laws and
any other applicable law. Each of Company, on the one hand, and Parent and
Newco, 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 Company further
agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and to be disseminated to Company's
stockholders, in each case as and to the extent required by applicable
federal securities laws and any other applicable law. Parent and its counsel
shall be given the opportunity to review the Schedule 14D-9 before it is
filed with the SEC. In addition, Company agrees to provide Parent and its
counsel in writing with any comments 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. Parent and Newco shall
cooperate with Company in responding to any comments received from the SEC
with respect to the Schedule 14D-9 and amending the Schedule 14D-9 in
response to any such comments.
(c) In connection with the Offer, if requested by Newco, Company
shall promptly furnish, or cause to be furnished, to Newco mailing labels,
security position listings and any available listing or computer file
containing the names and addresses of the record holders of the shares of
Company Common Stock as of a recent date, and shall furnish Newco with such
information and assistance (including updated information) as Newco or its
agents may reasonably request in communicating the Offer to Company's
stockholders. Parent and Newco agree to use such materials only in
connection with the Offer and the Merger, and, if this Agreement shall be
terminated, will promptly return all copies of such materials then in their
possession or control (or the possession or control of their agents or
representatives) to
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the Company or destroy such materials and provide Company with a signed
written statement stating that such materials were destroyed.
SECTION 1.03. Directors. (a) Promptly upon the acquisition by
Newco of such number of shares constituting a majority of Company Common
Stock and from time to time thereafter, Parent shall be entitled to designate
a majority of the members of Company's Board of Directors, subject to
compliance with Section 14(f) of the Exchange Act. Company shall, upon
request by Parent, promptly increase the size of the Board of Directors, to
the extent permitted by its Certificate of Incorporation, and/or secure the
resignations of such number directors as is necessary to enable Parent's
designees to be so elected to the Board of Directors and shall cause Parent's
designees to be so elected. Company shall take, at its sole expense, all
action necessary to effect any such election, including mailing to its
stockholders the information required by Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder in form and substance reasonably
satisfactory to Parent and its counsel, provided that Newco shall have
furnished to Company all information required to be included in the Schedule
14(f)-1 Information Statement (the "Schedule 14f-1") with respect to Parent's
designees on the board. In the event that a Continuing Director (as defined
in Section 1.03(b)) resigns from Company's Board of Directors, Parent, Newco
and Company shall permit the remaining Continuing Director to appoint his
successor in his reasonable discretion.
(b) Following the election or appointment of Parent's designees
pursuant to this Section 1.03 and prior to the Effective Time (as defined in
Section 2.03), any amendment or termination of this Agreement, extension for
the performance or waiver of the obligations or other acts of Parent or Newco
or waiver of any of Company's rights hereunder, shall require the concurrence
of a majority of Company's directors (or the concurrence of the director, if
there is only one remaining) then in office who are directors on the date
hereof (a "Continuing Director"), or are directors (other than directors
designated by Parent in accordance with this Section 1.03) designated by such
persons to fill any vacancy.
ARTICLE II.
The Merger
SECTION 2.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL,
Newco shall be merged with and into Company at the Effective Time. At the
Effective Time, the separate existence of Newco shall cease, and Company
shall continue as the surviving corporation under the laws of the State of
Delaware and shall continue under the name "Prime Service, Inc." and as a
wholly-owned Subsidiary (as defined in Section 9.04) of Parent (Company as
the surviving corporation in the Merger is sometimes referred to herein as
the "Surviving Corporation").
SECTION 2.02. Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 8.01, and subject to the satisfaction or waiver of the
conditions set forth in Article VII, the closing
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of the Merger (the "Closing") will take place at 10:00 a.m. New York City
time on the second business day after satisfaction (or waiver if permissible)
of the conditions set forth in Article VII (the "Closing Date"), at the
offices of Winthrop, Stimson, Putnam & Roberts, One Battery Park Plaza, New
York, New York 10004, unless another date, time or place is agreed to in
writing by the parties hereto.
SECTION 2.03. Effective Time. As soon as practicable following
the satisfaction or waiver of the conditions set forth in Article VI, the
parties shall file with the Secretary of State of the State of Delaware a
certificate of ownership or merger (the "Certificate of Merger") executed in
accordance with the relevant provisions of the DGCL and shall make all other
filings or recordings required under the DGCL. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such other time as is
permissible in accordance with the DGCL and as Newco and Company shall agree
is specified in the Certificate of Merger (the time the Merger becomes
effective being the "Effective Time").
SECTION 2.04. Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the DGCL.
SECTION 2.05. Certificate of Incorporation; By-Laws. (a) At the
Effective Time, and without any further action on the part of Company or
Newco, the Certificate of Incorporation of Company, as in effect immediately
prior to the Effective Time, shall be the certificate of incorporation of
Company following the Merger, until thereafter amended as provided therein
and under the DGCL.
(b) At the Effective Time, and without any further action on the
part of Company or Newco, the By-laws of Newco as in effect at the Effective
Time shall be the By-laws of Company following the Merger until thereafter
changed or amended as provided therein or by applicable law.
SECTION 2.06. Directors. Other than the Continuing Directors, the
directors of Company at the Effective Time shall be the directors of Company
following the Merger, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
SECTION 2.07. Officers. The officers of Company at the Effective
Time shall be the officers of Company following the Merger, until the earlier
of their resignation or removal or until their respective successors are duly
elected or appointed and qualified, as the case may be.
ARTICLE III.
Effect of the Merger on the
Capital Stock of the Constituent Corporations
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SECTION 3.01. Effect on Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of Company, Newco
or any holder of any shares of Company Common Stock or any shares of capital
stock of Newco:
(a) Common Stock of Newco. Each share of common stock of Newco
issued and outstanding immediately prior to the Effective Time shall be
converted into one fully paid and non-assessable share of common stock par
value $0.01 of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Company Common
Stock. Each share of Company Common Stock that is owned by Company or by any
Subsidiary of Company, and each share of Company Common Stock that is owned
by Parent, Newco or any other Subsidiary of Parent shall automatically be
canceled and retired and shall cease to exist, and no cash or other
consideration shall be delivered or deliverable in exchange therefor.
(c) Merger Consideration. Except as otherwise provided herein, each
issued and outstanding share of Company Common Stock (other than shares
canceled pursuant to Section 3.01(b) and Dissenting Shares (as defined in
Section 3.01(d)) shall be converted into the right to receive in cash from
Company following the Merger an amount equal to the highest price per share
paid pursuant to the Offer, without interest (the "Merger Consideration").
(d) Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time held by a holder (if any) who has the
right to demand payment for and an appraisal of such shares in accordance
with Section 262 of the DGCL (or any successor provision) ("Dissenting
Shares") shall not be converted into a right to receive Merger Consideration
(but shall have the rights set forth in Section 262 of the DGCL (or any
successor provision)) unless such holder fails to perfect or otherwise loses
such holder's right to such payment or appraisal, if any. If, after the
Effective Time, such holder fails to perfect or loses any such right to
appraisal, each such share of such holder shall be treated as a share that
had been converted as of the Effective Time into the right to receive Merger
Consideration in accordance with this Section 3.01. Company shall give
prompt notice to Parent of any demands received by Company for appraisal of
shares of Company Common Stock, and Parent shall have the right to
participate in and approve all negotiations and proceedings with respect to
such demands. Company shall not, except with the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any
such demands.
(e) Cancellation and Retirement of Company Common Stock. As of the
Effective Time, all shares of Company Common Stock (other than shares
referred to in Section 3.01(d)) issued and outstanding immediately prior to
the Effective Time, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common Stock shall, to
the extent such certificate represents such shares, cease to have any rights
with respect thereto,
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except the right to receive the Merger Consideration, to be paid in
consideration therefor upon surrender of such certificate in accordance with
Section 3.03.
SECTION 3.02. Treatment of Options. (a) Except as otherwise
agreed to in writing between Company and the holder of any Company Stock
Option (as defined below), and as consented to by Parent, immediately prior
to the Effective Time, each outstanding stock option to purchase shares of
Company Common Stock held by a current or former employee or director of
Company or any Subsidiary thereof (a "Company Stock Option") granted under
any stock option or stock purchase plan, program or arrangement of Company,
including without limitation, the Management Incentive Stock Plan and the
1996 Management Incentive Stock Plan (collectively, the "Stock Plans"),
whether or not then exercisable, shall be canceled by Company, and at the
Effective Time or as soon as practicable thereafter, the holder thereof shall
be entitled to receive from Company as of or as soon as practicable after the
Effective Time in consideration for such cancellation an amount in cash equal
to the product of (i) the number of shares of Company Common Stock previously
subject to such Company Stock Option and (ii) the excess, if any, of the
Merger Consideration over the exercise price per share, previously specified
in such Company Stock Option, reduced by the amount of withholding or other
taxes required by law to be withheld.
(b) Except as provided herein or as otherwise agreed by the parties,
the Stock Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of
Company shall terminate as of the Effective Time.
(c) Prior to the Effective Time, the Board of Directors (or, if
appropriate, any committee administering the Stock Plans) shall adopt such
resolutions or take such actions as are necessary, subject if necessary, to
obtaining consents of the holders thereof, to carry out the terms of this
Section 3.02.
SECTION 3.03. Exchange of Certificates. (a) Exchange Agent.
Prior to the earlier to occur of (i) the mailing of the Proxy Statement (as
defined in Section 4.01(d)) or (ii) the Effective Time, Parent shall appoint
a bank or trust company located in the United States which is reasonably
satisfactory to Company to act as exchange agent (the "Exchange Agent") for
the payment of the Merger Consideration. As of or as soon as reasonably
practicable after the Effective Time, Parent or Newco shall cause Company to
deposit with the Exchange Agent, for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article III, cash
in an amount equal to the aggregate Merger Consideration to be paid hereunder
(the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the Effective
Time, each holder of an outstanding certificate or certificates which prior
thereto represented shares of Company Common Stock shall, upon surrender to
the Exchange Agent of such certificate or certificates and acceptance thereof
by the Exchange Agent, be entitled to the amount of cash, into which the
number of shares of Company Common Stock previously represented by such
certificate or certificates surrendered shall have been converted pursuant to
this Agreement.
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The Exchange Agent shall accept such certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. After
the Effective Time, there shall be no further transfer on the records of
Company or its transfer agent of certificates representing shares of Company
Common Stock and if such certificates are presented to Company for transfer,
they shall be canceled against delivery of the Merger Consideration. If any
Merger Consideration is to be remitted to a name other than that in which the
certificate for Company Common Stock surrendered for exchange is registered,
it shall be a condition of such exchange that the certificate so surrendered
shall be properly endorsed, with signature guaranteed, or otherwise in proper
form for transfer and that the Person (as defined in Section 9.04) requesting
such exchange shall pay to Company or its transfer agent any transfer or
other taxes required by reason of the payment of Merger Consideration to a
name other than that of the registered holder of the certificate surrendered,
or establish to the satisfaction of Company or its transfer agent that such
tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 3.03(b), each certificate for shares of Company Common Stock
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the Merger Consideration as contemplated
by Section 3.01. No interest will be paid or will accrue on any amount
payable as Merger Consideration.
(c) No Further Ownership Rights in Company Common Stock. Merger
Consideration paid upon the surrender for exchange of certificates
representing shares of Company Common Stock in accordance with the terms of
this Article III shall be deemed to have been paid in full satisfaction of
all rights pertaining to the shares of Company Common Stock represented by
such certificates.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
(including any interest and other income received by the Exchange Agent in
respect of all such funds) which remains undistributed to the holders of the
certificates representing shares of Company Common Stock for six months after
the Effective Time shall be delivered to Company, upon demand, and any
holders of shares of Company Common Stock prior to the Merger who have not
theretofore complied with this Article III shall thereafter look only to
Company and only as general creditors thereof for payment of their claim for
Merger Consideration to which such holders may be entitled.
(e) No Liability. No party to this Agreement shall be liable to any
Person in respect of any amount from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law. If any certificates representing shares of Company Common Stock shall
not have been surrendered in exchange for Merger Consideration prior to one
year after the Effective Time (or immediately prior to such earlier date on
which any Merger Consideration would otherwise escheat to or become the
property of any Governmental Entity (as defined in Section 4.01(d))), any
such amount shall, to the extent permitted by applicable law, become the
property of Company, free and clear of all claims or interest of any Person
previously entitled thereto.
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(f) Investment of Exchange Fund. The Exchange Agent shall invest
the cash included in the Exchange Fund as directed by Company, provided that
such investment shall be (i) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than six months from
the Effective Time, (ii) certificates of deposit, eurodollar time deposits
and bankers' acceptances with maturities not exceeding six months and
overnight bank deposits with any commercial bank, depository institution or
trust company incorporated or doing business under the laws of the United
States of America, any state thereof or the District of Columbia, provided
that such commercial bank, depository institution or trust company has, at
the time of investment, (A) capital and surplus exceeding $250 million and
(B) outstanding short-term debt securities which are rated at least A-1 by
Standard & Poor's Rating Group Division of The McGraw-Hill Companies, Inc. or
at least P-1 by Moody's Investors Services, Inc. or carry an equivalent
rating by a nationally recognized rating agency if both of the two named
rating agencies cease to publish ratings of investment, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clauses (i) and (ii) above entered into with any
financial institution meeting the qualifications specified in clause (ii)
above, (iv) commercial paper having a rating in the highest rating categories
from Standard & Poor's Rating Group Division of The McGraw-Hill Companies,
Inc. or Moody's Investors Services, Inc. or carrying an equivalent rating by
a nationally recognized rating agency if both of the two named rating
agencies cease to publish ratings of investments and in each case maturing
within six months of the Effective Time and (v) money market mutual or
similar funds having assets in excess of $1 billion. Any interest and other
income resulting from such investments shall be paid to Company.
(g) Lost Certificates. In the event any certificate or certificates
representing shares of Company Common Stock shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such certificate or certificates to be lost, stolen or destroyed,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
certificate the Merger Consideration deliverable in respect thereof as
determined in accordance with, this Article III, provided that the Person to
whom the Merger Consideration is paid shall, if requested by the Surviving
Corporation and as a condition precedent to the payment thereof, give the
Surviving Corporation a bond in such reasonable amount as it may direct or
otherwise indemnify the Surviving Corporation in a manner satisfactory to it
against any claim that may be made against the Surviving Corporation with
respect to the certificate claimed to have been lost, stolen or destroyed.
ARTICLE IV.
Representations and Warranties
SECTION 4.01. Representations and Warranties of Company. Company
represents and warrants to Parent and Newco as follows:
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(a) Organization, Standing and Corporate Power. Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate
power and authority to carry on its business as now being conducted. Company
is duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing
of its properties makes such qualification or licensing necessary, other than
in such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a Material Adverse Effect
(as defined in Section 9.04) with respect to Company. Prior to the date
hereof, Company has delivered to Parent complete and correct copies of the
Certificate of Incorporation and By-laws of Company as currently in effect.
(b) Subsidiaries; Investments. The only direct or indirect
Subsidiary of Company is Prime Equipment Company, a Texas corporation, which
owns no assets, has no liabilities (whether accrued, absolute, contingent or
otherwise) and conducts no business. Company does not own, directly or
indirectly, any capital stock or other ownership interest in any other
corporation, partnership, business association, joint venture or other entity.
(c) Capital Structure. The authorized capital stock of Company
consists of (i) 100,000,000 shares of Company Common Stock, par value $.01
per share, and (ii) 10,000,000 shares of preferred stock (the "Preferred
Stock"). Subject to any Permitted Changes (as defined in Section 5.01(a)(ii))
there are: (i) 27,991,721 shares of Company Common Stock issued and
outstanding (excluding shares held in the treasury of Company); (ii) no
shares of Company Common Stock held in the treasury of Company; (iii)
1,759,727 shares of Company Common Stock reserved for issuance upon exercise
of authorized but unissued Company Stock Options pursuant to the Stock Plans;
(iv) 611,732 shares of Company Common Stock issuable upon exercise of awarded
but unexercised Company Stock Options, with an exercise price per each
awarded but unexercised Company Stock Option as is set forth in Section
4.01(c) of the disclosure schedule delivered to Parent by Company at the time
of execution of this Agreement (the "Disclosure Schedule"); and (v) no shares
of Preferred Stock issued and outstanding or in the treasury of Company.
Except as set forth above, no shares of capital stock or other equity
securities of Company are issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of Company are, and all shares which may
be issued pursuant to the Stock Plans will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are no outstanding bonds, debentures, notes or other
indebtedness or other securities of Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of Company may vote. Except as set
forth above, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which Company is a party or by which it is bound obligating Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares
of capital stock or other equity or voting securities of Company or
obligating Company to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking. Except as set forth in Section 4.01(c) of the Disclosure
Schedule, there are no outstanding contractual obligations, commitments,
understandings or arrangements of Company to repurchase, redeem or otherwise
acquire or
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make any payment in respect of any shares of capital stock of Company and,
except as contemplated by the Stockholder Agreement, to the knowledge (as
defined in Section 9.04) of Company, there are no irrevocable proxies with
respect to shares of capital stock of Company. Except as set forth in
Section 4.01(c) of the Disclosure Schedule, there are no agreements or
arrangements pursuant to which Company is or could be required to register
shares of Company Common Stock or other securities under the Securities Act
of 1933, as amended (the "Securities Act") or other agreements or
arrangements with or, to the knowledge of Company, among any securityholders
of Company with respect to securities of Company.
(d) Authority; Noncontravention. Company has the requisite
corporate power and authority to enter into this Agreement and, subject to
Company Stockholder Approval (as defined in Section 4.01(q)) with respect to
the consummation of the Merger, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Company and the
consummation by Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Company,
subject, in the case of the Merger, to Company Stockholder Approval. This
Agreement has been duly executed and delivered by Company and (assuming due
authorization, execution and delivery by Parent and Newco) constitutes a
valid and binding obligation of Company, enforceable against Company in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. Except as disclosed in Section
4.01 of the Disclosure Schedule, the execution and delivery of this Agreement
does not, and the consummation by Company of the transactions contemplated by
this Agreement and compliance by Company with the provisions hereof will not,
conflict with, or result in any breach or violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of or "put" right with respect to
any obligation or to loss of a material benefit under, or result in the
creation of any Lien (as defined in Section 9.04) upon any of the properties
or assets of Company under, (i) the Certificate of Incorporation, as amended,
or By-laws, as amended, of Company, (ii) any loan or credit agreement, note,
note purchase agreement, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Company or
its properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule, regulation or arbitration award
applicable to Company or its properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, breaches, violations, defaults,
rights, losses or Liens that individually or in the aggregate would not have
a Material Adverse Effect with respect to Company or could not prevent,
materially hinder or materially delay the ability of Company to consummate
the transactions contemplated by this Agreement. No consent, approval, order
or authorization of, or registration, declaration or filing with, or notice
to, any federal, state or local government or any court, administrative
agency or commission or other governmental authority or agency, domestic or
foreign (a "Governmental Entity"), is required by or with respect to Company
in connection with the execution and delivery of this Agreement by Company or
the consummation by Company of the transactions contemplated
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hereby, except for (i) the filing of a pre-merger notification and report
form by Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) the filing with the SEC of (A) a proxy
statement relating to Company Stockholder Approval (such proxy statement as
amended or supplemented from time to time, the "Proxy Statement"), (B) the
Schedule 14D-1 to be filed by Parent and Newco, (C) the Schedule 14D-9 to be
filed by Company and (D) such reports under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated
by this Agreement, (iii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with
the relevant authorities of other states in which Company is qualified to do
business, and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations, filings or notices the failure of which to make
or obtain, individually or in the aggregate, would not (x) prevent or
materially delay consummation of the Merger or the other transactions
contemplated hereby or (y) have a Material Adverse Effect with respect to
Company.
(e) SEC Documents. Company has filed with the SEC all reports,
schedules, forms, statements and other documents required pursuant to the
Securities Act and the Exchange Act since February 27, 1995 (collectively,
and in each case including all exhibits and schedules thereto and documents
incorporated by reference therein, the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act, or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents (including
any and all financial statements included therein) as of such dates contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Company included in all
SEC Documents filed since February 27, 1995 (the "SEC Financial Statements")
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited consolidated quarterly
statements, as permitted by Form 10-Q of the SEC), applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in accordance with generally accepted accounting
principles the consolidated financial position of Company as of the dates
thereof and the consolidated results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited quarterly statements,
to normal year-end audit adjustments).
(f) Information Supplied. None of the information supplied or to be
supplied by Company for inclusion or incorporation by reference in (i) the
Schedule 14D-9 will, at the time the Schedule 14D-9 is filed with the SEC,
and at any time it is amended or supplemented, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) the
Proxy Statement will, at the date it is first mailed to Company's
stockholders and at the time of the Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any
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material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are
made, not misleading, or (iii) the Offer Documents will, at the time the
Offer Documents or any amendments or supplements thereto are first published,
sent to Company's stockholders, or at the time the Offer is consummated,
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 the light of the circumstances under which they were
made, not misleading. The Schedule 14D-9 and the Proxy Statement will comply
as to form in all material respects with the requirements of the Exchange Act
and the rules and regulations promulgated thereunder, except that no
representation is made by Company with respect to statements made or
incorporated by reference therein based on information supplied in writing by
Parent or Newco specifically for inclusion therein. For purposes of this
Agreement, the parties agree that statements made and information in the
Schedule 14D-9 and the Proxy Statement relating to the federal income tax
consequences of the transactions herein contemplated to holders of Company
Common Stock shall be deemed to be supplied by Company and not by Parent or
Newco.
(g) Absence of Certain Changes or Events. Except as required by
this Agreement, and except as disclosed in the SEC Documents filed by Company
since January 1, 1997 and prior to the date of this Agreement (the "Recent
SEC Documents"), since the date of the most recent audited financial
statements included in such Recent SEC Documents, Company has conducted its
business in the ordinary course consistent with past practice in all material
respects, and there is not and has not been: (i) any Material Adverse Change
(as defined in Section 9.04) with respect to Company; (ii) any condition,
event or occurrence which, individually or in the aggregate, would have a
Material Adverse Effect with respect to Company; (iii) any action, other than
those described on Section 4.01(g) of the Disclosure Schedule, which, if it
had been taken or occurred after the execution of this Agreement, would have
required the consent of Parent or Newco pursuant to Section 5.01; or (iv) any
condition, event or occurrence which, individually or in the aggregate, would
prevent, materially hinder or materially delay the ability of Company to
consummate the transactions contemplated by this Agreement.
(h) Litigation; Labor Matters; Compliance With Laws.
(i) Except as disclosed in the Recent SEC Documents or in
Section 4.01(h)(i) of the Disclosure Schedule there is (1) no suit,
action or proceeding pending, and (2) to the knowledge of Company, no
suit, action or proceeding threatened against or investigation pending
with respect to Company that, individually or in the aggregate, would
have a Material Adverse Effect with respect to Company or prevent,
materially hinder or materially delay the ability of Company to
consummate the transactions contemplated by this Agreement, nor is there
any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Company which, individually or
in the aggregate, would have any such effect.
(ii) Except as disclosed in Section 4.01(h)(ii) of the
Disclosure Schedule or in the SEC Documents, (1) there are no labor
strikes, disputes, slowdowns,
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stoppages or lockouts actually pending, or, to the knowledge of Company,
threatened against or affecting Company and during the past five years
there have been no such actions; (2) Company is not a party to or bound
by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of Company;
(3) to the knowledge of Company, there are no current union organizing
activities among the employees of Company; (4) true, correct and complete
copies of all written personnel policies, rules or procedures applicable
to employees of Company have been delivered to Parent; (5) Company is,
and has at all times been, in material compliance with all applicable
laws respecting employment and employment practices, terms and conditions
of employment, wages, hours of work and occupational safety and health;
(6) there are no material complaints, charges, arbitrations,
controversies, lawsuits or other proceedings pending or, to the knowledge
of Company, threatened in any forum against Company alleging breach of
any express or implied contract of employment, any law or regulation
governing employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment
relationship; (7) there are no employment contracts or severance
agreements with any employees of Company; and (8) since the enactment of
the Worker Adjustment and Retraining Notification Act of 1988 (the "WARN
Act"), Company has not effectuated (A) a "plant closing" (as defined in
the WARN Act) affecting any site of employment or one or more facilities
or operating units within any site of employment or facility of Company,
or (B) a "mass layoff" (as defined in the WARN Act) affecting any site of
employment or facility of Company; nor has Company engaged in layoffs or
employment terminations sufficient in number to trigger application of
any similar state or local law.
(iii) To the knowledge of Company, the conduct of the business
of Company complies in all material respects with all statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees or arbitration
awards applicable thereto.
(i) Employee Benefit Plans. (1) Section 4.01(i) of the Disclosure
Schedule contains a true and complete list of each written and material
unwritten "employee benefit plan" (within the meaning of section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")
(including, without limitation, multiemployer plans within the meaning of
ERISA Section 3(37)), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements relating to employment, benefits or
entitlements, whether or not subject to ERISA (including any funding
mechanism therefor now in effect or required in the future as a result of the
transaction contemplated by this Agreement or otherwise), under which any
employee or former employee of Company has any present or future right to
benefits or under which Company has any present or future liability. All
such plans, agreements, programs, policies and arrangements shall be
collectively referred to as the "Company Plans".
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<PAGE>
(2) With respect to each Company Plan, Company has made available to
Parent a current, accurate and complete copy (or, to the extent no such copy
exists, an accurate description) thereof and, to the extent applicable, (i)
any related trust agreement, annuity contract or other funding instrument;
(ii) the most recent determination letter; (iii) any summary plan description
and other written communications (or a description of any oral
communications) by Company to its employees concerning the extent of the
benefits provided under a Company Plan; and (iv) for the three most recent
years (I) the Form 5500 and attached schedules; (II) audited financial
statements; and (III) actuarial valuation reports.
(3) (i) Each Company Plan has been established and administered in
accordance with its terms, and in compliance with the applicable provisions
of ERISA, the Internal Revenue Code of 1986, as amended (the "Code") and
other applicable laws, rules and regulations (including the applicable laws,
rules and regulations of any foreign jurisdiction), in each case, in all
material respects; (ii) each Company Plan which is intended to be qualified
within the meaning of Code Section 401(a) has received a favorable
determination letter as to its qualification and to the knowledge of Company
nothing has occurred, whether by action or failure to act, which would cause
the loss of such qualification; (iii) with respect to any Company Plan, no
material actions, suits or claims (other than routine claims for benefits in
the ordinary course) are pending or, to the knowledge of Company, threatened,
and, to the knowledge of Company, no facts or circumstances exist which could
give rise to any such material actions, suits or claims and Company will
promptly notify Parent in writing of any pending claims or, to the knowledge
of Company, any threatened claims arising between the date hereof and the
Effective Time; (iv) neither Company nor, to the knowledge of Company, any
other party has engaged in a prohibited transaction, as such term is defined
under Code Section 4975 or ERISA Section 406, which would subject Company or
Parent to any material taxes, penalties or other liabilities under the Code
or ERISA; (v) no event has occurred and no condition exists that would
subject Company, either directly or by reason of its affiliation with any
member of its "Controlled Group" (defined as any organization which is a
member of a controlled group of organizations within the meaning of Code
Sections 414(b), (c), or (m)), to any material tax, fine or penalty imposed
by ERISA, the Code or other applicable laws, rules and regulations (including
the applicable laws, rules and regulations of any foreign jurisdiction); (vi)
all insurance premiums required to be paid and all contributions required to
be made under the terms of any Company Plan, the Code, ERISA or other
applicable laws, rules and regulations (including the applicable laws, rules
and regulations of any foreign jurisdiction) as of the Effective Time have
been or will be timely paid or made prior thereto and adequate reserves have
been provided for on Company's balance sheet for any premiums (or portions
thereof) and for all benefits attributable to service on or prior to the
Effective Time; (vii) for each Company Plan with respect to which a Form 5500
has been filed, to the knowledge of Company, no material change has occurred
with respect to the matters covered by the most recent Form 5500 since the
date thereof; and (viii) no Company Plan provides for an increase in benefits
on or after the Effective Time.
(4) Except to the extent that each of the following, individually or
in the aggregate, would not result in a material liability to Company, (i) no
Company Plan has incurred any "accumulated funding deficiency" as such term
is defined in ERISA Section 302
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and Code Section 412 (whether or not waived); (ii) no event or condition
exists which could be deemed a reportable event within the meaning of ERISA
Section 4043 which could result in a liability to Company or any member of
its Controlled Group and no condition exists which could subject Company or
any member of its Controlled Group to a fine under ERISA Section 4071; (iii)
as of the Effective Time, Company and each member of its Controlled Group
have made all required premium payments when due to the Pension Benefit
Guaranty Corporation ("PBGC"); (iv) neither Company nor any member of its
Controlled Group is subject to any liability to the PBGC for any plan
termination occurring on or prior to the Effective Time; (v) no amendment has
occurred which has required or would require Company or any member of its
Controlled Group to provide security pursuant to Code Section 401(a)(29); and
(vi) neither Company nor any member of its Controlled Group has engaged in a
transaction which could subject it to liability under ERISA Section 4069.
(5) With respect to each of the Company Plans which is not a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA but is
subject to Title IV of ERISA (or a substantially similar provision of a
foreign jurisdiction), as of the Effective Time, except as disclosed in
Section 4.01(i) of the Disclosure Schedule, the assets of each such Company
Plan are at least equal in value to the present value of the accrued benefits
(vested and unvested) of the participants in such Company Plan on an
accumulated benefit obligation and projected benefit obligation basis within
the meaning of Statement of Financial Accounting Standard ("SFAS") No. 87,
based on the actuarial methods and assumptions indicated in the most recent
actuarial valuation reports.
(6) With respect to any multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA) to which Company or any member of its Controlled
Group has any liability or contributes (or has at any time contributed or had
an obligation to contribute): (i) Company and each member of its Controlled
Group has or will have, as of the Effective Time, made all contributions to
each such multiemployer plan required by the terms of such multiemployer plan
or any collective bargaining agreement; (ii) neither Company nor any member
of its Controlled Group has incurred any material withdrawal liability under
Title IV of ERISA or would be subject to such liability if, as of the
Effective Time of the merger, Company or any member of its Controlled Group
were to engage in a complete withdrawal (as defined in ERISA Section 4203) or
partial withdrawal (as defined in ERISA Section 4205) from any such
multiemployer plan; (iii) no such multiemployer plan is in reorganization or
insolvent (as those terms are defined in ERISA Sections 4241 and 4245,
respectively); and (iv) neither Company nor any member of its Controlled
Group has engaged in a transaction which could subject it to liability under
ERISA Section 4212(c).
(7) (i) Each Company Plan which is intended to meet the requirements
for tax-favored treatment under Subchapter B of Chapter 1 of Subtitle A of
the Code meets such requirements; and (ii) Company has received a favorable
determination from the Internal Revenue Service with respect to any trust
intended to be qualified within the meaning of Code Section 501(c)(9).
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<PAGE>
(8) Section 4.01(i)(8) of the Disclosure Schedule sets forth, on a
plan by plan basis, the present value of benefits payable presently or in the
future to present or former employees of Company under each unfunded Company
Plan that must be accounted for in accordance with SFAS No. 87 or 106.
(9) Except as set forth in Section 4.01(i)(9) of the Disclosure
Schedule, no Company Plan exists which could result in the payment to any
Company employee of any money or other property or rights or accelerate or
provide any other rights or benefits to any Company employee as a result of
the transaction contemplated by this Agreement, whether or not such payment
would constitute a parachute payment within the meaning of Code section 280G.
(j) Tax Returns and Tax Payments. Except as disclosed in Section
4.01(j) of the Disclosure Schedule, Company and each of its Subsidiaries, and
any consolidated, combined, unitary or aggregate group for Tax purposes of
which Company or any of its Subsidiaries is or has been a member (a
"Consolidated Group") has timely filed all Tax Returns required to be filed
by it, in material compliance with all applicable laws, and such Tax Returns
are complete and correct in all material respects, has timely paid all Taxes
shown thereon to be due and has provided adequate reserves in its financial
statements for any Taxes that have not been paid, whether or not shown as
being due on any Tax Returns. Except as disclosed in Section 4.01(j) of the
Disclosure Schedule: (i) no material claim for unpaid Taxes has become a lien
against the property of Company or a member of any Consolidated Group or is
being asserted against Company or a member of any Consolidated Group; (ii) no
audit of any Tax Return of Company or a member of any Consolidated Group is
pending, being conducted or, to the knowledge of Company, threatened by a Tax
authority; (iii) no extension of the statute of limitations on the assessment
of any Taxes has been granted by Company or a member of any Consolidated
Group and is currently in effect; (iv) no consent under Section 341(f) of the
Code has been filed with respect to Company; (v) Company is not a party to
any agreement or arrangement that would result, separately or in the
aggregate, in the actual or deemed payment by Company of any "excess
parachute payments" within the meaning of Section 280G of the Code; (vi) no
acceleration of the vesting schedule for any property that is substantially
unvested within the meaning of the regulations under Section 83 of the Code
will occur in connection with the transactions contemplated by this
Agreement; (vii) Company is not and has not been at any time a member of any
partnership or joint venture or the holder of a beneficial interest in any
trust for any period for which the statute of limitations for any Tax has not
expired; (viii) Company has not been at any time a member of an affiliated
group of corporations for purposes of Section 1501 of the Code that have
filed consolidated returns; (ix) Company is not a party to any tax sharing or
allocation agreement, nor has it given any indemnity against Taxes imposed on
any other Person, that has not expired by its terms or otherwise have been
terminated and for which no amount is claimed to be owed; (x) Company has not
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code; (xi) Company is neither doing business
in nor engaged in a trade or business in any jurisdiction in which it has not
filed all required income or franchise tax returns; (xii) Company has made
all payments of estimated Taxes required to be made under Section 6655
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of the Code and any comparable state, local or foreign Tax provision; (xiii)
all Taxes required to be withheld, collected or deposited by or with respect
to Company have been timely withheld, collected or deposited, as the case may
be, and, to the extent required, have been paid to the relevant taxing
authority; (xiv) Company has not issued or assumed (A) any obligations
described in Section 279(a) of the Code, (B) any applicable high yield
discount obligations, as defined in Section 163(i) of the Code, or (C) any
registration-required obligations, within the meaning of Section 163(f)(2) of
the Code, that are not in registered form; (xv) there are no requests for
information currently outstanding that could affect the Taxes of Company;
(xvi) there are no proposed reassessments of any property owned by Company or
other proposals that could materially increase the amount of any Tax to which
Company would be subject; and (xvii) there is no power of attorney currently
in force with respect to any matter relating to Taxes that could materially
affect the Tax liability of Company. As used herein, "Taxes" shall mean all
taxes of any kind, including, without limitation, those on or measured by or
referred to as income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, property or windfall profits taxes,
customs, duties or similar fees, assessments or charges of any kind
whatsoever, or combination of two or more of the foregoing, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any governmental authority, domestic or foreign. As used herein, "Tax Return"
shall mean any return, report or statement required to be filed with any
governmental authority with respect to Taxes.
(k) Properties. Section 4.01(k) of the Disclosure Schedule contains
a true and complete list of all real properties owned or leased by Company.
Company has good and marketable title to all properties, assets and rights of
any kind whatsoever which are material to the conduct of its business
(whether real, personal or mixed, and whether tangible or intangible) owned
by it (collectively, the "Company Assets"), in each case free and clear of
all Liens and other encumbrances except for such Liens which have been
disclosed in the SEC Documents or are listed on Section 4.01(k) of the
Disclosure Schedule and except those Liens which, individually or in the
aggregate, would not have a Material Adverse Effect with respect to Company.
There are no pending or, to the knowledge of Company, threatened condemnation
proceedings against or affecting any Company Asset, and none of the Company
Assets is subject to any commitment or other arrangement for its sale to a
third party outside the ordinary course of business, which either
individually or in the aggregate would have a Material Adverse Effect with
respect to Company. Company has all permits (other than permits required
under Environmental Laws (as defined in Section 4.01(l)), the representations
and warranties with respect to which are set forth in Section 4.01(l))
necessary to own or operate the Company Assets and no such permits will be
required, as a result of the Merger or the other transactions contemplated
hereby, to be issued, re-issued or transferred after the Effective Time in
order to permit Company following the Merger to continue to own or operate
such Company Assets, other than any such permits which are ministerial in
nature or the absence of which, individually or in the aggregate, would not
have a Material Adverse Effect with respect to Company.
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(l) Environmental Matters. (i) Except as disclosed in Section
4.01(l)(i) of the Disclosure Schedule or in any Phase I or Phase II report
previously made available to Parent, Company has obtained all permits,
licenses and other authorizations which are required under the Environmental
Laws for the ownership, use and operation of each location owned, operated or
leased by Company (the "Property"), all such permits, licenses and
authorizations are in effect, no appeal nor any other action is pending to
revoke any such permit, license or authorization, and Company is in full
compliance with all terms and conditions of all such permits, licenses and
authorizations;
(ii) Except as disclosed in Section 4.01(l)(ii) of the
Disclosure Schedule, Company and the Property are in compliance with all
Environmental Laws including, without limitation, all restrictions,
conditions, standards, limitations, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental Laws
or contained in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder;
(iii) Except as disclosed in Section 4.01(l)(iii) of the
Disclosure Schedule, to the knowledge of Company, Company has heretofore
delivered to Parent true and complete copies of all environmental studies
in the possession of Company or any of its current employees or
consultants made in the last ten years relating to the Property or any
other property or facility previously owned, operated or leased by
Company;
(iv) Except as disclosed in Section 4.01(l)(iv) of the
Disclosure Schedule, there is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter existing or pending, or to the
knowledge of Company threatened, relating to Company, the Property or any
other property or facility owned, operated or leased, or previously owned
operated or leased by Company relating in any way to the Environmental
Laws or any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved
thereunder;
(v) Except as disclosed in Section 4.01(l)(v) of the Disclosure
Schedule, Company has not, and to the Company's knowledge, no other
Person has, Released, placed, stored, buried or dumped any Hazardous
Substances or any other wastes produced by, or resulting from, any
business, commercial or industrial activities, operations or processes,
on, beneath or adjacent to the Property or any property formerly owned,
operated or leased by Company except for inventories of such substances
to be used, and wastes generated therefrom, in the ordinary course of
business of Company (which inventories and wastes, if any, were and are
stored or disposed of in accordance with applicable laws and regulations
and in a manner such that there has been no Release of any such
substances into the environment);
(vi) Except as disclosed in Section 4.01(l)(vi) of the
Disclosure Schedule, no Release, or Cleanup occurred at the Property or
any other properties
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owned by Company which could result in the assertion or creation of a lien
on the Property by any governmental body or agency with respect thereto,
nor has any such assertion of a lien been made by any governmental body or
agency with respect thereto;
(vii) Except as disclosed in Section 4.01(l)(vii) of the
Disclosure Schedule, no employee of Company in the course of his or her
employment with Company has been exposed to any Hazardous Substances or
other substance, generated, produced or used by Company which could give
rise to any claim against Company;
(viii) Except as disclosed in Section 4.01(l)(viii) of the
Disclosure Schedule, Company has not received any notice or order from
any governmental agency or private or public entity advising it that it
is responsible for or potentially responsible for Cleanup or paying for
the cost of Cleanup of any Hazardous Substances or any other waste or
substance and Company has not entered into any agreements concerning such
Cleanup, nor is Company aware of any facts which might reasonably give
rise to such notice, order or agreement;
(ix) Except as disclosed in Section 4.01(l)(ix) of the
Disclosure Schedule, the Property does not contain any: (a) underground
storage tanks; (b) asbestos; (c) equipment using PCBs; (d) underground
injection wells; or (e) septic tanks in which process wastewater or any
Hazardous Substances have been disposed;
(x) Except as disclosed in Section 4.01(l)(x) of the Disclosure
Schedule, Company has not entered into any agreement that may require it
to pay to, reimburse, guarantee, pledge, defend, indemnify or hold
harmless any Person for or against any Environmental Liabilities and
Costs;
(xi) Except as disclosed in Section 4.01(l)(x) of the
Disclosure Schedule, with regard to Company and the Property, there are
no events, conditions, circumstances, activities, practices, incidents,
actions or Company plans which are reasonably likely to materially
interfere with or prevent compliance or continued compliance with the
Environmental Laws as in effect on the date hereof or with any
regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, or
which are reasonably likely to give rise to any material common law or
legal liability under the Environmental Laws, or otherwise form the basis
of any material claim, action, demand, suit, proceeding, hearing, notice
of violation, study or investigation, based on or related to the
manufacture, generation, processing, distribution, use, treatment,
storage, place of disposal, transport or handling, or the Release or
threatened Release into the indoor or outdoor environment by Company or a
facility of Company, of any Hazardous Substances;
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(xii) For purposes of this Agreement, the following terms shall
have the following meanings:
"Cleanup" means all actions required to: (1) cleanup, remove, treat
or remediate Hazardous Substances in the indoor or outdoor environment;
(2) prevent the Release of Hazardous Substances so that they do not
migrate, endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; (3) perform pre-remedial studies and
investigations and post-remedial monitoring and care; or (4) respond to
any government requests for information or documents in any way relating
to cleanup, removal, treatment or remediation or potential clean up,
removal, treatment or remediation of Hazardous Substances in the indoor
or outdoor environment.
"Environmental Laws" means all foreign, federal, state and local
laws, regulations, rules and ordinances relating to pollution or
protection of the environment, or health and safety, including, without
limitation, laws relating to Releases or threatened Releases of Hazardous
Substances into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or handling of
Hazardous Substances, and all laws and regulations with regard to
recordkeeping, notification, disclosure, training and reporting
requirements respecting Hazardous Substances, and all laws relating to
endangered or threatened species of fish, wildlife and plants and the
management or use of natural resources.
"Hazardous Substances" means all substances defined as hazardous
substances, oils, pollutants or contaminants in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5,
or defined as such by, or regulated as such under, any Environmental Law.
"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to conduct cleanup, losses,
damages, deficiencies, punitive damages, consequential damages, treble
damages, costs and expenses (including, without limitation, all
reasonable fees, disbursements and expenses of counsel, expert and
consulting fees and costs of investigations and feasibility studies and
responding to government requests for information or documents), fines,
penalties, restitution and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or
future, resulting from any claim or demand, by any Person, whether based
in contract, tort, implied or express warranty, strict liability, joint
and several liability, criminal or civil statute, including any
Environmental Law, or arising from environmental, health or safety
conditions, the Release or threatened Release of Hazardous Substances
into the environment, as a result of past or present ownership, leasing
or operation of any Properties, owned, leased or operated by Company;
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"Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, and surface or
subsurface strata) or into or out of any property, including the movement
of Hazardous Substances through or in the air, soil, surface water,
groundwater or property.
(m) Material Contracts. Company is not, and has not received any
notice or has any knowledge that any other party is, in default in any
respect under any material contract, agreement, commitment, arrangement,
lease, policy or other instrument to which it is a party or by which it is
bound ("Material Contracts"), except for those defaults which would not have
a Material Adverse Effect with respect to Company; and, to the knowledge of
Company, there has not occurred any event that with the lapse of time or the
giving of notice or both would constitute such a material default.
(n) Brokers. No broker, investment banker, financial advisor or
other Person, other than First Boston, the fees and expenses of which will be
paid by Company (pursuant to fee agreements, copies of which have been
provided to Parent), is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Company.
(o) Opinion of Financial Advisor. Company has received the opinion
of First Boston, dated the date of this Agreement, to the effect that, as of
such date, the consideration to be received in the Offer and the Merger by
Company's stockholders is fair to such holders of Company Common Stock from a
financial point of view, a signed copy of which opinion has been delivered to
Parent.
(p) Board Recommendation. The Board of Directors of Company, at a
meeting duly called and held, has (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, taken together are
fair to and in the best interests of the stockholders of Company, (ii)
assuming that neither Parent nor Newco is an Interested Stockholder (as such
term is defined in Section 203 of the Delaware General Corporation Law (the
"DGCL") immediately prior to the Board of Directors of Company taking the
actions described in this Section 4.01(p), taken all other actions necessary
to render the restrictions on business combinations contained in Section 203
of the DGCL inapplicable to the Offer, the Merger, this Agreement and the
Stockholders Agreement, and the transactions contemplated hereby and thereby
and (iii) resolved to recommend that the holders of the shares of Company
Common Stock accept the Offer, tender all their shares of Company Common
Stock pursuant to the Offer and approve this Agreement and the transactions
contemplated herein, including the Merger.
(q) Required Company Vote. The affirmative vote of a majority of
the outstanding shares of Company Common Stock (the "Company Stockholder
Approval") is the
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only vote of the holders of any class or series of Company's securities which
may be necessary to approve this Agreement, the Merger and the other
transactions contemplated hereby.
(r) No Rights Plan. Company has no rights plan or similar preferred
stock purchase plan or similar arrangement.
(s) Intellectual Property. (i) The only material intellectual
property owned or used by Company which is material to the business of the
Company consists of Company's mark "Prime Equipment" and its rights with
respect to its point-of-sale system (the "Material Intellectual Property").
(ii) Company owns or has the right to use all the Material
Intellectual Property as it is currently used and consistent with past
practice.
(iii) Except as set forth on Section 4.01(s)(iii) of the Disclosure
Schedule: (1) all of the Material Intellectual Property of Company is
subsisting and unexpired, free of all liens, encumbrances or other defects,
has not been abandoned and does not infringe or otherwise impair the
intellectual property rights of any third party; (2) none of the Material
Intellectual Property of Company is the subject of any license, security
interest or other agreement granting rights therein to any third party; (3)
no judgment, decree, injunction, rule or order has been rendered by any U.S.
or foreign Governmental Entity which would limit, cancel or question the
validity of, or Company's rights in and to any Material Intellectual Property
in any respect that would have individually or in the aggregate a Material
Adverse Effect with respect to Company; (4) Company has not received notice
of any pending or threatened suit, action or proceeding that seeks to limit,
cancel or question the validity of, or Company's rights in and to any
Material Intellectual Property, which, if adversely determined, could
reasonably be expected to have individually or in the aggregate a Material
Adverse Effect with respect to Company; and (5) Company has taken reasonable
steps to protect, maintain and safeguard the Material Intellectual Property,
for which improper or unauthorized disclosure would impair its value or
validity.
(t) Financial Accounting. Company has been advised by its
independent accountants that no Transaction Proposal (as defined in Section
6.07) will qualify as a "pooling of interests" for financial accounting
purposes for at least twelve months from the date hereof.
SECTION 4.02. Representations and Warranties of Parent and Newco.
Parent and Newco represent and warrant to Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and
Newco is duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated and has the requisite
corporate power and authority to carry on its business as now being
conducted. Each of Parent and Newco is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary,
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other than in such jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) would not have a Material Adverse
Effect with respect to it.
(b) Subsidiaries. Newco has no direct or indirect Subsidiaries.
(c) Capital Structure. The authorized capital stock of Newco
consists of 1000 shares of common stock, par value $.01 per share, all of
which have been validly issued, are fully paid and nonassessable and are
owned by Parent, free and clear of any Lien.
(d) Authority; Noncontravention. Each of Parent and Newco has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Parent and Newco and the consummation by
Parent and Newco of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate action on the part of Parent and
Newco. This Agreement has been duly executed and delivered by Parent and
Newco and (assuming due authorization, execution and delivery by Company)
constitutes a valid and binding obligation of each of Parent and Newco,
enforceable against each of Parent and Newco in accordance with its terms,
except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency or similar laws, now or hereafter in effect, affecting creditors'
rights generally, and (ii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought. The execution and delivery of this Agreement do not, and the
consummation by Parent and Newco of the transactions contemplated by this
Agreement and compliance by Parent and Newco with the provisions of this
Agreement will not, conflict with, or result in any breach or violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of or "put"
right with respect to any obligation or to loss of a material benefit under,
or result in the creation of any Lien upon any of the properties or assets of
Parent or Newco under, (i) the certificate of incorporation or by-laws of
Parent or Newco, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Parent or Newco or its properties or
assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree, statute,
law, ordinance, rule, regulation or arbitration award applicable to Parent or
Newco or their respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, breaches, violations, defaults,
rights, losses or Liens that individually or in the aggregate could not have
a Material Adverse Effect with respect to Parent or Newco or could not
prevent, hinder or materially delay the ability of Parent or Newco to
consummate the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing
with, or notice to, any Governmental Entity is required by or with respect to
Parent or Newco in connection with the execution and delivery of this
Agreement by Parent and Newco or the consummation by Parent and Newco of any
of the transactions contemplated by this Agreement, except for (i) the filing
of a pre-merger notification and report form under the HSR Act, (ii) the
filing with the SEC of (A) the Proxy Statement, (B) the Schedule 14D-1 to be
filed by Parent and Newco, (C) the Schedule 14D-9 to be filed by Company and
(D) such
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other reports under the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated hereby, (iii) the filing of
the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other
states in which Company is qualified to do business and (iv) such other
consents, approvals, orders, authorizations, registrations, declarations,
filings or notices as may be required under the "takeover" or "blue sky" laws
of various states.
(e) Brokers. No broker, investment banker, financial advisor or
other Person, other than Merrill Lynch & Co., the fees and expenses of which
will be paid by Parent or its Affiliates (as defined in Section 9.04), is
entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or its
Affiliates.
(f) Interim Operations of Newco. Newco was formed on May 30, 1997
solely for the purpose of engaging in the transactions contemplated hereby,
has engaged in no other business activities and has conducted its operations
only as contemplated hereby.
(g) Offer Documents; Proxy Statement. The Offer Documents shall
not, at the time the Offer Documents or any amendments or supplements thereto
are first published, sent or given to Company's stockholders, as the case may
be, 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, (ii) none of the information supplied in writing by Parent or
Newco specifically for inclusion in the Schedule 14D-9 will, at the time the
Schedule 14D-9 is filed with the SEC, and at any time it is amended or
supplemented, 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 (iii) none of the information supplied in
writing by Parent or Newco specifically for inclusion in the Proxy Statement
will, at the date it is first mailed to the stockholders of Company or at the
time of the Stockholders Meeting, 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 and (iv) the
Schedule 14f-1 will not, at the time the Schedule 14f-1 is filed with the
SEC, and at any time it is amended or supplemented, 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 statement therein, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, neither Parent nor Newco makes any
representation or warranty with respect to any information supplied by
Company or any of its representatives which is contained in or incorporated
by reference in any of the foregoing documents.
(h) Financing. Parent has sufficient financial capacity, and will
cause Newco to have sufficient financial capacity, to consummate the Offer
and the Merger.
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ARTICLE V.
Covenants Relating to Conduct of Business Prior to Merger
SECTION 5.01. Conduct of Business of Company. (a) Conduct of
Business by Company. During the period from the date of this Agreement
to the Effective Time (except as otherwise expressly contemplated by the
terms of this Agreement), Company shall act and carry on its business in
the usual, regular and ordinary course of business consistent with past
practice and use its reasonable best efforts to preserve substantially
intact its current business organization, keep available the services of
its current officers and employees and preserve its relationships with
customers, suppliers, licensors, licensees, advertisers, distributors and
others having significant business dealings with it. Without limiting
the generality of the foregoing, during the period from the date of this
Agreement to the Effective Time of the merger, Company shall not, without
the prior consent of Parent or except as provided on Schedule 5.01(a) of
the Disclosure Schedule
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, (y)
split, combine or reclassify any capital stock of Company or issue or
authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares of capital stock of Company, or (z)
purchase, redeem or otherwise acquire any shares of capital stock of
Company or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(ii) authorize for issuance, issue, deliver, sell, pledge or
otherwise encumber any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities or any other securities or equity equivalents (including
without limitation stock appreciation rights) other than the issuance of
Company Common Stock upon the exercise of Company Stock Options awarded
but unexercised on the date of this Agreement and in accordance with
their present terms (such issuances being referred to herein as
"Permitted Changes");
(iii) amend the certificate of incorporation, by-laws or other
comparable charter or organizational documents of Company;
(iv) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets of,
or by any other manner, any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets other than any such properties or assets the value of which does
not exceed $250,000 individually
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and $2,000,000 in the aggregate, except sales of inventory, rental
equipment and receivables in the ordinary course of business consistent
with past practice;
(vi) (A) except in the ordinary course of business consistent
with past practice incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
Company, guarantee any debt securities of another Person, enter into any
"keep well" or other agreement to maintain any financial statement
condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing, or (B) make any loans, advances
or capital contributions to, or investments in, any other Person;
(vii) acquire or agree to acquire any assets, other than in the
ordinary course of business consistent with past practice, that are
material, individually or in the aggregate, to Company, or make or agree
to make any capital expenditures except capital expenditures which,
individually or in the aggregate, do not exceed the amount budgeted
therefor in Company's annual capital expenditures budget for 1997
previously provided to Parent;
(viii) pay, discharge or satisfy any claims (including claims
of stockholders), liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), except for the payment,
discharge or satisfaction of (x) liabilities or obligations in the
ordinary course of business consistent with past practice or in
accordance with their terms as in effect on the date hereof, or (y)
claims settled or compromised to the extent permitted by Section
5.01(a)(xii), or waive, release, grant, or transfer any rights of
material value or modify or change in any material respect any existing
material license, lease, contract or other document, other than in the
ordinary course of business consistent with past practice;
(ix) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(x) enter into any collective bargaining agreement;
(xi) change any material accounting principle used by it,
except as required by the SEC or applicable law;
(xii) settle or compromise any litigation or settle a dispute
under any contract or other agreement (whether or not commenced prior to
the date of this Agreement) other than settlements or compromises of
litigation where the amount paid (after giving effect to insurance
proceeds actually received) by Company in settlement or compromise does
not exceed $100,000, provided that the aggregate amount paid in
connection with the settlement or compromise of all such matters shall
not exceed $250,000;
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(xiii) engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly,
any of Company's Affiliates, including, without limitation, any
transactions, agreements, arrangements or understandings with any
Affiliate or other Person covered under Item 404 of SEC Regulation S-K
that would be required to be disclosed under such Item 404; or
(xiv) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Changes in Employment Arrangements. Company shall not (except
as may be required in order to give effect to the requirements of Section
3.02) adopt or amend (except as may be required by law) any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust,
fund or other arrangement (including any Company Plan) for the benefit or
welfare of any employee, director or former director or employee or, other
than increases for individuals (other than officers and directors) in the
ordinary course of business consistent with past practice, increase the
compensation or fringe benefits of any director, employee or former director
or employee or pay any benefit not required by any existing plan, arrangement
or agreement.
(c) Severance. Company shall not grant any new or modified
severance or termination arrangement or increase or accelerate any benefits
payable under its severance or termination pay policies in effect on the date
hereof.
(d) WARN. Company shall not effectuate a "plant closing" or "mass
layoff," as those terms are defined in the WARN Act, affecting in whole or in
part any site of employment, facility, operating unit or employee of Company.
(e) Tax Elections. Except in the ordinary course of business and
consistent with past practice, Company shall not make any Tax election,
change or request to change its method of accounting, or settle or compromise
any federal, state, local or foreign Tax liability.
ARTICLE VI.
Additional Agreements
SECTION 6.01. Proxy Statement; Stockholder Meeting.
(a) Company and each of Parent and Newco shall prepare and file, or
shall cause to be prepared and filed, with the SEC those documents,
schedules and amendments and supplements thereto required to be filed with
respect to the transactions contemplated by this
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Agreement. Company, acting through its Board of Directors, shall, if
necessary, cause a meeting of its stockholders (the "Stockholders Meeting")
to be duly called (including establishing the record date, if requested, to
be the date immediately after the date Newco first purchases any shares of
Company Common Stock pursuant to the Offer) and shall give notice of, convene
and hold the Stockholders Meeting as soon as practicable, and at such time
and place designated by Parent, for the purpose of approving the Merger, this
Agreement and any other actions contemplated hereby which required the
approval of Company's stockholders. Company shall recommend to its
stockholders approval of the Merger and take all reasonable actions necessary
to solicit such approval. Company shall use its best efforts to obtain and
furnish the information required to be included by it in the Proxy Statement
and, after consultation with Parent, shall respond promptly to any comments
of the SEC relating to any preliminary proxy statement regarding the Merger
and the other transactions contemplated by this Agreement and to cause the
Proxy Statement to be mailed to its stockholders, all at the earliest
practicable time. Whenever any event occurs which should be set forth in an
amendment or supplement to the Proxy Statement or any other filing required
to be made with the SEC with respect to the Proxy Statement or the
Stockholders Meeting, each party shall promptly inform the other of such
occurrence and cooperate in filing with the SEC and/or mailing to Company's
stockholders such amendment or supplement. The Proxy Statement and all
amendments and supplements thereto shall comply with applicable law and be in
form and substance satisfactory to each of Parent and Company. Company,
acting through its Board of Directors, shall include in the Proxy Statement
the recommendation of its Board of Directors that stockholders of Company
vote in favor of the approval and adoption of this Agreement and the Merger.
Company shall use its best efforts to solicit from stockholders of Company
proxies in favor of such approval and adoption and shall take all other
actions necessary or, in the reasonable judgment of Parent, advisable to
secure the vote or consent of the Company's stockholders required by the DGCL
to effect the Merger.
(b) Notwithstanding anything to the contrary contained herein, in
the event that Newco shall acquire at least ninety percent (90%) of the
outstanding Shares, the parties hereto agree, at the request of Parent,
subject to Article VII, to take all necessary and appropriate action to cause
the Merger to become effective as soon as reasonably practicable after such
acquisition, without a meeting and without a vote of the Company's
stockholders, in accordance with the DGCL.
SECTION 6.02. Access to Information; Confidentiality. (a) Company
shall, and shall cause its officers, employees, counsel, financial advisors
and other representatives to, afford to Parent and its representatives and to
potential financing sources reasonable access during normal business hours,
in a manner initially coordinated with the chief executive officer of
Company, and thereafter coordinated with those persons designated by the
chief executive officer, during the period prior to the Effective Time to its
properties, books, contracts, commitments, personnel and records, including
security position listings and other information concerning beneficial owners
and/or record owners of Company's securities which may be relevant to the
Merger or Offer, and, during such period,
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Company shall, and shall cause its officers, employees and representatives
to, furnish promptly to Parent (i) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities laws and (ii) all
other information concerning its business, properties, financial condition,
operations and personnel as Parent may from time to time reasonably request.
Each of Company, Parent and Newco will hold, and will cause its respective
directors, officers, employees, accountants, counsel, financial advisors and
other representatives and Affiliates to hold, any nonpublic information in
confidence to the extent required by, and in accordance with, the provisions
of the letter dated May 6, 1997, between Atlas Copco AB, Company and
Investcorp International, Inc. (the "Confidentiality Agreement").
(b) No investigation pursuant to this Section 6.02 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
SECTION 6.03. Reasonable Best Efforts. Upon the terms and subject
to the conditions set forth in this Agreement, each of the parties agrees to
use its reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including the Offer. Parent and Company will
use their reasonable best efforts and cooperate with one another (i) in
promptly determining whether any filings are required to be made or consents,
approvals, waivers, licenses, permits or authorizations are required to be
obtained (or, which if not obtained, would result in an event of default,
termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any Governmental
Entities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by this
Agreement, including the Merger and the Offer and (ii) in promptly making any
such filings, in furnishing information required in connection therewith and
in timely seeking to obtain any such consents, approvals, permits or
authorizations.
SECTION 6.04. Indemnification. (a) The certificate of
incorporation and the by-laws of the Surviving Corporation shall contain the
provisions with respect to indemnification and exculpation from liability set
forth in Company's certificate of incorporation and by-laws on the date of
this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who on or prior
to the Effective Time were directors, officers, employees or agents of
Company, unless such modification is required by law.
(b) Company shall maintain in effect for three years from the
Effective Time policies of directors' and officers' liability insurance
containing terms and conditions which are not less advantageous to the
insureds than any such policies currently in effect on the date of this
Agreement (the "Company Insurance"), with respect to matters occurring prior
to the Effective Time, to the extent available, and having the maximum
available coverage under any
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such Company Insurance policies; provided that (i) Company following the
Merger shall not be required to spend in excess of 150% of the amount spent
on current annual premiums for the Company Insurance (the "Premium Limit")
per year therefor; provided further that if Company following the Merger
would be required to spend in excess of the Premium Limit per year to obtain
insurance having the maximum available coverage under Company Insurance
policies, Company will be required to spend up to such amount to maintain or
procure insurance coverage pursuant hereto, subject to availability of such
(or similar) coverage and (ii) such policies may in the sole discretion of
Company be one or more "tail" policies for all or any portion of the full
three year period, provided that such "tail" policies, contain terms and
conditions and provide coverage no less advantageous to the insureds than the
terms, conditions and coverage in the Company Insurance. Company agrees that
in the event it would be required to spend in excess of the Premium Limit per
year to obtain insurance having the maximum available coverage under Company
Insurance policies, Company will notify the officers and directors who are
the beneficiaries thereof and permit such officers and directors to pay any
excess amount over the Premium Limit which may be necessary to maintain such
policies.
(c) From and after the purchase of any shares of Company Common
Stock pursuant to the Offer, Parent agrees to indemnify and agrees to cause
the Surviving Corporation to indemnify all persons who are covered on the
date of this Agreement by the Company Insurance (the "Indemnified Parties")
to the fullest extent permitted by applicable law with respect to all acts
and omissions arising out of such individuals' services as officers,
directors, employees or agents of Company or as trustees or fiduciaries of
any plan for the benefit of employees of Company, occurring prior to the
Effective Time including, without limitation, the transactions contemplated
by this Agreement. Without limitation of the foregoing, in the event any such
Indemnified Party is or becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter, including without
limitation, the transactions contemplated by this Agreement, occurring prior
to, and including, the Effective Time, Parent, from and after the date of
purchase of any shares of Company Common Stock pursuant to the Offer, will
pay as incurred such Indemnified Party's reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in
connection therewith. Subject to Section 6.04(d), Parent shall advance (in
reasonable amounts) and pay all reasonable expenses, including attorneys'
fees, that may be incurred by any Indemnified Party in enforcing this Section
6.04 or any action involving an Indemnified Party resulting from the
transactions contemplated by this Agreement. Notwithstanding anything to the
contrary contained herein, Parent shall not have any obligation hereunder to
any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final, that
the indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law.
(d) Any Indemnified Party wishing to claim indemnification under
this Section 6.04, upon learning of any claim, action, suit, proceeding or
investigation which may give rise to a right to indemnification under this
Section 6.04, shall promptly notify Parent thereof. In the event of any such
claim, action, suit, proceeding or investigation, (i) Parent or the Surviving
Corporation shall have the right to assume the defense thereof (with counsel
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engaged by Parent or the Surviving Corporation to be reasonably acceptable to
the Indemnified Party) and, provided there is no conflict of interest, Parent
shall not be liable to such Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Party
in connection with the defense thereof, (ii) the Indemnified Party will
cooperate in the defense of any such matter and (iii) Parent shall not be
liable for any settlement effected without its prior written consent.
SECTION 6.05. Public Announcements. Neither Parent or Newco, on
the one hand, nor Company, on the other hand, will issue any press release or
public statement with respect to the transactions contemplated by this
Agreement, including the Merger and the Offer, without the other party's
prior consent (such consent not to be unreasonably withheld), except as may
be required by applicable law, court process or by obligations pursuant to
any listing agreement with the New York Stock Exchange. In addition to the
foregoing, Parent and Company will consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any such
press release or other public statements with respect to such transactions.
The parties agree that the initial press release or releases to be issued
with respect to the transactions contemplated by this Agreement shall be
mutually agreed prior to the issuance thereof.
SECTION 6.06. Employee Benefits. (a) Parent agrees that, and
shall take all necessary action to ensure that, during the period commencing
at the Effective Time and ending on the first anniversary thereof, the
employees of Company will continue to be provided with (whether by Parent,
the Surviving Corporation or otherwise) employee benefit plans (other than
stock option or other plans involving the potential issuance of securities of
Company) which in the aggregate are not materially less favorable to those
currently provided by Company to such employees, to the extent permitted
under laws and regulations in force from time to time, provided, however,
that subject to compliance with this Section 6.06, Parent reserves the right
to review all employee benefits after the Effective Time and to make such
changes as it deems appropriate.
(b) If any salaried employee of Company becomes a participant in any
employee benefit plan, practice or policy of the Parent (or any of its
Subsidiaries), such employee shall be given credit under such plan, practice
or policy for all service prior to the Effective Time with Company or any
predecessor employer (to the extent such credit was given by Company), and
all service after the Effective Time and prior to the time such employee
becomes such a participant, for purposes of eligibility and vesting and for
all other purposes for which such service is either taken into account or
recognized; provided, however, such service need not be credited to the
extent it would result in a violation of the terms of Parent's defined
benefit plans or result in a duplication of benefits, including, without
limitation, benefit accrual service under defined benefit plans.
SECTION 6.07. No Solicitation. Company shall not (whether
directly or indirectly through advisors, agents or other intermediaries), nor
shall Company authorize or permit any of its officers, directors, agents,
representatives, advisors to (a) solicit, initiate or
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take any action knowingly to facilitate the submission of inquiries,
proposals or offers from any Person (other than Newco or Parent) relating to
(i) any acquisition or purchase of 20% or more of the consolidated assets of
Company or of over 20% of any class of equity securities of Company, (ii) any
tender offer (including a self tender offer) or exchange offer that if
consummated would result in any Third Party (as defined in Section 9.02)
beneficially owning 20% or more of any class of equity securities of Company,
(iii) any merger, consolidation, business combination, sale of substantially
all assets, recapitalization, liquidation, dissolution or similar transaction
involving Company other than the transactions contemplated by this Agreement,
or (iv) any other transaction the consummation of which would or could
reasonably be expected to impede, interfere with, prevent or materially delay
the Merger or the Offer or which would or could reasonably be expected to
materially dilute the benefits to Parent of the transactions contemplated
hereby (collectively, "Transaction Proposals"), (b) agree to or endorse any
Transaction Proposal, or (c) enter into or participate in any discussions or
negotiations regarding any of the foregoing, or furnish to any other Person
any information with respect to its business, properties or assets or any of
the foregoing, or otherwise cooperate in any way with, or knowingly assist or
participate in, facilitate or encourage, any effort or attempt by any other
Person (other than Newco or Parent) to do or seek any of the foregoing;
provided, however, that nothing in this Agreement shall prohibit Company
(either directly or indirectly through advisors, agents or other
intermediaries) from (A) furnishing information pursuant to an appropriate
confidentiality letter (which letter shall not be less favorable to Company
in any material respect than the Confidentiality Agreement, concerning
Company and its business, properties or assets to a third party who has
offered to make a bona fide Transaction Proposal, (B) engaging in discussions
or negotiations with such third party (C) following receipt of a bona fide
Transaction Proposal, taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) under the Exchange Act or otherwise making
disclosure to its stockholders, (D) following receipt of a bona fide
Transaction Proposal, failing to make or withdrawing or modifying its
recommendation referred to in Section 4.01(p), and/or (E) taking any
non-appealable, final action ordered to be taken by Company by any court of
competent jurisdiction but in each case referred to in the foregoing clauses
(A) through (D) only to the extent that the Board of Directors of Company
shall have concluded in good faith after consulting with its outside counsel
and financial advisors that such action is consistent with the discharge of
its fiduciary duties to the stockholders of Company under applicable law;
provided, further, that the Board of Directors of Company shall not take any
of the foregoing actions referred to in clauses (A) through (E) above, until
after reasonable notice to Parent with respect to such action and that such
Board of Directors shall, to the extent it may do so without breaching such
fiduciary duties, continue to advise Parent after taking such action and, in
addition, if the Board of Directors of Company receives a Transaction
Proposal, then Company shall promptly inform Parent of the terms and
conditions of such proposal and the identity of the Person making it.
Company will immediately cease and cause its advisors, agents and other
intermediaries to cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing, and shall use its reasonable best efforts to cause any such
parties in possession of confidential information about Company that was
furnished by or on behalf of Company to return or destroy all such
information in the possession of any such party or in the possession of any
agent or advisor of any such party.
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SECTION 6.08. Resignation of Directors. At the Closing, Company
shall deliver to Parent evidence satisfactory to Parent of the resignation of
all Continuing Directors, effective at the Effective Time.
SECTION 6.09. Certain Agreements. Company will not waive or fail
to enforce any provision of any confidentiality or standstill or similar
agreement to which it is a party without the prior written consent of Parent.
SECTION 6.10 Newco Obligations. Parent shall cause Newco to
perform all of its obligations, agreements and covenants under this Agreement.
ARTICLE VII.
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Company Stockholder Approval. To the extent required by
applicable law, Company Stockholder Approval shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that the
parties hereto shall use their best efforts to have any such injunction,
order, restraint or prohibition vacated.
SECTION 7.02. Conditions to Obligations of Parent and Newco. The
obligations of Parent and Newco to effect the Merger are further subject to
the following conditions:
(a) Representations and Warranties. The representations and
warranties of Company set forth in this Agreement shall be true and correct
in each case as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, except where the failure
of such representations and warranties to be so true and correct (without
giving effect to any limitation as to "materiality" or "Material Adverse
Effect" set forth therein) would not individually or in the aggregate have a
Material Adverse Effect. Parent
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shall have received a certificate signed on behalf of Company by the chief
executive officer and the chief financial officer of Company to the effect
set forth in this paragraph.
(b) Performance of Obligations of Company. Company shall have
performed the obligations required to be performed by it under this Agreement
at or prior to the Closing Date (except for such failures to perform either
individually or in the aggregate that would not have a Material Adverse
Effect with respect to Company or materially adversely affect the ability of
Company to consummate the transactions herein contemplated or perform its
obligations hereunder).
(c) Consents, etc. Parent shall have received evidence, in form and
substance reasonably satisfactory to it, that such licenses, permits,
consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties as are necessary in
connection with the transactions contemplated hereby have been obtained,
except where the failure to obtain such licenses, permits, consents,
approvals, authorizations, qualifications and orders individually or in the
aggregate would not have a Material Adverse Effect with respect to Company.
(d) No Litigation. There shall not be pending any suit, action or
proceeding by any Governmental Entity or by any other Person, which has a
reasonable likelihood of success and which, if successful, would have a
Material Adverse Effect with respect to Company or Parent, or materially
adversely affect the ability of the parties hereto to consummate the
transactions contemplated herein.
Notwithstanding the foregoing, the obligations of Parent and Newco to effect
the merger shall not be relieved by the failure of any of the foregoing
conditions if such failure is the result, direct or indirect, of any breach
by Parent or Newco of any of their obligations under this Agreement.
SECTION 7.03. Conditions to Obligation of Company. The obligation
of Company to effect the Merger is further subject to the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Newco set forth in this Agreement shall be true and
correct, in each case as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, except where
the failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) would not individually or in the aggregate
have a Material Adverse Effect with respect to Parent and Newco. Company
shall have received a certificate signed on behalf of Parent by an authorized
officer of Parent to the effect set forth in this paragraph.
(b) Performance of Obligations of Parent and Newco. Parent and
Newco shall have performed the obligations required to be performed by it
under this Agreement at or prior to the Closing Date (except for such
failures to perform, either individually or in the
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aggregate, that would not have a Material Adverse Effect with respect to
Parent and Newco or materially adversely affect the ability of Parent and
Newco to consummate the transactions herein contemplated or perform their
respective obligations hereunder).
Notwithstanding the foregoing, the obligations of Company to effect the
merger shall not be relieved by the failure of any of the foregoing
conditions if such failure is the result, direct or indirect, of any breach
by Company of any of its obligations under this Agreement.
ARTICLE VIII.
Termination, Amendment and Waiver
SECTION 8.01. Termination. This Agreement may be terminated and
abandoned at any time prior to the Effective Time, whether before or after
approval of matters presented in connection with the Merger by the
stockholders of Company:
(a) by mutual written consent of Parent and Company; or
(b) by either Parent or Company, if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger or
the Offer and such order, decree, ruling or other action shall have
become final and nonappealable; or
(c) by either Parent or Company, if the Merger shall not have been
consummated on or before October 31, 1997 (other than due to the failure
of the party seeking to terminate this Agreement to perform its
obligations under this Agreement required to be performed at or prior to
the Effective Time); or
(d) if Company Stockholder Approval is required, by either Parent or
Company, if at the duly held meeting of the stockholders of Company
(including any adjournment thereof) held for the purpose of voting on the
Merger, this Agreement and the consummation of the transactions
contemplated hereby, the holders of a majority of the outstanding shares
of Company Common Stock shall not have approved the Merger, this
Agreement and the consummation of the transactions contemplated hereby; or
(e) by Parent, if Company or its Board of Directors shall have (1)
withdrawn, modified or amended in any respect adverse to Parent its
approval or recommendation of this Agreement or any of the transactions
contemplated herein, (2) failed as promptly as practicable to mail the
Proxy Statement to its stockholders or failed to include in such
statement such recommendation in accordance with Section 6.01, (3)
recommended any Transaction Proposal from a Person other than Parent or
Newco or any of their Affiliates, or (4) resolved to do any of the
foregoing; or
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(f) by Company, if, pursuant to and in compliance with Section 6.07
hereof, the Board of Directors of Company does not make or withdraws or
modifies its recommendation referred to in Section 4.01(p).
SECTION 8.02. Effect of Termination. In the event of termination
of this Agreement by either Company or Parent as provided in Section 8.01,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Newco or Company, other than
the provisions of Section 4.01(n), Section 4.02(e), the last sentence of
Section 6.02(a), this Section 8.02, Section 9.02, Section 9.07 and 9.08.
Nothing contained in this Section shall relieve any party of any liability
for any breach of the representations, warranties, covenants or agreements
set forth in this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by the
parties at any time before or after any required approval of matters
presented in connection with the Merger by the stockholders of Company;
provided, however, that after any such approval, there shall be made no
amendment that by law requires further approval by such stockholders without
the further approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties.
SECTION 8.04. Extension; Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of
any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c)
subject to the proviso of Section 8.03, waive compliance with any of the
agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights.
SECTION 8.05. Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 8.01, an
amendment of this Agreement pursuant to Section 8.03 or an extension or
waiver pursuant to Section 8.04 shall, in order to be effective, require in
the case of Parent or Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors.
ARTICLE IX.
General Provisions
SECTION 9.01. Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time and all
such representations and warranties will be extinguished on consummation of
the Merger and neither Company nor any officer, director or employee or
stockholder shall be under any liability whatsoever with respect to any
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such representation or warranty after such time. This Section 9.01 shall not
limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.02. Fees and Expenses. (a) If this Agreement is
terminated pursuant to Section 8.01(e) or Section 8.01(f), then Company shall
(provided that Parent or Newco is not then in material breach of its
obligations under this Agreement), promptly, but in no event later than one
business day after the termination of this Agreement, reimburse Parent and
Newco for all documented out-of-pocket expenses and fees (including, without
limitation, fees payable to all banks, investment banking firms and other
financial institutions, and their respective agents and counsel, and all fees
of counsel, accountants, financial printers, experts and consultants to Newco
and its Affiliates), whether incurred prior to, on or after the date hereof,
in connection with the Offer, the Merger and the consummation of all
transactions contemplated by this Agreement and the financing thereof;
provided, that in no event shall Company be required to pay in excess of an
aggregate of $5 million pursuant to this paragraph (a).
(b) If this Agreement is terminated pursuant to Section 8.01(e) or
Section 8.01(f) and within twelve months following the date of such
termination Company either (x) consummates with any Person or "group" (as
referred to in Section 13(d)(3) of the Exchange Act, and including Company
and any of its Affiliates) other than Parent, Newco or any of their
Affiliates (collectively, "Third Party") a transaction the proposal of which
would otherwise qualify as a Transaction Proposal under Section 6.07 or (y)
enters into a definitive agreement with a Third Party with respect to a
transaction the proposal of which would otherwise qualify as a Transaction
Proposal under Section 6.07 (whether or not such Third Party is the same
Third Party referred to in clause (i) above), then Company shall promptly,
but in no event later than one business day after Company consummates the
transaction referred to in clause (x) or (y) above, pay to Parent, in same
day funds, a fee of $27.2 million, less any amounts paid by Company pursuant
to Section 9.02(a).
(c) In addition to the other provisions of this Section 9.02, in the
event a fee is or becomes payable pursuant to Section 9.02(a) or (b) hereof,
Company agrees promptly, but in no event later than two business days
following written notice thereof, together with related bills or receipts, to
reimburse Parent and Newco for all reasonable out-of-pocket costs, fees and
expenses, including, without limitation, the reasonable fees and
disbursements of counsel and the expenses of litigation, incurred in
connection with collecting the expenses pursuant to paragraph (a) of this
Section and the fee pursuant to paragraph (b) of this Section, as a result of
any breach by Company of its obligations under this Section 9.02.
(d) Except as provided otherwise in paragraph (a) above, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses.
SECTION 9.03. Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if
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(i) delivered personally, (ii) sent by overnight courier (providing proof of
delivery) or (iii) upon transmission (with confirmed delivery to the
recipient of such communication) by facsimile 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 Newco, to
Atlas Copco North America Inc.
1211 Hamburg Turnpike
Suite 214
Wayne, New Jersey 07470
Telephone: (973) 633-8600
Telecopy: (973) 633-9722
Attention: Mark Cohen
with a copy to
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Telephone: (212) 858-1000
Telecopy: (212) 858-1500
Attention: Stephen R. Rusmisel, Esq.
(b) if to Company, to
Prime Service, Inc.
16225 Park Ten Place
Suite 200
Houston, TX 77084
Attention: Chief Executive Officer
Corporate General Counsel
with copies to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166-0193
Telephone: (212) 351-4000
Telecopy: (212) 351-4035
Attention: E. Michael Greaney, Esq.
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SECTION 9.04. Definitions. For purposes of this Agreement:
(a) "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first Person;
(b) "knowledge" with respect to Company means the actual knowledge
of the following officers and employees (as well as any of their
successors) of Company: Chief Executive Officer, Chief Financial
Officer, Director of Finance and Corporate General Counsel, and, without
duplication, the employees primarily responsible for environmental and
Tax matters concerning Company, in each case after reasonable
investigation and inquiry;
(c) "Lien" means any pledge, claim, lien, charge, encumbrance or
security interest of any kind or nature whatsoever;
(d) "Material Adverse Change" or "Material Adverse Effect" means,
when used in connection with any Person, any change or effect that either
individually or in the aggregate with all other such changes or effects
is materially adverse to the business, assets, liabilities, financial
condition or results of operations of such Person but shall exclude any
change or effect resulting from general economic conditions (including,
without limitation, changes in interest rates) and, with respect to
Section 4.01(g)(i) and (ii) hereof and paragraph (iii)(E) of Annex I, any
occurrence or condition arising out of the transactions contemplated by
this Agreement or the public announcement thereof;
(e) "Person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
and
(f) "Subsidiary" of any Person means another Person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its
Board of Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first Person.
SECTION 9.05. Interpretation. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation."
SECTION 9.06. Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall
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become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries.
This Agreement and the other agreements referred to herein constitute the
entire agreement, and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of
this Agreement. This Agreement, other than Sections 6.04 and 6.06 is not
intended to confer upon any Person other than the parties hereto any rights
or remedies.
SECTION 9.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 9.09. Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties
without the prior written consent of the other parties. 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.
SECTION 9.10 Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement.
SECTION 9.11 Consent to Jurisdiction. Any judicial proceeding
brought with respect to this Agreement must be brought in any court of
competent jurisdiction in the State of New York, and, by execution and
delivery of this Agreement, each party (i) accepts, generally and
unconditionally, the exclusive jurisdiction of such courts and any related
appellate court, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement and (ii) irrevocably waives any
objection it may now or hereafter have as to the venue of any such suit,
action or proceeding brought in such a court or that such court is an
inconvenient forum. THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
AGREEMENT.
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IN WITNESS WHEREOF, Newco and Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
ATLAS COPCO NORTH AMERICA INC.
By: /s/ Mark Cohen
-------------------------------------
Name: Mark Cohen
Title: Executive Vice President
PS ACQUISITION CORP.
By: /s/ Mark Cohen
-------------------------------------
Name: Mark Cohen
Title: President
PRIME SERVICE, INC.
By: /s/ Thomas E. Bennett
-------------------------------------
Name: Thomas E. Bennett
Title: Chairman of the Board, President
and Chief Executive Officer
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ANNEX I
CONDITIONS OF THE OFFER
The term "Agreement" as used in this Annex I shall mean the
Agreement and Plan of Merger to which this Annex I is attached, and all
capitalized terms used in this Annex I and not defined in this Annex I shall
have the respective meanings set forth in the Agreement.
Notwithstanding any other provision of the Offer or the Agreement,
and in addition to (and not in limitation of) Newco's rights to extend and
amend the Offer at any time (subject to the provisions of the Agreement),
Newco 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 Newco's obligation to pay for or return
tendered shares of Company Common Stock 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 of Company Common Stock, and may terminate the Offer as to
any shares of Company Common Stock not then paid for, if:
(i) any waiting period (and any extension thereof) under the HSR
Act applicable to the purchase of shares of Company Common Stock pursuant
to the Offer shall not have expired or been terminated;
(ii) there shall not have been validly tendered and not withdrawn
prior to the expiration of the Offer at least 20 million shares of
Company Common Stock;
(iii) at any time on or after the date of the Agreement, any of the
following events shall have occurred:
(A) there shall have been any action taken or threatened, or
any statute, rule, regulation, judgement, temporary restraining
order, preliminary or permanent injunction or other order, decree or
filing proposed, sought, promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Merger by any Governmental
Entity that would directly or indirectly, (1) make the acceptance
for payment or the payment for, or the purchase of some or all of,
the shares of Company Common Stock pursuant to the Offer illegal or
otherwise materially delay, restrict or prohibit consummation of the
Offer or the Merger or the consummation of any transaction
contemplated by the Agreement, (2) result in a material delay in or
materially restrict the ability of Newco, or render Newco unable, to
accept for payment, pay for or purchase some or all of the shares of
Company Common Stock, (3) require the divestiture by Parent, Newco,
Company or any of their respective Subsidiaries or Affiliates of all
or any material portion of the business, assets or property of any
of them or any shares of Company Common Stock or impose any material
limitation on the ability of any of them to conduct their business
and own such assets, properties or shares of Company Common Stock,
(4) impose any
<PAGE>
material limitation on the ability of Parent, Newco or any of their
Affiliates to acquire or hold or to exercise effectively all rights
of ownership of the shares of Company Common Stock, including the
right to vote any shares of Company Common Stock purchased by any of
them on all matters properly presented to the stockholders of
Company, including, without limitation, the adoption and approval of
the Agreement and the Merger, (5) result in a material diminution in
the benefits expected to be derived by Parent or Newco as a result
of the transactions contemplated by the Offer or the Agreement, or
(6) impose any conditions to the Offer, the Agreement or the Merger,
which would be materially adverse to Parent or Newco; or
(B) Company shall have breached, or failed to observe or
perform, in any material respect, any of its covenants or agreements
under the Agreement or any of the representations or warranties of
Company set forth in the Agreement shall not be true and accurate
both when made and as of the date of consummation of the Offer, as
if made at and as of such time (except to the extent expressly made
as of an earlier date, in which case as of such date), except where
the breach or failure to observe or perform such covenants or
agreements, or the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as
to "materiality" or "Material Adverse Effect" set forth therein),
does not have, a Material Adverse Effect with respect to Company; or
(C) the Board of Directors of Company or any committee thereof
shall have (1) withdrawn or modified (including without limitation,
by amendment of Company's Schedule 14D-9) in a manner adverse to
Parent or Newco its approval or recommendation of the Offer, the
Merger or the Agreement, (2) approved or recommended any Transaction
Proposal by a Third Party other than the Offer and the Merger, or
(3) publicly resolved to do any of the foregoing; or
(D) the Agreement shall have been terminated in accordance
with its terms; or
(E) a Material Adverse Effect or Material Adverse Change with
respect to Company shall have occurred; or
(F) there shall have occurred and be continuing (i) any
general suspension of trading in, or limitation on prices for,
securities on a national securities exchange in the United States
(excluding any coordinated trading halt triggered solely as a result
of a specified increase or decrease in a market index or similar
"circuit breaker" process), (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the
United States, (iii) any material limitation (whether or not
mandatory) by any Governmental Entity on, or other similar event
that materially adversely affects, the extension of credit in the
United States by banks or other lending institutions, or (iv) a
commencement of a war or armed hostilities or other national or
international
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<PAGE>
calamity directly or indirectly involving the United States which
materially adversely affects the extension of credit.
The foregoing conditions are for the sole benefit of Parent, Newco
and their Affiliates and may be asserted by Parent or Newco regardless of the
circumstances (including any action or inaction by Parent or Newco or any of
their Affiliates not inconsistent with the terms of the Agreement) giving
rise to such condition. All the foregoing conditions may be waived by Parent
or Newco in whole or in part at any time and from time to time in the sole
discretion of Parent or Newco. The failure by Parent or Newco at any time to
exercise its rights with respect to the foregoing conditions shall not be
deemed a waiver of any such condition, and each condition shall be deemed an
ongoing condition with respect to which Parent or Newco may assert its rights
at any time and from time to time.
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Exhibit 99.2
JOINT RELEASE
PRIME SERVICE, INC. TO BE ACQUIRED BY
ATLAS COPCO NORTH AMERICA INC.
FOR $32 CASH PER SHARE
Stockholm, Sweden and Houston, Texas, June 9, 1997 --- Prime Service, Inc.
(NYSE: PRS), one of the largest rental equipment companies in the United States,
announced today that it has entered into a definitive merger agreement with
Atlas Copco North America Inc., a subsidiary of Sweden based Atlas Copco AB,
pursuant to which Atlas Copco will acquire all outstanding shares of Prime
Service at a price of $32.00 per share in cash. The aggregate consideration of
the transaction to Prime Service shareholders is approximately $900 million
(exclusive of approximately $260 million in debt.)
Pursuant to the agreement, Atlas Copco will commence a cash tender offer on
June 9, 1997 for all of Prime Service's approximately 28 million shares. The
agreement also provides that Prime Service shares not acquired by Atlas Copco
in the tender offer will be converted into the right to receive $32.00 in
cash per share in a merger to be completed following consummation of the
tender offer. The boards of directors of both Prime Service and Atlas Copco
have approved the transaction. The Prime Service board has received an
opinion from Credit Suisse First Boston that the consideration to be received
by the Prime Service shareholders pursuant to the tender offer and merger is
fair to such holders from a financial point of view. The acquisition is
subject to antitrust approvals and other customary conditions.
Prime Service was acquired in December 1994 by Investcorp, certain international
investors and Prime Service management. At the time, Prime Service had
approximately $212 million in revenues. The company completed an initial public
offering in October 1996. Investcorp and the other international investors, who
currently own approximately 74 per cent of the outstanding shares of Prime
Service, have agreed to tender all of their shares as a part of the Atlas Copco
acquisition.
Thomas E. Bennett, Chairman of the Board and Chief Executive Officer of Prime
Service, said, "We are extremely excited about this new partnership with Atlas
Copco, with its long history of solid growth and premier product lines. As
before, we will continue to enhance our customer relationships, grow our rental
fleet and improve our market coverage."
Giulio Mazzalupi, President and Chief Executive Officer of Atlas Copco AB, said,
"It is a strategic goal for Atlas Copco to increase revenues generated from the
use of our products, including accessories, service and rental operations. Prime
Service, with its highly developed service ability, is part of this strategy and
is an excellent fit to our existing business in the U.S."
In the U.S. market, there is a trend towards renting construction and industrial
equipment driven primarily by the desire to concentrate on core activity and
always have the state of the art equipment. In the last five years it is
estimated that the rental industry has grown about 20 per cent per year.
Analysts estimate that the contractor rental market in the U.S. alone exceeds
$18 billion.
"The acquisition increases the opportunity to develop our business in the United
States, to be close to the customers, and to enhance the growth potential of
Atlas Copco products. Atlas Copco will also achieve a leading position in
service of construction and industrial equipment in the U.S.," comments Giulio
Mazzalupi.
<PAGE>
Christopher J.O'Brien, a member of Investcorp's Management Committee and a
Director of Prime Service said, "We have enjoyed our association with Prime
Service, and are proud to have participated in the growth of this premier
company. We are very pleased that Prime Service shareholders will realize an
excellent return on their investment in Prime Service." On June 6, 1997, Prime
Service's shares closed at a price of $24 7/8 per share.
Prime Service is one of the leaders in the rental equipment industry in the
United States, and currently operates 122 rental equipment locations in 14
states. Prime Service rents over 100 different types of equipment, including
aerial manlifts, portable air compressors, forklifts and light earth moving
equipment, as well as small equipment such as power tools. Prime Service has a
base of over 40,000 customers ranging from Fortune 500 companies to
subcontractors and homeowners. Total revenue for 1996 was approximately $330
million.
Atlas Copco, based in Sweden, is an international industrial group of companies
and is among the world's leading suppliers of products and services in the areas
of air and gas compression, industrial manufacturing, rock excavation, light
construction and demolition, as well as installation, repair and service. Atlas
Copco has approximately 21,000 employees worldwide, and had sales in 1996 of
approximately $3.6 billion. Atlas Copco North America Inc. is the holding
company for well-known U.S. companies including Milwaukee Electric Tool
Corporation and Chicago Pneumatic Tool Company.
Investcorp was established in 1982. It acts as a principal and an intermediary
in international investment transactions. To date, it has completed over 60
transactions with an acquisition value of approximately $9 billion. Investcorp
and its clients currently own 16 corporate investments in North America and
Europe, including Saks Fifth Avenue, Star Markets, Simmons Company, William
Carter Company, Helly Hansen and CSK Auto. Previous investments include Tiffany,
Gucci, Circle K and Thorn Lighting.
CONTACTS: Prime Service - Todd Fogarty
Kekst & Company
212 521 4800
Atlas Copco - Lennart Johansson
Sweden 46 8 743 8570
Hans Ola Meyer
46 8 743 8292
Carl-Johan Wachtmeister
46 8 743 8070, 46 70 543 8070
<PAGE>
Exhibit 99.3
PRIME SERVICE, INC.
16225 Park Ten Place, Suite 200
Houston, Texas 77084
April 18, 1997
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to
be held on Friday, May 16, 1997, at 10:00 a.m., at the Houston Marriott
Westside, 13210 Katy Freeway, Houston, Texas 77079.
At the meeting you will be asked to consider and vote upon (1) the
election of six directors, (2) the approval of appointment of the Company's
independent auditors, and (3) such other business as may properly come before
the meeting or any adjournment thereof.
Representation of your shares at the meeting is very important. We urge
each shareholder, whether or not you now plan to attend the meeting, to
promptly date, sign and return the enclosed proxy in the envelope furnished
for this purpose. If you do attend the meeting, you may, if you wish, revoke
your proxy and vote in person. If you are planning on attending the Annual
Meeting, please check the box on the reverse side of the enclosed Proxy Card
where indicated.
It is always a pleasure to meet with our shareholders, and I personally
look forward to seeing as many of you as possible at the Annual Meeting.
Sincerely,
Thomas E. Bennett
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
PRIME SERVICE, INC.
16225 Park Ten Place, Suite 200
Houston, Texas 77084
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, MAY 16, 1997
To the Shareholders of Prime Service, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Prime Service, Inc., a Delaware corporation, will be held at the Houston
Marriott Westside, 13210 Katy Freeway, Houston, Texas 77079, on Friday, May
16, 1997, at 10:00 a.m. local time, for the following purposes:
(1) to elect six members to the Board of Directors to serve until the
1998 Annual Meeting of Shareholders;
(2) to ratify the appointment of Coopers & Lybrand, L.L.P. as
independent auditors for the Company for the fiscal year ending
December 31, 1997; and
(3) to transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 4, 1997,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Annual Meeting. A list of all shareholders
entitled to vote is on file at the principal offices of the Company, 16225
Park Ten Place, Suite 200, Houston, Texas 77084, and will be available for
inspection by any shareholder during the meeting.
SO THAT WE MAY BE SURE YOUR SHARES WILL BE VOTED AT THE ANNUAL MEETING,
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. For your
convenience, a postpaid return envelope is enclosed for your use in returning
your proxy. If you attend the meeting, you may revoke your proxy and vote in
person.
By Order of the Board of Directors,
Kevin L. Loughlin
Director of Finance, Treasurer
and Secretary
April 18, 1997
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 16, 1997
Solicitation and Revocability of Proxies
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Prime Service, Inc. ("Prime" or the
"Company") to be used at the Annual Meeting of Shareholders to be held at the
Houston Marriott Westside, 13210 Katy Freeway, Houston, Texas 77079, on
Friday, May 16, 1997, at 10:00 a.m. local time, and at any and all
adjournments thereof. This Proxy Statement and the enclosed proxy are being
mailed to the shareholders on or about April 18, 1997.
Unless otherwise indicated thereon, proxies in the accompanying form
which are properly executed and duly returned to the Company and which are
not revoked will be voted:
(1) for each of the six nominees for director to serve as directors
until the 1998 Annual Meeting of Shareholders, and
(2) for ratification of the appointment of Coopers & Lybrand, L.L.P.
as independent auditors for the Company for the year ending
December 31, 1997.
Shares represented by proxies marked as abstentions on any matter will
not be voted on that matter, although they will be counted for quorum
purposes; brokers' shares held in "street name" and not voted on behalf of
shareholders will not be counted in tabulating votes. Votes at the Annual
Meeting will be tabulated by an Inspector of Election selected by the Company.
The Board of Directors is not presently aware of other proposals which
may be brought before the Annual Meeting. In the event other proposals are
brought before the Annual Meeting, the persons named in the enclosed form of
proxy will vote in accordance with what they consider to be the best
interests of the Company and its shareholders.
The cost of soliciting proxies will be borne by the Company. In addition
to the Company's solicitation by mail, proxies may be solicited personally or
by telephone by the management of the Company. The Company may request
brokerage houses or other custodians, nominees and fiduciaries to forward
proxies and proxy material to the beneficial owners of the shares held of
record by such persons and will reimburse them for their reasonable
forwarding expenses.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is exercised. Proxies may be revoked
by filing with the Secretary of the Company written notice of revocation, by
executing and delivering a later-dated proxy, or by appearing and voting in
person at the meeting.
1
<PAGE>
Voting Securities and Record Date
The Board of Directors of the Company has fixed the close of business on
April 4, 1997, as the Record Date (the "Record Date") for the determination
of shareholders entitled to notice of and to vote at the Annual Meeting and
any adjournments thereof.
The issued and outstanding voting securities of the Company as of the
Record Date consist of 27,991,714 shares of common stock, $0.01 par value per
share ("Common Stock"), each of which is entitled to one vote. Shares of
Common Stock are not entitled to cumulative voting rights in the election of
Directors. The presence in person or by proxy of the holders of a majority of
the shares of Common Stock outstanding on the Record Date will be necessary
to constitute a quorum at the Annual Meeting.
Assuming the presence of a quorum of the Common Stock, the affirmative
vote of the holders of a plurality of the shares of Common Stock represented
in person or by proxy at the meeting is required for the election of
Directors, and the affirmative vote of the holders of a majority of such
shares of Common Stock represented at the meeting is required for
ratification of the appointment of Coopers & Lybrand, L.L.P. as independent
auditors for the fiscal year ending December 31, 1997.
PROPOSAL ONE
ELECTION OF DIRECTORS
The persons designated as proxies in the enclosed proxy card intend,
unless the proxy is marked with contrary instructions, to vote for the
following nominees as directors to serve until the 1998 Annual Meeting of
Shareholders and until their successors have been duly elected and qualified:
Mr. Thomas E. Bennett, Mr. Jon P. Hedley, Mr. Robert M. Howe, Mr. Christopher
J. O'Brien, Mr. Charles J. Philippin, and Mr. Christopher J. Stadler. Each
nominee has consented to serve if elected. The Board of Directors has no
reason to believe that any nominee for election as a director will not be a
candidate or will be unable to serve, but if for any reason one or more of
these nominees is unavailable as a candidate or unable to serve when election
occurs, the persons designated as proxies in the enclosed proxy card, in the
absence of contrary instructions, will in their discretion vote the proxies
for the election of any of the other nominees or for a substitute nominee or
nominees, if any, selected by the Board of Directors. The affirmative vote of
a plurality of the votes cast at the Annual Meeting is required for the
election of each nominee for director. The Board of Directors unanimously
recommends a vote "FOR" each of the following nominees for director.
The following sets forth information concerning the six nominees for
election as directors at the Annual Meeting, including information as to such
nominee's age as of December 31, 1996, position with the Company and business
experience during the past five years:
Thomas E. Bennett, age 51, joined the Company in 1975 as Equipment
Manager. He became a Rental Equipment Yard Manager in 1978 of the Company's
largest distribution location, and was named Regional Manager in 1979. In
1987, Mr. Bennett was promoted to Vice President of the Southwest Division.
In 1988, he was selected as the Vice President of Operations of the Company
and was named President, Chief Executive Officer and a director in 1990. Mr.
Bennett was elected as Chairman of the Board in 1997. Prior to joining the
Company, Mr. Bennett worked for Tool Crib, Inc. for 11 years.
Jon P. Hedley, age 35, became a director of Prime in September 1996. He
has been an executive of Investcorp, S.A. ("Investcorp"), its predecessor or
one of more of its wholly-owned subsidiaries since April 1990. Mr. Hedley is
a director of Saks Holdings, Inc., Simmons Company and CSK Auto, Inc.
Robert M. Howe, age 59, became a director of the Company on October 29,
1996. For the last five years prior to his retirement this year, Mr. Howe
served as President, Chief Operating Officer and a director of MAPCO, Inc., a
diversified energy company. Mr. Howe is a director of Carbide Graphite Group,
Inc.
Christopher J. O'Brien, age 38, became director of Prime in December
1994. He has been an executive of Investcorp, its predecessor or one or more
of its wholly-owned subsidiaries since November 1993. Mr. O'Brien is a
director of Simmons Company and CSK Auto, Inc.
2
<PAGE>
Charles J. Philippin, age 45, became a director of Prime in December
1994. He has been an executive of Investcorp, its predecessor or one or more
of its wholly-owned subsidiaries since October 1994. Prior to joining
Investcorp, Mr. Philippin was a partner with Coopers & Lybrand L.L.P. Mr.
Philippin is a director of Saks Holdings, Inc., Simmons Company and CSK Auto,
Inc.
Christopher J. Stadler, age 32, became a director of Prime in September
1996. He has been an executive of Investcorp, its predecessor or one or more
of its wholly-owned subsidiaries since April 1, 1996. Prior to joining
Investcorp, Mr. Stadler was a Director with CS First Boston Corporation. Mr.
Stadler is a director of CSK Auto, Inc.
Compensation of Directors
The Company pays no additional remuneration to its employees or to
executives of Investcorp for serving as directors. Other directors will
receive an annual retainer of $25,000 in cash and incentive compensation,
including but not limited to restricted stock, $1,500 for each regular or
special meeting and reimbursement of out-of-pocket expenses incurred in
attending meetings of the Board of Directors and any committees of the Board
on which they serve.
Activities of the Board
The Board of Directors held two meetings during 1996. Each Director
attended at least 75% of the meetings of the Board and of any committee of
which he was a member.
The Board of Directors has two standing committees, Audit and
Compensation. The Board of Directors does not have a nominating committee.
Robert M. Howe is currently the sole member of the Audit Committee. The
Audit Committee was formed in December 1996, and did not meet in 1996.
Functions of the Audit Committee include recommending to the Board of
Directors the independent auditors, approving the estimated fees for such
services, reviewing the audit reports and making such recommendations to the
Board of Directors concerning the audit reports as may be appropriate,
meeting with the independent auditors, financial officers of the Company and
other members of management to review the results of audits, and evaluating
the adequacy of the internal control system of the Company.
Members of the Compensation Committee are Jon P. Hedley, Christopher J.
O'Brien, Charles J. Philippin, and Christopher J. Stadler. The Compensation
Committee was formed in 1997. Prior to such time, the Board of Directors
undertook the duties of the Compensation Committee. Functions of the
Compensation Committee include establishing and reviewing compensation for
the officers of the Company and reviewing all employee benefit programs,
including the recommendation of changes in the benefits.
3
<PAGE>
Executive Officers and Key Employees
The following table sets forth the name, age and position of each of the
executive officers and certain key employees of the Company. Officers of the
Company are elected by the Board of Directors of the Company and serve at the
discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Thomas E. Bennett 51 Chairman of the Board, President and Chief Executive Officer
Brian Fontana 39 Executive Vice President and Chief Financial Officer
Kevin L. Loughlin 47 Director of Finance, Treasurer and Secretary
Peter A. Post 53 Vice President of Operations
James O. York 53 Vice President of Sales and Marketing
Stanton P. Eigenbrodt 31 Corporate General Counsel and Assistant Secretary
John D. Latimer 51 Controller, Assistant Treasurer and Assistant Secretary
Gerald E. Lane 57 Director of Central Division
Michael Gordon 45 Director of Eastern Division
Rick L. McCurry 50 Director of Western Division
</TABLE>
Mr. Bennett's biography is set forth above.
Brian Fontana joined Prime on April 1, 1996 as Executive Vice President
and Chief Financial Officer. Mr. Fontana was employed previously with
National Convenience Stores, Incorporated (NCS), a company traded on the New
York Stock Exchange until it was acquired by Diamond Shamrock in 1995. Mr.
Fontana joined NCS in 1990 as Assistant Treasurer and was appointed to
Treasurer in February 1992. In August 1993, he was promoted to Vice President
and Treasurer of NCS, a position he held until December 1993, when Mr.
Fontana was named Vice President and Chief Financial Officer of NCS.
Kevin L. Loughlin joined the Company in 1980 as Controller and Vice
President of Finance and held this position until 1990, when he was named
Executive Vice President, Chief Financial Officer, Secretary and Treasurer.
Mr. Loughlin became Director of Finance, Treasurer and Secretary in April
1996. From 1973 to 1979, Mr. Loughlin was employed by W.R. Grace where he
served in various accounting and financial capacities. Prior to joining W.R.
Grace, Mr. Loughlin was an accounting supervisor for Dun & Bradstreet from
1971 to 1973.
Peter A. Post joined the Company in 1979 as a Rental Equipment Yard
Manager. In December 1979, Mr. Post was promoted to Regional Manager for East
Texas, Louisiana and Alabama, where he served until 1988, when he was named
Vice President of Operations for the Southwest Division. In January 1990, Mr.
Post became Vice President, Southwest Division. Mr. Post became Vice
President of Operations in August 1995, and was elected an officer of the
Company with the same title in September 1996.
James O. York joined the Company in April, 1996 as the Vice President of
Sales and Marketing. Prior to joining the Company, Mr. York held similar
positions during the past 17 years with Tate, Inc. and Trak International,
both of which are manufacturers of construction and industrial equipment.
Stanton P. Eigenbrodt joined the Company in February, 1997 as Corporate
General Counsel and Assistant Secretary. Prior to joining the Company, Mr.
Eigenbrodt was an attorney with the Dallas, Texas office of Gibson, Dunn &
Crutcher LLP for the last approximately six and one half years.
John D. Latimer joined the Company in 1979, and served as Assistant
Controller of the Company from 1979 to 1989. In 1982, he was elected to the
office of Assistant Secretary of the Company. In December 1989, he was named
Controller and Assistant Treasurer of the Company.
Gerald E. Lane joined the Company in 1981 as a Rental Equipment Yard
Manager. In 1983, he was promoted to Regional Manager, and in October 1992
was named Vice President, Southeast Division. Mr. Lane was named Director of
the Central Division in September 1995. Prior to joining the Company, Mr.
Lane worked for Hertz Equipment Rental Company for 18 years.
4
<PAGE>
Michael Gordon joined the Company in 1981 as a sales representative. In
1982, he was promoted to Rental Equipment Yard Manager. In 1988, Mr. Gordon
was promoted to Regional Manager for the Houston area. In 1993 he became
Regional Manager for the Company's California Region. Mr. Gordon was promoted
to Director of the Eastern Division in September 1995. Prior to joining the
Company, Mr. Gordon was employed by JLG Industries for three years.
Rick L. McCurry joined the Company in 1989 as Regional Manager for North
Texas and Oklahoma. He remained in this position until September 1995 when he
was named Director of the Western Division. Prior to joining the Company, Mr.
McCurry served as General Manager at Zuni Rental in Albuquerque, New Mexico
for six years.
Compensation Committee Interlocks and Insider Participation
In 1996, the Company had no compensation committee or other committee of
the Board of Directors performing similar functions. Decisions concerning
compensation of executive officers were made by the Company's Board of
Directors.
5
<PAGE>
Executive Compensation
The following table sets forth all cash compensation earned in the
previous three years by the Company's Chief Executive Officer and each of the
other four most highly compensated executive officers whose remuneration
exceeded $100,000 (collectively, the "Named Executive Officers"). The current
compensation arrangements for each of these officers are described in
"Employment Arrangements".
<TABLE>
<CAPTION>
PRIME
LTIP (OPTIONS) ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) PAYOUTS(2) (#)(3) COMPENSATION
- --------------------------- ---- ------ -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Bennett 1996 $240,000 $408,000 -- 154,275 $4,750
Chief Executive Officer 1995 225,000 330,000 -- 58,352 4,620
1994 172,500 95,757 $74,000 -- 4,620
Brian Fontana 1996 120,000 144,000 -- 62,218 --
Executive Vice President and
Chief Financial Officer(5)
Kevin L. Loughlin 1996 150,000 180,000 -- 25,410 4,750
Director of Finance, 1995 140,000 160,000 -- 19,438 4,620
Treasurer and Secretary 1994 135,600 63,544 47,017 -- 4,620
Peter A. Post 1996 150,000 180,000 -- 19,975 4,750
Vice President of Operations 1995 130,625 140,000 -- 16,861 4,620
1994 110,500 41,387 38,040 -- 4,620
James O. York 1996 89,022 112,500 -- 32,924 --
Vice President of Sales
and Marketing(5)
</TABLE>
- ------------------------
(1) Earned in year shown but paid in subsequent year.
(2) Amounts paid upon termination of the phantom stock plan of Artemis, S.A.,
the owner of the Company prior to its purchase in 1994 by Investcorp and
a group of international investors (the "1994 Acquisition").
(3) Following the closing of the 1994 Acquisition, certain members of
management were offered the opportunity to purchase shares of Common Stock
from the original investors at a price of $3.86 per share (the price per
share paid by the original participants in the 1994 Acquisition). The
number of shares purchased by the Named Executive Officers offered such
opportunity were as follows: Thomas E. Bennett (58,352); Kevin L. Loughlin
(19,438); Peter A. Post (16,861). Upon starting with the Company in April
1996, Messrs. Fontana and York were offered the opportunity to purchase
shares of Common Stock from the original investors at the same price of
$3.86 per share. Messrs. Fontana and York purchased 25,918 shares and
12,959 shares, respectively.
(4) Amounts paid pursuant to the Company's defined contribution 401(k) plan
matching program.
(5) Mr. Fontana and Mr. York started on April 1, 1996, and the information
presented herein is for the 9 month period from April 1, 1996 to December
31, 1996. Mr. Fontana and Mr. York had base annual salary rates for 1996 of
$160,000 and $125,000, respectively. The bonus payments for Mr. Fontana and
Mr. York were determined by prorating the bonus that would have been earned
had Messrs. Fontana and York worked all of 1996 based on the actual number
of days worked in 1996.
6
<PAGE>
The following table provides information with respect to stock options
granted during the fiscal year ended December 31, 1996 to the Named Executive
Officers:
<TABLE>
<CAPTION>
INDIVIDUAL
GRANTS
---------- POTENTIAL REALIZABLE
PERCENT VALUE AT
OF TOTAL ASSUMED
OPTIONS EXERCISE ANNUAL RATES
NUMBER OF GRANTED OF OF STOCK PRICE
SECURITIES TO BASE APPRECIATION
UNDERLYING EMPLOYEES PRICE FOR OPTION
OPTIONS IN PER EXPIRATION TERM (E)
NAME GRANTED FISCAL YEAR SHARE DATE 5%(C) 10%(D)
- ---------------------------- ----------- ------------- ----------- --------------- ------------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Bennett........... 154,275(a) 40.0% $ 23.50 Nov. 30, 2006 $ 2,280,185 $ 5,777,599
Brian Fontana............... 25,918(b) 6.7 3.86 May 1, 2006 62,981 159,396
36,300(a) 9.4 23.50 Nov. 30, 2006 536,514 1,359,435
Kevin L. Loughlin........... 25,410(a) 6.6 23.50 Nov. 30, 2006 375,560 951,605
Peter A. Post............... 19,965(a) 5.2 23.50 Nov. 30, 2006 295,083 747,689
James O. York............... 12,959(b) 3.4 3.86 May 1, 2006 31,490 79,698
19,965(a) 5.2 23.50 Nov. 30, 2006 295,083 797,689
</TABLE>
- ------------------------
(a) The options are for shares of Common Stock and were granted on October 31,
1996. The options vest at 20% per year over five years. To the extent not
earlier vested or terminated, all options will vest on the tenth anniversary
of the date of grant and will expire 30 days thereafter if not exercised.
All options will also vest upon certain changes in control. The options
contain a reload feature which provides that to the extent a Named Executive
Officer exercises an option using previously owned shares of Common Stock to
pay the exercise price, such Named Executive Officer shall receive options
for a number of shares of Common Stock equal to such number of previously
owned shares.
(b) The options are for shares of Common Stock and were granted on April 1,
1996. 20% of the options vested on December 31, 1996. The remaining options
will vest 20% at December 31, 1997, and 30% on each of December 31, 1998 and
1999. To the extent not earlier vested or terminated, all options will vest
on the tenth anniversary of the date of grant and will expire 30 days
thereafter if not exercised. All options will also vest upon certain changes
in control.
(c) Represents an assumed market price per share of $6.29 on May 1, 2006, and
$38.28 on November 30, 2006.
(d) Represents an assumed market price per share of $10.01 on May 1, 2006, and
$60.95 on November 30, 2006.
(e) The dollar amounts under columns headed 5% and 10% represent the
hypothetical gain or "option spread" that would exist for the options based
on the required assumed 5% and 10% annual compounded rates of share price
appreciation over the full option term.
7
<PAGE>
The following table contains certain information regarding options to
purchase shares of Common Stock held as of December 31, 1996 by each of the
Named Executive Officers. None of such Named Executive Officers exercised any
options during fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED HOLDINGS OPTIONS IN-THE-MONEY OPTIONS
AT AT FY-END (A)
FY-END EXERCISABLE /
NAME EXERCISABLE/UNEXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------------------------- ------------------------
<S> <C> <C>
Thomas E. Bennett................... 23,340 / 189,287 $ 551,758 / 1,444,784
Brian Fontana....................... 5,183 / 57,035 $ 122,526 / 635,375
Kevin L. Loughlin................... 7,775 / 37,073 $ 183,801 / 377,353
Peter A. Post....................... 6,744 / 30,082 $ 159,428 / 319,026
James O. York....................... 2,591 / 30,333 $ 61,251 / 324,960
</TABLE>
- ------------------------
(a) All of the options for each Named Executive Officer are in-the-money as of
December 31, 1996.
Employee Benefit Plans
The Company has a noncontributory defined benefit pension plan (the "Plan")
covering substantially all of its employees. The following table sets forth the
estimated annual benefits payable upon retirement under the Plan based on
retirement at age 65 and 1996 covered compensation of $25,920:
<TABLE>
<CAPTION>
YEARS OF SERVICE
REMUNERATION -----------------------------------------------------
(I.E. FINAL EARNINGS) 15 20 25 30 35
- ---------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 24,595 $ 32,794 $ 40,992 $ 49,191 $ 57,389
$ 150,000 and above 29,945 39,794 49,742 59,691 69,639
</TABLE>
For each of the individuals listed above, the Plan covers total
compensation as listed in the Summary Compensation Table, but limited to
$150,000 as required by the Employee Retirement Income Security Act of 1974.
Messrs. Bennett, Loughlin and Post have credited service as of December 31,
1996 of 7.3 years, and Messrs. Fontana and York have credited service as of
December 31, 1996 of .8 years. Benefits under the Plan are based on (i) final
earnings (the highest five consecutive years' earnings out of the last ten
years before retirement date or average earnings received in the last five
full years before early retirement or termination of employment), (ii)
covered compensation (the average of the Social Security Taxable Wage Bases
for the 35-year period ending at Social Security Retirement Age) and (iii)
years of credited service. Benefits under the Plan are determined by a
formula which multiplies (x) the sum of 1% of final earnings up to covered
compensation and 1.4% of final earnings in excess of covered compensation by
(y) the years of credited service up to 35 years. There is no reduction for
early retirement at age 62. The Company's policy is to fund all current and
prior service costs. Plan assets are invested in various segregated accounts
with an insurance company. Benefits under the Plan are not subject to any
offset.
The Company also sponsors a defined contribution 401(k) plan that covers
substantially all employees. The Company matches 50 percent of employee
contributions limited to a maximum equal to three percent of eligible
employee compensation. Company contributions to the plan were approximately
$588,000, $633,000 and $832,000 in 1994, 1995 and 1996, respectively.
8
<PAGE>
Employment Arrangements
The Company has entered into employment agreements with Thomas E.
Bennett, Brian Fontana, Kevin L. Loughlin, Peter A. Post, and James O. York.
Mr. Bennett's agreement, effective as of December 2, 1994, provides that he
shall serve as President and Chief Executive Officer. Upon the expiration of
the initial seven year term, Mr. Bennett's agreement shall automatically be
extended for an additional term of one year, unless either party has notified
the other party of its election to terminate the agreement, not later than 90
days prior to the scheduled expiration date. During the term of employment,
the agreement provides for an annual base salary of $225,000 subject to
annual review by the Board provided that the level of base salary shall not
be subject to reduction. Mr. Bennett's current annual base salary is
$260,000. Mr. Bennett is entitled to participate in the management cash
incentive bonus program, and in all fringe benefit programs maintained by the
Company. Mr. Bennett's employment agreement also provides that in the event
that the Company terminates his employment or elects to not renew the
agreement other than for cause, Mr. Bennett will receive monthly one-twelfth
of his annual base salary at the time of such termination for the period
ending on the earlier of the expiration date of the employment agreement or
the first anniversary of the date of termination. If Mr. Bennett's employment
is terminated by death, the Company shall pay to Mr. Bennett's estate or
legal representative a lump sum payment equal to 25% of Mr. Bennett's annual
base salary in effect at such time. If Mr. Bennett's employment is terminated
based upon a permanent disability, Prime shall pay to Mr. Bennett a lump sum
of 50% of Mr. Bennett's annual base salary in effect at such time.
Mr. Fontana, Mr. Loughlin, Mr. Post and Mr. York's employment agreements
are substantially identical to Mr. Bennett's except that the annual base
salaries differ, and the initial terms expire on December 2, 1999 (Mr.
Bennett's expires on December 2, 2001). The initial annual base salaries for
Messrs. Fontana, Loughlin, Post and York were $160,000, $140,000, $125,000
and $125,000, respectively. The current annual base salaries for Messrs.
Fontana, Loughlin, Post and York are $160,000, $150,000, $160,000, and
$140,000, respectively.
Compensation Committee Report on Executive Compensation
The Company's executive compensation program is designed to help the
Company attract, motivate and retain the key executives of the Company.
Compensation for the Company's executive officers, including Mr. Bennett, the
Company's Chairman, President and Chief Executive Officer, has been
determined since December 2, 1994, according to the terms and conditions of
each officer's employment agreement with the Company. Compensation under the
employment agreements consists of a base salary, and a bonus consisting of a
percentage of base salary, within a range based on Company and individual
performance. The range increases based on the spread between actual and
targeted earnings. For 1996, at least 90% of the earnings target had to be
met for any bonus to be paid. The earnings target for 1996, which was
exceeded by 16.5%, is set forth in each executive officer's employment
agreement. The actual amount paid within the range for 1996 was determined by
the Board of Directors based on such officer's performance during the year.
With the exception of Mr. Bennett, who has a higher potential bonus, the
potential bonus ranges for the Named Executive Officers are identical.
The Board of Directors does not use a specific formula for weighing
individual performance. Instead, individuals are assessed based on the extent
to which the individual contributed to the Company's business success in his
or her area of responsibility.
In addition to base salary and bonus, the Company also incentivizes its
Named Executive Officers through grants of options to purchase Common Stock
under its Management Incentive Stock Plan and its 1996 Management Incentive
Stock Plan (the "Stock Plans"). The material terms of recent option grants
for each Named Executive Officer are set forth in the option grant table
above. The amount of options granted to each officer vary each year and are
based upon what the Compensation Committee and the Board of Directors
believes is appropriate taking into account the executive's total
compensation package, the amount of stock options previously awarded, and the
number of options issued to employees of the Company as a whole, as well as
the Compensation Committee's and the Board of Directors' desire to encourage
equity ownership by the Company's executives to provide an appropriate link
to the interests of the shareholders.
9
<PAGE>
In connection with the Company's initial public offering, the Board of
Directors engaged a consultant to review the compensation packages of the
executive officers, and to make recommendations for the compensation program
going forward. As a result of such consultations, which included a comparison
of the compensation of the Company's executive officers with the compensation
generally received in the Company's industry, the Board of Directors and each
executive officer amended the employment arrangements to revise the bonus
program to a level the Board of Directors feels is more comparable to that of
public companies of comparable size. Consequently, target bonuses for 1997
and following years are expected to be less than in 1996 and 1995. The new
bonus ranges for the executive officers are identical, except for Mr.
Bennett, who has a higher potential bonus. Payment of bonuses for 1997 and
following years is contingent on attaining at least 90% of net income and
earnings targets set by the Board of Directors each year, with bonuses being
paid in a range as a percentage of base salary, depending on Company and
individual performance. As with the prior arrangement, the Board does not
anticipate using a specific formula for weighing individual performance, but
rather will assess each executive officer based on the extent to which such
officer contributed to the Company in his or her area of responsibility.
The Board of Directors believes that the compensation program for the
Named Executive Officers of the Company serves the best interests of the
Company's shareholders.
The Board of Directors
Thomas E. Bennett
Jon P. Hedley
Robert M. Howe
Christopher J. O'Brien
Charles J. Philippin
Christopher J. Stadler
10
<PAGE>
Performance Graph
Set forth below is a line graph comparing the percentage change in the
cumulative total shareholder return on the Company's Common Stock against the
cumulative total return of Standard & Poor's 500 Stock Index and the Russell
2000 Index for the period of 2 months commencing November 1, 1996 and ending
on December 31, 1996. The Company included the Russell 2000 Index because it
contains publicly traded issuers with total market capitalization of between
approximately $160,000,000 and $1,000,000,000, which is similar to the
Company's total market capitalization. The Company does not believe it can
reasonably identify a peer group, given the small number of publicly-traded
peer issuers. The Company has not paid any dividends during the measurement
period, and consequently the cumulative total shareholders' return does not
include reinvestment of dividends of the Company. The graph assumes that $100
was invested on November 1, 1996 (the date that the Company's stock was first
traded publicly on the New York Stock Exchange).
{graph not filed}
11
<PAGE>
Security Ownership of Officers, Directors and Certain Beneficial Owners
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of April 4, 1997, by (i) each person who is
known by the Company to own beneficially more than 5% of the outstanding
shares of the Common Stock, (ii) each director and executive officer named in
the Summary Compensation Table, and (iii) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
NUMBER
NAME OF BENEFICIAL OWNER OF SHARES PERCENT
- ------------------------------------------------------------------------ ---------- -----------
<S> <C> <C>
Investcorp (1).......................................................... 7,463,132 26.7%
SIPCO Limited (2)....................................................... 7,463,132 26.7
Equipment Investments Limited (3)....................................... 1,756,887 6.3
Thomas E. Bennett (4)................................................... 86,592 *
Brian Fontana (4)....................................................... 35,101 *
Kevin L. Loughlin (4)................................................... 29,714 *
Peter A. Post (4)....................................................... 25,575 *
James O. York (4)....................................................... 16,770 *
Jon P. Hedley........................................................... 38,107 *
Christopher J. O'Brien.................................................. 22,222 *
Charles J. Philippin.................................................... 39,958 *
Christopher J. Stadler.................................................. 13,500 *
Robert M. Howe.......................................................... 3,170 *
All directors and executive officers as a group (12 people) (4)......... 327,217 1.2
</TABLE>
- ------------------------
* Less than 1%.
(1) Beneficial ownership is as of December 31, 1996, based on a Schedule 13G
filed with the Company. Investcorp does not own any shares of the Common
Stock. The number of shares shown as owned by Investcorp includes all of
the shares owned by Arlington Limited, Ballet Limited, Chase Nominees
(Guernsey) Limited, Denary Limited, Equipment Rental Limited, Equity PEA
Limited, Equity PEB Limited, Equity PEC Limited, Equity PED Limited,
Freeport Limited, Gleam Limited, Highlands Limited, Investcorp Investment
Equity Limited, LaPorte Limited, Noble Limited, Outrigger Limited, Plano
Limited, Quill Limited, Radial Limited, Shoreline Limited and Zinnia
Limited. Other than Equipment Rental Limited and Investcorp Investment
Equity Limited, which are indirect wholly owned subsidiaries of Investcorp,
Investcorp owns no stock in such entities. Investcorp may be deemed to
share beneficial ownership of the shares of Common Stock held by such
entities because such entities or their shareholders or principals have
entered into revocable management agreements with a wholly owned subsidiary
of Investcorp pursuant to which each such entity has granted such
subsidiary the authority to direct the voting and disposition of the stock
owned by such entity for so long as such agreement is in effect. Investcorp
is a Luxembourg corporation, with its registered address at 37 rue Notre-
Dame, Luxembourg.
(2) Beneficial ownership is as of December 31, 1996, based on a Schedule 13G
filed with the Company. SIPCO Limited ("SIPCO") does not directly own any
Common Stock. The number of shares shown as owned by SIPCO consists of the
shares Investcorp is deemed to beneficially own. SIPCO may be deemed to
control Investcorp through its ownership of a majority of the stock of a
company which indirectly owns a majority of Investcorp's outstanding stock.
SIPCO is a Cayman Islands corporation with its address at P. O. Box 1111,
West Wind Building, George Town, Grand Cayman, British West Indies.
(3) Beneficial ownership is as of December 31, 1996, based on a Schedule 13G
filed with the Company. Equipment Investments Limited is a Cayman Islands
corporation with its address at P. O. Box 1111, West Wind Building,
Georgetown, Grand Cayman, British West Indies.
12
<PAGE>
(4) Includes for each individual the following shares of Common Stock,
purchasable within 60 days of April 4, 1997, upon exercise of Stock
Options held by such individual, and for the directors and executive
officers as a group includes the aggregate of such shares: Thomas E.
Bennett (23,340 Shares), Brian Fontana (5,183 Shares), Kevin L. Loughlin
(7,775 Shares), Peter A. Post (6,744 Shares), and James O. York (2,591
Shares).
Certain Transactions
In connection with the 1994 Acquisition, Prime paid Investcorp
International, Inc. ("III") fees of $2.7 million for arranging Prime's credit
facility. Prime also entered into an agreement for management advisory,
strategic planning and consulting services (the "Management Agreement") with
III pursuant to which Prime agreed to pay III $1.5 million per year for a
five year term. Prime prepaid III $4.5 million for the first three years of
the term and agreed to make quarterly payments during the fourth and fifth
years. In connection with the 1994 Acquisition, Prime also entered into an
agreement with Investcorp Bank E.C. ("EC") for a term of five years pursuant
to which Prime paid EC approximately $7.6 million in exchange for EC's
assistance in arranging financing for the 1994 Acquisition and for EC's
covenant not to arrange or facilitate the acquisition of a competitor of
Prime without Prime's consent. These two agreements were terminated in
October 1996 in connection with the Company's initial public offering.
In connection with the Company's purchase of the stock of Vibroplant
U.S., Inc. (which did business as American Hi-Lift), Equipment Rental
Limited, Arlington Limited, Freeport Limited, LaPorte Limited and Plano
Limited made a capital infusion of $10.0 million into the Company which, in
turn, paid $1.0 million to III on February 26, 1996 for financial advisory
services related to the purchase of American Hi-Lift. This capital
contribution, plus borrowing from Prime's credit facility, provided funds for
the completion of the American Hi-Lift purchase.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission ("SEC") and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Officers, directors and
greater than ten-percent shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
The Company became subject to Section 16(a) on October 31, 1996, the
effective date of the Company's Registration Statement on Form S-1 for its
initial public offering. Initial statements of ownership on Form 3 were filed
for the following persons on November 12, 1996: Thomas E. Bennett, Brian
Fontana, Jon P. Hedley, Robert M. Howe, Investcorp, S.A., John D. Latimer,
Kevin L. Loughlin, Christopher J. O'Brien, Charles J. Philippin, Peter A.
Post, Sipco, Ltd., Christopher J. Stadler, and James O. York. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written reports than no other reports were
required, except as set forth herein all Section 16(a) filing requirements
applicable to the Company's officers, directors, and greater than ten-percent
beneficial owners were complied with during the year ended December 31, 1996.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Coopers & Lybrand, L.L.P. has been appointed by the Board of Directors as
independent auditors of the Company and its subsidiaries for the fiscal year
ending December 31, 1997. This appointment is being presented to the
shareholders for ratification. Coopers & Lybrand, L.L.P. has served the
Company as independent auditors since December 1994. Although the Company is
not required to obtain shareholder ratification of the appointment of the
independent auditors for the Company for the fiscal year ended December 31,
1997, the Company has elected to do so. The affirmative vote of holders of a
majority of the shares of Common Stock represented in person or by proxy at
the meeting is required for ratification of the appointment of the
independent auditors of the Company.
13
<PAGE>
Representatives of Coopers & Lybrand, L.L.P. will be present at the
Annual Meeting. While they do not plan to make a statement at the meeting,
such representatives will be available to respond to appropriate questions
from shareholders and will be free to make a statement if they so desire.
In the event that the shareholders do not ratify the appointment of
Coopers & Lybrand, L.L.P. as the independent auditors of the Company, the
Board of Directors will consider the retention of other independent auditors.
The Board of Directors of the Company has unanimously approved Coopers &
Lybrand, L.L.P. as the independent auditors for the Company for the fiscal
year ended December 31, 1997 and recommends a vote "FOR" the ratification of
the appointment of Coopers & Lybrand, L.L.P. as independent auditors for the
Company for such fiscal year.
Shareholders' Proposals for 1998 Annual Meeting
Proposals of shareholders of the Company which are intended to be
included in the Company's Proxy Statement and proxy relating to the 1998
Annual Meeting of the Company must be received at the Company's principal
executive offices no later than December 16, 1997. Such proposals must be in
conformity with all applicable legal provisions, including Rule 14a-8 of the
General Rules and Regulations under the Securities Exchange Act of 1934.
Other Business
The Board of Directors of the Company does not know of any other matters
which are to be presented for action at the meeting. However, if any other
matters properly come before the meeting, it is intended that the enclosed
proxy will be voted in accordance with the recommendation of the Board of
Directors.
By Order of the Board of Directors,
Kevin L. Loughlin
Director of Finance, Treasurer
and Secretary
Houston, Texas
April 18, 1997
14
<PAGE>
Exhibit 99.4
EMPLOYMENT AGREEMENT
This Agreement is made and entered into effective as of February 3,
1997, by and between Primeco Inc., a Texas corporation ("Employer"), and
Stanton P. Eigenbrodt ("Employee").
Employer hereby agrees to employ Employee, and Employee hereby accepts
such employment, on the terms and conditions hereinafter set forth.
1. PERIOD OF EMPLOYMENT. The period of Employee's employment under
this Agreement (the "Period of Employment") shall commence on the date hereof
(the "Effective Date") and shall expire on December 31, 1999 (the "Expiration
Date"), subject to any extension as may be agreed or any earlier termination
of Employee's employment as provided in Section 6 hereof. Upon the
expiration of the initial term of this Agreement, and each subsequent term or
extension thereof, this Agreement shall automatically be extended for an
additional term of one year, unless the Employer or the Employee shall have
notified the other party hereto of its election to terminate this Agreement
not later than 90 days prior to the scheduled Expiration Date. If Employee's
employment is terminated pursuant to Section 6 hereof, the Period of
Employment shall expire as of the Date of Termination (as hereinafter
defined).
2. DUTIES. During the Period of Employment, Employee will faithfully
perform those duties and responsibilities assigned by the Board of Directors
of the corporate parent ("Parent") of Employer (the "Board") or the Chief
Executive Officer of Employer and Employee will devote his full working time
and use his best efforts to advance the business and welfare of Employer in
furtherance of the policies established by the Board. During the Period of
Employment, Employee shall not engage in any other employment activities for
any direct or indirect remuneration without the concurrence of the Board,
except that Employee may continue to devote reasonable time to the management
of investments and to participation in community and charitable affairs, so
long as such activities do not interfere with his duties under this
Agreement. Employee shall have such title as the Board shall determine from
time to time; Employee's initial title is set forth on Exhibit A hereto.
3. COMPENSATION.
3.1. BASE SALARY. During the Period of Employment, Employer shall pay
Employee a Base Salary at the rate of $140,000 per annum payable at least as
frequently as bi-weekly and subject to payroll deductions as may be necessary
or customary in respect of Employer's salaried employees in general. The
amount of Employee's Base Salary shall be subject to annual review by the
Board, provided that the level of such Base Salary shall not be subject to
reduction.
3.2. INCENTIVE COMPENSATION. In addition to the Base Salary provided
for in Section 3.1 hereof, Employee shall be entitled to annual cash bonuses
as set forth on Exhibit B hereto. Notwithstanding the foregoing, Employee's
bonus payment, if any, for fiscal 1997 shall be based upon achievement of the
applicable targets by Employer for the entire fiscal year, but the amount of
such bonus payment shall be prorated in accordance with the number of days
during the 1997 fiscal year that Employee was employed hereunder. Employer
agrees that it will not amend or modify Exhibit B in any manner materially
adverse to Employee's interest thereunder without Employee's written consent.
4. BENEFITS. During the Period of Employment, Employee shall be
entitled to participate in all fringe benefit programs maintained by Employer
that are available to its executive officers generally. Any payments or
benefits payable to Employee hereunder under any such fringe benefit programs
in respect of any calendar year during which Employee is employed by Employer
for less than the entire year shall, unless otherwise provided in the
applicable plan or arrangement, be prorated in accordance with the number of
days in such calendar year during which he is so employed. Employee
acknowledges that he shall have no vested rights under or to participate in
any such program except as expressly provided under the terms hereof or
thereof.
5. EXPENSES. Employer will pay or reimburse Employee for such
reasonable travel, entertainment or other expenses as he may incur on behalf
of Employer during the Period of Employment in connection with the
<PAGE>
performance of his duties hereunder but only to the extent that such expenses
were either specifically authorized by Employer or incurred in accordance
with policies established by the Board and provided that Employee shall
furnish Employer with such evidence relating to such expenses as Employer may
reasonably require to substantiate such expenses for tax purposes.
6. TERMINATION OF EMPLOYMENT.
6.1. CIRCUMSTANCES OF TERMINATION. Notwithstanding the terms set forth
in Section 1 hereof, Employee's employment shall terminate under any of the
following circumstances:
(A) DEATH. In the event of Employee's death.
(B) PERMANENT DISABILITY. If during the Period of Employment Employee
becomes physically or mentally incapacitated or disabled so that (i) he is
unable to perform for Employer substantially the same services as he
performed prior to incurring such incapacity or disability or to devote his
full working time or use his best efforts to advance the business and welfare
of Employer or otherwise to perform his duties under this Agreement and (ii)
such condition exists for an aggregate of six months in any 12 consecutive
calendar month period (Employer, at its option and expense, being entitled to
retain a physician reasonably acceptable to Employee to confirm the existence
of such incapacity or disability, and the determination of such physician
being binding upon Employer and Employee).
(C) CAUSE. At the option of Employer, because Employee: (i) has been
convicted of, or has pled guilty or nolo contendere to, a felony or a crime
involving moral turpitude, or (ii) has embezzled or misappropriated Employer
funds or property, or (iii) has continued use of alcohol or drugs to an
extent that interferes with the performance by Employee of his employment
responsibilities, or (iv) has violated Section 8.1, Section 8.2, Section 8.3
or Section 8.4 hereof, or (v) has willfully failed or refused to perform
those duties reasonably assigned or delegated to him by the Board or the
Chief Executive Officer, which failure or refusal continues following (a) the
Board giving the Employee written notice setting forth the facts or events
constituting such failure or refusal and (b) a reasonable opportunity to
correct the deficiencies or other problems specified in such notice to the
reasonable satisfaction of the Board.
(D) NOT FOR CAUSE. At the option of Employer at any time for any
reason other than those referred to above or for no reason at all, whereupon
the Employer shall become obligated to make those payments set forth in
Section 7.1(d) hereof.
6.2. NOTICE OF TERMINATION. Any termination of Employee's employment by
Employer (other than termination pursuant to Section 6.1(a) hereof) or by
Employee shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 9.2. For purposes of this Agreement,
a "Notice of Termination" shall mean a notice terminating Employee's
employment by Employer. If a Notice of Termination is given by Employer,
such notice shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances that provide a basis for termination of Employee's employment
under the provision so indicated. For purposes of this Agreement, the "Date
of Termination" shall be the date on which the Notice of Termination is
delivered except that with respect to Section 6.1(a) the "Date of
Termination" shall be the date of Employee's death.
7. PAYMENTS UPON TERMINATION OF EMPLOYMENT.
7.1 PAYMENTS. In the event that Employee's employment is terminated
prior to the Expiration Date (including any extension thereof), the Period of
Employment shall expire as of the Date of Termination.
(a) If Employer terminates Employee's employment for Cause or if
Employee voluntarily terminates his employment, Employer's obligation to
compensate Employee shall in all respects cease as of the Date of
Termination, except that Employer shall pay Employee the Base Salary accrued
under Section 3 and the
<PAGE>
reimbursable expenses incurred under Section 5 of this Agreement up to such
Date of Termination (the "Accrued Obligations");
(b) If Employee's employment is terminated upon the death of Employee,
Employer's obligation to compensate Employee shall in all respects cease as
of the Date of Termination, except that within thirty (30) days after the
Date of Termination Employer shall (i) pay Employee's estate or legal
representative the Accrued Obligations and a lump sum payment equal to 25% of
the Employee's annual Base Salary payable under Section 3 hereof at the rate
in effect immediately prior to such termination and (ii) continue to maintain
during the three-month period following the Date of Termination for the
benefit of the Employee's dependents, basic health and dental insurance and
related medical expenses coverage on terms no less favorable to the Employee
than Employer provides to its executive officers generally, as such benefits
may be modified from time to time during such period;
(c) If Employee's employment is terminated upon the Permanent
Disability of Employee, Employer's obligation to compensate Employee shall in
all respects cease as of the Date of Termination, except that within thirty
(30) days after the Date of Termination Employer shall (i) pay Employee
Accrued Obligations and a lump sum payment equal to 50% of the Employee's
annual Base Salary payable under Section 3 hereof at the rate in effect
immediately prior to such termination less the amount of any disability
payments payable to Employee during the six-month period following the Date
of Termination pursuant to any Employer-paid or state sponsored insurance
policy or employer self-insured program and (ii) continue to maintain during
the six-month period following the Date of Termination for the benefit of
Employee and his dependents, basic health, disability and dental insurance
and related medical expenses coverage on terms no less favorable to the
Employee than Employer provides to its executive officers generally, as such
benefits may be modified from time to time during such period provided that
the Employee shall continue to be obligated to make any contributions or
payments in connection with such benefits to the same extent as other
executive officers generally; and
(d) If Employee's employment is terminated by Employer pursuant to
Section 6.1(d), Employer's obligation to compensate Employee shall in all
respects cease, except that within thirty (30) days after the Date of
Termination Employer shall pay to Employee the Accrued Obligations and during
the period ending on the earlier of the Expiration Date or the first
anniversary of the Date of Termination (the "Severance Period"), Employer
shall (i) pay to Employee on a monthly basis the sum of one-twelfth (1/12th)
of the annual Base Salary of Employee in effect at the Date of Termination
(the "Continuation Payments") and (ii) continue to maintain, during the
Severance Period for the benefit of the Employee and his dependents, basic
health, dental and life insurance and related medical expenses coverage
(including disability and hospitalization coverage) (the "Continuation
Benefits") on terms no less favorable to the Employee than the Employer
provides to its executive officers generally, as such benefits may be
modified from time to time during the Severance Period. During the Severance
Period, Employee shall be required to make any contributions required to
maintain such Continuation Benefits, which may be withheld from the
Continuation Payments; provided that such contributions are also required to
be made by the Employer's executive officers generally. If at any time
during the Severance Period Employee shall obtain employment with a third
party (the "Substitute Employer") in which Employee is entitled to receive
basic health benefits in connection with such employment on terms provided by
the Substitute Employer to its similarly situated employees generally, the
Employer shall no longer be required to provide Continuation Benefits to the
Employee, regardless of whether such benefits differ in any respect from the
Continuation Benefits. The Employer shall be excused from its obligations to
make payments under this Section 7.1(d) if the Employee breaches its
obligations hereunder (including its obligations under Article 8 hereof).
7.2. RELEASE AND SATISFACTION. With respect to Employee, his heirs,
successors and assigns, payment by Employer of the amounts provided under
this Section 7 shall release, relinquish and forever discharge Employer and
any director, officer, employee, shareholder or agent of Employer from any
and all claims, damages, losses, costs, expenses, liabilities or obligations,
whether known or unknown (other than any such claims, damages, losses, costs,
expenses, liabilities or obligations (a) covered by any indemnification
arrangement of Employer with respect to Employee or (b) arising under any
written employee benefit plan or arrangement (whether or not tax-qualified)
covering Employee), which Employee has incurred or suffered or may incur or
suffer as a result of Employee's employment by Employer or the termination of
such employment.
<PAGE>
7.3 EFFECT ON THIS AGREEMENT. Any termination of Employee's employment
and any expiration of the Period of Employment under this Agreement shall not
affect the continuing operation and effect of Sections 7.2, 8.1, 8.2, 8.3,
8.4 and 8.5 hereof, which shall continue in full force and effect with
respect to Employer and Employee, and its and his heirs, successors and
assigns. Nothing in Section 7.1 hereof shall be deemed to operate or shall
operate as a release, settlement or discharge of any liability of Employee to
Employer or others from any action or omission by Employee enumerated in
Section 6.1(c) hereof as a possible basis for termination of Employee's
employment for Cause.
7.4 NO DUTY TO MITIGATE. Subject to the provisions of Sections 8.1,
8.2, 8.3, 8.4 and 8.5 hereof, Employee shall be free to accept such
employment and engage in such business as Employee may desire following the
termination of his employment hereunder, and no compensation received by
Employee therefrom shall reduce or affect any payments required to be made by
Employer hereunder except to the extent expressly provided in the benefit
plans of Employer.
8. NON-DISCLOSURE OF PROPRIETARY INFORMATION, SURRENDER OF RECORDS,
INVENTIONS AND PATENTS; NON-COMPETE.
8.1 PROPRIETARY INFORMATION. Employee shall not during the Period of
Employment or at any time thereafter (irrespective of the circumstances under
which Employee's employment by Employer terminates), directly or indirectly
use for his own purpose or for the benefit of any person or entity other than
Employer, nor otherwise disclose, any proprietary information, as defined
below, to any individual or entity, unless such disclosure has been
authorized in writing by the Board or is otherwise required by law. For
purposes of this Agreement, the term "proprietary information" shall include,
but is not limited to: (a) the name or address of any customer, vendor or
affiliate of Employer or any information concerning the transactions or
relations of any customer, vendor or affiliate of Employer with Employer or
any of its shareholders; (b) any information concerning any product,
technology or procedure employed by Employer but not generally known to its
customers, vendors or competitors, or under development by or being tested by
Employer but not at the time offered generally to customers or vendors; (c)
any information relating to Employer's computer software, computer systems,
pricing or marketing methods, sales margins, cost of goods, cost of material,
capital structure, operating results, borrowing arrangements or business
plans; (d) any information which is generally regarded as confidential or
proprietary in any line of business engaged in by Employer; (e) any
information contained in any of Employer's written or oral policies and
procedures or employee manuals; (f) any information belonging to customers,
vendors or affiliates of Employer which Employer has agreed to hold in
confidence; (g) any inventions, innovations or improvements covered by
Section 8.3 below; (h) any other information which the Board has reasonably
determined by resolution and communicated to Employee to be confidential or
proprietary; and (i) all written, graphic and other material relating to any
of the foregoing. Information that is not novel or copyrighted or patented
may nonetheless be proprietary information. However, proprietary information
shall not include (i) any information that is or becomes generally known to
the industries in which Employer competes through sources independent of
Employer or through authorized publication to persons other than Employer's
employees by Employer or (ii) other non-sensitive information that may be
disclosed by Employee in the ordinary course of business, the disclosure of
which is not reasonably likely to adversely affect Employer's business
operations, their relationships with customers, vendors or employees or the
results of their operations
8.2 CONFIDENTIALITY AND SURRENDER OF RECORDS. Employee shall not
during the Period of Employment or at any time thereafter (irrespective of
the circumstances under which Employee's employment by Employer terminates),
except as required by law, directly or indirectly give any "confidential
records" (as hereinafter defined) to, or permit any inspection or copying of
confidential records by, any individual or entity other than in the course of
such individual's or entity's employment or retention by Employer, nor shall
he retain, and will deliver promptly to Employer, any of the same following
termination of his employment. For purposes hereof, "confidential records"
means all correspondence, memoranda, files, manuals, books, lists, financial,
operating or marketing records, magnetic tape, or electronic or other media
or equipment of any kind which may be in Employee's possession or under his
control or accessible to him which contain any proprietary information as
defined in Section 8.1. above. All confidential records shall be and remain
the sole property of Employer during the Period of Employment and thereafter.
<PAGE>
8.3 INVENTIONS AND PATENTS. All inventions, innovations or
improvements in Employer's method of conducting its business (including
policies, procedures, products, improvements, software, ideas and
discoveries, whether patentable or copyrightable or not) conceived or made by
Employee, either alone or jointly with others, during the Period of
Employment belong to Employer. Employee will promptly disclose in writing
such inventions, innovations or improvements to the Board and perform all
actions reasonably requested by the Board to establish and confirm such
ownership by Employer, including, but not limited to, cooperating with and
assisting Employer in obtaining patents for Employer in the United States and
in foreign countries. Any patent application filed by Employee within a year
after termination of his employment hereunder shall be presumed to relate to
an invention which was made during the Period of Employment unless Employee
can provide evidence to the contrary.
8.4 COVENANT NOT TO COMPETE; NO SOLICITATION.
(a) Employee acknowledges and recognizes the highly competitive nature
of Employer's business and, in consideration of the payment by Employer to
Employee of amounts that may hereafter be paid to Employee pursuant to
Sections 7.1 and 8.4(d) hereof, Employee agrees that during the period (the
"Covered Time") beginning on the Date of Termination and ending (i) if
Employee's employment is terminated for any reason other than pursuant to
Section 6.1(d) hereof, on the second anniversary of the Date of Termination
or (ii) if Employee's employment is terminated pursuant to Section 6.1(d)
hereof and subject to Section 8.4(d) hereof, on the earlier of (A) the first
anniversary of the Date of Termination or (B) the last day of the Period of
Employment remaining under Section 1 hereof immediately prior to the Date of
Termination, Employee will not compete with the business of Employer, which
means that Employee will not engage, directly or indirectly, in the "Covered
Business" (as hereinafter defined) in any state of the United States of
America in which the Employer is conducting business or proposes to conduct
business as of the Date of Termination and any states contiguous therewith
(these areas are hereinafter collectively referred to as the "Covered Area").
For purposes of this Agreement, (i) "Covered Business" shall mean the
renting and selling of the following types of equipment (and parts and
supplies for such equipment): high-reach booms, forklifts, tractors, dump
trucks, air compressors and high- reach scissor lifts, and small tools such
as electrical generators, power saws and hand tools; and (ii) the phrase
"engage, directly or indirectly" shall mean engaging directly or having an
interest, directly or indirectly, as owner, partner, shareholder, independent
contractor, capital investor, lender, renderer of consultation services or
advice or otherwise (other than as the holder of less than 2% of the
outstanding stock of a publicly-traded corporation), either alone or in
association with others, in the operation of any aspect of any type of
business or enterprise engaged in any aspect of the Covered Business.
Employee shall be deemed engaged in business in the Covered Area if his place
of business is located in the Covered Area or if he solicits customers
located anywhere in, or delivers products anywhere in, the Covered Area.
(b) Employee agrees that during the term of this Agreement (including
any extensions thereof) and during the Covered Time he shall not (i) directly
or indirectly solicit or attempt to solicit any of the employees, agents or
representatives of Employer or affiliates of Employer to leave any of such
entities; (ii) directly or indirectly solicit or attempt to solicit any of
the employees, agents, consultants or representatives of Employer or
affiliates of Employer to become employees, agents, representatives or
consultants of any other person or entity; or (iii) directly or indirectly
solicit or attempt to solicit any customer, vendor or distributor of Employer
or affiliates of Employer with respect to any product or service being
furnished, made, sold, leased or rented by Employer.
(c) Employee understands that the provisions of Section 8.4(a) may
limit his ability to earn a livelihood in a business similar to the business
of Employer but nevertheless agrees and hereby acknowledges that the
consideration provided under this Agreement, including any amounts or
benefits provided under Section 7 hereof, is sufficient to justify the
restrictions contained in such provisions and in consideration thereof and in
light of Employee's education, skills and abilities, Employee agrees that he
will not assert that, and it should not be considered that, such provisions
prevent him from earning a living or otherwise are void or unenforceable or
should be voided or held unenforceable. Employee acknowledges and agrees that
his duties with Employer are of an executive nature and that he is a member
of Employer's management group.
<PAGE>
(d) If Employee's employment is terminated pursuant to Section 6.1(d)
hereof, Employer may extend the Covered Time to extend up to and through the
second anniversary of the Date of Termination by delivering written notice to
Employee (specifying the duration of the extended Covered Time), within ten
(10) days of such Date of Termination, that Employer has elected to continue
to pay to Employee the Continuation Payments and provide the Continuation
Benefits (on terms no less favorable to Employee than Employer provides to
its executive officers generally, as such benefits may be modified from time
to time) for each month of such extended Covered Time. During the extended
Covered Time, Employee shall be required to make any contributions required
to maintain such Continuation Benefits, which may be withheld from the
Continuation Payments; provided that such contributions are also required to
be made by the Employer's executive officers generally. If at any time
during the extended Covered Time Employee shall obtain employment with a
Substitute Employer in which Employee is entitled to receive basic health
benefits in connection with such employment on terms provided by the
Substitute Employer to its similarly situated employees generally, Employer
shall no longer be required to provide Continuation Benefits to the Employee,
regardless of whether such benefits differ in any respect from the
Continuation Benefits. Employer shall be excused from its obligations to make
payments under this Section 8.4(d) if Employee breaches its obligations
hereunder.
8.5 LITIGATION ASSISTANCE. Employee agrees that after the Date of
Termination he shall, at the request of Employer, render all assistance and
perform all lawful acts that Employer considers necessary or advisable in
connection with any litigation involving Employer or any director, officer,
employee, shareholder, agent, representative, consultant, customer or vendor
of Employer. In the event that Employer requests Employee's assistance under
this Section 8.5, Employer shall pay to Employee for each day such assistance
is rendered an amount equal to the annual Base Salary of Employee in effect
at the Date of Termination divided by 250 and shall promptly pay or reimburse
Employee for such reasonable travel expenses as he may incur in connection
with rendering assistance hereunder
8.6 DEFINITION OF EMPLOYER. For purposes of this Section 8, the term
Employer shall include Employer and any and all of its subsidiaries, ventures
or affiliates, whether currently existing or hereafter formed, which are
engaged in the Covered Business or a portion thereof, as well as any person
to whom this Agreement is assigned as permitted by Section 9.8 hereof.
8.7 ENFORCEMENT.
(a) The parties hereto agree and acknowledge that the covenants and
agreements contained herein are reasonably necessary in duration and to
protect the reasonable competitive business interests of Employer, including,
without limitation, the value of the proprietary information and goodwill of
Employer.
(b) Employee agrees that the covenants and undertakings contained in
Article 8 of this Agreement relate to matters which are of a special, unique
and extraordinary character and that Employer cannot be reasonably or
adequately compensated in damages in an action at law in the event Employee
breaches any of these covenants or undertakings. Therefore, Employee agrees
that Employer shall be entitled, as a matter of course, without the need to
prove irreparable injury, to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction, restraining any
violation or threatened violation of any of such terms by Employee and such
other persons as the court shall order. Employee agrees to pay costs and
legal fees incurred by Employer in obtaining such injunction.
(c) Rights and remedies provided for in this Section are cumulative and
shall be in addition to rights and remedies otherwise available to the
parties under any other agreement or applicable law.
(d) In the event that any provision of this Agreement shall to any
extent be held invalid, unreasonable or unenforceable in any circumstances,
the parties hereto agree that the remainder of this Agreement and the
application of such provision of this Agreement to other circumstances shall
be valid and enforceable to the fullest extent permitted by law. If any
provision of this Agreement, or any part thereof, is held to be unenforceable
because of the scope or duration of or the area covered by such provision,
the parties hereto agree that the court or arbitrator making such
determination shall reduce the scope, duration and/or area of such provision
(and shall
<PAGE>
substitute appropriate provisions for any such unenforceable provisions) in
order to make such provision enforceable to the fullest extent permitted by
law, and/or shall delete specific words and phrases, and such modified
provision shall then be enforceable and shall be enforced. The parties
hereto recognize that if, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants contained in this Agreement, then that
unenforceable covenant contained in this Agreement shall be deemed eliminated
from these provisions to the extent necessary to permit the remaining
separate covenants to be enforced. In the event that any court or arbitrator
determines that the time period or the area, or both, are unreasonable and
that any of the covenants is to that extent unenforceable, the parties hereto
agree that such covenants will remain in full force and effect, first, for
the greatest time period, and second, in the greatest geographical area that
would not render them unenforceable.
9 MISCELLANEOUS.
9.1. KEY MAN INSURANCE. Employee recognizes and acknowledges that
Employer or its affiliates may seek and purchase one or more policies
providing key man life insurance with respect to Employee, the proceeds of
which would be payable to Employer or such affiliate. Employee hereby
consents to Employer or its affiliates seeking and purchasing such insurance
and will provide such information, undergo such medical examinations (at
Employer's expense), execute such documents, and otherwise take any and all
actions necessary or desirable in order for Employer or its affiliates to
seek, purchase and maintain in full force and effect such policy or policies.
9.2 NOTICE. Any notice required or permitted to be given hereunder
shall be deemed sufficiently given if sent by registered or certified mail,
postage prepaid, addressed to the addressee at his or its address last
provided the sender in writing by the addressee for purposes of receiving
notices hereunder or, unless or until such address shall be so furnished, to
the address indicated opposite his or its signature to this Agreement. For
purposes of this Agreement, notice sent in conformity with this Section 9.2
shall be deemed to have been received on the third business day following the
date on which such notices are so sent.
9.3. MODIFICATION AND NO WAIVER OF BREACH. No waiver or modification of
this Agreement shall be binding unless it is in writing signed by the parties
hereto. No waiver by a party of a breach hereof by the other party shall be
deemed to constitute a waiver of a future breach, whether of a similar or
dissimilar nature, except to the extent specifically provided in any written
waiver under this Section 9.3.
9.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND ALL
QUESTIONS RELATING TO THE VALIDITY AND PERFORMANCE HEREOF AND REMEDIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW.
9.5. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same agreement.
9.6. CAPTIONS. The captions used herein are for ease of reference only
and shall not define or limit the provisions hereof.
9.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto relating to the matters encompassed hereby and
supersedes any prior oral or written agreements.
9.8 ASSIGNMENT. The rights of Employer under this Agreement may,
without the consent of Employee, be assigned by Employer to any person, firm,
corporation, or other business entity which at any time, whether by purchase,
merger, or otherwise, directly or indirectly, acquires all or material
portions of the stock, assets or any line of business of Employer.
9.9. NON-TRANSFERABILITY OF INTEREST. None of the rights of Employee to
receive any form of compensation payable pursuant to this Agreement shall be
assignable or transferable except through a testamentary disposition or by
the laws of descent and distribution upon the death of Employee.
<PAGE>
Any attempted assignment, transfer, conveyance, or other disposition (other
than as aforesaid) of any interest in the rights of Employee to receive any
form of compensation to be made by Employer pursuant to this Agreement shall
be void.
9.10. ARBITRATION. The parties shall endeavor to settle all
disputes by amicable negotiations. Except as otherwise provided herein, any
claim, dispute, disagreement or controversy that arises among the parties
relating to this Agreement that is not amicably settled shall be resolved by
arbitration, as follows:
(a) Any such arbitration shall be heard in The City of New York, New
York, before a panel consisting of one (l) to three (3) arbitrators, each of
whom shall be impartial. Upon the written Request of Arbitration of either
party hereto to commence arbitration hereunder, the parties shall attempt to
mutually agree as to the number and identity of the arbitrator(s), within
thirty (30) days of the date of such Request. Except as the parties may
otherwise agree, all arbitrators (if not selected by the parties hereto
within thirty (30) days of a written Request for Arbitration) shall be
appointed pursuant to the commercial arbitration rules of the American
Arbitration Association. In determining the number and appropriate
background of the arbitrators, the appointing authority shall give due
consideration to the issues to be resolved, but his or her decision as to the
number of arbitrators and their identity shall be final.
(b) An arbitration may be commenced by any party to this Agreement by
the service of a written Request for Arbitration upon the other affected
parties. Such Request for Arbitration shall summarize the controversy or
claim to be arbitrated.
(c) All attorneys' fees and costs of the arbitration shall in the first
instance be borne by the respective party incurring such costs and fees, but
the arbitrators shall have the discretion to award costs and/or attorneys'
fees as they deem appropriate under the circumstances. The parties hereby
expressly waive punitive damages, and under no circumstances shall an award
contain any amount that in any way reflects punitive damages.
(d) Judgment on the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof.
(e) It is intended that controversies or claims submitted to
arbitration under this Section 9.10 shall remain confidential, and to that
end it is agreed by the parties that neither the facts disclosed in the
arbitration, the issues arbitrated, nor the views or opinions of any persons
concerning them, shall be disclosed to third persons at any time, except to
the extent necessary to enforce an award or judgment or as required by law or
in response to legal process or in connection with such arbitration.
(f) Any arbitration under this Section 9.10 shall be conducted pursuant
to the commercial arbitration rules of the American Arbitration Association.
9.11. JURISDICTION; VENUE. Subject to Section 9.10 hereof, the
parties hereto irrevocably and unconditionally submit to the exclusive
jurisdiction of any State or Federal court sitting in The City of New York
over any suit, action or proceeding arising out of or relating to this
Agreement. Service of any process, summons, notice or document by registered
mail addressed to any party as provided in Section 9.2 hereof shall be
effective service of process for any action, suit or proceeding brought
against such party in any such court. The parties hereto irrevocably and
unconditionally waive any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. A final judgment in any suit, action or proceeding
brought in any such court shall be conclusive and binding upon the parties
and may be enforced in any other courts to whose jurisdiction a party is or
may be subject, by suit upon such judgment.
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, this Agreement has been duly executed effective as
of the day and year first written above.
<PAGE>
Address for notices: PRIMECO INC.
16225 Park Ten Place
Suite 200
Houston, Texas 77084
Attention: Thomas E. Bennett By: /s/ Thomas E. Bennett
----------------------------------
Thomas E. Bennett
President
With a copy to:
INVESTCORP International Inc.
280 Park Avenue, 37th Floor
New York, New York 10017
Attention: Christopher J. O'Brien
EMPLOYEE
/s/ Stanton P. Eigenbrodt
----------------------------------
Stanton P. Eigenbrodt
<PAGE>
EXHIBIT A
Employee's initial title shall be
Corporate General Counsel and Assistant Secretary
<PAGE>
EXHIBIT B
Cash bonuses are payable to Employee in a given year if the consolidated
net income of Prime Service, Inc., a Delaware corporation and parent of
Employer (the "Company") for such year exceeds 90% of the net income target
(the "Net Income Percentage") in the Company's budget for such year, as
approved by the Board. Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA")(1) targets for such years shall be as set forth in
the Company's budget for such year, as approved by the Board. EBITDA and net
income targets shall be subject to change in the discretion of the Board for
any change to the capital structure of the Company or Employer in connection
with any acquisitions, equity offerings or other transactions that would, or
would be likely to, materially affect EBITDA or net income. Upon achievement
of the Net Income Percentage, the percentage of Base Salary payable as bonus
shall be determined as follows:
% of EBITDA % of Base
Target Achieved Salary
Payable
as Bonus(2)
- -------------------------------------------------------------------------------
Equal to Or But Less
Greater Than: Than:
- ----------------------------------------------
0 90 0
90 -- 35-50
(1) The EBITDA target for each year shall be defined by the Board in the
budget for each year.
(2) The Board in its discretion shall set the bonus percentage amount for
each fiscal year within the ranges indicated, but not less than the bottom of
the range.
<PAGE>
Exhibit 99.5
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
This Amendment No. 3 to Employment Agreement (this "Agreement") is made
and entered into as of June 8, 1997, by and between Prime Service, Inc., a
Delaware corporation and successor by merger to Primeco Inc., a Texas
corporation ("Employer"), and Thomas E. Bennett ("Employee").
WHEREAS, Employer and Employee have entered into an Employment Agreement,
dated as of December 2, 1994 (as amended pursuant to Amendment No. 1 to
Employment Agreement, dated as of October 25, 1996, and Amendment No. 2 to
Employment Agreement, dated as of November 20, 1996, the "Employment
Agreement");
WHEREAS, Employer and Employee desire to amend the Employment Agreement
to address the possibility of a change in control of Employer;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms.
(a) Capitalized terms not defined herein shall have the meanings set
forth in the Employment Agreement.
(b) As used herein and in the Employment Agreement, the following
terms shall have the following meanings:
"Change in Control" shall mean any of the following events:
(i) any Person, other than Investcorp S.A., its affiliates and the
executive officers of Employer ("Permitted Holders"), becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a Person shall be deemed
to have beneficial ownership of shares that such Person has a right to
acquire only if such right to acquire is immediately exercisable) of
more than 50% of the shares of capital stock of Employer normally
entitled to vote for the election of directors; or (ii) at any time
(a) Employer shall consolidate, merge, or effect a share exchange with
any other Person unless after giving effect thereto more than 50% of
the shares of capital stock of the continuing or surviving Person (or
an affiliate of such Person that controls such Person) normally
entitled to vote for directors shall be beneficially owned by
Permitted Holders or (b) Employer shall sell or otherwise transfer
more than 50% of the assets or earning power of Employer and its
subsidiaries (taken as a whole) to any Person. For this definition,
"Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Securities Exchange Act of 1934 and used in
Sections 13(d) and 14(d) thereof, including a "group" as used in
Section 13(d) thereof.
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<PAGE>
"Change in Control Date" shall mean the date immediately prior to
the effectiveness of a Change in Control.
2. Amendments. If a Change in Control occurs, the Employment Agreement
shall be amended, effective as of the Change in Control Date, as set forth in
this Section 2:
(a) Exhibit B to the Employment Agreement shall be restated in its
entirety to read as appended hereto.
(b) Section 4 of the Employment Agreement is amended by deleting the
words "payments or" from the second sentence thereof.
(c) Section 6.1 of the Employment Agreement is amended by adding a
new Section 6.1(e) to read as follows:
(e) For Good Reason. At the option of Employee, at any time
prior to the Expiration Date, for any of the following reasons (each a
"Good Reason"), whereupon Employer shall become obligated to make
those payments set forth in Section 7.1(d) hereof: (i) there is a
material adverse change in Employee's title from that which he held on
the Change in Control Date (provided that the removal of or failure to
elect Employee as a director of the Company shall not constitute "Good
Reason"); (ii) Employee's duties as an employee are materially reduced
or diminished from those in effect on the Change in Control Date
without Employee's written consent; (iii) Employer reduces Employee's
compensation after the Change in Control Date; (iv) Employer amends or
modifies the Program or benefits as in effect on the Change in Control
Date in any manner materially adverse to Employee's interest
thereunder; or (v) Employer requires that Employee's employment be
based more than 60 miles from the location of Employer's executive
offices on the Change in Control Date, without Employee's written
consent.
(d) Section 7.1(a) of the Employment Agreement is restated in its
entirety to read as follows:
(a) If Employer terminates Employee's employment for Cause or if
Employee voluntarily terminates his employment other than for Good
Reason, Employer's obligation to compensate Employee shall in all
respects cease as of the Date of Termination, except that Employer
shall pay Employee the Base Salary accrued under Section 3 hereof and
the reimbursable expenses incurred under Section 5 hereof up to such
Date of Termination (the "Accrued Obligations");
(e) Section 7.1(d) of the Employment Agreement is restated in its
entirety to read as follows:
(d) If Employee's employment is terminated by Employer pursuant
to Section 6.1(d) or by Employee for Good Reason pursuant to
Section 6.1(e), Employer's obligation to compensate Employee shall in
all respects cease, except
2
<PAGE>
that within thirty (30) days after the Date of Termination Employer
shall pay to Employee the Accrued Obligations, and for the period
ending on the earlier of the Expiration Date or the third anniversary
of the Date of Termination (the "Severance Period"), Employer shall:
(i) pay to Employee, at Employee's election, (A) on a
monthly basis, for each month in the Severance Period, an amount
equal to one-twelfth (1/12th) of the annual Base Salary of
Employee in effect at the Date of Termination or the Change in
Control Date, whichever is greater, or (B) in a single payment,
made within thirty (30) days after the Date of Termination, the
aggregate amount of such monthly Base Salary payments for the
Severance Period (the "Continuation Payments");
(ii) pay to Employee: (A) at Employee's election, (1) on a
monthly basis, for each month in the Severance Period, an amount
equal to one-twelfth (1/12th) of the bonus payment payable to him
under the Program for the fiscal year prior to the fiscal year in
which the Date of Termination occurs (each a "Monthly Bonus
Payment") or (2) in a single payment, made within thirty (30)
days after the Date of Termination, the aggregate amount of all
Monthly Bonus Payments for the Severance Period; and (B) if the
Date of Termination occurs in the 1997 fiscal year, in a single
payment made within thirty (30) days after the Date of
Termination, an amount equal to the bonus payment paid to him
under the Program for the 1996 fiscal year (annualized, if
Employee was employed by Employer for less than all of such
fiscal year), prorated for the period from the beginning of the
1997 fiscal year through the Date of Termination; and
(iii) continue to maintain, during the Severance Period
for the benefit of Employee and his dependents, basic health,
dental and life insurance and related medical expenses coverage
(including disability and hospitalization coverage) (the
"Continuation Benefits") on terms no less favorable to Employee
than Employer provides to its executive officers generally, as
such benefits may be modified from time to time during the
Severance Period.
During the Severance Period, Employee shall be required to make any
contributions required to maintain such Continuation Benefits, which
may be withheld from the Continuation Payments (if monthly payments
thereof are elected by Employee); provided that such contributions are
also required to be made by Employer's executive officers generally.
If at any time during the Severance Period Employee shall obtain
employment with a third party (the "Substitute Employer") in which
Employee is entitled to receive basic health benefits in connection
with such employment on terms provided by the Substitute Employer to
its similarly situated employees generally, Employer shall no longer
be required to provide Continuation Benefits to Employee, regardless
of whether such benefits differ in
3
<PAGE>
any respect from the Continuation Benefits. Employer shall be excused
from its obligations to make payments under this Section 7.1(d) if
Employee breaches its obligations hereunder (including its obligations
under Article 8 hereof).
(f) Section 8.4(a) of the Employment Agreement is amended by
restating the first sentence thereof in its entirety to read as follows:
(a) Employee acknowledges and recognizes the highly competitive
nature of Employer's business and, in consideration of the
payment by Employer to Employee of amounts that may hereafter be
paid to Employee pursuant to Sections 7.1 or 8.4(d) hereof,
Employee agrees that during the period (the "Covered Time")
(i) for a termination pursuant to a Notice of Termination,
beginning on the Date of Termination and ending (A) if Employee's
employment is terminated for any reason other than pursuant to
Section 6.1(d) hereof or Section 6.1(e) hereof, on the second
anniversary of the Date of Termination or (B) if Employee's
employment is terminated pursuant to Section 6.1(d) hereof or
Section 6.1(e) hereof on the earlier of the second anniversary of
the Date of Termination or the last day of the Severance Period,
or (ii) for a termination on the expiration of the term of this
Agreement (but subject to compliance with Section 8.4(d) hereof),
beginning on the date of such expiration and ending on the date
(not later than the first anniversary of the date of such
expiration) established pursuant to Section 8.4(d) hereof,
Employee will not compete with the business of Employer, which
means that Employee will not engage, directly or indirectly, in
the "Covered Business" (as hereinafter defined) in any state of
the United States of America in which the Employer is conducting
business or proposes to conduct business as of the Date of
Termination and any states contiguous therewith (these areas are
hereinafter collectively referred to as the "Covered Area").
(g) Section 8.4(d) of the Employment Agreement is hereby restated in
its entirety to read as follows:
(d) If the term of this Agreement (and any extensions
thereof) expires pursuant to Section 1 hereof, Employer may elect
to have the Covered Time extend from the date of expiration of
the term of this Agreement (and any extensions thereof) up to and
through the first anniversary of such date by delivering written
notice to Employee (specifying the duration of such Covered
Time), within ten (10) days of the date of expiration, that
Employer has elected to continue to pay to Employee the monthly
Continuation Payments in the amount described in
Section 7.1(d)(i)(A) hereof (treating such Covered Time as the
Severance Period for such purpose) and provide the Continuation
Benefits as described in Section 7.1(d)(iii) hereof (treating
such Covered Time as the Severance Period for such purpose) (on
terms no less favorable to Employee than Employer provides to its
executive officers generally, as
4
<PAGE>
such benefits may be modified from time to time) for each month
of such Covered Time. During such Covered Time, Employee shall
be required to make any contributions required to maintain such
Continuation Payments; provided that such contributions are also
required to be made by the Employer's executive officers
generally. If at any time during such Covered Time Employee
shall obtain employment with a Substitute Employer in which
Employee is entitled to receive basic health benefits in
connection with such employment on terms provided by the
Substitute Employer to its similarly situated employees
generally, Employer shall no longer be required to provide
Continuation Benefits to the Employee, regardless of whether such
benefits differ in any respect from the Continuation Benefits.
Employer shall be excused from its obligations to make payments
under this Section 8.4(d) if Employee breaches its obligations
hereunder.
3. Stock Option Vesting. Notwithstanding the vesting schedules provided
in the Stock Option Agreement, dated as of December 2, 1994, as amended, or the
Stock Option Agreement, dated as of October 25, 1996, each between Employer and
Employee (collectively, the "Stock Option Agreements"), all options granted
thereunder shall become immediately exercisable upon a Change in Control unless
prior thereto such options shall have been exercised or shall have expired.
4. Golden Parachute Gross-Up.
(a) If the aggregate of the benefit payments under this Agreement and
the Stock Option Agreements would cause the payment of one or more of such
benefit payments to constitute an "excess parachute payment" as defined in
Section 280G(b) of the Internal Revenue Code ("Code"), then Employer will
pay to the Internal Revenue Service for the account of Employee, when
Employee's underlying tax liability is due and payable (but subject to
paragraphs (b), (c) and (d) below), an additional amount in cash (the
"Gross-Up Payment") equal to the amount necessary to cause the net amount
retained by Employee, after deduction of any (i) excise tax on the payments
under this Agreement and the Stock Option Agreements, (ii) federal, state
or local income tax on the Gross-Up Payment, and (iii) excise tax on the
Gross-Up Payment, to be equal to the aggregate remuneration Employee would
have received under this Agreement and the Stock Option Agreements,
excluding such Gross-Up Payment (net of all federal, state and local excise
and income taxes), as if Sections 280G and 4999 of the Code (and any
successor provisions thereto) had not been enacted into law.
(b) The Gross-Up Payment provided for in paragraph (a) above shall
not be made unless Employee provides written notice to Employer setting
forth, in reasonable detail, the amounts and calculation of such benefit
payments constituting "excess parachute payments" and accompanied by a
written opinion of a nationally recognized accounting firm confirming that
such benefit payments constitute "excess
5
<PAGE>
parachute payments," with such notice and opinion received by Employer
prior to the time that Employee pays any tax based on or files any tax
return claiming receipt of "excess parachute payments." The reasonable
fees and expenses of obtaining such opinion shall be paid by Employer.
(c) Upon receipt of the opinion described in paragraph (b) above,
Employer will have thirty (30) days to notify Employee whether it wishes to
obtain an opinion (the "Second Opinion") from a nationally recognized
accounting firm selected by Employer that such benefit payments constitute
"excess parachute payments." Employer shall have thirty (30) days to
obtain the Second Opinion. If the accounting firm rendering the Second
Opinion concludes that such benefit payments do not constitute "excess
parachute payments," Employee and Employer shall each prepare their
respective tax returns on that basis.
(d) If based on the Second Opinion Employee does not report the
receipt of any "excess parachute payments," then notwithstanding any other
provision of this Agreement or the Stock Option Agreements, Employer shall
nevertheless be liable for the Gross-Up Payment provided for in paragraph
(a) above if Employee provides copies to Employer within ten (10) days of
any and all notices or other correspondence from a tax authority of an
examination of Employee's returns for the tax periods in which Employee
received payments under this Agreement and the Stock Option Agreements
("Examination Notice"), and provides Employer with the right to represent
Employee in connection with any such examination. Employer also agrees to
indemnify Employee from and hold harmless Employee against any costs
reasonably incurred by Employee in connection with any such Examination
Notice to the extent attributable to the receipt by Employee of amounts
considered "excess parachute payments" contrary to the conclusion of the
Second Opinion.
5. Other Terms and Conditions. Except as expressly amended or modified
in this Agreement, all terms and conditions of the Employment Agreement and the
Stock Option Agreements remain in full force and effect.
6. Termination. This Agreement, including the amendments and
modifications of the Employment Agreement and the Stock Option Agreements
effected hereby, shall cease to have any force or effect if (a) on September 30,
1997, there shall not be in effect a binding definitive agreement, providing for
a Change in Control, to which Employer or any of its controlling stockholders is
party, or (b) a Change in Control shall not have occurred by December 31, 1997.
[SIGNATURES ON NEXT PAGE]
6
<PAGE>
IN WITNESS WHEREOF, each of the parties to this Agreement has executed and
delivered this Agreement as of the date first written above.
EMPLOYER:
PRIME SERVICE, INC.
By: /s/ Brian Fontana
---------------------------------------
Title: Executive Vice President and Chief
Financial Officer
------------------------------------
EMPLOYEE:
/s/ Thomas E. Bennett
------------------------------------------
Thomas E. Bennett
7
<PAGE>
EXHIBIT B
1997 THROUGH 2001
For 1997 through 2001, cash bonuses under the Management Cash Bonus
Incentive Program are payable to participants in the program in a given year if
the Company's Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") for such year equals or exceeds 90% of the EBITDA target in the
Company's budget for such year, as approved by the Board, provided that the
EBITDA target for 1997 is $135 million, as set forth in the Employer's 1997
budget. EBITDA targets for 1998 through 2001 shall be as set by the Board in
its sole discretion. EBITDA targets shall be subject to change in the
discretion of the Board for any change to the capital structure of the Company
in connection with any acquisitions, equity offerings or other transactions that
would, or would be likely to, materially affect EBITDA or net income. The
percentage of Base Salary payable as bonus shall be determined as follows:
% of EBITDA % of Base Salary
Target Achieved Payable as Bonus(1)
--------------------------- ----------------------------
Equal To Or
Greater Than: But Less Than:
0 90 0
90 100 60-80
100 110 80-100
110 120 100-120
120 130 120-130
130 140 130-140
140 150 140-150
150 160 150-160
160 170 160-170
170 180 170-180
180 190 180-190
190 200 190-200
200 --- 200
- ------------------------------------------
(1) The Board in its discretion shall set the bonus percentage amount
for each fiscal year within the ranges indicated, but not less than the
bottom of the range. The bonus percentage will be determined on an
individual basis and may differ among eligible employees.
8
<PAGE>
EXHIBIT 99.6
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement (this "Agreement") is made and
entered into as of June 8, 1997, by and between Prime Service, Inc., a Delaware
corporation and successor by merger to Primeco Inc., a Texas corporation
("Employer"), and Brian Fontana ("Employee").
WHEREAS, Employer and Employee have entered into an Employment Agreement,
dated as of April 1, 1996 (as amended pursuant to Amendment No. 1 to Employment
Agreement, dated as of October 25, 1996, the "Employment Agreement");
WHEREAS, Employer and Employee desire to amend the Employment Agreement to
address the possibility of a change in control of Employer;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms.
(a) Capitalized terms not defined herein shall have the meanings set
forth in the Employment Agreement.
(b) As used herein and in the Employment Agreement, the following
terms shall have the following meanings:
"Change in Control" shall mean any of the following events:
(i) any Person, other than Investcorp S.A., its affiliates and the
executive officers of Employer ("Permitted Holders"), becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a Person shall be deemed
to have beneficial ownership of shares that such Person has a right to
acquire only if such right to acquire is immediately exercisable) of
more than 50% of the shares of capital stock of Employer normally
entitled to vote for the election of directors; or (ii) at any time
(a) Employer shall consolidate, merge, or effect a share exchange with
any other Person unless after giving effect thereto more than 50% of
the shares of capital stock of the continuing or surviving Person (or
an affiliate of such Person that controls such Person) normally
entitled to vote for directors shall be beneficially owned by
Permitted Holders or (b) Employer shall sell or otherwise transfer
more than 50% of the assets or earning power of Employer and its
subsidiaries (taken as a whole) to any Person. For this definition,
"Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Securities Exchange Act of 1934 and used in
Sections 13(d) and 14(d) thereof, including a "group" as used in
Section 13(d) thereof.
1
<PAGE>
"Change in Control Date" shall mean the date immediately prior to
the effectiveness of a Change in Control.
2. Amendments. If a Change in Control occurs, the Employment Agreement
shall be amended, effective as of the Change in Control Date, as set forth in
this Section 2:
(a) Exhibit B to the Employment Agreement shall be restated in its
entirety to read as appended hereto.
(b) Section 4 of the Employment Agreement is amended by deleting the
words "payments or" from the second sentence thereof.
(c) Section 6.1 of the Employment Agreement is amended by adding a
new Section 6.1(e) to read as follows:
(e) For Good Reason. At the option of Employee, at any time
prior to the Expiration Date, for any of the following reasons (each a
"Good Reason"), whereupon Employer shall become obligated to make
those payments set forth in Section 7.1(d) hereof: (i) there is a
material adverse change in Employee's title from that which he held on
the Change in Control Date (provided that the removal of or failure to
elect Employee as a director of the Company shall not constitute "Good
Reason"); (ii) Employee's duties as an employee are materially reduced
or diminished from those in effect on the Change in Control Date
without Employee's written consent; (iii) Employer reduces Employee's
compensation after the Change in Control Date; (iv) Employer amends or
modifies the Program or benefits as in effect on the Change in Control
Date in any manner materially adverse to Employee's interest
thereunder; or (v) Employer requires that Employee's employment be
based more than 60 miles from the location of Employer's executive
offices on the Change in Control Date, without Employee's written
consent.
(d) Section 7.1(a) of the Employment Agreement is restated in its
entirety to read as follows:
(a) If Employer terminates Employee's employment for Cause or if
Employee voluntarily terminates his employment other than for Good
Reason, Employer's obligation to compensate Employee shall in all
respects cease as of the Date of Termination, except that Employer
shall pay Employee the Base Salary accrued under Section 3 hereof and
the reimbursable expenses incurred under Section 5 hereof up to such
Date of Termination (the "Accrued Obligations");
(e) Section 7.1(d) of the Employment Agreement is restated in its
entirety to read as follows:
(d) If Employee's employment is terminated by Employer pursuant
to Section 6.1(d) or by Employee for Good Reason pursuant to
Section 6.1(e), Employer's obligation to compensate Employee shall in
all respects cease, except
2
<PAGE>
that within thirty (30) days after the Date of Termination Employer
shall pay to Employee the Accrued Obligations, and for the period
ending on the earlier of the Expiration Date or the second
anniversary of the Date of Termination (the "Severance Period"),
Employer shall:
(i) pay to Employee, at Employee's election, (A) on a
monthly basis, for each month in the Severance Period, an amount
equal to one-twelfth (1/12th) of the annual Base Salary of
Employee in effect at the Date of Termination or the Change in
Control Date, whichever is greater, or (B) in a single payment,
made within thirty (30) days after the Date of Termination, the
aggregate amount of such monthly Base Salary payments for the
Severance Period (the "Continuation Payments");
(ii) pay to Employee: (A) at Employee's election, (1) on a
monthly basis, for each month in the Severance Period, an amount
equal to one-twelfth (1/12th) of the bonus payment payable to him
under the Program for the fiscal year prior to the fiscal year in
which the Date of Termination occurs (each a "Monthly Bonus
Payment") or (2) in a single payment, made within thirty (30)
days after the Date of Termination, the aggregate amount of all
Monthly Bonus Payments for the Severance Period; and (B) if the
Date of Termination occurs in the 1997 fiscal year, in a single
payment made within thirty (30) days after the Date of
Termination, an amount equal to the bonus payment paid to him
under the Program for the 1996 fiscal year (annualized, if
Employee was employed by Employer for less than all of such
fiscal year), prorated for the period from the beginning of the
1997 fiscal year through the Date of Termination; and
(iii) continue to maintain, during the Severance Period
for the benefit of Employee and his dependents, basic health,
dental and life insurance and related medical expenses coverage
(including disability and hospitalization coverage) (the
"Continuation Benefits") on terms no less favorable to Employee
than Employer provides to its executive officers generally, as
such benefits may be modified from time to time during the
Severance Period.
During the Severance Period, Employee shall be required to make any
contributions required to maintain such Continuation Benefits, which
may be withheld from the Continuation Payments (if monthly payments
thereof are elected by Employee); provided that such contributions are
also required to be made by Employer's executive officers generally.
If at any time during the Severance Period Employee shall obtain
employment with a third party (the "Substitute Employer") in which
Employee is entitled to receive basic health benefits in connection
with such employment on terms provided by the Substitute Employer to
its similarly situated employees generally, Employer shall no longer
be required to provide Continuation Benefits to Employee, regardless
of whether such benefits differ in
3
<PAGE>
any respect from the Continuation Benefits. Employer shall be
excused from its obligations to make payments under this Section
7.1(d) if Employee breaches its obligations hereunder (including
its obligations under Article 8 hereof).
(f) Section 8.4(a) of the Employment Agreement is amended by
restating the first sentence thereof in its entirety to read as follows:
(a) Employee acknowledges and recognizes the highly competitive
nature of Employer's business and, in consideration of the
payment by Employer to Employee of amounts that may hereafter be
paid to Employee pursuant to Sections 7.1 or 8.4(d) hereof,
Employee agrees that during the period (the "Covered Time")
(i) for a termination pursuant to a Notice of Termination,
beginning on the Date of Termination and ending (A) if Employee's
employment is terminated for any reason other than pursuant to
Section 6.1(d) hereof or Section 6.1(e) hereof, on the second
anniversary of the Date of Termination or (B) if Employee's
employment is terminated pursuant to Section 6.1(d) hereof or
Section 6.1(e) hereof on the earlier of the second anniversary of
the Date of Termination or the last day of the Severance Period,
or (ii) for a termination on the expiration of the term of this
Agreement (but subject to compliance with Section 8.4(d) hereof),
beginning on the date of such expiration and ending on the date
(not later than the first anniversary of the date of such
expiration) established pursuant to Section 8.4(d) hereof,
Employee will not compete with the business of Employer, which
means that Employee will not engage, directly or indirectly, in
the "Covered Business" (as hereinafter defined) in any state of
the United States of America in which the Employer is conducting
business or proposes to conduct business as of the Date of
Termination and any states contiguous therewith (these areas are
hereinafter collectively referred to as the "Covered Area").
(g) Section 8.4(d) of the Employment Agreement is hereby restated in
its entirety to read as follows:
(d) If the term of this Agreement (and any extensions
thereof) expires pursuant to Section 1 hereof, Employer may elect
to have the Covered Time extend from the date of expiration of
the term of this Agreement (and any extensions thereof) up to and
through the first anniversary of such date by delivering written
notice to Employee (specifying the duration of such Covered
Time), within ten (10) days of the date of expiration, that
Employer has elected to continue to pay to Employee the monthly
Continuation Payments in the amount described in
Section 7.1(d)(i)(A) hereof (treating such Covered Time as the
Severance Period for such purpose) and provide the Continuation
Benefits as described in Section 7.1(d)(iii) hereof (treating
such Covered Time as the Severance Period for such purpose) (on
terms no less favorable to Employee than Employer provides to its
executive officers generally, as
4
<PAGE>
such benefits may be modified from time to time) for each
month of such Covered Time. During such Covered Time,
Employee shall be required to make any contributions required
to maintain such Continuation Payments; provided that such
contributions are also required to be made by the Employer's
executive officers generally. If at any time during such
Covered Time Employee shall obtain employment with a
Substitute Employer in which Employee is entitled to receive
basic health benefits in connection with such employment on
terms provided by the Substitute Employer to its similarly
situated employees generally, Employer shall no longer be
required to provide Continuation Benefits to the Employee,
regardless of whether such benefits differ in any respect from
the Continuation Benefits. Employer shall be excused from its
obligations to make payments under this Section 8.4(d) if
Employee breaches its obligations hereunder.
3. Stock Option Vesting. Notwithstanding the vesting schedules provided
in the Stock Option Agreement, dated as of April 1, 1996, as amended, or the
Stock Option Agreement, dated as of October 25, 1996, each between Employer and
Employee (collectively, the "Stock Option Agreements"), all options granted
thereunder shall become immediately exercisable upon a Change in Control unless
prior thereto such options shall have been exercised or shall have expired.
4. Golden Parachute Gross-Up.
(a) If the aggregate of the benefit payments under this Agreement and
the Stock Option Agreements would cause the payment of one or more of such
benefit payments to constitute an "excess parachute payment" as defined in
Section 280G(b) of the Internal Revenue Code ("Code"), then Employer will
pay to the Internal Revenue Service for the account of Employee, when
Employee's underlying tax liability is due and payable (but subject to
paragraphs (b), (c) and (d) below), an additional amount in cash (the
"Gross-Up Payment") equal to the amount necessary to cause the net amount
retained by Employee, after deduction of any (i) excise tax on the payments
under this Agreement and the Stock Option Agreements, (ii) federal, state
or local income tax on the Gross-Up Payment, and (iii) excise tax on the
Gross-Up Payment, to be equal to the aggregate remuneration Employee would
have received under this Agreement and the Stock Option Agreements,
excluding such Gross-Up Payment (net of all federal, state and local excise
and income taxes), as if Sections 280G and 4999 of the Code (and any
successor provisions thereto) had not been enacted into law.
(b) The Gross-Up Payment provided for in paragraph (a) above shall
not be made unless Employee provides written notice to Employer setting
forth, in reasonable detail, the amounts and calculation of such benefit
payments constituting "excess parachute payments" and accompanied by a
written opinion of a nationally recognized accounting firm confirming that
such benefit payments constitute "excess parachute payments," with such
notice and opinion received by Employer prior to the time that Employee
pays any tax based on or files any tax return claiming receipt of "excess
5
<PAGE>
parachute payments." The reasonable fees and expenses of obtaining such
opinion shall be paid by Employer.
(c) Upon receipt of the opinion described in paragraph (b) above,
Employer will have thirty (30) days to notify Employee whether it wishes to
obtain an opinion (the "Second Opinion") from a nationally recognized
accounting firm selected by Employer that such benefit payments constitute
"excess parachute payments." Employer shall have thirty (30) days to
obtain the Second Opinion. If the accounting firm rendering the Second
Opinion concludes that such benefit payments do not constitute "excess
parachute payments," Employee and Employer shall each prepare their
respective tax returns on that basis.
(d) If based on the Second Opinion Employee does not report the
receipt of any "excess parachute payments," then notwithstanding any other
provision of this Agreement or the Stock Option Agreements, Employer shall
nevertheless be liable for the Gross-Up Payment provided for in paragraph
(a) above if Employee provides copies to Employer within ten (10) days of
any and all notices or other correspondence from a tax authority of an
examination of Employee's returns for the tax periods in which Employee
received payments under this Agreement and the Stock Option Agreements
("Examination Notice"), and provides Employer with the right to represent
Employee in connection with any such examination. Employer also agrees to
indemnify Employee from and hold harmless Employee against any costs
reasonably incurred by Employee in connection with any such Examination
Notice to the extent attributable to the receipt by Employee of amounts
considered "excess parachute payments" contrary to the conclusion of the
Second Opinion.
5. Other Terms and Conditions. Except as expressly amended or modified
in this Agreement, all terms and conditions of the Employment Agreement and the
Stock Option Agreements remain in full force and effect.
6. Termination. This Agreement, including the amendments and
modifications of the Employment Agreement and the Stock Option Agreements
effected hereby, shall cease to have any force or effect if (a) on September 30,
1997, there shall not be in effect a binding definitive agreement, providing for
a Change in Control, to which Employer or any of its controlling stockholders is
party, or (b) a Change in Control shall not have occurred by December 31, 1997.
[SIGNATURES ON NEXT PAGE]
6
<PAGE>
IN WITNESS WHEREOF, each of the parties to this Agreement has executed and
delivered this Agreement as of the date first written above.
EMPLOYER:
PRIME SERVICE, INC.
By: /s/ Thomas E. Bennett
-----------------------------------------------
Title: Chairman of the Board, President and
Chief Executive Officer
--------------------------------------------
EMPLOYEE:
/s/ Brian Fontana
--------------------------------------------------
Brian Fontana
7
<PAGE>
EXHIBIT B
1997 THROUGH 2001
For 1997 through 2001, cash bonuses under the Management Cash Bonus
Incentive Program are payable to participants in the program in a given year if
the Company's Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") for such year equals or exceeds 90% of the EBITDA target in the
Company's budget for such year, as approved by the Board, provided that the
EBITDA target for 1997 is $135 million, as set forth in the Employer's 1997
budget. EBITDA targets for 1998-2001 shall be as set by the Board in its sole
discretion. EBITDA targets shall be subject to change in the discretion of the
Board for any change to the capital structure of the Company in connection with
any acquisitions, equity offerings or other transactions that would, or would be
likely to, materially affect EBITDA or net income. The percentage of Base
Salary payable as bonus shall be determined as follows:
% of EBITDA % of Base Salary
Target Achieved Payable as Bonus(1)
- ------------------------------------------ -------------------------
Equal To Or Greater Than: But Less Than:
0 90 0
90 100 50-80
100 110 60-100
110 120 100-105
120 130 105-110
130 140 110-115
140 150 115-120
150 160 120-125
160 170 125-130
170 180 130-135
180 190 135-140
190 200 140-145
200 -- 145-150
------------------------------------------
(1) The Board in its discretion shall set the bonus percentage amount for
each fiscal year within the ranges indicated, but not less than the bottom of
the range. The bonus percentage will be determined on an individual basis and
may differ among eligible employees.
<PAGE>
Exhibit 99.7
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement (this "Agreement") is made and
entered into as of June 8, 1997, by and between Prime Service, Inc., a Delaware
corporation and successor by merger to Primeco Inc., a Texas corporation
("Employer"), and Kevin L. Loughlin ("Employee").
WHEREAS, Employer and Employee have entered into an Employment Agreement,
dated as of December 2, 1994 (as amended pursuant to Amendment No. 1 to
Employment Agreement, dated as of October 25, 1996, the "Employment Agreement");
WHEREAS, Employer and Employee desire to amend the Employment Agreement to
address the possibility of a change in control of Employer;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms.
(a) Capitalized terms not defined herein shall have the meanings set
forth in the Employment Agreement.
(b) As used herein and in the Employment Agreement, the following
terms shall have the following meanings:
"Change in Control" shall mean any of the following events:
(i) any Person, other than Investcorp S.A., its affiliates and the
executive officers of Employer ("Permitted Holders"), becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a Person shall be deemed
to have beneficial ownership of shares that such Person has a right to
acquire only if such right to acquire is immediately exercisable) of
more than 50% of the shares of capital stock of Employer normally
entitled to vote for the election of directors; or (ii) at any time
(a) Employer shall consolidate, merge, or effect a share exchange with
any other Person unless after giving effect thereto more than 50% of
the shares of capital stock of the continuing or surviving Person (or
an affiliate of such Person that controls such Person) normally
entitled to vote for directors shall be beneficially owned by
Permitted Holders or (b) Employer shall sell or otherwise transfer
more than 50% of the assets or earning power of Employer and its
subsidiaries (taken as a whole) to any Person. For this definition,
"Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Securities Exchange Act of 1934 and used in
Sections 13(d) and 14(d) thereof, including a "group" as used in
Section 13(d) thereof.
1
<PAGE>
"Change in Control Date" shall mean the date immediately prior to
the effectiveness of a Change in Control.
2. Amendments. If a Change in Control occurs, the Employment Agreement
shall be amended, effective as of the Change in Control Date, as set forth in
this Section 2:
(a) Exhibit B to the Employment Agreement shall be restated in its
entirety to read as appended hereto.
(b) Section 4 of the Employment Agreement is amended by deleting the
words "payments or" from the second sentence thereof.
(c) Section 6.1 of the Employment Agreement is amended by adding a
new Section 6.1(e) to read as follows:
(e) FOR GOOD REASON. At the option of Employee, at any time
prior to the Expiration Date, for any of the following reasons (each a
"Good Reason"), whereupon Employer shall become obligated to make
those payments set forth in Section 7.1(d) hereof: (i) there is a
material adverse change in Employee's title from that which he held on
the Change in Control Date (provided that the removal of or failure to
elect Employee as a director of the Company shall not constitute "Good
Reason"); (ii) Employee's duties as an employee are materially reduced
or diminished from those in effect on the Change in Control Date
without Employee's written consent; (iii) Employer reduces Employee's
compensation after the Change in Control Date; (iv) Employer amends or
modifies the Program or benefits as in effect on the Change in Control
Date in any manner materially adverse to Employee's interest
thereunder; or (v) Employer requires that Employee's employment be
based more than 60 miles from the location of Employer's executive
offices on the Change in Control Date, without Employee's written
consent.
(d) Section 7.1(a) of the Employment Agreement is restated in its
entirety to read as follows:
(a) If Employer terminates Employee's employment for Cause or if
Employee voluntarily terminates his employment other than for Good
Reason, Employer's obligation to compensate Employee shall in all
respects cease as of the Date of Termination, except that Employer
shall pay Employee the Base Salary accrued under Section 3 hereof and
the reimbursable expenses incurred under Section 5 hereof up to such
Date of Termination (the "Accrued Obligations");
(e) Section 7.1(d) of the Employment Agreement is restated in its
entirety to read as follows:
(d) If Employee's employment is terminated by Employer pursuant
to Section 6.1(d) or by Employee for Good Reason pursuant to
Section 6.1(e), Employer's obligation to compensate Employee shall in
all respects cease, except
2
<PAGE>
that within thirty (30) days after the Date of Termination Employer
shall pay to Employee the Accrued Obligations, and for the period
ending on the earlier of the Expiration Date or the second anniversary
of the Date of Termination (the "Severance Period"), Employer shall:
(i) pay to Employee, at Employee's election, (A) on a
monthly basis, for each month in the Severance Period, an amount
equal to one-twelfth (1/12th) of the annual Base Salary of
Employee in effect at the Date of Termination or the Change in
Control Date, whichever is greater, or (B) in a single payment,
made within thirty (30) days after the Date of Termination, the
aggregate amount of such monthly Base Salary payments for the
Severance Period (the "Continuation Payments");
(ii) pay to Employee: (A) at Employee's election, (1) on a
monthly basis, for each month in the Severance Period, an amount
equal to one-twelfth (1/12th) of the bonus payment payable to him
under the Program for the fiscal year prior to the fiscal year in
which the Date of Termination occurs (each a "Monthly Bonus
Payment") or (2) in a single payment, made within thirty (30)
days after the Date of Termination, the aggregate amount of all
Monthly Bonus Payments for the Severance Period; and (B) if the
Date of Termination occurs in the 1997 fiscal year, in a single
payment made within thirty (30) days after the Date of
Termination, an amount equal to the bonus payment paid to him
under the Program for the 1996 fiscal year (annualized, if
Employee was employed by Employer for less than all of such
fiscal year), prorated for the period from the beginning of the
1997 fiscal year through the Date of Termination; and
(iii)continue to maintain, during the Severance Period
for the benefit of Employee and his dependents, basic health,
dental and life insurance and related medical expenses coverage
(including disability and hospitalization coverage) (the
"Continuation Benefits") on terms no less favorable to Employee
than Employer provides to its executive officers generally, as
such benefits may be modified from time to time during the
Severance Period.
During the Severance Period, Employee shall be required to make any
contributions required to maintain such Continuation Benefits, which
may be withheld from the Continuation Payments (if monthly payments
thereof are elected by Employee); provided that such contributions are
also required to be made by Employer's executive officers generally.
If at any time during the Severance Period Employee shall obtain
employment with a third party (the "Substitute Employer") in which
Employee is entitled to receive basic health benefits in connection
with such employment on terms provided by the Substitute Employer to
its similarly situated employees generally, Employer shall no longer
be required to provide Continuation Benefits to Employee, regardless
of whether such benefits differ in
3
<PAGE>
any respect from the Continuation Benefits. Employer shall be excused
from its obligations to make payments under this Section 7.1(d)
if Employee breaches its obligations hereunder (including its
obligations under Article 8 hereof).
(f) Section 8.4(a) of the Employment Agreement is amended by
restating the first sentence thereof in its entirety to read as follows:
(a) Employee acknowledges and recognizes the highly competitive
nature of Employer's business and, in consideration of the
payment by Employer to Employee of amounts that may hereafter be
paid to Employee pursuant to Sections 7.1 or 8.4(d) hereof,
Employee agrees that during the period (the "Covered Time")
(i) for a termination pursuant to a Notice of Termination,
beginning on the Date of Termination and ending (A) if Employee's
employment is terminated for any reason other than pursuant to
Section 6.1(d) hereof or Section 6.1(e) hereof, on the second
anniversary of the Date of Termination or (B) if Employee's
employment is terminated pursuant to Section 6.1(d) hereof or
Section 6.1(e) hereof on the earlier of the second anniversary of
the Date of Termination or the last day of the Severance Period,
or (ii) for a termination on the expiration of the term of this
Agreement (but subject to compliance with Section 8.4(d) hereof),
beginning on the date of such expiration and ending on the date
(not later than the first anniversary of the date of such
expiration) established pursuant to Section 8.4(d) hereof,
Employee will not compete with the business of Employer, which
means that Employee will not engage, directly or indirectly, in
the "Covered Business" (as hereinafter defined) in any state of
the United States of America in which the Employer is conducting
business or proposes to conduct business as of the Date of
Termination and any states contiguous therewith (these areas are
hereinafter collectively referred to as the "Covered Area").
(g) Section 8.4(d) of the Employment Agreement is hereby restated in
its entirety to read as follows:
(d) If the term of this Agreement (and any extensions
thereof) expires pursuant to Section 1 hereof, Employer may elect
to have the Covered Time extend from the date of expiration of
the term of this Agreement (and any extensions thereof) up to and
through the first anniversary of such date by delivering written
notice to Employee (specifying the duration of such Covered
Time), within ten (10) days of the date of expiration, that
Employer has elected to continue to pay to Employee the monthly
Continuation Payments in the amount described in
Section 7.1(d)(i)(A) hereof (treating such Covered Time as the
Severance Period for such purpose) and provide the Continuation
Benefits as described in Section 7.1(d)(iii) hereof (treating
such Covered Time as the Severance Period for such purpose) (on
terms no less favorable to Employee than Employer provides to its
executive officers generally, as
4
<PAGE>
such benefits may be modified from time to time) for each month of
such Covered Time. During such Covered Time, Employee shall be
required to make any contributions required to maintain such
Continuation Payments; provided that such contributions are also
required to be made by the Employer's executive officers
generally. If at any time during such Covered Time Employee
shall obtain employment with a Substitute Employer in which
Employee is entitled to receive basic health benefits in
connection with such employment on terms provided by the
Substitute Employer to its similarly situated employees
generally, Employer shall no longer be required to provide
Continuation Benefits to the Employee, regardless of whether
such benefits differ in any respect from the Continuation
Benefits. Employer shall be excused from its obligations to make
payments under this Section 8.4(d) if Employee breaches its
obligations hereunder.
3. Stock Option Vesting. Notwithstanding the vesting schedules provided
in the Stock Option Agreement, dated as of December 2, 1994, as amended, or the
Stock Option Agreement, dated as of October 25, 1996, each between Employer and
Employee (collectively, the "Stock Option Agreements"), all options granted
thereunder shall become immediately exercisable upon a Change in Control unless
prior thereto such options shall have been exercised or shall have expired.
4. Golden Parachute Gross-Up.
(a) If the aggregate of the benefit payments under this Agreement and
the Stock Option Agreements would cause the payment of one or more of such
benefit payments to constitute an "excess parachute payment" as defined in
Section 280G(b) of the Internal Revenue Code ("Code"), then Employer will
pay to the Internal Revenue Service for the account of Employee, when
Employee's underlying tax liability is due and payable (but subject to
paragraphs (b), (c) and (d) below), an additional amount in cash (the
"Gross-Up Payment") equal to the amount necessary to cause the net amount
retained by Employee, after deduction of any (i) excise tax on the payments
under this Agreement and the Stock Option Agreements, (ii) federal, state
or local income tax on the Gross-Up Payment, and (iii) excise tax on the
Gross-Up Payment, to be equal to the aggregate remuneration Employee would
have received under this Agreement and the Stock Option Agreements,
excluding such Gross-Up Payment (net of all federal, state and local excise
and income taxes), as if Sections 280G and 4999 of the Code (and any
successor provisions thereto) had not been enacted into law.
(b) The Gross-Up Payment provided for in paragraph (a) above shall
not be made unless Employee provides written notice to Employer setting
forth, in reasonable detail, the amounts and calculation of such benefit
payments constituting "excess parachute payments" and accompanied by a
written opinion of a nationally recognized accounting firm confirming that
such benefit payments constitute "excess parachute payments," with such
notice and opinion received by Employer prior to the time that Employee
pays any tax based on or files any tax return claiming receipt of "excess
5
<PAGE>
parachute payments." The reasonable fees and expenses of obtaining such
opinion shall be paid by Employer.
(c) Upon receipt of the opinion described in paragraph (b) above,
Employer will have thirty (30) days to notify Employee whether it wishes to
obtain an opinion (the "Second Opinion") from a nationally recognized
accounting firm selected by Employer that such benefit payments constitute
"excess parachute payments." Employer shall have thirty (30) days to
obtain the Second Opinion. If the accounting firm rendering the Second
Opinion concludes that such benefit payments do not constitute "excess
parachute payments," Employee and Employer shall each prepare their
respective tax returns on that basis.
(d) If based on the Second Opinion Employee does not report the
receipt of any "excess parachute payments," then notwithstanding any other
provision of this Agreement or the Stock Option Agreements, Employer shall
nevertheless be liable for the Gross-Up Payment provided for in paragraph
(a) above if Employee provides copies to Employer within ten (10) days of
any and all notices or other correspondence from a tax authority of an
examination of Employee's returns for the tax periods in which Employee
received payments under this Agreement and the Stock Option Agreements
("Examination Notice"), and provides Employer with the right to represent
Employee in connection with any such examination. Employer also agrees to
indemnify Employee from and hold harmless Employee against any costs
reasonably incurred by Employee in connection with any such Examination
Notice to the extent attributable to the receipt by Employee of amounts
considered "excess parachute payments" contrary to the conclusion of the
Second Opinion.
5. Other Terms and Conditions. Except as expressly amended or modified
in this Agreement, all terms and conditions of the Employment Agreement and the
Stock Option Agreements remain in full force and effect.
6. Termination. This Agreement, including the amendments and
modifications of the Employment Agreement and the Stock Option Agreements
effected hereby, shall cease to have any force or effect if (a) on September 30,
1997, there shall not be in effect a binding definitive agreement, providing for
a Change in Control, to which Employer or any of its controlling stockholders is
party, or (b) a Change in Control shall not have occurred by December 31, 1997.
[SIGNATURES ON NEXT PAGE]
6
<PAGE>
IN WITNESS WHEREOF, each of the parties to this Agreement has executed and
delivered this Agreement as of the date first written above.
EMPLOYER:
PRIME SERVICE, INC.
By: /s/ Thomas E. Bennett
-----------------------------------------------
Title: Chairman of the Board, President and
Chief Executive Officer
--------------------------------------------
EMPLOYEE:
/s/ Kevin L. Loughlin
--------------------------------------------------
Kevin L. Loughlin
7
<PAGE>
EXHIBIT B
1997 THROUGH 2001
For 1997 through 2001, cash bonuses under the Management Cash Bonus
Incentive Program are payable to participants in the program in a given year if
the Company's Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") for such year equals or exceeds 90% of the EBITDA target in the
Company's budget for such year, as approved by the Board, provided that the
EBITDA target for 1997 is $135 million, as set forth in the Employer's 1997
budget. EBITDA targets for 1998-2001 shall be as set by the Board in its sole
discretion. EBITDA targets shall be subject to change in the discretion of the
Board for any change to the capital structure of the Company in connection with
any acquisitions, equity offerings or other transactions that would, or would be
likely to, materially affect EBITDA or net income. The percentage of Base
Salary payable as bonus shall be determined as follows:
% of EBITDA % of Base Salary
Target Achieved Payable as Bonus(1)
- -------------------------------------------- ----------------------------
Equal To Or Greater Than: But Less Than:
- ------------------------- --------------
0 90 0
90 100 50-80
100 110 60-100
110 120 100-105
120 130 105-110
130 140 110-115
140 150 115-120
150 160 120-125
160 170 125-130
170 180 130-135
180 190 135-140
190 200 140-145
200 -- 145-150
------------------------------------------
(1) The Board in its discretion shall set the bonus percentage amount for
each fiscal year within the ranges indicated, but not less than the bottom of
the range. The bonus percentage will be determined on an individual basis and
may differ among eligible employees.
8
<PAGE>
Exhibit 99.8
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement (this "Agreement") is made and
entered into as of June 8, 1997, by and between Prime Service, Inc., a Delaware
corporation and successor by merger to Primeco Inc., a Texas corporation
("Employer"), and Peter A. Post ("Employee").
WHEREAS, Employer and Employee have entered into an Employment Agreement,
dated as of December 2, 1994 (as amended pursuant to Amendment No. 1 to
Employment Agreement, dated as of October 25, 1996, the "Employment Agreement");
WHEREAS, Employer and Employee desire to amend the Employment Agreement to
address the possibility of a change in control of Employer;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms.
(a) Capitalized terms not defined herein shall have the meanings set
forth in the Employment Agreement.
(b) As used herein and in the Employment Agreement, the following
terms shall have the following meanings:
"Change in Control" shall mean any of the following events:
(i) any Person, other than Investcorp S.A., its affiliates and the
executive officers of Employer ("Permitted Holders"), becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a Person shall be deemed
to have beneficial ownership of shares that such Person has a right to
acquire only if such right to acquire is immediately exercisable) of
more than 50% of the shares of capital stock of Employer normally
entitled to vote for the election of directors; or (ii) at any time
(a) Employer shall consolidate, merge, or effect a share exchange with
any other Person unless after giving effect thereto more than 50% of
the shares of capital stock of the continuing or surviving Person (or
an affiliate of such Person that controls such Person) normally
entitled to vote for directors shall be beneficially owned by
Permitted Holders or (b) Employer shall sell or otherwise transfer
more than 50% of the assets or earning power of Employer and its
subsidiaries (taken as a whole) to any Person. For this definition,
"Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Securities Exchange Act of 1934 and used in
Sections 13(d) and 14(d) thereof, including a "group" as used in
Section 13(d) thereof.
1
<PAGE>
"Change in Control Date" shall mean the date immediately prior to
the effectiveness of a Change in Control.
2. Amendments. If a Change in Control occurs, the Employment Agreement
shall be amended, effective as of the Change in Control Date, as set forth in
this Section 2:
(a) Exhibit B to the Employment Agreement shall be restated in its
entirety to read as appended hereto.
(b) Section 4 of the Employment Agreement is amended by deleting the
words "payments or" from the second sentence thereof.
(c) Section 6.1 of the Employment Agreement is amended by adding a
new Section 6.1(e) to read as follows:
(e) For Good Reason. At the option of Employee, at any time
prior to the Expiration Date, for any of the following reasons (each a
"Good Reason"), whereupon Employer shall become obligated to make
those payments set forth in Section 7.1(d) hereof: (i) there is a
material adverse change in Employee's title from that which he held on
the Change in Control Date (provided that the removal of or failure to
elect Employee as a director of the Company shall not constitute "Good
Reason"); (ii) Employee's duties as an employee are materially reduced
or diminished from those in effect on the Change in Control Date
without Employee's written consent; (iii) Employer reduces Employee's
compensation after the Change in Control Date; (iv) Employer amends or
modifies the Program or benefits as in effect on the Change in Control
Date in any manner materially adverse to Employee's interest
thereunder; or (v) Employer requires that Employee's employment be
based more than 60 miles from the location of Employer's executive
offices on the Change in Control Date, without Employee's written
consent.
(d) Section 7.1(a) of the Employment Agreement is restated in its
entirety to read as follows:
(a) If Employer terminates Employee's employment for Cause or if
Employee voluntarily terminates his employment other than for Good
Reason, Employer's obligation to compensate Employee shall in all
respects cease as of the Date of Termination, except that Employer
shall pay Employee the Base Salary accrued under Section 3 hereof and
the reimbursable expenses incurred under Section 5 hereof up to such
Date of Termination (the "Accrued Obligations");
(e) Section 7.1(d) of the Employment Agreement is restated in its
entirety to read as follows:
(d) If Employee's employment is terminated by Employer pursuant
to Section 6.1(d) or by Employee for Good Reason pursuant to
Section 6.1(e), Employer's obligation to compensate Employee shall in
all respects cease, except
2
<PAGE>
that within thirty (30) days after the Date
of Termination Employer shall pay to Employee the Accrued Obligations,
and for the period ending on the earlier of the Expiration Date or the
second anniversary of the Date of Termination (the "Severance
Period"), Employer shall:
(i) pay to Employee, at Employee's election, (A) on a
monthly basis, for each month in the Severance Period, an amount
equal to one-twelfth (1/12th) of the annual Base Salary of
Employee in effect at the Date of Termination or the Change in
Control Date, whichever is greater, or (B) in a single payment,
made within thirty (30) days after the Date of Termination, the
aggregate amount of such monthly Base Salary payments for the
Severance Period (the "Continuation Payments");
(ii) pay to Employee: (A) at Employee's election, (1) on a
monthly basis, for each month in the Severance Period, an amount
equal to one-twelfth (1/12th) of the bonus payment payable to him
under the Program for the fiscal year prior to the fiscal year in
which the Date of Termination occurs (each a "Monthly Bonus
Payment") or (2) in a single payment, made within thirty (30)
days after the Date of Termination, the aggregate amount of all
Monthly Bonus Payments for the Severance Period; and (B) if the
Date of Termination occurs in the 1997 fiscal year, in a single
payment made within thirty (30) days after the Date of
Termination, an amount equal to the bonus payment paid to him
under the Program for the 1996 fiscal year (annualized, if
Employee was employed by Employer for less than all of such
fiscal year), prorated for the period from the beginning of the
1997 fiscal year through the Date of Termination; and
(iii) continue to maintain, during the Severance Period
for the benefit of Employee and his dependents, basic health,
dental and life insurance and related medical expenses coverage
(including disability and hospitalization coverage) (the
"Continuation Benefits") on terms no less favorable to Employee
than Employer provides to its executive officers generally, as
such benefits may be modified from time to time during the
Severance Period.
During the Severance Period, Employee shall be required to make any
contributions required to maintain such Continuation Benefits, which
may be withheld from the Continuation Payments (if monthly payments
thereof are elected by Employee); provided that such contributions are
also required to be made by Employer's executive officers generally.
If at any time during the Severance Period Employee shall obtain
employment with a third party (the "Substitute Employer") in which
Employee is entitled to receive basic health benefits in connection
with such employment on terms provided by the Substitute Employer to
its similarly situated employees generally, Employer shall no longer
be required to provide Continuation Benefits to Employee, regardless
of whether such benefits differ in
3
<PAGE>
any respect from the Continuation
Benefits. Employer shall be excused from its obligations to make
payments under this Section 7.1(d) if Employee breaches its
obligations hereunder (including its obligations under Article 8
hereof).
(f) Section 8.4(a) of the Employment Agreement is amended by
restating the first sentence thereof in its entirety to read as follows:
(a) Employee acknowledges and recognizes the highly competitive
nature of Employer's business and, in consideration of the
payment by Employer to Employee of amounts that may hereafter be
paid to Employee pursuant to Sections 7.1 or 8.4(d) hereof,
Employee agrees that during the period (the "Covered Time")
(i) for a termination pursuant to a Notice of Termination,
beginning on the Date of Termination and ending (A) if Employee's
employment is terminated for any reason other than pursuant to
Section 6.1(d) hereof or Section 6.1(e) hereof, on the second
anniversary of the Date of Termination or (B) if Employee's
employment is terminated pursuant to Section 6.1(d) hereof or
Section 6.1(e) hereof on the earlier of the second anniversary of
the Date of Termination or the last day of the Severance Period,
or (ii) for a termination on the expiration of the term of this
Agreement (but subject to compliance with Section 8.4(d) hereof),
beginning on the date of such expiration and ending on the date
(not later than the first anniversary of the date of such
expiration) established pursuant to Section 8.4(d) hereof,
Employee will not compete with the business of Employer, which
means that Employee will not engage, directly or indirectly, in
the "Covered Business" (as hereinafter defined) in any state of
the United States of America in which the Employer is conducting
business or proposes to conduct business as of the Date of
Termination and any states contiguous therewith (these areas are
hereinafter collectively referred to as the "Covered Area").
(g) Section 8.4(d) of the Employment Agreement is hereby restated in
its entirety to read as follows:
(d) If the term of this Agreement (and any extensions
thereof) expires pursuant to Section 1 hereof, Employer may elect
to have the Covered Time extend from the date of expiration of
the term of this Agreement (and any extensions thereof) up to and
through the first anniversary of such date by delivering written
notice to Employee (specifying the duration of such Covered
Time), within ten (10) days of the date of expiration, that
Employer has elected to continue to pay to Employee the monthly
Continuation Payments in the amount described in
Section 7.1(d)(i)(A) hereof (treating such Covered Time as the
Severance Period for such purpose) and provide the Continuation
Benefits as described in Section 7.1(d)(iii) hereof (treating
such Covered Time as the Severance Period for such purpose) (on
terms no less favorable to Employee than Employer provides to its
executive officers generally, as
4
<PAGE>
such benefits may be modified
from time to time) for each month of such Covered Time. During
such Covered Time, Employee shall be required to make any
contributions required to maintain such Continuation Payments;
provided that such contributions are also required to be made by
the Employer's executive officers generally. If at any time
during such Covered Time Employee shall obtain employment with a
Substitute Employer in which Employee is entitled to receive
basic health benefits in connection with such employment on terms
provided by the Substitute Employer to its similarly situated
employees generally, Employer shall no longer be required to
provide Continuation Benefits to the Employee, regardless of
whether such benefits differ in any respect from the Continuation
Benefits. Employer shall be excused from its obligations to make
payments under this Section 8.4(d) if Employee breaches its
obligations hereunder.
3. Stock Option Vesting. Notwithstanding the vesting schedules provided
in the Stock Option Agreement, dated as of December 2, 1994, as amended, or the
Stock Option Agreement, dated as of October 25, 1996, each between Employer and
Employee (collectively, the "Stock Option Agreements"), all options granted
thereunder shall become immediately exercisable upon a Change in Control unless
prior thereto such options shall have been exercised or shall have expired.
4. Golden Parachute Gross-Up.
(a) If the aggregate of the benefit payments under this Agreement and
the Stock Option Agreements would cause the payment of one or more of such
benefit payments to constitute an "excess parachute payment" as defined in
Section 280G(b) of the Internal Revenue Code ("Code"), then Employer will
pay to the Internal Revenue Service for the account of Employee, when
Employee's underlying tax liability is due and payable (but subject to
paragraphs (b), (c) and (d) below), an additional amount in cash (the
"Gross-Up Payment") equal to the amount necessary to cause the net amount
retained by Employee, after deduction of any (i) excise tax on the payments
under this Agreement and the Stock Option Agreements, (ii) federal, state
or local income tax on the Gross-Up Payment, and (iii) excise tax on the
Gross-Up Payment, to be equal to the aggregate remuneration Employee would
have received under this Agreement and the Stock Option Agreements,
excluding such Gross-Up Payment (net of all federal, state and local excise
and income taxes), as if Sections 280G and 4999 of the Code (and any
successor provisions thereto) had not been enacted into law.
(b) The Gross-Up Payment provided for in paragraph (a) above shall
not be made unless Employee provides written notice to Employer setting
forth, in reasonable detail, the amounts and calculation of such benefit
payments constituting "excess parachute payments" and accompanied by a
written opinion of a nationally recognized accounting firm confirming that
such benefit payments constitute "excess parachute payments," with such
notice and opinion received by Employer prior to the time that Employee
pays any tax based on or files any tax return claiming receipt of "excess
5
<PAGE>
parachute payments." The reasonable fees and expenses of obtaining such
opinion shall be paid by Employer.
(c) Upon receipt of the opinion described in paragraph (b) above,
Employer will have thirty (30) days to notify Employee whether it wishes to
obtain an opinion (the "Second Opinion") from a nationally recognized
accounting firm selected by Employer that such benefit payments constitute
"excess parachute payments." Employer shall have thirty (30) days to
obtain the Second Opinion. If the accounting firm rendering the Second
Opinion concludes that such benefit payments do not constitute "excess
parachute payments," Employee and Employer shall each prepare their
respective tax returns on that basis.
(d) If based on the Second Opinion Employee does not report the
receipt of any "excess parachute payments," then notwithstanding any other
provision of this Agreement or the Stock Option Agreements, Employer shall
nevertheless be liable for the Gross-Up Payment provided for in paragraph
(a) above if Employee provides copies to Employer within ten (10) days of
any and all notices or other correspondence from a tax authority of an
examination of Employee's returns for the tax periods in which Employee
received payments under this Agreement and the Stock Option Agreements
("Examination Notice"), and provides Employer with the right to represent
Employee in connection with any such examination. Employer also agrees to
indemnify Employee from and hold harmless Employee against any costs
reasonably incurred by Employee in connection with any such Examination
Notice to the extent attributable to the receipt by Employee of amounts
considered "excess parachute payments" contrary to the conclusion of the
Second Opinion.
5. Other Terms and Conditions. Except as expressly amended or modified
in this Agreement, all terms and conditions of the Employment Agreement and the
Stock Option Agreements remain in full force and effect.
6. Termination. This Agreement, including the amendments and
modifications of the Employment Agreement and the Stock Option Agreements
effected hereby, shall cease to have any force or effect if (a) on September 30,
1997, there shall not be in effect a binding definitive agreement, providing for
a Change in Control, to which Employer or any of its controlling stockholders is
party, or (b) a Change in Control shall not have occurred by December 31, 1997.
[SIGNATURES ON NEXT PAGE]
6
<PAGE>
IN WITNESS WHEREOF, each of the parties to this Agreement has executed and
delivered this Agreement as of the date first written above.
EMPLOYER:
PRIME SERVICE, INC.
By: /s/ Thomas E. Bennett
-----------------------------------------------
Title: Chairman of the Board, President and
Chief Executive Officer
--------------------------------------------
EMPLOYEE:
/s/ Peter A. Post
--------------------------------------------------
Peter A. Post
<PAGE>
EXHIBIT B
1997 THROUGH 2001
For 1997 through 2001, cash bonuses under the Management Cash Bonus
Incentive Program are payable to participants in the program in a given year if
the Company's Earnings Before Interest, Taxes, Depreciation or Amortization
("EBITDA") for such year equals or exceeds 90% of the EBITDA target in the
Company's budget for such year, as approved by the Board, provided that the
EBITDA target for 1997 is $135 million, as set forth in the Employer's 1997
budget. EBITDA targets for 1998-2001 shall be as set by the Board in its sole
discretion. EBITDA targets shall be subject to change in the discretion of the
Board for any change to the capital structure of the Company in connection with
any acquisitions, equity offerings or other transactions that would, or would be
likely to, materially affect EBITDA or net income. The percentage of Base
Salary payable as bonus shall be determined as follows:
% of EBITDA % of Base Salary
Target Achieved Payable as Bonus(1)
- ---------------------------------------------------------------------------
Equal To Or Greater Than: But Less Than:
- ------------------------ -------------
0 90 0
90 100 50-80
100 110 60-100
110 120 100-105
120 130 105-110
130 140 110-115
140 150 115-120
150 160 120-125
160 170 125-130
170 180 130-135
180 190 135-140
190 200 140-145
200 --- 145-150
------------------------------------------
(1) The Board in its discretion shall set the bonus percentage amount for
each fiscal year within the ranges indicated, but not less than the bottom of
the range. The bonus percentage will be determined on an individual basis and
may differ among eligible employees.
<PAGE>
Exhibit 99.9
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement (this "Agreement") is made
and entered into as of June 8, 1997, by and between Prime Service, Inc., a
Delaware corporation and successor by merger to Primeco Inc., a Texas
corporation ("Employer"), and James O. York ("Employee").
WHEREAS, Employer and Employee have entered into an Employment Agreement,
dated as of October 25, 1996 (the "Employment Agreement");
WHEREAS, Employer and Employee desire to amend the Employment Agreement
to address the possibility of a change in control of Employer;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms.
(a) Capitalized terms not defined herein shall have the meanings
set forth in the Employment Agreement.
(b) As used herein and in the Employment Agreement, the following
terms shall have the following meanings:
"Change in Control" shall mean any of the following events: (i)
any Person, other than Investcorp S.A., its affiliates and the
executive officers of Employer ("Permitted Holders"), becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a Person shall be
deemed to have beneficial ownership of shares that such Person has a
right to acquire only if such right to acquire is immediately
exercisable) of more than 50% of the shares of capital stock of
Employer normally entitled to vote for the election of directors; or
(ii) at any time (a) Employer shall consolidate, merge, or effect a
share exchange with any other Person unless after giving effect
thereto more than 50% of the shares of capital stock of the
continuing or surviving Person (or an affiliate of such Person that
controls such Person) normally entitled to vote for directors shall
be beneficially owned by Permitted Holders or (b) Employer shall
sell or otherwise transfer more than 50% of the assets or earning
power of Employer and its subsidiaries (taken as a whole) to any
Person. For this definition, "Person" shall have the meaning
ascribed to such term in Section 3(a)(9) of the Securities Exchange
Act of 1934 and used in Sections 13(d) and 14(d) thereof, including
a "group" as used in Section 13(d) thereof.
"Change in Control Date" shall mean the date immediately prior
to the effectiveness of a Change in Control.
1
<PAGE>
2. Amendments. If a Change in Control occurs, the Employment Agreement
shall be amended, effective as of the Change in Control Date, as set forth in
this Section 2:
(a) Exhibit B to the Employment Agreement shall be restated in its
entirety to read as appended hereto.
(b) Section 4 of the Employment Agreement is amended by deleting
the words "payments or" from the second sentence thereof.
(c) Section 6.1 of the Employment Agreement is amended by adding a
new Section 6.1(e) to read as follows:
(e) For Good Reason. At the option of Employee, at any time
prior to the Expiration Date, for any of the following reasons (each
a "Good Reason"), whereupon Employer shall become obligated to make
those payments set forth in Section 7.1(d) hereof: (i) there is a
material adverse change in Employee's title from that which he held
on the Change in Control Date (provided that the removal of or
failure to elect Employee as a director of the Company shall not
constitute "Good Reason"); (ii) Employee's duties as an employee are
materially reduced or diminished from those in effect on the Change
in Control Date without Employee's written consent; (iii) Employer
reduces Employee's compensation after the Change in Control Date;
(iv) Employer amends or modifies the Program or benefits as in
effect on the Change in Control Date in any manner materially
adverse to Employee's interest thereunder; or (v) Employer requires
that Employee's employment be based more than 60 miles from the
location of Employer's executive offices on the Change in Control
Date, without Employee's written consent.
(d) Section 7.1(a) of the Employment Agreement is restated in its
entirety to read as follows:
(a) If Employer terminates Employee's employment for Cause or
if Employee voluntarily terminates his employment other than for
Good Reason, Employer's obligation to compensate Employee shall in
all respects cease as of the Date of Termination, except that
Employer shall pay Employee the Base Salary accrued under Section 3
hereof and the reimbursable expenses incurred under Section 5 hereof
up to such Date of Termination (the "Accrued Obligations");
(e) Section 7.1(d) of the Employment Agreement is restated in its
entirety to read as follows:
(d) If Employee's employment is terminated by Employer
pursuant to Section 6.1(d) or by Employee for Good Reason pursuant
to Section 6.1(e), Employer's obligation to compensate Employee
shall in all respects cease, except that within thirty (30) days
after the Date of Termination Employer shall pay to Employee the
Accrued Obligations, and for the period ending on the earlier of the
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<PAGE>
Expiration Date or the second anniversary of the Date of
Termination (the "Severance Period"), Employer shall:
(i) pay to Employee, at Employee's election, (A) on a
monthly basis, for each month in the Severance Period, an
amount equal to one-twelfth (1/12th) of the annual Base Salary
of Employee in effect at the Date of Termination or the Change
in Control Date, whichever is greater, or (B) in a single
payment, made within thirty (30) days after the Date of
Termination, the aggregate amount of such monthly Base Salary
payments for the Severance Period (the "Continuation Payments");
(ii) pay to Employee: (A) at Employee's election, (1) on a
monthly basis, for each month in the Severance Period, an
amount equal to one-twelfth (1/12th) of the bonus payment
payable to him under the Program for the fiscal year prior to
the fiscal year in which the Date of Termination occurs (each a
"Monthly Bonus Payment") or (2) in a single payment, made
within thirty (30) days after the Date of Termination, the
aggregate amount of all Monthly Bonus Payments for the
Severance Period; and (B) if the Date of Termination occurs in
the 1997 fiscal year, in a single payment made within thirty
(30) days after the Date of Termination, an amount equal to the
bonus payment paid to him under the Program for the 1996 fiscal
year (annualized, if Employee was employed by Employer for less
than all of such fiscal year), prorated for the period from the
beginning of the 1997 fiscal year through the Date of
Termination; and
(iii) continue to maintain, during the Severance
Period for the benefit of Employee and his dependents, basic
health, dental and life insurance and related medical expenses
coverage (including disability and hospitalization coverage)
(the "Continuation Benefits") on terms no less favorable to
Employee than Employer provides to its executive officers
generally, as such benefits may be modified from time to time
during the Severance Period.
During the Severance Period, Employee shall be required to make any
contributions required to maintain such Continuation Benefits, which
may be withheld from the Continuation Payments (if monthly payments
thereof are elected by Employee); provided that such contributions
are also required to be made by Employer's executive officers
generally. If at any time during the Severance Period Employee shall
obtain employment with a third party (the "Substitute Employer") in
which Employee is entitled to receive basic health benefits in
connection with such employment on terms provided by the Substitute
Employer to its similarly situated employees generally, Employer
shall no longer be required to provide Continuation Benefits to
Employee, regardless of whether such benefits differ in any respect
from the Continuation Benefits. Employer shall be excused from its
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<PAGE>
obligations to make payments under this Section 7.1(d) if Employee
breaches its obligations hereunder (including its obligations under
Article 8 hereof).
(f) Section 8.4(a) of the Employment Agreement is amended by
restating the first sentence thereof in its entirety to read as follows:
(a) Employee acknowledges and recognizes the highly
competitive nature of Employer's business and, in consideration
of the payment by Employer to Employee of amounts that may
hereafter be paid to Employee pursuant to Sections 7.1 or
8.4(d) hereof, Employee agrees that during the period (the
"Covered Time") (i) for a termination pursuant to a Notice of
Termination, beginning on the Date of Termination and ending
(A) if Employee's employment is terminated for any reason other
than pursuant to Section 6.1(d) hereof or Section 6.1(e)
hereof, on the second anniversary of the Date of Termination or
(B) if Employee's employment is terminated pursuant to Section
6.1(d) hereof or Section 6.1(e) hereof on the earlier of the
second anniversary of the Date of Termination or the last day
of the Severance Period, or (ii) for a termination on the
expiration of the term of this Agreement (but subject to
compliance with Section 8.4(d) hereof), beginning on the date
of such expiration and ending on the date (not later than the
first anniversary of the date of such expiration) established
pursuant to Section 8.4(d) hereof, Employee will not compete
with the business of Employer, which means that Employee will
not engage, directly or indirectly, in the "Covered Business"
(as hereinafter defined) in any state of the United States of
America in which the Employer is conducting business or
proposes to conduct business as of the Date of Termination and
any states contiguous therewith (these areas are hereinafter
collectively referred to as the "Covered Area").
(g) Section 8.4(d) of the Employment Agreement is hereby restated
in its entirety to read as follows:
(d) If the term of this Agreement (and any extensions
thereof) expires pursuant to Section 1 hereof, Employer may
elect to have the Covered Time extend from the date of
expiration of the term of this Agreement (and any extensions
thereof) up to and through the first anniversary of such date
by delivering written notice to Employee (specifying the
duration of such Covered Time), within ten (10) days of the
date of expiration, that Employer has elected to continue to
pay to Employee the monthly Continuation Payments in the amount
described in Section 7.1(d)(i)(A) hereof (treating such Covered
Time as the Severance Period for such purpose) and provide the
Continuation Benefits as described in Section 7.1(d)(iii)
hereof (treating such Covered Time as the Severance Period for
such purpose) (on terms no less favorable to Employee than
Employer provides to its executive officers generally, as such
benefits may be modified from time to time) for each month of
such
4
<PAGE>
Covered Time. During such Covered Time, Employee shall be
required to make any contributions required to maintain such
Continuation Payments; provided that such contributions are
also required to be made by the Employer's executive officers
generally. If at any time during such Covered Time Employee
shall obtain employment with a Substitute Employer in which
Employee is entitled to receive basic health benefits in
connection with such employment on terms provided by the
Substitute Employer to its similarly situated employees
generally, Employer shall no longer be required to provide
Continuation Benefits to the Employee, regardless of whether
such benefits differ in any respect from the Continuation
Benefits. Employer shall be excused from its obligations to
make payments under this Section 8.4(d) if Employee breaches
its obligations hereunder.
3. Stock Option Vesting. Notwithstanding the vesting schedules
provided in the Stock Option Agreement, dated as of April 1, 1996, as
amended, or the Stock Option Agreement, dated as of October 25, 1996, each
between Employer and Employee (collectively, the "Stock Option Agreements"),
all options granted thereunder shall become immediately exercisable upon a
Change in Control unless prior thereto such options shall have been exercised
or shall have expired.
4. Golden Parachute Gross-Up.
(a) If the aggregate of the benefit payments under this Agreement
and the Stock Option Agreements would cause the payment of one or more of
such benefit payments to constitute an "excess parachute payment" as
defined in Section 280G(b) of the Internal Revenue Code ("Code"), then
Employer will pay to the Internal Revenue Service for the account of
Employee, when Employee's underlying tax liability is due and payable
(but subject to paragraphs (b), (c) and (d) below), an additional amount
in cash (the "Gross-Up Payment") equal to the amount necessary to cause
the net amount retained by Employee, after deduction of any (i) excise
tax on the payments under this Agreement and the Stock Option Agreements,
(ii) federal, state or local income tax on the Gross-Up Payment, and
(iii) excise tax on the Gross-Up Payment, to be equal to the aggregate
remuneration Employee would have received under this Agreement and the
Stock Option Agreements, excluding such Gross-Up Payment (net of all
federal, state and local excise and income taxes), as if Sections 280G
and 4999 of the Code (and any successor provisions thereto) had not been
enacted into law.
(b) The Gross-Up Payment provided for in paragraph (a) above shall
not be made unless Employee provides written notice to Employer setting
forth, in reasonable detail, the amounts and calculation of such benefit
payments constituting "excess parachute payments" and accompanied by a
written opinion of a nationally recognized accounting firm confirming
that such benefit payments constitute "excess parachute payments," with
such notice and opinion received by Employer prior to the time that
Employee pays any tax based on or files any tax return claiming receipt
of "excess
5
<PAGE>
parachute payments." The reasonable fees and expenses of obtaining such
opinion shall be paid by Employer.
(c) Upon receipt of the opinion described in paragraph (b) above,
Employer will have thirty (30) days to notify Employee whether it wishes
to obtain an opinion (the "Second Opinion") from a nationally recognized
accounting firm selected by Employer that such benefit payments
constitute "excess parachute payments." Employer shall have thirty (30)
days to obtain the Second Opinion. If the accounting firm rendering the
Second Opinion concludes that such benefit payments do not constitute
"excess parachute payments," Employee and Employer shall each prepare
their respective tax returns on that basis.
(d) If based on the Second Opinion Employee does not report the
receipt of any "excess parachute payments," then notwithstanding any
other provision of this Agreement or the Stock Option Agreements,
Employer shall nevertheless be liable for the Gross-Up Payment provided
for in paragraph (a) above if Employee provides copies to Employer within
ten (10) days of any and all notices or other correspondence from a tax
authority of an examination of Employee's returns for the tax periods in
which Employee received payments under this Agreement and the Stock
Option Agreements ("Examination Notice"), and provides Employer with the
right to represent Employee in connection with any such examination.
Employer also agrees to indemnify Employee from and hold harmless
Employee against any costs reasonably incurred by Employee in connection
with any such Examination Notice to the extent attributable to the
receipt by Employee of amounts considered "excess parachute payments"
contrary to the conclusion of the Second Opinion.
5. Other Terms and Conditions. Except as expressly amended or modified
in this Agreement, all terms and conditions of the Employment Agreement and
the Stock Option Agreements remain in full force and effect.
6. Termination. This Agreement, including the amendments and
modifications of the Employment Agreement and the Stock Option Agreements
effected hereby, shall cease to have any force or effect if (a) on September
30, 1997, there shall not be in effect a binding definitive agreement,
providing for a Change in Control, to which Employer or any of its
controlling stockholders is party, or (b) a Change in Control shall not have
occurred by December 31, 1997.
[SIGNATURES ON NEXT PAGE]
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<PAGE>
IN WITNESS WHEREOF, each of the parties to this Agreement has executed
and delivered this Agreement as of the date first written above.
EMPLOYER:
PRIME SERVICE, INC.
By: /s/ Thomas E. Bennett
-----------------------------------------------
Title: Chairman of the Board, President and
Chief Executive Officer
--------------------------------------------
EMPLOYEE:
/s/ James O. York
--------------------------------------------------
James O. York
7
<PAGE>
EXHIBIT B
1997 THROUGH 2001
For 1997 through 2001, cash bonuses under the Management Cash Bonus
Incentive Program are payable to participants in the program in a given year
if the Company's Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA") for such year equals or exceeds 90% of the EBITDA
target in the Company's budget for such year, as approved by the Board,
provided that the EBITDA target for 1997 is $135 million, as set forth in the
Employer's 1997 budget. EBITDA targets for 1998-2001 shall be as set by the
Board in its sole discretion. EBITDA targets shall be subject to change in
the discretion of the Board for any change to the capital structure of the
Company in connection with any acquisitions, equity offerings or other
transactions that would, or would be likely to, materially affect EBITDA or
net income. The percentage of Base Salary payable as bonus shall be
determined as follows:
% of EBITDA % of Base Salary
Target Achieved Payable as Bonus(1)
--------------------------------------- -----------------------
Equal To Or Greater Than: But Less Than:
0 90 0
90 100 50-80
100 110 60-100
110 120 100-105
120 130 105-110
130 140 110-115
140 150 115-120
150 160 120-125
160 170 125-130
170 180 130-135
180 190 135-140
190 200 140-145
200 --- 145-150
- -----------------
(1) The Board in its discretion shall set the bonus percentage amount
for each fiscal year within the ranges indicated, but not less than the
bottom of the range. The bonus percentage will be determined on an
individual basis and may differ among eligible employees.
<PAGE>
Exhibit 99.10
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement (this "Agreement") is made and
entered into as of June 8, 1997, by and between Prime Service, Inc., a Delaware
corporation and successor by merger to Primeco Inc., a Texas corporation
("Employer"), and Stanton P. Eigenbrodt ("Employee").
WHEREAS, Employer and Employee have entered into an Employment Agreement,
dated as of February 3, 1997 (the "Employment Agreement");
WHEREAS, Employer and Employee desire to amend the Employment Agreement to
address the possibility of a change in control of Employer;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms.
(a) Capitalized terms not defined herein shall have the meanings set
forth in the Employment Agreement.
(b) As used herein and in the Emplyment Agreement, the following
terms shall have the following meanings:
"Change in Control" shall mean any of the following events:
(i) any Person, other than Investcorp S.A., its affiliates and the
executive officers of Employer ("Permitted Holders"), becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a Person shall be deemed
to have beneficial ownership of shares that such Person has a right to
acquire only if such right to acquire is immediately exercisable) of
more than 50% of the shares of capital stock of Employer normally
entitled to vote for the election of directors; or (ii) at any time
(a) Employer shall consolidate, merge, or effect a share exchange with
any other Person unless after giving effect thereto more than 50% of
the shares of capital stock of the continuing or surviving Person (or
an affiliate of such Person that controls such Person) normally
entitled to vote for directors shall be beneficially owned by
Permitted Holders or (b) Employer shall sell or otherwise transfer
more than 50% of the assets or earning power of Employer and its
subsidiaries (taken as a whole) to any Person. For this definition,
"Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Securities Exchange Act of 1934 and used in
Sections 13(d) and 14(d) thereof, including a "group" as used in
Section 13(d) thereof.
"Change in Control Date" shall mean the date immediately prior to
the effectiveness of a Change in Control.
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<PAGE>
2. Amendments. If a Change in Control occurs, the Employment Agreement
shall be amended, effective as of the Change in Control Date, as set forth in
this Section 2:
(a) Exhibit B to the Employment Agreement shall be restated in its
entirety to read as appended hereto.
(b) Section 4 of the Employment Agreement is amended by deleting the
words "payments or" from the second sentence thereof.
(c) Section 6.1 of the Employment Agreement is amended by adding a
new Section 6.1(e) to read as follows:
(e) For Good Reason. At the option of Employee, at any time
prior to the Expiration Date, for any of the following reasons (each a
"Good Reason"), whereupon Employer shall become obligated to make
those payments set forth in Section 7.1(d) hereof: (i) there is a
material adverse change in Employee's title from that which he held on
the Change in Control Date (provided that the removal of or failure to
elect Employee as a director of the Company shall not constitute "Good
Reason"); (ii) Employee's duties as an employee are materially reduced
or diminished from those in effect on the Change in Control Date
without Employee's written consent; (iii) Employer reduces Employee's
compensation after the Change in Control Date; (iv) Employer amends or
modifies the Program or benefits as in effect on the Change in Control
Date in any manner materially adverse to Employee's interest
thereunder; or (v) Employer requires that Employee's employment be
based more than 60 miles from the location of Employer's executive
offices on the Change in Control Date, without Employee's written
consent.
(d) Section 7.1(a) of the Employment Agreement is restated in its
entirety to read as follows:
(a) If Employer terminates Employee's employment for Cause or if
Employee voluntarily terminates his employment other than for Good
Reason, Employer's obligation to compensate Employee shall in all
respects cease as of the Date of Termination, except that Employer
shall pay Employee the Base Salary accrued under Section 3 hereof and
the reimbursable expenses incurred under Section 5 hereof up to such
Date of Termination (the "Accrued Obligations");
(e) Section 7.1(d) of the Employment Agreement is restated in its
entirety to read as follows:
(d) If Employee's employment is terminated by Employer pursuant
to Section 6.1(d) or by Employee for Good Reason pursuant to
Section 6.1(e), Employer's obligation to compensate Employee shall in
all respects cease, except that within thirty (30) days after the Date
of Termination Employer shall pay to
2
<PAGE>
Employee the Accrued Obligations, and for the period ending on the
Expiration Date (the "Severance Period"), Employer shall:
(i) pay to Employee, at Employee's election, (A) on a
monthly basis, for each month in the Severance Period, an amount
equal to one-twelfth (1/12th) of the annual Base Salary of
Employee in effect at the Date of Termination or the Change in
Control Date, whichever is greater, or (B) in a single payment,
made within thirty (30) days after the Date of Termination, the
aggregate amount of such monthly Base Salary payments for the
Severance Period (the "Continuation Payments");
(ii) pay to Employee: (A) at Employee's election, (1) on a
monthly basis, for each month in the Severance Period, an amount
equal to one-twelfth (1/12th) of the bonus payment payable to him
under the Program (i) for the fiscal year prior to the fiscal
year in which the Date of Termination occurs or (ii) if the Date
of Termination occurs in the 1997 fiscal year, for the 1997
fiscal year (annualized) (each a "Monthly Bonus Payment") or
(2) in a single payment, made within thirty (30) days after the
Date of Termination, the aggregate amount of all Monthly Bonus
Payments for the Severance Period; and (B) if the Date of
Termination occurs in the 1997 fiscal year, in a single payment
made within thirty (30) days after the Date of Termination, an
amount equal to the bonus payment payable to him under the
Program for the 1997 fiscal year (annualized), prorated for the
period from February 3, 1997 through the Date of Termination; and
(iii) continue to maintain, during the Severance Period
for the benefit of Employee and his dependents, basic health,
dental and life insurance and related medical expenses coverage
(including disability and hospitalization coverage) (the
"Continuation Benefits") on terms no less favorable to Employee
than Employer provides to its executive officers generally, as
such benefits may be modified from time to time during the
Severance Period.
During the Severance Period, Employee shall be required to make any
contributions required to maintain such Continuation Benefits, which
may be withheld from the Continuation Payments (if monthly payments
thereof are elected by Employee); provided that such contributions are
also required to be made by Employer's executive officers generally.
If at any time during the Severance Period Employee shall obtain
employment with a third party (the "Substitute Employer") in which
Employee is entitled to receive basic health benefits in connection
with such employment on terms provided by the Substitute Employer to
its similarly situated employees generally, Employer shall no longer
be required to provide Continuation Benefits to Employee, regardless
of whether such benefits differ in any respect from the Continuation
Benefits. Employer shall be excused from its obligations to make
payments under this Section 7.1(d) if Employee breaches its
obligations hereunder (including its obligations under Article 8
hereof).
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<PAGE>
(f) Section 8.4(a) of the Employment Agreement is amended by
restating the first sentence thereof in its entirety to read as follows:
(a) Employee acknowledges and recognizes the highly competitive
nature of Employer's business and, in consideration of the
payment by Employer to Employee of amounts that may hereafter be
paid to Employee pursuant to Sections 7.1 or 8.4(d) hereof,
Employee agrees that during the period (the "Covered Time")
(i) for a termination pursuant to a Notice of Termination,
beginning on the Date of Termination and ending (A) if Employee's
employment is terminated for any reason other than pursuant to
Section 6.1(d) hereof or Section 6.1(e) hereof, on the second
anniversary of the Date of Termination or (B) if Employee's
employment is terminated pursuant to Section 6.1(d) hereof or
Section 6.1(e) hereof on the earlier of the second anniversary of
the Date of Termination or the last day of the Severance Period,
or (ii) for a termination on the expiration of the term of this
Agreement (but subject to compliance with Section 8.4(d) hereof),
beginning on the date of such expiration and ending on the date
(not later than the first anniversary of the date of such
expiration) established pursuant to Section 8.4(d) hereof,
Employee will not compete with the business of Employer, which
means that Employee will not engage, directly or indirectly, in
the "Covered Business" (as hereinafter defined) in any state of
the United States of America in which the Employer is conducting
business or proposes to conduct business as of the Date of
Termination and any states contiguous therewith (these areas are
hereinafter collectively referred to as the "Covered Area").
(g) Section 8.4(d) of the Employment Agreement is hereby restated in
its entirety to read as follows:
(d) If the term of this Agreement (and any extensions
thereof) expires pursuant to Section 1 hereof, Employer may elect
to have the Covered Time extend from the date of expiration of
the term of this Agreement (and any extensions thereof) up to and
through the first anniversary of such date by delivering written
notice to Employee (specifying the duration of such Covered
Time), within ten (10) days of the date of expiration, that
Employer has elected to continue to pay to Employee the monthly
Continuation Payments in the amount described in
Section 7.1(d)(i)(A) hereof (treating such Covered Time as the
Severance Period for such purpose) and provide the Continuation
Benefits as described in Section 7.1(d)(iii) hereof (treating
such Covered Time as the Severance Period for such purpose) (on
terms no less favorable to Employee than Employer provides to its
executive officers generally, as such benefits may be modified
from time to time) for each month of such Covered Time. During
such Covered Time, Employee shall be required to make any
contributions required to maintain such Continuation Payments;
provided that such contributions are also required to be made by
4
<PAGE>
the Employer's executive officers generally. If at any time
during such Covered Time Employee shall obtain employment with a
Substitute Employer in which Employee is entitled to receive
basic health benefits in connection with such employment on terms
provided by the Substitute Employer to its similarly situated
employees generally, Employer shall no longer be required to
provide Continuation Benefits to the Employee, regardless of
whether such benefits differ in any respect from the Continuation
Benefits. Employer shall be excused from its obligations to make
payments under this Section 8.4(d) if Employee breaches its
obligations hereunder.
3. Stock Option Vesting. Notwithstanding the vesting schedules provided
in the Stock Option Agreement, dated as of February 3, 1997, between Employer
and Employee (the "Stock Option Agreement"), all options granted thereunder
shall become immediately exercisable upon a Change in Control unless prior
thereto such options shall have been exercised or shall have expired.
4. Golden Parachute Gross-Up.
(a) If the aggregate of the benefit payments under this Agreement and
the Stock Option Agreement would cause the payment of one or more of such
benefit payments to constitute an "excess parachute payment" as defined in
Section 280G(b) of the Internal Revenue Code ("Code"), then Employer will
pay to the Internal Revenue Service for the account of Employee, when
Employee's underlying tax liability is due and payable (but subject to
paragraphs (b), (c) and (d) below), an additional amount in cash (the
"Gross-Up Payment") equal to the amount necessary to cause the net amount
retained by Employee, after deduction of any (i) excise tax on the payments
under this Agreement and the Stock Option Agreement, (ii) federal, state or
local income tax on the Gross-Up Payment, and (iii) excise tax on the
Gross-Up Payment, to be equal to the aggregate remuneration Employee would
have received under this Agreement and the Stock Option Agreement,
excluding such Gross-Up Payment (net of all federal, state and local excise
and income taxes), as if Sections 280G and 4999 of the Code (and any
successor provisions thereto) had not been enacted into law.
(b) The Gross-Up Payment provided for in paragraph (a) above shall
not be made unless Employee provides written notice to Employer setting
forth, in reasonable detail, the amounts and calculation of such benefit
payments constituting "excess parachute payments" and accompanied by a
written opinion of a nationally recognized accounting firm confirming that
such benefit payments constitute "excess parachute payments," with such
notice and opinion received by Employer prior to the time that Employee
pays any tax based on or files any tax return claiming receipt of "excess
parachute payments." The reasonable fees and expenses of obtaining such
opinion shall be paid by Employer.
(c) Upon receipt of the opinion described in paragraph (b) above,
Employer will have thirty (30) days to notify Employee whether it wishes to
obtain an opinion (the
5
<PAGE>
"Second Opinion") from a nationally recognized accounting firm selected
by Employer that such benefit payments constitute "excess parachute
payments." Employer shall have thirty (30) days to obtain the Second
Opinion. If the accounting firm rendering the Second Opinion concludes
that such benefit payments do not constitute "excess parachute payments,"
Employee and Employer shall each prepare their respective tax returns on
that basis.
(d) If based on the Second Opinion Employee does not report the
receipt of any "excess parachute payments," then notwithstanding any other
provision of this Agreement or the Stock Option Agreement, Employer shall
nevertheless be liable for the Gross-Up Payment provided for in paragraph
(a) above if Employee provides copies to Employer within ten (10) days of
any and all notices or other correspondence from a tax authority of an
examination of Employee's returns for the tax periods in which Employee
received payments under this Agreement and the Stock Option Agreement
("Examination Notice"), and provides Employer with the right to represent
Employee in connection with any such examination. Employer also agrees to
indemnify Employee from and hold harmless Employee against any costs
reasonably incurred by Employee in connection with any such Examination
Notice to the extent attributable to the receipt by Employee of amounts
considered "excess parachute payments" contrary to the conclusion of the
Second Opinion.
5. Other Terms and Conditions. Except as expressly amended or modified
in this Agreement, all terms and conditions of the Employment Agreement and the
Stock Option Agreement remain in full force and effect.
6. Termination. This Agreement, including the amendments and
modifications of the Employment Agreement and the Stock Option Agreement
effected hereby, shall cease to have any force or effect if (a) on September 30,
1997, there shall not be in effect a binding definitive agreement, providing for
a Change in Control, to which Employer or any of its controlling stockholders is
party, or (b) a Change in Control shall not have occurred by December 31, 1997.
[SIGNATURES ON NEXT PAGE]
6
<PAGE>
IN WITNESS WHEREOF, each of the parties to this Agreement has executed and
delivered this Agreement as of the date first written above.
EMPLOYER:
PRIME SERVICE, INC.
By: /s/ Thomas E. Bennett
-----------------------------------------------
Title: Chairman of the Board, President and
Chief Executive Officer
--------------------------------------------
EMPLOYEE:
/s/ Stanton P. Eigenbrodt
--------------------------------------------------
Stanton P. Eigenbrodt
7
<PAGE>
EXHIBIT B
1997 THROUGH 2001
For 1997 through 2001, cash bonuses under the Management Cash Bonus
Incentive Program are payable to participants in the program in a given year if
the Company's Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") for such year equals or exceeds 90% of the EBITDA target in the
Company's budget for such year, as approved by the Board, provided that the
EBITDA target for 1997 is $135 million, as set forth in the Employer's 1997
budget. EBITDA targets for 1998-2001 shall be as set by the Board in its sole
discretion. EBITDA targets shall be subject to change in the discretion of the
Board for any change to the capital structure of the Company in connection with
any acquisitions, equity offerings or other transactions that would, or would be
likely to, materially affect EBITDA or net income. The percentage of Base
Salary payable as bonus shall be determined as follows:
% of EBITDA % of Base Salary
Target Achieved Payable as Bonus(1)
------------------------- ---------------------------
Equal To Or
Greater Than: But Less Than:
0 90 0
90 -- 35-50
- ------------------------------------------
(1) The Board in its discretion shall set the bonus percentage amount for
each fiscal year within the ranges indicated, but not less than the bottom of
the range. The bonus percentage will be determined on an individual basis and
may differ among eligible employees.
8
<PAGE>
Exhibit 99.11
CERTAIN TRANSACTIONS
The Company was capitalized with $70.0 million of equity contributed by
Investcorp, its affiliates and other international and domestic investors and
$10.0 million aggregate principal amount of Subordinated Notes acquired for
$9 million by Invifin S.A., an affiliate of Investcorp, and other
international investors. The Subordinated Notes are due on March 31, 2006
and bear interest at a fixed annual rate of 14%. See Note 8 to Consolidated
Financial Statements. The Company capitalized Primeco with $79.0 million in
exchange for 100% of the outstanding common and preferred stock of Primeco in
connection with the consummation of the 1994 Acquisition. This capital
contribution to Primeco, in addition to borrowings under the credit facility
and the subordinated loan facility, provided the sources of the consideration
for the 1994 Acquisition and related costs and fees. The Company paid
$150,000 in fees to Invifin in connection with the Subordinated Notes. The
Company intends to repay the Subordinated Notes with the proceeds from the
Offering. Following repayment of the Subordinated Notes, the Company intends
to contribute to Primeco the outstanding preferred stock of Primeco.
In connection with the 1994 Acquisition, Primeco paid Investcorp
International, Inc. ("III") fees of $2.7 million for arranging Primeco's
credit facility. Primeco also entered into an agreement for management
advisory, strategic planning and consulting services (the "Management
Agreement") with III pursuant to which Primeco agreed to pay III $1.5 million
per year for a five year term. Primeco prepaid III $4.5 million for the
first three years of the term and agreed to make quarterly payments during
the fourth and fifth years. In connection with the 1994 Acquisition, Primeco
also entered into an agreement with Investcorp Bank E.C. ("EC") for a term of
five years pursuant to which Primeco paid EC approximately $7.6 million in
exchange for EC's assistance in arranging financing for the 1994 Acquisition
and for EC's covenant not to arrange or facilitate the acquisition of a
competitor of Primeco without Primeco's consent. These two agreements will
be terminated in connection with the Offering.
In connection with the purchase of American Hi-Lift, Equipment Rental
Limited, Arlington Limited, Freeport Limited, LaPorte Limited and Plano
Limited made a capital infusion of $9.4 million into the Company which, in
turn, paid $1.0 million to III on February 26, 1996 for financial advisory
services related to the purchase of American Hi-Lift. This capital
contribution, plus borrowing from Prime's credit facility, provided funds for
the completion of the American Hi-Lift purchase.
The Company paid legal fees of approximately $197,000 and $82,000 in 1993
and 1994, respectively, to a law firm with which John Hyland, a former
director of the Company who resigned upon the closing of the 1994
Acquisition, was affiliated during that time.
<PAGE>
Exhibit 99.12
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (this "Agreement"), dated as of June 8, 1997,
by and between ATLAS COPCO NORTH AMERICA INC., a Delaware corporation
("Parent"), CHASE NOMINEES (GUERNSEY) LIMITED, a Guernsey (Channel Islands)
corporation, and ARLINGTON LIMITED, BALLET LIMITED, DENARY LIMITED, EQUIPMENT
RENTAL LIMITED, EQUITY PEA LIMITED, EQUITY PEB LIMITED, EQUITY PEC LIMITED,
EQUITY PED LIMITED, FLEET EQUITY LIMITED, FREEPORT LIMITED, GLEAM LIMITED,
HIGHLANDS LIMITED, INVESTCORP INVESTMENT EQUITY LIMITED, LAPORTE LIMITED,
NOBLE LIMITED, OUTRIGGER LIMITED, PLANO LIMITED, QUILL LIMITED, RADIAL
LIMITED, SHORELINE LIMITED, RENTAL HOLDINGS LIMITED, RENTAL EQUITY LIMITED,
PRIME HOLDINGS LIMITED, PRIME EQUITY LIMITED, PE INVESTMENTS LIMITED, PE
HOLDING LIMITED, NEW PRIME INVESTMENTS LIMITED, NEW PRIME EQUITY LIMITED,
EQUIPMENT INVESTMENTS LIMITED, EQUIPMENT HOLDINGS LIMITED, EQUIPMENT EQUITY
LIMITED, and ZINNIA LIMITED (each a Cayman Islands corporation and together
with Chase Nominees (Guernsey) Limited each referred to as an "International
Investor," and, collectively, the "International Investors").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Parent, PS Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Parent ("Newco"), and
Prime Service, Inc., a Delaware corporation (the "Company"), will enter into
an Agreement and Plan of Merger of even date herewith (as such agreement may
be amended from time to time, the "Merger Agreement"; capitalized terms used
but not defined herein shall have the meanings set forth in the Merger
Agreement), pursuant to which (and subject to the terms and conditions
specified therein) Newco will be merged with and into the Company, with the
Company continuing as the surviving corporation and as a wholly owned
subsidiary of Parent (the "Merger"), whereby each share of common stock, par
value $0.01 per share, of the Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time of the Merger will be
converted into the right to receive the Merger Consideration, other than (i)
shares of Company Common Stock owned, directly or indirectly, by the Company
or any subsidiary of the Company or by Parent, Newco or any other Affiliate
of Parent and (ii) Dissenting Shares; and
WHEREAS, as a condition to Parent and Newco entering into the Merger
Agreement, Parent requires that each International Investor enter into, and
each International Investor has agreed to enter into, this Agreement with
Parent;
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NOW, THEREFORE, in consideration of the representations and
warranties and covenants set forth herein and in the Merger Agreement, Parent
and the International Investors, each intending to be legally bound, hereby
agree as follows:
1. Representations and Warranties of the International Investors. Each
International Investor hereby represents and warrants to Parent as follows:
1.1 Organization; Authorization; Validity of Agreement. Such
International Investor is a corporation duly organized and validly existing
under the laws of its jurisdiction of incorporation and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by such
International Investor and the consummation by such International Investor of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of such International Investor and no
other corporate proceedings on the part of such International Investor are
necessary to authorize this Agreement or any of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by such
International Investor and constitutes a valid and binding obligation of such
International Investor enforceable against such International Investor in
accordance with its terms, except that (a) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
1.2 Consents and Approvals; No Violations. The execution, delivery
and performance of this Agreement by such International Investor shall not
(a) conflict with or result in any breach of the certificate of
incorporation, by-laws or other corporate organizational documents of such
International Investor, (b) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to
any third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which such International Investor is a party or by which such International
Investor or any of its properties or assets is bound or affected or (c)
violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to such International Investor or any of its properties
or assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, or notice to, any state, federal or foreign
public body or authority is required by or with respect to such International
Investor in connection with the execution and delivery of this Agreement by
such International Investor or the consummation by such International
Investor of any of the transactions contemplated by this Agreement.
1.3 Ownership of International Shares. (a) Such International
Investor is the record and/or beneficial owner of that number of shares of
Company Common Stock set forth opposite such International Investor's name on
Annex 1 attached hereto (such shares hereinafter referred to as the "Existing
Shares," and together with any shares of Company Common Stock acquired of
record or beneficially by such International Investor in any
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capacity after the date hereof and prior to the termination hereof, whether
upon exercise of options, conversion of convertible securities, purchase,
exchange or otherwise, referred to as the "International Shares").
(b) On the date hereof, the Existing Shares constitute all of
the outstanding shares of Company Common Stock owned of record and/or
beneficially by such International Investors.
(c) Such International Investor has sole power of disposition
with respect to all of the Existing Shares owned by it and sole voting
power with respect to the matters set forth in Section 3.1 hereof and
sole power to demand dissenter's or appraisal rights, in each case with
respect to all of the Existing Shares owned by it with no restrictions on
such rights, subject to applicable federal securities laws and the terms
of this Agreement.
(d) Such International Investor will have sole power of
disposition with respect to shares of Company Common Stock other than
Existing Shares, if any, which become beneficially owned by such
International Investor and will have sole voting power with respect to
the matters set forth in Section 3.1 hereof and sole power to demand
dissenter's or appraisal rights, in each case with respect to all such
shares, if any, which become beneficially owned by such International
Investor with no restrictions on such rights, subject to applicable
federal securities laws and the terms of this Agreement.
1.4 No Encumbrances. The Existing Shares and the certificates
representing such shares are now, and the International Shares and the
certificates representing such shares at all times during the term hereof
will be, held by such International Investor, free and clear of all claims,
liens, charges, security interests, proxies, voting trusts or agreements,
understandings or arrangements and any other encumbrances of any kind or
nature whatsoever, except as otherwise provided in this Agreement.
1.5 Brokers and Intermediaries. No broker, investment banker,
financial adviser or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf
of such International Investor.
1.6 Reliance. Such International Investor understands and
acknowledges that Parent and Newco are entering into the Merger Agreement in
reliance upon such International Investor's execution and delivery of this
Agreement with Parent.
2. Representations and Warranties of Parent. Parent hereby represents
and warrants to the International Investors as follows:
2.1 Organization; Authorization; Validity of Agreement. Parent is
a corporation duly organized, validly existing and in good standing under the
laws of Delaware and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement by Parent and the
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consummation by Parent of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and no
other corporate proceedings on the part of Parent are necessary to authorize
this Agreement or any of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Parent and constitutes a
valid and binding obligation of Parent enforceable against Parent in
accordance with its terms, except that (a) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
2.2 Consents and Approvals; No Violations. The execution, delivery
and performance of this Agreement by Parent shall not (a) conflict with or
result in any breach of the certificate of incorporation or by-laws of
Parent, (b) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which Parent is a party or by which Parent or any of its properties or assets
is bound or affected or (c) violate any order, writ, injunction, decree,
judgment, statute, rule or regulation applicable to Parent or any of Parent's
properties or assets. Except as provided in the Merger Agreement, no
consent, approval, order or authorization of, or registration, declaration or
filing with, or notice to, any state, federal or foreign public body or
authority is required by or with respect to Parent in connection with the
execution and delivery of this Agreement by Parent or the consummation by
Parent of any of the transactions contemplated by this Agreement.
3. Agreement to Vote; Proxy.
3.1 Voting. Each International Investor hereby agrees that, until
the Termination Date (as defined in Section 9), at any meeting of the
stockholders of the Company, however called, or in connection with any
written consent of the stockholders of the Company, such International
Investor shall vote (or cause to be voted) the International Shares held of
record or beneficially by such party (a) in favor of the Merger, the
execution and delivery by the Company of the Merger Agreement and the
approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and this Agreement and any actions required in
furtherance hereof and thereof; (b) against any action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company under the Merger Agreement or
this Agreement; and (c) except as specifically requested in writing by Parent
in advance, against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (i) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company; (ii) a sale, lease or transfer of a
material amount of assets of the Company or reorganization, recapitalization,
dissolution or liquidation of the Company; (iii)(A) any change in the
majority of the board of directors of the Company; (B) any material change in
the present capitalization of the Company or any amendment of the Company's
Certificate of Incorporation or By-Laws; (C) any other material change in the
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Company's corporate structure or business; or (D) any other action which is
intended, or could reasonably be expected, to impede, interfere with, delay,
postpone, discourage or adversely affect the Offer, the Merger or the
transactions contemplated by the Merger Agreement or this Agreement or the
contemplated economic benefits of any of the foregoing. No International
Investor shall enter into any agreement or understanding with any person or
entity prior to the Termination Date to vote or give instructions after the
Termination Date in any manner inconsistent with clauses (i), (ii) or (iii)
of the preceding sentence.
3.2 PROXY. EACH INTERNATIONAL INVESTOR WHICH IS A RECORD OR
BENEFICIAL OWNER OF ANY OF THE INTERNATIONAL SHARES, HEREBY GRANTS TO, AND
APPOINTS, PARENT AND MARK COHEN, EXECUTIVE VICE PRESIDENT OF PARENT, AND
SIXTEN NORDMARK, GENERAL COUNSEL OF PARENT, IN THEIR RESPECTIVE CAPACITIES AS
OFFICERS OF PARENT, AND ANY INDIVIDUAL WHO SHALL HEREAFTER SUCCEED TO ANY
SUCH OFFICE OF PARENT, AND ANY OTHER DESIGNEE OF PARENT, EACH OF THEM
INDIVIDUALLY, SUCH INTERNATIONAL INVESTOR'S IRREVOCABLE (UNTIL THE
TERMINATION DATE) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF
SUBSTITUTION) TO VOTE THE INTERNATIONAL SHARES AS INDICATED IN SECTION 3.1
ABOVE. EACH INTERNATIONAL INVESTOR INTENDS THIS PROXY TO BE IRREVOCABLE
(UNTIL THE TERMINATION DATE) AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH
FURTHER ACTION AND EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO
EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY
GRANTED BY SUCH INTERNATIONAL INVESTOR WITH RESPECT TO THE INTERNATIONAL
SHARES.
4. Certain Covenants of the International Investors. Except in
accordance with the terms of this Agreement, Each International Investor
hereby agrees as follows:
4.1 Tender of International Shares. Each International Investor
agrees to tender and sell to Newco all of the International Shares pursuant
to and in accordance with the terms of the Offer. Each International
Investor agrees that such party shall deliver to the depositary for the
Offer, no later than the fifth Business Day (as defined below) following the
commencement of the Offer pursuant to Section 1.01 of the Merger Agreement, a
letter of transmittal together with any and all certificates representing the
International Shares owned by it. Notwithstanding any term of the Offer to
the contrary, each International Investor agrees not to withdraw any
International Shares tendered into the Offer pursuant to this Section 4.1
during the term of this Agreement. Each International Investor hereby
acknowledges and agrees that Newco's obligation to accept for payment and pay
for the International Shares in the Offer is subject to the terms and
conditions of the Offer. Each International Investor hereby permits Parent
and Newco to publish and disclose in the Offer Documents (including, without
limitation, all documents and schedules filed with the SEC), the identity of
the International Investors and the nature of their commitments, arrangements
and understandings under this Agreement. Notwithstanding anything in this
Section 4.1 to the contrary, the foregoing shall not restrict any director,
officer or employee of an International Investor who is also a director of
the Company from taking actions in such person's capacity as a director of
the Company to the extent and in the circumstances
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permitted by Section 6.07 of the Merger Agreement. For purposes of this
Agreement, "Business Day" shall mean a day on which banks are not required or
authorized to be closed in the City of New York.
4.2 No Solicitation. Prior to the Termination Date, no
International Investor shall (directly or indirectly through advisors, agents
or other intermediaries, nor shall such International Investor authorize or
permit any of their officers, directors, agents, representatives or advisors
to (a) solicit, initiate or take any action knowingly to facilitate the
submission of inquiries, proposals or offers from any Person (other than
Parent or any of its affiliates) relating to any Transaction Proposal or (b)
enter into or participate in any discussions or negotiations regarding any of
the foregoing, or furnish to any other Person any information with respect to
the business, properties or assets or any of the foregoing, or otherwise
cooperate in any way with, or knowingly assist or participate in, facilitate
or encourage, any effort or attempt by any other Person (other than Parent or
any of its affiliates) to do or seek any of the foregoing; provided, however,
that the foregoing shall not restrict any director, officer or employee of an
International Investor who is also a director of the Company from taking
actions in such person's capacity as a director of the Company to the extent
and in the circumstances permitted by Section 6.07 of the Merger Agreement.
If an International Investor receives any such inquiry or proposal, then such
International Investor shall promptly inform Parent of the terms and
conditions, if any, of such inquiry or proposal and the identity of the
person making it. Each International Investor will immediately cease and
cause its advisors, agents and other intermediaries to cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and shall use its reasonable
best efforts to cause any such parties in possession of confidential
information about the Company that was furnished by or on behalf of the
Company to return or destroy all such information in the possession of any
such party or in the possession of any agent or advisor of such party.
4.3 Restriction on Transfer, Proxies and Non-Interference;
Restriction on Withdrawal. Prior to the Termination Date, no International
Investor shall directly or indirectly: (a) except pursuant to the terms of
the Offer and the Merger Agreement, and to Parent pursuant to this Agreement,
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, enforce or permit the execution of the provisions of any
redemption agreement with the Company or enter into any contract, option or
other arrangement or understanding with respect to or consent to the offer
for sale, sale, transfer, tender, pledge, encumbrance, or other disposition
of, or exercise any discretionary powers to distribute, any or all of the
International Shares owned by it or any interest therein; (b) except as
contemplated hereby, grant any proxies or powers of attorney with respect to
any International Shares, deposit any International Shares into a voting
trust or enter into a voting agreement with respect to any International
Shares; or (c) take any action that would make any representation or warranty
of any International Investor contained herein untrue or incorrect or have
the effect of preventing or disabling any International Investor from
performing its obligations under this Agreement.
4.4 Waiver of Appraisal and Dissenter's Rights. Each International
Investor hereby waives any rights of appraisal or rights to dissent from the
Merger that such International Investor may have.
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5. Third Party Business Combination; Remedy.
(a)(i) If the Merger Agreement is terminated in accordance with
Section 8.01(e) or Section 8.01(f) of the Merger Agreement, and, upon or
following any such termination, any International Investor receives from any
Person (other than Parent, Newco or any of their affiliates) any cash or
non-cash consideration in an amount greater than $32.00 per share (the "Third
Party Consideration") in respect of all or any portion of the International
Shares in connection with or following any public announcement of a Third
Party Business Combination (as defined below) during the period commencing on
the date hereof and ending twelve months from the date the Merger Agreement
is terminated (provided that the contract or agreement relating to such Third
Party Business Combination was entered into within six months after the
Merger Agreement is terminated), then such International Investor shall
within two (2) Business Days of receipt thereof pay to Parent or its designee
an aggregate amount equal to one hundred percent (100%) of (A) the excess of
(1) the Third Party Consideration up to and including $36.00 over (2) $32.00
multiplied by (B) the number of International Shares with respect to which
such Third Party Consideration was received, or
(ii) if any International Investor receives from Parent, Newco or
any of their affiliates any cash or non-cash consideration pursuant to the
Offer or otherwise in an amount greater than $32.00 per share (the "Alternate
Consideration") in respect of all or any portion of the International Shares
owned by it following any public announcement of a Third Party Business
Combination (as defined below) during the period commencing on the date
hereof and ending twelve months from the date of such public announcement,
then such International Investor shall within two (2) Business Days of
receipt thereof pay to Parent or its designee an aggregate amount equal to
(A) one hundred percent (100%) of the excess of (1) the Alternate
Consideration up to and including $34.00 over (2) $32.00; and (B) fifty
percent (50%) of the excess, if any, of (1) the Alternate Consideration up to
and including $36.00 over (2) $34.00; in each case multiplied by the number
of International Shares with respect to which such Alternative Consideration
was received;
provided that, in each case, (x) if the consideration received by an
International Investor shall be securities listed on a national securities
exchange or traded on the NASDAQ National Market ("NASDAQ"), the per share
value of such consideration shall be equal to the closing price per share
listed on such national securities exchange or NASDAQ on the date such
transaction is consummated and (y) if the consideration received by an
International Investor shall be in a form other than such listed securities,
the per share value shall be determined in good faith as of the date such
transaction is consummated by Parent or its designee and such International
Investor, or, if Parent or its designee and such International Investor
cannot reach agreement, by a nationally-recognized investment banking firm
reasonably acceptable to the parties. The term "Third Party Business
Combination" with respect to the Company means the occurrence of any of the
following events: (i) the Company or any subsidiary of the Company whose
assets constitute twenty percent (20%) or more of the Company's consolidated
assets is acquired by merger or otherwise by any person or group, other than
Parent or any affiliate thereof (a "Third Party"); (ii) the Company or any
subsidiary of the Company enters into an agreement with a Third Party which
contemplates the acquisition of twenty percent (20%) or more of the total
assets of the Company and its subsidiaries, taken
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as a whole; (iii) the Company, or any International Investor enters into a
merger or other agreement with a Third Party which contemplates the
acquisition of more than twenty percent (20%) of the outstanding shares of
Company Common Stock; or (iv) a Third Party acquires more than twenty percent
(20%) of the outstanding Company Common Stock.
(b) If, within one hundred eighty (180) days after the acquisition
by Parent, Newco or any of their affiliates (the "Acquiring Company") of the
International Shares for an amount greater than $32.00 per share (as
contemplated by Section 5(a)(ii)), the Acquiring Company sells all or
substantially all of the outstanding shares of capital stock or assets of the
Company, then the Acquiring Company shall within two (2) Business Days of
receipt thereof pay to each International Investor or its designees an amount
equal to the excess of the sales proceeds received by the Acquiring Company
in connection with such sale attributable to the percentage ownership
interest in the Company represented by the International Shares purchased by
the Acquiring Company from such International Investor over the aggregate
price paid by the Acquiring Company to such International Investor for such
International Shares.
6. Further Assurances. From time to time, at any other party's request
and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further action as may be
necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
7. Certain Events. Each International Investor agrees that this
Agreement and the obligations hereunder shall attach to all International
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such International Shares shall pass, whether by
operation of law or otherwise.
8. Stop Transfer. Each International Investor agrees with, and
covenants to Parent that it shall not request that the Company register the
transfer (book-entry or otherwise) of any certificate or uncertificated
interest representing any of the International Shares.
9. Termination. The obligations of each International Investor under
Sections 3, 4.1, 4.2 , 4.3 and 8.1 shall terminate upon the first to occur of
(a) the Effective Time of the Merger and (b) the date the Merger Agreement is
terminated in accordance with its terms (such earlier date being the
"Termination Date"). Except as set forth in this Section 9, all other
agreements and obligations of the parties hereto shall survive the Effective
Time of the Merger and/or the Termination Date, as applicable, and in the
case of Section 5 hereof, to the extent set forth in such section.
10. Miscellaneous.
10.1 Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter
hereof and (b) shall not be assigned by operation of law or
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otherwise without the prior written consent of the other parties, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any affiliate of Parent, but no such assignment shall relieve
Parent of its obligations hereunder if such assignee does not perform such
obligations.
10.2 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
10.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram,
telex or telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered
to the respective parties at the following addresses:
(a) if to Parent,to
Atlas Copco North America Inc.
1211 Hamburg Turnpike
Suite 214
Wayne, New Jersey 07470
Telephone: (973) 633-8600
Telecopy: (973) 633-9722
Attention: Mr. Mark Cohen
with a copy to
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Telephone: (212) 858-1000
Telecopy: (212) 858-1500
Attention: Stephen R. Rusmisel, Esq.
(b) if to the International Investors or any of them, to
c/o Investcorp Management Services Limited
P.O. Box 5430
Investcorp House
Manama, Bahrain
Telephone: 011 973 532 000
Telecopy: 011 973 530 816
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Attention: H. Richard Lukens, III
with a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166-0193
Telephone: (212) 351-4000
Telecopy: (212) 351-4035
Attention: E. Michael Greaney, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
10.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
10.5 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement.
10.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same Agreement.
10.7 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
10.8 Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and
this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
10.9 Definitions. For purposes of this Agreement:
(a) "beneficially own" or "beneficial ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement,
-10-
<PAGE>
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities beneficially
owned by a Person shall include securities Beneficially Owned by all other
Persons with whom such Person would constitute a "group" as described in
Section 13(d)(3) of the Exchange Act.
(b) "Person" shall mean an individual, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity.
(c) In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"International Shares" shall be deemed to refer to and include the
International Shares as well as all such stock dividends and distributions
and any shares into which or for which any or all of the International Shares
may be changed or exchanged.
10.10 Stockholder Capacity. Notwithstanding anything herein to the
contrary, no person who is a director, officer or employee of an
International Investor who is, or becomes during the term hereof, a director
of the Company makes any agreement or understanding herein in his or her
capacity as such director, and the agreements set forth herein shall in no
way restrict any director in the exercise of his or her fiduciary duties as a
director of the Company. Each International Investor has executed this
Agreement solely in its capacity as the record and/or beneficial holder of
International Shares.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
ARLINGTON LIMITED BALLET LIMITED
By: /s/ By: /s/ H. Richard Lukens III
-------------------------------- ---------------------------------
Name: Martonmere Services Ltd. Name: H. Richard Lukens III
Title: Director Title: Authorized Signatory
CHASE NOMINEES (GUERNSEY) DENARY LIMITED
LIMITED
By: /s/ A. Williams By: /s/ H. Richard Lukens III
-------------------------------- ---------------------------------
Name: A. Williams Name: H. Richard Lukens III
Title: Secretary Title: Authorized Signatory
EQUIPMENT RENTAL LIMITED EQUITY PEA LIMITED
By: /s/ Sydney J. Coleman By: /s/ Sydney J. Coleman
-------------------------------- ---------------------------------
Name: Sydney J. Coleman Name: Sydney J. Coleman
Title: The Director Ltd. Director Title: The Director Ltd. Director
EQUITY PEB LIMITED EQUITY PEC LIMITED
By: /s/ Sydney J. Coleman By: /s/ Sydney J. Coleman
-------------------------------- ---------------------------------
Name: Sydney J. Coleman Name: Sydney J. Coleman
Title: The Director Ltd. Director Title: The Director Ltd. Director
EQUITY PED LIMITED FREEPORT LIMITED
By: /s/ Sydney J. Coleman By: /s/
-------------------------------- ---------------------------------
Name: Sydney J. Coleman Name: Martonmere Services Ltd.
Title: The Director Ltd. Director Title: Director
-12-
<PAGE>
GLEAM LIMITED HIGHLANDS LIMITED
By: /s/ H. Richard Lukens III By: /s/ H. Richard Lukens III
------------------------------ -------------------------------
Name: H. Richard Lukens III Name: H. Richard Lukens III
Title: Authorized Signatory Title: Authorized Signatory
INVESTCORP INVESTMENT EQUITY LAPORTE LIMITED
LIMITED
By: /s/ Sydney J. Coleman By: /s/
------------------------------ --------------------------------
Name: Sydney J. Coleman Name: Martonmere Services Ltd.
Title: The Director Ltd. Director Title: Director
NOBLE LIMITED OUTRIGGER LIMITED
By: /s/ H. Richard Lukens III By: /s/ H. Richard Lukens III
------------------------------ --------------------------------
Name: H. Richard Lukens III Name: H. Richard Lukens III
Title: Authorized Signatory Title: Authorized Signatory
PLANO LIMITED QUILL LIMITED
By: By: /s/ H. Richard Lukens III
------------------------------ --------------------------------
Name: Martonmere Services Ltd. Name: H. Richard Lukens III
Title: Director Title: Authorized Signatory
RADIAL LIMITED SHORELINE LIMITED
By: /s/ H. Richard Lukens III By: /s/ H. Richard Lukens III
------------------------------ ---------------------------------
Name: H. Richard Lukens III Name: H. Richard Lukens III
Title: Authorized Signatory Title: Authorized Signatory
-13-
<PAGE>
RENTAL EQUITY LIMITED PRIME HOLDINGS LIMITED
By: /s/ Ray Iler By: /s/ Rory Mohammed
----------------------------- -------------------------------
Name: Ray Iler Name: Rory Mohammed
Title: Director Title: Alternate Director
PRIME EQUITY LIMITED PE INVESTMENTS LIMITED
By: /s/ Sydney J. Coleman By: /s/ Christopher J. Bowring
----------------------------- -------------------------------
Name: Sydney J. Coleman Name: Christopher J. Bowring
Title: The Director Ltd. Director Title: Director
PE HOLDING LIMITED NEW PRIME INVESTMENTS LIMITED
By: /s/ Michael Pilling By: /s/ Simon James
----------------------------- -------------------------------
Name: Michael Pilling Name: Simon James
Title: Director Title: Director
NEW PRIME EQUITY LIMITED EQUIPMENT INVESTMENTS LIMITED
By: /s/ Jessie Bush By: /s/ Dale Babiuk
----------------------------- -------------------------------
Name: Jessie Bush Name: Dale Babiuk
Title: Director Title: Director
EQUIPMENT HOLDINGS LIMITED EQUIPMENT EQUITY LIMITED
By: /s/ Mark Rutkowski By: /s/ Glen Wigney
----------------------------- -------------------------------
Name: Mark Rutkowski Name: Glen Wigney
Title: Director Title: Director
-14-
<PAGE>
ZINNIA LIMITED RENTAL HOLDINGS LIMITED
By: /s/ H. Richard Lukens III By: /s/ Bruce Stirling
--------------------------- --------------------------
Name: H. Richard Lukens III Name: Bruce Stirling
Title: Authorized Signatory Title: Director
FLEET EQUITY LIMITED ATLAS COPCO NORTH AMERICA INC.
By: /s/ Richard E. Douglas By: /s/ Mark Cohen
--------------------------- --------------------------
Name: Richard E. Douglas Name: Mark Cohen
Title: Director Title: Exec. V.P.
-15-
<PAGE>
Exhibit 99.13
INVESTCORP BANK E.C. GUARANTY
The undersigned, INVESTCORP BANK E.C., a corporation organized under
the laws of Bahrain, hereby guarantees that each of the International Investors
will perform each of their respective obligations and agreements under this
Agreement and the undersigned expressly agrees to be liable in the event any of
the International Investors fails to perform any of their respective
obligations or agreements under this Agreement; provided, however, that this
undertaking and agreement shall terminate immediately following the Effective
Time of the Merger. The undersigned hereby represents and warrants to Parent
and Newco that (i) it has full corporate power and authority to execute and
deliver this Agreement and perform its obligations hereunder, (ii) it has taken
all actions necessary to authorize the execution, delivery and performance of
this Agreement by it, (iii) such execution, delivery and performance do not
conflict with, violate or otherwise result in a default under its Certificate
of Incorporation, By-Laws or other organizational documents, and (iv) this
Agreement is the legal, valid and binding obligation of the undersigned,
enforceable in accordance with its terms.
INVESTCORP BANK E.C.
By: /s/ H. Richard Lukens III
------------------------------
Name: H. Richard Lukens III
Title: Member of the Management Committee
<PAGE>
Exhibit 99.14
ATLAS COPCO AB GUARANTY
The undersigned, ATLAS COPCO AB, a corporation formed and organized
under the laws of the Kingdom of Sweden, hereby undertakes and agrees to cause
Atlas Copco North America Inc. ("Parent") and PS Acquisition Corp. ("Newco") to
perform each of their respective obligations and agreements under the Agreement
and Plan of Merger (the "Merger Agreement"), dated as of June 8, 1997, by and
among Parent, Newco and Prime Service, Inc. (the "Company") and the undersigned
expressly agrees to be liable in the event Parent or Newco fails to perform any
of their respective obligations or agreements under the Merger Agreement;
provided, however, that this undertaking and agreement shall terminate
immediately following the Effective Time of the Merger (as each is defined in
the Merger Agreement). The undersigned hereby represents and warrants to the
Company that (i) it has full corporate power and authority to execute and
deliver this undertaking and perform its obligations hereunder, (ii) it has
taken all actions necessary to authorize the execution, delivery and performance
of this undertaking by it, (iii) such execution, delivery and performance do not
conflict with, violate or otherwise result in a default under its Certificate of
Incorporation, By-laws or other organizational documents, and (iv) this
undertaking is the legal, valid and binding obligation of the undersigned,
enforceable in accordance with its terms, except that (i) such enforcement may
be subject to applicable bankruptcy, insolvency or similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
ATLAS COPCO AB
(public)
By: /s/ Hakan Osvald
---------------------------
Name: Hakan Osvald
Title: Vice President
By: /s/ Mark Cohen
---------------------------
Name: Mark Cohen
Title: Attorney-in-Fact
<PAGE>
Exhibit 99.15
[Prime Letterhead]
CONFIDENTIAL
May 6, 1997
Atlas Copco AB
S-105 23
Stockholm, Sweden
Dear Sirs:
In connection with your consideration of a possible transaction with Prime
Service, Inc. (the "Company") or its shareholders (the majority of the
outstanding shares of the Company being owned or controlled by Investcorp,
S.A., and its affiliates who are represented for purposes of this letter by
Investcorp International, Inc. ("Investcorp")), you have requested certain
information relating to the Company which is either non-public, confidential
or proprietary in nature, including, without limitation, financial,
engineering, technical, legal, title, commercial, environmental, acquisition
and other business planning, budgetary, and other information. Such
information, in whole or in part, together with any analyses, computations,
studies or other documents prepared by you, or your Representatives (as
defined below), which contain or otherwise reflect such information is
hereafter referred to as the "Information."
In consideration of the Company furnishing you with the Information, it is
agreed as follows:
1. The Information will be kept confidential and shall not, except as
otherwise provided in this letter, without the prior written consent of the
Company and Investcorp, be disclosed by you, your affiliated corporations,
representatives, agents, bankers, financial advisors, employees or attorneys,
in any manner whatsoever, in whole or in part, and shall be used by you and
your affiliated corporations, representatives, agents, directors, officers,
affiliates, employees and attorneys (collectively "Representatives") solely
for the purpose of considering a negotiated transaction with the Company and
Investcorp. Moreover, you agree to transmit the Information only to your
Representatives who need to know the Information for purposes of providing
assistance in evaluating the Company, who are informed by you of the
confidential nature of the Information, and who agree to be bound by the
terms of this Agreement. You shall be responsible
<PAGE>
Atlas Copco AB May 6, 1997
to the Company and Investcorp for any breach of this Agreement by any of your
Representatives and agree to take precautions deemed by you to be reasonably
effective, contractual or otherwise, to prevent unauthorized use or
disclosure of the Information.
2. If you determine that you do not wish to proceed with a transaction
with the Company, you will advise the Company and Investcorp promptly. In
the event discussions concerning a possible transaction are terminated by any
party hereto (i) the Information and all copies thereof (except for (x) the
portion of the Information which consists of analyses, compilations, studies
or other documents prepared by you or your Representatives, (y) a copy of
this letter or (z) a log of communications regarding the discussions to be
retained solely for record keeping purposes) will be returned to the Company
promptly upon the Company's request and no copies thereof shall be retained
and (ii) that portion of the Information which consists of analyses,
compilations, studies or other documents prepared by you or your
Representatives will be destroyed. Such destruction will be confirmed in
writing at the Company's request. No such termination of discussions, or
return or destruction of Information, will affect your obligations, or those
of your Representatives, under this Agreement.
3. In the event that you or anyone to whom you transmit the Information
pursuant to this Agreement becomes legally compelled to disclose any of the
Information, you will provide the Company and Investcorp with prompt notice
thereof so that the Company may seek a protective order or other appropriate
remedy. If such a protective order or remedy is not obtained, or should the
Company and Investcorp waive compliance with the provisions of this
Agreement, you will furnish only that portion of the Information which is
legally required and will exercise all reasonable efforts to obtain a
protective order or other reliable assurance that confidential treatment will
be accorded the Information.
4. For a period of two (2) years from the date of this letter, no party
hereto will make any disclosure of the discussions or terms which are the
subject of this Agreement, or the termination thereof, without the prior
written consent of the other parties, except as required by law and on prior
written notice to the other parties hereto. No party will disclose, or allow
any disclosure to persons other than their respective Representatives (and
then only to the extent described in paragraph 1), that: (i) the Information
has been made available to you or your Representatives; (ii) you or your
Representatives have received or inspected any Information; (iii) you or your
Representatives may be considering a possible transaction with the Company,
or any of the terms, conditions or other facts with respect to any such
possible transaction, including the status thereof; or (iv) you or your
Representatives have had, are having or propose to have any discussions or
negotiations with respect thereto.
5. The term "Information" does not include information that:
(a) becomes generally available to the public other than as a result
of a disclosure by you or anyone who receives the Information
directly or indirectly through you;
(b) can be demonstrated by written evidence to have been available to
you on a non-confidential basis prior to its disclosure to you by
the Company; or
2
<PAGE>
Atlas Copco AB May 6, 1997
(c) becomes available to you on a non-confidential basis from a
source, other than the Company, who is not reasonably known to
you to be bound to the Company to keep such information
confidential.
6. The discussion and exchange of Information contemplated hereby shall
neither obligate any party to continue negotiations with the other parties
nor obligate the parties to reach or execute any agreement with respect to
any transaction. Furthermore, except as otherwise expressly provided in this
letter (including, without limitation, in Sections 1, 2, 3, 4, 7, 10, 11 and
12), no party shall incur any liability to any other party by reason of the
discussions, exchange of Information or negotiations had or to be had
hereunder, or the termination thereof.
7. In addition, you hereby acknowledge that you are aware, and that you
will advise your Representatives who receive the Information, that the United
States securities laws prohibit any person who has material, non-public
information concerning the matters which are the subject of this Agreement
from purchasing or selling securities of a company which may be a party to a
transaction of the type contemplated by this Agreement or from communicating
such information to any other person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell such
securities.
8. You understand and acknowledge that neither the Company nor Investcorp
is making any representation or warranty, express or implied, as to the
accuracy or completeness of the Information. Neither the Company, nor
Investcorp, nor any of their respective affiliates, officers, directors,
employees, agents or controlling persons (within the meaning of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) shall have any
liability to you or any other person resulting from your use of the
Information.
9. Neither you nor the Company or Investcorp shall be committed in any way
to proceed with any transaction involving you and the Company, or any matters
related thereto, unless and until a formal agreement with respect thereto is
executed by you and duly authorized officers of the Company.
10. For a period of one year from the date of this letter, you shall not,
directly or indirectly (and you shall cause any person or entity controlled
by you not to), without the prior written consent of the Board of Directors
of the Company: (i) in any manner acquire, agree to acquire or make any
proposal to acquire, directly or indirectly, any securities, assets or
property of the Company or any of its affiliates (except in the ordinary
course of business), (ii) propose to enter into, directly or indirectly, any
merger, consolidation, business combination or other similar transaction
involving the Company or any of its affiliates, (iii) make, or in any way
participate in, any "solicitation" of "proxies" (as such terms are used in
the proxy rules of the Securities and Exchange Commission) to vote, or seek
to advise or influence any person with respect to the voting of any voting
securities of the Company or any of its affiliates, (iv) form, join or in any
way participate in a "group" (within the meaning of Section 13(d)(3) of the
1934 Act) with respect to any voting securities of the Company or any of its
affiliates, (v) otherwise act, alone or in concert with others, to seek to
control or influence the management, Board of Directors or policies of the
Company, (vi) disclose any intention, plan or arrangement inconsistent with
the foregoing, or (vii) advise, assist or encourage or facilitate any other
persons in connection with any of the foregoing.
3
<PAGE>
Atlas Copco AB May 6, 1997
Those of your Representatives whom you have informed of the subject matter of
this Agreement shall not, after having been so informed, engage in any of the
actions or conduct prohibited by this Section 10. You also agree during such
period that you and your Representatives will not directly or indirectly take
any action (including a publicly disclosed request that the Company (or its
representatives) amend or waive any provision of this paragraph) which might
require the Company or any of its affiliates to make a public announcement
regarding the possibility of a merger, consolidation, business combination or
other similar transaction.
11. You also agree that, without the prior written consent of the Company
and Investcorp, you will not for a period of two years from the date of this
letter, directly or indirectly, (i) solicit for employment or employ any
executive officer of the Company, (ii) solicit for employment or employ any
other person who is now employed by the Company or any of its subsidiaries
and who is identified by you as a result of your evaluation or otherwise in
connection with a possible transaction with the Company provided, however,
that you shall not be prohibited from employing any such person who contacts
you on his or her own initiative and without any direct or indirect
solicitation by you, or (iii) initiate or maintain contact (except for those
contacts made in the ordinary course of business) with any officer, director
or employee of the Company regarding the business, operations, prospects or
finances of the Company. Unless otherwise agreed to by the Company and
Investcorp in writing, all communications regarding any possible transaction,
any request for additional information or any request for facility tours or
management meetings shall be submitted to the Company through agents
specifically designated by the Company and Investcorp for such purposes.
12. You agree that the Company and Investcorp, or either of them, shall be
entitled to equitable relief, including injunction and specific performance,
in the event of any breach of the provisions of this Confidentiality
Agreement, in addition to all other remedies available to the Company or
Investcorp at law or in equity. You also hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction of the courts
of the State of New York and of the United States of America located in the
City of New York for any actions, suits or proceedings arising out of or
relating to this Confidentiality Agreement and the transactions contemplated
hereby and you agree not to commence any action, suit or proceedings relating
thereto except in such courts.
4
<PAGE>
Atlas Copco AB May 6, 1997
If the terms of this letter are acceptable to you, please indicate your
agreement thereto by signing the enclosed copy of this letter at the place
indicated below and returning the original to us by overnight delivery and
facsimile.
Very truly yours,
PRIME SERVICE, INC. INVESTCORP INTERNATIONAL, INC.
By: /s/ Thomas E. Bennett By: /s/ Christopher J. O'Brien
------------------------- ---------------------------
Thomas E. Bennett
President and CEO
Agreed to by:
ATLAS COPCO AB
By: /s/
----------------------------
Title:
----------------------------
5
<PAGE>
Exhibit 99.16
[LOGO]
[LOGO]
June 8, 1997
Board of Directors
Prime Service, Inc.
16225 Park Ten Place
Suite 200
Houston, TX 77084
Gentlemen:
You have asked us to advise you with respect to the fairness, from a financial
point of view, of the consideration to be received by the stockholders of Prime
Service, Inc., a Delaware corporation (the "Company"), pursuant to the terms of
the Agreement and Plan of Merger, dated as of June 8, 1997 (the "Merger
Agreement"), by and among Atlas Copco North America Inc., a Delaware corporation
("Parent"), PS Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Newco"), and the Company. The Merger Agreement provides
for Newco to make a tender offer for all of the outstanding shares of common
stock, par value $0.01 per share, of the Company (the "Company Common Stock") at
$32.00 per share net to the seller in cash (the "Offer"). The Offer will be
followed by the merger (the "Merger") of Newco with and into the Company
pursuant to which the Company will become a wholly owned subsidiary of Parent,
and each outstanding share of Company Common Stock (other than shares of Company
Common Stock owned by the Company, any subsidiary of the Company, Parent, Newco
or any other subsidiary of Parent and other than shares of Company Common Stock
as to which dissenters' rights of appraisal are perfected) will be converted
into the right to receive $32.00 in cash.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as the Merger
Agreement. We have also reviewed certain other information, including financial
forecasts, provided to us by the Company and have met with the Company's
management to discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the Company,
and we have compared those data with similar data for other publicly held
companies in businesses similar to those of the Company, and we have considered
the financial terms of certain other business combinations and other
transactions which have recently been effected. We also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria which we deemed relevant.
<PAGE>
Board of
Directors
[LOGO]
June 8, 1997
Page 2
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company. In
addition, we have not been requested to make and have not made an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company, nor have we been furnished with any such evaluations or
appraisals. Our opinion is necessarily based upon financial, economic, market
and other conditions as they exist and can be evaluated on the date hereof. We
were not requested to and did not solicit third party indications of interest in
acquiring all or any part of the Company.
We have acted as financial advisor to the Board of Directors of the Company in
connection with the Offer and the Merger and will receive a fee for our
services, a significant portion of which is contingent upon the consummation of
the Offer.
In the ordinary course of our business, Credit Suisse First Boston Corporation
and its affiliates may actively trade the securities of both Parent and the
Company for their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
In addition we have in the past provided certain financial advisory and
investment banking services to the Company and Parent, for which services we
have received compensation.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its consideration of the Offer and
the Merger, does not constitute a recommendation to any stockholder whether or
not such stockholder should tender shares pursuant to the Offer and is not to be
quoted or referred to, in whole or in part, in any registration statement,
prospectus or proxy statement, or in any other document used in connection with
the offering or sale of securities, nor shall this letter be used for any other
purposes, without Credit Suisse First Boston Corporation's prior written
consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be received by the stockholders of the Company in
the Offer and the Merger is fair to such stockholders from a financial point of
view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
<PAGE>
EXHIBIT 99.17
PRIME SERVICE, INC.
16225 PARK TEN PLACE, SUITE 200
HOUSTON, TEXAS 77084
[LOGO]
June 9, 1997
To Our Stockholders:
On behalf of the Board of Directors of Prime Service, Inc., a Delaware
corporation (the "Company"), we are pleased to inform you that on June 8, 1997,
the Company entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Atlas Copco North America Inc. (the "Parent") and its wholly-
owned subsidiary, PS Acquisition Corp. (the "Purchaser"). Pursuant to the Merger
Agreement, Purchaser has today commenced a cash tender offer (the "Offer") to
purchase all of the outstanding shares (the "Shares") of the common stock of the
Company at $32.00 per Share, net to the seller in cash, subject to the terms and
conditions in the Offer to Purchase accompanying this letter.
Subject to certain conditions specified in the Merger Agreement, the Offer
will be followed by a merger (the "Merger") in which any Shares not tendered
pursuant to the Offer (except for any Shares as to which the holder has properly
exercised dissenter's rights of appraisal) will be converted into the right to
receive $32.00 in cash, without interest. In addition, certain stockholders of
the Company have entered into a Stockholder Agreement pursuant to which the
stockholder parties thereto have agreed to tender all of the Shares owned by
such parties (representing approximately 74% of the Shares) pursuant to the
terms of the Offer.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE OFFER AND MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND HAS APPROVED
THE OFFER AND MERGER. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF
THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached Schedule 14D-9 that is
being filed today with the Securities and Exchange Commission, including the
opinion of Credit Suisse First Boston Corporation, the Company's financial
advisor, relating to the fairness from a financial point of view of the
consideration to be received by the stockholders in the Offer and the Merger.
In addition to the attached Schedule 14D-9, also enclosed is the Offer to
Purchase dated June 9, 1997, together with related materials, including a Letter
of Transmittal, to be used for tendering your Shares in the Offer. These
documents state the terms and conditions of the Offer and the Merger and provide
instructions as to how to tender your Shares. WE URGE YOU TO READ THESE
DOCUMENTS CAREFULLY IN MAKING YOUR DECISION WITH RESPECT TO TENDERING YOUR
SHARES PURSUANT TO THE OFFER.
On behalf of the Board of Directors,
/s/ Thomas E. Bennett
Thomas E. Bennett
Chairman of the Board, President and
Chief Executive Officer
