<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
-----------------
PRIME SERVICE, INC.
(NAME OF SUBJECT COMPANY)
-------------------
PS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ATLAS COPCO NORTH AMERICA INC.
(BIDDERS)
-------------------
COMMON STOCK, $.01 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
-------------------
00074157E1
(CUSIP NUMBER OF CLASS OF SECURITIES)
-------------------
MR. MARK COHEN
ATLAS COPCO NORTH AMERICA INC.
1211 HAMBURG TURNPIKE, SUITE 214
WAYNE, NEW JERSEY 07470
(Name, address and telephone number of persons authorized to
receive notices and communications on behalf of bidders)
COPY TO
WINTHROP, STIMSON, PUTNAM & ROBERTS
ONE BATTERY PARK PLAZA
NEW YORK, NEW YORK 10004-1490
(212) 858-1000
ATTENTION: STEPHEN R. RUSMISEL, ESQ.
-------------------
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
<S> <C>
- --------------------------------------------------------------------------------
$915,310,496.00 $183,062.10
</TABLE>
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- --------------------------------------------------------------------------------
* For the purpose of calculating the fee only, this amount assumes the
purchase of 28,603,453 shares of Common Stock of Prime Service, Inc. at
$32.00 per share. Such number of shares includes all outstanding shares as
of June 6, 1997, and assumes the exercise of all stock options to purchase
shares of common stock issued by Prime Service, Inc. which were outstanding
as of June 6, 1997.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
AMOUNT PREVIOUSLY PAID: FILING PARTY:
FORM OR REGISTRATION NO.: DATE FILED:
</TABLE>
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<PAGE>
14D-1
CUSIP NO. 00074157E1
<TABLE>
<S> <C> <C>
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PS Acquisition Corp.
I.R.S. Employer Identification Number--Application Pending
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED / /
PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
20,722,116 Shares which may be deemed to be beneficially owned as a result
of the Stockholder Agreement described herein
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT ON ROW (7)
74.0%
10 TYPE OF REPORTING PERSON
CO
</TABLE>
2
<PAGE>
14D-1
CUSIP NO. 00074157E1
<TABLE>
<S> <C> <C>
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Atlas Copco North America Inc.
I.R.S. Employer Identification Number 22-1669012
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED / /
PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
20,722,116 Shares which may be deemed to be beneficially owned as a result
of the Stockholder Agreement described herein
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT ON ROW (7)
74.0%
10 TYPE OF REPORTING PERSON
CO
</TABLE>
3
<PAGE>
This Statement relates to a tender offer by PS Acquisition Corp., a Delaware
corporation (the "Offeror") and a wholly owned subsidiary of Atlas Copco North
America Inc., a Delaware corporation (the "Parent"), to purchase all outstanding
shares of common stock, par value $.01 per share, of Prime Service, Inc., a
Delaware corporation (the "Company"), (collectively, the "Shares"), at a
purchase price of $32.00 per Share, net to the seller in cash, without interest
thereon, upon 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 constitute the "Offer"), copies of which
are filed as Exhibits (a)(1) and (a)(2) hereof, respectively, and which are
incorporated herein by reference.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Prime Service, Inc. The address of
the principal executive offices of the Company is set forth in Section 8
("Certain Information Concerning the Company") of the Offer to Purchase and is
incorporated herein by reference.
(b) The exact title of the class of equity securities being sought in the
Offer is the common stock, par value $.01 per share, of the Company. The
information set forth in the Introduction to the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) through (d), (g): The information set forth in the Introduction and
Section 9 ("Certain Information Concerning Parent and the Offeror") of the Offer
to Purchase, and in Annex I thereto, is incorporated herein by reference.
(e) and (f): Neither the Offeror nor the Parent nor, to the best of their
knowledge, any of the persons listed in Annex I of the Offer to Purchase, has
during the last five years (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 9 ("Certain Information Concerning
Parent and the Offeror") of the Offer to Purchase is incorporated herein by
reference.
(b) The information set forth in the Introduction and Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations with the
Company") of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b): The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
4
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) through (e): The information set forth in the Introduction, Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations with the
Company"), Section 12 ("Purpose of the Offer and the Merger; Plans for the
Company") and Section 13 ("The Transaction Documents") of the Offer to Purchase
is incorporated herein by reference.
(f) and (g): The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b): The information set forth in the Introduction, Section 9
("Certain Information Concerning Parent and the Offeror") and Section 13 ("The
Transaction Documents") of the Offer to Purchase is incorporated herein by
reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 11 ("Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company") and
Section 13 ("The Transaction Documents") of the Offer to Purchase is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and in Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning
Parent and the Offeror") of the Offer to Purchase is incorporated herein by
reference.
The incorporation by reference herein of the above-mentioned financial
information does not constitute an admission that such information is material
to a decision by a security holder of the Company as whether to sell, tender or
hold Shares being sought in the Offer.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Introduction, Section 9 ("Certain
Information Concerning Parent and the Offeror") Section 11 ("Background of the
Offer; Past Contacts, Transactions or Negotiations with the Company") and
Section 13 ("The Transaction Documents") of the Offer to Purchase is
incorporated herein by reference.
(b) and (c) The information set forth in Section 16 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference in its entirety.
5
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1)Offer to Purchase, dated June 9, 1997.
(a)(2)Letter of Transmittal.
(a)(3)Letter from Merrill Lynch & Co., as Dealer Manager, to Brokers,
Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(4)Letter from Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees to Clients.
(a)(5)Notice of Guaranteed Delivery.
(a)(6)Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7)Summary Announcement, dated June 9, 1997.
(a)(8)Press Release issued by the Parent and the Company on June 9, 1997.
(b)(1)Commitment Letter, dated June 8, 1997, between Atlas Copco AB and
Merrill Lynch Capital Corporation.
(c)(1)Agreement and Plan of Merger, dated as of June 8, 1997, among Parent,
the Offeror and the Company.
(c)(2)Stockholder Agreement, dated June 8, 1997, by and among Parent and
certain affiliates and clients of Investcorp S.A. (the "International
Investors").
(c)(3)Atlas Copco AB Guaranty, dated June 8, 1997.
(c)(4)Investcorp Bank E.C. Guaranty, dated June 8, 1997.
(c)(5)Confidentiality Agreement, dated as of May 6, 1997, among Atlas Copco
AB and the Company is incorporated by reference to the Schedule 14D-9 of
Prime Service, Inc. filed on June 9, 1997.
(d) None.
(e) Not applicable.
(f) None.
(g) Atlas Copco North America Inc. Consolidated Financial Statements as of
and for the years ended December 31, 1996 and 1995.
6
<PAGE>
SIGNATURE
After due 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.
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
Dated: June 9, 1997
7
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PRIME SERVICE, INC.
AT
$32.00 NET PER SHARE
BY
PS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ATLAS COPCO NORTH AMERICA INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, JULY 7, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
TWENTY-MILLION (20,000,000) SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF
THE COMPANY, (COLLECTIVELY, THE "SHARES"), (II) ANY WAITING PERIOD UNDER THE HSR
ACT (AS DEFINED HEREIN) APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE
OFFER HAVING EXPIRED OR HAVING BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE
OFFER AND (III) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE
SECTION 15.
THIS OFFER (THE "OFFER") IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND
PLAN OF MERGER, DATED AS OF JUNE 8, 1997 (THE "MERGER AGREEMENT"), AMONG ATLAS
COPCO NORTH AMERICA INC., PS ACQUISITION CORP., AND PRIME SERVICE, INC. (THE
"COMPANY"). THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
OFFER, THE MERGER (AS DEFINED HEREIN) AND THE MERGER AGREEMENT (AS DEFINED
HEREIN), HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE COMPANY AND THE COMPANY'S STOCKHOLDERS AND RECOMMENDS
THAT HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO
THE OFFER.
------------------------
IMPORTANT
Any stockholder of the Company desiring to tender Shares should either (i)
complete and sign the Letter of Transmittal or a facsimile thereof in accordance
with the instructions in the Letter of Transmittal and deliver the Letter of
Transmittal with the Shares and all other required documents to the Depositary
(as defined herein) or follow the procedure for book entry transfer set forth in
Section 3 or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for the stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such person if they
desire to tender their Shares.
Any stockholder of the Company who desires to tender Shares and whose
certificates representing such Shares are not immediately available or who
cannot comply with the procedures for book entry transfer on a timely basis or
who cannot deliver all required documents to the Depositary, in each case prior
to the expiration of the Offer, must tender such Shares pursuant to the
guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance may be directed to Merrill Lynch,
Pierce, Fenner & Smith Incorporated, the Dealer Manager, or to Georgeson &
Company Inc., the Information Agent, at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional copies
of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and other related materials may be obtained from the Information Agent
or from brokers, dealers, commercial banks and trust companies.
------------------------
The Dealer Manager for the Offer is:
MERRILL LYNCH & CO.
June 9, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Introduction............................................................................................... 1
1. Terms of the Offer..................................................................................... 2
2. Acceptance for Payment and Payment for Shares.......................................................... 4
3. Procedure for Tendering Shares......................................................................... 5
4. Withdrawal Rights...................................................................................... 7
5. Certain Federal Income Tax Consequences................................................................ 8
6. Price Range of Shares; Dividends....................................................................... 9
7. Certain Effects of the Transaction..................................................................... 10
8. Certain Information Concerning the Company............................................................. 11
9. Certain Information Concerning Parent and the Offeror.................................................. 13
10. Source and Amount of Funds............................................................................. 15
11. Background of the Offer; Past Contacts, Transactions or Negotiations with the Company.................. 16
12. Purpose of the Offer and the Merger; Plans for the Company............................................. 17
13. The Transaction Documents.............................................................................. 19
14. Dividends and Distributions............................................................................ 28
15. Certain Conditions to the Offeror's Obligations........................................................ 29
16. Certain Legal Matters.................................................................................. 30
17. Fees and Expenses...................................................................................... 33
18. Miscellaneous.......................................................................................... 34
Annex I. Certain Information Concerning the Directors and Executive Officers of
Parent and the Offeror................................................................................... I-1
</TABLE>
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF PRIME SERVICE, INC.:
INTRODUCTION
PS Acquisition Corp., a Delaware corporation (the "Offeror") and a wholly
owned subsidiary of Atlas Copco North America Inc., a Delaware corporation
("Parent"), hereby offers to purchase all outstanding shares of Common Stock,
$.01 par value per share, of Prime Service, Inc., a Delaware corporation (the
"Company"), (collectively, the "Shares"), at a purchase price of $32.00 per
Share, net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in this Offer to Purchase and in the related Letter
of Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer"). Tendering holders of Shares will
not be obligated to pay brokerage fees or commissions or, except as set forth in
the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the
Offeror pursuant to the Offer. The Offeror will pay all charges and expenses of
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Dealer Manager" or
"Merrill Lynch"), The Bank of New York (the "Depositary") and Georgeson &
Company Inc. (the "Information Agent") in connection with the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER (AS DEFINED HEREIN) AND THE MERGER AGREEMENT (AS DEFINED HEREIN), HAS
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS
OF, THE COMPANY AND THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT HOLDERS OF
THE SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Company has advised the Offeror that Credit Suisse First Boston
Corporation ("First Boston"), the Company's financial advisor, has delivered to
the Company's Board of Directors its written opinion that, as of the date of the
Merger Agreement, the consideration to be offered to the Company's stockholders
pursuant to the Offer and the Merger is fair to such stockholders from a
financial point of view. A copy of such opinion is set forth in full in the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 which is being
mailed to the Company's stockholders with this Offer to Purchase, and such
stockholders are urged to read the opinion in its entirety.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST TWENTY
MILLION (20,000,000) SHARES (THE "MINIMUM CONDITION"), (II) ANY WAITING PERIOD
UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE
"HSR ACT"), APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING
EXPIRED OR HAVING BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER AND (III)
THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 15.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of June 8, 1997 (the "Merger Agreement"), among Parent, the Offeror and the
Company. The Merger Agreement provides that, among other things, after the
purchase of Shares pursuant to the Offer and the satisfaction of the other
conditions set forth in the Merger Agreement and in accordance with the relevant
provisions of the General Corporation Law of the State of Delaware, as amended
(the "DGCL"), the Offeror will be merged with and into the Company (the
"Merger"). If the Offeror acquires at least 90% of the outstanding Shares
pursuant to the Offer, the Offeror would be able to effect the Merger pursuant
to the "short form" merger provisions of Section 253 of the DGCL, without prior
notice to, or any action by, any stockholder of the Company. See Section 12.
Following consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will be a wholly owned subsidiary
of Parent. At the effective time of the Merger (the "Effective Time"), each
Share that is issued and outstanding (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) will be canceled and become the right to
receive from the Surviving Corporation $32.00 (or any higher price that may be
paid for each Share pursuant to the Offer) in cash, without interest thereon
(the "Offer Price"). See Section 5 for a description of certain tax consequences
of the Offer and the Merger.
<PAGE>
The Merger Agreement provides that, promptly after the acquisition by the
Offeror of such number of Shares constituting a majority of the outstanding
Shares pursuant to the Offer, Parent will be entitled, to the fullest extent
permitted by law, to designate at its option a majority of the members of the
Board of Directors of the Company. The Company has agreed, at the option of
Parent, either to increase the size of the Board of Directors of the Company
and/or obtain the resignation of such number of directors as is necessary to
enable Parent's designees to be elected or appointed to the Board, and to take
all action necessary to effect any such election. The Merger Agreement is more
fully described in Section 13.
In connection with the execution and delivery of the Merger Agreement,
Parent and certain affiliates and clients of Investcorp S.A., a Luxembourg
corporation (collectively, the "International Investors"), have entered into the
Stockholder Agreement, dated as of June 8, 1997 (the "Stockholder Agreement"),
pursuant to which the International Investors have agreed, among other things,
to tender their respective Shares (collectively, the "International Investor
Shares") to the Offeror in connection with the Offer, constituting an aggregate
of approximately 74.0% of the outstanding Shares. Subject to the terms and
conditions of the Stockholder Agreement, the International Investors have agreed
to vote, and have appointed Parent and its officers, Mr. Mark Cohen and Mr.
Sixten Nordmark, as their irrevocable proxies to vote, the International
Investor Shares in favor of the Merger and of certain related actions and
against certain other enumerated actions or agreements. Subject to the terms and
conditions of the Stockholder Agreement, the International Investors have agreed
to refrain from soliciting or responding to certain inquiries or proposals
regarding the Company, to comply with certain restrictions upon the transfer of
the International Investor Shares, to waive any rights of appraisal available in
the Merger and to take or refrain from taking certain other actions.
The Stockholder Agreement also provides that, under certain circumstances,
if any of the International Investors receives any consideration in excess of
$32.00 in respect of all or any portion of the International Investor Shares
from Parent, the Offeror or any of their affiliates or, following a termination
of the Merger Agreement, from a third party in connection with a Third Party
Business Combination (as defined below), Parent will be entitled to all or a
portion of such consideration, to the extent in excess of $32.00 and less than
or equal to $36.00. The Stockholder Agreement is more fully described in Section
13.
The Company has advised the Offeror that as of June 6, 1997, there were
27,991,721 Shares issued and outstanding, and as of the date of the Merger
Agreement there were outstanding stock options and rights to purchase not in
excess of 611,732 Shares. As of the date hereof, (i) neither the Offeror nor
Parent beneficially owns any Shares and (ii) the International Investors
beneficially own in the aggregate 20,722,116 Shares, constituting approximately
74.0% of the outstanding Shares. If the Offeror acquires at least 14,301,727
Shares in the Offer, it will control a majority of the outstanding Shares
(assuming the exercise of all options to purchase Shares outstanding at the
expiration date of the Offer). Accordingly, the Offeror would have sufficient
voting power to approve the Merger without the affirmative vote of any other
stockholder of the Company.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Offeror will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4. 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, 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.
2
<PAGE>
If the Offeror shall decide, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and if, at the time that
notice of such increase is first published, sent or given to holders of Shares
in the manner specified below, the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that such notice is first so published, sent or given,
then the Offer will be extended until the expiration of such period of 10
business days. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or a federal holiday and consists of the time period
from 12:01 a.m. through 12:00 Midnight, New York City time.
THE OFFER IS CONDITIONED UPON THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN
PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST TWENTY MILLION (20,000,000)
SHARES, ANY WAITING PERIOD UNDER THE HSR ACT APPLICABLE TO THE PURCHASE OF
SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR HAVING BEEN TERMINATED PRIOR TO
THE EXPIRATION OF THE OFFER AND CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION
15. THE MERGER AGREEMENT AND THE OFFER MAY BE TERMINATED BY THE OFFEROR AND
PARENT IF CERTAIN EVENTS OCCUR. The Offeror reserves the right (but shall not be
obligated), in accordance with applicable rules and regulations of the United
States Securities and Exchange Commission (the "Commission"), subject to the
limitations set forth in the Merger Agreement and described below, to waive any
condition to the Offer. If the Minimum Condition or any condition set forth in
Section 15 has not been satisfied by 12:00 Midnight, New York City time, on
Monday, July 7, 1997 (or any other time then set as the Expiration Date), the
Offeror may, subject to the terms of the Merger Agreement as described below,
elect to (1) extend the Offer and, subject to applicable withdrawal rights,
retain all tendered Shares until the expiration of the Offer, as extended, (2)
subject to complying with applicable rules and regulations of the Commission,
accept for payment all Shares so tendered and not extend the Offer or (3)
terminate the Offer and not accept for payment any Shares and return all
tendered Shares to tendering stockholders.
Under the terms of the Merger Agreement, the Offeror may not (except as
described in the next sentence), without the consent of the Company, decrease
the Offer Price, change the form of consideration to be paid pursuant to the
Offer, decrease the number of Shares being sought pursuant to the Offer, amend
or modify any of the conditions to the Offer, impose any additional conditions
to the Offer, extend the Offer, if all of the Offer conditions have been
satisfied or waived, or 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 of the Offer, any of the conditions shall
not have been satisfied, (ii) for any period required by applicable law,
including, without limitation, any rule, regulation, interpretation or position
of 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
transferred and not withdrawn is less than 90% of the then outstanding Shares,
for an aggregate period of not more than five business days 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 that have
been satisfied as of such date shall be deemed irrevocably waived by Parent and
the Offeror.
Subject to the limitations set forth in this Offer and the Merger Agreement,
the Offeror reserves the right (but will not be obligated), at any time or from
time to time in its sole discretion, to extend the period during which the Offer
is open by giving oral or written notice of such extension to the Depositary and
by making a public announcement of such extension. Except to the extent required
by the Merger Agreement, there can be no assurance that the Offeror will
exercise its right to extend the Offer. See Section 13.
Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, the Offeror
expressly reserves the right, at any time and from time to time, in its sole
discretion, (i) to delay payment for any Shares regardless of whether such
Shares were theretofore accepted for payment, or to terminate the Offer and not
to accept for payment or pay for any Shares not theretofore accepted for payment
or paid for, upon the occurrence of any of the conditions set
3
<PAGE>
forth in Section 15, by giving oral or written notice of such delay or
termination to the Depositary, and (ii) at any time or from time to time, to
amend the Offer in any respect (subject to the provisions of the Merger
Agreement). The Offeror's right to delay payment for any Shares or not to pay
for any Shares theretofore accepted for payment is subject to the applicable
rules and regulations of the Commission, including Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating to
the Offeror's obligation to pay for or return tendered Shares promptly after the
termination or withdrawal of the Offer.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, termination or amendment of the Offer will be
followed, as promptly as practicable, by public announcement thereof, such
announcement in the case of an extension to be issued not later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of Rules
14d-4(c) and 14e-1(d) under the Exchange Act. Without limiting the obligation of
the Offeror under such rule or the manner in which the Offeror may choose to
make any public announcement, the Offeror currently intends to make
announcements by issuing a press release to the Dow Jones News Service and
making any appropriate filing with the Commission.
If, subject to the terms of the Merger Agreement, the Offeror makes a
material change in the terms of the Offer or the information concerning the
Offer, or if it waives a material condition of the Offer, the Offeror will
disseminate additional tender offer materials and extend the Offer if and to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act or
otherwise. The minimum period during which a tender offer must remain open
following material changes in the terms of the Offer or the information
concerning the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the terms or information changes. With respect to a
change in price or a change in percentage of securities sought, a minimum 10
business day period is generally required to allow for adequate dissemination to
stockholders and investor response.
The Company has provided the Offeror with the Company's list of stockholders
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Offeror will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 promptly after the later to occur of (a) the
Expiration Date and (b) the satisfaction or waiver of the conditions set forth
in Section 15 related to regulatory matters. Subject to compliance with Rule
14e-1(c) under the Exchange Act and any other applicable rules of the
Commission, the Offeror expressly reserves the right to delay acceptance for
payment and payment for Shares in order to comply in whole or in part with any
applicable law. See Sections 1 and 16. In all cases, payment for Shares tendered
and accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Shares or timely
confirmation (a "Book Entry Confirmation") of a book entry transfer of such
Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (collectively, the "Book Entry Transfer
Facilities"), pursuant to the procedures set forth in Section 3, (ii) a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with all required signature guarantees or, in
4
<PAGE>
the case of a book entry transfer, an Agent's Message (as defined below) and
(iii) any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book Entry Confirmation, which states that such Book Entry Transfer Facility has
received an express acknowledgment from the participant in such Book Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Offeror may enforce such agreement against the participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Offeror gives oral or written notice to the Depositary of the
Offeror's acceptance of such Shares for payment pursuant to the Offer. In all
cases, payment for Shares purchased pursuant to the Offer will be made by
deposit of the purchase price with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Offeror and
transmitting such payment to tendering stockholders. If, for any reason
whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer
is delayed, or the Offeror is unable to accept for payment Shares tendered
pursuant to the Offer, then, without prejudice to the Offeror's rights under
Section 1, the Depositary may, nevertheless, on behalf of the Offeror, retain
tendered Shares, and such Shares may not be withdrawn, except to the extent that
the tendering stockholders are entitled to withdrawal rights as described in
Section 4 below and as otherwise required by Rule 14e-1(c) under the Exchange
Act. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE OFFEROR BECAUSE OF ANY
DELAY IN MAKING ANY PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased or untendered
Shares will be returned, without expense to the tendering stockholder (or, in
the case of Shares delivered by book entry transfer to a Book Entry Transfer
Facility, such Shares will be credited to an account maintained within such Book
Entry Transfer Facility), as promptly as practicable after the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Offeror increases the price being paid
for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all stockholders whose Shares are purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDERS. For Shares to be validly tendered pursuant to the Offer,
either a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof), with any required signature guarantees, or,
in the case of a book entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date or the
tendering stockholder must comply with the guaranteed delivery procedure set
forth below. In addition, either (i) certificates representing such Shares must
be received by the Depositary along with the Letter of Transmittal or such
Shares must be tendered pursuant to the procedure for book entry transfer set
forth below, and a Book Entry Confirmation must be received by the Depositary,
in each case prior to the Expiration Date, or (ii) the guaranteed delivery
procedures set forth below must be complied with. No alternative, conditional or
contingent tenders will be accepted. DELIVERY OF DOCUMENTS TO A BOOK ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
BOOK ENTRY TRANSFER. The Depositary will make a request to establish an
account with respect to the Shares at each Book Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book Entry
Transfer
5
<PAGE>
Facility's system may make book entry delivery of Shares by causing a Book Entry
Transfer Facility to transfer such Shares into the Depositary's account at a
Book Entry Transfer Facility in accordance with such Book Entry Transfer
Facility's procedures for transfer. Although delivery of Shares may be effected
through book entry at a Book Entry Transfer Facility prior to the Expiration
Date, (i) the Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message in connection with a book entry transfer, and any other
required documents, must, in any case, be transmitted to and received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase or (ii) the guaranteed delivery procedures described below must be
complied with.
SIGNATURE GUARANTEE. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program, the Stock Exchange Medallion Program, or by any other bank, broker,
dealer, credit union, savings association or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Exchange Act (each of the foregoing being referred to as an "Eligible
Institution" and, collectively, as "Eligible Institutions"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Delivery Instructions" or the box
labeled "Special Payment Instructions" on the Letter of Transmittal or (ii) for
the account of any Eligible Institution. If the certificates evidencing Shares
are registered in the name of a person or persons other than the signer of the
Letter of Transmittal, or if payment is to be made, or delivered to, or
certificates for unpurchased Shares are to be issued or returned to, a person
other than the registered owner or owners, then the tendered certificates must
be endorsed or accompanied by duly executed stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates, with the signatures on the certificates or stock powers guaranteed
by an Eligible Institution as provided in the Letter of Transmittal. See
Instructions 1 and 5 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all of
the following guaranteed delivery procedures are duly complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Offeror, is
received by the Depositary, as provided below, prior to the Expiration Date;
and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a book
entry transfer, an Agent's Message, and any other documents required by the
Letter of Transmittal are received by the Depositary within three trading
days after the date of such Notice of Guaranteed Delivery. The term "trading
day" is any day on which the New York Stock Exchange ("NYSE") is open for
business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Depositary and must include a guarantee by
an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
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<PAGE>
THE CASE OF A BOOK ENTRY TRANSFER, BY BOOK ENTRY CONFIRMATION). IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book Entry
Confirmation, (ii) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with all required signature guarantees
or, in the case of a book entry transfer, an Agent's Message, and (iii) any
other documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates for
Shares or Book Entry Confirmations with respect to Shares are actually received
by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE
PRICE OF THE SHARES TO BE PAID BY THE OFFEROR, REGARDLESS OF ANY EXTENSION OF
THE OFFER OR ANY DELAY IN MAKING ANY PAYMENT.
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT 31% "BACKUP" FEDERAL
INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE OF SHARES
PURCHASED PURSUANT TO THE OFFER, EACH STOCKHOLDER MUST, SUBJECT TO CERTAIN
EXCEPTIONS, PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER ("TIN") AND CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT
TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL. FOREIGN HOLDERS MUST GENERALLY SUBMIT A
COMPLETED FORM W-8 TO AVOID 31% BACKUP WITHHOLDING. THIS FORM MAY BE OBTAINED
FROM THE DEPOSITARY. SEE INSTRUCTIONS 8 AND 9 SET FORTH IN THE LETTER OF
TRANSMITTAL.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Offeror, in its sole
discretion, and its determination will be final and binding on all parties. The
Offeror reserves the absolute right to reject any or all tenders of any Shares
that are determined by it not to be in proper form or the acceptance of or
payment for which may, in the opinion of the Offeror, be unlawful. The Offeror
also reserves the absolute right to waive any of the conditions of the Offer,
subject to the limitations set forth in the Merger Agreement, or any defect or
irregularity in the tender of any Shares. The Offeror's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
Instructions to the Letter of Transmittal) will be final and binding on all
parties. No tender of Shares will be deemed to have been validly made until all
defects and irregularities have been cured or waived. None of the Offeror,
Parent, the Dealer Manager, the Depositary, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth
above (including through delivery of an Agent's Message), a tendering
stockholder irrevocably appoints designees of the Offeror as such stockholder's
attorneys in fact and proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's right with respect to the Shares tendered by such stockholder and
accepted for payment by the Offeror (and any and all other Shares or other
securities issued or issuable in respect of such Shares). All such powers of
attorney and proxies shall be considered coupled with an interest in the
tendered Shares. This appointment is effective when, and only to the extent
that, the Offeror accepts for payment the Shares deposited with the Depositary.
Upon acceptance for payment, all prior powers of attorney and proxies given by
the stockholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent proxies may be given or
written consent executed (and, if given or executed, will not be deemed
effective). The designees of the Offeror will, with respect to the Shares and
other securities or rights, be empowered to exercise all voting and other rights
of such stockholder as they in their sole judgment deem proper in respect of any
annual or special meeting of the Company's stockholders, or any adjournment or
postponement thereof, any actions by written consent in lieu of any such meeting
or otherwise. The Offeror reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon the
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<PAGE>
Offeror's payment for such Shares, the Offeror must be able to exercise full
voting and other rights with respect to such Shares and the other securities or
rights issued or issuable in respect of such Shares, including voting at any
meeting of stockholders (whether annual or special or whether or not adjourned)
in respect of such Shares.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that (i) such stockholder has the full power and authority to
tender, sell, assign and transfer the tendered Shares (and any and all other
Shares or other securities issued or issuable in respect of such Shares), and
(ii) when the same are accepted for payment by the Offeror, the Offeror will
acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims.
The Offeror's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering stockholder and the
Offeror upon the terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time
after August 7, 1997. If purchase of or payment for Shares is delayed for any
reason or if the Offeror is unable to purchase or pay for Shares for any reason,
then, without prejudice to the Offeror's rights under the Offer, tendered Shares
may be retained by the Depositary on behalf of the Offeror and may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as set forth in this Section 4, subject to Rule 14e-1(c) under
the Exchange Act, which provides that no person who makes a tender offer shall
fail to pay the consideration offered or return the securities deposited by or
on behalf of security holders promptly after the termination or withdrawal of
the Offer.
For a withdrawal of Shares tendered pursuant to the Offer to be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal must
be timely received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase. Any notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name in which the certificates representing such Shares
are registered, if different from that of the person who tendered the Shares. If
certificates for Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book entry transfer set forth in Section 3, any notice of withdrawal must
also specify the name and number of the account at the Book Entry Transfer
Facility to be credited with the withdrawn Shares and must otherwise comply with
such Book Entry Transfer Facility's procedures. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be determined
by the Offeror, in its sole discretion, and its determination will be final and
binding on all parties. None of the Offeror, Parent, the Dealer Manager, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be re-tendered at any subsequent time prior to
the Expiration Date by following any of the procedures described in Section 3.
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5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to beneficial owners of Shares whose
Shares are purchased pursuant to the Offer or whose Shares are converted into
the right to receive cash in the Merger. The discussion is for general
information only and does not purport to consider all aspects of federal income
taxation that might be relevant to beneficial owners of Shares. The discussion
is based on current provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), existing, proposed and temporary regulations promulgated
thereunder and administrative and judicial interpretations thereof, all of which
are subject to change. The discussion applies only to beneficial owners of
Shares in whose hands Shares are capital assets within the meaning of Section
1221 of the Code, and may not apply to Shares received pursuant to the exercise
of employee stock options or otherwise as compensation, or to certain types of
beneficial owners of Shares (such as insurance companies, tax-exempt
organizations and broker-dealers) who may be subject to special rules. This
discussion does not discuss the federal income tax consequences to a beneficial
owner of Shares who, for United States federal income tax purposes, is a
non-resident alien individual, a foreign corporation, a foreign partnership or a
foreign estate or trust, nor does it consider the effect of any foreign, state
or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL OWNER OF SHARES
SHOULD CONSULT SUCH BENEFICIAL OWNER'S OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH BENEFICIAL OWNER AND THE
PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL OWNER OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for federal income tax purposes. In general, for federal
income tax purposes, a beneficial owner of Shares will recognize gain or loss
equal to the difference between the beneficial owner's adjusted tax basis in the
Shares sold pursuant to the Offer or converted into the right to receive cash in
the Merger and the amount of cash received therefor. Gain or loss must be
determined separately for each block of Shares (i.e., Shares acquired at the
same cost in a single transaction) sold pursuant to the Offer or converted into
the right to receive cash in the Merger, although, under proposed legislation
not yet effective, gain or loss would be determined based on the average tax
basis of all Shares held by the beneficial owner. Such gain or loss will be
capital gain or loss and will be long-term capital gain or loss if the
beneficial owner held the Shares for more than one year as of the date of sale
(in the case of the Offer) or the Effective Time (in the case of the Merger).
Long-term capital gain of individuals currently is taxed at a maximum rate of
28%. Legislation has been proposed which, if enacted, would favorably affect the
taxation of capital gains. It is uncertain whether, in what form, and with what
effective date any such legislation will be enacted. However, the chairmen of
the House Ways and Means Committee and the Senate Finance Committee have stated
their present intention to propose legislation regarding capital gains effective
tax rate reductions which will be effective for transactions occurring on or
after May 7, 1997.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%, unless a beneficial owner of Shares (a)
is a corporation or comes within certain exempt categories and, when required,
demonstrates this fact or (b) provides a correct TIN to the payor, certifies as
to no loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. A beneficial owner who
does not provide a correct TIN may be subject to penalties imposed by the
Internal Revenue Service. Any amount paid as backup withholding does not
constitute an additional tax and will be creditable against the beneficial
owner's federal income tax liability. Each beneficial owner of Shares should
consult with his or her own tax advisor as to his or her qualification for
exemption from backup withholding and the procedure for obtaining such
exemption. Those tendering their Shares in the Offer may prevent backup
withholding by completing the Substitute Form W-9 included in the Letter of
Transmittal. See Section 3. Similarly, those who convert their Shares into the
right to receive cash in the Merger may prevent backup withholding by completing
a Substitute Form W-9 and submitting it to the paying agent for the Merger.
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Parent and the Offeror will be entitled to deduct and withhold from the
consideration otherwise payable pursuant to the Merger Agreement to any holder
of Shares such amounts as Parent or the Offeror is required to deduct and
withhold with respect to the making of such payment. To the extent that amounts
are so withheld by Parent or the Offeror, such withheld amounts shall be treated
for all purposes of the Merger Agreement as having been paid to the holder of
the Shares in respect of which such deduction and withholding was made by Parent
or the Offeror.
6. PRICE RANGE OF SHARES; DIVIDENDS.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (the "1996 10-K"), the Shares are traded on the New York
Stock Exchange (the "NYSE"). The Shares were initially offered to the public on
November 1, 1996 at a price of $23.50 per share. Prior to such date, there was
no public market for the Shares. The following table sets forth for the periods
indicated the high and low sales prices per Share on the NYSE as reported by the
Company in the 1996 10-K with respect to the year ended December 31, 1996, and
as reported by published financial sources with respect to periods after
December 31, 1996.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
Year Ended December 31, 1996:
Fourth Quarter............................................................. $ 30 3/8 $ 23 1/2
Year Ended December 31, 1997:
First Quarter.............................................................. $ 27 1/2 $ 17 1/2
Second Quarter (through June 6, 1997)...................................... 25 3/4 18
</TABLE>
On June 6, 1997, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement and the commencement of
the Offer, the closing price per Share as reported on the NYSE was $24 7/8.
Since its inception, the Company has not paid cash dividends on its Shares.
7. CERTAIN EFFECTS OF THE TRANSACTION.
The purchase of the Shares by the Offeror pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and will reduce the
number of holders of Shares, which will adversely affect the liquidity and
market value of the remaining Shares held by stockholders other than the
Offeror. The Company has advised the Offeror that, as of June 5, 1997, there
were approximately 75 holders of record and as of March 31, 1997 there were
approximately 900 beneficial owners of the Shares.
MARKET FOR SHARES. Depending upon the number of Shares purchased pursuant
to the Offer, the Shares may no longer meet the standards for continued
inclusion on the NYSE. According to the NYSE's published guidelines, the NYSE
would consider delisting such Shares if, among other things, the number of
public holders of 100 Shares or more should fall below 1,200, the number of
publicly held Shares (exclusive of holdings of officers, directors, their
immediate families and other concentrated holdings of 10% or more ("NYSE
Excluded Holdings")) should fall below 600,000 or the aggregate market value of
publicly held Shares (exclusive of NYSE Excluded Holdings) should fall below
$5,000,000. If as a result of the purchase of the Shares pursuant to the Offer
or otherwise, the Shares no longer meet the requirements of the NYSE for
continued listing and the Shares are no longer listed, the market for the Shares
would be adversely affected.
In the event that the Shares should no longer be listed or traded on the
NYSE, it is possible that such Shares would continue to trade in the
over-the-counter market and that price quotations would be reported by other
sources. The extent of the public market for such Shares and the availability of
such quotations would, however, depend upon the number of holders of such Shares
remaining at such time, the
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interest in maintaining a market in Shares on the part of securities firms, the
possible termination of registration of such Shares under the Exchange Act, as
described below, and other factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the Commission if there are fewer than 300 record holders of such
Shares. It is the intention of the Offeror to seek to cause an application for
such termination to be made as soon after consummation of the Offer as the
requirements for termination of registration of such Shares are met.
Notwithstanding the termination of registration of the Shares, the Company will
continue to make public disclosure of financial and certain other information in
annual, quarterly and other reports to be filed with the Commission under the
Exchange Act in connection with the Company's 12.75% senior subordinated notes
due March 1, 2005 for so long as such notes remain outstanding.
If registration of the Shares is terminated, the Company would no longer
legally be required to disclose publicly in proxy materials distributed to
stockholders the information which it now must provide under the Exchange Act;
the Company would no longer be subject to Rule 13e-3 under the Exchange Act
relating to "going private" transactions; and the officers, directors and 10%
stockholders of the Company would no longer be subject to the "short swing"
insider trading reporting and profit recovery provisions of the Exchange Act.
Furthermore, if such registration were terminated, persons holding "restricted
securities" of the Company may be deprived of their ability to dispose of such
securities under Rule 144 or Rule 144A promulgated under the Securities Act of
1933, as amended (the "Securities Act").
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from all stock exchanges and the registration of the
Shares under the Exchange Act will be terminated following the consummation of
the Merger.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares. Depending upon
factors similar to those described above regarding listing and market
quotations, it is possible that, following the Offer, the Shares would no longer
constitute "margin securities" for the purposes of the margin regulations of the
Federal Reserve Board and therefore could no longer be used as collateral for
loans made by brokers. If registration of Shares under the Exchange Act were
terminated, such Shares would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase, including financial information, has been
furnished by the Company or has been taken from or based upon publicly available
documents and records on file with the Commission and other public sources.
Although neither the Offeror nor Parent has any knowledge that would indicate
that statements contained herein based upon such documents are untrue, none of
the Offeror, Parent and the Dealer Manager assume any responsibility for the
accuracy or completeness of the information concerning the Company or for any
failure by the Company to disclose events which may have occurred or may affect
the significance or accuracy of any such information but which are unknown to
the Offeror, Parent or the Dealer Manager.
The Company is a Delaware corporation with its principal executive offices
located at 16225 Park Ten Place, Suite 200, Houston, Texas 77084. The Company is
one of the leading rental equipment companies in the United States, and
currently operates 122 rental equipment yards in 14 states. The Company rents
over 100 different types of equipment, such as aerial manlifts, portable air
compressors, forklifts and light earth moving equipment and small equipment such
as power tools, to commercial construction, industrial and residential users.
The Company also sells complementary parts and merchandise and used equipment,
and acts as a distributor of new equipment on behalf of nationally known
equipment manufacturers.
11
<PAGE>
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived from financial information contained in the
1996 10-K, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 for Primeco Inc., the former wholly owned subsidiary that
merged with and into the Company on March 5, 1997, and the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997. More comprehensive
financial information is included in such reports and other documents filed by
the Company with the Commission, and the following summary is qualified in its
entirety by reference to such reports and such other documents and all the
financial information (including any related notes) contained therein. Such
reports and other documents should be available for inspection and copies
thereof should be obtainable in the manner set forth below.
PRIME SERVICE, INC.
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------
1997 1996 1996 1995 1994(1)
----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Net sales...................................... $ 84,624 $ 70,930 $ 326,588 $ 242,787 $ 211,924
Operating income(2)............................ 17,050 11,078 50,964 20,789 34,459
Net Income (Loss).............................. 7,348 1,236 6,944 (7,389) 12,084
Net Income (Loss) per share.................... .26 0.06 0.32 (0.41) N/A
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ----------------------------------
MARCH 31, 1997 1996 1995 1994(1)
---------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net Book Value of Rental Equipment............. $ 302,517 $ 268,992 $ 181,798 $ 153,818
Total assets................................... 565,003 528,583 391,979 369,403
Total stockholders' equity..................... 237,376 230,028 60,976 69,633
</TABLE>
- ------------------------
(1) As a result of the acquisition by the International Investors of the
predecessor of the Company from Artemis S.A. (the "1994 Acquisition"), the
Company's assets and liabilities were adjusted to their estimated fair
values as of December 2, 1994. In addition, the Company entered into new
financing arrangements and had a change in its capital structure. Rental
equipment acquired subsequent to January 1, 1995 is being depreciated over a
longer useful life. Accordingly, the combined results of the 1994 period and
subsequent periods are not comparable to prior periods. The period from
December 2, 1994 to December 31, 1994 reflects increased cost of sales due
to higher depreciation expense for rental equipment and cost of rental
equipment sales; increased interest expense; and lower other depreciation
and amortization. The combined period for 1994 represents the mathematical
addition of the historical amounts for the Predecessor period (January 1,
1994 to December 1, 1994) and the Successor period (December 2, 1994 to
December 31, 1994). Such results may not be indicative of results that would
have been obtained had the 1994 Acquisition occurred on January 1, 1994.
(2) Operating income of the Company is equal to gross profit less selling,
general, administrative and other expenses and depreciation and amortization
expense.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. The Company is required to disclose in such proxy statements
certain information, as of particular dates, concerning the Company's directors
and officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interests of such persons
in transactions with the Company. Such reports, proxy statements
12
<PAGE>
and other information may be inspected at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may
also be obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains a World Wide Web site on the internet at http://www.sec.gov that
contains reports and other information regarding registrants that file
electronically with the Commission. Such material may also be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
CERTAIN COMPANY PROJECTIONS.
To the knowledge of Parent and the Offeror, the Company does not as a matter
of course make public forecasts as to its future financial performance. However,
in connection with the preliminary discussions concerning the feasibility of the
Offer and the Merger, the Company prepared and furnished Parent with certain
financial projections.
The projections presented in the tables below (the "Projections") are
derived or excerpted from information provided by the Company and are based on
numerous assumptions concerning future events, including acquisitions. The
Projections have not been adjusted to reflect the effects of the Offer or the
Merger or the incurrence of indebtedness in connection therewith. The
Projections should be read together with the other information contained in this
Section 8.
PRIME SERVICE, INC.
SELECTED PROJECTIONS OF FUTURE ANNUAL OPERATING RESULTS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Total Gross Revenue.................................................................. $ 741.5 $ 582.6 $ 447.8
Net Income........................................................................... $ 71.1 $ 51.0 $ 40.5
</TABLE>
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING
PROJECTIONS OR FORECASTS AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION
WAS PROVIDED TO PARENT. THESE FORWARD LOOKING STATEMENTS ARE SUBJECT TO CERTAIN
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THE PROJECTIONS. THE PROJECTIONS REFLECT NUMEROUS ASSUMPTIONS, ALL MADE BY
MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL
BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS INCLUDING
ASSUMED INTEREST EXPENSE AND EFFECTIVE TAX RATES CONSISTENT WITH HISTORICAL
LEVELS FOR THE COMPANY, ALL OF WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE
BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY
PARENT OR THE OFFEROR. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE
ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE ACCURATE, AND ACTUAL
RESULTS MAY BE MATERIALLY DIFFERENT FROM THOSE CONTAINED IN THE PROJECTIONS. THE
INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT
ANY OF PARENT, THE OFFEROR, THE COMPANY AND THEIR RESPECTIVE FINANCIAL ADVISORS
CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE
EVENTS, AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF PARENT,
THE OFFEROR, THE COMPANY AND THEIR RESPECTIVE FINANCIAL ADVISORS ASSUMES ANY
RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF THE
PROJECTIONS. NONE OF PARENT, THE OFFEROR, THE COMPANY AND ANY OF THEIR FINANCIAL
ADVISORS HAS MADE, OR MAKES, ANY REPRESENTATION TO ANY PERSON REGARDING THE
INFORMATION CONTAINED IN THE PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR
OTHERWISE REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE
DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT
THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN
ERROR.
13
<PAGE>
9. CERTAIN INFORMATION CONCERNING PARENT AND THE OFFEROR.
The Offeror is a newly incorporated Delaware corporation. To date, the
Offeror has not conducted any business other than that incident to its
formation, the execution and delivery of the Merger Agreement and the
commencement of the Offer. Accordingly, no meaningful financial information with
respect to the Offeror is available. The Offeror is a wholly owned subsidiary of
Parent. The principal executive office of the Offeror is located at 1211 Hamburg
Turnpike, Suite 214, Wayne, New Jersey 07470.
Parent, a Delaware corporation, has its principal executive office at 1211
Hamburg Turnpike, Suite 214, Wayne, New Jersey 07470. Parent is owned by Atlas
Copco AB ("Atlas Copco") and Atlas Copco Airpower n.v., a wholly owned
subsidiary of Atlas Copco. Atlas Copco is an international industrial group of
companies, with its head office in Stockholm, Sweden. Of invoiced sales
amounting to more than U.S.$3.6 billion, 96% is attributable to countries
outside Sweden. The Atlas Copco group of companies has approximately 21,000
employees. Atlas Copco, founded in 1873, is listed on the Stockholm Stock
Exchange and is also quoted on the London, Frankfurt, Dusseldorf and Hamburg
stock exchanges. Atlas Copco also established an ADR (American Depositary
Receipt) program in the United States in 1990 although without formal stock
exchange registration.
Parent, through its subsidiaries, is engaged primarily in the manufacture,
sale and rental of a diversified line of equipment principally in the United
States.
Set forth below are certain summary consolidated financial data with respect
to Parent excerpted or derived from financial information contained in Parent's
audited Consolidated Financial Statements ("Parent Financial Statements") as of
and for the years ended December 31, 1996 and 1995. The Parent Financial
Statements, a copy of which has been filed with the Commission as an exhibit to
Schedule 14D-1, is incorporated herein by reference. The Parent Financial
Statements may be examined and copies may be obtained at the places and in the
manner set forth in Section 8 of this Offer to Purchase.
ATLAS COPCO NORTH AMERICA INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Net sales................................................... $ 1,130,818 $ 841,678
Net income (loss)........................................... 978 14,793
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
<S> <C> <C>
1996 1995
------------ ------------
BALANCE SHEET DATA:
Total current assets........................................ $391,167 $386,072
Total assets................................................ 1,069,383 1,066,618
Total current liabilities................................... 359,628 306,594
Total debt.................................................. 780,864 774,012
Stockholders' equity (deficit).............................. 288,519 292,606
</TABLE>
The name, citizenship, business address, present principal occupation and
material positions held during the past five years of each of the directors and
executive officers of Parent and the Offeror are set forth in Annex I to this
Offer to Purchase.
14
<PAGE>
Except as described in this Offer to Purchase, none of the Offeror, Parent,
or to the best knowledge of the Offeror or Parent, any of the persons listed in
Annex I hereto, owns or has any right to acquire any Shares and none of them has
effected any transaction in the Shares during the past 60 days.
Parent, through certain of its subsidiaries, engages in a number of
transactions with the Company. The Company acts as a distributor of air tools
manufactured by Chicago Pneumatic Tool Company ("CPTC") pursuant to a
Distributor Agreement between the Company and CPTC. In addition, the Company
purchases electric tools from Milwaukee Electric Tool Corporation, and acts as
an agent in connection with the rental of portable oil-free compressors by Atlas
Copco Rental Inc. to end users. These transactions are not material to the
businesses of Parent, its subsidiaries or the Company.
Except as set forth in this Section 9 or elsewhere in this Offer to
Purchase, none of the Offeror, Parent or, to the best knowledge of the Offeror
or Parent, any of the persons listed in Annex I hereto, has any contract,
arrangement, understanding or relationship with any other person with respect to
any securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies. Except as set forth in this Offer to Purchase, there have been no
contacts, negotiations or transactions between the Offeror or Parent, or, to the
best of their knowledge, any of the persons listed in Annex I hereto, on the one
hand, and the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets. Except as described in this Offer to Purchase, none of the Offeror,
Parent or, to the best knowledge of Parent or the Offeror, any of the persons
listed in Annex I hereto, has had any transaction with the Company or any of its
executive officers, directors or affiliates that would require disclosure under
the rules and regulations of the Commission applicable to the Offer.
10. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Offeror to consummate the Offer
and the Merger is expected to be approximately $915 million, which amount
excludes related fees and expenses.
Parent plans to obtain the necessary funds through capital contributions or
advances made by Atlas Copco. Atlas Copco plans to obtain the funds for such
capital contributions or advances from its available cash and working capital, a
senior revolving credit facility with Merrill Lynch Capital Corporation
("Merrill Lynch Capital") described below, and either through the issuance of
long- or short-term debt securities (including, without limitation, commercial
paper notes) or pursuant to credit facilities that Atlas Copco maintains with
certain commercial banks.
Atlas Copco has received from Merrill Lynch Capital a written financing
commitment to provide $400 million (the "Merrill Lynch Commitment") of an up to
$1.5 billion aggregate principal amount senior revolving credit facility (the
"Credit Facility"). The terms of the definitive agreement providing for the
Credit Facility (the "Loan Agreement") have not yet been finalized. The
following is a summary of the anticipated principal terms of the Credit Facility
based upon the Commitment Letter, dated June 8, 1997, between Atlas Copco and
Merrill Lynch Capital (the "Commitment Letter"). This summary is subject to
finalizing the Loan Agreement, and is qualified in its entirety by reference to
the Commitment Letter, which is filed as an Exhibit to the Schedule 14D-1 and is
incorporated herein by reference.
The Merrill Lynch Commitment is part of the Credit Facility. Although
Merrill Lynch Capital has committed to provide the entire $400 million in
connection with the Offer, Merrill Lynch Capital expects to assemble a syndicate
of financial institutions with respect to the remaining $1.1 billion. The
Merrill Lynch Commitment is not conditioned on the syndication of all or any
portion of the remaining portion of the Credit Facility.
15
<PAGE>
The Credit facility will mature in five years. The Credit Facility will have
no scheduled amortization, but any undrawn portion of the Credit Facility may be
canceled in whole or in part in minimum amounts of $10 million by Atlas Copco
without penalty upon thirty days prior written notice to Merrill Lynch Capital.
The Credit Facility is unsecured.
Borrowings under the Credit Facility will bear interest at a rate equal to
the aggregate of the appropriate London Inter-bank Offered Rate for the relevant
period plus 15.0 basis point, 20.0 basis points or 22.5 basis points depending
upon the credit rating for Atlas Copco's senior unsecured debt during the
relevant period plus, in each case, a utilization fee. The utilization fee of
2.5 basis points per annum is payable quarterly and will be applicable when more
than 50% of the Credit Facility is drawn. Atlas Copco also will pay to Merrill
Lynch Capital commitment, arranger and administration fees, reimburse Merrill
Lynch Capital commitment, arranger and administration fees, reimburse Merrill
Lynch Capital for certain expenses and provide certain indemnities all of which
Parent believes to be customary for commitments of this type.
With regard to the Merrill Lynch Commitment, the Commitment Letter contains,
and the Loan Agreement will contain, conditions precedent, representations and
warranties, covenants (including financial covenants), events of default and
other provisions customary for such financings.
In addition to the use by Atlas Copco of $400 million to provide financing
to Parent and the Offeror in connection with the Offer and the Merger, Atlas
Copco may utilize portions of the funds available under the Credit Facility to
restructure the indebtedness of Atlas Copco, Parent and/or the Company.
Atlas Copco's commercial paper program involves the private placement of
unsecured, commercial paper notes with maturities of up to 360 days. The
commercial paper generally has an effective interest rate approximating the then
market rate of interest for commercial paper of similar rating, currently
approximately 5.75%.
It is anticipated that any indebtedness incurred by Parent in connection
with the transactions contemplated by the Merger Agreement will be repaid from
funds generated internally by Parent and its subsidiaries (including, after the
Merger, if consummated, dividends paid by the Surviving Corporation and its
subsidiaries), through additional borrowings, through application of proceeds of
dispositions or through a combination of two or more such sources. No final
decisions have been made concerning the method Parent will employ to repay any
such indebtedness. Such decisions, when made, will be based on Parent's review
from time to time of the advisability of particular actions, as well as on
prevailing interest rates and financial and other economic conditions.
The Offer is not conditioned on the obtaining of financing.
11. 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.
16
<PAGE>
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 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 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
17
<PAGE>
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 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 the 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.
18
<PAGE>
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 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 matter 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 NYSE on the morning of June 9, 1997,
Parent and the Company issued a joint press release announcing the signing of
the definitive Merger Agreement.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
The purpose of the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby, is to enable Parent to acquire control of,
and the entire equity interest in, the Company.
Pursuant to the DGCL and the Certificate of Incorporation of the Company,
adoption by the Board of Directors of the Company and the affirmative vote of
the holders of a majority of the outstanding shares of the Company entitled to
vote thereon and, if a class or series is entitled to vote as a class, the
affirmative vote of the holders of a majority of the outstanding shares of the
class or series, is required to approve the Merger Agreement. The Board of
Directors of the Company has unanimously approved the Offer, the Merger and the
Merger Agreement, and, unless the Merger is consummated pursuant to the short
form merger provisions under the DGCL as described below, the only remaining
required corporate action of the Company is the approval of the Merger Agreement
by the affirmative vote of the holders of a majority of the outstanding Shares.
If the Minimum Condition is satisfied, the Offeror will have sufficient voting
power to cause the approval of the Merger Agreement without the affirmative vote
of any other stockholder.
In the Merger Agreement, the Company has agreed that, if approval of the
Merger by stockholders of the Company is required by law, the Company shall, at
Parent's request, as soon as practicable following
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expiration of the Offer in accordance with the Merger Agreement, duly call, give
notice of, convene and hold a meeting of its stockholders for the purpose of
obtaining the stockholders' approval. Parent has agreed that all Shares owned by
the Offeror or any other subsidiary of Parent will be voted in favor of approval
of the Merger Agreement. The stockholders meeting shall be held as soon as
practicable following the purchase of Shares pursuant to the Offer. If the
Offeror owns a majority of the outstanding Shares, approval of the Merger
Agreement can be obtained without the affirmative vote of any other stockholder
of the Company.
SHORT FORM MERGER. Under the DGCL, if the Offeror acquires at least 90% of
the outstanding Shares, the Offeror will be able to approve the Merger without a
vote of the Company's stockholders. In such event, the Offeror anticipates that
it will take all necessary and appropriate action to cause the Merger to become
effective as soon as reasonably practicable after such acquisition without a
meeting of the Company's stockholders. If the conditions to the Offeror's
obligation to purchase Shares in the Offer are satisfied prior to the tender of
90% of the outstanding Shares in the Offer, the Offeror may, subject to certain
limitations set forth in the Merger Agreement, delay its purchase of the Shares
tendered to it in the Offer. See Section 1. If the Offeror does not acquire at
least 90% of the outstanding Shares pursuant to the Offer or otherwise, a
significantly longer period of time may be required to effect the Merger,
because a vote of the Company's stockholders would be required under the DGCL.
Pursuant to the Merger Agreement, the Company has agreed to take all action
necessary under the DGCL and its Charter and Bylaws to convene a meeting of its
stockholders promptly following consummation of the Offer to consider and vote
on the Merger, if a stockholders' vote is required. If the Offeror owns a
majority of the outstanding Shares, approval of the Merger can be obtained
without the affirmative vote of any other stockholder of the Company.
APPRAISAL RIGHTS. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company will
have certain rights under the DGCL to dissent and demand appraisal of and to
receive payment in cash for the fair value of their Shares. Such rights to
dissent, if the statutory procedures are complied with, could lead to a judicial
determination of the fair value of the Shares (excluding any element of value
arising from the accomplishment or expectation of the Merger) required to be
paid in cash to such dissenting holders of their Shares. In addition, such
dissenting stockholders may be entitled to receive payment of a fair rate of
interest from the date of consummation of the Merger on the amount determined to
be the fair value of their Shares. In determining the fair value of the Shares,
a Delaware court would be required to take into account all relevant factors.
Accordingly, such determination could be based upon considerations other than,
or in addition to, the market value of the Shares, including, among other
things, asset values and earning capacity. In WEINBERGER V. UPO, INC., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceedings. Therefore, the value so determined in any appraisal could
be different from the price being paid in the Offer.
In addition, several decisions by Delaware courts have held that, in certain
circumstances, a controlling stockholder of a company involved in a merger has a
fiduciary duty to other stockholders which requires that the merger be fair to
such other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of consideration to be received by the stockholders and whether there was
fair dealing among the parties. The Delaware Supreme Court stated in WEINBERGER
and RABKIN V. PHILIP A. HUNT CHEMICAL CORP. that although the remedy ordinarily
available to minority stockholders in a cash out merger is the right to
appraisal described above, a damages remedy or injunctive relief may be
available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may, under
certain circumstances, be applicable to the
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Merger or another business combination in which the Offeror seeks to acquire the
remaining Shares not held by it following the purchase of Shares pursuant to the
Offer. The Offeror believes, however, that Rule 13e-3 will not be applicable to
the Merger if the Merger is consummated within one year after the termination of
the Offer at the Offer Price. If applicable, Rule 13e-3 requires, among other
things, that certain financial information concerning the Company and certain
information relating to the fairness of the proposed transaction and the
consideration offered to minority stockholders in such transaction be filed with
the Commission and disclosed to stockholders prior to consummation of the
transaction.
PLANS FOR THE COMPANY. Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger. Parent intends to seek additional
information about the Company during this period. Thereafter, Parent intends to
review such information as part of a comprehensive review of the Company's
business, operations, capitalization and management with a view to optimizing
the Company's potential contribution to Parent's business.
Except as indicated in Section 10 or elsewhere in this Offer to Purchase,
Parent does not have any current plans or proposals which relate to or would
result in any of the following: an extraordinary corporate transaction, such as
a merger, reorganization or liquidation involving the Company or any of its
subsidiaries; a sale or transfer of a material amount of assets of the Company
or any of its subsidiaries; any change in the present Board of Directors or
management of the Company; any material change in the Company's present
capitalization or dividend policy; or any other material change in the Company's
corporate structure or business. Notwithstanding the foregoing, following the
acquisition of Shares pursuant to the Offer, the Offeror may designate a
majority of the members of the Board of Directors of the Company. In addition,
assuming the designation of directors as aforesaid and so long as there are
holders of Shares other than Parent or any of its subsidiaries, Parent expects
that the Board of Directors would not declare dividends on the Shares.
13. THE TRANSACTION DOCUMENTS.
The following summaries of certain provisions of the Merger Agreement, the
Stockholder Agreement, the Guaranties of Investcorp Bank E.C. ("Investcorp
Bank") and Atlas Copco and the Confidentiality Agreement, copies of which are
filed as an exhibit to the Schedule 14D-1, are qualified in their entirety by
reference to the text of the Merger Agreement, the Stockholder Agreement, the
Guarantees and the Confidentiality Agreement respectively.
THE MERGER AGREEMENT
THE OFFER. 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 Price, (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 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 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 that have
been satisfied as of such
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date 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 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 (as defined below), and as
consented to by Parent, immediately prior to the Effective Time, each
outstanding stock option to purchase Shares held by a current or former employee
or director of the Company or any subsidiary thereof (a "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 Price 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
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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 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 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
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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;
(c) amend its Certificate of Incorporation or Bylaws 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;
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(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
(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 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.
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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, (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
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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.
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
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(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 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.
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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 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 Merger Agreement is filed as an Exhibit to the Schedule 14D-1 and is
incorporated herein by reference.
THE STOCKHOLDER AGREEMENT
VOTING. 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) the International Investor 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
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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 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 Stockholders 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 Investor 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 Investor 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 Investor Shares; (iv) no
encumbrances with respect to the International Investor 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 Investor 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 Investor 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 Investor 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 Stockholders
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 Investor 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
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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
Investor 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 share in respect of all or any portion of
the International Investor 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 Investor 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
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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 Stockholders 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 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 Investor 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 Investor Shares, deposit any
International Investor Shares into a voting trust or enter into a voting
agreement with respect to any International Investor 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.
The Stockholder Agreement is filed as an Exhibit to the Schedule 14D-1 and
is incorporated herein by reference.
GUARANTIES.
INVESTCORP GUARANTY. Pursuant to the Investcorp Bank E.C. Guaranty, dated
June 8, 1997 (the "Investcorp Bank Guaranty"), 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 (the "Atlas Copco Guaranty"), 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.
Each of the Investcorp Bank Guaranty and the Atlas Copco Guaranty is filed
as an Exhibit to the Schedule 14D-1 and is incorporated herein by reference.
THE CONFIDENTIALITY AGREEMENT. The Company and Atlas Copco are parties to a
Confidentiality Agreement, dated May 6, 1997, containing customary terms,
including a standstill provision. The Confidentiality Agreement is filed as an
Exhibit to the Schedule 14D-1 and is incorporated herein by reference.
14. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that the Company will not, among other things,
from the date of the Merger Agreement until the Effective Time, (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
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shares of its capital stock, or (z) purchase, redeem or otherwise acquire any
shares of its capital stock or any other securities thereof or any rights,
warrants or options to acquire any such Shares or other securities; or (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 equivalents (including stock appreciation rights) other than the issuance
of Shares upon the exercise of stock options of the Company awarded but
unexercised on the date of the Merger Agreement in accordance with their present
terms.
15. CERTAIN CONDITIONS TO THE OFFEROR'S OBLIGATIONS.
Notwithstanding any other provision of the Offer or the Merger Agreement,
and in addition to (and not in limitation of) the Offeror's rights to extend and
amend the Offer at any time (subject to the provisions of the Merger Agreement),
the Offeror shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to Offeror's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for,
and may delay the acceptance for payment of or, subject to the restriction
referred to above, the payment for, any tendered Shares, and may terminate the
Offer as to any Shares not then paid for, if:
(i) any waiting period (and any extension thereof) under the HSR Act
applicable to the purchase of Shares 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 Twenty Million (20,000,000) Shares;
(iii) at any time on or after the date of the Merger 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 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 Merger Agreement, (2) result in a
material delay in or materially restrict the ability of the Offeror, or
render the Offeror unable, to accept for payment, pay for or purchase
some or all of the Shares, (3) require the divestiture by Parent, the
Offeror, the 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 or impose any material limitation
on the ability of any of them to conduct their business and own such
assets, properties or Shares, (4) impose any material limitation on the
ability of Parent, the Offeror or any of their Affiliates to acquire or
hold or to exercise effectively all rights of ownership of the Shares,
including the right to vote any Shares purchased by any of them on all
matters properly presented to the stockholders of Company, including,
without limitation, the adoption and approval of the Merger Agreement and
the Merger, (5) result in a material diminution in the benefits expected
to be derived by Parent or the Offeror as a result of the transactions
contemplated by the Offer or the Merger Agreement, or (6) impose any
conditions to the Offer, the Merger Agreement or the Merger, which would
be materially adverse to Parent or the Offeror; or
(B) the Company shall have breached, or failed to observe or perform,
in any material respect, any of its covenants or agreements under the
Merger Agreement or any of the representations or warranties of the
Company set forth in the Merger Agreement shall not be
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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 the Company; or
(C) the Board of Directors of the 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
the Offeror its approval or recommendation of the Offer, the Merger or
the Merger 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 Merger Agreement shall have been terminated in accordance
with its terms; or
(E) a Material Adverse Effect or Material Adverse Change with respect
to the 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 calamity directly or indirectly involving the United States
which materially adversely affects the extension of credit.
For purposes of the Merger Agreement, "Material Adverse Change" or "Material
Adverse Effect" means 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
the subject person, but will exclude any change or effect resulting from general
economic conditions and, in certain instances any occurrence or condition
arising out of the transactions contemplated by the Merger Agreement or the
public announcement thereof.
The foregoing conditions are for the sole benefit of Parent, the Offeror and
their affiliates and may be asserted by Parent or the Offeror regardless of the
circumstances (including any action or inaction by Parent or the Offeror or any
of their affiliates not inconsistent with the terms of the Merger Agreement)
giving rise to such condition. All the foregoing conditions (other than those
described in paragraphs (i) and (iii)(E) above) may be waived by Parent or the
Offeror in whole or in part at any time and from time to time in the sole
discretion of Parent or the Offeror. The failure by Parent or the Offeror 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 the Offeror may assert its
rights at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the Depositary to the tendering stockholders.
16. CERTAIN LEGAL MATTERS.
Except as set forth in this Section, the Offeror is not aware of any
approval or other action by any governmental or administrative agency which
would be required for the acquisition or ownership of Shares
34
<PAGE>
by the Offeror as contemplated herein. Should any such approval or other action
be required, it will be sought, but the Offeror has no current intention to
delay the purchase of Shares tendered pursuant to the Offer pending the outcome
of any such matter, subject, however, to the Offeror's right to decline to
purchase Shares if any of the conditions specified in Section 15 shall have
occurred. There can be no assurance that any such approval or other action, if
needed, would be obtained or would be obtained without substantial conditions,
or that adverse consequences might not result to the Company's business or that
certain parts of the Company's business might not have to be disposed of if any
such approvals were not obtained or other action taken.
U.S. ANTITRUST. Under the provisions of the HSR Act applicable to the
Offer, the acquisition of Shares under the Offer may be consummated following
the expiration of a 15 day waiting period following the filing by Parent of a
Premerger Notification and Report Form with respect to the Offer, unless Parent
receives a request for additional information or documentary material from the
Department of Justice, Antitrust Division (the "Antitrust Division") or the
Federal Trade Commission ("FTC") or unless early termination of the waiting
period is granted. Parent anticipates making its filing on or about June 16,
1997 and, accordingly, the initial waiting period will expire on July 1, 1997.
If, within the initial 15 day waiting period, either the Antitrust Division or
the FTC requests additional information or documentary material concerning the
Offer, the waiting period will be extended through the tenth day after the date
of substantial compliance by all parties receiving such requests. Complying with
a request for additional information or documentary material can take a
significant amount of time.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Offeror's proposed acquisition of
the Company. At any time before or after the Offeror's acquisition of Shares
pursuant to the Offer, the Antitrust Division or the FTC could take such action
under the antitrust laws as either deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger, or seeking the divestiture of Shares
acquired by the Offeror or the divestiture of substantial assets of the Company
or its subsidiaries or Parent or its subsidiaries. Private parties may also
bring legal action under the antitrust laws under certain circumstances. There
can be no assurance that a challenge to the Offer or the consummation of the
Merger on antitrust grounds will not be made, or, if such a challenge is made,
of the result thereof.
If any applicable waiting period under the HSR Act applicable to the Offer
has not expired or been terminated prior to the Expiration Date, the Offeror
will not be obligated to proceed with the Offer or the purchase of any Shares
not theretofore purchased pursuant to the Offer. See Section 15.
STATE TAKEOVER LAWS. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL ("Section 203") prevents
an "interested stockholder" (including a person who owns or has the right to
acquire 15% or more of a corporation's outstanding voting stock) from engaging
in a "business combination" (defined to include mergers and certain other
actions) with a Delaware corporation for a period of three years following the
date such person became an interested stockholder unless, among other things,
the "business combination" is approved by the Board of Directors of such
corporation prior to such date. The Company's Board of Directors has approved
the Offer and the Merger. Accordingly, Section 203 is inapplicable to the Offer
and the Merger. A number of other states have adopted laws and regulations
applicable to attempts to acquire securities of corporations which are
incorporated, or have substantial assets, stockholders, principal executive
offices or principal places of business or whose business operations otherwise
have substantial economic effects in such states. In EDGAR V. MITE CORP., in
1982, the Supreme Court of the United States (the "U.S. Supreme Court")
invalidated on constitutional grounds the Illinois Business Takeover statute,
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However in 1987, in CTS CORP. V.
DYNAMICS CORP. OF AMERICA, the U.S. Supreme Court held that the State of Indiana
may, as a matter of corporate law and, in particular, with respect to those
aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquirer from voting on the affairs of a target
35
<PAGE>
corporation without the prior approval of the remaining stockholders. The state
law before the U.S. Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and were
incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. The Offeror does not know whether any of these laws will, by their terms,
apply to the Offer or the Merger and has not complied with any such laws. Should
any person seek to apply any state takeover law, the Offeror will take such
action as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
or the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, the Offeror might be required
to file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, the Offeror might be unable to accept for
payment any Shares tendered pursuant to the Offer, or be delayed in continuing
or consummating the Offer and the Merger. In such event, the Offeror may not be
obligated to accept for payment any Shares tendered. See Section 15.
17. FEES AND EXPENSES.
Neither the Offeror nor Parent, nor any officer, director, stockholder,
agent or other representative of the Offeror or Parent will pay any fees or
commissions to any broker, dealer or other person (other than the Dealer
Manager, the Information Agent and the Depositary) for soliciting tenders of
Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies and other nominees will, upon request, be reimbursed by the Offeror
for customary mailing and handling expenses incurred by them in forwarding
materials to their customers.
Merrill Lynch is acting as Dealer Manager in connection with the Offer and
is serving as financial advisor to Parent and the Offeror in connection with the
Offer. Parent has agreed to pay Merrill Lynch reasonable and customary
compensation for such services. In addition, Parent has agreed to reimburse
Merrill Lynch for its out of pocket expenses related to its engagement,
including the reasonable fees and expenses of its counsel, and has agreed to
indemnify Merrill Lynch and certain affiliated persons against certain
liabilities and expenses in connection with its services, including, without
limitation, certain liabilities under the federal securities laws.
The Offeror has retained Georgeson & Company Inc. as Information Agent and
The Bank of New York as Depositary in connection with the Offer. The Information
Agent and the Depositary will receive reasonable and customary compensation for
their services hereunder and reimbursement for their reasonable out of pocket
expenses. The Depositary will also be indemnified by the Offeror against certain
liabilities in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telex, telegraph and personal interviews and may
request brokers, dealers and other nominee stockholders to forward materials
relating to the Offer to beneficial owners of Shares.
18. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making or
acceptance thereof would not be in compliance with the securities, blue sky or
other laws of such jurisdiction. In any jurisdiction where the securities, blue
sky or other laws require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of the Offeror by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Offeror other than as contained in this Offer to
Purchase or in the Letter of Transmittal and, if any such
36
<PAGE>
information or representation is given or made, it should not be relied upon as
having been authorized by the Offeror or Parent.
The Offeror and Parent have filed with the Commission the Schedule 14D-1,
pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated
thereunder, furnishing certain information with respect to the Offer, and a
Schedule 13D, pursuant to Section 13(d)(1) of the Exchange Act and Rule 13d-1
promulgated thereunder, furnishing certain information with respect to Parent's
and the Offeror's beneficial ownership of Shares. The Schedule 14D-1 and any
amendments thereto, including exhibits, may be examined and copies may be
obtained at the same places and in the same manner as set forth with respect to
the Company in Section 8 (except that they will not be available at the regional
offices of the Commission).
June 9, 1997
PS Acquisition Corp.
37
<PAGE>
ANNEX I
CERTAIN INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF PARENT AND THE OFFEROR
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below is the name,
current business address, citizenship, present principal occupation or
employment and employment history (covering a period of not less than five
years) of each executive officer and director of Parent. Unless otherwise
indicated, each such person's business address is 1211 Hamburg Turnpike, Suite
214, Wayne, New Jersey 07470. All persons listed below are citizens of the
United States of America, except Bengt Kvarnback, Lennart Johansson, Sixten
Nordmark and Anders Orbom, who are citizens of Sweden, Freek Nijdam, who is a
citizen of the Netherlands, and Giulio Mazzalupi, who is a citizen of Italy.
<TABLE>
<CAPTION>
DIRECTORS
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- -------------------------------------- --------------------------------------------------------------------------
<S> <C>
Mr. Lennart Johansson Senior Vice President of Atlas Copco AB, S-10523 Stockholm, Sweden and
President of Atlas Copco North America Inc., 1211 Hamburg Turnpike, Wayne,
NJ 07470. Employed since January 1, 1987.
Mr. Charles Long Executive Vice President and Secretary of Citicorp., 153 E. 53rd Street,
23rd Floor, New York, NY 10043.
Mr. Bengt Kvarnback Senior Executive Vice President of Atlas Copco AB, S-10523 Stockholm,
Sweden. Employed since October 15, 1992.
Mr. Giulio Mazzalupi President and CEO of Atlas Copco AB, S-10523 Stockholm, Sweden since April
22, 1997. Previously Senior Executive Vice President of Atlas Copco
Airpower n.v. Belgium. Employed since 1972.
Mr. Freek Nijdam Senior Executive Vice President of Atlas Copco AB, S-10523 Stockholm,
Sweden Atlas Copco Airpower n.v. Belgium. Employed since June 1, 1970.
Mr. Donald Pratt President of Butler Manufacturing Company, P.O. Box 419917, Kansas City,
MO 64141-0971.
EXECUTIVE OFFICERS
Robert E. Boyle Corporate Controller of Atlas Copco North America Inc., 1211 Hamburg
Turnpike, Wayne, NJ 07470 since June 3, 1996; Previously with Deloitte &
Touche, Parsippany, NJ.
Mark Cohen Executive Vice President of Atlas Copco North America Inc., 1211 Hamburg
Turnpike, Wayne, NJ 07470. Employed since January 28, 1974.
Mr. Lennart Johansson President of Atlas Copco, S-10523 Stockholm, Sweden.
Sixten Nordmark General Counsel of Atlas Copco North America Inc., 1211 Hamburg Turnpike,
Wayne, NJ 07470. Employed since August 1, 1989.
Anders Orbom Treasurer of Atlas Copco North America Inc., 1211 Hamburg Turnpike Wayne,
NJ 07470. Employed since April 1987.
William M. Thomas Corporate Counsel of Atlas Copco North America Inc., 1211 Hamburg
Turnpike, Wayne, NJ 07470. Employed since September 1, 1990.
</TABLE>
I-1
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF OFFEROR. Set forth below is the
name, current business address, citizenship, present principal occupation or
employment and employment history (covering a period of not less than five
years) of each executive officer and director of the Offeror. Unless otherwise
indicated, each such person's business address is 1211 Hamburg Turnpike, Suite
214, Wayne, New Jersey 07470. All persons listed below are citizens of the
United States of America.
<TABLE>
<CAPTION>
DIRECTORS
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- -------------------------------------- --------------------------------------------------------------------------
<S> <C>
Mark Cohen Executive Vice President of Atlas Copco North America Inc., 1211 Hamburg
Turnpike, Wayne, NJ 07470. Employed since January 28, 1974.
Sixten Nordmark General Counsel of Atlas Copco North America Inc., 1211 Hamburg Turnpike,
Wayne, NJ 07470. Employed since August 1, 1989.
EXECUTIVE OFFICERS
Mark Cohen Executive Vice President of Atlas Copco North America Inc., 1211 Hamburg
Turnpike, Wayne, NJ 07470. Employed since January 28, 1974.
Sixten Nordmark General Counsel of Atlas Copco North America Inc., 1211 Hamburg Turnpike,
Wayne, NJ 07470. Employed since August 1, 1989.
</TABLE>
I-2
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal and certificates for
Shares and any other required documents should be sent or delivered by each
stockholder of the Company or such stockholder's broker, dealer, commercial
bank, trust company or other nominee to the Depositary at one of the addresses
set forth below:
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission: By Hand or Overnight Courier:
Tender & Exchange Department (for Eligible Institutions Tender & Exchange Department
P.O. Box 11248 Only) 101 Barclay Street
Church Street Station (212) 815-6213 Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
</TABLE>
For Confirmation Telephone:
(800) 507-9357
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses or telephone numbers
and locations set forth below. Additional copies of this Offer to Purchase, the
Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from
the Information Agent. Stockholders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Offer.
The Information Agent for the Offer is:
[LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect: (212) 440-9800
ALL OTHERS CALL TOLL FREE: 1-800-223-2064
The Dealer Manager for the Offer is:
MERRILL LYNCH & CO.
World Financial Center
North Tower
New York, New York 10281-1305
1-800-436-1019 (Toll Free)
(212) 449-8209 (Call Collect)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER OF SHARES OF COMMON STOCK
OF
PRIME SERVICE, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JUNE 9, 1997
BY
PS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ATLAS COPCO NORTH AMERICA INC.
<TABLE>
<S> <C>
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, JULY 7, 1997, UNLESS THE OFFER IS
EXTENDED.
</TABLE>
<TABLE>
<S> <C> <C>
THE DEPOSITARY FOR THE OFFER IS:
THE BANK OF NEW YORK
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
Tender & Exchange Department (for Eligible Institutions Tender & Exchange Department
P.O. Box 11248 Only) 101 Barclay Street
Church Street Station (212) 815-6213 Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
FOR CONFIRMATION TELEPHONE:
(800) 507-9357
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE
A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN
THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM
W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders of Prime
Service, Inc. (the "Company") if certificates evidencing Shares are to be
forwarded herewith or, unless an Agent's Message (as defined in the Offer to
Purchase) is utilized, if delivery of Shares (as defined below) is to be made by
book-entry transfer to the Depositary's account at The Depository Trust Company
or the Philadelphia Depository Trust Company (hereinafter collectively referred
to as the "Book-Entry Transfer Facilities") pursuant to the procedures set forth
in Section 3 of the Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS
TO A BOOK-ENTRY TRANSFER-FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITORY.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their Shares and all other documents required hereby to the
Depositary by the Expiration Date (as defined in the Offer to Purchase), or who
cannot comply with the book-entry transfer procedures on a timely basis, may
nevertheless tender their Shares pursuant to the guaranteed delivery procedures
set forth in Section 3 of the Offer to Purchase. See Instruction 2.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
SHARE NUMBER OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
Total Shares
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates
delivered to the Depositary are being tendered. See Instruction 4.
</TABLE>
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
Account No. _____________________________________________________________ at
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Transaction Code No. _______________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Tendering Stockholder(s) __________________________________________
Date of Execution of Notice of Guaranteed Delivery ___________________________
Window Ticket Number (if any) ________________________________________________
Name of Institution which Guaranteed Delivery ________________________________
If delivery is by book-entry transfer ________________________________________
Name of Tendering Institution ________________________________________________
Account No. _______________________________________________________________ at
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Transaction Code No. _________________________________________________________
-------------------
Ladies and Gentlemen:
The undersigned hereby tenders to PS Acquisition Corp. (the "Offeror"), a
Delaware corporation and
a wholly owned subsidiary of Atlas Copco North America Inc., a Delaware
corporation ("Parent"), the above-described shares of common stock, $.01 par
value per share of Prime Service, Inc., a Delaware corporation (the "Company"),
(collectively, the "Shares"), pursuant to the Offeror's offer to purchase all of
the outstanding Shares at a purchase price of $32.00 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated June 9, 1997 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, together with the Offer to Purchase, and any amendments or
supplements hereto or thereto, collectively constitute the "Offer"). The Offer
is being made in connection with the Agreement and Plan of Merger, dated as of
June 8, 1997 (the "Merger Agreement"), among the Parent, the Offeror and the
Company.
3
<PAGE>
Subject to and effective upon acceptance for payment of and payment for the
Shares tendered herewith, the undersigned hereby sells, assigns and transfers to
or upon the order of the Offeror all right, title and interest in and to all the
Shares that are being tendered hereby (and any and all other Shares or other
securities issued or issuable in respect thereof) and appoints the Depositary
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Shares (and all such other Shares or securities), with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates for such Shares (and all
such other Shares or securities), or transfer ownership of such Shares (and all
such other Shares or securities) on the account books maintained by any of the
Book-Entry Transfer Facilities, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of the
Offeror, (b) present such Shares (and all such other Shares or securities) for
transfer on the books of the Company and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares (and all such other
Shares or securities), all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints each designee of the Offeror as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned in such
manner as each such attorney and proxy or his substitute shall in his sole
judgment deem proper, with respect to all of the Shares tendered hereby which
have been accepted for payment by the Offeror prior to the time of any vote or
other action (and any and all other Shares or other securities or rights issued
or issuable in respect of such Shares) at any meeting of stockholders of the
Company (whether annual or special and whether or not an adjourned meeting), any
actions by written consent in lieu of any such meeting or otherwise. This proxy
is irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by the Offeror in accordance with the
terms of the Offer. Such acceptance for payment shall revoke any other proxy or
written consent granted by the undersigned at any time with respect to such
Shares (and all such other Shares or other securities or rights), and no
subsequent proxies will be given or written consents will be executed by the
undersigned (and if given or executed, will not be deemed effective).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or other securities or rights issued or
issuable in respect of such Shares) and that when the same are accepted for
payment by the Offeror, the Offeror will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claims. The undersigned, upon request, will execute
and deliver any additional documents deemed by the Depositary or the Offeror to
be necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and all such other Shares or other securities or
rights).
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and the
Offeror upon the terms and subject to the conditions of the Offer. The Offeror's
acceptance of such Shares for payment will constitute a binding agreement
between the undersigned and the Offeror upon the terms and subject to the
conditions of the Offer, including, without limitation, the undersigned's
representation and warranty that the undersigned owns the Shares being tendered.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of any Shares purchased, and return any
certificates evidencing Shares not tendered or not purchased, in the name(s) of
the undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of any Shares
purchased and return any certificates for Shares not tendered or not purchased
(and accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature(s). In the event that both "Special
Payment Instructions" and "Special Delivery Instructions" are completed, please
issue the check for the purchase price of any Shares purchased and return any
Shares not tendered or not purchased in the name(s) of, and mail said check and
any certificates to, the person(s) so indicated. The undersigned recognizes that
the Offeror has no obligation, pursuant to the "Special Payment Instructions,"
to transfer any Shares from the name of the registered holder(s) thereof if the
Offeror does not accept for payment any of the Shares so tendered.
4
<PAGE>
<TABLE>
<S> <C> <C>
SPECIAL PAYMENT INSTRUCTIONS
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if the check for
the purchase price of Shares
purchased or certifi- cates for
Shares not tendered or not
purchased are to be issued in
the name of someone other than
the undersigned or if Shares
tendered hereby and delivered by
book-entry transfer which are
not accepted for payment are to
be returned by credit to an
account at one of the Book-Entry Transfer Facilities other than
desig- nated above.
To be completed ONLY if the
check for the purchase price of
Shares purchased or
certifi cates for Shares not
tendered or not purchased are
to be mailed to someone other than the
undersigned or to the
undersigned at an address other
than that shown below the
under signed's signature(s).
Mail check and/or certificates
to: Name __________________________
Issue / / Check / / Certificate to:
(Please Print)
Address _______________________
Name __________________________________________________________________________
(Please Print)
_______________________________
Address _______________________________________________________________________
(Zip Code)
_______________________________
_______________________________________________________________________________
(Taxpayer Identification or Social Security No.)
(Zip Code)
_______________________________________________________________________________
(See Substitute Form W-9)
(Taxpayer Identification or Social Security No.)
(See Substitute Form W-9)
/ / Credit Shares delivered by book-entry transfer and not purchased to the
account set forth below
Check appropriate box.
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
</TABLE>
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Signature Guarantee Program, the Stock
Exchange Medallion Program, or by any other bank, broker, dealer, credit union,
savings association or other entity which is an "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (each of the foregoing constituting an
"Eligible Institution"), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has not completed either the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 5. If the certificates are registered in
the name of a person or persons other than the signer of this Letter of
Transmittal, or if payment is to be made or delivered to, or certificates
evidencing unpurchased Shares are to be issued or returned to, a person other
than the registered owner or owners, then the tendered certificates must be
endorsed or accompanied by duly executed stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates or stock powers, with the signatures on the certificates or stock
powers guaranteed by an Eligible Institution as provided herein. See Instruction
5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES. This Letter of
Transmittal is to be used either if certificates are to be forwarded herewith
or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized,
if the delivery of Shares is to be made by book-entry transfer pursuant to the
procedures set forth in Section 3 of the Offer to Purchase. Certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of all Shares
delivered electronically, as well as a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) and any other
documents required by this Letter of Transmittal, or an Agent's Message in the
case of a book-entry delivery, must be received by the Depositary at one of its
addresses set forth on the front page of this Letter of Transmittal by the
Expiration Date. If certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal must
accompany each such delivery. Stockholders who cannot deliver their Shares and
all other required documents to the Depositary by the Expiration Date must
tender their Shares pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. Pursuant to such procedures: (a) such tender
must be made by or through an Eligible Institution; (b) a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form provided
by the Offeror, must be received by the Depositary prior to the Expiration Date;
and (c) the certificates for all tendered Shares, in proper form for tender, or
a confirmation of a book-entry transfer into the Depositary's account at one of
the Book-Entry Transfer Facilities of all Shares delivered electronically, as
well as a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof), and any other documents required by this
Letter of Transmittal must be received by the Depositary within three trading
days after the date of execution of such Notice of Guaranteed Delivery, all as
provided in Section 3 of the Offer to Purchase. The term "trading day" is any
day on which the New York Stock Exchange is open for business.
THE METHOD OF DELIVERY OF CERTIFICATES EVIDENCING SHARES, THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY A CONFIRMATION
OF A BOOK-ENTRY TRANSFER). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
6
<PAGE>
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal (or
a manually signed facsimile thereof), the tendering stockholder waives any right
to receive any notice of the acceptance for payment of the Shares.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
which are to be tendered in the box entitled "Number of Shares Tendered." In
such case, a new certificate for the remainder of the Shares represented by the
old certificate will be sent to the person(s) signing this Letter of Transmittal
unless otherwise provided in the appropriate box on this Letter of Transmittal,
as promptly as practicable following the expiration or termination of the Offer.
All Shares evidenced by certificates delivered to the Depositary will be deemed
to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment of the purchase price is to be made, or certificates
evidencing Shares not tendered or not purchased are to be returned, in the name
of any person other than the registered holder(s), in which case the
certificate(s) for such Shares tendered hereby must be endorsed, or accompanied
by, appropriate stock powers, in either case signed exactly as the name(s) of
the registered holder(s) appear(s) on the certificate for such Shares.
Signatures on any such certificates or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate evidencing Shares or stock
power is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to the Offeror of the authority of such person so
to act must be submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, the Offeror will pay any stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or Shares not tendered or not
purchased are to be returned in the name of, any person other than the
registered holder(s), then the amount of any stock transfer taxes (whether
imposed on the registered holder(s), such other person or otherwise) payable on
account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7
<PAGE>
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTION. If the check for the purchase
price of any Shares purchased is to be issued, or any Shares not tendered or not
purchased are to be returned, in the name of a person other than the person(s)
signing this Letter of Transmittal or if the check or any certificates for
Shares not tendered or not purchased are to be mailed to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal at an address other than that shown above, the appropriate
boxes on this Letter of Transmittal should be completed. Stockholders tendering
Shares by book-entry transfer may request that Shares not purchased be credited
to such account at any of the Book-Entry Transfer Facilities as such stockholder
may designate under "Special Payment Instructions." If no such instructions are
given, any such Shares not purchased will be returned by crediting the account
at the Book-Entry Transfer Facilities designated above.
8. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide
the Depositary with such stockholder's correct TIN on Substitute Form W-9, which
is provided below, unless an exemption applies. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
a $50 penalty and to 31% federal income tax backup withholding on the payment of
the purchase price for the Shares.
9. FOREIGN HOLDERS. Foreign holders must submit a completed IRS Form W-8
to avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting the
Depositary at one of the addresses on the face of this Letter of Transmittal.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance may be directed to the Dealer Manager or the Information Agent at
their respective addresses or telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery may be obtained from the Information Agent or from brokers,
dealers, commercial banks or trust companies.
11. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Offeror (subject to certain limitations in the Merger Agreement), in whole or in
part, at any time or from time to time, in the Offeror's sole discretion.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY
HEREOF (TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE
OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
stockholder's correct TIN on the Substitute Form W-9. If such stockholder is an
individual, the TIN is such stockholder's Social Security Number. If the
Depositary is not provided with the correct TIN, the stockholder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, payments
that are made to such stockholder with respect to Shares purchased pursuant to
the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
8
<PAGE>
perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Depositary. All exempt recipients (including foreign persons
wishing to qualify as exempt recipients) should see the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding on payments that are made
to a stockholder with respect to Shares purchased pursuant to the Offer, the
stockholder is required to notify the Depositary of such stockholder's correct
TIN by completing the form certifying that the TIN provided on the Substitute
Form W-9 is correct.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the Social Security
Number or Employer Identification Number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidelines on which number to
report.
9
<PAGE>
SIGN HERE
(Complete Substitute Form W-9 below)
________________________________________________________________________________
________________________________________________________________________________
(Signature(s) of Owner(s))
________________________________________________________________________________
Name(s) ________________________________________________________________________
________________________________________________________________________________
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
________________________________________________________________________________
Area Code and Telephone Number _________________________________________________
Taxpayer Identification or Social Security Number ______________________________
(See Substitute Form W-9)
Dated: ___________________________________________________________________, 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, please set forth full title
and see Instruction 5).
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE
IN SPACE BELOW.
Authorized signature(s) ________________________________________________________
Name ___________________________________________________________________________
Name of Firm ___________________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
Dated: ___________________________________________________________________, 1997
10
<PAGE>
PAYOR'S NAME: THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
SUBSTITUTE Part I -- PLEASE PROVIDE YOUR TIN IN TIN:
FORM W-9 THE BOX AT THE RIGHT AND CERTIFY BY Social Security
SIGNING AND DATING BELOW. Number or Employer
Identification Number
DEPARTMENT OF THE TREASURY, Part II -- For Payees exempt from backup withholding, see the enclosed
INTERNAL REVENUE SERVICE Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 and complete as instructed therein.
PAYOR'S REQUEST FOR Certification -- Under penalties of perjury, I certify that:
TAXPAYER IDENTIFICATION (1) The number shown on this form is my correct TIN (or I am waiting for a
NUMBER ("TIN") number to be issued to me); and
AND CERTIFICATION
(2) I am not subject to backup withholding because (a) I am exempt from backup
withholding or (b) I have not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified me that I am
no longer subject to backup withholding.
SIGNATURE: Date:
</TABLE>
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding, you received
another notification from the IRS that you were no longer subject to backup
withholding, do not cross out item (2). (Also see the instructions in the
enclosed Guidelines.)
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR
TIN.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to me,
and either (1) I have mailed or delivered an application to receive a TIN to the
appropriate IRS Center or Social Security Administration Officer or (2) I intend
to mail or deliver an application in the near future. I understand that if I do
not provide a TIN by the time of payment, 31% of all payments pursuant to the
Offer made to me thereafter will be withheld until I provide a number.
SIGNATURE:________________________________________________ Date:_____________
11
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
Wall Street
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
ALL OTHERS CALL TOLL FREE: 1-800-223-2064
THE DEALER MANAGER FOR THE OFFER IS:
MERRILL LYNCH & CO.
World Financial Center
North Tower
New York, New York 10281-1305
1-800-436-1019 (Toll Free)
(212) 449-8209 (Call Collect)
<PAGE>
<TABLE>
<S> <C>
World Financial Center
North Tower
New York, New York 10281-1305
1-800-436-3019 (Toll Free)
[LOGO] (212) 449-8209 (Call Collect)
</TABLE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PRIME SERVICE, INC.
AT
$32.00 NET PER SHARE
BY
PS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ATLAS COPCO NORTH AMERICA INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, JULY 7, 1997, UNLESS THE OFFER IS EXTENDED.
June 9, 1997
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by PS Acquisition Corp., a Delaware corporation (the
"Offeror") and a wholly owned subsidiary of Atlas Copco North America Inc., a
Delaware corporation ("Parent"), to act as Dealer Manager in connection with the
Offeror's offer to purchase all outstanding shares of common stock, par value
$.01 per share, of Prime Service, Inc., a Delaware corporation (the "Company"),
(collectively, the "Shares"), at a purchase price of $32.00 per Share, net to
the seller in cash, without interest thereon, upon 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 with any
amendments or supplements thereto, collectively constitute the "Offer") enclosed
herewith. The Offer is being made in connection with the Agreement and Plan of
Merger, dated as of June 8, 1997, among Parent, the Offeror and the Company (the
"Merger Agreement"). Holders of Shares whose certificates for such Shares (the
"Certificates") are not immediately available or who cannot deliver their
Certificates and all other required documents to The Bank of New York (the
"Depositary") or complete the procedures for book-entry transfer prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender
their Shares according to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST TWENTY
MILLION (20,000,000) SHARES, (II) ANY WAITING PERIOD (AND ANY EXTENSION THEREOF)
UNDER THE HSR ACT (AS DEFINED IN THE OFFER TO PURCHASE) APPLICABLE TO THE
PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR HAVING BEEN
TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER AND (III) THE SATISFACTION OF
CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 15 OF THE OFFER TO PURCHASE.
<PAGE>
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. The Offer to Purchase, dated June 9, 1997.
2. The Letter of Transmittal to be used by holders of Shares in
accepting the Offer and tendering Shares. Facsimile copies of the Letter of
Transmittal (with manual signatures) may be used to tender Shares.
3. A letter to stockholders of the Company from Thomas E. Bennett,
Chairman of the Board, President and Chief Executive Officer of the Company,
together with a Solicitation/Recommendation Statement on Schedule 14D-9
filed with the Securities and Exchange Commission by the Company and mailed
to the stockholders of the Company.
4. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if neither of the two procedures for tendering Shares set forth in
the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name, with space provided for
obtaining such clients' instructions with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Offeror will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 of the Offer to Purchase promptly after the later to
occur of (a) the Expiration Date and (b) the satisfaction or waiver of the
conditions set forth in Section 15 of the Offer to Purchase related to
regulatory matters. Subject to compliance with Rule 14e-1(c) under the Exchange
Act, the Offeror expressly reserves the right to delay payment for Shares in
order to comply in whole or in part with any applicable law. See Sections 1 and
16 of the Offer to Purchase. In all cases, payment for Shares tendered and
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Shares or timely
confirmation of a book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company or the Philadelphia Depository Trust
Company, pursuant to the procedures set forth in Section 3 of the Offer to
Purchase, (ii) a properly completed and duly executed Letter of Transmittal (or
a manually signed facsimile thereof) with all required signature guarantees or,
in the case of a book-entry transfer, an Agent's Message (as defined in Section
2 of the Offer to Purchase) and (iii) any other documents required by the Letter
of Transmittal.
The Offeror will not pay any fees or commissions to any broker or dealer or
any other person (other than the Dealer Manager, the Information Agent and the
Depositary as described in Section 17 of the Offer to Purchase) in connection
with the solicitation of tenders of Shares pursuant to the Offer. The Offeror
will, however, upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding the enclosed materials to your clients.
The Offeror will pay any stock transfer taxes incident to the transfer to it
of validly tendered Shares except as otherwise provided in Instruction 6 of the
Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JULY 7, 1997, UNLESS
THE OFFER IS EXTENDED.
2
<PAGE>
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) with
any required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase) or other required
documents should be sent to the Depositary and (ii) Certificates representing
the tendered Shares on a timely Book-Entry Confirmation (as defined in the Offer
to Purchase) should be delivered to the Depositary in accordance with the
instructions set forth in the Offer.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender must
be effected by following the guaranteed delivery procedures specified in Section
3 of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to
Georgeson & Company Inc., the Information Agent, or Merrill Lynch, Pierce,
Fenner & Smith Incorporated, the Dealer Manager, at their respective addresses
and telephone numbers set forth on the back cover of the Offer to Purchase.
Additional copies of the enclosed materials may be obtained by calling
Georgeson & Company Inc., the Information Agent, collect at 212-440-9800 or from
brokers, dealers, commercial banks or trust companies.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF PARENT, THE OFFEROR, THE COMPANY, THE
DEPOSITARY, THE INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF
THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE
ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN
THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PRIME SERVICE, INC.
AT
$32.00 NET PER SHARE
BY
PS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ATLAS COPCO NORTH AMERICA INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, JULY 7, 1997, UNLESS THE OFFER IS EXTENDED.
June 9, 1997
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated June 9,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") relating to an offer by PS Acquisition Corp., a Delaware corporation
(the "Offeror") and a wholly owned subsidiary of Atlas Copco North America Inc.,
a Delaware corporation ("Parent"), to purchase all outstanding shares of common
stock, par value $.01 per share of Prime Service, Inc., a Delaware corporation
(the "Company"), (collectively, the "Shares"), at a purchase price of $32.00 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer. The Offer is being made in
connection with the Agreement and Plan of Merger, dated as of June 8, 1997,
among Parent, the Offeror and the Company (the "Merger Agreement"). Holders of
Shares whose certificates for such Shares (the "Certificates") are not
immediately available or who cannot deliver their Certificates and all other
required documents to The Bank of New York (the "Depositary") or complete the
procedures for book-entry transfer prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase) must tender their shares according to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
THIS MATERIAL IS BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF SHARES
CARRIED BY US IN YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. A TENDER OF SUCH
SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR
INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION
ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any or
all of the Shares held by us for your account, upon the terms and conditions set
forth in the Offer.
Please note the following:
1. The tender price is $32.00 per Share, net to you in cash without
interest.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Monday, July 7, 1997, unless the Offer is extended.
<PAGE>
4. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the expiration of the Offer at
least Twenty Million (20,000,000) Shares. The Offer is also subject to the
other terms and conditions contained in the Offer to Purchase.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions imposed by Parent or the Offeror or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the transfer
of Shares pursuant to the Offer.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
residing in any jurisdiction in which the making of the Offer or acceptance
thereof would not be in compliance with the securities laws of such
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Offeror by Merrill Lynch, Pierce, Fenner &
Smith Incorporated or by one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
If you wish to have us tender any or all of the Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
contained in this letter. An envelope in which to return your instruction to us
is enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form.PLEASE FORWARD YOUR
INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER YOUR
SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PRIME SERVICE, INC.
BY
PS ACQUISITION CORP.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated June 9, 1997 (the "Offer to Purchase"), and the related Letter
of Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer") in connection with the offer by PS
Acquisition Corp., a Delaware corporation (the "Offeror") and a wholly owned
subsidiary of Atlas Copco North America Inc., a Delaware corporation, to
purchase all outstanding shares of common stock, par value $.01 per share of
Prime Service, Inc., a Delaware corporation (the "Company"), (collectively, the
"Shares"), at a purchase price of $32.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer.
This will instruct you to tender to the Offeror the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares to be Tendered:* ________________________
<TABLE>
<S> <C>
SIGN HERE
--------------------------------------------
--------------------------------------------
Account Number: Signature(s)
Date: , 1997
--------------------------------------------
--------------------------------------------
(Print Name(s))
--------------------------------------------
--------------------------------------------
(Print Address(es))
--------------------------------------------
(Area Code and Telephone Number(s))
--------------------------------------------
(Taxpayer Identification or
Social Security Number(s))
</TABLE>
- ------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
3
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
PRIME SERVICE, INC.
TO
PS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ATLAS COPCO NORTH AMERICA INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JULY 7, 1997, UNLESS THE OFFER IS EXTENDED.
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates for shares of common stock, par
value $.01, per share, of Prime Service, Inc., a Delaware corporation (the
"Company"), (collectively, the "Shares"), are not immediately available or if
the procedure for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary on or prior
to the Expiration Date (as defined in the Offer to Purchase). Such form may be
delivered by hand, facsimile transmission, or mail to the Depositary. See
Section 3 of the Offer to Purchase, dated June 9, 1997 (the "Offer to
Purchase").
<TABLE>
<S> <C> <C>
THE DEPOSITARY FOR THE OFFER IS:
THE BANK OF NEW YORK
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
Tender & Exchange Department (for Eligible Tender & Exchange Department
P.O. Box 11248 Institutions Only) 101 Barclay Street
Church Street Station (212) 815-6213 Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
FOR CONFIRMATION TELEPHONE:
(800) 507-9357
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF INSTRUMENTS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES
NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES
IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" (AS DEFINED IN THE OFFER TO PURCHASE) UNDER THE
INSTRUCTION THERETO, SUCH SIGNATURE GUARANTEES MUST APPEAR IN THE APPLICABLE
SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message and certificates for Shares to the Depositary within the time
period shown herein. Failure to do so could result in a financial loss to such
Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to PS Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Atlas Copco North America Inc., a
Delaware Corporation ("Parent"), upon the terms and subject to the conditions
set forth in the Offer to Purchase, and the related Letter of Transmittal,
receipt of which are hereby acknowledged, Shares of the Company, pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares Tendered: SIGN HERE
Certificate No(s) (if available): Name(s) of Record Holder(s):
(Please Print)
If securities will be tendered by Address(es):
book-entry transfer: (Zip Code)
Name of Tendering Institution:
Area Code and Telephone No(s):
Account No.: at Signature(s):
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Dated: , 1997
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program, the Stock Exchange Medallion Program, or a bank, broker,
dealer, credit union, savings association or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, guarantees the delivery to the
Depositary of the Shares tendered hereby, together with a properly completed and
duly executed Letter of Transmittal (or manually signed facsimile(s) thereof)
and any other required documents, or an Agent's Message (as defined in the Offer
to Purchase) in the case of a book-entry delivery of Shares, all within three
trading days of the date hereof. A "trading day" is any day on which the New
York Stock Exchange is open for business.
<TABLE>
<S> <C>
Name of Firm: Title:
Name:
(Authorized Signature) (Please Print or Type)
Address: Area Code and Telephone No.:
Dated:
(Zip Code)
</TABLE>
DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM--CERTIFICATES SHOULD BE SENT
WITH LETTER OF TRANSMITTAL
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the Payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------
GIVE THE NAME AND
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- -----------------------------------------------------
<S> <C> <C>
1. Individual The individual
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Custodian account of The minor(2)
a minor (Uniform
Gift to Minors Act)
4. a. The usual The grantor-
revocable savings trustee(1)
trust (grantor is
also trustee)
b. So-called trust
account that is The actual owner(1)
not a legal or
valid trust under
state law
5. Sole proprietorship The owner(3)
- -----------------------------------------------------
<CAPTION>
GIVE THE NAME AND
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
<S> <C> <C>
- -----------------------------------------------------
6. Sole proprietorship The owner(3)
7. A valid trust, The legal entity (Do
estate or pension not furnish the
trust identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(4)
8. Corporate The corporation
9. Association, club, The organization
religious,
charitable,
educational, or
other tax-exempt
organization
10. Partnership The partnership
11. A broker or The broker or
registered nominee nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ---------------------------------------------
- ---------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
employment identification umber (if you have one).
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), or Form W-7 for Individual Taxpayer Identification Number (for alien
individuals required to file U.S. tax returns), at an office of the Social
Security Administration or the Internal Revenue Service.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on all payments include the
following:
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
Payees that may be exempted from backup withholding:
- A corporation.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident alien partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A, and 6050N, and their regulations.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest
or other payments to give taxpayer identification numbers to payers who must
report the payments to the IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. Payers must be
given the numbers whether or not recipients are required to file tax returns.
Payers must generally withhold 31% of taxable interest, dividend and certain
other payments to a payee who does not furnish a taxpayer identification number
to a payer. Certain penalties may also apply.
PENALTIES.
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
[EXHIBIT 99(A)(7)]
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made only by the Offer to Purchase dated
June 9, 1997, and the related Letter of Transmittal and is not being made to
(nor will tenders be accepted from or on behalf of) holders of Shares in any
jurisdiction in which the Offer or the acceptance thereof would not be in
compliance with the securities, blue sky or other laws of such jurisdiction.
However, the Offeror may, in its discretion, take such action as it may deem
necessary to make the Offer in any jurisdiction and extend the Offer to
holders of Shares in such jurisdiction. In those jurisdictions where
securities laws require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of the Offeror by Merrill
Lynch, Pierce, Fenner & Smith Incorporated (the "Dealer Manager") or one or
more registered brokers or dealers licensed under the laws of such
jurisdiction.
<PAGE>
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Prime Service, Inc.
at
$32.00 Net Per Share
by
PS Acquisition Corp.
a wholly owned subsidiary of
Atlas Copco North America Inc.
PS Acquisition Corp., a Delaware corporation (the "Offeror") and a wholly
owned subsidiary of Atlas Copco North America Inc., a Delaware corporation
("Parent"), is offering to purchase all of the shares of common stock, par
value $.01 per share, of Prime Service, Inc., a Delaware corporation (the
"Company"), (collectively, the "Shares"), at a price of $32.00 per Share, net
to the seller in cash, without interest thereon, upon 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 with any amendments or supplements thereto, collectively constitute
the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JULY 7, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
TWENTY MILLION (20,000,000) SHARES, (II) ANY WAITING PERIOD UNDER THE HSR ACT
(AS DEFINED IN THE OFFER TO PURCHASE) APPLICABLE TO THE PURCHASE OF SHARES
PURSUANT TO THE OFFER HAVING EXPIRED OR HAVING BEEN TERMINATED PRIOR TO THE
EXPIRATION OF THE OFFER AND (III) THE SATISFACTION OF CERTAIN OTHER TERMS AND
CONDITIONS CONTAINED IN THE OFFER TO PURCHASE.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of June 8, 1997 (the "Merger Agreement"), among Parent, the Offeror and
the Company. The Merger Agreement provides that, among other things, after
the purchase of Shares pursuant to the Offer and the satisfaction of the
other conditions set forth in the Merger Agreement and in accordance with
relevant provisions of the General Corporation Law of the State of Delaware,
as amended (the "DGCL"), the Offeror will be merged with and into the Company
(the "Merger"). As of the effective time of the Merger (the "Effective
Time"), each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held in the treasury of the Company, Shares held by
any subsidiary of the Company, Parent, the Offeror or any other subsidiary of
Parent, or Shares which are held by stockholders, if any, who properly
exercise their appraisal rights under the DGCL) will be cancelled and
converted into the right to receive $32.00 in cash, or any higher price that
is paid in the Offer, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE
MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT THE OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND THE COMPANY'S
STOCKHOLDERS AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
<PAGE>
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when the Offeror gives oral or written notice to The
Bank of New York (the "Depositary") of the Offeror's acceptance of such
Shares for payment pursuant to the Offer. In all cases, payment for Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
with the Depositary, which will act as agent for tendering stockholders for
the purpose of receiving payment from the Offeror and transmitting such
payment to tendering stockholders. Under no circumstances will interest be
paid by the Offeror because of any delay in making any payment. Payment for
Shares tendered and accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) certificates for such
Shares or timely confirmation of a book-entry transfer of such Shares into
the Depositary's account at the Book-Entry Transfer Facilities (as defined in
the Offer to Purchase), pursuant to the procedures set forth in the Offer to
Purchase, (ii) a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) with all required signature guarantees
or, in the case of a book-entry transfer, an Agent's Message (as defined in
the Offer to Purchase) and (iii) any other documents required by the Letter
of Transmittal.
If any of the conditions set forth in the Offer to Purchase that relate to
the Offeror's obligations to purchase the Shares are not satisfied by 12:00
Midnight, New York City time, on Monday, July 7, 1997 (or any other time then
set as the Expiration Date), the Offeror may, subject to the terms of the
Merger Agreement as described below, elect to (i) extend the Offer and,
subject to applicable withdrawal rights, retain all tendered Shares until the
expiration of the Offer, as extended, (ii) subject to complying with
applicable rules and regulations of the Securities and Exchange Commission,
accept for payment all Shares so tendered and not extend the Offer or (iii)
terminate the Offer and not accept for payment any Shares and return all
tendered Shares to tendering stockholders. 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,
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.
Subject to the limitations set forth in the Offer and the Merger Agreement,
the Offeror reserves the right (but will not be obligated), at any time or
from time to time in its sole discretion, to extend the period during which
the Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement of such extension. Except to
the extent required by the Merger Agreement, there can be no assurance that
the Offeror will exercise its right to extend the Offer. Any extension of the
period during which the Offer is open will be followed, as promptly as
practicable, by public announcement thereof, such announcement to be issued
not later than 9:00 a.m., New York City time, on the next business day after
the previously scheduled Expiration Date. During any such extension, all
Shares previously tendered and not withdrawn will remain subject to the
Offer, subject to the rights of a tendering stockholder to withdraw such
stockholder's Shares.
Except as otherwise provided in Section 4 of the Offer to Purchase, tenders
of Shares made pursuant to the Offer are irrevocable. Shares tendered
pursuant to the Offer may be withdrawn at any time prior to the Expiration
Date and, unless theretofore accepted for payment pursuant to the Offer, may
also be withdrawn at any time after August 7, 1997. For a withdrawal of
Shares tendered pursuant to the Offer to be effective, a written,
telegraphic, telex or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the
back cover of the Offer to Purchase. Any notice of withdrawal must specify
the name of the person who
<PAGE>
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name in which the certificates representing such Shares are registered,
if different from that of the person who tendered the Shares. If certificates
for Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the
serial numbers shown on such certificates must be submitted to the Depositary
and, unless such Shares have been tendered by an Eligible Institution (as
defined in the Offer to Purchase), the signatures on the notice of withdrawal
must be guaranteed by an Eligible Institution. If Shares have been tendered
pursuant to the procedures for book-entry transfer set forth in the Offer to
Purchase, any notice of withdrawal must also specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares. All questions as to the form and validity (including time
of receipt) of notices of withdrawal will be determined by the Offeror, in
its sole discretion, and its determination will be final and binding on all
parties.
The information required to be disclosed by Paragraph (e)(1)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act
of 1934, as amended, is contained in the Offer to Purchase and is
incorporated herein by reference.
The Company has provided to the Offeror its lists of stockholders and
security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase, the related Letter of Transmittal
and other related materials are being mailed to record holders of Shares and
will be mailed to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder lists or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO
THE OFFER.
Questions and requests for assistance may be directed to the Dealer Manager
or the Information Agent at their respective addresses as set forth below.
The Offeror will not pay any fees or commissions to any broker or dealer or
to any other person (other than the Dealer Manager and the Information Agent)
for soliciting tenders of Shares pursuant to the Offer. Additional copies of
the Offer to Purchase, the Letter of Transmittal and all other tender offer
materials may be obtained from the Information Agent or from brokers,
dealers, commercial banks and trust companies, and will be furnished promptly
at the Offeror's expense.
The Information Agent for the Offer is:
[Georgeson & Company Inc. Logo]
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
Call Toll Free: 1-800-223-2064
The Dealer Manager for the Offer is:
Merrill Lynch & Co.
World Financial Center
North Tower
New York, New York 10281-1305
1-800-436-1019 (Toll Free)
(212) 449-8209 (Call Collect)
June 9, 1997
<PAGE>
Exhibit 99(a)-8
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(b).1
MERRILL LYNCH CAPITAL CORPORATION
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
June 8, 1997
Atlas Copco AB
105 23 Stockholm, Sweden
Attention: Hans Ola Meyer, Director
Re: Commitment Letter
Ladies and Gentlemen:
Atlas Copco AB (the "Company") has advised Merrill Lynch Capital
Corporation ("Merrill Lynch") that it intends, directly or indirectly, to
acquire (the "Acquisition") all of the issued and outstanding capital stock of a
company previously identified to us as Pinta (the "Target") pursuant to a merger
agreement (the "Merger Agreement") to be entered into among the Company and a
wholly-owned subsidiary of the Company formed to effect the Acquisition
("Acquisition Sub"), and the Target. We understand that the Acquisition will
take the form of a tender offer (the "Tender Offer") by Acquisition Sub for all
of the issued and outstanding shares of common stock of the Target (all of such
common stock collectively, the "Shares") and the purchase of the portion of the
Shares tendered and not withdrawn pursuant to the Tender Offer (the "Tendered
Shares"), which purchase shall be subject to the condition that not less than
that number of the Shares (on a fully diluted basis) which would entitle the
Company to approve the Merger without the affirmative vote of any other
securityholder or any other person be tendered and not withdrawn pursuant to the
Tender Offer. You have advised Merrill Lynch that certain holders of not less
than 70% of the outstanding Shares have agreed to tender such Shares in the
Tender Offer. We further understand that the Tender Offer price will not exceed
$32 per Share and the aggregate purchase price for all of the Shares will not
exceed $950,000,000. We further understand that, in connection with the
launching of the Tender Offer, the Company intends to give notice to the lenders
thereunder of its intention to repay all indebtedness (and terminate all
commitments to make extensions of credit) under the existing $250,000,000
syndicated credit facility of the Company agented
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by Enskilda (the "Refinanced Debt"). In addition, after consummation of the
Tender Offer the Company intends to (x) repay (including by tender offer (the
"Note Tender Offer")) the existing public debt securities (the "Public
Notes") of the Target aggregating approximately $67,000,000, or make other
arrangements satisfactory to Merrill Lynch with respect to the Public Notes,
and (y) repay all indebtedness and terminate all commitments to make
extensions of credit under all credit arrangements of the Target and its
subsidiaries, aggregating approximately $160,000,000 (the transactions in
clauses (x) and (y), the "Target Debt Repayment").
The Acquisition, the Target Debt Repayment, the Tender Offer, the
repayment of all debt and cancellation of all commitments to make extensions
of credit under the Refinanced Debt (the "Existing Debt Repayment"), and the
entering into and borrowings under the Credit Facility herein described are
herein referred to as the "Transactions." Pursuant to the Merger Agreement,
after the consummation of the Tender Offer, Acquisition Sub will merge (the
"Merger") into the Target and the Target will be the survivor. We further
understand that the precise structure of the Transactions will be under
continuing consideration, may vary from the foregoing and will be subject to
our mutual agreement.
You have advised Merrill Lynch that the total consideration necessary
to effect the Transactions will not exceed $1,450,000,000 (excluding fees and
expenses).
You have requested that Merrill Lynch commit to provide to the
Company $400,000,000 of an up to $1,500,000,000 aggregate principal amount of
senior revolving credit facility (the "Credit Facility"), of which up to
$100,000,000 will be available as a U.S. dollar swing line subfacility
(appropriately adjusted to reflect the actual size of the Credit Facility).
It is anticipated that drawings under the Credit Facility will be available
to be made in the currencies specified in the Term Sheet (as defined below).
You have advised Merrill Lynch that the Company may issue commercial
paper in an amount sufficient to effect the Transactions, in which event the
Credit Facility would be available as a backup for such commercial paper
issuance. You have advised Merrill Lynch that no other financing other than
the Company's commercial paper program and/or the Credit Facility will be
incurred or be necessary to effect the Transactions.
Accordingly, subject to the terms and conditions set forth below,
Merrill Lynch hereby agrees with you as follows:
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1. Commitment. Merrill Lynch hereby commits to the Company to provide
$400,000,000 of the Credit Facility to the Company and to use its best efforts
to assemble a syndicate of financial institutions (together with Merrill Lynch,
the "Lenders") to provide the balance of the Credit Facility ($1,100,000,000),
in each case upon the terms and subject to the conditions set forth or referred
to herein, in the fee letter (the "Fee Letter") dated the date hereof and
delivered to you and in the Summary of Terms and Conditions attached hereto (and
incorporated by reference herein) as Exhibit A (the "Term Sheet"). The initial
extensions of credit under the Credit Facility will occur not earlier than
simultaneously with the consummation of the Tender Offer and the Existing Debt
Repayment. If the size of the Credit Facility exceeds $400,000,000, the
syndication and allocations of such commitments in excess of $400,000,000
related to such Credit Facility shall be satisfactory to Merrill Lynch and the
Borrower. Merrill Lynch reserves the right to designate any of its affiliates
to fund Merrill Lynch's commitment hereunder.
It is a condition of Merrill Lynch's commitment hereunder that Merrill
Lynch act as sole and exclusive arranger of and syndication agent for (the
"Arranger") the Credit Facility, it being understood and agreed that the
Arranger will perform all functions and exercise all authority (including,
without limitation, (a) serving as sole manager of the syndication effort,
(b) selecting counsel for the Arranger, and (c) negotiating definitive
documentation for the Credit Facility (the "Credit Documents")) customarily
performed and exercised by agent banks in such capacity. The appointment of any
co-agents for the Credit Facility would be subject to the prior approval of
Merrill Lynch. The co-agent title and other titles awarded to syndicate
participants would not entail any role with respect to the matters referred to
in this paragraph without the prior consent of Merrill Lynch. Merrill Lynch may
select after consultation with you Lenders reasonably acceptable to you to act
as a facility agent (in such capacity, the "Facility Agent") to perform such
ministerial and administrative functions as Merrill Lynch, in its reasonable
discretion, may desire and as swing line agent (the "Swing Line Agent") to
perform swing line facility functions under the Credit Facility.
2. Syndication. Merrill Lynch reserves the right and intends,
prior to or after the execution of the Credit Documents, to syndicate all or
a portion of its commitment to one or more Lenders that will become parties
to the Credit Documents, and in that connection, promptly following your
acceptance of Merrill Lynch's commitment hereunder, Merrill Lynch will
commence the syndication of the Credit Facility to such Lenders. You agree
that no Lender will receive compensation outside the terms contained herein
and in the Fee Letter in order to obtain its commitment to
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participate in the Credit Facility. It is understood and agreed that, except
as otherwise provided in the Fee Letter, the amount and distribution of the
fees and other compensation referred to herein among the Lenders and to any
Administrative Agent (or any co-agent) will be at Merrill Lynch's sole
discretion. It is understood and agreed that Merrill Lynch will manage all
aspects of the syndication (but will consult with you in such matters),
including, without limitation, decisions as to the selection of potential
Lenders reasonably acceptable to you to be approached and when they will be
approached, when their commitments will be accepted, which Lenders will
participate, any naming rights (including the naming of co-agents, subject to
your reasonable approval) and the final allocations of the commitments among
the Lenders.
You agree actively to assist Merrill Lynch in achieving a timely
syndication that is satisfactory to Merrill Lynch. The syndication efforts will
be accomplished by a variety of means, including direct contact during the
syndication between senior management (including,
but not limited to, the chief executive officer, chief financial officer and
treasurer of the Company and/or the Target) and advisors and affiliates of the
Company and/or the Target on the one hand and the proposed syndicate Lenders on
the other hand. To assist Merrill Lynch in its syndication efforts, you agree
that you will, promptly, upon Merrill Lynch's request, (a) provide, and cause
your affiliates and advisors to provide, and use your best efforts to have the
Target provide, to Merrill Lynch all information reasonably deemed necessary by
Merrill Lynch to complete successfully the syndication, including but not
limited to, information and projections (including, without limitation, any
updated projections requested by Merrill Lynch) prepared by you or on your
behalf relating to the transactions contemplated hereby, and (b) to assist, and
to cause your affiliates and advisors to assist, and use your best efforts to
have the Target assist, Merrill Lynch in the preparation of a confidential
information memorandum and other marketing materials to be used in connection
with the syndication, including making available representatives of the Company
and/or the Target and their respective subsidiaries. You also agree to use your
best efforts to ensure that Merrill Lynch's syndication efforts benefit from
your existing lending relationships. Your assistance in connection with the
syndication will also include, if Merrill Lynch so requests, your assisting
Merrill Lynch in obtaining for the Company (at the sole expense of the Company)
credit ratings from one or more nationally recognized rating agencies. You
further agree that Merrill Lynch shall have a reasonable period of time to
syndicate the Credit Facility and, in any event, shall not be obligated to make
any advances under the Credit Facility (x) until the date which is at least 23
business days following the effectiveness of a definitive merger agreement with
respect to the Acquisi-
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tion, or (y) if the information memorandum described above is not distributed
to prospective Lenders within eight business days following such
effectiveness. It is understood and agreed that Merrill Lynch shall be
entitled, with your prior written consent (which shall not be unreasonably
withheld or delayed), to change the structure and terms and provisions of the
Credit Facility as described herein and in the Term Sheet (provided that the
aggregate principal amount of the Credit Facility, taken as a whole, remains
the same) if Merrill Lynch deems such action advisable in order to ensure a
successful syndication (including Merrill Lynch achieving a hold level
acceptable to Merrill Lynch and the Company) or an optimal credit structure.
3. Fees. As consideration for Merrill Lynch's commitment hereunder
and its agreement to arrange, manage and structure the Credit Facility and its
agreement to use its best efforts to syndicate the Credit Facility, you agree to
pay to Merrill Lynch the fees as set forth in the Term Sheet and in the Fee
Letter. You agree that, once paid, such fees and any part thereof shall be
nonrefundable under any and all circumstances and regardless of whether the
transactions or borrowings contemplated hereby are consummated. All such fees
shall be paid by wire transfer of immediately available funds in United States
dollars and free of all withholding taxes (for which you agree to indemnify the
recipient thereof).
4. Conditions. Merrill Lynch's commitment hereunder is subject to
the negotiation, execution and delivery of definitive Credit Documents
satisfactory in all respects to Merrill Lynch and its counsel. Such definitive
documentation shall reflect the terms and conditions set forth herein and in the
Term Sheet and contain such other indemnities, covenants, representations and
warranties, events of default, conditions precedent, security arrangements and
other terms and conditions as are satisfactory to Merrill Lynch and the Company,
modified as appropriate to reflect the terms of the Transactions and the
financial condition of the Company, the Target and their respective
subsidiaries. Our willingness to provide our commitment in respect of the
Credit Facility is further subject to review of the Merger Agreement, tender
offer documents and other documents relating to the Acquisition and the other
Transactions and to our reasonable satisfaction with the terms and conditions
thereof (including the price of the Note Tender Offer) and that the Company and
Target shall have entered into the Merger Agreement and the Merger Agreement
being in full force and effect. Those matters that are not covered by or made
clear under the provisions hereof or of the Term Sheet are subject to the
approval and agreement of Merrill Lynch and you (it being understood that the
terms and conditions of the Credit Documents shall not be inconsistent with the
terms and conditions set forth herein or in the Term Sheet).
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Merrill Lynch's commitment hereunder is also subject to (a) there
shall not have occurred or become known (i) in the judgment of Merrill Lynch any
material adverse change (or any development involving a prospective material
adverse change) or any condition or event that could reasonably be expected to
result in a material adverse change in the business, assets, liabilities
(contingent or otherwise), operations, condition (financial or otherwise),
solvency, properties or material agreements of the Company or the Target,
individually or together with their respective subsidiaries taken as a whole, as
the case may be (and before and after giving effect to the Transactions), in
each case since the date of the latest audited financial statements of the
Company and the Target, respectively, delivered to Merrill Lynch, (ii) any facts
or circumstances discovered by Merrill Lynch in the course of its ongoing due
diligence investigation of the Company, the Target and the Transactions,
including (without limitation) its review of the historical, pro forma and
projected consolidated financial statements of the Company and/or the Target and
their respective subsidiaries, which (x) Merrill Lynch believes could,
individually or in the aggregate, have a material adverse effect on the
Transactions or the business, assets, liabilities (contingent or otherwise),
operations, condition (financial or otherwise), solvency, properties or material
agreements of the Company or the Target, individually or together with their
respective subsidiaries taken as a whole, as the case may be (and before and
after giving effect to the Transactions) or (y) would be materially inconsistent
with the assumptions underlying the Projections (as defined below in Section 5),
(iii) any transaction (other than the Transactions) entered into by the Company
or the Target or any of their respective subsidiaries, whether or not in the
ordinary course of business, that in Merrill Lynch's judgment is material to the
Company or the Target, individually or together with their respective
subsidiaries, taken as a whole, or (iv) any dividend or distribution of any kind
declared or paid by the Company or the Target on its capital stock not in the
ordinary course; (b) no material adverse change (or development involving a
prospective material adverse change) shall have occurred in the United States or
English loan syndication or financial, banking, currency or capital market
conditions generally from those in effect on the date hereof that, individually
or in the aggregate, in the judgment of Merrill Lynch could reasonably be
expected to adversely affect the consummation of the Transactions or the other
transactions contemplated by this Commitment Letter or adversely affect the
ability of Merrill Lynch to successfully syndicate the Credit Facility (it being
understood that the consummation of a successful syndication is not a condition
to Merrill Lynch's commitment hereunder); no banking moratorium shall have been
declared by United States Federal, English or New York State banking authorities
and shall be continuing; (c) the Target, the Company and their respective
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subsidiaries shall not have syndicated or issued, attempted to syndicate or
issue, announced or authorized the announcement of the syndication or
issuance of, or engaged or discussion concerning the syndication or issuance
of, any debt facility or debt security of the Target, the Company or any of
their respective subsidiaries, including renewals thereof, except that the
Company may continue and increase its existing commercial paper program,
backstopped on and after the date of execution and delivery of the Credit
Documentation (the "Closing Date") only by the Credit Facility; and (d) the
satisfaction of the other terms and conditions set forth or referred to
herein (including, without limitation, those set forth in Sections 1, 2 and
5) and in the Term Sheet. For purposes of this Commitment Letter and the
Term Sheet, the "subsidiaries" of the Company shall be deemed to include
those who will become subsidiaries of the Company in connection with the
Transactions.
5. Information and Investigations. You hereby represent and
covenant that (a) all information and data (excluding financial projections)
concerning the Company, its subsidiaries, the Target, the Transactions and the
other transactions contemplated hereby (the "Information") that have been made
or will be prepared by or on behalf of you or any of your affiliates or
authorized representatives or advisors and that have been or will be made
available to Merrill Lynch by you or on your behalf in connection with the
transactions contemplated hereby, taken as a whole, is and will be complete and
correct in all material respects and does not and will not, taken as a whole,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements contained therein not misleading
in light of the circumstances under which such statements are made, and (b) all
financial projections concerning the Company, the Target, their respective
subsidiaries and the transactions contemplated hereby (the "Projections") that
have been prepared by or on behalf of you or any of your affiliates or
authorized representatives and that have been or will be made available to
Merrill Lynch by you or on behalf of you or any of your affiliates or authorized
representatives or advisors in connection with the transactions contemplated
hereby have been and will be prepared in good faith based upon assumptions
believed by you to be reasonable. You agree to supplement the Information and
the Projections from time to time until the Closing Date and, if requested by
Merrill Lynch, for a reasonable period thereafter necessary to complete the
syndication of the Credit Facility so that the representation and covenant in
the preceding sentence remain correct. In arranging the Credit Facility,
including the syndication thereof, Merrill Lynch will be using and relying
primarily on the Information and the Projections without independent check or
verification thereof.
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Merrill Lynch has completed a substantial portion of its due diligence
investigation of the Company and the Target and is pleased to confirm that it is
satisfied with the results thereof to date. However, we will need the
opportunity to complete the remaining portion of our due diligence efforts
necessary to substantiate the financial, legal and factual premises upon which
our commitment is based. Merrill Lynch's commitment hereunder is based upon the
accuracy and completeness of the financial and other information provided to us
by or on behalf of you and is subject to Merrill Lynch being afforded the
opportunity to complete the remainder of its customary due diligence
investigation with respect to each of the Company, the Target, their respective
subsidiaries, the Transactions, including (without limitation) in respect of
business, financial, tax, accounting, environmental, and other contingent
obligation matters, and other structural, legal and regulatory matters. If
Merrill Lynch's ongoing due diligence investigation discloses information, or
Merrill Lynch otherwise discovers information not previously disclosed to it,
that Merrill Lynch believes has had or could have, individually or in the
aggregate, a materially adverse impact on the business, assets, liabilities
(contingent or otherwise), operations, condition (financial or otherwise),
solvency, properties or material agreements of the Company or the Target,
individually or together with their respective subsidiaries taken as a whole, as
the case may be (and before and after giving effect to the Transactions), or on
the tax or accounting consequences of the Transactions, then Merrill Lynch (a)
shall be entitled to decline to participate in the financing contemplated hereby
or (b) may, in its sole discretion, suggest alternative financing amounts or
structures that ensure adequate protection for Merrill Lynch and the other
Lenders. In any such event, Merrill Lynch shall not be responsible or liable
for any damages which may be alleged as a result of its failure, in accordance
with the terms of this Commitment Letter, to provide its commitment in respect
of the Credit Facility.
6. Indemnification. By executing this Commitment Letter, you agree
to indemnify and hold harmless Merrill Lynch and each of the other Lenders and
their respective officers, directors, employees, affiliates, agents and
controlling persons (Merrill Lynch and each such other person being an
"Indemnified Party") from and against any and all losses, claims, damages and
liabilities, joint or several, to which any such Indemnified Party may become
subject arising out of or in connection with or relating to this Commitment
Letter, the Fee Letter, the Term Sheet, the Credit Facility, the loans under the
Credit Facility, the use of proceeds of any such loan, any of the Transactions
or any related transaction and the performance by Merrill Lynch or any of its
affiliates of the services contemplated by this Commitment Letter and will
reimburse any Indemnified Party for any and all reasonable expenses (including
counsel fees and expenses) as they are
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incurred in connection with the investigation of or preparation for or
defense of any pending or threatened claim or any action or proceeding
arising therefrom, whether or not such Indemnified Party is a party and
whether or not such claim, action or proceeding is initiated or brought by
or on behalf of the Company or any of its affiliates and whether or not any
of the transactions contemplated hereby are consummated or this Commitment
Letter is terminated. You will not be liable under the foregoing
indemnification provision to an Indemnified Party to the extent that any
loss, claim, damage, liability or expense is found in a final non-appealable
judgment by a court of competent jurisdiction to have resulted primarily from
such Indemnified Party's willful misconduct, bad faith or gross negligence.
You also agree that no Indemnified Party shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to the
Company, the Target or their respective security holders or creditors related
to or arising out of or in connection with this Commitment Letter, the Fee
Letter, the Term Sheet, the Credit Facility, the loans under the Credit
Facility, the use of proceeds of any such loan, any of the Transactions or
any related transaction or the performance by Merrill Lynch or any of its
affiliates of the services contemplated by this Commitment Letter, except to
the extent that any loss, claim, damage or liability is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
primarily from such Indemnified Party's willful misconduct, bad faith or
gross negligence.
You agree that, without Merrill Lynch's prior written consent, you
will not settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding in respect of which
indemnification has been or could be sought under the indemnification provisions
of this Commitment Letter (whether or not Merrill Lynch or any other Indemnified
Party is an actual or potential party to such claim, action or proceeding),
unless such settlement, compromise or consent (i) includes an unconditional
written release in form and substance satisfactory to the Indemnified Parties of
each Indemnified Party from all liability arising out of such claim, action or
proceeding and (ii) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of any Indemnified Party.
In the event that an Indemnified Party is requested or required to
appear as a witness in any action brought by or on behalf of or against you or
any of your affiliates in which such Indemnified Party is not named as a
defendant, you agree to reimburse Merrill Lynch for all reasonable expenses
incurred by it in connection with such Indemnified Party's appearing and
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preparing to appear as such a witness, including, without limitation, the fees
and disbursements of its legal counsel.
7. Costs and Expenses. By executing this Commitment Letter, you
agree to reimburse Merrill Lynch and its affiliates upon request made from time
to time for their reasonable out-of-pocket expenses (including, without
limitation, expenses of Merrill Lynch's due diligence investigation,
consultants' fees (if such consultants are engaged by Merrill Lynch with your
consent (which consent shall not be unreasonably withheld or delayed)),
syndication expenses, appraisal and valuation fees and expenses, travel
expenses, and the reasonable fees, disbursements and other charges of counsel)
incurred in connection with the Credit Facility and the negotiation,
preparation, execution and delivery, waiver or modification, administration,
collection and enforcement of this Commitment Letter, the Term Sheet, the Fee
Letter, the Credit Documents and the security arrangements in connection
therewith.
8. Confidentiality. You agree that this Commitment Letter, the Term
Sheet, the Fee Letter, the contents of any of the foregoing and Merrill Lynch's
and/or its affiliates' activities pursuant hereto or thereto is confidential and
shall not be disclosed by you to any person without the prior written consent of
Merrill Lynch, other than your officers, directors, employees, accountants,
attorneys and other advisors, and then only in connection with the Transactions
and on a confidential and need-to-know basis, except that, following your
acceptance hereof (and payment of any fees due and payable upon such acceptance
as set forth in the Fee Letter), you may (x) make such filings of this
Commitment Letter and the Term Sheet (but not the Fee Letter or any information
regarding any matter related to the Fee Letter) with the United States
Securities and Exchange Commission (the "SEC") as are required by the United
States federal securities laws and applicable rules and regulations thereunder
in connection with the Tender Offer and the Merger and describe the contents of
this Commitment Letter and the Term Sheet (but not the Fee Letter or any
information regarding any matter related to the Fee Letter) in any document
filed by the Company with the SEC in connection therewith, and (y) provide a
copy of this Commitment Letter and the Term Sheet (but not the Fee Letter or any
information regarding any matter related to the Fee Letter) on a confidential
basis to the Target and their respective officers, directors, employees,
accountants, attorneys and other advisors, and you may make such other public
disclosures of the terms and conditions hereof as you are required by applicable
law or compulsory legal process to make; provided, however, that if such
disclosure is required by applicable law or compulsory legal process you agree
to give Merrill Lynch reasonable notice to afford Merrill Lynch the opportunity
to seek a protective order and to cooperate with Merrill Lynch in securing
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such a protective order. You agree that you will permit Merrill Lynch to
review and approve any reference to Merrill Lynch in connection with the
Credit Facility or the transactions contemplated hereby contained in any
press release or similar public disclosure prior to public release.
9. Termination. In the event that (i) you have not accepted this
Commitment Letter by June 9, 1997 or executed a definitive Merger Agreement with
the Target in form and substance acceptable to Merrill Lynch on or prior to
June 9, 1997; (ii) the Closing Date does not occur on or before July 31, 1997;
(iii) any circumstance described in clause (a), (b), or (c) of the second
paragraph of Section 4 shall have occurred; (iv) the Tender Offer is terminated
without any Shares being purchased and the abandonment of the effort to acquire
the Target; or (v) the Target accepts an acquisition or recapitalization
proposal other than that of the Company or upon the termination of an executed
acquisition agreement between the Company and the Target, this Commitment Letter
and Merrill Lynch's commitment hereunder shall terminate (upon written notice by
Merrill Lynch with respect to clause (ii) of this sentence) unless Merrill Lynch
shall, in its discretion, agree to an extension. Notwithstanding the foregoing,
the compensation, reimbursement, indemnification and confidentiality provisions
hereof and of the Term Sheet and the Fee Letter and Sections 11 and 14 of this
Commitment Letter shall survive any termination of this Commitment Letter or
Merrill Lynch's commitment hereunder.
10. Assignment, Etc. This Commitment Letter and Merrill Lynch's
commitment hereunder shall not be assignable by either party hereto without the
prior written consent of the other party hereto, and any attempted assignment
shall be void and of no effect; provided, however, that nothing contained in
this Section shall prohibit Merrill Lynch (in its sole discretion) from
(i) performing any of its duties hereunder through any of its affiliates,
including Merrill Lynch, Pierce, Fenner & Smith Incorporated, and you will owe
any related duties (including those set forth in Section 2 above) to any such
affiliate, and (ii) granting participations in, or selling assignments of all or
a portion of, the commitments or the loans under the Credit Facility pursuant to
arrangements satisfactory to Merrill Lynch. This Commitment Letter is intended
to be solely for the benefit of the parties hereto and is not intended to confer
any benefits upon, or create any rights in favor of, any person other than the
parties hereto.
11. GOVERNING LAW. THIS COMMITMENT LETTER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW). The Company hereby irrevocably submits to
the jurisdiction of any New York State or Federal
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court sitting in The City of New York, New York County, in any action or
proceeding arising out of or relating to this Commitment Letter or the Fee
Letter, and the Company hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in such New York
State court or such Federal court. The Company hereby irrevocably waives, to
the fullest extent it may effectively do so, the defense of an inconvenient
forum to the maintenance of such action or proceeding. The Company hereby
irrevocably consents to the service of copies of any summons and complaint
and any other process which may be served in any such action or proceeding by
certified mail, return receipt requested, or by delivering a copy of such
process to the Company, at its address specified in Section 16 or by any
other method permitted by law. The Company agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or by any other manner provided
by law.
12. Execution in Counterparts. This Commitment Letter may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Commitment Letter by
telecopier shall be effective as delivery of a manually executed counterpart of
this Commitment Letter.
13. Amendments, Etc. No amendment or waiver of any provision of this
Commitment Letter, nor any consent or approval to any departure therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
parties hereto and then any such waiver, consent or approval shall be effective
only in the specific instance and for the specific purpose for which given. By
executing this letter, you acknowledge that this Commitment Letter and the Fee
Letter are the only agreements between you and Merrill Lynch with respect to the
Credit Facility and set forth the entire understanding of the parties with
respect thereto.
14. Waiver of Jury Trial. Each of you and Merrill Lynch (in each
case on its own behalf and, to the extent permitted by applicable law, on behalf
of its shareholders) waives all right to trial by jury in any action, proceeding
or counterclaim (whether based upon contract, tort or otherwise) related to or
arising out of any of the Transactions, the other transactions contemplated by,
or the performance by Merrill Lynch or any of its affiliates of the services
contemplated by, this Commitment Letter.
15. Public Announcements. You acknowledge that Merrill Lynch may, at
its option and expense, place an announcement
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in such newspapers and periodicals as it may choose, stating that Merrill
Lynch has acted in the capacity set forth in this Commitment Letter.
16. Notices. Any notice given pursuant to any of the provisions of
this agreement shall be in writing and shall be mailed or delivered, if to you,
at your address set forth on page one of this agreement to the attention of Hans
Ola Meyer, Director, and, if to Merrill Lynch, at the offices of Merrill Lynch,
Merrill Lynch World Headquarters, North Tower, World Financial Center, New York,
New York 10281, Attention: Mike Zupon, with a copy to Michael E. Michetti, Esq.,
at Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005.
[Signature Page Follows]
<PAGE>
Please confirm that the following correctly sets forth our agreement
of the terms hereof and the Fee Letter by signing and returning to Merrill Lynch
the duplicate copy of this letter and Fee Letter enclosed herewith. Upon your
acceptance hereof, this letter shall constitute a binding agreement between you
and Merrill Lynch; provided Merrill Lynch shall have received your executed
duplicate copies not later than 5:00 p.m., New York City time, on June 9, 1997,
at which time Merrill Lynch's commitment hereunder will expire in the event
Merrill Lynch has not received such executed duplicate originals.
We are pleased to have this opportunity and we look forward to working
with you on this transaction.
Very truly yours,
MERRILL LYNCH CAPITAL CORPORATION
By: /s/ Michael Zupon
-------------------------------
Name: Michael Zupon
Title: Managing Director
Accepted and agreed to as of
the date first written above:
ATLAS COPCO AB
By: /s/ Hans Ola Meyer
--------------------------
Name: Hans Ola Meyer
Title: Director
By: /s/ Hans Sandberg
-------------------------
Name: Hans Sandberg
Title: Director
<PAGE>
CONFIDENTIAL
EXHIBIT A
Atlas Copco AB
Up to US$1.5 Billion Multi-Currency Revolving Credit and Swingline Facility
Summary Terms and Conditions
Borrower: Atlas Copco AB (the "Borrower").
Facility Type: Multi-Currency Revolving Credit and Swingline
Facility (the "Facility")
Facility Amount: Up to US$1,500,000,000 or the equivalent in
Agreed Optional Currencies, of which up to a
total of US$100 million (appropriately adjusted
for Facility size) may be drawn via a U.S.
Dollar swingline facility (the "Swingline
Facility").
Agreed Optional Currencies: Deutsche Marks, Swiss Francs, French Francs and,
to the extent freely available to the Banks,
Dutch Guilders.
Transactions: The Borrower intends, directly or indirectly, to
acquire (the "Acquisition") all the issued and
outstanding capital stock of a company
previously disclosed to the Arranger (the
"Target") pursuant to a merger agreement (the
"Merger Agreement") to be entered into between
the Borrower,a wholly-owned subsidiary of the
Borrower formed to effect the Acquisition (the
"Acquisition Sub") and the Target. The
Acquisition will take the form of a tender offer
(the "Tender Offer") by the Acquisition Sub for
all the issued and outstanding shares of common
stock of the Target (the "Shares") and the
purchase of the portion of the Shares tendered
and not withdrawn pursuant to the Tender Offer
(the "Tendered Shares"), which purchase will be
subject to the condition that not less than the
number of the Shares (on a fully diluted basis)
which would entitle the Borrower to approve the
Merger without the affirmative vote of any other
security-holder or any other person be tendered
and not withdrawn pursuant to the Tender Offer.
1
<PAGE>
In connection with the launching of the Tender
Offer, the Borrower intends to give notice to
the lenders thereunder of its intention to repay
all financial indebtedness (and terminate all
commitments to make extensions of credit) under
its existing US$250 million syndicated revolving
credit and swingline facility (for which
Enskilda acts as facility agent) (the
"Refinanced Debt") but shall continue and
increase its Commercial Paper program (subject
to the Facility being the sole back stop
facility therefor). In addition, after
consummation of the Tender Offer, the Borrower
intends (x) to repay the existing public debt
securities of the Target aggregating
approximately US$67 million (or to make other
satisfactory arrangements with respect to those
securities) and (y) to repay all other financial
indebtedness and terminate all commitments to
make extensions of credit under all credit
arrangements of the Target and its subsidiaries
aggregating approximately US$160 million (the
transactions in (x) and (y), the "Target Debt
Repayment").
Pursuant to the Merger Agreement, after
consummation of the Tender Offer, the
Acquisition Sub will merge (the "Merger") into
the Target and the Target will be the survivor.
The Acquisition, the Target Debt Repayment, the
Tender Offer, the Merger, the repayment of all
financial debt and the cancellation of
all commitments to make extensions of credit
under the Refinanced Debt (the "Existing Debt
Repayment") and the entering into the Merrill
Lynch Facility Agreement are herein referred to
as the "Transactions").
Purpose: The Facility will be available initially to
provide funds for and/or to backstop issuances
of Commercial Paper made for the purpose of
providing funds for (i) financing the Tender
Offer and the Acquisition for aggregate
consideration not to exceed US$950 million and
to effect the Existing Debt Repayment, and (ii)
paying fees and expenses in connection with the
Transactions.
Thereafter the Facility will be available as a
Commercial Paper backstop facility and for
general corporate purposes (including without
limitation to finance the Target Debt Repayment).
Arranger and Syndication Merrill Lynch & Co. will act as sole and
Agent exclusive arranger and syndication agent (the
"Arranger") for a syndicate of participating
Banks.
Facility Agent and Each a Bank to be mutually agreed by the Borrower
Swingline Agent and the Arranger.
2
<PAGE>
Participating Banks: Merrill Lynch Capital Corporation ("Merrill Lynch")
and a group of international banks (the "Banks"),
as mutually agreed between the Borrower and the
Arranger.
Termination of commitments: The commitments in respect of the Facility will
terminate in their entirety on 31st July 1997 if
the Closing Date for the Tender Offer does not
occur on or before that date. Terminated
commitments may not be reinstated.
Maturity: Five years from the date of execution and delivery
of the Credit Documentation.
Availability: Upon satisfaction of conditions precedent, drawings
may be made on a fully revolving basis in
minimum tranche amounts of US$10 million or the
equivalent thereof in an Agreed Optional Currency
and integral multiples of US$5 million (or the
equivalent thereof) up to the maximum amount
available under the Facility, subject to a
maximum of a number of tranches (excluding any
advances outstanding under the Swingline Facility)
and currencies outstanding at any one time to be
agreed between the Borrower and the Arranger.
Commitment Fee: Commitment fee will be calculated on the undrawn
and available amount of the Facility, such
calculation to be effective from the date of
execution and delivery of the Credit
Documentation. The Commitment fee will be
calculated on the basis of the actual number of
days elapsed in a year of 360 days, and will be
payable quarterly in arrears at the following
rates:
Borrower's Senior Unsecured
Credit Rating Fee
> or = to AA- or Aa3 6.5 basis points p.a.
> or = to A- or A3 7.5 basis points p.a.
< or = to BBB+ of Baa1 10 basis points p.a.
However, until the earlier of 90 days after the
Closing Date and such time as the Borrower's
ratings by Standard and Poor's and Moody's are
first published, the fee shall be at the rate of
7.5 basis points p.a.
If ratings by Standard and Poor's and Moody's are
split, the lower rating applies, or if a long-term
rating is no longer published or is withdrawn by
either Standard and Poor's or Moody's, the BBB+ or
Baa1 tier shall apply.
Interest Rate: The aggregate of the appropriate London Inter-bank
Offered Rate ("LIBOR") as determined by the
Facility Agent for the relevant period and currency
plus the applicable margin as follows:
3
<PAGE>
Borrower's Senior Unsecured
Credit Rating Margin
> or = to AA- or Aa3 15.0 basis points p.a.
> or = to A- or A3 20.0 basis points p.a.
< or = to BBB+ or Baa1 22.5 basis points p.a.
However, until the earlier of 90 days after the
Closing Date and such time as the Borrower's
ratings by Standard and Poor's and Moody's are
first published, the margin shall be 20.0 basis
points p.a.
If ratings by Standard and Poor's and Moody's
are split, the lower rating applies, or if a
long-term debt rating is no longer published or
is withdrawn by either Standard and Poor's or
Moody's, the BBB+ or Baa1 tier shall apply.
Interest will be payable at the end of each
interest period, except that for any interest
period in excess of 3 months, accrued interest
will be payable after each 3 months. Interest
will be calculated on the basis of the actual
number of days elapsed in a year of 360 days.
Utilisation Fee: The Borrower shall pay a Utilisation Fee
quarterly in arrears to the Facility Agent on
behalf of the Banks calculated on the average
utilisation of the Facility during the preceding
three months as follows:
Utilisation Fee
0 - 50% Nil
51 - 100% 2.5 basis points p.a.
Interest Periods: 1, 3 or 6 months or such other period as may be
agreed from time to time by the Banks (subject
to a maximum number of drawings of one month
maturity in any one year to be agreed between
the Borrower and the Arranger).
Cancellation: The undrawn portion of the Facility may be
cancelled in whole or in part in minimum amounts
of US$10 million and integral multiples of US$5
million or equivalent thereof in an Agreed
Optional Currency by the Borrower without
penalty, upon 30 days' prior written notice to
the Facility Agent. Amounts cancelled may not be
re-drawn.
Swingline Availability
- ----------------------
U.S. Dollar Swingline Up to US$100 million of the overall Facility
Facility Amounts: (appropriately adjusted for Facility size) will
be available to be drawn under the U.S. Dollar
Swingline Facility.
4
<PAGE>
U.S. Dollar Swingline Upon satisfaction of conditions precedent,
Facility Availability: drawings may be made in minimum tranche amounts
of US$10 million and integral multiples of US$5
million (or such other minimum amounts and/or
multiples as may be appropriate having regard
to Facility size). Swingline advances will be
available on a same day basis up to the maximum
amount available under the Swingline Facility.
Advances will be drawn on a daily basis for up
to a maximum of 5 consecutive New York business
days.
U.S. Dollar Swingline Interest will accrue at the higher of the Prime
Facility Interest Rate: Rate of the Swingline Agent and 50 basis points
above the Federal Funds Rate (as quoted by the
Swingline Agent) for overnight deposits plus
the applicable margin as described above.
Terms Applicable to the overall Facility
- ----------------------------------------
Taxes: All payments by the Borrower shall be made free
and clear of all withholdings, taxes and
deductions.
Documentation: The Facility will be evidenced by a facility
agreement (the "Merrill Lynch Facility
Agreement") between the Arranger, the
Borrower, the Facility Agent, the Swingline
Agent and the Banks containing provisions
usual for facilities and transactions of this
type and reasonably acceptable to the Borrower
and the Arranger. The Merrill Lynch Facility
Agreement will be prepared by Cahill Gordon &
Reindel and Linklaters & Paines, legal advisers
to the Arranger, and as far as appropriate will
be substantially in the form of the US$250
million Agreement dated 24th February 1995.
Governing Law: English law.
Conditions Precedent: The Facility shall become available to the
Borrower only upon satisfaction (all in a
manner in all respects satisfactory to the
Arranger) of conditions precedent usual for
facilities and transactions of this type and
the conditions precedent specified below and in
the Commitment Letter, and of such additional
conditions precedent as may be required by the
Arranger. The date on which the Arranger
notifies the Borrower it is so satisfied shall
be the "Effective Date".
In particular availability of the Facility shall
be subject to execution and delivery of the
Merrill Lynch Facility Agreement in form and
substance satisfactory to the Banks; delivery
of borrowing requests; accuracy of
representations and warranties; absence of
defaults and material litigation; evidence of
authority; compliance with laws; adequate
insurance; and payment of fees and legal and
other expenses.
Additional Conditions to The Effective Date will not occur unless the
Effective Date: following additional conditions are satisfied
as set out above:
5
<PAGE>
- The delivery, on or prior to the Effective Date,
of (a) legal opinions in form and substance
satisfactory to the Arranger as to matters of
applicable US, English and Swedish law, (b)
officers' certificates, together with the
accompanying charter documents and corporate
resolutions in form and substance satisfactory
to the Arranger, and (c) such other closing
documents customary for such agreements or
reasonably requested by the Arranger.
- The Board of Directors of the Borrower and the
Target shall have approved the Tender Offer and
the Merger, The Acquisition Sub and the Target
shall have entered into the Merger Agreement and
the Merger Agreement shall be in full force and
effect. The terms, conditions and structure of
the Tender Offer and the Merger, including any
amendments thereto (and the documents therefor)
including, without limitation, the price per
Share, shall be in form and substance
satisfactory to the Arranger and the Banks. All
Tendered Shares shall have been accepted for
payment in accordance with the terms of the
Tender Offer.
- The Borrower shall, upon consummation of the
Tender Offer, own and control such number of
Shares as shall be necessary to approve the
Merger without the affirmative vote or approval
of any other security-holder or any other
person. The Tender Offer and the financing
therefor shall be in compliance with all laws
and regulations. Any state antitakeover law,
if any, regulating the Tender Offer or the Merger
shall have been complied with or shall have been
determined by the Arranger and the Banks to be
invalid or inapplicable to the Tender Offer and
the Merger. The Arranger shall have received
copies, certified by the Borrower, of all filings
made with any governmental authority in
connection with the Tender Offer, the Merger or
the other Transactions.
- The Target shall not have any "poison pill"
rights or shall have redeemed such rights at a
nominal price, or the Arranger and the Banks
shall otherwise be satisfied that such rights
are null and void applied to the Tender Offer
and the Merger.
- All conditions in the Tender Offer shall have
been satisfied, and not waived, amended,
supplemented or otherwise modified except with
the consent of the Arranger and the Banks, to
the satisfaction of the Arranger and the Banks.
The purchase price for the Tendered Shares shall
not exceed US$32.00 per share.
6
<PAGE>
- All requisite third party and governmental
authorities in the United States, Sweden and
elsewhere shall have approved or consented to
the Transactions and the other transactions
contemplated hereby (without the imposition of
any burdensome conditions) and all such
approvals and consents shall be in full force
and effect. All applicable waiting periods shall
have expired without any action being taken by
any competent authority which restrains,
prevents or imposes materially adverse
conditions upon the Transactions.
- There shall not have occurred or become known
(a) any material adverse change or any condition
or event which could reasonably be expected to
result in a material adverse charge in the
business, assets, liabilities (contingent or
otherwise), operations, condition (financial or
otherwise), solvency, properties or material
agreements (each, a "Material Adverse Change") of
the Borrower of the Target, individually or
together with their respective subsidiaries taken
as a whole, as the case may be (and before and
after giving effect to the Transactions),
(b) any facts or circumstances discovered by the
Banks in the course of their ongoing due diligence
investigation, including (without limitation)
their review of the historical, pro forma and
projected consolidated financial statements of the
Borrower and/or the Target and their respective
subsidiaries reflecting the forecasted financial
condition, income and expenses of the Borrower
and/or the Target and their respective
subsidiaries after giving effect to the
Transactions and the other transactions
contemplated hereby, which (x) the Banks
reasonably believe could, individually or in
the aggregate, have a material adverse effect
on the Transactions or result in a
Material Adverse Change with respect to the
Borrower and/or the Target, individually or
together with their respective subsidiaries taken
as a whole, as the case may be (and before and
after giving effect to the Transactions) or
(y) would be materially inconsistent with the
assumptions underlying the projections, (c) any
transaction (other than the Transactions) entered
into by the Borrower or the Target or any of their
respective subsidiaries, whether or not in the
ordinary course of business, which is material to
the Borrower or the Target, individually or
together with their respective subsidiaries taken
as a whole, or (d) any dividend or distribution
of any kind declared or paid by the Borrower or
the Target on its capital stock.
7
<PAGE>
- There shall not exist any threatened or
pending action, proceeding or counterclaim by or
before any court or governmental, administrative
or regulatory agency or authority in the United
States, Sweden or elsewhere (a) challenging the
consummation of any of the Transactions or which
would restrain, prevent or impose burdensome
conditions on the Transactions, (b) seeking to
prohibit the ownership or operation by the
Borrower or any of its subsidiaries of all or a
material part of any of their business or assets
of those of the Target, or (c) seeking to
obtain, or having resulted in the entry of, any
judgment, order or injunction which (i) could
reasonably be expected to result in a Material
Adverse Change, (ii) could purport to affect the
legality, validity or enforceability of the
Merrill Lynch Facility Agreement or any
documents relating thereto or could have a
material adverse effect on the Borrower's
ability to perform its obligations under the
Merrill Lynch Facility Agreement or the rights
and remedies of the Banks, (iii) would be
materially inconsistent with the stated
assumptions underlying the projections provided
to the Arranger and the Banks, or (iv) is
seeking any material damages as a result thereof.
- Any defaults in any material agreements of the
Borrower or the Target which may result from the
Transactions shall have been resolved or
otherwise addressed in a manner reasonably
satisfactory to the Arranger; and no law or
regulation shall be applicable in the reasonable
judgment of the Arranger which restrains,
prevents or imposes materially adverse
conditions upon any of the Transactions or the
financing thereof.
- All other documentation and agreements related
to the Transactions or which, in the judgment of
the Arranger, affects the Merrill Lynch Facility
Agreement and the commitments thereunder in any
respect shall be in form and substance
satisfactory to the Arranger; and all conditions
precedent under all documents relating to the
Transactions or the financing or refinancing
thereof shall have been satisfied (except to the
extent such conditions have been waived with the
prior consent of the Banks and Arranger).
- All loans and other financing to the Borrower
shall be in full compliance with all applicable
requirements of Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System.
- The Arranger shall be satisfied that all
financial indebtedness shall have been repaid
and all commitments shall have been cancelled
with respect to the Refinanced Debt.
8
<PAGE>
- All security interests in favour of existing
lenders which are to be repaid shall have been
unconditionally released and evidence thereof
satisfactory to the Arranger shall have been
provided in writing.
- All accrued fees and expenses (including the
reasonable legal fees of the legal advisers to
the Banks, the Arranger and the Facility Agents
of the Banks, the Arranger and the Facility
Agent in connection with the Merrill Lynch
Facility Agreement shall have been paid.
- The Banks shall be reasonably satisfied with
all legal, tax and accounting matters relating to
the Transactions, including, without limitation,
the ability of subsidiaries of the Borrower to
repatriate funds to the Borrower and the
withholding tax consequences thereof.
- The Arranger shall have determined that
reasonably satisfactory insurance relating to
the Borrower, the Target and their subsidiaries
will be in place after the Tender Offer and the
Merger.
- The Arranger shall be satisfied as to the
amount and nature of all tax and ERISA, employee
retirement benefit and other contingent
liabilities which the Borrower or any of its
subsidiaries or the Target or any of its
subsidiaries may be subject, and the plans of
the Borrower and its subsidiaries with respect
thereto.
- The Banks shall have received a satisfactory
pro forma balance sheet of the Borrower and its
subsidiaries as at the Effective Date and after
giving effect to the Transactions, which pro
forma balance sheet shall be substantially in
conformity with that delivered to the Banks
during syndication. The Banks shall have
received projected cash flow and income
statements for the period of six years following
the Effective Date, which projections shall be
(a) based upon reasonable assumptions made in
good faith, (b) reasonably satisfactory to the
Banks, and (c) substantially in conformity with
those delivered to the Banks during syndication.
The Banks shall have received (i) audited
financial statements of the Target for the year
ended 31st December 1996 and (ii) unaudited
interim combined financial statements of each of
the Borrower, the Acquisition Sub and the Target
for the period ended 31st March 1997 and such
financial statements shall not, in the
reasonable judgment of the Banks, reflect any
material adverse change in the financial
condition of any of them as reflected in the
financial statements or projections previously
furnished to the Banks.
9
<PAGE>
- The Banks shall have received the results of a
recent lien, tax and judgment search in each of
the jurisdictions where assets of the Borrower,
the Target and their subsidiaries are located or
recorded, and such search shall reveal no liens
on any of their assets except for liens
permitted by the Merrill Lynch Facility
Agreement or liens to be discharged in
connection with the transactions contemplated
hereby.
- The Borrower and its subsidiaries and the
Target and its subsidiaries shall have conducted
their respective businesses in the ordinary
course.
- All other material documentation of the
Borrower and its subsidiaries shall be
reasonably satisfactory in form and substance to
the Arranger.
- The Banks shall have received such other legal
opinions, corporate documents, and other
instruments and/or certificates as they may
reasonably request.
No advances in excess of US$1,275,000,000 will
be made unless and until the Target Debt
Repayment has been made and the Acquisition Sub
has acquired all the Shares.
Additional Conditions to Each advance under the Facility will be subject
all Extensions of Credit: to (a) the absence of any Event of Default or
Potential Event of Default, (b) continued
accuracy of representations and warranties
(except representations and warranties made only
as of a prior date), and (c) absence of any
Material Adverse Change and no material adverse
effect upon the ability of the Borrower to
perform its obligations under the Merrill Lynch
Facility Agreement.
Pari Passu Ranking: The Borrower will procure, and will cause its
material subsidiaries to procure, (including,
without limitation, by executing all necessary
agreements and instruments) that the obligations
of the Borrower under the Merrill Lynch Facility
Agreement will rank at least pari passu with all
the Borrower's and such material subsidiary's
other unsecured and unsubordinated obligations.
Representations and The Borrower will make representations and
Warranties: warranties customary for a facility of this
nature and such additional representations and
warranties as may be required by the Arranger.
In particular it will make representations and
warranties as to ERISA matters, environmental
matters, use of proceeds and margin
requirements. The obligations of the Banks
in relation to each drawing will be subject to
the representations and warranties remaining
true and accurate as at the date of such drawing.
10
<PAGE>
Covenants: To include, inter alia:
(i) Consummation of the Merger within
90 days after consummation of the
Tender Offer on the terms set out in
the Merger Agreement (without waiver
or amendment of any material term)
(ii) No material change to the Merger
Agreement or any agreement related
thereto without the consent of the
Arranger and the majority Banks
(iii) ERISA compliance
(iv) Environmental compliance
(v) Provision of Financial Information
(vi) Negative Pledge
(vii) To effect the Target Debt Repayment
and, to the extent that the Borrower
is unable to purchase or procure the
redemption of the public debt
securities of the Target, to make
arrangements with respect to such
debt instruments satisfactory to the
Banks
(viii) Financial Covenants to be mutually
agreed by the Borrower and the
Arranger
(ix) Disposals Restrictions
(x) Change in nature of business.
Events of Default: Clauses customary for a facility of this type
and others to be specified by the Arranger
(subject to grace periods, minimum amounts and
other conditions to be agreed), to include
without limitation the following:
(i) Non-payment
(ii) Breach of covenants
(iii) Breach of representations and
warranties
(iv) Cross default on any other permitted
borrowings of any member of the
Group (as defined below)
(v) Insolvency of any member of the Group
(vi) Change of Control of the Borrower
(vii) Material adverse change.
Default Rate: The applicable interest rate (including the
applicable margin) plus 2.00% p.a.
11
<PAGE>
Transferability: Until completion of syndication (as determined by
the Arranger) each Bank's commitment will be
transferable in minimum amounts of US$10
million without consent of the Borrower but in
consultation with the Borrower (unless the
Borrower and the Facility Agent agree to a
lesser amount or unless the assigning Bank's
exposure is reduced to zero). Thereafter, each
Bank's commitment will be transferable in
minimum amounts of US$10 million subject to the
Borrower's prior written consent, which shall
not be unreasonably withheld, except that no
such consent need be obtained to a transfer to
any Bank (or its affiliates) or if any Event of
Default has occurred and is continuing.
Reserve Requirements: In the event of the existing requirements of any
central bank or other competent authority being
changed, or any new such requirements being
imposed, such that the overall cost to any of
the Banks of providing the Facility is
increased, and/or the return on capital to any
of the Banks in respect of the Facility is
reduced, the Borrower shall (provided it is
notified of such cost as soon as the relevant
Bank becomes aware of it) compensate the
relevant Bank or Banks by way of additional
payment for the resultant higher cost and/or
reduced return involved in continuing to provide
the Facility to the Borrower, and may (without
prejudice to its obligation to make such payment):
(1) cancel the relevant Bank's participation in
the Facility and repay, in whole, but not
in part without penalty, any drawings
thereunder; or
(2) arrange for the transfer of the commitment
of the relevant Bank or Banks thereby
affected to another party.
Compensation for increased costs will not
include capital adequacy costs resulting from
the current interpretation and implementation of
the matters set out in the report dated July,
1988 entitled "International Convergence of
Capital Measurement and Capital Standards" issued
by the Basle Committee on Banking Regulations
and Supervisory Practices.
Illegality: In the event that it becomes illegal for any
Bank to lend or maintain its commitment, the
Borrower shall repay that Bank and/or that
Bank's commitment will be cancelled.
Expenses: All legal and other out-of-pocket expenses
incurred by the Arranger in connection with the
negotiation and preparation of the Facility
agreement will be for the account of the
Borrower, which will also be responsible for its
own legal costs.
12
<PAGE>
* Capitalised terms used herein and not defined shall have the meanings
assigned to such terms in the Commitment Letter. References herein to "US"
and "U.S. Dollars" are to United States Dollars. For all purposes of this
Terms Sheet, the "subsidiaries" of the Borrower shall be deemed to include
those entities which will become subsidiaries of the Borrower in connection
with the Transactions, and "Group" shall be deemed to include the Borrower
and all such subsidiaries.
13
<PAGE>
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
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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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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(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: _________________________
Name:
Title:
PS ACQUISITION CORP.
By: _________________________
Name:
Title:
PRIME SERVICE, INC.
By: _________________________
Name:
Title:
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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
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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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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(c)-2
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
-8-
<PAGE>
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
-9-
<PAGE>
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(c).3
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(c)(4)
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(g)
[Coopers Coopers & Lybrand L.L.P.
&Lybrand logo] a professional services firm
Report of Independent Accountants
To the Board of Directors and Stockholders
of Atlas Copco North America Inc.:
We have audited the accompanying consolidated balance sheets of Atlas Copco
North America Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations and retained earnings, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Atlas
Copco North America Inc. and subsidiaries as of December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Parsippany, New Jersey
January 27, 1997
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International,
a limited liability association incorporated in Switzerland.
<PAGE>
ATLAS COPCO NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
(In thousands, except share information) 1996 1995
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ --
Accounts and notes
receivable - net 160,353 161,464
Receivables from affiliates 20,141 15,230
Inventory - net 168,600 172,103
Prepaid expenses and other current assets 15,629 16,074
Deferred income taxes 26,444 21,201
---------- ----------
Total Current Assets 391,167 386,072
---------- ----------
FIXED ASSETS:
Rental fleet - net 36,455 28,966
Property, plant and equipment - net 158,985 148,827
---------- ----------
Total Net Fixed Assets 195,440 177,793
---------- ----------
OTHER NON-CURRENT ASSETS:
Excess of cost over net assets
acquired, patents and trademarks - net 442,133 454,656
Deferred income taxes 29,524 33,974
Investment in unconsolidated
companies 8,083 8,204
Deferred pension cost -- 3,248
Accounts and notes receivable and other
assets 3,036 2,671
---------- ----------
Total Other Non-current Assets 482,776 502,753
---------- ----------
TOTAL $1,069,383 $1,066,618
========== ==========
See notes to consolidated financial statements.
2
<PAGE>
- --------------------------------------------------------------------------------
(In thousands, except share information) 1996 1995
- --------------------------------------------------------------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank borrowings $ 22,170 $ 27,171
Accounts payable and accrued expenses 160,580 143,222
Amounts due to affiliates 176,878 136,201
---------- ----------
Total Current Liabilities 359,628 306,594
---------- ----------
NON-CURRENT LIABILITIES:
Pension obligations 22,493 17,553
Postretirement benefit obligations 31,744 32,111
Deferred income taxes 34,569 35,065
Minority interest 5,024 4,212
Amounts due to affiliates 300,000 350,000
Other non-current liabilities 27,406 28,477
---------- ----------
Total Non-Current Liabilities 421,236 467,418
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value;
shares authorized 50,000; shares issued
and outstanding, 1996-0; 1995-35,506 -- 130,000
Common stock, no par value;
shares authorized 100,000; shares
issues and oustanding, 1996-48,294;
1995-35,506 255,730 125,730
---------- ----------
Adjustment to recognize minimum pension
liability (7,834) (6,142)
Cumulative translation adjustment (403) 970
Paid-in capital 8,232 8,232
Retained earnings 32,794 33,816
---------- ----------
Total Stockholders' Equity 288,519 292,606
---------- ----------
TOTAL $1,069,383 $1,066,618
========== ==========
3
<PAGE>
ATLAS COPCO NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
(In thousands) 1996 1995
- --------------------------------------------------------------------------------
NET SALES & EQUIPMENT
RENTALS $ 1,130,818 $ 841,678
COSTS AND EXPENSES:
Cost of sales 868,047 649,277
Selling and administrative expenses 193,056 137,044
Relocation charge 12,800 --
----------- ---------
Total Costs and Expenses 1,073,903 786,321
----------- ---------
OPERATING PROFIT 56,915 55,357
EQUITY IN EARNINGS OF
UNCONSOLIDATED COMPANIES 1,133 714
INTEREST INCOME & OTHER (EXPENSE)
INCOME - NET (5,365) (1,073)
INTEREST EXPENSE (35,713) (22,190)
----------- ---------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 16,970 32,808
INCOME TAXES (14,645) (17,121)
MINORITY INTEREST (1,347) (894)
----------- ---------
NET INCOME 978 14,793
RETAINED EARNINGS, BEGINNING
OF YEAR 33,816 21,023
DIVIDENDS (2,000) (2,000)
----------- ---------
RETAINED EARNINGS, END OF YEAR $ 32,794 $ 33,816
=========== =========
See notes to consolidated financial statements.
4
<PAGE>
ATLAS COPCO NORTH AMERICA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
(In thousands) 1996 1995
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net Income $ 978 $ 14,793
Adjustments to reconcile net income
to net cash provided by operations:
Charges (credits) not impacting cash:
Depreciation and amortization 44,173 30,911
Recognition of deferred income -- (667)
Equity in earnings of unconsolidated
companies, net of dividends (844) (299)
Loss (gain) on sale of fixed assets 54 (290)
Deferred income taxes (1,288) 4,507
Relocation charge 11,000 --
Changes in assets and liabilities net of effects
of acquisition:
Increase in accounts and notes receivable (19,107) (44,917)
Increase in receivables from affiliates (4,911) (618)
Decrease (increase) in inventory 3,016 (13,001)
Increase in accounts and
notes receivable - non-current (375) (123)
Decrease (increase) in prepaid expenses and
other current assets 248 (3,116)
Increase in other non-current assets (136) --
(Decrease) increase in accounts payable and
accrued expenses (392) 33,493
Increase (decrease) in amounts due to
affiliates - trade 5,414 (5,533)
Increase in pension and postretirement
obligations 432 1,234
Increase in other non-current liabilities 213 1,600
------- -------
Net cash provided by operations 38,475 17,974
------- -------
See notes to consolidated financial statements.
5
<PAGE>
- --------------------------------------------------------------------------------
(In thousands) 1996 1995
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of fixed assets (55,422) (28,961)
Proceeds from sale of fixed assets 5,359 3,501
Acquisition, net of cash acquired -- (570,205)
----------- ---------
Net cash used in investing activities (50,063) (595,665)
----------- ---------
Cash flows from financing activities:
Proceeds from issuance of preferred stock -- 130,000
Payments on short-term borrowings with
affiliates (297,617) (404,060)
Proceeds from short-term borrowings with
affiliates 343,617 456,710
Proceeds from short-term bank borrowings 90,564 90,513
Payments of short-term bank borrowings (95,412) (68,461)
Proceeds from long-term borrowings with affiliates -- 350,000
Payments on long-term borrowings with affiliates (50,000) --
Proceeds from sale of receivables 20,525 20,609
Cash dividend paid (2,000) (2,000)
Payments under capitalized lease obligations (115) (3,765)
----------- ---------
Net cash provided by financing activities 9,562 569,546
----------- ---------
Effect of exchange rate changes on cash 2,026 719
----------- ---------
Net decrease in cash and cash equivalents -- (7,426)
Cash and cash equivalents at beginning of year -- 7,426
----------- ---------
Cash and cash equivalents at end of year $ -- $ --
=========== =========
Cash paid during the year for:
Income taxes $ 8,541 $ 10,538
=========== =========
Interest $ 43,615 $ 8,827
=========== =========
See notes to consolidated financial statements for additional non-cash
financing activities.
6
<PAGE>
ATLAS COPCO NORTH AMERICA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(Amounts in thousands, except share information)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Preparation - Atlas Copco North America
Inc. (the "Company" or "ACNA") is owned by Atlas Copco AB ("ACAB") and
Atlas Copco Airpower n.v. ("ACA"), a wholly owned subsidiary of ACAB. ACAB
and ACA own 73.5% and 26.5% of the outstanding common shares of ACNA,
respectively. In December, 1996, ACNA effected a recapitalization whereby
12,788 shares of common stock were issued for 100% of the outstanding
preferred stock of ACNA, eliminating the outstanding preferred stock. The
preferred shares were issued to ACA in September, 1995, in connection with
the acquisition of Esstar Inc., and had a liquidation preference to ACA of
$130 million.
The Company is engaged primarily in the manufacture, sale, and rental of a
diversified line of equipment, geographically disbursed, principally in the
United States. The accompanying consolidated financial statements include
the accounts of the Company and its subsidiaries. All intercompany accounts
and transactions have been eliminated in consolidation. Investments in less
than majority owned subsidiaries and affiliates are accounted for by the
equity method.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principals ("GAAP") requires management
to make estimates and use assumptions that affect certain reported amounts
and disclosures; actual amounts may differ.
Foreign Currency Transactions and Translations - The financial statements
of the Company's foreign subsidiaries are translated into U.S. dollars in
accordance with Statement of Financial Accounting Standards ("SFAS") No.
52. Assets and liabilities of foreign subsidiaries are translated into U.S.
dollars at year-end exchange rates. Sales and expense items are translated
at the average exchange rates prevailing during the period. Resulting
translation adjustments are included in stockholders' equity.
Gains and losses arising from the settlement of foreign currency
transactions and year-end valuation of foreign-denominated receivables and
payables are included in cost of sales and other income/expense in the
accompanying Consolidated Statements of Operations and Retained Earnings
and amounted to a net loss of $3,831 and $1,324 and 1996 and 1995,
respectively.
Revenue Recognition - Revenue is generally recognized when title passes to
the customer. Fulfillment of certain contracts can span several months;
revenue on such contracts is primarily recognized on the completed contract
basis. Revenue is recognized under the percentage-of-completion method for
contracts relating to the manufacture of tunnel boring equipment. Such
contracts require estimates to determine the appropriate cost and revenue
recognition. Current estimates of costs and revenues under the percentage
of completion method may be revised as additional information becomes
available. Unearned interest related to conditional sales contracts
(installment sales) is netted against accounts receivable and amortized to
income over the contract period. Rental income arising from operating
equipment leases is accrued using the straight-line method.
Cash and Cash equivalents - The Company considers all highly liquid
investments with a maturity of three months or less at the date of purchase
to be cash equivalents.
Inventory - Inventories are valued at the lower of cost or market. Cost is
determined principally by the last-in, first out ("LIFO") method.
Rental Fleet - The rental fleet, which consists primarily of compressors
leased under operating leases, is stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
related assets (three to twelve years). Depreciation expense aggregated
$10,952 and $10,734 in
7
<PAGE>
1996 and 1995 respectively. Accumulated depreciation at December 31, 1996
and 1995 aggregated $57,196 and $49,478 respectively. Maintenance and
repairs are charged to operations as incurred. Expenditures which increase
productive capacity or extend the life of the rental fleet equipment leased
under operating leases are capitalized.
Property, Plant and Equipment - Property, plant and equipment is stated at
cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets (three to forty years).
Depreciation expense aggregated $20,698 and $13,098 in 1996 and 1995,
respectively. Maintenance and repairs are charged to operations as
incurred. Expenditures which increase productivity or extend the life of an
asset are capitalized.
Goodwill and other intangibles - Goodwill represents the excess of cost
over the fair value of assets acquired and liabilities assumed related to
acquisitions by the Company. Goodwill and other intangibles are being
amortized, on a straight-line basis, over ten to forty years. Accumulated
amortization aggregated $52,464 and $39,941 at December 31, 1996 and 1995,
respectively.
The recoverability of long term assets, including goodwill is evaluated
based upon operating results and other changes in the business or business
environment. Should operating results or changes in the business or
business environment indicate potential impairment, the Company will
evaluate whether impairment exists based upon expected future cash flows.
Income Taxes - Income taxes are accounted for under SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109 deferred income taxes
reflect the tax consequences of differences between the financial reporting
and tax bases of assets and liabilities. A valuation allowance is provided
for deferred tax assets whose realization is not considered to be more
likely than not. Adjustments to the deferred income tax valuation allowance
are made periodically based on management's assessment of the
recoverability of the related assets.
Provisions for deferred income taxes are recorded to the extent of
withholding taxes and incremental U.S. taxes, if any, that will arise from
repatriation of dividends from those foreign subsidiaries where local
earnings are not permanently reinvested.
Research and Development Costs - Research and development costs are
charged to expense in the period in which the costs are incurred and
amounted to approximately $24,306 and $15,623 and 1996 and 1995,
respectively.
Relocation Charge - In the second quarter of 1996 the Company recorded a
charge of $12,800 related to its decision to relocate its Chicago Pneumatic
Tool Company ("CP") headquarters from Utica, New York, to a new facility in
Rock Hill, South Carolina. The significant components of the charge
recorded in 1996 included employee termination benefits - $9,200; asset
write-offs - $2,400; and other - $1,200. Of the $12,800 charge recorded in
the second quarter, approximately $1,800 has been paid through the end of
the year, and as a result the Company has a current liability of $5,111 and
a long term liability of $5,889 recorded at December 31, 1996, for the
remainder of the charge to be incurred subsequent to 1996.
Reclassifications - Certain prior year amounts have been reclassified to
conform with the current year presentation.
2. ACQUISITIONS AND DIVESTITURES
On August 1, 1995, the Company acquired 100% of the outstanding shares of
Esstar Inc. (Esstar), for $570.2 million. Esstar owns 100% of Amstar
Corporation which owns 100% of Milwaukee Electric Tool Corporation (METCO)
and Milrem, Inc. (Milrem). METCO is a manufacturer of electric tools,
primarily for the professional contractor market. Milrem is a corporation
that was formed in connection with a previous sale of a business by Esstar
and exists solely for the purpose of completing an environmental
remediation program in Connecticut. The acquisition was accounted for as a
purchase, and the purchase price was assigned to the tangible and
intangible assets acquired and
8
<PAGE>
liabilities assumed based on the fair market values at the date of the
acquisition. The purchase price exceeded the amounts assigned to such net
assets by approximately $390 million.
3. ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable consist of the following:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Accounts receivable $ 162,022 $164,140
Installment receivables 2,431 1,956
Notes receivable 1,208 433
--------- --------
165,661 166,529
Non-current portion (1,682) (1,414)
Allowance for doubtful accounts (3,626) (3,651)
--------- --------
Accounts and notes receivable - net $ 160,353 $ 161,464
========= =========
During 1996 and 1995, a subsidiary of the Company sold receivables with
full recourse. The proceeds and related gains for the sale of these
receivables were $20,525 and $50 in 1996 and $20,609 and $72 in 1995,
respectively.
The total amount of receivables sold with recourse, which are outstanding
at December 31, 1996, amount to approximately $22,352, for which the
company has allowances to cover the estimated exposure under the recourse
provisions.
4. INVENTORY
Inventory consists of the following:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Raw materials, component parts
and work-in-progress $ 111,302 $109,260
Finished goods 94,761 94,657
Allowance for excess and obsolete inventories (8,424) (7,229)
LIFO reserve (16,773) (11,781)
--------- --------
180,866 184,907
Progress billings (12,266) (12,804)
--------- --------
Inventory - net $ 168,600 $ 172,103
========= =========
9
<PAGE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Land and land improvements $ 9,223 $ 9,784
Buildings and building improvements 50,448 45,776
Machinery and equipment 165,783 145,889
Office furniture and fixtures 13,225 15,423
Construction in progress 11,669 8,522
--------- --------
250,348 225,394
Accumulated depreciation (91,363) (76,567)
--------- --------
Property, plant and equipment - net $ 158,985 $ 148,827
========= =========
6. BANK BORROWINGS
Included in short-term bank borrowings are notes and loans which are
payable under available lines of credit maintained in the U.S., as well as
short-term borrowings by foreign subsidiaries through local banks. Where
borrowings are made on a discounted basis, the discount is amortized over
the term of the loan on a straight-line basis. The average rate on
outstanding borrowings was 7.67% and 7.32% at the end of 1996 and 1995,
respectively. The Company's lines of credit may be withdrawn at the
discretion of the banks and do not require commitment fees or compensating
balance arrangements. The Company has $100 million of available line of
credit, of which $17 million was utilized at December 31, 1996. Included in
other non-current liabilities at December 31, 1996 and 1995 are $1,823 and
$2,398, respectively, of long-term borrowings of a foreign subsidiary. The
outstanding amounts relate principally to term loans payable through March,
2001. Such borrowings bear interest rates from 12% to 15.5%.
7. INCOME TAXES
The domestic and foreign components of the provision for income taxes are
as follows:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Current:
Federal $ 9,420 $ 6,576
State 4,478 3,902
Foreign 2,035 2,136
------- -------
Total Current 15,933 12,614
------- -------
Deferred:
Federal and State (1,290) 4,367
Foreign 2 140
------- -------
Total Deferred (1,288) 4,507
------- -------
Total Provision for Income Taxes $14,645 $17,121
======= =======
10
<PAGE>
The provision for income taxes differs from amounts computed by applying
the statutory federal income tax rate of 35% due to the following:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Federal income taxes at statutory rate $ 5,940 $11,483
Goodwill amortization and other permanent items 5,064 2,565
State income taxes less federal income tax effect 2,891 2,536
Other - net 750 537
------- -------
Provision for income taxes $14,645 $17,121
======= =======
The Company and its wholly owned U.S. subsidiaries file a consolidated
federal income tax return. The Company's federal tax provision is shown net
of tax credits. As of December 31, 1996, the Company has tax carryforwards
relating to foreign tax of $793, which expire in years 1999 through 2002.
The foreign tax credit carryforward has been offset by a $242 valuation
allowance. The Company also has approximately $4,372 of U.S. net operating
loss carryforwards which expire in years through 2004 that are subject to
limitations under provisions of the Internal Revenue Code. In addition, the
Company has approximately $769 of state net operating loss carryforwards.
As a result of the acquisition of Atlas Copco Robbins Inc. ("ACR"), the
Company has additional carryforwards relating to foreign tax credits of
approximately $607, research and development credits of $383, alternative
minimum tax credit carryforward of approximately $79, investment tax
credit carryforwards of approximately $15 and a net operating loss
carryforward of $874, all of which are limited to the separate company
tax liability of ACR and by Internal Revenue Code Section 382. In
addition, as a result of the METCO acquisition, the company has additional
federal net operating loss carryforwards of $19,430 which expire in years
through 2009 and is limited to the separate company tax liability of METCO
and by Internal Revenue Code Section 382 and state net operating loss
carryforward of $85,460. The METCO state carryforward, as well as the ACR
NOL and tax credit carryforwards, have been offset by a 100% valuation
allowance.
As of December 31, 1996, no provision has been made for deferred income
taxes on approximately $2,493 of undistributed earnings of its foreign
subsidiaries which are permanently reinvested. The Company also has a
federal capital loss carryforward of $869, which can be used only against
capital gains and expires in 1997. The federal capital loss carryforward
has been offset by a 100% valuation allowance.
Deferred income taxes reflect (a) the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes,
(b) the net tax effects of operating losses and (c) tax credit
carryforwards. The effects of significant items comprising the Company's
net deferred tax asset and liability as of December 31, 1996 and 1995 are
as follows:
11
<PAGE>
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Deferred Tax Assets
Current deferred taxes:
Accounts receivable reserves $ 1,332 $ 1,178
Warranty reserves 5,469 5,431
Employee benefits 4,477 4,646
Other current assets 8,258 6,996
Relocation reserve 3,860 --
Foreign reserve 158 188
Inventory reserves 6,933 6,805
Valuation allowance (4,043) (4,043)
-------- --------
Net Current 26,444 21,201
-------- --------
Non-current deferred taxes:
Domestic net operating loss
carryforwards (expiring
through 2009) 8,636 11,895
Other non-current assets 1,414 3,018
Tax credit carryforwards
(Foreign, AMT & R&D) 3,033 4,320
Federal capital loss carryforward 304 366
State net operating loss 7,106 8,206
Employee benefits 4,082 3,524
Postretirement benefit
obligations 13,886 12,915
Valuation allowance (8,937) (10,270)
-------- --------
Net Non-Current 29,524 33,974
-------- --------
Net Deferred Tax Asset $ 55,968 $ 55,175
======== ========
Deferred Tax Liabilities
Non-Current deferred taxes:
Fixed assets and intangible assets $ 23,988 $ 24,361
LIFO reserve 8,725 8,834
U.S. tax on unrepatriated earnings 832 789
Basis of foreign subsidiaries 321 338
Foreign liabilities 703 743
-------- --------
Total Deferred Tax Liability $ 34,569 $ 35,065
======== ========
The Company has recorded a deferred tax asset of $19,079 relating to net
operating loss and tax credit carryforwards, before a valuation allowance
of $8,937. Realization of the Company's deferred tax asset is dependent on
generating sufficient taxable income prior to the expiration of the loss
carryforwards. Although realization is not assured, management believes it
is more likely than not that the net deferred tax assets will be realized.
The Company has certain tax contingencies. Management believes the Company
has adequate accruals. However, events and circumstances may change in the
near term, which could require an adjustment to the accruals.
12
<PAGE>
8. PENSION AND OTHER BENEFIT PLANS
The Company sponsors a defined benefit pension plan for substantially all
of its U.S. subsidiaries except CP, ACR and METCO (the "Plan").
Substantially, all employees of the included entities are eligible to
participate in the Plan. Effective January 1, 1995, Uniroc Inc. became a
member of the Plan. Benefits under the defined benefit pension plan are
based upon years of service and compensation levels. In addition, CP
sponsors several defined benefit pension plans for employees who are
members of various unions. Benefits under the defined benefit pension plans
are based upon years of service and terms included in the related
collective bargaining agreements.
Net periodic pension cost for 1996 and 1995 for the Plan consisted of the
following components:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Service cost - benefits earned during
the period $ 2,500 $ 2,263
Interest cost on projected benefit obligation 2,983 3,031
Actual return on plan assets (6,156) (8,902)
Net amortization and deferral 2,411 5,747
------- -------
Net periodic pension cost $ 1,738 $ 2,139
======= =======
The funded status of the Plan at December 31, 1996 and 1995 is as follows:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Actuarial present value of -
Vested benefit obligation $(33,208) $(32,547)
======== ========
Accumulated benefit obligation $(34,136) $(33,499)
======== ========
Projected benefit obligation $(43,986) $(43,583)
Plan assets at market value 46,849 42,579
-------- --------
Plan assets over (under)
projected benefit obligation 2,863 (1,004)
Unrecognized net gain (13,271) (7,552)
Unrecognized prior service cost 566 611
Unrecognized transition asset (1,621) (1,807)
-------- --------
Accrued pension cost in the
Company's balance sheet $(11,463) $(9,752)
======== =======
The benefit obligation for 1996 and 1995 was determined using an assumed
discount rate of 7.5% and 7%, respectively. An assumed long-term rate of
compensation increase of 4.75% and 5.0% was used for 1996 and 1995,
respectively. The assumed long-term rate of return on plan assets was 8.5%
for 1996 and 8% for 1995. Plan assets consist principally of stocks and
bonds.
13
<PAGE>
Net periodic pension cost for 1996 and 1995 for the CP plans consisted of
the following components:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Service cost - benefits earned during
the period $ 379 $ 310
Interest cost on projected benefit obligation 2,855 3,027
Actual return on plan assets (2,440) (5,403)
Net amortization and deferral 563 3,543
One time charge - plant closing 5,889 --
------- -------
Net periodic pension cost $ 7,246 $ 1,477
======= =======
The one time charge - plant closing noted above, has been recorded in the
Consolidated Statement of Operations and Retained Earnings as a component
of the relocation charge and the remainder of the net periodic pension cost
is recorded within cost of sales and selling and administrative expenses.
The funded status of the CP plans at December 31, 1996 and 1995 is as
follows:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Actuarial present value of -
Vested benefit obligation $(49,238) $(41,674)
======== ========
Accumulated benefit obligation $(49,238) $(43,322)
======== ========
Projected benefit obligation $(49,238) $(43,322)
Plan assets at market value 37,210 34,681
-------- --------
Projected benefit obligation over plan assets (12,028) (8,641)
Unrecognized net loss 7,834 6,142
Unrecognized prior service cost -- 1,667
Unrecognized transition obligation -- 1,581
Adjustments required to recognize minimum
liability:
Deferred pension cost -- (3,248)
Stockholders' equity (7,834) (6,142)
-------- --------
(7,834) (9,390)
-------- --------
Accrued pension cost in the
Company's balance sheet $(12,028) $(8,641)
======== ========
The benefit obligation for 1996 and 1995 was determined using an assumed
discount rate of 7.5% and 7%, respectively. The assumed long-term rate of
return on plan assets for 1996 and 1995 was 7.5% and 7%, respectively. Plan
assets consist principally of stocks and bonds.
In addition to the aforementioned pension plans, the Company contributes to
qualified 401(k) plans which cover substantially all non-union employees.
Company contributions during 1996 and 1995 totaled $1,850 and $1,592,
respectively. METCO has a profit sharing plan for substantially all of its
employees. Expense for this plan amounted to approximately $10,214 in 1996
and $4,503 for the period August 1, 1995 through December 31, 1995.
Additionally, one of the Company's subsidiaries participates in several
multi-employer defined benefit pension plans. Amounts charged to pension
cost and contributed to these plans in 1996 and 1995 totaled $848 and $815,
respectively.
14
<PAGE>
9. POSTRETIREMENT BENEFIT OBLIGATIONS
The Company provides postretirement health care and other benefits to its
eligible United States retirees and their dependents. Eligibility for
benefits depends upon age and years of service.
Net periodic postretirement benefit cost for 1996 and 1995 consisted of the
following components:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Service cost $ 726 $ 686
Interest cost 2,198 2,075
Unrecognized prior service cost (7) 50
Unrecognized net (gain) loss (785) 25
------- -------
$ 2,132 $ 2,836
======= =======
The postretirement benefit obligation for 1996 and 1995 consisted of the
following components:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Accumulated postretirement benefit obligation
Retirees $19,180 $20,139
Fully eligible active plan participants 3,981 6,095
Other active plan participants 7,392 7,620
------- -------
Total accumulated postretirement
benefit obligation 30,553 33,854
Unrecognized net gain (loss) 3,085 (114)
Unrecognized prior service cost 192 (347)
------- -------
Accrued postretirement benefit cost $33,830 $33,393
======= =======
The estimated current portion of the above liability is included in
accounts payable and accrued expenses. The accumulated postretirement
benefit obligation for 1996 and 1995 was determined using a weighted
average discount rate of 7.5% and 7%, respectively. Other than CP, for
measurement purposes, a 9.5% pre-65 and a 7.5% post-65 annual increase in
per-capita costs of health care benefits were assumed for 1997 to 1998
gradually declining by 1% per year thereafter, until they reach a constant
annual rate of 5.5%. For CP, a 9.8% annual increase in per-capita costs of
health care benefits was assumed for 1996 to 1997 gradually declining to
5.1% over an eight year period. The health care cost trend rate assumption
has a significant effect on the amounts reported. For example, a 1%
increase in the health care cost trend rate would increase the accumulated
postretirement benefit obligation by $3,777 at December 31, 1996 and
increase the aggregate of total service cost and interest cost components
of net periodic postretirement benefit cost for 1996 by $417.
10. TRANSACTIONS WITH AFFILIATES
The Company is a member of a group of affiliated companies and has
extensive transactions and relationships with members of that Group (see
note 1).
15
<PAGE>
Amounts due to affiliates include short-term debt and trade purchases. A
portion of the Company's short-term debt is funded by ACAB. The short-term
borrowings at the end of 1996 and 1995 were $158,038 and $122,831,
respectively, including accrued interest. Total interest paid for these
borrowings was $12,372 in 1996 and $7,048 in 1995. The average interest
rates for the outstanding borrowings at year end were 6.19% in 1996 and
5.99% in 1995.
Amounts due to affiliates (long-term) relates to borrowings from ACAB at
the end of 1996 totaling $300 million. The carrying value of such
borrowings approximates fair value. Such amount matures as follows: $100
million in 1998, $135 million in 2000 and $65 million in 2002. The average
interest rate for the outstanding borrowings at December 31, 1996 and 1995
was 6.72% and 6.65%, respectively. Interest was accrued on the long-term
debt from ACAB in 1996.
Sales to affiliated companies of $123,150 and $84,369 in 1996 and 1995,
respectively, are included in the accompanying consolidated financial
statements.
Inventory purchases from affiliated companies were $137,907 and $114,766 in
1996 and 1995, respectively. The majority of these purchases were made from
affiliates in Belgium, Sweden and Canada. Purchases are payable in U.S.
dollars.
From time to time, the Company has negotiated agreements with certain
affiliated companies to provide for the reimbursement of identifiable
expenses incurred in assisting them in their expansion, warranty, research
and development and various other programs in the Unites States.
Accordingly, approximately $1,174 and $1,039 of such reimbursed expenses in
1996 and 1995, respectively, have been included as a reduction of expenses
in the determination of operating results.
11. LEASE TRANSACTIONS
Rental and lease expense charged to operations by the Company under
operating leases amounted to $6,728 and $5,483 in 1996 and 1995,
respectively. These leases cover principally warehouses, offices and other
facilities, and certain equipment. The Company has certain leases for
property and equipment that are accounted for as capital leases.
The Company's future minimum lease payments under noncancelable operating
and capital leases having initial or remaining lease terms in excess of one
year as of December 31, 1996 are as follows:
Year Operating Capital
---- --------- -------
1997 $ 5,922 $ 119
1998 4,427 63
1999 2,210 5
2000 1,232 --
2001 727 --
Thereafter 561 --
------- -------
Total minimum lease payments $15,079 $ 187
=======
Amount representing interest (15)
-------
$ 172
=======
The Company also leases (as lessor) compressors under operating lease
agreements for periods of less than one year.
16
<PAGE>
12. INVESTMENTS IN UNCONSOLIDATED COMPANIES
The Company has a 50% equity interest in Toku Hambai Kabushiki Kaisha of
Japan, and a 35% equity interest in Revathi - CP Equipment, Ltd. The
Company accounts for these less than majority owned investments using the
equity method.
Summary operating information for these investments for 1996 and 1995 are
as follows:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Net sales $97,112 $109,181
Costs and expenses 92,694 105,618
Income before income taxes 4,418 3,563
Net income 2,722 1,817
Equity in net income 1,133 714
Share of dividends 289 415
Summary balance sheet information for these investments at December 31,
1996 and 1995 is as follows:
---------------------------------------------------------------------------
(In thousands) 1996 1995
---------------------------------------------------------------------------
Current assets $28,489 $29,598
Non-current assets 4,266 4,057
Current liabilities 15,558 16,212
Non-current liabilities 162 161
13. GUARANTEES AND OTHER COMMITMENTS
As of December 31, 1996, the Company had total available irrevocable
letters of credit facilities of $86,390, of which $42,941 was outstanding.
Of the $86,390, $55,000 relates to joint letters of credit/lines of credit
facilities. To the extent that $55,000 of the letters of credit facilities
are used, the availability under the Company's lines of credit (see note 6)
is decreased and vice-versa. Such irrevocable commercial and standby
letters of credit facilities support various agreements, leases and
insurance policies.
As of December 31, 1996, the Company has guaranteed approximately $787
which primarily covers a subsidiary's performance with respect to specific
projects. A subsidiary of the Company has guaranteed a sister company's
performance relating to a project in the amount of $6 million.
14. LITIGATION
The Company has been named co-defendant in a number of product liability
legal actions, as well as certain employee discrimination actions. Also,
the Company has been notified by a party that such party may assert a claim
against the Company for non-performance under a contract, if the party is
unsuccessful in negotiating a change order with the project owner. The
claim, if asserted, could be significant.
Based on the facts and circumstances of each of the individual actions and
the unasserted claim, management is of the opinion that the ultimate
outcome of these matters will not have a material adverse effect on the
consolidated financial statements of the Company.
17
