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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
UNIVERSAL COMPRESSION HOLDINGS, INC.,
UNIVERSAL COMPRESSION, INC.,
GAS COMPRESSION SERVICES, INC.,
THE REUBEN JAMES HELTON TRUST
DATED JANUARY 24, 2000
AND
MICHAEL PAHL
DATED AS OF AUGUST 4, 2000
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TABLE OF CONTENTS
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ARTICLE I THE MERGER..............................................................................................2
Section 1.1. The Merger..................................................................................2
Section 1.2. Effective Time; Closing.....................................................................2
Section 1.3. Effect of the Merger........................................................................2
Section 1.4. Merger Consideration; Conversion of Company Common Stock....................................3
Section 1.5. Escrowed Shares.............................................................................4
Section 1.6. Tax-Free Reorganization.....................................................................4
Section 1.7. Withholding Rights..........................................................................4
ARTICLE II THE SURVIVING CORPORATION..............................................................................4
Section 2.1. Articles of Incorporation...................................................................4
Section 2.2. Bylaws......................................................................................5
Section 2.3. Directors and Officers......................................................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY HOLDERS.................................5
Section 3.1. Organization, Good Standing, Capitalization and Authority...................................5
Section 3.2. No Conflict.................................................................................7
Section 3.3. Required Filings and Consents...............................................................8
Section 3.4. Compliance..................................................................................8
Section 3.5. Government Licenses, Permits and Related Approvals..........................................8
Section 3.6. Financial Statements; Liabilities...........................................................8
Section 3.7. Absence of Certain Changes or Events........................................................9
Section 3.8. Taxes.......................................................................................9
Section 3.9. Title to Assets............................................................................10
Section 3.10. Condition of Equipment and Inventory.......................................................11
Section 3.11. Change of Control Agreements...............................................................12
Section 3.12. Litigation.................................................................................12
Section 3.13. Contracts and Commitments..................................................................12
Section 3.14. Compression Contracts......................................................................13
Section 3.15. Warranties and Product Liability...........................................................13
Section 3.16. Customers and Suppliers....................................................................14
Section 3.17. Employees..................................................................................14
Section 3.18. Employee Benefit Plans.....................................................................14
Section 3.19. Labor and Employment Matters...............................................................15
Section 3.20. Environmental Compliance and Disclosure....................................................16
Section 3.21. Intellectual Property......................................................................17
Section 3.22. Brokers....................................................................................17
Section 3.23. Insurance Policies.........................................................................18
Section 3.24. Notes and Accounts Receivable..............................................................18
Section 3.25. Transactions with Affiliates...............................................................18
Section 3.26. Books and Records..........................................................................19
Section 3.27. Bank Accounts..............................................................................19
Section 3.28. The Trust; Fiduciary Capacity..............................................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT..............................................................19
Section 4.1. Organization and Standing..................................................................19
Section 4.2. Capitalization.............................................................................20
Section 4.3. Corporate Authority........................................................................20
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Section 4.4. No Conflict................................................................................21
Section 4.5. Required Filings and Consents..............................................................21
Section 4.6. Compliance.................................................................................21
Section 4.7. SEC Filings; Financial Statements..........................................................22
Section 4.8. Absence of Certain Changes or Events.......................................................22
Section 4.9. Litigation.................................................................................22
Section 4.10. Brokers....................................................................................22
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS..............................................................23
Section 5.1. Covenants of the GCS Entities..............................................................23
Section 5.2. Covenants of Parent........................................................................25
ARTICLE VI ADDITIONAL AGREEMENTS.................................................................................26
Section 6.1. Access.....................................................................................26
Section 6.2. Reasonable Efforts; Consents and Approvals.................................................26
Section 6.3. Exclusive Dealing..........................................................................27
Section 6.4. Pahl Option................................................................................28
Section 6.5. Affiliated Companies.......................................................................28
Section 6.6. Transactions with Sub......................................................................28
Section 6.7. Benefit Plans..............................................................................29
Section 6.8. Fees and Expenses..........................................................................29
Section 6.9. Public Announcements.......................................................................29
Section 6.10. Listing....................................................................................29
Section 6.11. Tax Treatment..............................................................................30
Section 6.12. Board Participation........................................................................30
Section 6.13. Further Assurances.........................................................................30
Section 6.14. Registration of the Sale of Merger Shares..................................................30
Section 6.15. Notices of Certain Events..................................................................30
ARTICLE VII CONDITIONS...........................................................................................31
Section 7.1. Conditions to the Obligation of Each Party.................................................31
Section 7.2. Conditions to Obligations of Parent and Sub to Effect the Merger...........................31
Section 7.3. Conditions to Obligations of the Company and the Company
Holders to Effect the Merger..........................................................33
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER...................................................................34
Section 8.1. Termination................................................................................34
Section 8.2. Effect of Termination......................................................................35
Section 8.3. Amendments.................................................................................35
Section 8.4. Waiver.....................................................................................35
ARTICLE IX INDEMNIFICATION.......................................................................................35
Section 9.1. Company Holders' Indemnification Obligations...............................................35
Section 9.2. Parent's Indemnification Obligations.......................................................36
Section 9.3. Survival...................................................................................36
Section 9.4. Threshold..................................................................................36
Section 9.5. Notice of Claim............................................................................36
Section 9.6. Defense....................................................................................37
Section 9.7. Limitation on Recourse.....................................................................37
Section 9.8. Express Negligence.........................................................................38
ARTICLE X GENERAL PROVISIONS.....................................................................................38
Section 10.1. No Third Party Beneficiaries...............................................................38
Section 10.2. Entire Agreement...........................................................................38
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Section 10.3. Succession and Assignment..................................................................38
Section 10.4. Counterparts...............................................................................39
Section 10.5. Headings...................................................................................39
Section 10.6. Governing Law..............................................................................39
Section 10.7. Consent to Jurisdiction; Waiver of Jury Trial..............................................39
Section 10.8. Severability...............................................................................39
Section 10.9. Specific Performance.......................................................................39
Section 10.10. Construction...............................................................................40
Section 10.11. Certain Definitions........................................................................40
Section 10.12. Notices....................................................................................40
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EXHIBITS
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Exhibit A Form of Escrow Agreement
Exhibit B Form of Special Retention Bonus Plan
Exhibit C Form of Special Retention Payment Plan
Exhibit D Board Participation Letter Agreement
Exhibit E Form of Lock-up Letter
Exhibit F Form of Legal Opinion of Mayor, Day, Caldwell & Keeton, L.L.P.
Exhibit G Form of Legal Opinion of Warner Norcross & Judd, L.L.P.
Exhibit H Form of Legal Opinion of Zerafa Law Offices, P.C.
Exhibit I Form of Certificate of Trustee
Exhibit J Form of Registration Agreement
Exhibit K Form of Legal Opinion of Valerie L. Banner
Exhibit L Form of Legal Opinion of King & Spalding
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
August 4, 2000, by and among Universal Compression Holdings, Inc., a Delaware
corporation ("Parent"), Universal Compression, Inc., a Texas corporation and
wholly owned subsidiary of Parent ("Sub"), Gas Compression Services, Inc., a
Michigan corporation (the "Company"), the Reuben James Helton Trust Dated
January 24, 2000, a revocable trust formed pursuant to the laws of the State of
Michigan, which, as of the date hereof, is the sole stockholder of the Company
(the "Stockholder"), and Michael Pahl, an individual resident of the State of
Michigan and, as of the date hereof, the sole holder of an option to acquire
capital stock of the Company (the "Optionholder") (the Stockholder and the
Optionholder, collectively, the "Company Holders" or the "Stockholders").
WITNESSETH:
WHEREAS, the respective Boards of Directors of each of Parent, Sub and
the Company deem it advisable and in the best interests of each corporation and
its respective shareholders, that Parent and the Company combine in order to
advance the long-term business strategies of Parent and the Company;
WHEREAS, the Board of Directors of the Company has unanimously
determined that the merger of the Company with and into Sub (the "Merger") and
this Agreement are fair to, and in the best interests of, the Company and the
holder of the common stock of the Company, par value $1.00 per share (the
"Company Common Stock");
WHEREAS, the Board of Directors of Parent has unanimously determined
that the Merger and this Agreement are fair to, and in the best interests of,
Parent and the holders of the common stock of Parent, par value $.01 per share
(the "Parent Common Stock");
WHEREAS, the respective Boards of Directors of each of Parent, Sub and
the Company have approved this Agreement and the Merger on the terms and
conditions contained in this Agreement;
WHEREAS, Parent, as the sole shareholder of Sub, has approved this
Agreement, the Merger and the transactions contemplated by this Agreement in
accordance with the requirements of the Texas Business Corporation Act (the
"TBCA") and the articles of incorporation and bylaws of Sub;
WHEREAS, the Stockholder, as the sole shareholder of the Company as of
the date hereof, has approved this Agreement, the Merger and the transactions
contemplated by this Agreement in accordance with the requirements of the
Michigan Business Corporation Act (the "MBCA") and the certificate of
incorporation and bylaws of the Company, and the Optionholder approves this
Agreement, the Merger and the transactions contemplated by this Agreement; and
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WHEREAS, for federal income tax purposes, the parties hereto intend
that the Merger shall qualify as a "reorganization" within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions
of this Agreement and in accordance with the provisions of the TBCA and the
MBCA, at the Effective Time (as hereinafter defined), the Company shall be
merged with and into Sub. As a result of the Merger, the separate corporate
existence of the Company shall cease and Sub shall continue as the surviving
corporation following the Merger (the "Surviving Corporation"). The corporate
existence of Sub, with all its purposes, rights, privileges, franchises, powers
and objects, shall continue unaffected and unimpaired by the Merger and, as the
Surviving Corporation, it shall continue to be governed by the laws of the State
of Texas.
Section 1.2. Effective Time; Closing. As promptly as practicable, and
in any event within three Business Days (as such term is defined in Section
10.11 hereof) after the satisfaction or waiver of the conditions set forth in
Article VII hereof, the parties hereto shall cause the Merger to be consummated
by filing articles of merger (the "Articles of Merger") with the Secretary of
State of the State of Texas and a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Michigan, and by making all
other filings or recordings required under the TBCA and the MBCA in connection
with the Merger, in such form as is required by, and executed in accordance with
the relevant provisions of, the TBCA and the MBCA. The Merger shall become
effective after the Articles of Merger are duly filed with the Secretary of
State of the State of Texas and the Certificate of Merger is duly filed with the
Secretary of State of the State of Michigan at such time on the date of such
filings as the parties hereto agree shall be specified in the Articles of Merger
and the Certificate of Merger (the date and time that the Merger becomes
effective, the "Effective Time"). On the date of such filings, a closing (the
"Closing") shall be held at 10:00 a.m., Houston, Texas time, at the offices of
King & Spalding, 1100 Louisiana Street, Suite 3300, Houston, Texas 77002, or at
such other time and location as the parties hereto shall otherwise agree. The
date on which the Closing occurs is referred to herein as the "Closing Date."
Except as otherwise specified herein, each reference to the Closing or the
Closing Date refers to the time on the Closing Date immediately prior to the
Effective Time.
Section 1.3. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the TBCA and the
MBCA. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all of the property, rights, privileges, powers and
franchises of the Company shall continue with, or vest in, as the case may be,
the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and
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duties of the Company shall continue to be, or become, as the case may be, the
debts, liabilities, obligations, restrictions, disabilities and duties of the
Surviving Corporation.
Section 1.4. Merger Consideration; Conversion of Company Common Stock.
At the Effective Time, by virtue of the Merger and without any action on the
part of any holder thereof:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares canceled pursuant to
Section 1.4(b) hereof, if any) shall be canceled and shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
automatically into the right to receive (subject to the escrow arrangements
described in Section 1.5 below) (i) $241.7199 in cash (such cash, the "Merger
Cash") and (ii) a number of shares of Parent Common Stock equal to the lesser of
X or Y, where X is equal to 42 and Y is equal to the quotient determined by
dividing $1,035.0104 by the weighted average sales price of Parent Common Stock
on the New York Stock Exchange (the "NYSE") for the 20 consecutive trading days
ending the third Business Day prior to the Closing Date (such shares, the
"Merger Shares") (such Merger Cash and Merger Shares, the "Merger
Consideration"), subject to the applicable escrow arrangements described in
Section 1.5 below. As of the Closing Date, the Merger Shares will be duly
authorized, validly issued, fully paid and non-assessable, but the issuance will
not be registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any applicable state securities Laws, provided, however, the
subsequent offering and sale of the Merger Shares by the Stockholders will be
subject to registration as described in the Registration Agreement referred to
in Section 6.14 hereof. The Merger Cash will be paid to the record holders of
Company Common Stock by wire transfer of immediately available funds immediately
after the Effective Time. The certificates with appropriate legends representing
the Merger Shares will be delivered to the record holders of Company Common
Stock (or, as provided in Section 1.5 into escrow) immediately after the
Effective Time.
(b) Each share of Company Common Stock that is owned by the
Company as treasury stock shall be canceled and retired and cease to exist and
no payment or distribution shall be made with respect thereto.
(c) At the Effective Time, all shares of Company Common Stock
converted pursuant to Section 1.4(a) shall no longer be outstanding and shall
automatically be canceled and retired and cease to exist, and each holder of a
certificate representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration in accordance with Section 1.4(a).
(d) Each share of common stock, par value $.01 per share, of
Sub issued and outstanding immediately prior to the Effective Time shall remain
outstanding and continue unchanged by virtue of the Merger, and shall constitute
the only outstanding shares of capital stock of the Surviving Corporation.
(e) No fractional shares of Parent Common Stock shall be
issued in the Merger. In lieu of any such fractional shares, the Company
Holders, the only stockholders of the Company immediately prior to the Merger,
will receive the next highest whole number of a share of Parent Common Stock.
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Section 1.5. Escrowed Shares. Immediately after the Effective Time, the
parties shall cause to be deposited in escrow such number of the Merger Shares
(the "Escrowed Shares") as is equal to 9.5652% of the number of Merger Shares
otherwise issuable to each holder of Company Common Stock pursuant to Section
1.4(a) (provided that no fractional share will be deposited but instead the next
highest number of whole shares of Parent Common Stock shall be deposited),
pursuant to an Escrow Agreement to be entered into by the Company Holders and
Parent, which Escrow Agreement shall be substantially in the form of Exhibit A
hereto (the "Escrow Agreement"). The Escrowed Shares shall be released to Parent
as needed during the escrow period to cover (i) any amounts to which Parent may
be entitled pursuant to Article IX hereof, (ii) any amounts in excess of
$250,000 payable to or on behalf of Ms. Colleen Yuncker in connection with this
Agreement, the transactions contemplated hereby, or any termination of or change
in her employment in connection herewith or therewith (whether pursuant to the
Agreement dated June 26, 2000 between Ms. Yuncker and the Company (the "Yuncker
Agreement") or any other agreement of the GCS Entities entered into prior to the
Effective Time, and (iii) the costs associated with the retention plans
substantially in the forms of Exhibits B and C hereto (collectively, the
"Retention Plan"), each as described more fully in the Escrow Agreement;
provided, however, that the maximum aggregate amount of Escrowed Shares to which
Parent shall be entitled for (ii) and (iii) above shall not exceed that number
of Escrowed Shares valued at $800,000. Each Escrowed Share so released to Parent
shall be released and valued as provided in the Escrow Agreement. Pursuant to
the terms of the Escrow Agreement, (x) on June 30, 2001, all Escrowed Shares
except for those with an aggregate value of $1,800,000 and those subject to
pending claims shall be released to the Stockholders; and (y) on June 30, 2002,
(A) Escrowed Shares with an aggregate value of $1,000,000 shall be released to
Parent, (B) Escrowed Shares subject to any pending claims shall be retained in
escrow and (C) all remaining Escrowed Shares shall be released to the
Stockholders.
Section 1.6. Tax-Free Reorganization. The Merger is intended to be a
reorganization within the meaning of Section 368(a) of the Code, and this
Agreement is intended to be a "plan of reorganization" within the meaning of the
regulations promulgated under Section 368(a) of the Code. The parties hereto
agree to report the Merger as, and to use their reasonable efforts to cause the
Merger to constitute, a reorganization under the provisions of Section 368(a).
Section 1.7. Withholding Rights. The Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to the Stockholders such amounts, if any, as it is
required to deduct and withhold with respect to the making of such payment under
the Code and the rules and regulations promulgated thereunder, or any provision
of state, local or foreign tax Law. To the extent that amounts are so withheld
by the Surviving Corporation, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the Stockholders in respect of
which such deduction and withholding was made by the Surviving Corporation.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1. Articles of Incorporation. The Articles of Incorporation of Sub as
in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving
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Corporation, until the same shall thereafter be altered, amended or repealed in
accordance with applicable Law and such Articles of Incorporation.
Section 2.2. Bylaws. The Bylaws of Sub as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation, until
the same shall thereafter be altered, amended or repealed in accordance with
applicable Law, the Articles of Incorporation of the Surviving Corporation and
such Bylaws.
Section 2.3. Directors and Officers. From and after the Effective Time,
until the earlier of their resignation or removal or until their respective
successors are duly elected or appointed and qualified in accordance with
applicable Law, the directors and officers of Sub at the Effective Time shall
continue to be the directors and officers of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY HOLDERS
The Company, the Stockholder and the Optionholder hereby jointly and
severally represent and warrant (except as to Section 3.28, as to which the
Stockholder, solely and severally, represents and warrants) to each of the other
parties hereto as follows:
Section 3.1. Organization, Good Standing, Capitalization and Authority.
(a) The Company (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and (ii) has full corporate power and authority and all necessary
government approvals to own, lease and operate its properties and assets and to
conduct its business as presently conducted. The Company has no subsidiaries
other than Gas Compression Realty, L.L.C., a Michigan limited liability company
(the "Subsidiary"). Each of the Subsidiary, GCFC and Distributing (as such terms
are defined in Section 3.1(b) below) (i) is a limited liability company or
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation and (ii) has full power and authority and
all necessary governmental approvals to own, lease and operate its properties
and assets and to conduct its business as presently conducted. Each of the
Company, the Subsidiary, GCFC and Distributing (collectively, the "GCS Entities"
and individually, a "GCS Entity") is duly qualified or licensed to do business
as a foreign corporation or limited liability company and is in good standing in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except where failure to be so qualified or licensed would
not, individually or in the aggregate, have a Company Material Adverse Effect
(as defined below). The Company has furnished to Parent correct and complete
copies of its articles of incorporation (the "Company Articles of
Incorporation") and bylaws (the "Company Bylaws"), and the charter, bylaws,
certificate of formation and other organizational documents of GCFC and
Distributing (collectively, the "Affiliated Companies") and the Subsidiary, each
as amended to date. Such articles of incorporation, bylaws, certificates of
formation and other organizational documents are in full force and effect, and
none of the GCS Entities is in violation of any provision thereof. The term
"Company Material Adverse Effect" shall mean, with respect to the Company, any
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change, event or effect that materially adversely affects the business,
operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) of the GCS
Entities, taken as a whole, except to the extent that any such change, event or
effect is the result of adverse changes in economic conditions in or affecting
the U.S. gas compression service industry generally.
(b) The authorized capital stock of the Company consists of
50,000 shares of Company Common Stock. As of the date hereof, 40,000 shares of
Company Common Stock are issued and outstanding and as of the Closing Date,
44,444 shares of Company Common Stock will be issued and outstanding. All of
such shares are (or, with respect to the 4,444 shares of Company Common Stock to
be issued pursuant to exercise of Optionholder's option, will be as of the
Closing Date) validly issued, fully paid and nonassessable and free of
preemptive rights, and no shares of Company Common Stock will as of the Closing
Date be held in the treasury of the Company. Other than the option granted to
Optionholder pursuant to that certain Stock Option Agreement dated August 1,
1995, which shall be amended to comply with Section 6.4 of this Agreement (the
"Pahl Option"), and the contingent equity-based cash payment rights of Ms.
Colleen Yuncker pursuant to the Yuncker Agreement; (i) there are no options,
warrants, convertible securities, subscriptions, stock appreciation rights,
phantom stock plans or stock equivalents or other rights, agreements,
arrangements or commitments (contingent or otherwise) of any character issued or
authorized relating to the issued or unissued capital stock or membership
interests of any of the GCS Entities or obligating any of them to issue or sell
any shares of capital stock or membership interests of, or options, warrants,
convertible securities, subscriptions or other equity interests in, any of the
GCS Entities; (ii) there are no outstanding contractual obligations of the GCS
Entities to repurchase, redeem or otherwise acquire any shares of Company Common
Stock or any equity interests in the Subsidiary or the Affiliated Companies or
to pay any dividend or make any other distribution in respect thereof or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Person; and (iii) as of the date hereof, the
Stockholder owns, and immediately prior to the Effective Time the Stockholders
shall own, all of the issued and outstanding capital stock of the Company, free
and clear of all security interests, liens, claims, pledges, options rights of
first refusal, agreements, limitations on voting rights, charges and other
encumbrances of any nature whatsoever. As of the date hereof: (x) the Company
owns beneficially and of record 99% and Chad Helton owns beneficially and of
record 1% of the issued and outstanding ownership interests in the Subsidiary;
(y) the Stockholder owns 79% and the Optionholder owns beneficially and of
record 21% of the issued and outstanding shares of capital stock of Gas
Compression Finance Corporation, a Michigan corporation ("GCFC"); and (z) the
Stockholder owns 79% and Randy Irish owns 21% of the issued and outstanding
ownership interests in G.C.S. Distributing L.L.C., a Texas limited liability
company ("Distributing"). As of the Closing Date in accordance with the
transactions contemplated in this Agreement: (x) the Company will own
beneficially and of record 100% of the issued and outstanding ownership
interests in the Subsidiary; (y) each of the Stockholder and the Optionholder
will own 79% and 21%, respectively, of the issued and outstanding shares of
capital stock of GCFC; and (z) each of the Stockholder and the Company will own
79% and 21%, respectively, of the issued and outstanding ownership interests in
Distributing. The Company does not own an equity interest in any other
corporation, partnership or entity other than the Subsidiary. Each outstanding
equity interest in the Subsidiary, GCFC and Distributing is or on the Closing
Date will be duly authorized, validly issued, fully paid and nonassessable and
free and clear of all security
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interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on voting rights, charges and other encumbrances of any nature
whatsoever.
(c) Each of the Company and the Company Holders has all
necessary power and authority to execute and deliver this Agreement and the
other agreements contemplated in this Agreement, to perform its obligations
hereunder and to consummate the Merger and the other transactions contemplated
hereby. The execution, delivery and performance by the Company of this
Agreement, and the consummation by the Company of the Merger and the other
transactions contemplated by this Agreement, have been duly authorized by all
necessary corporate action (including, without limitation, the approval of the
Board of Directors of the Company and the approval of all security holders
entitled to vote thereon pursuant to the MBCA) and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Merger or the other transactions contemplated by this
Agreement (other than, (i) with respect to the Merger, the filing and
recordation of appropriate merger documents as required by applicable Law (as
hereafter defined) and (ii) with respect to the transactions contemplated in
Sections 6.4, 6.5 and 6.6, the completion of the other corporate proceedings
contemplated in Sections 6.4, 6.5 and 6.6). This Agreement has been, and at
Closing the other agreements contemplated in this Agreement will have been, duly
executed and delivered by the Company, the Stockholder and the Optionholder and,
assuming the due authorization, execution and delivery by Parent and Sub,
constitutes a legal, valid and binding obligation of each of the Company, the
Stockholder and the Optionholder enforceable against each of them in accordance
with its terms, subject to applicable bankruptcy, insolvency and other similar
Laws affecting the enforceability of creditors' rights generally, general
equitable principles and the discretion of courts in granting equitable
remedies.
(d) The Board of Directors of the Company has (i) determined
that this Agreement and the other transactions contemplated hereby, including
the Merger, are in the best interests of the Company and the Stockholders and
(ii) approved, authorized and adopted this Agreement, the Merger and the other
transactions contemplated hereby. No state anti-takeover or similar statute or
regulation is applicable to this Agreement, the Merger or the other transactions
contemplated hereby.
Section 3.2. No Conflict. The execution and delivery of this Agreement
by the Company do not, and the performance of this Agreement by the Company and
the consummation of the Merger and the other transactions contemplated hereby
will not, (i) conflict with or violate the Company Articles of Incorporation or
Company Bylaws or the organizational documents of the Subsidiary or the
Affiliated Companies, (ii) subject to Section 3.3 hereof, conflict with or
violate any United States federal, state or local or any foreign statute, law,
rule, regulation, ordinance, code, order, judgment, decree or any other
requirement or rule of law (a "Law") applicable to any of the GCS Entities or by
which any property or asset of any of the GCS Entities is bound or affected, or
(iii) except as set forth in that certain letter dated the date hereof from the
Company and the Company Holders to Parent with respect to certain disclosure
matters (the "Company Disclosure Letter"), result in a breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, give to others any right of termination, amendment, acceleration
or cancellation of, result in triggering any payment or other obligations, or
result in the creation of a lien or other encumbrance on any property or asset
of any of the GCS Entities pursuant to, any note, bond, mortgage, indenture,
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contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which any of the GCS Entities is a party or by which any of them
or any of their properties or assets are bound or affected, except in the case
of clauses (ii) and (iii) above for any such conflicts, violations, breaches,
defaults or other occurrences which would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
Section 3.3. Required Filings and Consents. The execution and delivery
of this Agreement by the Company does not, and the transactions contemplated
hereby and the performance of this Agreement by the Company and the Company
Holders will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any United States federal, state or local or any
foreign government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), except (i) for those required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
Section 3.4. Compliance. Except as disclosed in the Company Disclosure
Letter, each of the GCS Entities and the Stockholder Properties (as defined in
Section 6.6 hereof) (i) has been operated at all times in compliance with all
Laws applicable to them or by which any property, business or asset of any of
them is bound or affected and (ii) is not in default or violation of any notes,
bonds, mortgages, indentures or similar agreements or similar obligations to
which any of the GCS Entities is a party or by which any of them or any of their
properties or assets is bound or affected, except in the case of clause (i)
which would not reasonably be expected to, individually or in the aggregate,
have a Company Material Adverse Effect.
Section 3.5. Government Licenses, Permits and Related Approvals. The
Company Disclosure Letter contains a complete and accurate list of all licenses,
permits, registrations and approvals of Governmental Entities required for the
Stockholder Properties and each of the GCS Entities to own, lease or operate
their assets and properties and to conduct and operate their business in the
manner currently conducted and operated, including, without limitation, all air
emission permits for compressors (collectively, the "Permits"), true and
complete copies of which have been previously furnished or made available for
copying to Parent and all of which are valid and in full force and effect,
except in each case for Permits as to which failure to have such Permits would
not reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business of the GCS Entities taken as a whole. Each of the
GCS Entities is in compliance in all respects with the terms and conditions of
all of the Permits applicable to such entity, except in each case for Permits as
to which failure to comply with such terms and conditions would not reasonably
be expected to have, individually or in the aggregate, a material adverse effect
on the business of the GCS Entities taken as a whole. No representation or
warranty is made in this Section 3.5 with respect to any matter that is the
subject of a more specific representation in this Article III (including,
without limitation and only as an example, Section 3.20).
Section 3.6. Financial Statements; Liabilities. The Company has
heretofore furnished Parent (i) the audited consolidated balance sheets of the
Company as of July 31, 1998 and July
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31, 1999, and the related consolidated statements of income, stockholders'
equity and cash flow for the years then ended, all certified by Follmer,
Rudzewicz & Co., P.C. (the "Auditors"), whose unqualified reports thereon are
included therewith (the "Audited Historical Financial Statements"), and (ii) the
unaudited unconsolidated balance sheets of each of the GCS Entities as of June
30, 2000, and the related unconsolidated statements of income, stockholders'
equity and cash flow for the eleven-month period then ended (the "Interim
Financial Statements"). The Historical Audited Financial Statements (including
the footnotes thereto) were prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied, and present fairly, in all
material respects, the Company's consolidated financial condition, results of
the operations and cash flows as of the dates and for the periods presented. The
Interim Financial Statements were prepared in good faith and in a manner
consistent with the Company's normal operating practices and are subject to
audit adjustments and accruals. The audited consolidated balance sheet of the
Company as of July 31, 2000, and the related consolidated statements of income,
stockholders' equity and cash flow for the year then ended (each including
footnotes thereto) (the "Current Audited Financial Statements"), which will be
delivered to the Parent prior to the Closing Date, when so delivered (i) will
have been certified by the Auditors with unqualified reports thereto, (ii) will
have been prepared in accordance with GAAP consistently applied, (iii) will
present fairly, in all material respects, the Company's consolidated financial
condition, results of the operations and cash flows as of the dates and for the
periods presented, and (iv) will not disclose any material adverse change from
the information disclosed in the Interim Financial Statements or pursuant to
this Agreement, including, without limitation, any material adverse change in
liabilities and assets.
Section 3.7. Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as disclosed in the Company Disclosure Letter,
during the period from July 31, 1999 to the date of this Agreement, the GCS
Entities have conducted their respective businesses in a manner substantially
consistent with past practice and there has not occurred (i) any condition that
has had or would reasonably be expected to have a Company Material Adverse
Effect, (ii) any declaration, setting aside or payment of any dividend or any
other distribution with respect to any of the capital stock of the Company or
GCFC or equity interests of the Subsidiary or Distributing, (iii) any change in
accounting methods, principles or practices employed by any of the GCS Entities,
(iv) any material write-off as uncollectible of any notes or accounts
receivable, except write-offs in the ordinary course of business, none of which,
individually or in the aggregate, is material to the applicable GCS Entity, (v)
any material increase in the rate of wages, salaries, bonuses or other
remuneration of any officer, director or other key employee of any of the GCS
Entities, or of any other employee of the GCS Entities not in the ordinary
course and consistent with past practice, (vi) any cancellation or waiver of any
claims or rights of substantial value that would reasonably be expected to have
a Company Material Adverse Effect, (vii) any sale, lease or other disposition of
any material assets or material equipment except in the ordinary course of
business, (viii) any material capital expenditures other than in the ordinary
course of business, or (ix) any action of the type described in Section 5.1(a),
(d) or (e) which, had such action been taken after the date of this Agreement,
would be in violation of such Section.
Section 3.8. Taxes. Except as disclosed in the Company Disclosure
Schedule, each of the GCS Entities has timely filed all Tax Returns (as
hereinafter defined) required to be filed by it, except where the failure to
file Tax Returns that would not reasonably be expected to be
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material to the applicable GCS Entity. All such Tax Returns are correct and
complete and accurately reflect the taxes due from the GCS Entities in all
material respects. All Taxes (as hereinafter defined) of any of the GCS Entities
which are (i) shown as due on such Tax Returns or (ii) claimed or asserted by
any taxing authority to be due, have been paid, except for those Taxes being
contested in good faith and for which reserves have been established in the
Interim Financial Statements or will be established in the Current Audited
Financial Statements in accordance with GAAP. There are no liens for any Taxes
payable upon the assets of any of the GCS Entities, other than statutory liens
for Taxes not yet due and payable or being contested in good faith. The Company
has no Knowledge of any threatened material Tax claims or assessments. None of
the GCS Entities has made an election under Section 341(f) of the Code. Except
as set forth in the Company Disclosure Letter, none the GCS Entities has waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency. The GCS Entities have
withheld and paid over to the relevant taxing authority all Taxes required to
have been withheld and paid in connection with payments to employees,
independent contractors, creditors, shareholders or other third parties, except
where a failure to withhold and pay would be immaterial to the GCS Entities
taken as a whole. GCFC has been a validly electing S corporation within the
meaning of Sections 1361 and 1362 of the Code at all times since its inception
and will be an S corporation up to and including the time immediately prior to
the Effective Time. For purposes of this Agreement, (a) "Tax" (and, with
correlative meaning, "Taxes") means any federal, state, local or foreign income,
gross receipts, property, sales, use, license, excise, franchise, business,
employment, payroll, premium, withholding, social security, alternative or added
minimum, ad valorem, service, leasing, occupation, transfer or excise tax, or
any other tax, custom, duty, governmental fee or other like assessment or charge
of any kind whatsoever, including without limitation the Michigan Single
Business Tax, together with any interest or penalty or addition thereto, whether
disputed or not, imposed by any Governmental Entity, and (b) "Tax Return" means
any return, report or similar statement required to be filed with respect to any
Tax (including any attached schedules), including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax.
Section 3.9. Title to Assets.
(a) Each of the GCS Entities has good and marketable title to,
or a valid leasehold interest in, all of its real property, compressors, and
other material personal property and assets reflected on the balance sheet of
the Current Audited Financial Statements as owned or leased by it, and as of the
Closing Date, the Stockholder will have good and marketable title to the
Stockholder Properties, in each case free and clear of all mortgages, title
defects, liens, pledges, security interests, encumbrances, restrictions,
reservations, covenants and adverse claims, except for (i) liens, encumbrances
or restrictions which secure indebtedness disclosed in the Company Disclosure
Letter; (ii) liens for Taxes not yet payable or being contested in good faith;
(iii) liens arising as a matter of law in the ordinary course of business; (iv)
matters set forth in the title policies related to the real property, including
the Stockholder Properties, referred to in Section 3.9(b) hereof, and (v) such
title defects, liens, encumbrances and restrictions, if any, as individually or
in the aggregate do not interfere materially with the use by any of the GCS
Entities of such properties or assets and are otherwise immaterial. Except as
otherwise set forth in the Company Disclosure Letter, all of the real property,
compressors, and other material personal property and assets necessary for the
business of the GCS Entities are either owned and
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held in the name of, or leased under valid leasehold interests of, the GCS
Entities. Except as set forth in the Company Disclosure Letter, none of the GCS
Entities has received any written notice of condemnation or suspension of its
right to use with respect to any of the real property used by it, none of such
real property is subject to condemnation proceedings to which it is a party and
there is not now pending or threatened any governmental or regulatory action to
which it is a party or action by a private party adverse to which it is a party
to the uses contemplated for the real property by any of the GCS Entities.
(b) The Company Disclosure Letter sets forth a correct and
complete list of all real property (i) owned or leased by any of the GCS
Entities (including any intercompany leases), (ii) as to which any of the GCS
Entities has a license, easement, right of way or other right to use, or (iii)
as to which any of the GCS Entities has the option to purchase, lease, license
or acquire an easement, right of way or other right. The Company has previously
delivered or made available for copying to Parent copies of all title reports
and title insurance policies owned by or in the possession of any of the GCS
Entities or with respect to the Stockholder Properties.
(c) The Company Disclosure Letter sets forth a correct and
complete list of all vehicles owned or leased by any of the GCS Entities as of
July 25, 2000 and there has been no material change between such date and the
date hereof.
(d) Except as set forth in the Company Disclosure Letter, as
of the date hereof, none of the GCS Entities has any legal obligation, absolute
or contingent, to any other person to sell, lease or otherwise dispose of any of
its real property, compressors, or other material personal property and assets,
other than pursuant to mortgages and security interests or leases with financing
sources in the ordinary course of business.
Section 3.10. Condition of Equipment and Inventory. The Company
Disclosure Letter sets forth a true and complete list of all compressor units
owned or leased by any of the GCS Entities as of July 27, 2000, including a
reasonably detailed description of each such compressor and its then current
location. Where conformity with a published standard is required by Law or
contract, the compressors of the GCS Entities comply with such standards. Except
as set forth in the Company Disclosure Letter, all compressors, equipment,
vehicles and other similar assets owned by any of the GCS Entities or used in
connection with their business are in good operating condition and in a good
state of maintenance and repair, ordinary wear and tear excepted, and are usable
in the ordinary course of business. All items of completed inventory of the GCS
Entities are, in all material respects, in usable or saleable condition in the
ordinary course of business, or serviceable for use in the field. All raw
materials, supplies and work-in-process material to the business of the GCS
Entities taken as a whole, are at least the standard quality for such items in
the compression service industry, are in such condition that they can be
converted into merchantable products by industry standard processing procedures
currently used by the GCS Entities, and are not materially in excess of the
normal purchasing patterns of the GCS Entities. The Company has not been advised
in writing by a specific supplier as to any material decrease in the supply of
materials available to the GCS Entities, and the Company has no Knowledge that
the cost associated with current work-in-process exceeds the saleable value of
the final products.
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Section 3.11. Change of Control Agreements. Except as set forth in the
Company Disclosure Letter or contemplated by this Agreement, neither the
execution and delivery of this Agreement nor the consummation of the Merger or
the other transactions contemplated hereby, will (either alone or in conjunction
with any other event) result in, cause the accelerated vesting or delivery of,
or increase the amount or value of, any payment by or benefit from the GCS
Entities to any director, officer, employee of the Company or any other person.
Without limiting the generality of the foregoing, no amount paid or payable by
the Company in connection with the Merger or the other transactions contemplated
by this Agreement, including accelerated vesting of options (either solely as a
result thereof or as a result of such transactions in conjunction with any other
event) will be an "excess parachute payment" within the meaning of Section 280G
of the Code.
Section 3.12. Litigation. Except as set forth in the Company Disclosure
Letter, there are no claims, suits, actions, investigations, indictments or
information, or administrative, arbitration or other proceedings ("Litigation")
pending or, to the Knowledge of the Company and the Company Holders, threatened
against any of the GCS Entities or with respect to the Stockholder Properties.
Except as set forth in the Company Disclosure Letter, there are no judgments,
orders, injunctions, decrees, stipulations or awards (whether rendered by a
court, administrative agency, or by arbitration, pursuant to a grievance or
other procedure) against or relating to any of the GCS Entities or the
Stockholder Properties.
Section 3.13. Contracts and Commitments. The Company Disclosure Letter
sets forth as of the date hereof a correct and complete list of the following
contracts to which any of the GCS Entities is a party or which involve the
Stockholder Properties (including any amendments, modifications or supplements
thereto):
(a) all employee agreements, contracts and commitments
providing for compensation, severance or other benefits to any employee, former
employee or director of any of the GCS Entities and all bonus, deferred
compensation, pension, profit sharing, stock option, employee stock purchase,
retirement and other employee benefit plans, compensation arrangements and other
benefit arrangements (whether written or oral);
(b) all agreements, contracts, and commitments relating to
capital expenditures or borrowings in excess of $10,000 individually;
(c) all loans, advances to, and investments in, any other
Person (as defined in Section 10.11 hereof), and all agreements, contracts or
commitments relating to the making of any such loan, advance or investment;
(d) all service contracts (including management, consulting
and other service contracts) other than with employees;
(e) all leases as lessee of personal property (including
vehicles);
(f) all other agreements, contracts and commitments relating
to sales of compression equipment;
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(g) all other agreements, contracts and commitments that
involve $100,000 or more per year individually; and
(h) all other agreements, contracts and commitments containing
any change of control or similar provision that would (either alone or in
conjunction with any other event) be triggered by the execution and delivery of
this Agreement or consummation of the Merger or the other transactions
contemplated hereby; and
(i) all other agreements, contracts and commitments, the
breach or termination of which would reasonably be expected to have a Company
Material Adverse Effect.
Except for agreements, arrangements or commitments disclosed in the
Company Disclosure Letter, none of the GCS Entities is a party to, and the
Stockholder Properties are not involved in, any agreement, arrangement or
commitment that is material to the business of the GCS Entities taken as a
whole. The Company has delivered or made available for copying to Parent correct
and complete copies of all such agreements, arrangements and commitments. None
of the GCS Entities has Knowledge that it is in default under any such
agreement, arrangement or commitment which has had, or would reasonably be
expected to have, a Company Material Adverse Effect.
Section 3.14. Compression Contracts. The Company has delivered or
otherwise made available for copying to Parent and its representatives true and
complete copies of all contracts pursuant to which, as of the date hereof, any
of the GCS Entities leases or rents compressor units to third parties, or
provides compressor operations, maintenance or service ("Compression
Contracts"). Except as set forth in the Company Disclosure Letter, no GCS Entity
has Knowledge of any material breach, default under or violation of any of the
Compression Contracts that are material in the aggregate, by any party to such
Compression Contracts, or any event or circumstance that with notice, or lapse
of time or both, would constitute an event of default under the terms of any of
the Compression Contracts that are material in the aggregate, and all of such
Compression Contracts are in full force and effect. Except as set forth in the
Company Disclosure Letter, to the Knowledge of the Company, no credits in excess
of $10,000 are owed to any customer under any of the Compression Contracts, and
there are no oral agreements relating to compression equipment or modifying the
terms of any of the Compression Contracts that are material in the aggregate.
Section 3.15. Warranties and Product Liability. Except for warranties
implied by Law or as set forth in the Company Disclosure Letter, none of the GCS
Entities has given or made any warranties or guarantees in connection with the
sale, rental or lease of goods or operations and maintenance services performed
thereon. None of the GCS Entities, to their Knowledge, has given any warranties
agreeing to be liable for consequential damages. Except as set forth in the
Company Disclosure Letter, neither the Company nor the Company Holders has
Knowledge of any pending or threatened claim against any of the GCS Entities
with respect to warranties relating to products sold or rented by any of them or
maintenance services performed by or on behalf of any of them, including but not
limited to warranties related to run time performance, other than pass-throughs
of manufacturers' warranties as to which there are no material claims as of the
date hereof.
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Section 3.16. Customers and Suppliers.
(a) The Company Disclosure Letter contains a true and correct
list of (i) the names and addresses of the top twenty customers of the GCS
Entities (in terms of revenue) during the eleven-month period ended June 30,
2000 (each, a "Significant Customer"), together with the approximate dollar
amount of revenue attributable to each Significant Customer for such period and
(ii) gas compression contract customers as of March 21, 2000 showing the
approximate total monthly income amounts for such customers. Except as set forth
in the Company Disclosure Letter, no Significant Customer has advised the
Company that it has terminated or, to the Knowledge of the Company, threatened
to terminate its business dealings with any of the GCS Entities during the
six-month period ending on the date hereof or has, during such six-month period,
materially decreased, or threatened to materially decrease, its business
dealings with any of the GCS Entities in terms of recurring revenue on a monthly
basis compared to the average monthly revenue attributable to such Significant
Customer over such six-month period.
(b) The Company Disclosure Letter contains a true and correct
list of the names and addresses of the top ten suppliers of the GCS Entities (in
terms of expenses) during the eleven-month period ended June 30, 2000 (each, a
"Significant Supplier"), together with a brief description of the type of goods
or services provided by such Significant Supplier.
Section 3.17. Employees. The Company Disclosure Letter contains a true
and complete list of all of the employees of the GCS Entities as of July 28,
2000 (and there has been no material change in the number of such employees
since that date), specifying their position, age and their weekly salary or
hourly wages (including any bonus commitments, if applicable).
Section 3.18. Employee Benefit Plans. All bonus, deferred compensation,
pension, profit sharing, stock option, employee stock (purchase, retirement and
other), employee benefit plans, compensation arrangements and other benefit
arrangements covering employees or former employees or directors of any of the
GCS Entities and all employee agreements, contracts and commitments providing
for compensation, severance or other benefits to any employee or former
employee or director of any of the GCS Entities or to which any of the GCS
Entities has or has had an obligation to make contributions to (whether written
or oral) (the "Company Benefit Plans") are set forth in the Company Disclosure
Letter. Correct and complete copies of the Company Benefit Plans, any
amendments thereto, all Internal Revenue Service, Department of Labor or
Pension Benefit Guaranty Corporation rulings or determinations, annual reports,
summary plan descriptions, actuarial and other financial reports and such other
documentation as reasonably requested by Parent have been provided or made
available for copying to Parent. The Company Benefit Plans comply in all
material respects with the currently mandatory requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code, and
any Company Benefit Plan intended to be qualified under Section 401(a) of the
Code has received a determination letter or is a model prototype plan and
continues to satisfy the requirements for such qualification. None of the GCS
Entities nor any ERISA Affiliate (as defined below) of any of them maintains,
contributes to, or has an obligation to contribute to, or has maintained or
contributed to, or has an obligation to contribute to, any benefit plan which
is covered by Title IV of ERISA or Section 412 of the Code, or which is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA. Neither any
Company Benefit Plan, nor any of
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the GCS Entities has incurred any material liability or penalty under Section
4975 of the Code or Section 502(i) of ERISA or engaged in any transaction that
is reasonably likely to result in any such liability or penalty. Each Company
Benefit Plan has been maintained and administered in compliance in all material
respects with its terms and with ERISA, the Code and all other applicable Laws.
All contributions required to be made as of the date hereof by or on behalf of
any GCS Entity to the Company Benefit Plans have been made or provided for.
Except as required by Law, none of the GCS Entities maintains or contributes to
any plan or arrangement which provides or has any liability to provide life
insurance or medical or other employee welfare benefits to any employee or
former employee upon his retirement or termination of employment, except to the
extent such benefits are required to satisfy the minimum requirements under Part
6 of Subtitle B of Title I of ERISA, and none of the GCS Entities has ever
represented, promised or contracted (whether in oral or written form) to any
employee or former employee that such benefits would be provided, other than in
the discretion of the Company. To the Knowledge of the Company, there is no
audit or investigation by any governmental agency announced or pending with
respect to any Company Benefit Plan.
For purposes of this Agreement "ERISA Affiliate" means any business or
entity which is a member of the same "controlled group of corporations," an
"affiliated service group" or is under "common control" with an entity within
the meanings of Sections 414(b), (c) or (m) of the Code, is required to be
aggregated with the entity under Section 414(o) of the Code, or is under "common
control" with the entity, within the meaning of Section 4001(a)(14) of ERISA, or
any regulations promulgated or proposed under any of the foregoing Sections.
Section 3.19. Labor and Employment Matters. Except as set forth in the
Company Disclosure Letter and except as would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the GCS
Entities taken as a whole:
(a) None of the GCS Entities is a party to, or bound by, any
collective bargaining agreement or other contracts, arrangements, agreements or
understandings with a labor union or labor organization that was certified by
the National Labor Relations Board ("NLRB"). None of the employees of any of the
GCS Entities is represented by a union, and to the Knowledge of the Company
there is no existing, pending or threatened (i) unfair labor practice charge or
complaint, labor dispute, labor arbitration proceeding or any other matter
before the NLRB or any other comparable state agency against or involving any of
the GCS Entities, (ii) activity or proceeding by a labor union or representative
thereof to organize any employees of any of the GCS Entities, (iii)
certification or decertification question relating to collective bargaining
units at the premises of any of the GCS Entities or (iv) lockout, strike,
organized slowdown, work stoppage or work interruption with respect to such
employees.
(b) None of the GCS Entities has taken any action that would
constitute a "Mass Layoff" or "Plant Closing" within the meaning of the Worker
Adjustment and Retraining Notification ("WARN") Act or would otherwise trigger
notice requirements or liability under any state or local plant closing notice
Law. No agreement, arbitration or court decision or governmental order to which
any of the GCS Entities is a party in any way limits or restricts any of the GCS
Entities, Parent or Sub from relocating or closing any of the operations of any
of the GCS Entities.
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(c) None of the GCS Entities has failed to pay when due any
wages, bonuses, commissions, benefits, taxes, penalties or assessments or other
monies, owed to, or arising out of the employment of or any relationship or
arrangement with, any officer, director, stockholder, employee, sales
representative, contractor, consultant or other agent.
(d) Each of the GCS Entities is in substantial compliance with
all immigration Laws relating to employment and have properly completed and
maintained in all material respects all applicable forms (including but not
limited to I-9 forms).
Section 3.20. Environmental Compliance and Disclosure. Except as set
forth in the Company Disclosure Letter and except as would not, individually or
in the aggregate, reasonably be expected to have a material adverse effect on
the GCS Entities taken as a whole:
(a) The GCS Entities possess, and are in substantial
compliance with, all permits (including air emission permits), licenses and
government authorizations and have filed all notices and registrations that are
required under local, state and federal Laws and regulations relating to
protection of the environment, pollution control, product registration and
hazardous materials ("Environmental Laws") applicable to any of the GCS
Entities, their compressors and other assets, and the Stockholder Properties and
the GCS Entities are in compliance with all applicable limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in those Laws or contained in any Law,
regulation, code, plan, order, decree, judgment, notice, permit or demand letter
issued, entered, promulgated or approved thereunder;
(b) None of the GCS Entities has received written notice of
actual or threatened liability under the Federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or any similar state or
local statute or ordinance from any governmental agency or any third party, and
the GCS Entities and the Stockholder have no Knowledge of facts or circumstances
which would reasonably be expected to form the basis for the assertion of any
claim against any of the GCS Entities under any Environmental Laws including,
without limitation, CERCLA or any similar local, state or foreign Law with
respect to any on-site or off-site location (including, without limitation, the
Stockholder Properties);
(c) None of the GCS Entities has entered into or agreed to,
nor does any of the GCS Entities contemplate entering into, any consent decree
or order, and none of such entities is subject to any judgment, decree or
judicial or administrative order relating to compliance with, or the cleanup of
hazardous materials under, any applicable Environmental Laws;
(d) None of the GCS Entities or the Stockholder Properties is
or to the Knowledge of the Company has been subject to any administrative or
judicial proceeding pursuant to, and, to the Knowledge of the Company none has
been alleged to be in violation of, applicable Environmental Laws or regulations
any time during the past five years;
(e) None of the GCS Entities or the Stockholder has received
notice that it or the Stockholder Properties is subject to any claim,
obligation, liability, loss, damage or expense
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of whatever kind or nature, contingent or otherwise, incurred or imposed or
based upon any provision of any Environmental Law and arising out of any act or
omission of the Stockholder or any of the GCS Entities, or any of their
employees, agents or representatives or, to the Knowledge of the Company,
arising out of the ownership, use, control or operation by the Stockholder or
any of the GCS Entities of any plant, facility, site, area or property
(including, without limitation, the Stockholder Properties and any other plant,
facility, site, area or property currently or previously owned or leased by any
of the GCS Entities) from which any hazardous materials were released into the
environment (the term "release" meaning any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment, and the term "environment" meaning any surface
or ground water, drinking water supply, soil, surface or subsurface strata or
medium, or the ambient air);
(f) The Company has, to the Knowledge of the Company,
heretofore provided Parent with correct and complete copies of all files of the
GCS Entities and the Stockholder relating to environmental matters, including,
without limitation, any reports of prior environmental assessments of the
Company's operations, facilities and properties and the Stockholder Properties
and any correspondence to or from any Governmental Entities with respect to
environmental matters. None of the GCS Entities or the Stockholder has paid any
fines, penalties or assessments within the last five years with respect to
environmental matters for such properties; and
(g) None of the Stockholder Properties, the assets owned by
the GCS Entities or (to the Knowledge of the Company) any real property leased
by any of them contains any friable asbestos, regulated PCBs or underground
storage tanks.
As used in this Section 3.20, the term "Hazardous Materials" means any
waste, pollutant, hazardous substance, toxic, ignitable, reactive or corrosive
substance, hazardous waste, special waste, industrial substance, by-product,
process intermediate product or waste, petroleum or petroleum-derived substance
or waste, chemical liquids or solids, liquid or gaseous products, or any
constituent of any such substance or waste, the use, handling or disposal of
which by any of the GCS Entities or with respect to the Stockholder Properties
is in any way governed by or subject to any applicable Law, rule or regulation
of any Governmental Entity.
Section 3.21. Intellectual Property. Except as disclosed in the Company
Disclosure Letter, none of the GCS Entities owns, uses or possesses any patents,
patent applications, trade names, logos, service marks, service mark
applications, trademarks, trademark applications, copyrights, copyright
applications, trade secrets, know-how and confidential business information
(whether patentable or unpatentable), exclusive of "shrink-wrap" licensed
software. The Company Disclosure Letter sets forth a true and complete list of
all websites, webpages, Internet addresses, home pages and domain names owned or
used by any of the GCS Entities.
Section 3.22. Brokers. Except for Garlin R. Rhymes and Edward C.
Stanton III (the "Company's Independent Advisors"), no third-party broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with this Agreement, the Merger or the other
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any of the GCS Entities or the Company Holders. The Company
Disclosure Letter includes a complete and correct description of all agreements
between any of
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the GCS Entities or the Company Holders and the Company's Independent Advisors
pursuant to which such advisors would be entitled to any payment relating to
this Agreement, the Merger or the other transactions contemplated by this
Agreement, and true and complete copies of such agreements have been previously
delivered to Parent.
Section 3.23. Insurance Policies The Company has delivered or made
available for copying to Parent prior to the date hereof a complete and accurate
list and summary description of all its material insurance policies currently in
force that relate to the Stockholder Properties or name any of the GCS Entities
or their employees as an insured or beneficiary or as a loss payee or for which
any of the GCS Entities has paid or is obligated to pay all or part of the
premiums (including with respect to the Stockholder Properties) and has provided
the name of the insurance agent for insurance policies providing coverage during
any of the preceding three years. None of the GCS Entities has received notice
of any pending or threatened cancellation or premium increase (retroactive or
otherwise) with respect thereto, and each of the GCS Entities is in compliance
in all material respects with all conditions contained therein. Except as set
forth in the Company Disclosure Letter, there are no pending claims against such
insurance policies by any of the GCS Entities or as to which insurers are
defending under reservation of rights or have denied liability, and there exists
no material claim under such insurance policies that has not been properly filed
by the GCS Entities. All such policies are to the Knowledge of the Company in
full force and effect, all premiums due thereon have been duly paid, and each of
the GCS Entities has complied in all material respects with the provisions of
such policies.
Section 3.24. Notes and Accounts Receivable.
(a) Except as disclosed in the Company Disclosure Letter, as
of June 30, 2000, there are no notes receivable payable by or to any of the GCS
Entities and there has been no material change between such date and the date
hereof.
(b) The Company has heretofore delivered or made available for
copying to Parent a list of its accounts receivable as of June 30, 2000, showing
the amounts due and an aging analysis thereof. Such listing is complete and
accurate in all material respects, and all accounts receivable listed thereon
are bona fide accounts receivable arising in the ordinary course of the business
of the GCS Entities and, to the Knowledge of the GCS Entities, are valid claims
against the applicable account debtors and not subject to any asserted set-offs
as of the date hereof, except as otherwise disclosed in the Company Disclosure
Letter.
Section 3.25. Transactions with Affiliates. Except as set forth in the
Company Disclosure Letter (other than compensation and benefits received in the
ordinary course of business as an employee or director of the GCS Entities), no
director, officer, stockholder or other "affiliate" or "associate" (as
hereinafter defined) of any of the GCS Entities (or any entity in which, to the
Knowledge of the Company or the Company Holders, any such director, officer or
other affiliate or associate, has any interest, direct or indirect) has an
interest, direct or indirect, in: (i) any contract, arrangement or understanding
with, or relating to the business or operations of the GCS Entities; (ii) any
loan, arrangement, understanding, agreement or contract for or relating to
indebtedness of any of the GCS Entities; or (iii) any property (real, personal
or mixed), tangible, or intangible, used or currently intended to be used in,
the business or operations of the GCS Entities.
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Section 3.26. Books and Records. The minute books of the GCS Entities,
have previously been made available for copying to Parent and its
representatives. Except as set forth in the Company Disclosure Letter, the GCS
Entities do not have any of their records, systems, controls, data or
information recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not, and all means of access
thereto and therefrom) which are not under the exclusive ownership and direct
control of such entities.
Section 3.27. Bank Accounts. The Company Disclosure Letter sets forth
an accurate and complete list showing the name and address of each bank in which
any of the GCS Entities has an account or safe deposit box, the number of each
such account or box, and the names of all persons authorized to draw thereon or
that have access thereto.
Section 3.28. The Trust; Fiduciary Capacity. The Stockholder has
provided or made available for review by Parent a true, complete and accurate
copy of the Restated Trust Agreement of the Reuben James Helton Trust Dated
January 24, 2000 (the "Trust") and all related documents, including any
amendments thereto, but redacted to exclude information regarding the
beneficiaries of the Trust (the "Trust Documents"). The Trust is a duly formed
and valid revocable trust under Michigan law. The Trust authorizes the trustee
thereof to sign such documents and take such actions as are necessary to
consummate the transactions contemplated by the Merger Agreement. The Trust
Documents have been duly executed by Reuben James Helton, as settlor, and by
Richard J. Zerafa, as trustee, of the Trust, and James Bauters is the successor
trustee upon the resignation, death or disability of Richard J. Zerafa. In the
event of the death of Reuben James Helton, the Trust becomes irrevocable. Reuben
James Helton has validly transferred to the Trust all of his interest in and to
the issued and outstanding shares of Company Common Stock, the Stockholder
Properties, and his ownership interests in GCFC and Distributing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Company as follows:
Section 4.1. Organization and Standing. Each of Parent and Sub (a) is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, (b) has full corporate power and authority
to own, lease and operate it properties and assets and to conduct its business
as presently conducted and (c) is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed would not, individually or in the
aggregate, have a Parent Material Adverse Effect (as hereinafter defined). Sub
is the only significant subsidiary of Parent. Parent has furnished or made
available for copying to the Company correct and complete copies of its amended
and restated certificate of incorporation (the "Parent Restated Certificate of
Incorporation") and bylaws (the "Parent Bylaws") and the charter and bylaws of
Sub, each as amended to date. Such charters and
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bylaws are in full force and effect, and neither Parent nor Sub is in violation
of any provision of its charter, bylaws or equivalent organizational documents.
Section 4.2. Capitalization. The authorized capital stock of Parent
consists of 200,000,000 shares of Parent Common Stock. As of the date hereof,
(i) 13,260,061 shares of Parent Common Stock are issued and outstanding, all of
which are validly issued, fully paid and nonassessable and free of preemptive
rights, (ii) 13,162 shares of Parent Common Stock are held in the treasury of
Parent, (iii) 860,310 options are outstanding pursuant to the Parent Stock
Option Plans ("Parent Options"), each such option entitling the holder thereof
to purchase one share of Parent Common Stock, and 1,912,421 shares of Parent
Common Stock are authorized and reserved for future issuance pursuant to the
exercise of such Parent Options. Except as set forth above or in that certain
letter dated the date hereof from Parent to the Company and the Company Holders
with respect to certain disclosure matters (the "Parent Disclosure Letter"),
there are no options, warrants, convertible securities, subscriptions, stock
appreciation rights, phantom stock plans or stock equivalents or other rights,
agreements, arrangements or commitments (contingent or otherwise) of any
character issued or authorized by the Parent relating to the issued or unissued
capital stock of Parent or obligating Parent to issue or sell any shares of
capital stock of, or options, warrants, convertible securities, subscriptions or
other equity interests in, Parent. All shares of Parent Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in the Parent
Disclosure Letter, there are no outstanding contractual obligations of Parent to
repurchase, redeem or otherwise acquire any shares of Parent Common Stock or to
pay any dividend or make any other distribution in respect thereof.
Section 4.3. Corporate Authority.
(a) Each of Parent and Sub has all necessary power and
authority to execute and deliver this Agreement and the other agreements
contemplated in this Agreement, to perform its obligations hereunder and to
consummate the Merger and the other transactions contemplated by this Agreement.
The execution, delivery and performance by each of Parent and Sub of this
Agreement, and the consummation by each of Parent and Sub of the Merger and the
other transactions contemplated by this Agreement, have been duly authorized by
all necessary corporate action and no other corporate proceedings on the part of
either Parent or Sub are necessary to authorize this Agreement or to consummate
the Merger or the other transactions contemplated by this Agreement (other than,
with respect to the Merger, the filing and recordation of appropriate merger
documents as required by the TBCA and MBCA). This Agreement has been, and at
Closing the other agreements contemplated in this Agreement will have been, duly
executed and delivered by each of Parent and Sub and, assuming the due
authorization, execution and delivery by the Company and the Company Holders,
constitute a legal, valid and binding obligation of each of Parent and Sub
enforceable against each of Parent and Sub in accordance with its terms, subject
to applicable bankruptcy, insolvency and other similar Laws affecting the
enforceability of creditors' rights generally, general equitable principles and
the discretion of courts in granting equitable remedies.
(b) The Board of Directors of each of Parent and Sub has (i)
determined that this Agreement and the other transactions contemplated hereby,
including the Merger, are in the
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best interests of each of Parent and Sub and the holders of Parent Common Stock
and (ii) approved, authorized and adopted this Agreement, the Merger and the
other transactions contemplated hereby.
Section 4.4. No Conflict. The execution and delivery of this Agreement
by each of Parent and Sub do not, and the performance of this Agreement by each
of Parent and Sub and the consummation of the Merger and the other transactions
contemplated hereby will not, (i) conflict with or violate Parent's or Sub's
charters or bylaws, (ii) subject to Section 4.5, conflict with or violate any
Law applicable to Parent or Sub or by which any property or asset of either of
them is bound or affected, or (iii) except as set forth in the Parent Disclosure
Letter, result in a breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, give to others
any right of termination, amendment, acceleration or cancellation of, result in
triggering any payment or other obligations, or result in the creation of a lien
or other encumbrance on any property or asset of Parent or Sub pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or Sub is a party or
by which Parent or Sub or any property or asset of any of them is bound or
affected, except in the case of clauses (ii) and (iii) above for any such
conflicts, violations, breaches, defaults or other occurrences which would not
reasonably be expected to, individually or in the aggregate, have a Parent
Material Adverse Effect. The term "Parent Material Adverse Effect" shall mean,
with respect to Parent, any change, event or effect that materially adversely
affects the business, operations, properties, condition (financial or
otherwise), assets or liabilities (including, without limitation, contingent
liabilities) of Parent, taken as a whole, except to the extent that any such
change, event or effect is the result of adverse changes in economic conditions
in or affecting the U.S. gas compression service industry generally.
Section 4.5. Required Filings and Consents. The execution and delivery
of this Agreement by Parent and Sub do not, and the performance of this
Agreement by such persons will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Entity, except
(i) for applicable requirements, if any, of the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any applicable state
securities Laws and filing and recordation of appropriate merger documents as
required by the TBCA and the MBCA, (ii) for those required by the HSR Act and
(iii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not, individually or in
the aggregate, prevent or materially delay the performance by such person of any
of its respective obligations under this Agreement or the consummation of the
Merger or the other transactions contemplated by this Agreement.
Section 4.6. Compliance. Except as disclosed in the Parent Disclosure
Letter, each of Parent and Sub (i) has been operated at all times in compliance
with all Laws applicable to Parent and Sub or by which any property, business or
asset of Parent or Sub is bound or affected and (ii) is not in default or
violation of any notes, bonds, mortgages, indentures, contracts, agreements,
leases, licenses, permits, franchises, or other instruments or obligations to
which Parent or Sub is a party or by which Parent or Sub or any property or
asset of Parent or Sub is bound or affected, except where the failure to be in
compliance or for such defaults or violations, that would not, individually or
in the aggregate, have a Parent Material Adverse Effect.
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Section 4.7. SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports, statements and
documents required to be filed with the Securities and Exchange Commission (the
"SEC") since the date of its initial public offering of Parent Common Stock
(collectively, the "Parent SEC Reports"), each of which has complied in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act, each as in effect on the date so filed. None of the Parent SEC
Reports contained when filed any untrue statement of a material fact or omitted
or omits to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) All of the financial statements included in the Parent SEC
Reports, in each case including any related notes thereto, as filed with the SEC
(collectively, the "Parent Financial Statements"), have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto and subject, in the
case of the unaudited statements, to normal, recurring audit adjustments) and
fairly present the consolidated financial position of Parent and its
subsidiaries at the respective date thereof and the consolidated results of its
operations and changes in cash flows for the periods indicated.
Section 4.8. Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as disclosed in the Parent Disclosure Letter,
since March 31, 2000, Parent and Sub have conducted their respective businesses
in a manner substantially consistent with prior practice and there has not
occurred (i) any event or condition that has had or would reasonably be expected
to have a Parent Material Adverse Effect, (ii) any declaration, setting aside or
payment of any dividend or any other distribution with respect to any of the
capital stock of Parent or Sub, (iii) any material change in accounting methods,
principles or practices employed by Parent, or (iv) any material action of the
type described in Section 5.2 which, had such action been taken after the date
of this Agreement, would be in violation of any such Section.
Section 4.9. Litigation. Except as set forth in the Parent Disclosure
Letter, there is no Litigation pending or, to the Knowledge of Parent,
threatened against Parent that would reasonably be expected to have a Parent
Material Adverse Effect. Except for such matters which have not had, and would
not reasonably be expected to have, a Parent Material Adverse Effect, there are
no judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court, administrative agency, or by arbitration, pursuant to a
grievance or other procedure) against or relating to Parent or Sub.
Section 4.10. Brokers. No broker, finder or investment banker Parent or
Subsidiary is entitled to any brokerage, finder's or other fee or commission
payable by such person in connection with this Agreement, the Merger or the
other transactions contemplated by this Agreement based upon arrangements made
by or on behalf of either of them.
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ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1. Covenants of the GCS Entities. During the period from the
date of this Agreement and continuing until the Effective Time, each of the
Company and the Company Holders agrees as to itself or himself that (except as
expressly contemplated or permitted by this Agreement or as otherwise indicated
on the Company Disclosure Letter or to the extent that Parent shall otherwise
consent in writing):
(a) Ordinary Course. The Company shall, and the Company, the
Stockholder and the Optionholder shall cause each of the Subsidiary and the
Affiliated Companies to, carry on its business in the usual, regular and
ordinary course, in substantially the same manner as heretofore conducted, and
shall use all reasonable efforts to maintain its rights and franchises and
preserve its relationships with customers, suppliers and others having business
dealings with it.
(b) Dividends; Changes in Share Capital. The Company shall not, and the
Company, the Stockholder and the Optionholder shall not permit the Subsidiary or
the Affiliated Companies to, and shall not propose to, (i) declare or pay any
dividends on or make other distributions in respect of any of its capital stock,
(ii) split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, (iii) issue any securities or
grant options, warrants or rights to purchase any securities or (iv) repurchase,
redeem or otherwise acquire any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock.
(c) Issuance of Securities. The Company shall not, and the Company, the
Stockholder and the Optionholder shall not permit the Subsidiary or any of the
Affiliated Companies to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class or
any securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such shares, or enter into any agreement with respect to
any of the foregoing.
(d) Governing Documents. The Company shall not, and the Company, the
Stockholder and the Optionholder shall cause the Subsidiary and the Affiliated
Companies not to, amend the charter or bylaws or other governing documents of
such entities or, except as otherwise contemplated by this Agreement, propose or
authorize any plan or complete or partial liquidation or dissolution.
(e) No Acquisitions. The Company shall not, and the Company, the
Stockholder and the Optionholder shall not permit the Subsidiary or the
Affiliated Companies to, acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or all or any portion of assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof. The Company will
not materially change its vehicle fleet from that set forth in the Company
Disclosure Letter without notifying Parent.
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(f) No Dispositions. The Company shall not, and the Company, the
Stockholder and the Optionholder shall not permit the Subsidiary or any of the
Affiliated Companies to, sell, lease (whether by operating lease, capital lease,
synthetic lease or otherwise), encumber or otherwise dispose of, or agree to
sell, lease, encumber or otherwise dispose of (including by way of a spin-off or
similar transaction), any assets or equipment except in the ordinary course of
business pursuant to contractual obligations existing as of the date hereof.
(g) Capital Expenditures. The Company shall not, and the Company, the
Stockholder and the Optionholder shall not permit the Subsidiary or the
Affiliated Companies to, incur or commit to any capital expenditures except as
described in the Company Disclosure Letter other than additional capital
expenditures incurred or committed to in the ordinary course of business
consistent with past practice; provided that no such additional capital
expenditure shall be incurred or committed to with respect to (i) the repair or
retrofitting of existing compressor equipment in excess of $100,000 per
compressor or (ii) other expenditures in excess of $50,000 per item, in each
case unless consented to by Sub, such consent not to be unreasonably withheld.
(h) No Incurrence or Compromise of Indebtedness. Other than borrowings
in the ordinary course of business, the Company shall not, and the Company, the
Stockholder and the Optionholder shall not permit the Subsidiary or the
Affiliated Companies to (i) incur, create, assume, guarantee or otherwise become
liable for indebtedness for borrowed money, or (ii) forgive or compromise
indebtedness owing to any of the GCS Entities.
(i) No Changes in Employment Arrangements. The GCS Entities shall not
enter into or amend any employee agreements, contracts or commitments, to any of
their directors or any of their officers or other employees; enter into, adopt
or amend any bonus, deferred compensation, pension, profit sharing, stock
option, employee stock purchase, retirement or other employee benefit plan,
compensation arrangement or other arrangement; or grant any increases in the
compensation of (i) any director or any officer or (ii) with respect to any
other employee, any increase outside the ordinary annual increase to such
employees.
(j) Consultation with Parent. The GCS Entities and management thereof
shall consult Parent concerning all material business and operating decisions
affecting the GCS Entities and advise Parent of any material adverse changes or
developments relating to customers.
(k) Other Actions. Neither the Company nor the Company Holders shall,
and shall not permit the Subsidiary or the Affiliated Companies to, take any
action that would reasonably be expected to result in any of the conditions to
the Merger set forth in Article VII not being satisfied.
(l) Accounting Matters. Except as required by a Governmental Entity,
the Company shall not make any change to its methods, principles or practices of
accounting in effect at July 31, 1999, except as required by changes in GAAP or
as concurred with by the Auditors. The Company shall not change its fiscal year.
The Company shall deliver the Current Audited Financial Statements to Parent as
soon as available but in any event not less than two Business Days prior to
Closing.
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(m) Tax Matters. The GCS Entities shall not, without the prior
written consent of Parent (which consent shall not unreasonably be withheld),
make any change with respect to their methods of reporting income or deductions
for federal income tax purposes from those employed in the preparation of Tax
Returns for prior taxable years, except for any change required by applicable
Law.
(n) Authorization of the Foregoing. The Company shall not, and
shall not permit the Subsidiary or any of the Affiliated Companies to,
authorize, commit or agree to take any of the foregoing actions, as the case may
be.
Section 5.2. Covenants of Parent. During the period from the date of
this Agreement and continuing until the Effective Time, Parent agrees as to
itself and Sub that (except as expressly contemplated or permitted or required
by this Agreement or as otherwise indicated on the Parent Disclosure Letter or
to the extent that the Company shall otherwise consent in writing, which consent
shall not be unreasonably withheld or delayed):
(a) Dividends; Changes in Share Capital. Parent shall not, and
shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock.
(b) Issuance of Securities. Parent shall not issue, deliver or
sell, or authorize or propose the issuance, delivery or sale of, any shares of
its capital stock of any class or any securities convertible into or exercisable
for, or any rights, warrants or options to acquire, any such shares or enter
into any agreement with respect to any of the foregoing, other than (i) the
issuance of Parent Common Stock upon the exercise of stock options or in
connection with rights under other stock-based benefits plans or upon the
exercise of the stock options issued pursuant to clause (iii) below, (ii)
issuances by a wholly owned subsidiary of Parent of capital stock to such
subsidiary's parent, (iii) issuances of stock options in connection with option
grants by Parent or for new hires in the ordinary course of business, (iv) the
issuance of Parent Common Stock in connection with acquisitions, or (v) the
issuance of Parent Common Stock pursuant to contractual purchase rights or
preemptive rights held by shareholders of Parent.
(c) Governing Documents. Except to the extent required to
comply with their respective obligations hereunder, required by Law or required
by the rules and regulations of the NYSE, Parent shall not amend the Parent
Restated Certificate of Incorporation or the Parent Bylaws, or other governing
documents.
(d) Other Actions. Parent shall not, and shall not permit Sub
to, take any action that would reasonably be expected to result in any of the
conditions to the Merger set forth in Article VII not being satisfied.
(e) Authorization of the Foregoing. Parent shall not, and
shall not permit Sub to, authorize, commit or agree to take any of the foregoing
actions.
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ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1. Access.
(a) Upon reasonable advance notice, each of Parent and the
Company shall, and shall cause its Subsidiaries and Affiliated Companies to,
afford to the other party and to the officers, employees, accountants, counsel,
financial advisors and other representatives ("Representatives") of such other
party reasonable access during normal business hours, during the period prior to
the Effective Time, to all of its properties, books, contracts, commitments and
records and, during such period, each of Parent and the Company shall, and shall
cause its Subsidiaries to, furnish promptly to the other party consistent with
its legal obligations all other information concerning its business, properties
and personnel as such other party may reasonably request; provided, however,
that each of Parent and the Company may restrict the foregoing access to the
extent that (i) a Governmental Entity requires either party or any of its
Subsidiaries to restrict access to any properties or information reasonably
related to any such contract on the basis of applicable Law with respect to
national security matters or (ii) in the reasonable judgment of such party any
Law or treaty of any Governmental Entity applicable to such party requires it or
its Subsidiaries to restrict access to any properties or information. The
parties will hold any such information in confidence to the extent required by,
and in accordance with, the provisions of the Non-Disclosure Agreement dated as
of June 20, 2000 between Parent and the Company (the "Confidentiality
Agreement"). Any investigation by Parent, any of the GCS Entities or the Company
Holders shall not affect the representations and warranties of Parent or the
Company and the Company Holders, as the case may be.
(b) Upon reasonable advance notice, the Company shall, and
shall cause its Subsidiary and the Affiliated Companies to, afford to Parent and
its Representatives, from the date hereof until the Effective Time, reasonable
access during normal business hours to all employees, agents and independent
contractors of such entities.
(c) Prior to the Closing Date, Parent shall have the right to
conduct a Phase I environmental assessment of the operations, facilities and
properties of the GCS Entities (including the Stockholder Properties), whether
owned or leased, which assessment shall be conducted by an environmental
consultant of Parent's choice.
Section 6.2. Reasonable Efforts; Consents and Approvals.
(a) Subject to the terms and conditions of this Agreement,
each party hereto will use all commercially reasonable efforts to (i) take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable Law to consummate the Merger and
the other transactions contemplated by this Agreement as soon as practicable
after the date hereof and (ii) obtain and maintain all approvals, consents,
waivers, registrations, permits, authorizations, clearances and other
confirmations required to be obtained from any third party and/or any
Governmental Entity that are necessary to consummate the Merger and the
transactions contemplated hereby (each a "Required Approval"). In furtherance
and not in limitation of the foregoing, each of Parent, Company and Stockholder
agrees to make as
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promptly as practicable, to the extent it has not already done so, (i) an
appropriate filing of a Notification and Report Form pursuant to the HSR Act
with respect to the transactions contemplated hereby (which filing shall be made
in any event within five Business Days of the date hereof) and (ii) any other
necessary filings with other Governmental Entities relating to the Merger, and,
in each case, to supply as promptly as practicable any additional information
and documentary material that may be requested pursuant to such Law and to use
its commercially reasonable efforts to cause the expiration or termination of
the applicable waiting periods under the HSR Act and the receipt of Required
Approvals under such other Law as soon as practicable.
(b) Each of Parent and the Company shall, in connection with
the efforts referenced in Section 6.2(a) to obtain all Required Approvals, use
its commercially reasonable efforts to (i) cooperate in all respects with each
other in connection with any filing or submission and in connection with any
investigation or other inquiry, (ii) promptly inform the other party of any
communication received by such party from, or given by such party to, the
Antitrust Division of the Department of Justice (the "DOJ") or any other
Governmental Entity regarding any of the transactions contemplated hereby, and
(iii) promptly inform the other party of the timing and content of any
communications with the DOJ or any such other Governmental Entity, and, to the
extent permitted by the DOJ or such other applicable Governmental Entity, give
the other party the opportunity to attend and participate in such meetings and
conferences.
(c) Each of Parent and the Company, and their respective Board
of Directors, shall, if any state takeover statute or similar statute becomes
applicable to this Agreement, the Merger or any other transactions contemplated
hereby, to the extent legally permissible, take all action reasonably necessary
to ensure that the Merger and the other transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise to minimize the effect of such statute or
regulation on this Agreement, the Merger and the other transactions contemplated
hereby.
Section 6.3. Exclusive Dealing.
(a) During the period from the date of this Agreement to the
Effective Time, neither the Company, the Stockholder, the Optionholder, the
Subsidiary nor the Affiliated Companies shall take any action to, directly or
indirectly, encourage, initiate or engage in discussion or negotiations with, or
provide any information to, any Person, other than Parent or its
representatives, concerning any purchase of the stock or any merger or sale of
all or any substantial portion of the assets of the Company, the Subsidiary or
the Affiliated Companies or of the Stockholder Properties or similar transaction
involving the Company, the Stockholder, the Optionholder, the Subsidiary, the
Affiliated Companies or the Stockholder Properties or any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or other
extraordinary transaction involving the Company, the Subsidiary or the
Affiliated Companies (an "Alternative Transaction"), other than the transactions
contemplated by this Agreement.
(b) The Company will notify Parent orally (within two Business
Days) and in writing (as promptly as is reasonably practicable) of all relevant
terms of any proposals by a third party with respect to any Alternative
Transaction which the Company, or any of their respective officers, directors,
employees, investment bankers, financial advisors, attorneys, accounts or other
representatives may receive during the period from the date hereof to the
Effective Time
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relating to any Alternative Transaction and, if such proposal is in writing,
the Company will deliver to Parent a copy of such inquiry or proposal.
(c) The Company will promptly request and pursue the return or
destruction of confidential Company information in accordance with all
applicable confidentiality agreements.
Section 6.4. Pahl Option. On the Closing Date, effective immediately
prior to the Effective Time, Optionholder shall exercise the Pahl Option for
4,444 shares of Company Common Stock and shall surrender any right to receive
any additional shares of Company Common Stock pursuant to the Pahl Option or
otherwise. In payment of the option exercise price for the Pahl Option,
Optionholder shall transfer, convey, assign and deliver to the Company and the
Company shall accept all right, title and interest (including all rights to
receive payment) in respect of the note or account payable from GCFC to
Optionholder in the principal amount of $401,901. (If such note or account
payable is evidenced by a promissory note, Optionholder will endorse and deliver
such note to the Company.) In satisfaction of his obligation to provide for the
withholding taxes arising from the exercise of the Pahl Option, Optionholder
directs Parent to deliver to the Company (i) the $60,000 payable to Optionholder
by Sub for Optionholder's shares in GCFC as provided in Section 6.6 below, (ii)
the cash payable to Optionholder in the Merger attributable to his ownership of
Company Common Stock and (iii) that number of Merger Shares attributable to his
ownership of Company Common Stock with a value determined under Section 1.4(a)
equal to the minimum withholding tax obligation applicable to the ordinary
income recognized by Optionholder as a result of the exercise of the Pahl Option
less the sum of the amounts in clauses (i) and (ii) of this sentence.
Section 6.5. Affiliated Companies.
(a) Prior to the Closing Date, the Company will purchase,
accept and assume, for $100,000 in cash, the 21% membership interest in
Distributing held by Randy Irish together with all right, title and interest of
Randy Irish in and to any amounts payable or distributable by Distributing to
Randy Irish or in respect of such membership interest (the foregoing,
collectively, the "Irish Distributing Interests").
(b) Prior to the Closing Date, the Company will purchase,
accept and assume, for $10,000 in cash, the 1% membership interest in Subsidiary
held by Chad Helton together with all right, title and interest of Chad Helton
in and to any amounts payable or distributable by Subsidiary to Chad Helton or
in respect of such membership interest (the foregoing, collectively, the "Chad
Helton Subsidiary Interests").
(c) The Company and Stockholder will take any and all actions
reasonably necessary to cause the Company to so acquire the Irish Distributing
Interests and the Chad Helton Subsidiary Interests for the aforementioned cash
amounts, including implementing cash-out statutory mergers, if necessary subject
to the approval of Parent, which approval shall not be unreasonably withheld.
Section 6.6. Transactions with Sub. At the Effective Time, the
Optionholder shall convey and transfer to Sub and Sub shall purchase, accept and
assume from the Optionholder, for an aggregate purchase price of $60,000 in
cash, all of the Optionholder's shares of capital
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stock of GCFC representing his 21% interest in GCFC together with all right,
title and interest of the Optionholder in and to any amounts payable or
distributable by GCFC to the Optionholder or in respect of such capital stock,
including any S corporation distributions payable. At the Effective Time, the
Stockholder shall convey and transfer to Sub and Sub shall purchase, accept and
assume from the Stockholder for an aggregate purchase price of $1,197,000 in
cash: (i) all of the shares of capital stock of GCFC representing the
Stockholder's 79% interest in GCFC, together with all right, title and interest
of the Stockholder in and to any amounts payable or distributable by GCFC to the
Stockholder or in respect of such capital stock, including any S corporation
distributions payable; (ii) the 79% membership interest in Distributing held by
the Stockholder together with all right, title and interest of the Stockholder
in and to any amounts payable or distributable by Distributing to the
Stockholder or in respect of such membership interest; and (iii) the real estate
assets described and identified as the Stockholder Properties in the Company
Disclosure Letter (the "Stockholder Properties"). The aggregate purchase price
for the Stockholder Properties shall be allocated as set forth in the Company
Disclosure Letter. All parties agree that the purchase by Sub of the stock of
GCFC shall be subject to an election under Section 338(h)(10) of the Code. The
Company, the Stockholder and the Optionholder each represents and warrants to
Parent that, upon consummation of the Merger and the transactions contemplated
by this Section 6.6, there shall have been conveyed to Sub 100% of the
authorized, issued and outstanding capital stock of GCFC and 100% of the
authorized, issued and outstanding membership interests in each of Distributing
and Subsidiary, in each case free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
voting rights, charges and other encumbrances of any nature whatsoever.
Section 6.7. Benefit Plans. Immediately prior to the Closing, the
Company shall take appropriate action to cease benefit accruals under and
terminate the Company's 401(k) plan. All employees of the Company at the
Effective Time will become employees of Sub.
Section 6.8. Fees and Expenses. Whether or not the Merger is
consummated, all Expenses (as hereinafter defined) incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such Expenses, except (i) as otherwise set forth in Section 8.2
hereof and, (ii) that the Expenses incurred by the GCS Entities as set forth in
the Company Disclosure Letter shall not exceed the amounts reflected therein. As
used in this Agreement, the term "Expenses" includes all out-of-pocket expenses
(including all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its affiliates) incurred by a
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution, satisfaction of conditions and performance
of this Agreement and the transactions contemplated hereby.
Section 6.9. Public Announcements. Parent and the Company shall consult
each other before issuing any press release or other public announcement
regarding this Agreement or the Merger, and shall not issue any such press
release or other public announcement without the consent of the other (which
consent shall not be unreasonably withheld) unless required by Law, as advised
by counsel, or by obligations pursuant to any listing agreement with any
national securities exchange.
Section 6.10. Listing. Parent shall cause the shares of Parent Common
Stock to be issued in connection with the Merger to be listed on the NYSE.
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Section 6.11. Tax Treatment. Each of Parent and the Company and their
respective Subsidiaries shall use reasonable efforts to cause the Merger to
qualify as a "reorganization" under the provisions of Section 368(a) of the
Code. The Company and Parent (and their subsidiaries) and the Stockholders shall
treat the Merger Shares as property permitted to be received by Section 354 of
the Code without the recognition of gain. Each of the Company and Parent
covenants and agrees to, and agrees to cause its affiliates to, vigorously and
in good faith defend all challenges to the treatment of the reorganization as
described in this Section 6.11. Each of the Company and Parent agrees that if it
becomes aware of any such fact or circumstance that is reasonably likely to
prevent the Merger from qualifying as a reorganization described in Section
368(a) of the Code, it will promptly notify the other party in writing.
Section 6.12. Board Participation. Reuben James Helton, if he so elects
on or prior to the Closing Date, shall be offered the opportunity to be
nominated to serve in his individual capacity on the Board of Directors of
Parent in accordance with the provisions of the Parent Restated Certificate of
Incorporation and Parent Bylaws, as described in the letter agreement to be
entered into by Parent and the Company Holders, which letter agreement shall be
substantially in the form of Exhibit D hereto (the "Board Participation Letter
Agreement").
Section 6.13. Further Assurances.
(a) At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company, any deeds, bills of sale,
assignments or assurances and to take any other actions and do any other things,
in the name and on behalf of the Company, reasonably necessary to vest, perfect
or confirm of record or otherwise in the Surviving Corporation any and all
right, title and interest in, to and under any of the rights, properties or
assets of the Company acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger.
(b) In case at any time after the Effective Time any further
action is necessary to carry out the purposes and intent of this Agreement and
the transactions contemplated hereby, each of the Company Holders agrees to take
or cause to be taken such further action (including the execution and delivery
of such further instruments and documents) as Parent reasonably may request.
Section 6.14. Registration of the Sale of Merger Shares. Parent agrees
that it shall prepare and cause to be filed, within two Business Days after the
Closing Date, at its sole expense, a shelf registration statement on Form S-3
covering the offering and sale by the Company Holders of 500,000 of the Merger
Shares and provide subsequent registration rights in accordance with the
Registration Agreement substantially in the form attached as Exhibit J hereto
(the "Registration Agreement").
Section 6.15. Notices of Certain Events. From the date hereof until the
Closing Date, each of the Company and the Company Holders, on the one hand, and
Parent, on the other, shall promptly notify the other party of:
(a) the occurrence of any event whose occurrence would be
likely to cause either (i) any representation or warranty contained in this
Agreement to be untrue or inaccurate
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in any material respect at any time from the date hereof to the Effective Time,
(ii) any condition set forth in Article VII to not be satisfied, or (iii) any
Company Material Adverse Effect or Parent Material Adverse Effect, as
applicable, on such party;
(b) any material failure of such party, to comply with in any
material respect any covenant or agreement to be complied with by it hereunder;
and
(c) any notice or other communication from any Person alleging
that a material consent of such Person is or may be required in connection with
the transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS
Section 7.1. Conditions to the Obligation of Each Party. The respective
obligations of Parent, Sub, the Company and the Company Holders to effect the
Merger are subject to the satisfaction of the following conditions, unless
waived in writing by all parties:
(a) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition (including, any statute, rule, regulation,
injunction, order or decree proposed, enacted, enforced, promulgated, issued or
applied to, or the withholding any consent or approval withheld with respect to,
the Merger, by any Governmental Entity) preventing the consummation of the
Merger shall be in effect; provided, however, that the parties invoking this
condition shall have used commercially reasonable efforts to have any such order
or injunction vacated; and
(b) All actions by or in respect of or filings with any
Governmental Entity required to permit the consummation of the Merger shall have
been obtained or made (including the expiration or termination of any applicable
waiting period under the HSR Act).
Section 7.2. Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger are further
subject to satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) (i) the representations and warranties of the Company and
the Company Holders in this Agreement that are qualified by materiality shall be
true and correct in all respects as of the date of the Agreement and as of the
Effective Time (except that any representations and warranties made as of a
specified date or as to a specified period of time need be true and correct only
as of such date or as to such period of time); (ii) the representations and
warranties of the Company and the Company Holders in the Agreement that are not
qualified by materiality shall be true and correct in all material respects as
of the date of this Agreement and as of the Effective Time (except that any
representations and warranties made as of a specified date or as to a specified
period of time need be true and correct only as of such date or as to such
period of time); (iii) the Company and the Company Holders shall have performed
in all material respects all obligations required to be performed by it under
this Agreement; and (iv) an officer of the Company and each of the Company
Holders shall have
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delivered to Parent and Sub a certificate to the effect that each of the
foregoing conditions and the conditions in Section 7.2(c) and (i) is satisfied
in all respects;
(b) Each of Parent, the Company, the Affiliated Companies and
any of their Subsidiaries shall have fully cooperated in good faith to procure
applicable third party consents or waivers with respect to consummation of the
Merger and the other transactions contemplated hereby;
(c) There shall not have occurred since the date hereof any
change, condition, event or development that has resulted in, or would
reasonably be expected to result in, a Company Material Adverse Effect;
(d) The Company and the Company Holders shall have tendered to
Sub certificates representing all of the issued and outstanding shares of
capital stock of the Company and GCFC.
(e) Each of the Company Holders shall have executed and
delivered to Parent a lock-up letter in substantially the form of Exhibit E
hereto;
(f) Michael Pahl shall have exercised the Pahl Option;
(g) Each of the Company Holders shall have executed and
delivered to Parent the Escrow Agreement;
(h) The Company shall have executed and delivered the
Retention Plan;
(i) No holder of equity securities of the Company, the
Subsidiary or any of the Affiliated Companies shall have exercised any
dissenters', appraisal or similar rights with respect to the Merger or the other
transactions contemplated hereby;
(j) Parent shall have received the legal opinions, dated the
Closing Date, of (i) Mayor, Day, Caldwell & Keeton, L.L.P., Warner Norcross and
Judd, L.L.P. and Zerafa Law Offices, P.C., substantially to the effects, subject
to customary qualifications and assumptions, set forth in Exhibits F, G and H,
respectively, hereto and (ii) King & Spalding that the Merger will qualify as a
reorganization under Section 368(a) of the Code;
(k) Phase I environmental assessments of the operations,
facilities and properties of the GCS Entities and the Stockholder Properties
shall have been completed, and, within Parent's reasonable judgment, shall not
indicate material potential liabilities; provided, however, that Parent shall
have advised the Company as to any such judgment by Parent on or before August
21, 2000, and Parent shall have, at its option, the right (i) to terminate this
Agreement by notice on or before August 23, 2000 or (ii) to continue with the
Closing and pursue any remedies with respect to any Loss (as hereafter defined)
related to such operations, facilities and properties subject to all the
provisions of Article IX; and with respect to any Stockholder Property, Parent
may elect by notice on or before August 23, 2000 to exclude such property from
purchase under this Agreement and require the property to be retained by the
Stockholder (in which event the parties shall enter into a lease termination
agreement with respect to such excluded property in substantially the form of
the lease termination agreement
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attached as an exhibit to the Company Disclosure Letter) and pursue any remedies
with respect to any Loss related to such Stockholder Property, or the operations
or facilities thereon, subject to all the provisions of Article IX;
(l) The trustee of the Trust shall have delivered to Parent a
Certificate of Trustee substantially in the form of Exhibit I hereto; and
(m) Indebtedness of Reuben James Helton to the Company in the
amount of $950,000 shall be repaid at the Closing.
Section 7.3. Conditions to Obligations of the Company and the Company
Holders to Effect the Merger. The obligations of the Company and the Company
Holders to effect the Merger are further subject to satisfaction or waiver at or
prior to the Effective Time of the following conditions:
(a) (i) the representations and warranties of Parent and Sub
in this Agreement that are qualified by materiality shall be true and correct in
all respects as of the date of the Agreement and as of the Effective Time; (ii)
the representations and warranties of Parent and Sub in the Agreement that are
not qualified by materiality shall be true and correct in all material respects
as of the date of this Agreement and as of the Effective Time; (iii) each of
Parent and Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement; and (v) an officer of each
of Parent and Sub shall have delivered to the Company a certificate to the
effect that each of the foregoing conditions and the condition in Section 7.3(b)
is satisfied in all respects;
(b) There shall not have occurred any change, condition, event
or development that has resulted in, or would reasonably be expected to result
in, a Parent Material Adverse Effect;
(c) Parent shall have executed and delivered to the Company
Holders a Registration Agreement in substantially the form of Exhibit J hereto;
(d) The Company and the Company Holders shall have received
the legal opinions, dated the Closing Date, of Valerie L. Banner, Senior Vice
President and General Counsel of Parent and King & Spalding, substantially to
the effects, subject to customary qualifications and conditions, set forth in
Exhibits K and L, respectively, hereto;
(e) If Reuben James Helton so elects, Parent shall have
executed and delivered to him the Board Participation Letter Agreement;
(f) Parent shall have executed and delivered the Escrow
Agreement;
(g) Parent shall have executed and delivered the Retention
Plan; and
(h) Reuben James Helton shall have been released from all
guarantees or other similar obligations in respect of debt or other similar
agreements of the GCS Entities disclosed in the Company Disclosure Letter.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time:
(a) By mutual written consent of Parent and the Company;
(b) By either the Company or Parent if the Effective Time
shall not have occurred on or before September 30, 2000 (the "Termination
Date");
(c) By either the Company or Parent if any Governmental Entity
(i) shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other action
shall have become final and nonappealable or (ii) shall have failed to issue an
order, decree or ruling or to take any other action, in each of case (i) and
(ii) which is necessary to fulfill the conditions set forth in Section 7.1(b)
and such denial of a request to issue such order, decree, ruling or take such
other action shall have become final and nonappealable; provided, however, that
the right to terminate this Agreement under this Section 8.1(c) shall not be
available to any party whose failure to comply with Section 6.2 has caused or
resulted in such action or inaction; and provided, further that if an
information request is received under the HSR Act, the Termination Date will be
extended as necessary for up to sixty days;
(d) By the Company, if Parent or Sub shall have breached or
failed to perform any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform (A)
would give rise to the failure of a condition set forth in Section 7.3 and (B)
has not been or is incapable of being cured by Parent or Sub within 30 calendar
days after its receipt of written notice thereof from the Company;
(e) By Parent, if any of the Company or the Company Holders
shall have breached or failed to perform any of its or his representations,
warranties, covenants or other agreements contained in this Agreement, which
breach or failure to perform (A) would give rise to the failure of a condition
set forth in Section 7.2 and (B) has not been or is incapable of being cured by
the Company or the Company Holders within 30 calendar days after its receipt of
written notice thereof from Parent;
(f) By the Company or Parent if the mean of the closing prices
of Parent Common Stock on the NYSE for the 20 consecutive trading day period
ending the third Business Day prior to the Closing Date is less than $22.00 per
share;
(g) By the Company or Parent if trading in any securities of
Parent has been suspended or materially limited by the SEC or the NYSE, or if
trading generally on the NYSE has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by said exchange or by order of the SEC, the National
Association of Securities Dealers, Inc. or any Governmental Entity, or if a
banking moratorium has been declared by either Federal or New York authorities;
and
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(h) By Parent as and on or prior to the date provided in
Section 7.2(l) hereof.
Notwithstanding anything else contained in this Agreement, the
right to terminate this Agreement under Section 8.1(b), (d) or (e) shall not be
available to any party (a) that is in material breach of its obligations
hereunder or (b) whose failure to fulfill its obligations or to comply with its
covenants under this Agreement has been the cause of, or resulted in, the
failure to satisfy any condition to the obligations of either party hereunder.
Section 8.2. Effect of Termination.
(a) In the event of the termination of this Agreement pursuant
to Section 8.1 hereof, this Agreement shall forthwith be terminated and have no
further effect except as specifically provided herein and, except as provided in
this Section 8.2 and in Section 6.8, there shall be no liability on the part of
any party hereto; provided that nothing herein shall relieve any party from
liability for any willful breach hereof.
(b) In the event of termination of this Agreement other than
pursuant to Section 8.1(e), Parent agrees to reimburse the Company for up to
$250,000 in reasonable out-of-pocket third party expenses (including the
reasonable fees and expenses of legal counsel, accountants and other
consultants) actually incurred by the GCS Entities in connection with the
preparation and negotiation of this Agreement or the furtherance of the
transactions contemplated hereby.
Section 8.3. Amendments. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 8.4. Waiver. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any of the covenants,
obligations or other acts of any other party hereto or (ii) waive any inaccuracy
of any representations or warranties or compliance with any of the agreements,
covenants or conditions of any other party or with any conditions to its own
obligations. Any agreement on the part of a party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party by its duly authorized officer. 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. The waiver of any such right with
respect to particular facts and other circumstances shall not be deemed a waiver
with respect to any other facts and circumstances and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
ARTICLE IX
INDEMNIFICATION
Section 9.1. Company Holders' Indemnification Obligations. Subject to
the further provisions hereof and of the Escrow Agreement, after the Effective
Time, the Company Holders shall indemnify and reimburse Parent for any and all
claims, losses, liabilities, damages (including fines, penalties, and criminal
or civil judgments and settlements), costs (including court costs) and expenses
(including attorneys' and accountants' fees and expenses) (hereinafter
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"Loss" or "Losses"), suffered or incurred by Parent or Sub or any of their
directors, officers, employees, successors or assigns (the "Parent Indemnified
Parties"), as a result of, or with respect to, (i) any breach or inaccuracy of
any representation or warranty of the Company or the Company Holders set forth
in this Agreement, whether such breach or inaccuracy exists or is made on the
date of the Agreement or as of the Closing Date and without regard to any
qualification in such representation or warranty for material, immaterial,
Company Material Adverse Effect or similar terms (but subject to the provisions
of Sections 9.3 through 9.8), and (ii) any breach of or noncompliance by the
Company or the Company Holders with any covenant or agreement of either of them
contained in this Agreement.
Section 9.2. Parent's Indemnification Obligations. Subject to the
further provisions hereof, after the Effective Time, Parent shall indemnify and
reimburse the Company Holders, for any and all Losses suffered or incurred by
Company Holders or any of their trustees, representatives, heirs, beneficiaries,
successors or assigns (the "Stockholder Indemnified Parties"), as a result of,
or with respect to, (i) any breach or inaccuracy of any representation or
warranty of Parent or Sub set forth in this Agreement, whether such breach or
inaccuracy exists or is made on the date of the Agreement or as of the Closing
Date (but subject to the provisions of Sections 9.3 through 9.8), and (ii) any
breach of or noncompliance by Parent or Sub with any covenant or agreement of
Parent contained in this Agreement.
Section 9.3. Survival. The representations and warranties contained
herein or in any certificate or other document delivered pursuant hereto or in
connection herewith shall not be extinguished by the Closing, but shall survive
until June 30, 2001, except that (i) the representations and warranties
contained in Sections 3.1, 3.6, 3.15, 3.18, 3.20, 3.23, 4.1, 4.2 and 4.3 shall
survive until June 30, 2002 and (ii) the representations and warranties
contained in clause (iii) of the fourth sentence, the sixth sentence and the
eighth sentence of Section 3.1(b), Section 3.8 and the last sentence of Section
6.6 shall survive the until the expiration of the applicable statute of
limitations. No investigation or other examination by Parent or its designees
or representatives, on the one hand, or the Company, the Company Holders or
their designees or representatives, on the other, shall affect the term of
survival of the representations and warranties set forth above.
Section 9.4. Threshold. The Parent Indemnified Parties will not make a
Claim (as hereafter defined) against the Company Holders, and the Stockholder
Indemnified Parties will not make a Claim against Parent, for indemnification
under Section 9.1 and 9.2, respectively, herein unless and until the aggregate
amount of such Claims against such party exceeds $650,000 (the "Threshold"), in
which event such party may claim indemnification for all such Losses, including
the amount of the Threshold. For purposes of this Section 9.4, the Company
Holders shall be considered a single party. No Claim may be made in respect of
any breach of a representation, warranty, covenant or agreement pursuant to
Section 9.1 unless the amount of such Claim is in excess of $40,000, and Claims
with respect to separate breaches may not be aggregated for purposes of this
requirement.
Section 9.5. Notice of Claim. Parent shall promptly notify the Company
Holders, and the Company Holders shall promptly notify Parent, as applicable, in
writing, of any claim for recovery, specifying in reasonable detail the nature
of the Loss and, if known, the amount, or an estimate of the amount, of the
liability arising therefrom (a "Claim"). The party seeking indemnification shall
provide to the indemnifying party, as promptly as practicable thereafter,
information and documentation reasonably requested by such indemnifying party to
support and verify the claim asserted, unless the party seeking
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indemnification has been advised by counsel that there are no reasonable grounds
to assert a joint defense privilege with respect to such information and
documentation.
Section 9.6. Defense. If the facts pertaining to a Loss arise out of
the claim of any third party, or if there is any claim against a third party
available by virtue of the circumstances of the Loss, the indemnifying party may
assume the defense or the prosecution thereof by written notice to the party
seeking indemnification, including the employment of counsel or accountants, in
each case reasonably satisfactory to such party, at their cost and expense. The
party seeking indemnification shall have the right to employ counsel separate
from counsel employed by the indemnifying party in any such action and to
participate therein, but the fees and expenses of such counsel employed by the
party seeking indemnification shall be at its expense. The indemnifying party
shall not be liable for any settlement of any such claim effected without its
prior written consent, which shall not be unreasonably withheld; provided that
if the indemnifying party does not assume the defense or prosecution of a claim
within 30 days of notice thereof, the party seeking indemnification may settle
such claim without the indemnifying party's consent. The Company Holder shall
not agree to a settlement of any claim which provides for any relief other than
the payment of monetary damages or which could have a material precedential
impact or effect on the business or financial condition of the Company and the
Subsidiary without Parent's prior written consent. Whether or not the
indemnifying party does choose to so defend or prosecute such claim, all the
parties hereto shall cooperate in the defense or prosecution thereof and shall
furnish such records, information and testimony, and attend such conferences,
discovery proceedings, hearings, trials and appeals, as may be reasonably
requested in connection therewith. The indemnifying party shall be subrogated to
all rights and remedies of the party seeking indemnification.
Section 9.7. Limitation on Recourse. Except as provided in the next
sentence, all amounts owed by the Company Holders to the Parent Indemnified
Parties under this Article IX shall be offset by Parent against the Escrowed
Shares, to the extent of such shares, in accordance with the terms of the Escrow
Agreement without regard to whether the obligation was owed by the Company or
the Company Holders, or the relative fault of any of them, and such offset shall
be the sole remedy and recourse of the Parent Indemnified Parties.
Notwithstanding the foregoing, (i) in the event and to the extent that Escrowed
Shares have been released to the Company Holders in accordance with the Escrow
Agreement and thereafter the value of any remaining Escrowed Shares, if any, is
insufficient to cover amounts owed by the Company Holders to the Parent
Indemnified Parties in respect of Losses attributable to a breach of the
representations and warranties contained in Section 3.8, the Parent Indemnified
Parties shall have the right to recover from the Company Holders (or their
heirs, successors or assigns) prior to the expiration of the survival period for
such representations and warranties as specified in Section 9.3, the total
amount of such deficiency that does not exceed the total value of all Escrowed
Shares so released to the Company Holders (which value shall be calculated on
the date of such release in the same manner as described in Article I); and (ii)
in the event and to the extent that the value of then remaining Escrowed Shares,
if any, is insufficient to cover amounts owed by the Company Holders to the
Parent Indemnified Parties in respect of Losses attributable to a breach of the
representations and warranties contained in clause (iii) of the fourth sentence,
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the sixth sentence and the eighth sentence of Section 3.1(b) and the last
sentence of Section 6.6, the Parent Indemnified Parties shall have the right to
recover from the Company Holders (or their heirs, successors or assigns) prior
to the expiration of the survival period for such representations and warranties
as specified in Section 9.3, the total amount of such deficiency. Parent's
indemnification and reimbursement obligation to Stockholder Indemnified Parties
shall not exceed $3,600,000. It is further expressly agreed that, after the
Effective Time, neither the Company, any Parent Indemnified Party, the GCS
Entities nor any Stockholder Indemnified Party shall have any claim, cause of
action or right as to any representation, warranty, covenant, agreement, act or
omission under or relating to this Agreement, the other instruments and
agreements referred to herein or the transactions contemplated hereby or
thereby, other than the rights of indemnity under and subject to the provisions
of Articles VIII and IX and the Escrow Agreement; and all such other claims,
causes of action and rights are hereby irrevocably and fully released for all
purposes effective as of the Effective Time; provided, however, that this
Section 9.7 shall not limit any covenant or agreement of the parties which
contemplates performance after the Effective Time, or limit any claim, cause of
action or right arising from any fraudulent act or omission.
Section 9.8. Express Negligence. THE INDEMNITIES SET FORTH IN THIS
ARTICLE IX ARE INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE
WITH THE EXPRESS TERMS AND SCOPE HEREOF NOTWITHSTANDING TEXAS'S EXPRESS
NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE, OR THE SIMPLE GROSS NEGLIGENCE
(WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE), OR OTHER FAULT OR STRICT
LIABILITY OF ANY OF THE INDEMNIFIED PARTIES.
ARTICLE X
GENERAL PROVISIONS
Section 10.1. No Third Party Beneficiaries. Except as specifically
provided herein, nothing in this Agreement shall confer any rights or remedies
upon any person other than the parties hereto.
Section 10.2. Entire Agreement. This Agreement (including the Company
Disclosure Letter and the Parent Disclosure Letter), together with the
Confidentiality Agreement, constitutes the entire Agreement among the parties
with respect to the subject matter hereof and supersedes any prior
understandings, agreements, or representations by or among the parties, written
or oral, with respect to the subject matter hereof (including, without
limitation, that certain letter agreement dated July 13, 2000 between the
Company and Parent).
Section 10.3. Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties named herein and their
respective successors, heirs and assigns. No party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other parties; provided, however, that Sub may
freely assign its rights to another wholly owned subsidiary of Parent without
such prior written approval.
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Section 10.4. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 10.5. Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 10.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW THEREOF; PROVIDED, HOWEVER, THAT THE MERGER SHALL
BE GOVERNED BY THE APPLICABLE LAWS OF THE STATES OF TEXAS AND MICHIGAN.
Section 10.7. Consent to Jurisdiction; Waiver of Jury Trial. The
parties hereto irrevocably submit to the jurisdiction of the United States
District Court for the Southern District of Texas, and/or any state court of the
State of Texas located in Harris County in any action, suit or proceeding
brought by or against such party in connection with, arising from or relating to
this Agreement, the transactions contemplated hereby and any document
contemplated herein or otherwise relating hereto, and each party hereby waives
and further agrees not to assert as a defense in any such suit, action or
proceeding any claim that such party is not personally subject to the
jurisdiction of any such courts, that the venue of the suit, action or
proceeding is brought in an inconvenient forum or that this Agreement or the
subject matter hereof may not be enforced in or by such courts. THE PARTIES
HEREBY WAIVE IRREVOCABLY ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY IN
CONNECTION WITH THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY
DOCUMENT CONTEMPLATED HEREIN OR OTHERWISE RELATED HERETO.
Section 10.8. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
Section 10.9. Specific Performance. Each of the parties acknowledges
and agrees that the other party would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
agrees that the other party shall be entitled to seek an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any federal or state
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court located in the State of Texas, in addition to any other remedy to which it
may be entitled, at law or in equity.
Section 10.10. Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party. 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 10.11. Certain Definitions. For purposes of this Agreement, the
terms:
(a) "Associate" and "Affiliate" shall have the same meaning as
set forth in Rule l2b-2 promulgated under the Exchange Act.
(b) "Business Day" means any day on which banks are not
required or authorized to close in the City of New York.
(c) "Knowledge" means the actual knowledge of a Person. With
respect to any of the GCS Entities, such Persons shall be deemed to have
Knowledge only of those matters actually known by Reuben James Helton, Colleen
M. Yuncker, Michael Pahl, Randy Irish, Lois E. Pahl, Verna Blackwell, Michael
Taylor, Jaclynn K. Richards, Sandy Shields-Zoulek, Amy Rogers, Carry Miterko,
Chris Helton and Richard J. Zerafa.
(d) "Person" means any individual, corporation, partnership
(general or limited), limited liability company, limited liability partnership,
trust, joint venture, joint stock company, syndicate, association, entity,
unincorporated organization, government or any political subdivision, agency or
instrumentality thereof, or other entity or group (as defined in the Exchange
Act).
Section 10.12. 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 given upon receipt) by delivery in person, by
telecopy or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses, or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 10.12:
If to Parent or Sub:
Universal Compression Holdings, Inc.
4440 Brittmoore Road
Houston, Texas 77041
Attention: Mr. Stephen A. Snider, President
Telecopy: (713) 466-6720
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with copies to:
Universal Compression Holdings, Inc.
4440 Brittmoore Road
Houston, Texas 77041
Attention: Ms. Valerie L. Banner,
Senior Vice President and
General Counsel
Telecopy: (713) 466-6720
King & Spalding
1100 Louisiana Street, Suite 3300
Houston, Texas 77002
Attention: Ms. Christine LaFollette
Telecopy: (713) 751-3290
If to the Company, the Stockholder or the Optionholder:
Gas Compression Services, Inc.
2480 Aero Park Drive
Traverse City, Michigan 49686
Attention: Chief Executive Officer
Telecopy: (231) 946-0926
with copies to:
Zerafa Law Offices, P.C.
134 River Street
Elk Rapids, Michigan 49629
Attention: Richard J. Zerafa, Esq.
Telecopy: (231) 264-8127
Mayor, Day, Caldwell & Keeton
700 Louisiana Street, Suite 1900
Houston, Texas 77002
Attention: Ms. Kathleen M. Kopp
Telecopy: (713) 225-7047
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IN WITNESS WHEREOF, each of the Company, the Company Holders, Parent
and Sub have caused this Agreement to be executed as of the date first written
above by their respective officers thereunto duly authorized.
GAS COMPRESSION SERVICES, INC.
By: /s/ Colleen M. Yuncker
-------------------------------------------
Name: Colleen Yuncker
Title: President and Chief Executive Officer
THE REUBEN JAMES HELTON TRUST
DATED JANUARY 24, 2000
By: /s/ Richard J. Zerafa
-------------------------------------------
Name: Richard J. Zerafa
Title: Trustee
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ Ernie L. Danner
-------------------------------------------
Name: Ernie L. Danner
Title: Executive Vice President
UNIVERSAL COMPRESSION, INC.
By: /s/ Ernie L. Danner
-------------------------------------------
Name: Ernie L. Danner
Title: Executive Vice President
MICHAEL PAHL
By: /s/ Michael Pahl
-------------------------------------------
Michael Pahl
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JOINDER
Each of the undersigned hereby acknowledges and confirms that he or she
(i) has reviewed and is fully informed with respect to the foregoing Agreement
and Plan of Merger (the "Agreement") and the transactions contemplated thereby,
(ii) approves, consents to and endorses the Agreement, agrees and consents to
the consummation of the Agreement and the transactions contemplated by the
Agreement in accordance with the terms and conditions of the Agreement and
agrees to take such further actions as may be necessary to carry out the
purposes of the Agreement or to further evidence the matters represented herein
or therein, and (iii) agrees that any interest he or she may have had or may
have in the GCS Entities or Stockholder Properties shall be irrevocably bound by
the terms and conditions of the Agreement.
The undersigned Reuben James Helton hereby further represents and
warrants (i) that he has validly transferred to the Trust all of his right,
title and interest in and to the issued and outstanding shares of Company Common
Stock, the Stockholder Properties and his ownership interests in Gas Compression
Finance Corporation and GCS. Distributing, LLC, (together, the "Trust
Properties"), (ii) that the Trust has not been revoked and will not be revoked
prior to the earlier of the Effective Time or the termination of the Agreement
as provided therein, and that Richard J. Zerafa is fully empowered to act as
Trustee without any further authorization or consent of the undersigned.
The undersigned Susan Helton hereby further represents and warrants
that she had no interest in the Trust Properties prior to the transfer of the
Trust Properties to the Trust.
Dated this 4th day of August, 2000.
/s/ Reuben James Helton
-------------------------------------
Reuben James Helton
/s/ Susan Helton
-------------------------------------
Susan Helton
43
