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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 13, 2000
AMONG
HANOVER COMPRESSOR COMPANY
CADDO ACQUISITION CORPORATION
AND
OEC COMPRESSION CORPORATION
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TABLE OF CONTENTS
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ARTICLE I. THE MERGER............................................................................................1
Section 1.1. Effective Time of the Merger.................................................................1
Section 1.2. Closing......................................................................................2
Section 1.3. Effect of the Merger.........................................................................2
Section 1.4. Certificate of Incorporation; Bylaws.........................................................2
Section 1.5. Directors and Officers.......................................................................2
Section 1.6. Conversion of Capital Stock..................................................................2
Section 1.7. Adjustment of Conversion Number..............................................................3
Section 1.8. No Further Ownership Rights in Company Common Stock..........................................3
Section 1.9. No Fractional Shares.........................................................................4
Section 1.10. Shares of Dissenting Shareholders............................................................4
Section 1.11. Company Options..............................................................................4
Section 1.12. Tax Consequences.............................................................................5
ARTICLE II. EXCHANGE OF CERTIFICATES.............................................................................5
Section 2.1. Exchange Agent...............................................................................5
Section 2.2. Exchange and Payment Procedures..............................................................5
Section 2.3. Distributions with Respect to Unexchanged Shares.............................................6
Section 2.4. Termination of Exchange Fund.................................................................6
Section 2.5. No Liability.................................................................................6
Section 2.6. Lost Certificates............................................................................6
Section 2.7. Withholding Rights...........................................................................7
Section 2.8. Further Assurances...........................................................................7
Section 2.9. Stock Transfer Books.........................................................................7
Section 2.10. Affiliates...................................................................................7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................7
Section 3.1. Organization of the Company and its Subsidiaries.............................................8
Section 3.2. Capitalization...............................................................................8
Section 3.3. Authority; No Conflict; Required Filings and Consents; Recommendation of the Board..........11
Section 3.4. SEC Filings; Financial Statements...........................................................11
Section 3.5. No Undisclosed Liabilities..................................................................11
Section 3.6. Absence of Certain Changes or Events........................................................12
Section 3.7. Taxes...................................................................................... 12
Section 3.8. Title to Assets.............................................................................13
Section 3.9. Real Property...............................................................................14
Section 3.10. Intellectual Property.......................................................................16
Section 3.11. Agreements, Contracts and Commitments.......................................................17
Section 3.12. Litigation..................................................................................17
Section 3.13. Environmental Matters.......................................................................18
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Section 3.14. Employee Benefit Plans......................................................................19
Section 3.15. Compliance with Law; Authorizations.........................................................22
Section 3.16. Registration Statement and Proxy Statement..................................................23
Section 3.17. Labor Matters...............................................................................23
Section 3.18. Insurance...................................................................................23
Section 3.19. Year 2000 Problem...........................................................................24
Section 3.20. Opinion of Financial Advisor................................................................24
Section 3.21. Brokers.....................................................................................24
Section 3.22. Transactions With Affiliates................................................................24
Section 3.23. No Excess Parachute or Nondeductible Payments...............................................24
Section 3.24. State Anti-Takeover Statutes................................................................24
Section 3.25. Accuracy of Information.....................................................................25
Section 3.26. Inventory...................................................................................25
Section 3.27. Customers and Suppliers.....................................................................25
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.............................................25
Section 4.1. Organization................................................................................25
Section 4.2. Authority; No Conflict; Required Filings and Consents.......................................26
Section 4.3. Parent Common Stock.........................................................................26
Section 4.4. SEC Filings: Financial Statements...........................................................27
Section 4.5. Proxy Statement/Registration Statement......................................................27
Section 4.6. Absence of Certain Changes or Events........................................................28
Section 4.7. No Vote Required............................................................................28
Section 4.8. Merger Sub..................................................................................28
Section 4.9. Brokers.....................................................................................28
Section 4.10. Accuracy of Information.....................................................................28
ARTICLE V. COVENANTS............................................................................................28
Section 5.1. Conduct of Business of the Company..........................................................28
Section 5.2. Cooperation; Notice; Cure...................................................................31
Section 5.3. No Solicitation.............................................................................31
Section 5.4. Preparation of Proxy Statement/Registration; Company Shareholder Meeting....................33
Section 5.5. Access to Information.......................................................................34
Section 5.6. Legal Conditions to Merger..................................................................34
Section 5.7. Publicity...................................................................................35
Section 5.8. Tax-Free Reorganization.....................................................................36
Section 5.9. Affiliate Agreements........................................................................36
Section 5.10. NYSE Listing................................................................................36
Section 5.11. Prudential Agreement........................................................................36
Section 5.12. Indemnification.............................................................................36
Section 5.13. Letter of the Company's Accountants.........................................................37
Section 5.14. Stockholder Litigation......................................................................37
Section 5.15. Stock Exchange Listing......................................................................37
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Section 5.16. Employee Benefits...........................................................................37
Section 5.17. Fees and Expenses...........................................................................38
ARTICLE VI. CONDITIONS TO MERGER................................................................................38
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger..................................38
Section 6.2. Additional Conditions to Obligations of the Company.........................................38
Section 6.3. Additional Conditions to Obligations of Parent and Merger Sub...............................39
ARTICLE VII. TERMINATION AND AMENDMENT..........................................................................41
Section 7.1. Termination.................................................................................41
Section 7.2. Effect of Termination.......................................................................42
Section 7.3. Fees and Expenses...........................................................................42
Section 7.4. Amendment...................................................................................43
Section 7.5. Extension; Waiver...........................................................................43
ARTICLE VIII. MISCELLANEOUS.....................................................................................43
Section 8.1. Nonsurvival of Representations, Warranties and Agreements...................................43
Section 8.2. Notices.....................................................................................44
Section 8.3. Interpretation; Certain Definitions.........................................................44
Section 8.4. Counterparts................................................................................45
Section 8.5. Entire Agreement; No Third Party Beneficiaries..............................................45
Section 8.6. Governing Law...............................................................................45
Section 8.7. Assignment..................................................................................46
Annex I Key Stockholders
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TABLE OF EXHIBITS
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Exhibit A Form of Voting and Disposition Agreement
Exhibits B-1 and B-2 Estis and Smith Agreements
Exhibit C Form of Non-Competition Agreement
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TABLE OF DEFINED TERMS
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TERM SECTION
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Acquisition Proposal 5.3(a)
Affiliate 8.3 and 5.9
Affiliate Agreement 5.9
Agreement Preamble
AMEX 3.3(c)
Assets 3.8(a)
Average Parent Stock Price 1.6(b)
Benefit Arrangement 3.14(a)(i)
Business Day 1.2
Certificates 1.8
Certificate of Merger 1.1
Closing 1.2
Closing Date 1.2
Code Recitals
Company Preamble
Company 401(k) Plan 5.16
Company Balance Sheet 3.4(b)(i)
Company Common Stock 1.6
Company Disclosure Schedule ARTICLE III
Company Intellectual Property 3.10
Company Options 1.11
Company Material Adverse Effect 3.1
Company Material Contracts 3.11(a)
Company Preferred Stock 3.2(a)
Company SEC Reports 3.4(a)
Company Stock Option Plans 3.2(b) and 1.11
Company Stockholders' Meeting 5.4(e)
Confidentiality Agreement 5.3(a)
Contracts 3.11(a)
Conversion Ratio 1.6(b)
Dissenting Shares 1.10
Effective Time 1.1
Employee Plans 3.14(a)(iii)
Encumbrance 3.9
Environmental Condition 3.13
Environmental Laws 3.13
Environmental Liabilities and Costs 3.13
ERISA 3.14(a)(iv)
ERISA Affiliate 3.14(a)(v)
Exchange Act 3.3(c)
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TERM SECTION
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Exchange Agent 2.1
Exchange Fund 2.1
Expenses 5.17
GAAP 4.4(b)(i)
Governmental Entity 3.3(c)
Hazardous Substances 3.13
HSR Act 3.3(c)
Indebtedness 3.11(a)
Indemnified Parties 5.12(a)
Intellectual Property 3.10
Key Stockholders Recitals
Knowledge 8.3
Leases 3.9
Liens 3.8
Merger Recitals
Merger Consideration 1.6(b)
Merger Sub Preamble
Multiemployer Plan 3.14(a)(vi)
NYSE 4.2(c)
OGCA 1.1
Order 5.6(b)
Other Benefit Obligations 3.14(a)(vii)
Outside Date 7.1(b)
Parent Preamble
Parent 401(k) Plan 5.16
Parent Balance Sheet 4.4(b)(i)
Parent Common Stock 1.6(b)
Parent Disclosure Schedule ARTICLE IV
Parent Material Adverse Effect 4.1
Parent SEC Reports 4.4
Pension Plan 3.14(a)(viii)
Permits 3.15(b)
Permitted Encumbrance 3.9
Permitted Liens 3.8
Proxy Statement 5.4(a)
Prudential 5.11
Prudential Agreement 5.11
Registration Statement 5.4(a)
Regulations 3.15(a)
Required Company Vote 3.3(a)
Required Consents 5.6(c)
Rule 145 5.9
Securities Act 3.3(c)
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TERM SECTION
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Subsidiary 3.1
Superior Proposal 5.3(a)
Surviving Corporation 1.3
Tax Returns 3.7(b)
Taxes 3.7(b)
Third Party 5.3(a)
to the knowledge of 8.3
Voting, Option and Disposition Agreement Recitals
Voting Debt 3.2(b)
Warrants 1.12
Welfare Plan 3.14(a)(ix)
Year 2000 Problem 3.19
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of July 13,
2000, by and among Hanover Compressor Company, a Delaware corporation
("PARENT"), Caddo Acquisition Corporation, an Oklahoma corporation and a direct
wholly owned subsidiary of Parent ("MERGER SUB"), and OEC Compression
Corporation, an Oklahoma corporation (the "COMPANY").
WHEREAS, the respective Boards of Directors of Parent and Merger Sub
have determined that the merger of Merger Sub with and into the Company, upon
the terms and subject to the conditions set forth in this Agreement (the
"MERGER"), is advisable and in the best interests of each corporation and its
respective stockholders;
WHEREAS, the Board of Directors of the Company has determined that the
Merger is fair to, and in the best interests of, the Company and its
stockholders;
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have each approved and adopted this Agreement and approved the
Merger and the other transactions contemplated hereby;
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "CODE");
WHEREAS, contemporaneous with the execution of this Agreement, certain
of the stockholders of the Company listed on Annex I hereto (the "KEY
STOCKHOLDERS") have entered into an agreement in substantially the form of
EXHIBIT A hereto (the "VOTING AND DISPOSITION AGREEMENT") to vote all of their
shares of Company Common Stock in favor of the Merger, grant Parent certain
rights to acquire such shares and limit their disposition of Parent Common
Stock;
WHEREAS, the Company and Dennis W. Estis and Don E. Smith have each
entered into a non-competition and non-solicitation agreement attached as
Exhibits B-1 and B-2 hereto;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I.
THE MERGER
Section 1.1. EFFECTIVE TIME OF THE MERGER. Subject to the provisions
of this Agreement, a certificate of merger (the "CERTIFICATE OF MERGER") in
such form as is required by the relevant provisions of the Oklahoma General
Corporation Act (the "OGCA") shall be duly prepared, executed and acknowledged
by the Surviving Corporation and thereafter delivered to
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the Secretary of State of the state of Oklahoma for filing, as provided in the
OGCA, as early as practicable on the Closing Date. The Merger shall become
effective upon the filing of the Certificate of Merger with the Secretary of
State of the state of Oklahoma or such later time as specified in the
Certificate of Merger (the "EFFECTIVE TIME").
Section 1.2. CLOSING. The closing of the Merger (the "CLOSING") will
take place on the second business day, which is any day other than a Saturday,
a Sunday or a day on which U.S. banking institutions are authorized by law,
regulation or executive order to remain closed (a "BUSINESS DAY"), after
satisfaction or waiver (as permitted by this Agreement and applicable law) of
the conditions (excluding conditions that, by their terms, cannot be satisfied
until the Closing Date) set forth in Article VI (the "CLOSING DATE"), unless
another time or date is agreed to in writing by the parties hereto. The Closing
shall be held at the offices of Latham & Watkins, 5800 Sears Tower, Chicago,
Illinois 60606, unless another place is agreed to in writing by the parties
hereto. The Certificate of Merger shall be filed on or as promptly as
practicable following the Closing Date.
Section 1.3. EFFECT OF THE MERGER. As a result of the Merger, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation (the "SURVIVING CORPORATION"). Upon
becoming effective, the Merger shall have the effects set forth in the OGCA.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all properties, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 1.4. CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective
Time, (i) the Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation, and (ii) the Bylaws of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the Bylaws of
the Surviving Corporation, in each case until duly amended in accordance with
applicable law.
Section 1.5. DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate
of Incorporation and Bylaws of the Surviving Corporation. The officers of the
Company immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation.
Section 1.6. CONVERSION OF CAPITAL STOCK. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holders of
any shares of the Company's common stock, par value $.01 per share ("COMPANY
COMMON STOCK"), or capital stock of Merger Sub:
(a) CANCELLATION OF STOCK. Each share of Company Common
Stock that is owned by the Company or any wholly owned subsidiary of the
Company (as treasury stock or
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otherwise) shall automatically be canceled and retired and shall cease to exist
and no consideration shall be delivered in exchange therefor.
(b) CONSIDERATION FOR COMPANY COMMON STOCK. Subject to
Section 1.10, each issued and outstanding share of Company Common Stock (other
than Dissenting Shares and shares to be canceled in accordance with Section
1.6(a)) shall be converted into the right to receive a number of fully paid and
nonassessable shares of common stock, par value $.001 per share, of Parent
("PARENT COMMON STOCK") equal to the Conversion Ratio (as defined below) (the
"MERGER CONSIDERATION"). The "CONVERSION RATIO" shall be equal to $1.00 divided
by the Average Parent Stock Price (as defined below). The "AVERAGE PARENT STOCK
PRICE" shall mean the closing sales price per share of Parent Common Stock as
reported by The New York Stock Exchange Composite Tape for the twenty
consecutive trading days (on which shares of Parent Common Stock are actually
traded) immediately preceding the second Business Day prior to the Effective
Time; provided, however, that if the foregoing amount is calculated to be less
than $30, then the Average Parent Stock Price shall be $30; and provided
further, that if the foregoing amount is calculated to be greater than $32.50,
then the Average Parent Stock Price shall be $32.50. As of the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate which, prior to the Effective Time, represented any
such shares of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive, upon surrender of such certificate in
accordance with Section 2.2, the Merger Consideration in accordance with this
Section 1.6.
(c) MERGER SUB CAPITAL STOCK. Each share of capital stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
remain outstanding and shall be unchanged as a share of capital stock of the
Surviving Corporation.
Section 1.7. ADJUSTMENT OF CONVERSION NUMBER. In the event that
pursuant to a transaction announced after the date hereof and becoming
effective prior to the Effective Time (i) any distribution is made in respect
of Parent Common Stock other than a regular quarterly cash dividend or (ii) any
stock dividend, stock split, reclassification, recapitalization, combination or
mandatory exchange of shares occurs with respect to, or rights (other than
non-mandatory offers to exchange) are issued in respect of, Parent Common
Stock, then, the Conversion Ratio shall be adjusted accordingly.
Section 1.8. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
shares of Parent Common Stock issued upon the surrender for exchange of
certificates which immediately prior to the Effective Time represented
outstanding share of Company Common Stock ("CERTIFICATES") in accordance with
the terms hereof (including any cash paid pursuant to Sections 1.9 or 2.3)
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock, and from and after the
Effective Time there shall be no further registration of transfers of the
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in Article II.
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Section 1.9. NO FRACTIONAL SHARES. No certificate or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any other rights of a
stockholder of Parent. Notwithstanding any other provision of this Agreement,
each holder of shares of Company Common Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of
Parent Common Stock (after taking into account all Certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Parent Common Stock
multiplied by the Average Parent Stock Price.
Section 1.10. SHARES OF DISSENTING SHAREHOLDERS. Notwithstanding
anything in this Agreement to the contrary, any shares of Company Common Stock
that are outstanding immediately prior to the Effective Time and have not been
voted in favor of the Merger and with respect to which appraisal rights shall
have been demanded and perfected in accordance with Section 1091 of the OGCA to
the extent applicable (collectively, the "DISSENTING SHARES") and not withdrawn
shall not be converted into or represent the right to receive the Merger
Consideration, but such shares shall become the right to receive such
consideration as may be determined to be due to holders of Dissenting Shares
pursuant to the laws of the State of Oklahoma unless and until the holder of
such Dissenting Shares withdraws his or her demand for such appraisal in
accordance with the OGCA or becomes ineligible for appraisal. If, after the
Effective Time, any such holder withdraws his or her demand for appraisal or
becomes ineligible for appraisal (through failure to perfect or otherwise),
such Dissenting Shares shall thereupon be deemed to have been converted into
and to have become exchangeable for, as of the Effective Time, the right to
receive, without any interest thereon, the consideration provided for in
Section 1.6. The Company shall give Parent prompt notice of any demands for
appraisal for shares of Company Common Stock received by the Company, and
Parent shall have the right to direct all proceedings, negotiations and actions
taken by the Company in respect thereof.
Section 1.11. COMPANY OPTIONS. At the Effective Time, each unexpired
and unexercised outstanding option, whether or not then vested or exercisable
in accordance with its terms, to purchase shares of Company Common Stock (the
"COMPANY OPTIONS") previously granted by the Company or its Subsidiaries shall
be canceled and converted into the right to receive from the Parent, within 10
days following the Effective Time, cash in an amount equal to the product of
(a) $1.00 minus the exercise price per share of such Company Option, times (b)
the number of shares of Common Stock which may be purchased upon exercise of
such Company Option (whether or not then exercisable). Prior to (but effective
at) the Effective Time, the Company shall (i) obtain any consents from all
holders of Company Options and (ii) make any amendments to the terms of such
stock option or compensation plans or arrangements that, in the case of either
clause (i) or (ii), are necessary to give effect to the transactions
contemplated by this Section 1.11. Immediately prior to the Effective Time, the
Company shall terminate all plans and other arrangements pursuant to which such
Company Options were granted (the "COMPANY STOCK OPTION PLANS") effective as of
the Effective Time with no further liability to the Company.
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Section 1.12. TAX CONSEQUENCES. It is intended by the parties hereto
that the Merger shall constitute a "reorganization" within the meaning of
Section 368(a) of the Code. The parties hereto hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
ARTICLE II.
EXCHANGE OF CERTIFICATES
Section 2.1. EXCHANGE AGENT. As of the Effective Time, Parent shall
deposit with ChaseMellon Shareholder Services or such other bank or trust
company as may be designated by Parent and be reasonably acceptable to the
Company (the "EXCHANGE AGENT") for the benefit of the holders of shares of
Company Common Stock, for exchange or payment in accordance with this Section
2.1, through the Exchange Agent, (i) certificates evidencing such number of
shares of Parent Common Stock equal to (x) the Merger Consideration multiplied
by (y) the aggregate number of shares of Company Common Stock which may be
converted into the right to receive Parent Common Stock in the Merger; and (ii)
any cash necessary to pay amounts due pursuant to Section 1.9 (such
certificates for shares of Parent Common Stock and such cash being hereinafter
referred to as the "EXCHANGE FUND"). The Exchange Agent shall, pursuant to
irrevocable instructions in accordance with Articles I and II, deliver the
Parent Common Stock and cash contemplated to be issued pursuant to Sections
1.6(b) and 1.9 out of the Exchange Fund. The Exchange Fund shall not be used
for any other purpose. The Exchange Agent shall invest any cash included in the
Exchange Fund, as directed by Parent, on a daily basis. Any interest and other
income resulting from such investments shall be paid to Parent.
Section 2.2. EXCHANGE AND PAYMENT PROCEDURES. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of a Certificate or Certificates that were converted into the
right to receive shares of Parent Common Stock and cash pursuant to Sections
1.6(b) and 1.9, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent, and which
shall be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for shares of Parent Common Stock and cash. Upon
surrender of a Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed and completed in accordance with the
instructions thereto, and such other documents as may reasonably be required by
the Exchange Agent, the holder of such Certificate shall be entitled to receive
in exchange therefor a certificate representing that number of whole shares of
Parent Common Stock and cash which such holder has the right to receive
pursuant to the provisions of Article I and this Article II and the Certificate
so surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Company Common Stock that is not registered in the transfer
records of the Company, a certificate representing the proper number of shares
of Parent Common Stock may be issued, and cash, if any, pursuant to Sections
1.6(b) and 1.9 may be paid, to a person other than the person in whose name the
Certificate so surrendered is registered if the Certificate representing such
Company Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect
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such transfer and evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Article II, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon surrender the certificate representing shares of Parent
Common Stock and cash as contemplated by Article I.
Section 2.3. DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the shares of Parent Common Stock to which such holder is entitled hereunder
and no cash payment paid to any such holder pursuant to Sections 1.6(b) and 1.9
until the holder of record of such Certificate shall surrender such
Certificate. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be given to the record holder of the
certificates representing whole shares of Parent Common Stock to which such
holder is entitled hereunder, without interest, (i) at the time of such
surrender, a certificate representing the number of whole shares of Parent
Common Stock and the amount of cash, if any, pursuant to Section 1.9 to which
such holder is entitled pursuant to Section 1.9 and the amount of dividends or
other distributions with respect to such whole shares of Parent Common Stock
with a record date after the Effective Time and a payment date prior to the
date of issuance to such holder, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Parent Common Stock.
Section 2.4. TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund which remains undistributed to the holders of Certificates for
nine months after the Effective Time shall be delivered to Parent, upon demand,
and any shareholders of the Company who have not previously complied with the
provisions of this Article II shall thereafter look only to Parent for payment
of their claim for Parent Common Stock and cash and any dividends or
distributions with respect to Parent Common Stock. Any portion of the Exchange
Fund remaining unclaimed by holders of Company Common Stock five years after
the Effective Time (or such earlier date immediately prior to such time as such
portion would otherwise escheat to or become property of any Governmental
Entity) shall, to the extent permitted by applicable law, become the property
of Parent free and clear of any claims or interest of any person previously
entitled therein.
Section 2.5. NO LIABILITY. To the fullest extent permitted by law,
none of Parent, Merger Sub, the Company or the Surviving Corporation shall be
liable to any holder of Company Common Stock or Parent Common Stock, as the
case may be, for any shares (or dividends or distributions with respect
thereto) and/or cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 2.6. LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will deliver in
exchange for such
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lost, stolen or destroyed Certificate the shares of Parent Common Stock and
cash in accordance with this Agreement.
Section 2.7. WITHHOLDING RIGHTS. Parent and the Exchange Agent shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as Parent or the Exchange Agent, as applicable, is required to deduct
and withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign Tax law. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock in respect of which such deduction and
withholding was made by such party.
Section 2.8. FURTHER ASSURANCES. 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 or Merger Sub,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Company or Merger Sub, any other actions and things
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 acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger.
Section 2.9. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. From and after the Effective Time, the holders of
Certificates shall cease to have any rights with respect to such shares of
Company Common Stock formerly represented thereby, except as otherwise provided
herein or by law. On or after the Effective Time, any Certificates presented to
the Exchange Agent or Parent for any reason shall be converted into the Merger
Consideration with respect to the shares of Company Common Stock formerly
represented thereby.
Section 2.10. AFFILIATES. Notwithstanding anything herein to the
contrary, Certificates surrendered for exchange by any Affiliate (as defined in
Section 5.9) of the Company shall not be exchanged until Parent has received an
Affiliate Agreement (as defined in Section 5.9) from such Affiliate.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that the
statements contained in this Article III are true and correct except as set
forth herein and in the disclosure schedule delivered by the Company to Parent
and Merger Sub on or before the date of this Agreement (the "COMPANY DISCLOSURE
SCHEDULE"). The Company Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
III.
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Section 3.1. ORGANIZATION OF THE COMPANY AND ITS SUBSIDIARIES. Each
of the Company and its Subsidiaries (as defined below) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate, partnership or limited liability
company power and authority to carry on its business as now being conducted and
as proposed to be conducted. Each of the Company and its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so qualified, licensed or in good
standing, individually or in the aggregate, could not be expected to have a
material adverse effect on the business, properties, financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole (a
"COMPANY MATERIAL ADVERSE EFFECT"). The Company has delivered to Parent a true
and correct copy of the Certificate of Incorporation and Bylaws of the Company
and each of its Subsidiaries, in each case as amended to date and each of such
documents is in full force and effect. Neither the Company nor any of its
Subsidiaries is in violation of any provision of any of such documents. The
respective organizational documents of the Company's Subsidiaries do not
contain any provision that would limit or otherwise restrict the ability of
Parent or the Surviving Corporation, following the Effective Time, from owning
or operating such Subsidiaries on the same basis as the Company. A true and
complete list of all of the Company's Subsidiaries, together with the
jurisdiction of incorporation of each such Subsidiary and the percentage of
ownership interest of the Company therein, is set forth in Section 3.1 of the
Company Disclosure Schedule. Neither the Company nor any of its Subsidiaries
directly or indirectly owns (other than ownership interests in the Company or
in one or more of its Subsidiaries) any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any corporation,
partnership, joint venture or other business association or entity. As used in
this Agreement, the word "SUBSIDIARY" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general partner
or member or (ii) at least twenty-five percent (25%) of the securities or other
interests having by their terms ordinary voting power to elect or select a
majority of the Board of Directors or other persons or entities performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries.
Section 3.2. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
60,000,000 shares of Company Common Stock and 1,000,000 shares of the Company's
Preferred Stock, $1.00 par value per share ("COMPANY PREFERRED STOCK"). As of
the date hereof, (i) 36,885,333 shares of Company Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable,
(ii) 320,445 shares of Company Common Stock are held in the treasury of the
Company or by Subsidiaries of the Company, and (iii) no shares of Company
Preferred Stock are issued and outstanding. There are no obligations,
contingent or otherwise, of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
the capital stock of any Subsidiary or to provide funds to or make any material
investment (in the form of a loan, capital contribution or otherwise) in any
such Subsidiary or
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any other entity (other than to or in a wholly owned Subsidiary of the
Company). All of the outstanding shares of capital stock (including shares
which may be issued upon exercise of outstanding options) or other ownership
interests of each of the Company's Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable and all such shares are owned by the
Company or another Subsidiary of the Company free and clear of all security
interests, liens, claims, pledges, agreements, limitations on the Company's
voting rights, charges or other encumbrances of any nature.
(b) There are no bonds, debentures, notes or other
indebtedness having voting rights (or convertible into securities having such
rights) ("VOTING DEBT") of the Company or any of its Subsidiaries issued and
outstanding. Section 3.2(b) of the Company Disclosure Schedule sets forth (i)
the total number of shares of Company Common Stock reserved for issuance upon
exercise of Company Stock Options granted and outstanding as of the date hereof
and (ii) the Company Stock Option Plan, the name of each holder under the
Company Stock Option Plans, the number of Company Stock Options held by such
holder, and the exercise price of each such Company Stock Option. Except as
reserved for future grants of options or restricted stock under the Company
Stock Option Plans, (x) there are no shares of capital stock of any class of
the Company, or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding; (y) there are no
options, warrants (other than warrants to purchase 1,000,000 shares of Company
Common Stock issued to The Prudential Life Insurance Company), equity
securities, calls, rights, commitments or agreements of any character to which
the Company or any of its Subsidiaries is a party or by which any of them is
bound obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other ownership interests (including Voting Debt) of the Company or
any of its Subsidiaries or obligating the Company or any of its Subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option,
warrant, equity security, call, right, commitment or agreement; and (z) there
are no voting trusts, proxies or other voting agreements or understandings with
respect to the shares of capital stock of the Company, including, without
limitation, any registration rights agreements (other than those registration
rights agreements listed in Section 3.2(b) of the Company Disclosure Schedule)
or shareholder agreements. All shares of Company Common Stock subject to
issuance as specified in this Section 3.2(b) or the related Company Disclosure
Schedule section are duly authorized and, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be validly issued, fully paid and nonassessable.
Section 3.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS;
RECOMMENDATION OF THE BOARD.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by the Company have been
duly authorized by all necessary corporate action on the part of the Company,
subject only to the approval and adoption of this Agreement and the Merger by
the holders of a majority of the Company's outstanding common stock (the
"REQUIRED COMPANY VOTE"). This Agreement has been duly executed and delivered
by the Company and constitutes
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the valid and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditor rights and to general equity principles.
(b) The execution and delivery of this Agreement by the
Company does not, and the consummation of the transactions contemplated hereby
will not, (i) conflict with, or result in any violation or breach of, any
provision of the Certificate of Incorporation or Bylaws of the Company or the
comparable charter, organizational or governing documents of any of its
Subsidiaries, (ii) result in any violation or breach of, or constitute (with or
without notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound other than as disclosed in Section 3.3(b) of
the Company Disclosure Schedule, or (iii) subject to the governmental filings
and other matters referred to in Section 3.3(c), conflict with or violate any
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of its or their properties or assets. No consent of any
holder of outstanding Company Stock Options is required in connection with the
conversion of such Company Stock Options in accordance with the provisions of
Section 1.11.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, whether federal,
state or local (or any subdivision thereof) ("GOVERNMENTAL ENTITY") is required
by or with respect to the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) those required under or in
relation to the Hart-Scott Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), (ii) state securities or "blue sky" laws, (iii) the
Securities Act of 1933, as amended (the "SECURITIES ACT"), (iv) the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), (v) the OGCA with
respect to the filing and recordation of appropriate documents to effect the
Merger and (vi) rules and regulations of the American Stock Exchange ("AMEX").
(d) The Board of Directors of the Company has, by a
unanimous vote at a meeting of such Board (with one director absent) duly held
on July 12, 2000, approved, adopted and declared advisable this Agreement, the
Merger and the other transactions contemplated hereby, and determined that this
Agreement, the Merger and the other transactions contemplated hereby, taken
together, are in the best interests of the Company and of the stockholders of
the Company, and prior to the date hereof such Board has resolved to recommend
that the shareholders of the Company approve this Agreement, the Merger and the
other transactions contemplated hereby.
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Section 3.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed and made available to Parent all
forms, reports and documents filed by the Company with the SEC since December
31, 1996 (collectively, the "COMPANY SEC REPORTS"). The Company SEC Reports
(including any financial statements filed as a part thereof or incorporated
by reference therein) (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (ii) did not, at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing), contain any untrue statement of
a material fact or omit to state a material fact required to be stated in
such Company SEC Reports or necessary in order to make the statements in such
Company SEC Reports, in the light of the circumstances under which they were
made, not misleading as of such date. None of the Company's Subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) (i) Each of the consolidated financial statements
(including, in each case, any related notes) of the Company contained in the
Company SEC Reports complied as to form in all material respects with the
applicable rules, regulations and practices of the SEC with respect thereto,
was prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes to such financial statements or, in
the case of unaudited statements, as permitted by Form 10-Q under the
Exchange Act) and fairly presented the consolidated financial position of the
Company and its Subsidiaries as of the dates and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount. The audited balance sheet of the Company as of December
31, 1999 is referred to herein as the "COMPANY BALANCE SHEET."
(ii) The Company maintains a system of accounting
controls sufficient to provide reasonable assurances that (A) its
transactions and those of its Subsidiaries are executed in accordance with
management's general or specific authorization, (B) its transactions and
those of its Subsidiaries are recorded as necessary to permit preparation of
financial statements in accordance with GAAP and to maintain accountability
for assets, (C) access to its assets and those of its Subsidiaries is
permitted only in accordance with management's general or specific
authorization, and (D) the recorded accountability for its assets and those
of its Subsidiaries is compared with existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
Section 3.5 NO UNDISCLOSED LIABILITIES. Except for, and to the
extent of, those liabilities that are reflected or reserved against, to the
extent reflected or reserved against, on the consolidated balance sheet of
the Company and its Subsidiaries included in the Company's Quarterly Report
on Form 10-Q for the fiscal period ended March 31, 2000, or the Company's
Annual Report on Form 10-K for the year ended December 31, 1999, and except
for obligations under contracts and commitments incurred in the ordinary
course of business which are not required under GAAP to be reflected in the
financial statements of the Company, which, in both
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cases, individually or in the aggregate, are not material to the financial
condition or operating results of the Company, and except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since March 31, 2000, and except and as to the extent disclosed in
the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature whatsoever
(whether fixed, absolute, accrued, contingent or otherwise and whether due or
to become due).
Section 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Company's SEC Reports filed prior to the date hereof, since
the date of the Company Balance Sheet, the Company and its Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (i)
any event, change or development which, individually or in the aggregate, has
had or could reasonably be expected to have a Company Material Adverse
Effect; (ii) any change by the Company in its accounting methods, principles
or practices; (iii) any revaluation by the Company of any asset; (iv) any
modification of any Material Contract, except in the ordinary course of
business or as contemplated by this Agreement; (v) any disposition of any
assets of the Company or any of its Subsidiaries outside the ordinary course
of business; or (vi) any other action or event that would have required the
consent of Parent pursuant to Section 5.1 of this Agreement had such action
or event occurred after the date of this Agreement.
Section 3.7 TAXES.
(a) Except as set forth in Section 3.7 of the Company
Disclosure Schedule: (i) the Company and each of its Subsidiaries have duly
and timely filed (taking into account any extension of time within which to
file) all Tax Returns required to be filed by any of them and all such filed
Tax Returns are complete and accurate in all respects; (ii) the Company and
each of its Subsidiaries have timely paid to the proper taxing authorities
all Tax liabilities (whether or not shown as due on such filed Tax Returns),
including Taxes that the Company or any of its Subsidiaries have been
obligated to withhold from amounts paid or owed to any employee, independent
contractor, creditor or third party, except with respect to matters contested
in good faith and which are set forth in Section 3.7 of the Company
Disclosure Schedule, or for which a reserve (other than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) is provided on the Company Balance Sheet; (iii) as of the date
hereof: (A) there are no pending or, to the knowledge of the Company,
threatened audits, examinations, investigations or other proceedings in
respect of Taxes or Tax matters relating to the Company or any of its
Subsidiaries, (B) there are no deficiencies or claims for any Taxes that have
been proposed, asserted or assessed against the Company or any of its
Subsidiaries, (C) there are no Liens for Taxes upon the assets of the Company
or any of its Subsidiaries, other than Liens for current Taxes not yet due
and payable and Liens for Taxes that are being contested in good faith by
appropriate proceedings and properly reserved for and (D) neither the Company
nor any of its Subsidiaries has requested any extension of time within which
to file any Tax Returns in respect of any taxable year which have not since
been filed, and no request for waivers of the time to assess any Taxes are
pending or outstanding; (iv) none of the Company or any of its Subsidiaries
has made a consent under Section 341(f) of the Code; (v) as of the date
hereof, the consolidated federal income Tax Returns for the Company and its
Subsidiaries have
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never been examined by the Internal Revenue Service; (vi) neither the Company
nor any of its Subsidiaries has any liability for Taxes of any person (other
than the Company and its Subsidiaries) under Treasury Regulation Section
1.1502-6 (or any comparable provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise; (vii) neither the Company
nor any Subsidiary is a party to any agreement relating to the allocation or
sharing of Taxes; and (viii) as of the date hereof, neither the Company nor
any of its Subsidiaries knows of any facts with respect to the Company or its
Subsidiaries that would reasonably be expected to prevent or materially or
burdensomely impede the Merger from qualifying as a "reorganization" within
the meaning of Section 368(a) of the Code. Neither the Company nor any of its
Subsidiaries will, as a result of the consummation of the transactions
contemplated by this Agreement, recognize any gain under any applicable
provisions of the federal consolidated return regulations (Treasury
Regulation Section 1.1502 ET SEQ.) with respect to any excess loss account or
any intercompany transaction or distribution in which the taxation of gain or
loss was previously deferred. None of the Company or its Subsidiaries has
been a "United States real property holding corporation" within the meaning
of Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code. No written power of attorney that has
been granted by the Company or its Subsidiaries currently is in force with
respect to any matter relating to Taxes. The Company has not distributed the
stock of a "controlled corporation" (within the meaning of Section 355(a) of
the Code) in a transaction subject to Section 355 of the Code within the past
two years. None of the Company or its Subsidiaries has made an election, nor
is required, to treat any Assets as owned by another person or entity or as
tax-exempt bond financed property or tax-exempt use property for tax purposes.
(b) (i) "TAXES" shall mean all taxes, assessments, charges,
duties, fees, levies, imposts or other governmental charges, including,
without limitation, all federal, state, local, foreign and other income,
environmental, add-on, minimum, franchise, profits, capital gains, capital
stock, capital structure, transfer, sales, gross receipts, use, AD VALOREM,
service, occupation, property, excise, severance, windfall profits, premium,
stamp, license, payroll, social security, employment, unemployment,
disability, value-added, withholding and other taxes, assessments, charges,
duties, fees, levies, imposts or other governmental charges of any kind
whatsoever (whether payable directly or by withholding and whether or not
requiring the filing of a Tax Return), and all estimated taxes, deficiency
assessments, additions to tax, additional amounts imposed by any governmental
authority (domestic or foreign), penalties and interest, and shall include
any liability for such amounts as a result either of being a member of a
combined, consolidated, unitary or affiliated group or of a contractual
obligation to indemnify any person, corporation or other organization
regardless of whether disputed, and (ii) "TAX RETURNS" shall mean all returns
and reports (including elections, claims, declarations, disclosures,
schedules, estimates, computations and information returns) required to be
supplied to a governmental authority in any jurisdiction (domestic or
foreign) relating to Taxes, including any schedule or amendment thereto or
amendment thereof.
Section 3.8 TITLE TO ASSETS. The Company and each of its
Subsidiaries owns and has good and valid title to, or a valid leasehold
interest in, or otherwise has sufficient and legally enforceable rights to
use, all of the properties and assets (real, personal or mixed, tangible or
intangible), used, or held for use by, the Company and such Subsidiaries in
connection with the
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conduct of their business (the "ASSETS"), including Assets reflected on the
Company Balance Sheet or acquired since the date thereof, except for Assets
disposed of in the ordinary course of business consistent with past practice
and in accordance with this Agreement, in each case free and clear of any
lien, charge, encumbrance or security interest of any kind ("LIENS") except
for Permitted Liens. "PERMITTED LIENS" shall mean those Liens (i) securing
debt that is reflected on the Company Balance Sheet or the notes thereto,
(ii) for Taxes not yet due or payable or being contested in good faith and
for which adequate reserves have been established in accordance with GAAP,
(iii) that constitute mechanics', carriers', workmens' or similar liens,
liens arising under original purchase price conditional sale contracts and
equipment leases with third parties entered into in the ordinary course of
business consistent with past practice, and for which adequate provision for
payment has been made, and (iv) incurred or deposits made in the ordinary
course of business consistent with past practice in connection with workers'
compensation, unemployment insurance and social security, retirement and
other legislation. This Section 3.8 does not relate to intellectual property
(for which Section 3.10 is applicable). Section 3.8 of the Company Disclosure
Schedule includes a list of all compressors and related equipment owned or
leased by the Company (specifying for each compressor the horsepower and
whether such compressor is owned or leased).
Section 3.9 REAL PROPERTY.
(a) Section 3.9(a) of the Company Disclosure Schedule sets
forth a true and correct list of all facilities owned by the Company and its
Subsidiaries or to be acquired by the Company or its Subsidiaries prior to
the Effective Time. With respect to each parcel of owned real property,
except as set forth in Section 3.9(a) of the Company Disclosure Schedule, (i)
the Company or any Subsidiary of the Company, as the case may be, has good
and indefeasible fee simple title to such parcel of real property, free and
clear of any and all Encumbrances other than Permitted Encumbrances, (ii)
there are no leases, subleases, licenses, options, rights, concessions or
other agreements, written or oral, granting to any party or parties the right
of use or occupancy of any portion of such parcel of real property, (iii)
there are no outstanding options or rights of first refusal in favor of any
other party to purchase any such parcel of real property or any portion
thereof or interest thereof or interest therein, (iv) there are no parties
(other than the Company or its Subsidiary, as the case may be) who are in
possession of or who are using any such parcel of real property, except in
connection with a Permitted Encumbrance, and (v) there is no (A) pending or,
to the knowledge of the Company, threatened condemnation or expropriation
proceeding relating to such parcel of real property, (B) pending or, to the
knowledge of the Company, threatened Action relating to such parcel of real
property, (C) to the knowledge of the Company, other matter adversely
affecting the current use or occupancy of such parcel of real property in any
material respect, (D) pending, or to the knowledge of the Company, threatened
special assessment relating to such real property or (E) pending, or to the
Company's knowledge, proposed or threatened zoning change to any zoning
affecting the property.
(b) Section 3.9(b) of the Company Disclosure Schedule sets
forth all leases of real property (the "LEASES"), to which the Company is a
party and has delivered true and correct copies of all such Leases. The
Leases are in full force and effect and are valid and binding obligations of
the parties thereto enforceable against each such party in accordance with
their
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terms. The Company is not in default or, to the Company's knowledge, alleged
to be in default thereunder. To the knowledge of the Company, none of the
other parties to the Leases are in default, or alleged to be in default,
thereunder or have any defenses to their obligation thereunder. Except as set
forth in Section 3.9(b) of the Company Disclosure Schedule, the Company has
full legal power and authority to assign its rights under the Leases, and the
continuation, validity and effectiveness thereof will not be affected by the
occurrence of the Effective Time. The Company has not assigned, subleased,
mortgaged, deeded in trust or otherwise transferred or encumbered any Lease
or interest therein.
With respect to each Lease and the real property demised
thereby: (i) the Company or any Subsidiary of the Company, as the case may
be, has good and valid leasehold interest in such property, free and clear of
any and all Encumbrances other than Permitted Encumbrances, (ii) there are no
subleases, licenses, options, rights, concessions or other agreements,
written or oral, granting to any party or parties the right of use or
occupancy of any portion of such parcel of real property, (iii) there are no
outstanding options or rights of first refusal in favor of any other party to
purchase, lease or sublease any such parcel of real property or any portion
thereof or interest thereof or interest therein, (iv) there are no parties
(other than the Company or its Subsidiary, as the case may be) who are in
possession of or who are using any such parcel of real property, except in
connection with a Permitted Encumbrance, and (v) there is no (A) pending or,
to the knowledge of the Company, threatened condemnation or expropriation
proceeding relating to such parcel of real property, (B) pending or, to the
knowledge of the Company, threatened Action relating to such parcel of real
property, (C) to the knowledge of the Company, other matter adversely
affecting the current use or occupancy of such parcel of real property in any
material respect, (D) pending, or to the knowledge of the Company, threatened
special assessment relating to such real property or (E) pending, or to the
Company's knowledge, proposed or threatened zoning change to any zoning
affecting the property.
For purposes of this Section 3.9, the following definitions shall
apply:
"ENCUMBRANCE" means any claim, lien, pledge, option, lease,
license, occupancy agreement, charge, easement, tax assessment, security
interest, deed of trust, mortgage, right-of-way, encroachment, building or
use restriction, title defect, work order, conditional sales agreement,
encumbrance or other right of third parties or other restriction on use,
whether voluntarily incurred or arising by operation of law, and includes any
agreement to give any of the foregoing in the future, and any contingent sale
or other title retention agreement or lease in the nature thereof.
"PERMITTED ENCUMBRANCES" means (a) statutory liens of
landlords, liens of carriers, warehousepersons, mechanics and materialpersons
incurred in the ordinary course of business for sums (i) not yet due and
payable, or (ii) being contested in good faith, if, in either such case, an
adequate reserve, shall have been made therefor in such Person's financial
statements, (b) liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other similar types of social
security programs or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance
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and return of money bonds and similar obligations, in each case in the
ordinary course of business, consistent with past practice, (c) easements,
rights-of-way, restrictions and other similar non-monetary charges or
encumbrances which, in each case, and in the aggregate, do not interfere with
the ordinary conduct of business of the Company and its Subsidiaries and do
not materially detract from the value, use or occupancy of the property upon
which such encumbrance exists, and (d) liens securing taxes, assessments and
governmental charges not yet delinquent or the amount or validity of which
are being contested in good faith by appropriate proceedings by the Company
or its Subsidiaries, as applicable.
Section 3.10 INTELLECTUAL PROPERTY. The Company and its
Subsidiaries own or possess adequate and enforceable rights to use the
Intellectual Property used in their respective businesses as currently
conducted (the "COMPANY INTELLECTUAL PROPERTY"). There are no restrictions or
conditions on the use of the Company Intellectual Property. The Company
Intellectual Property is owned or licensed by the Company free from any Liens
except for Permitted Liens. The conduct of the respective businesses of the
Company and its Subsidiaries does not infringe or conflict with the rights of
any third party in respect of any Intellectual Property. To the Company's
knowledge, none of the Company Intellectual Property is being infringed by
any third party. "INTELLECTUAL PROPERTY" means all trademarks, trademark
applications, trade names, marketing or advertising slogans, service marks,
trade secrets (including customer lists and databases), copyrights, patents,
licenses, know-how and other proprietary intellectual property rights. The
Company has taken and will take all actions and necessary precautions to
preserve the confidentiality of its trade secrets (including customer lists
and customer databases). Section 3.10 of the Company Disclosure Schedule
lists (i) all trademark and service mark registrations and applications owned
by the Company or any of its Subsidiaries, (ii) license Contracts concerning
Intellectual Property to which the Company or any of its Subsidiaries is a
party and (iii) patents, patent applications and copyrights owned by the
Company or any of its Subsidiaries.
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SECTION 3.11 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Set forth in Section 3.11 of the Company Disclosure
Schedule are all of the following to which the Company or any of its
Subsidiaries is a party: (i) agreements, contracts, indentures or other
instruments or arrangements ("CONTRACTS") relating to Indebtedness (as
defined below) in an amount exceeding $100,000, (ii) partnership, joint
venture or limited liability agreements with any person, (iii) Contracts
pursuant to which the Company or any of its Subsidiaries will or may be
obligated to issue after the date of this Agreement any equity securities
(including Company Common Stock) or any security convertible equity
securities (including Company Common Stock), (iv) Contracts which provide for
the payment or receipt of consideration by the Company in excess of $100,000
in any 12-month period, (v) Contracts to be performed after the date hereof
which would be material contracts (as defined in Item 601(b)(10) of
Regulation S-K of the SEC), (vi) Contracts which restrict the conduct of any
line of business by the Company or any of its Subsidiaries, (vii) Contracts
which are not terminable by the Company within the next twelve months without
the payment of any termination fee or penalty, (viii) all leases pursuant to
which the Company leases compressors and related equipment that provide for
lease payments of more than $100,000 on an annual basis and (ix) Contracts
which include provisions relating to non-competition or non-solicitation or
non-hiring of employees (collectively, the "COMPANY MATERIAL CONTRACTS").
"INDEBTEDNESS" means any liability in respect of (A) borrowed money, (B)
capitalized lease obligations, (C) the deferred purchase price of property or
services (other than trade payables in the ordinary course of business) and
(D) guarantees of any of the foregoing incurred by any other person other
than the Company or any of its wholly owned Subsidiaries.
(b) (i) Each of the Company Material Contracts is valid and
binding in accordance with its terms and is in full force and effect, (ii)
there is no material breach or violation of or default by the Company or any
of its Subsidiaries under any of the Company Material Contracts, whether or
not such breach, violation or default has been waived, and (iii) no event has
occurred which, with notice or lapse of time or both, would constitute a
material breach, violation or default, or give rise to a right of
termination, modification, cancellation, foreclosure, imposition of a lien,
prepayment or acceleration under any of the Company Material Contracts. To
the knowledge of the Company, no counterparty to any Company Material
Contract has violated any provision of, or committed or failed to perform any
act which, with or without notice, lapse of time, or both, could reasonably
be expected to constitute a default or other breach under the provisions of,
such the Company Material Contract.
Section 3.12 LITIGATION. Except as set forth in Section 3.12 of the
Company Disclosure Letter, (a) there is no action, suit or proceeding, claim,
arbitration or investigation against the Company or any of its Subsidiaries
pending, or as to which the Company or any of its Subsidiaries has received
any written notice of assertion or, to the best knowledge of the Company,
threatened against or affecting, the Company or any of its Subsidiaries or
any property or asset of the Company or any of its Subsidiaries, before any
Governmental Entity, domestic or foreign and (b) there is no judgment, order,
injunction or decree of any Governmental Entity outstanding against the
Company or any of its Subsidiaries.
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Section 3.13 ENVIRONMENTAL MATTERS. (a) The Company is currently
and has in the past been in compliance with all applicable Environmental
Laws, (b) there are no existing or potential Environmental Liabilities and
Costs of the Company or its Subsidiaries, (c) there are no Environmental
Conditions on or related to any of the property owned or leased by the
Company or its Subsidiaries, or the other assets of the Company or its
Subsidiaries, (d) none of the Company or its Subsidiaries has received any
notices from any governmental agency or other third party regarding the
existence of any Hazardous Substance on any of the property owned or leased
by the Company or its Subsidiaries alleging any violation of or noncompliance
with any Environmental Law, or requiring the investigation, removal,
clean-up, or remediation of any Environmental Condition whether or not on
property owned or leased by the Company or its Subsidiaries, (e) the Company
is not subject to any enforcement or investigatory action by any governmental
agency regarding an Environmental Condition with respect to any of the
property owned or leased by the Company or its Subsidiaries, or any other
property related in any way to the Company or its Subsidiaries, (f) there are
no underground tanks or other underground storage receptacles for Hazardous
Substances located on any of the property owned or leased by the Company or
its Subsidiaries, (g) the Company has no knowledge of any leaks, releases,
threats of releases, spills or discharge of fluids at any property owned or
leased by the Company or its Subsidiaries, (h) there are no PCBs or asbestos
located at or on any property owned or leased by the Company or its
Subsidiaries and (i) true and correct copies of any environmental reports,
audits, analysis, summary or assessments which have been conducted, either by
or on behalf of the Company or its Subsidiaries, at any of the property
currently or previously owned or leased by the Company or its Subsidiaries
have been made available to Parent and Merger Sub. The Company and its
Subsidiaries have no obligation to indemnify any other person, corporation or
other entity with respect to any Environmental Liabilities and Costs.
For purposes of this Section 3.13, the following definitions shall
apply:
"ENVIRONMENTAL LAWS" means all applicable foreign, federal, state
and local statutes or laws, common law, judgments, orders, notice
requirements, regulations, agency guidelines, policies, licenses, permits,
rules and ordinances relating to pollution or protection of health, safety or
the environment, including, but not limited to the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 ET SEQ.), Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 ET SEQ.), Safe Drinking Water Act (42
U.S.C. Section 3000(f) ET SEQ.), Toxic Substances Control Act (15 U.S.C.
Section 2601 ET SEQ.), Clean Air Act (42 U.S.C. Section 7401 ET SEQ.),
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 ET SEQ.), each as amended, and other similar state and
local statutes.
"ENVIRONMENTAL CONDITION" means the introduction into the
environment of any pollution, including without limitation any contaminant,
pollutant, hazardous or toxic waste, substance or material (whether or not
upon the any of the property owned or leased by the Company or its
Subsidiaries and whether or not such pollution constituted at the time
thereof a violation of any Environmental Law as a result of any release of
any kind of any toxic or hazardous waste, substance or material) as a result
of which the Company (1) has or may become liable to any person, (2) is or
was in violation of any Environmental Law, or (3) by reason of which any of
the
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property owned or leased by the Company or its Subsidiaries or other assets
of the Company, may suffer or be subject to any lien.
"ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities,
obligations, responsibilities, obligations to conduct cleanup, losses,
damages, deficiencies, punitive damages, consequential damages, treble
damages, costs and expenses (including, without limitation, all reasonable
fees, disbursements and expenses of counsel, expert and consulting fees and
costs of investigations and feasibility studies and responding to government
requests for information or documents), fines, penalties, restitution and
monetary sanctions, interest, direct or indirect, known or unknown, absolute
or contingent, past, present or future, resulting from any claim or demand,
by any person or entity, whether based in contract, tort, implied or express
warranty, strict liability, joint and several liability, criminal or civil
statute, under any Environmental Law, or arising from environmental, health
or safety conditions, as a result of past or present ownership, leasing or
operation of any properties, owned, leased or operated by the Company or any
of its Subsidiaries.
"HAZARDOUS SUBSTANCES" means all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive,
reactive, toxic or otherwise hazardous substance, material or waste (whether
solid, liquid or gas) subject to regulation, control or remediation under
Environmental Laws.
Section 3.14 EMPLOYEE BENEFIT PLANS.
(a) The following terms, when used in this Section 3.14,
shall have the following meanings. Any of these terms may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference.
(i) BENEFIT ARRANGEMENT. "Benefit Arrangement" shall
mean any employment, consulting, severance or other similar
contract, arrangement or policy and each plan, arrangement
(written or oral), program, agreement or commitment providing
for insurance coverage (including without limitation any
self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health, disability or
accident benefits (including without limitation any "voluntary
employees' beneficiary association" as defined in Section
501(c)(9) of the Code providing for the same or other
benefits) or for deferred compensation, profit-sharing
bonuses, stock options, stock appreciation rights, stock
purchases or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which is
not a Welfare Plan, Pension Plan or Multiemployer Plan and is
entered into, maintained, contributed to or required to be
contributed to, as the case may be, by the Company or an ERISA
Affiliate or under which the Company or any ERISA Affiliate
may incur any liability.
(ii) CODE. "Code" shall have the meaning set forth in
the Preamble.
(iii) EMPLOYEE PLANS. "Employee Plans" shall mean
all Benefit Arrangements, Multiemployer Plans, Pension Plans
and Welfare Plans.
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(iv) ERISA. "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
(v) ERISA AFFILIATE. "ERISA Affiliate" shall mean any
entity which is (or at any relevant time was) a member of a
"controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group"
with, the Company as defined in Section 414(b), (c), (m) or
(o) of the Code.
(vi) MULTIEMPLOYER PLAN. "Multiemployer Plan" shall
mean any "multiemployer plan," as defined in Section 3(37) of
ERISA.
(vii) OTHER BENEFIT OBLIGATIONS. "Other Benefit
Obligations" shall mean all obligations, arrangements or
customary practices, whether or not legally enforceable, to
provide benefits, other than salary or commissions, as
compensation for services rendered, to present or former
directors, employees or agents, other than obligations,
arrangements and practices that are Employee Plans. Other
Benefit Obligations include employment agreements, consulting
agreements under which the compensation paid does not depend
upon the amount of service rendered, sabbatical policies,
severance payment policies and fringe benefits within the
meaning of Code Section 132.
(viii) PENSION PLAN. "Pension Plan" shall mean any
"employee pension benefit plan" as defined in Section 3(2) of
ERISA (other than a Multiemployer Plan) which the Company or
any ERISA Affiliate maintains, administers, contributes to or
is required to contribute to, or, within the five years prior
to the Closing Date, maintained, administered, contributed to
or was required to contribute to, or under which the Company
or any ERISA Affiliate may incur any liability.
(ix) WELFARE PLAN. "Welfare Plan" shall mean any
"employee welfare benefit plan" as defined in Section 3(1) of
ERISA, which the Company or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to,
or under which the Company or any ERISA Affiliate may incur
any liability.
(b) Section 3.14 of the Company Disclosure Schedule
contains a complete list of the Employee Plans and Other Benefit Obligations.
True and complete copies of each of the following documents have been
delivered by the Company to Parent: (i) each Employee Plan (and, if
applicable, related trust agreements) and all amendments thereto, all written
interpretations thereof and written descriptions thereof which have been
distributed to employees and all annuity contracts or other funding
instruments, (ii) the most recent determination or opinion letter issued by
the Internal Revenue Service with respect to each Pension Plan and, if
applicable, each Welfare Plan, (iii) for the three most recent plan years,
Annual Reports on Form 5500 Series required to be filed with any governmental
agency for each Pension Plan and Welfare Plan, (iv) all actuarial reports
prepared for the last three plan years for each Employee Plan, (v) all
documents that set forth the terms of each Other Benefit Obligation of the
Company and its ERISA Affiliates for which a plan description or summary plan
description is not required
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and (vi) all personnel, payroll and employment manuals and policies of the
Company and its ERISA Affiliates.
(c)(i) PENSION PLANS. No Pension Plan is subject to Title IV
of ERISA or the minimum funding requirements of Section 412 of
the Code. Each Pension Plan has been maintained in compliance
with its terms and, both as to form and in operation, is
qualified and tax-exempt under the provisions of Code Section
401(a) and 501(a) and no fact or condition exists which would
adversely affect such qualified status.
(ii) MULTIEMPLOYER PLANS. Neither the Company nor any
ERISA Affiliate has, at any time, contributed to, or been
obligated to contribute to, or have any liability to any
Multiemployer Plan.
(iii) WELFARE PLANS.
(A) None of the Company, any ERISA Affiliate
or any Welfare Plan has any present or future obligation to
make any payment to, or with respect to any present or former
employee of the Company or any ERISA Affiliate pursuant to,
any retiree medical benefit plan, or other retiree Welfare
Plan, except to the extent required by the Code or ERISA, and
no condition exists which would prevent the Company from
amending or terminating any such benefit plan or Welfare Plan.
(B) Each Welfare Plan which is a "group
health plan," as defined in Section 607(1) of ERISA, has been
operated in material compliance with provisions of Parts 6 and
7 of Title I, Subtitle B of ERISA and Sections 4980B of the
Code.
(iv) BENEFIT ARRANGEMENTS. Each Benefit Arrangement
has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules
and regulations which are applicable to such Benefit
Arrangement, including without limitation the Code.
(v) DEDUCTIBILITY OF PAYMENTS. There is no contract,
agreement, plan or arrangement covering any employee or former
employee of the Company (with respect to its relationship with
such entities) that, individually or collectively, provides
for the payment by the Company of any amount that is not
deductible under Section 162(a)(1) or 404 of the Code,
(vi) FOREIGN EMPLOYEES. No Employee Plan covers
foreign employees, other than resident aliens.
(vii) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS.
None of the Company, any ERISA Affiliate or any plan fiduciary
of any Employee Plan has engaged in any transaction in
violation of Sections 404 or 406 of ERISA or any
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"prohibited transaction," as defined in Section 4975(c)(1) of
the Code, for which no exemption exists under Section 408 of
ERISA or Section 4975(c)(2) or (d) of the Code, or has
otherwise violated the provisions of Part 4 of Title I,
Subtitle B of ERISA, which could result in any material
liability to the Company. The Company has not been assessed
any civil penalty under Section 502(l) of ERISA.
(viii) LITIGATION. There is no action, order, writ,
injunction, judgment or decree outstanding or claim, suit,
litigation, proceeding, arbitral action, letters requesting
information, governmental audit, investigation or voluntary
compliance resolution or closing agreement program proceeding
relating to or seeking benefits under any Employee Plan that
is pending, threatened or anticipated against the Company, any
ERISA Affiliate or any Employee Plan.
(ix) NO ACCELERATION OR CREATION OF RIGHTS. Except as
provided in Section 3.14 of the Company Disclosure Schedule,
neither the execution and delivery of this Agreement or other
related agreements by the Company nor the consummation of the
transactions contemplated hereby or the related transactions
will result in the acceleration or creation of any rights of
any person to benefits under any Employee Plan (including,
without limitation, the acceleration of the vesting or
exercisability of any stock options, the acceleration of the
vesting of any restricted stock, the acceleration of the
accrual or vesting of any benefits under any Pension Plan or
the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
(x) OTHER. The Company and its ERISA Affiliates have
performed all of their obligations under all the Employee
Plans and Other Benefit Obligations of the Company and its
ERISA Affiliates. No statement, either written or oral, has
been made by the Company or any ERISA Affiliate to any person
with regard to any Employee Plan or Other Benefit Obligation
that was not in accordance with the Employee Plan or Other
Benefit Obligation and that could have, individually or in the
aggregate, a material adverse effect on the Company or such
ERISA Affiliate. All tax, annual reporting and other
governmental filings required by ERISA and the Code as to each
Plan of the Company or its ERISA Affiliates have been timely
filed with the appropriate governmental agency, and all
notices and disclosures to participants of such Plans required
by either ERISA or the Code have been timely provided to such
participants. No amount, nor any asset of any Employee Plan of
the Company and its ERISA Affiliates is subject to tax as
unrelated business taxable income.
Section 3.15 COMPLIANCE WITH LAW; AUTHORIZATIONS.
(a) The Company, each of its Subsidiaries and the conduct of
their respective businesses is and has been in compliance with all applicable
Regulations and judgments, decisions or orders entered by any Governmental
Entity relating to the business, operations, assets or properties of the Company
and each of its Subsidiaries. "REGULATIONS" shall mean any
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laws, statutes, ordinances, regulations, rules, notice requirements, agency
guidelines and orders of any Governmental Entity. Neither the Company nor any
of its Subsidiaries has received any written or, to its knowledge, other
notice to the effect that, or otherwise been advised that, it is not in or
may not be in compliance with any Regulations, and neither the Company nor
any of its Subsidiaries have any reason to anticipate that any currently
existing circumstances are or have been likely to result in violations of any
Regulations.
(b) The Company and each of its Subsidiaries have all
licenses, permits, authorizations and approvals issued by Governmental
Entities (collectively, "PERMITS"), all of which are currently valid and in
full force and effect, necessary to carry on their respective businesses as
presently conducted and as proposed to be conducted.
Section 3.16 REGISTRATION STATEMENT AND PROXY STATEMENT. The
information to be supplied by the Company for inclusion in the Registration
Statement shall not at the time the Registration Statement is filed with or
declared effective by the SEC or at the date of the Company Stockholders'
Meeting contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or
necessary in order to make the statements in the Registration Statement, in
light of the circumstances under which they were made, not misleading. The
Proxy Statement shall not, on the date the Proxy Statement is first mailed to
shareholders of the Company, at the time of the Company Shareholders'
Meeting, or at the Effective Time, contain any statement which, at such time
and in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state any material
fact necessary in order to make the statements made in the Proxy Statement
not false or misleading (excluding any statement based upon information
supplied by Parent for inclusion in the Proxy Statement).
Section 3.17 LABOR MATTERS. (i) There are no controversies pending
or, to the best knowledge of the Company, threatened between the Company or
any of its Subsidiaries and any of their respective employees; (ii) to the
knowledge of the Company, there are no activities or proceedings of any labor
union to organize any non-unionized employees; and (iii) there are no unfair
labor practice complaints pending against the Company or any of its
Subsidiaries before the National Labor Relations Board, or any similar
foreign labor relations governmental bodies, or any current union
representation questions involving employees of the Company or any of its
Subsidiaries. The Company and its Subsidiaries are not parties to any
collective bargaining agreements.
Section 3.18 INSURANCE. The Company and its Subsidiaries maintain
policies or binders of fire, liability, title, worker's compensation and
other forms of insurance in a character and in amounts at least equivalent to
that carried by persons engaged in similar businesses and which are
sufficient for compliance with all requirements of law and of all Material
Contracts to which the Company or any of its Subsidiaries is a party. The
Company is not in default under any of such policies or binders, the Company
has not failed to give any notice or to present any claim under any such
policy or binder in a due and timely fashion, and such policies and binders
are in full force and effect on the date hereof and shall be kept in full
force and effect by the Company through the Closing Date.
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Section 3.19. YEAR 2000 PROBLEM. The "YEAR 2000 PROBLEM" (that is,
the risk that computer applications used by any person may be unable to
recognize and perform properly date-sensitive functions involving certain
dates prior to and any date after December 31, 1999) did not and will not
have a Company Material Adverse Effect.
Section 3.20. OPINION OF FINANCIAL ADVISOR. The financial advisors
of the Company, Prudential Securities, delivered to the Company an opinion
dated the date of this Agreement to the effect that the Merger Consideration
is fair to the holders of the Company Common Stock from a financial point of
view.
Section 3.21. BROKERS. None of the Company, any of its Subsidiaries,
or any of their respective officers, directors or employees have employed any
broker, financial advisor or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the
transactions contemplated by this Agreement, except that the Company has
retained Prudential Securities as its financial advisor, the arrangements
with which have been disclosed in writing to Parent and Merger Sub prior to,
and will not be modified subsequent to, the date of this Agreement.
Section 3.22. TRANSACTIONS WITH AFFILIATES. Other than the
transactions contemplated by this Agreement and except to the extent
disclosed in the Company SEC Reports filed prior to the date hereof or as
disclosed in Section 3.23 of the Company Disclosure Schedule, there have been
no transactions, agreements, arrangements or understandings between the
Company or any of its Subsidiaries, on the one hand, and the Company's
affiliates or other persons, on the other hand, that would be required to be
disclosed under Item 404 of Regulation S-K under the Securities Act.
Section 3.23. NO EXCESS PARACHUTE OR NONDEDUCTIBLE PAYMENTS. Any
amount that could be received (whether in cash or property or the vesting of
property) as a result of any of the transactions contemplated by this
Agreement by any employee, officer or director of the Company or any of its
affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or Benefit
Arrangement currently in effect does not constitute an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code and the
proposed regulations thereunder). Neither the Company nor any of its
Subsidiaries is a party to any agreement, contract or arrangement that could
result, on account of the transactions contemplated hereunder, individually
or in the aggregate, in any payment that would be nondeductible under Section
162(m) of the Code.
Section 3.24. STATE ANTI-TAKEOVER STATUTES. The Board of Directors
of the Company has approved the terms of this Agreement and the Voting,
Option and Disposition Agreement and the consummation of the transactions
contemplated hereby and thereby, and such approvals are sufficient to render
inapplicable to the Merger and the other transactions contemplated by this
Agreement and the Voting, Option and Disposition Agreement the restrictions
of Section 1090.3 of the OGCA. No other "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation
applies or purports to apply to the Merger, this Agreement, the
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Voting, Option and Disposition Agreement or any of the transactions
contemplated by this Agreement or the Voting, Option and Disposition
Agreement.
Section 3.25. ACCURACY OF INFORMATION. No representation or warranty
by the Company contained in this Agreement or in any certificate to be
furnished by or on behalf of the Company or its Subsidiaries pursuant hereto
contains or will contain any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading with respect to the Company and its Subsidiaries as a whole or the
transactions contemplated by this Agreement.
Section 3.26. INVENTORY. Except as set forth in Section 3.26 of the
Company Disclosure Schedule, (i) all items of the Company's inventory and
related supplies reflected on the Company Balance Sheet or thereafter
acquired (and not subsequently disposed of in the ordinary course of
business) are merchantable, for sale in the ordinary course of business at
normal mark-ups, (ii) none of such items of the Company's inventory is
obsolete (except to the extent accrued from the Company Balance Sheet) and
(iii) each item of such inventory reflected on the Company Balance Sheet and
the books and records of the Company is so reflected on the basis of a
complete physical count and is valued at the lower of cost or market in
accordance with GAAP.
Section 3.27. CUSTOMERS AND SUPPLIERS. Except for matters that
reasonably could not be expected to have a Company Material Adverse Effect,
no supplier or customer of the Company has advised the Company formally or
informally that such customer or supplier intends to terminate, discontinue
or substantially reduce its business with the Company and the Company does
not expect the occurrence of the Effective Time to adversely affect such
relationship.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company that the
statements contained in this Article IV are true and correct except as set forth
herein and in the disclosure schedule delivered by Parent and Merger Sub to the
Company on or before the date of this Agreement (the "PARENT DISCLOSURE
SCHEDULE"). The Parent Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IV.
Section 4.1. ORGANIZATION. Each of Parent and Merger Sub is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate, partnership
or limited liability company power and authority to carry on its business as
now being conducted and as proposed to be conducted. Each of Parent and its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
or licensing necessary, except where the failure to be so qualified, licensed
or in good standing could not be expected, individually or in the aggregate,
to
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have a material adverse effect on the business, properties, financial
condition or results of operations of Parent and its Subsidiaries, taken as a
whole (a "PARENT MATERIAL ADVERSE EFFECT"). Parent has delivered to the
Company true and correct copies of the Certificate of Incorporation and
Bylaws of each of Parent and Merger Sub, in each case as amended to the date
and each of such documents is in full force and effect.
Section 4.2. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Parent and Merger Sub
have been duly authorized by all necessary corporate action on the part of
Parent and Merger Sub. This Agreement has been duly executed and delivered by
Parent and Merger Sub (as applicable) and constitutes the valid and binding
obligation of Parent and Merger Sub (as applicable), enforceable against each of
them in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditor rights and to general equity principles.
(b) The execution and delivery of this Agreement by Parent and
Merger Sub (as applicable) does not, and the consummation of the transactions
contemplated hereby will not, (i) conflict with, or result in any violation or
breach of, any provision of the Certificate of Incorporation or Bylaws of Parent
or Merger Sub (ii) result in any violation or breach of, or constitute (with or
without notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which Parent or Merger Sub is a
party or by which any of them or any of their properties or assets may be bound
other than as disclosed in Section 4.2(b) of the Parent Disclosure Schedule, or
(iii) subject to the governmental filings and other matters referred to in
Section 4.2(c), conflict with or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Merger Sub or any of its or their properties or assets.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) those required under or in relation to the HSR Act, (ii)
state securities or "blue sky" laws, (iii) the Securities Act, (iv) the Exchange
Act, (v) the OGCA with respect to the filing and recordation of appropriate
documents to effect the Merger and (vi) rules and regulations of the New York
Stock Exchange ("NYSE").
Section 4.3. PARENT COMMON STOCK. The shares of Parent Common Stock
to be issued pursuant to Article I will, when issued, be duly authorized,
validly issued, fully paid and nonassessable, and no stockholder of Parent is
entitled to preemptive rights as a result of the
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issuance of the Parent Company Stock hereunder. The Parent Common Stock to be
issued in the Merger pursuant to Article I will, when issued, be registered
under the Securities Act and the Exchange Act and registered or exempt from
registration under any applicable state securities laws, in each case for
delivery hereunder to holders of Company Common Stock. Parent has available
for issuance a sufficient number of shares of authorized Parent Common Stock
necessary to satisfy the obligations of Parent under this Agreement.
Section 4.4. SEC FILINGS: FINANCIAL STATEMENTS. Parent has made
available to the Company all forms, statements and documents filed by Parent
with the SEC since April 1, 1997 (collectively, the "PARENT SEC REPORTS").
The Parent SEC Reports (including any financial statements filed as a part
thereof or incorporated by reference therein) (i) at the time filed, complied
in all material respects with the applicable requirements of the Securities
Act and the Exchange Act, as the case may be, and (ii) did not, at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Parent SEC Reports or necessary in order to make the
statements in such Parent SEC Reports, in the light of the circumstances
under which they were made, not misleading.
(a) (i) Each of the consolidated financial statements
(including, in each case, any related notes) of Parent contained in the Parent
SEC Reports complied as to form in all material respects with the applicable
rules, regulations and practices of the SEC with respect thereto, was prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and fairly
presented the consolidated financial position of Parent and its Subsidiaries as
of the dates and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not
or are not expected to be material in amount. The audited balance sheet of
Parent as of December 31, 1999 is referred to herein as the "PARENT BALANCE
SHEET."
(ii) Parent maintains a system of accounting controls
sufficient to provide reasonable assurances that (A) its transactions and
those of its Subsidiaries are executed in accordance with management's
general or specific authorization, (B) its transactions and those of its
Subsidiaries are recorded as necessary to permit preparation of financial
statements in accordance with GAAP and to maintain accountability for assets,
(C) access to its assets and those of its Subsidiaries is permitted only in
accordance with management's general or specific authorization, and (D) the
recorded accountability for its assets and those of its Subsidiaries is
compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
Section 4.5. PROXY STATEMENT/REGISTRATION STATEMENT. The
Registration Statement shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact
or omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
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Statement, in light of the circumstances under which they were made, not
misleading (excluding any statement based upon information supplied by the
Company for inclusion in the Proxy Statement). The information to be supplied
by Parent for inclusion in the Registration Statement shall not on the date
the Proxy Statement is first mailed to shareholders of the Company, at the
time of the Company Stockholders' Meeting, and at the Effective Time, contain
any statement that, at such time and in light of the circumstances under
which it shall be made, is false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements made in the Proxy Statement not false or misleading.
Section 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Parent SEC Reports filed prior to the date of this
Agreement, since March 31, 2000, there has not been any event, change or
development which, individually or in the aggregate, could reasonably be
expected to have a Parent Material Adverse Effect.
Section 4.7. NO VOTE REQUIRED. No vote or approval of the holders
of any class of Parent shares is necessary to approve this Agreement and the
transactions contemplated hereby.
Section 4.8. MERGER SUB. Merger Sub was formed solely for the
purpose of effecting the Merger and has not engaged in any business
activities or conducted any operations other than in connection with the
Merger. Except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement, and except for this Agreement and any other agreements or
arrangements contemplated by this Agreement, Merger Sub has not incurred,
directly or indirectly, through any subsidiary or affiliate, any obligations
or liabilities or entered into any agreement or arrangements with any person.
Section 4.9. BROKERS. None of Parent, any of its Subsidiaries, or
any of their respective officers, directors or employees have employed any
broker, financial advisor or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the
transactions contemplated by this Agreement.
Section 4.10. ACCURACY OF INFORMATION. No representation or warranty
by Parent or Merger Sub contained in this Agreement or in any certificate to
be furnished by or on behalf of Parent or its Subsidiaries pursuant hereto
contains or will contain any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading with respect to Parent and its Subsidiaries as a whole or the
transactions contemplated by this Agreement.
ARTICLE V.
COVENANTS
Section 5.1. CONDUCT OF BUSINESS OF THE COMPANY. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, the Company agrees as to
itself and each of its Subsidiaries (except to the extent that Parent shall
otherwise consent in writing) to carry on its business in the usual, regular
and
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ordinary course in substantially the same manner as previously conducted,
to pay its debts and taxes when due subject to good faith disputes over such
debts or taxes, to pay or perform its other obligations when due, and, to the
extent consistent with such business, use all reasonable efforts consistent
with past practices and policies to preserve intact its present business
organization, keep available the services of its present officers and key
employees and preserve its relationships with customers, suppliers,
distributors, and others having business dealings with it. Without limiting
the generality of the foregoing and except as expressly contemplated by this
Agreement, during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Effective Time,
without the written consent of Parent, the Company shall not and shall not
permit any of its Subsidiaries to:
(i) adopt any amendment to its Certificate of
Incorporation or Bylaws or comparable charter or
organizational documents;
(ii) (A) other than pursuant to the Prudential
Agreement issue, pledge or sell, or authorize the issuance,
pledge or sale of additional shares of capital stock of any
class, or securities convertible into capital stock of any
class, or any rights, warrants or options to acquire any
convertible securities or capital stock, or any other
securities in respect of, in lieu of, or in substitution for,
shares of Company Common Stock outstanding on the date hereof
or (B) amend, waive or otherwise modify any of the terms of
any option, warrant or stock option plan of the Company or any
of its Subsidiaries, including without limitation, the Company
Stock Options or the Company Option Plans;
(iii) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any
combination thereof) in respect of any class or series of its
capital stock other than between any wholly owned Subsidiary
of the Company and the Company or any other wholly owned
Subsidiary of the Company;
(iv) split, combine, subdivide, reclassify or other
than pursuant to the Prudential Agreement, redeem, purchase or
otherwise acquire, or propose to redeem or purchase or
otherwise acquire, any shares of its capital stock, or any of
its other securities;
(v) (A) increase the compensation or fringe benefits
payable or to become payable to its directors, officers or
employees (whether from the Company or any of its
Subsidiaries), or pay any benefit not required by any existing
plan or arrangement (including, without limitation, the
granting of stock options, stock appreciation rights, shares
of restricted stock or performance units) or grant any
severance or termination pay to, or (B) enter into any
employment or severance agreement with, any director, officer
or employee of the Company or any of its Subsidiaries or
establish, adopt, enter into, or amend any collective
bargaining, Employee plan or Other Benefit Obligation, to the
extent required by applicable Regulations;
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(vi) (A) sell, pledge, lease, dispose of, grant,
encumber, or otherwise authorize the sale, pledge,
disposition, grant or encumbrance of any material properties
or assets of the Company or any of its Subsidiaries or (B)
acquire (including, without limitation, by merger,
consolidation, lease or acquisition of stock or assets) any
corporation, partnership, other business organization or any
business thereof (or a substantial portion of the assets
thereof) or any other assets;
(vii) (A) incur, assume or pre-pay any Indebtedness,
except that the Company and its Subsidiaries may incur or
pre-pay debt in the ordinary course of business consistent
with past practice under existing lines of credit, (B) assume,
guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the
obligations of any other person except in the ordinary course
of business consistent with past practice, or (C) make any
loans, advances or capital contributions to, or investments
in, any other person except in the ordinary course of business
consistent with past practice and except for loans, advances,
capital contributions or investments between any wholly-owned
Subsidiary of the Company and the Company or another
wholly-owned Subsidiary of the Company; provided, however,
that in no event shall the Company or any of its Subsidiaries
incur Indebtedness which is subject to any penalty, premium,
"make-whole" or similar obligation in connection with
pre-payment thereof;
(viii) authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation
or dissolution of the Company or any of its Subsidiaries;
(ix) make or rescind any express or deemed election
relating to Taxes, settle or compromise any claim, action,
suit, litigation, proceeding, arbitration, investigation,
audit or controversy relating to Taxes, amend any Tax Return
except in the ordinary course of business consistent with past
practice, or, except as may be required by applicable law,
make any change to any of its methods of reporting income or
deductions for federal income tax purposes from those employed
in the preparation of the Company's consolidated federal
income tax return for the taxable year ending December 31,
1998;
(x) settle or consent to any judgment concerning any
pending or threatened litigation involving the Company or any
of its Subsidiaries (whether brought by a private party or a
Governmental Entity);
(xi) take any action, other than reasonable and usual
actions in the ordinary course of business and consistent with
past practice, with respect to accounting policies or
procedures, unless required by GAAP or the SEC;
(xii) modify, amend or terminate any of the Company
Material Contracts or waive, release or assign any material
rights or claims, except in the ordinary course of business
consistent with past practice;
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(xiii) take, or agree to commit to take, any action
that would make any representation or warranty of the Company
contained herein inaccurate in any respect at, or as of any
time prior to, the Effective Time such that the condition to
Closing set forth in Section 6.3(a) would not be likely
satisfied;
(xiv) engage in any transaction with, or enter into
any agreement, arrangement, or understanding with, directly or
indirectly, any of the Company's Affiliates which involves the
transfer of consideration or has a financial impact on the
Company, other than pursuant to such agreements, arrangements,
or understandings existing on the date of this Agreement which
are set forth in the Company Disclosure Schedule or in the
Company SEC Reports filed prior to the date hereof;
(xv) make any capital expenditures in excess of
$100,000, individually or $300,000 in the aggregate;
(xvi) amend, modify or terminate any standstill or
confidentiality agreement or waive, release or assign any
rights of the Company under any such agreement; or
(xvii) enter into an agreement, contract, commitment
or arrangement to do any of the foregoing, or to authorize,
recommend, propose or announce an intention to do any of the
foregoing.
Section 5.2. COOPERATION; NOTICE; CURE. Subject to compliance with
applicable law, from the date hereof until the Effective Time, the Company
shall confer on a regular basis with one or more representatives of Parent to
report on the general status of ongoing operations at the Company. Each of
Parent and the Company shall promptly notify the other in writing of, and
will use all commercially reasonable efforts to cure before the Closing Date,
any event, transaction or circumstance, as soon as practical after it becomes
known to such party, that causes or will cause any covenant or agreement of
such party under this Agreement to be breached or that renders or will render
untrue any representation or warranty of such party contained in this
Agreement. No notice given pursuant to this paragraph shall have any effect
on the representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition contained
herein.
Section 5.3. NO SOLICITATION.
(a) The Company shall not, directly or indirectly, through any
officer, director, employee, financial advisor, representative or agent of such
party (i) solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, a proposal or offer for
a merger, consolidation, business combination, recapitalization, sale of
substantial assets, sale or acquisition of shares of capital stock (including,
without limitation, by way of a tender offer) or similar transaction involving
the Company or any of its subsidiaries, other than the transactions contemplated
by this Agreement (any of the foregoing inquiries or proposals being referred to
in this Agreement as an "ACQUISITION PROPOSAL"), (ii) initiate or
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engage in negotiations or discussions with any person (or group of persons)
other than the Parent or its respective affiliates (a "THIRD PARTY")
concerning, or provide any non-public information to any person or entity
relating to or in contemplation of, any Acquisition Proposal, or (iii) agree
to or recommend any Acquisition Proposal; provided, however, that nothing
contained in this Agreement shall prevent the Company or its Board of
Directors from (A) furnishing non-public information to, or entering into
discussions or negotiations with, any person or entity in connection with an
unsolicited bona fide written Acquisition Proposal by such person or entity
or modifying or withdrawing its recommendation with respect to the
transactions contemplated hereby or recommending an unsolicited bona fide
written Acquisition Proposal to the stockholders of the Company, if and only
to the extent that (1) a Third Party has made a written proposal to the Board
of Directors of the Company to consummate an Acquisition Proposal, which
proposal identifies a price to be paid for the outstanding securities or
substantially all of the assets of the Company, (2) the Board of Directors of
the Company believes in good faith, after consultation with its financial
advisors, that such Acquisition Proposal is reasonably capable of being
completed on the terms proposed and would, if consummated, result in a
transaction more favorable to the stockholders of such party than the
transaction contemplated by this Agreement, (3) the Board of Directors of the
Company determines in good faith based on the written advice of outside legal
counsel, that such action is required for such Board of Directors to comply
with its fiduciary duties to stockholders under applicable law, (4) the
Company is not in breach of its obligations under this Section 5.3, and (5)
prior to furnishing such non-public information to, or entering into
discussions or negotiations with, such Third Party, the Board of Directors of
the Company receives from such Third Party an executed confidentiality and
standstill agreement with terms no less favorable to such party than those
contained in the Confidentiality Agreement dated July 8, 1999 between the
Parent and the Company (the "CONFIDENTIALITY AGREEMENT") (an Acquisition
Proposal meeting the requirements of each of clauses (1) through (5) above is
referred to as a "SUPERIOR PROPOSAL"); or (B) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal.
The Company agrees not to release any Third Party from, or waive any
provision of, any standstill agreement to which it is a party or any
confidentiality agreement between it and another person who has made, or who
may reasonably be considered likely to make, an Acquisition Proposal, unless
the Board of Directors of the Company determines in good faith based on the
written advice of outside legal counsel, that such action is required for the
Board of Directors of the Company to comply with its fiduciary duties to
stockholders under applicable law.
(b) The Company shall notify the Parent immediately after
receipt by the Company or any of its subsidiaries (or any of their advisors) of
any Acquisition Proposal or any request for non-public information in connection
with an Acquisition Proposal or for access to the properties, books or records
of such party by any Third Party that informs the Company or any of its
subsidiaries (or any of their advisors) that it is interested in making,
considering making, or has made, an Acquisition Proposal. Such notice shall be
made orally and in writing and shall indicate in reasonable detail the identity
of the offeror and the terms and conditions of such proposal, inquiry or
contact. The Company shall continue to keep the Parent informed, on a current
basis, of the status of any such discussions or negotiations and the terms being
discussed or negotiated. Notwithstanding the foregoing, the Company shall not
accept or enter into any agreement concerning a Superior Proposal for a period
of at least five business days after the
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Parent's receipt of the notification of the terms thereof pursuant the second
preceding sentence, during which period the Parent shall be afforded the
opportunity to beat or improve upon the terms and conditions contained in
such Superior Proposal.
(c) The Company has terminated any direct or indirect (through
any officer, director, employee, financial advisor, representative or agent of
such party) discussions or negotiations with, and the provision of information
or data to, any person (other than the Parent) respecting an Acquisition
Proposal.
Section 5.4. PREPARATION OF PROXY STATEMENT/REGISTRATION; COMPANY
SHAREHOLDER MEETING.
(a) As promptly as practicable after the execution of this
Agreement, Parent shall prepare and the Company shall cooperate therewith, and
the Company shall file with the SEC, a proxy statement/prospectus (the "PROXY
STATEMENT") to be sent to the shareholders of the Company in connection with the
Company Stockholders' Meeting to consider the Merger and the issuance of Parent
Common Stock in connection therewith, and Parent shall prepare and file with the
SEC a registration statement on Form S-4 pursuant to which the shares of Parent
Common Stock to be issued in the Merger will be registered under the Securities
Act (the "REGISTRATION STATEMENT") and the Company shall cooperate therewith, in
which the Proxy Statement will be included as a prospectus. Parent may delay the
filing of the Registration Statement until after the Proxy Statement has been
declared effective. Parent and the Company shall use reasonable best efforts to
cause the Registration Statement to become effective as soon after filing as
practicable. The Proxy Statement shall include the unanimous recommendation of
the Board of Directors of the Company (with one director absent) in favor of
this Agreement and the Merger unless the Board changes such recommendation
pursuant to clause (e) below. Parent and the Company shall make all other
necessary filings with respect to the Merger under the Securities Act and the
Exchange Act and the rules and regulations thereunder. If at any time before the
Effective Time any event relating to the Company or Parent, or any of its
affiliates, officers, or directors, is discovered by the Company or Parent,
respectively, that should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, such party shall promptly so
inform the other.
(b) The Company shall take all action necessary to cause the
representation set forth in Section 3.16 to be true and correct at all
applicable times with respect to each of the Proxy Statement and the
Registration Statement.
(c) Parent shall take all action necessary to cause the
representation set forth in Section 4.5 to be true and correct at all applicable
times with respect to each of the Proxy Statement and the Registration
Statement.
(d) As soon as reasonably practicable, the Company and Parent
shall take all such actions as may be necessary to comply with state "blue sky"
or securities laws in connection with the transactions contemplated by this
Agreement.
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(e) The Company shall, as soon as practicable following
the date of this Agreement, duly call, give notice of, convene and hold a
meeting of its shareholders (the "COMPANY STOCKHOLDERS' MEETING") for the
purpose of obtaining the Required Company Votes with respect to this
Agreement. The Board of Directors of the Company shall unanimously declare
advisable and recommend adoption of this Agreement by the stockholders of the
Company and, upon Parent's request, reconfirm such recommendation (provided
that the Board of Directors of the Company need not make or reconfirm such
recommendation (1) (x) if at the time that it would otherwise be required to
make or reconfirm such recommendation the Company is not then in breach of its
obligations under Section 5.3 and (y) in such event, if and only to the extent
that the Board of Directors of the Company concludes in good faith (after
having consulted with and considered the advice of outside legal counsel) in
connection with the receipt of a Superior Proposal that such action is
necessary in order for its directors to comply with their respective fiduciary
duties under applicable law, or (2) if no other Acquisition Proposal is
pending or in Parent's reasonable judgment likely to become pending).
Notwithstanding the foregoing, the Company shall use its best efforts to
solicit such adoption, and the Company shall nevertheless submit this
Agreement to its stockholders for consideration.
Section 5.5. ACCESS TO INFORMATION. Upon reasonable notice, the
Company shall (and shall cause its Subsidiaries to) afford to the officers,
employees, accountants, counsel and other representatives of Parent, access,
during normal business hours during the period prior to the Effective Time, to
all its personnel, properties, books, contracts, commitments and records and,
during such period, the Company shall, and shall cause its Subsidiaries to,
furnish promptly to the other (a) copies of monthly financial reports and
acquisition related reports, (b) a copy of each report, schedule, registration
statement and other document filed or received by it during such period
pursuant to the requirements of federal securities laws and (c) all other
information concerning its business, properties and personnel as Parent may
reasonably request. Parent will hold any such information furnished to it by
the Company which is nonpublic in confidence in accordance with the
Confidentiality Agreement. No information or knowledge obtained in any
investigation pursuant to this Section 5.5 shall affect or be deemed to modify
any representation or warranty contained in this Agreement or the conditions
to the obligations of the parties to consummate the Merger.
Section 5.6. LEGAL CONDITIONS TO MERGER.
(a) The Company and Parent shall each use their best
efforts to (i) take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary and proper under applicable law to
consummate and make effective the transactions contemplated hereby as promptly
as practicable, (ii) obtain from any Governmental Entity or any other third
party any consents, licenses, permits, waivers, approvals, authorizations, or
orders required to be obtained or made by the Company or Parent or any of
their Subsidiaries in connection with the authorization, execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby including, without limitation, the Merger, and (iii) as
promptly as practicable, make all necessary filings, and thereafter make any
other required submissions, with respect to this Agreement and the Merger
required under (A) the Securities Act and the Exchange Act, and any other
applicable federal or state securities laws, (B) the HSR Act and any
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related governmental request thereunder, and (C) any other applicable law;
without limiting the foregoing, the parties shall undertake all reasonable
efforts to cause to be filed all requisite filings under the HSR Act within 10
business days of the date of this Agreement. The Company and Parent shall
cooperate with each other in connection with the making of all such filings,
including providing copies of all such documents to the non-filing party and
its advisors prior to filing and, if requested, to accept all reasonable
additions, deletions or changes suggested in connection therewith. The Company
and Parent shall use their best efforts to furnish to each other all
information required for any application or other filing to be made pursuant
to the rules and regulations of any applicable law (including all information
required to be included in the Proxy Statement and the Registration Statement)
in connection with the transactions contemplated by this Agreement.
(b) Parent and the Company agree, and shall cause each of
their respective Subsidiaries, to cooperate and to use their respective best
efforts to obtain any government clearances required for Closing (including
through compliance with the HSR Act), to respond to any government requests
for information, and to contest and resist any action, including any
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order
(whether temporary, preliminary or permanent) (an "ORDER") that restricts,
prevents or prohibits the consummation of the Merger or any other transactions
contemplated by this Agreement, including, without limitation, by vigorously
pursuing all available avenues of administrative and judicial appeal and all
available legislative action. The parties hereto will consult and cooperate
with one another, and consider in good faith the views of one another, in
connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any
party hereto in connection with proceedings under or relating to the HSR Act
or any other federal or state antitrust or fair trade law. Parent shall be
entitled to direct any proceedings or negotiations with any Governmental
Entity relating to any of the foregoing, provided that it shall afford the
Company a reasonable opportunity to participate therein. Notwithstanding
anything to the contrary in this Section 5.6, neither Parent nor the Company
nor any of their respective Subsidiaries shall be required to take any action
that would reasonably be expected to substantially impair the overall benefits
expected, as of the date hereof, to be realized from the consummation of the
Merger or the divestiture or holding separate of any assets or businesses.
(c) Each of the Company and Parent shall give (or shall
cause their respective Subsidiaries to give) any notices to third parties, and
use, and cause their respective Subsidiaries to use, their best efforts to
obtain any third party consents related to or required in connection with the
Merger that are set forth on Schedule 5.6(c) (collectively, the "REQUIRED
CONSENTS").
Section 5.7. PUBLICITY. Parent and the Company shall agree on the
form and content of the initial press release regarding the transactions
contemplated hereby and thereafter shall consult with each other before
issuing, and use all reasonable efforts to agree upon, any press release or
other public statement with respect to any of the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law.
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Section 5.8. TAX-FREE REORGANIZATION. Parent and the Company shall
each use their respective best efforts to cause the Merger to be treated as a
"reorganization" within the meaning of Section 368(a) of the Code.
Section 5.9. AFFILIATE AGREEMENTS. Upon the execution of this
Agreement, the Company will provide Parent with a list of those persons who
are, in the Company's reasonable judgment, "affiliates" of the Company within
the meaning of Rule 145 (each such person who is an "affiliate" of the Company
within the meaning of Rule 145 is referred to as an "AFFILIATE") promulgated
under the Securities Act ("RULE 145"). The Company shall provide Parent such
information and documents as Parent shall reasonably request for purposes of
reviewing such list and shall notify Parent in writing regarding any change in
the identity of its Affiliates prior to the Closing Date. The Company shall
use its best efforts to deliver or cause to be delivered to Parent by August
15, 2000 (and in any case prior to the Effective Time) from each of its
Affiliates, an executed Affiliate Agreement, in form and substance
satisfactory to Parent (an "AFFILIATE AGREEMENT"). Parent shall be entitled to
place appropriate legends on the certificates evidencing any Parent Common
Stock to be received by such Affiliates of the Company pursuant to the terms
of this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the Parent Common Stock, consistent with the terms of the
Affiliate Agreements (provided that such legends or stop transfer instructions
shall be removed, one year after the Effective Date, upon the request of any
stockholder that is not then an Affiliate of Parent).
Section 5.10. NYSE LISTING. Parent shall promptly prepare and submit
to the NYSE a listing application covering the shares of Parent Common Stock
to be issued in the Merger, and shall use all reasonable efforts to cause such
shares to be approved for listing on the NYSE, subject to official notice of
issuance, prior to the Effective Time.
Section 5.11. PRUDENTIAL AGREEMENT. Parent, the Company and the
Prudential Insurance Company of America ("PRUDENTIAL") shall enter into an
agreement with respect to the repayment of certain subordinated notes, on
terms and conditions satisfactory to each of the Parent, the Company and
Prudential (the "PRUDENTIAL AGREEMENT").
Section 5.12. INDEMNIFICATION.
(a) From and after the Effective Time, Parent agrees that
it will, and will cause the Surviving Corporation to, indemnify and hold
harmless each present and former director and officer of the Company (the
"INDEMNIFIED PARTIES"), against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities or amounts paid
in settlement incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters existing or occurring at or prior to
the Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent that the Company would have been
permitted under Oklahoma law and its Certificate of Incorporation or Bylaws in
effect on the date hereof to indemnify such Indemnified Party.
(b) For a period of three years after the Effective Time,
Parent shall maintain or shall cause the Surviving Corporation to maintain (to
the extent available in the market) in
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effect a directors' and officers' liability insurance policy covering those
persons who are currently covered by the Company's directors' and officers'
liability insurance policy (copies of which have been heretofore delivered by
the Company to Parent) with coverage in amount and scope at least as favorable
as the Company's existing coverage; provided that in no event shall Parent or
the Surviving Corporation be required to expend in the aggregate in excess of
150% of the annual premium currently paid by the Company for such coverage;
and if such premium would at any time exceed 150% of the such amount, then
Parent or the Surviving Corporation shall maintain insurance policies which
provide the maximum and best coverage available at an annual premium equal to
150% of such amount.
(c) The provisions of this Section 5.12 are intended to be
an addition to the rights otherwise available to the current officers and
directors of the Company by law, charter, statute, bylaw or agreement, and
shall operate for the benefit of, and shall be enforceable by, each of the
Indemnified Parties, their heirs and their representatives.
Section 5.13. LETTER OF THE COMPANY'S ACCOUNTANTS. The Company shall
use reasonable efforts to cause to be delivered to Parent and the Company a
letter of Arthur Andersen LLP, the Company's independent auditors, dated a
date within two business days before the date on which the Registration
Statement shall become effective and addressed to Parent, in form reasonably
satisfactory to Parent and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
Section 5.14. STOCKHOLDER LITIGATION. The Company shall give Parent
the reasonable opportunity to participate in the defense of any stockholder
litigation against the Company and its directors relating to the transactions
contemplated hereby.
Section 5.15. STOCK EXCHANGE LISTING. Parent and the Company agree
to continue the listing and quotation of Parent Common Stock and Company
Common Stock on the NYSE and the AMEX, respectively, during the term of this
Agreement though the Effective Time.
Section 5.16. EMPLOYEE BENEFITS. Parent and the Company agree that
the Company and the Surviving Corporation shall pay promptly or provide when
due all compensation and benefits required to be paid pursuant to the terms of
any Employee Plan or Other Benefit Obligation as disclosed to Parent as of the
Effective Time. The Company shall take all action necessary to terminate its
401(k) Plan (the "COMPANY 401(k) PLAN") in compliance with applicable law, no
later than immediately prior to the Effective Time. On or as soon as
administratively practicable following the Effective Time employees who were
participants in the Company 401(k) Plan shall be eligible to participate in
the 401(k) Plan sponsored by Parent or one of its Subsidiaries ("PARENT 401(k)
PLAN"). At the election of participants, Parent 401(k) Plan shall accept
rollovers from the Company 401(k) Plan. Nothing herein shall require the
continued employment of any person. Years of service with the Company and its
Subsidiaries prior to the Effective Time shall be treated as service with the
Surviving Corporation or Parent for eligibility and vesting purposes and for
purposes of vacation and severance pay accruals, except to the extent such
treatment will result in the duplication of benefits.
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Section 5.17. FEES AND EXPENSES. Whether or not the Merger is
consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses. "EXPENSES" means all reasonable out-of-pocket expenses (including,
without limitation, 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 and performance of this
Agreement and the transactions contemplated hereby, including the preparation,
printing, filing and mailing of the Proxy Statement and the solicitation of
shareholder approvals and all other matters related to the transactions
contemplated hereby.
ARTICLE VI.
CONDITIONS TO MERGER
Section 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction or waiver by each party prior
to the Effective Time of the following conditions:
(a) HSR ACT. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(b) NO INJUNCTIONS. No Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any order, executive order,
stay, decree, judgment or injunction or statute, rule, regulation which is in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(c) REGISTRATION STATEMENT. The Registration Statement
shall have become effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order.
(d) NYSE LISTING. The shares of Parent Common Stock to be
issued in the Merger shall have been approved for listing on the NYSE.
(e) STOCKHOLDER APPROVAL. The Required Company Vote shall
have been obtained.
Section 6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Company to effect the Merger is subject to the
satisfaction of each of the following conditions prior to the Effective Time,
any of which may be waived in writing exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES. (i) Each of the
representations and warranties of Parent and Merger Sub set forth in this
Agreement that is qualified as to materiality or Parent Material Adverse
Effect shall have been true and correct when made and shall be true and
correct on and as of the Closing Date as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true
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and correct as of such certain date), and (ii) each of the representations and
warranties of each of Parent and Merger Sub that is not so qualified shall
have been true and correct when made and shall be true and correct on and as
of the Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain date
which shall be true and correct as of such certain date), except for such
inaccuracies as could not be expected, individually or in the aggregate, to
have a Parent Material Adverse Effect, and the Company shall have received a
certificate of the chief executive officer and the chief financial officer of
Parent to such effect with respect to both (i) and (ii) above.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT. Parent shall
have performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that are
qualified as to materiality or Parent Material Adverse Effect and shall have
performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or prior to
the Closing Date that are not so qualified as to materiality, and the Company
shall have received a certificate of an executive officer of Parent to such
effect.
Section 6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND
MERGER SUB. The obligations of Parent and Merger Sub to effect the Merger are
subject to the satisfaction of each of the following conditions prior to the
Effective Time, any of which may be waived in writing exclusively by Parent:
(a) REPRESENTATIONS AND WARRANTIES. (i) Each of the
representations and warranties of the Company set forth in this Agreement that
is qualified as to materiality or Company Material Adverse Effect shall have
been true and correct when made and shall be true and correct on and as of the
Closing Date as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be true
and correct as of such certain date), and (ii) each of the representations and
warranties of the Company that is not so qualified shall have been true and
correct in all material respects when made and shall be true and correct on
and as of the Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain date
which shall be true and correct as of such certain date), except for such
inaccuracies as could not be expected, individually or in the aggregate, to
have a Company Material Adverse Effect, and Parent and Merger Sub shall have
received a certificate of the chief executive officer and the chief financial
officer of the Company to such effect with respect to both (i) and (ii) above.
(b) PERFORMANCE OF OBLIGATIONS. The Company shall have
performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that are
qualified as to materiality or Company Material Adverse Effect and shall have
performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or prior to
the Closing Date that are not so qualified as to materiality or Company
Material Adverse Effect, and Parent and Merger Sub shall have received a
certificate of the chief executive officer and the chief financial officer of
the Company to such effect.
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(c) REGULATORY APPROVALS. All consents, approvals, orders,
authorizations of, or registrations, licenses, declarations or filings with,
any Governmental Entity required to consummate the transactions contemplated
hereby shall have been obtained and shall remain in full force and effect and
all statutory waiting periods in respect thereof shall have expired and no
such approval shall contain any conditions, limitations or restrictions which
Parent reasonably determines in good faith will have or would reasonably be
expected to have a Company Material Adverse Effect or a Parent Material
Adverse Effect.
(d) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date
of this Agreement, there shall not have been any event, development or change
of circumstance that constitutes, has had, or to have, individually or in the
aggregate, or could be expected to have a Company Material Adverse Effect.
(e) REQUIRED CONSENTS. All Required Consents shall have
been obtained, and the Company shall have provided evidence thereof to the
Parent, which evidence shall be reasonably satisfactory to Parent.
(f) NON-COMPETITION AGREEMENTS. Two-year non-competition
agreements, substantially in the form attached as EXHIBIT C hereto, shall have
been executed and delivered to Parent by all officers of the Company and
affiliates of the Company as requested by Parent, including, but not limited
to, Ray C. Davis and Kelcy L. Warren.
(g) PRUDENTIAL AGREEMENT. Parent, the Company and
Prudential shall have entered into the Prudential Agreement, and the
Prudential Agreement shall be in full force and effect as of the Effective
Time or shall have been consummated prior to the Effective Time.
(h) AFFILIATE AGREEMENTS. Parent shall have received an
Affiliate Agreement from each Person identified as an Affiliate pursuant to
Section 5.9.
(i) SUITS; ACTIONS. No suit, action, investigation or
other proceeding by any Governmental Entity shall have been instituted and be
pending which imposes, seeks to impose or reasonably would be expected to
impose any remedy, condition or restriction that would have a Company Material
Adverse Effect or that would materially restrict Parent's ownership or
operation of the Company (except as provided in Section 5.6(b)).
(j) DISSENTING SHARES. The number of shares of Company
Common Stock with respect to which dissenters' rights have been asserted under
the OGCA shall not exceed 7.5% of the number of outstanding shares of Company
Common Stock.
(k) FAIRNESS OPINION. The Company's financial advisor,
Prudential Securities, shall have rendered a fairness opinion with respect to
this Agreement and the transactions contemplated hereby, and such opinion
shall not have been withdrawn or adversely modified.
(l) ESTIS PROMISSORY NOTES. All principal and accrued
interest thereon under the promissory notes made by Dennis W. Estis and
Barbara Estis in favor of the Company having principal amounts of $217,250 and
$114,507 respectively, shall have been paid in full.
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ARTICLE VII.
TERMINATION AND AMENDMENT
Section 7.1. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time (with respect to Sections 7.1(b) through
7.1(h), by written notice by the terminating party to the other party),
whether before or after approval of the matters presented in connection with
the Merger by the stockholders of the Company:
(a) by mutual written consent of the Company and Parent; or
(b) by either Parent or the Company if the Merger shall not
have been consummated by six months from signing (the "OUTSIDE DATE"), provided
that the right to terminate this Agreement under this Section 7.1(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date); or
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other nonappealable final action, in
each case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger; or
(d) by Parent or the Company, if, at the Company
Stockholders' Meeting (including any adjournment or postponement), the
requisite vote of the stockholders of the Company in favor of the approval
and adoption of this Agreement and the Merger shall not have been obtained; or
(e) By Parent if (i) the Board of Directors of the Company
shall have withdrawn, or adversely modified, or failed (upon Parent's request)
to reconfirm its recommendation of the Merger or this Agreement (or determined
to do so); (ii) the Board of Directors of the Company shall have determined to
recommend to the shareholders of the Company that they approve an Acquisition
Proposal other than that contemplated by this Agreement or shall have determined
to accept a Superior Proposal; (iii) a tender offer or exchange officer that, if
successful, would result in any person or "group" becoming a "beneficial owner"
(such terms having the meaning in this Agreement as is ascribed under Regulation
13D under the Exchange Act) of 20% or more of the outstanding shares of Company
Common Stock is commenced (other than by Parent or an Affiliate of Parent) and
the Board of Directors of the Company fails to recommend that the shareholders
of the Company not tender their shares in such tender or exchange offer; (iv)
any person (other than Parent or an Affiliate of Parent) or "group" becomes the
"beneficial owner" of 20% or more of the outstanding shares of Company Common
Stock; or (v) for any reason the Company fails to call or hold the Company
Shareholders Meeting by the Outside Date; or
(f) by the Company, prior to the Required Company Vote if, as
a result of a Superior Proposal received by such party from a Third Party, the
Board of Directors of the Company determines in good faith, based on written
advice of outside legal counsel, that
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accepting such Superior Proposal is required for the Board of Directors of
the Company to comply with its fiduciary duties to stockholders under
applicable law; provided, however, that (i) no termination shall be effective
pursuant to this Section 7.1(f) under circumstances in which a termination
fee is payable by the Company pursuant to Section 7.3(b)(iv), unless
concurrently with such termination, such termination fee is paid in full by
the Company in accordance with Section 7.3(b)(iv) and (ii) the Company's
right to terminate under this paragraph (f) shall not be available if the
Company has breached Section 5.3; or
(g) by Parent or the Company, if there has been a breach of
any representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach will cause the conditions set
forth in Section 6.2(a) or (b) (in the case of termination by the Company) or
Section 6.3(a) or (b) (in the case of termination by Parent) not to be
satisfied.
Section 7.2. EFFECT OF TERMINATION. In the event of termination of
this Agreement as provided in Section 7.1, this Agreement shall immediately
become void and there shall be no liability or obligation on the part of
Parent, Merger Sub or the Company, or their respective officers, directors,
stockholders or Affiliates, except as set forth in Section 7.3 and Article
VIII and except that such termination shall not limit liability for a willful
breach of this Agreement; provided that, the provisions of Section 7.3 of
this Agreement and the Confidentiality Agreement shall remain in full force
and effect and survive any termination of this Agreement.
Section 7.3. FEES AND EXPENSES.
(a)
(i) In addition to any payment required by Section
7.3(b), if this Agreement is terminated pursuant to Section
7.1(d), (e), (f) or by Parent pursuant to Section 7.1(b) (but
only if such termination is due to the failure of the condition
specified in Section 6.3(g) to be satisfied) or 7.1(g), then
the Company shall pay Parent an amount equal to the sum of
Parent's Expenses up to an amount equal to $750,000.
(ii) If this Agreement is terminated pursuant to
Section 7.1(g) by the Company, then Parent shall pay the
Company an amount equal to the sum of the Company's expenses
up to an amount equal to $750,000.
(b) The Company shall pay Parent a termination fee of
$1,665,000 upon the earliest to occur of the following events:
(i) the termination of this Agreement by Parent
pursuant to Section 7.1(b), if such termination is due to the
failure of the condition specified in Section 6.3(g) to be
satisfied;
(ii) the termination of this Agreement pursuant to
Section 7.1(d);
(iii) the termination of this Agreement pursuant to
Section 7.1(e);
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(iv) the termination of this Agreement pursuant to
Section 7.1(f); or
(v) the termination of this Agreement by Parent
pursuant to Section 7.1(g).
(c) The Company's or Parent's satisfaction of its obligations
under this Section 7.3 shall be the sole and exclusive remedy of Parent against
the Company and the Company against Parent and Merger Sub, as the case may be,
and their respective directors, officers, employees, agents, advisors or other
representatives with respect to the occurrences giving rise to such payment and
the termination of this Agreement; provided that this limitation shall not apply
in the event of a willful breach of this Agreement by the Company or Parent.
(d) Fees payable pursuant to Section 7.3(b)(iv) shall be paid
concurrently with the event described in Section 7.3(b)(iv). Fees pursuant to
Section 7.3(b)(i), (ii), (iii) or (v) shall be paid within two business days of
the first to occur of the events described in Section 7.3(b)(i), (ii), (iii) or
(v). Expenses payable pursuant to Section 7.3(a) shall be paid with two business
days of delivery to the Company or Parent, as the case may be, of a demand for
payment and a documented itemization setting forth in reasonable detail all
Expenses of Parent or the Company (which itemization may be supplemented and
updated from time to time by Parent or the Company until the 60th day after
Parent or the Company delivers such notice of demand for payment). All payments
under this Section 7.3 shall be made by wire transfer of immediately available
funds to an account designated by Parent or the Company, as the case may be.
Section 7.4. AMENDMENT. This Agreement may be amended by the
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company, but, after any
such approval, no amendment shall be made which by law requires further
approval by such stockholders without such further approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
Section 7.5. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
here. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained
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in Sections 1.3, 5.12, 5.16 and 5.17 and Articles II and VIII, and the
agreements of the Affiliates delivered pursuant to Section 5.9. The
Confidentiality Agreement shall survive the execution and delivery of this
Agreement.
Section 8.2. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to the Company, to
OEC Compression Corporation
2501 Cedar Springs Road, Suite 600
Dallas, Texas 75201
Attn: President
Telecopy: (214) 954-9584
with a copy to
Schlanger, Mills, Mayer & Silver, LLP
109 North Post Oak Lane, Suite 300
Houston, Texas 77024
Attn: Kyle Longhofer
Telecopy: (713) 785-2091
(b) if to Parent, to
Hanover Compressor Company
12001 N. Houston Rosslyn Road
Houston, Texas 77086
Attn: Michael J. McGhan
Telecopy: (281) 447-0821
with a copy to:
Latham & Watkins
233 South Wacker Drive
Suite 5800
Chicago, Illinois 60606
Attn: Richard Meller, Esq.
Telecopy: (312) 993-9767
Section 8.3. INTERPRETATION; CERTAIN DEFINITIONS. When a reference is
made in this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement they shall
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be deemed to be followed by the words "without limitation." "KNOWLEDGE" or
"TO THE KNOWLEDGE OF" of the Company or any of its Subsidiaries means the
actual knowledge of Jack Brannon, Ray C. Davis, Kelcy L. Warren, Dan
McCormick and Dennis W. Estis. "PERSON" or "person" has the meaning given to
it in Section 3(a) of the Exchange Act. The term "AFFILIATE" has the meaning
given to it in Rule 12b-2 under the Exchange Act.
Section 8.4. COUNTERPARTS. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 8.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement and all documents and instruments referred to herein (a) constitute
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.12, are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder; provided that the Confidentiality Agreements shall remain in full
force and effect until the Effective Time. Each party hereto agrees that,
except for the representations and warranties contained in this Agreement,
none of Parent, Merger Sub or the Company makes any other representations or
warranties, and each hereby disclaims any other representations and
warranties made by itself or any of its officers, directors, employees,
agents, financial and legal advisors or other representatives, with respect
to the execution and delivery of this Agreement or the transactions
contemplated hereby, notwithstanding the delivery or disclosure to any of
them or their respective representatives of any documentation or other
information with respect to any one or more of the foregoing.
Section 8.6. GOVERNING LAW. The laws of the State of Oklahoma shall
govern the interpretation, validity and performance of the terms of this
Agreement, regardless of the law that might be applied under principles of
conflicts of law. Any suit, action or proceeding by a party hereto with respect
to this Agreement, or any judgment entered by any court in respect of any
thereof, may be brought in any state or federal court of competent jurisdiction
in Houston, Texas, and each party hereto hereby submits to the exclusive
jurisdiction of such courts for the purpose of any such suit, action, proceeding
or judgment. Nothing herein shall in any way be deemed to limit the ability of a
party hereto to serve any such writs, process or summonses in any other manner
permitted by applicable law. Each party hereto hereby irrevocably waives any
objections which it may now or hereafter have to the laying of the venue of any
suit, action or proceeding arising out of or relating to this Agreement brought
in any state or federal court of competent jurisdiction in Houston, Texas, and
hereby further irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in any inconvenient forum.
No suit, action or proceeding against a party hereto with respect to this
Agreement may be brought in any court, domestic or foreign, or before any
similar domestic or foreign authority other than in a court of competent
jurisdiction in Houston, Texas, and each party hereto hereby irrevocably waives
any right which it may otherwise have had to bring such an action in any other
court, domestic or foreign, or before any similar domestic or foreign authority.
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Section 8.7. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto, in whole or in part (whether by operation of law or
otherwise), without the prior written consent of the other parties, and any
attempt to make any such assignment without such consent shall be null and
void, except that Merger Sub may assign, in its sole discretion, any or all
of its rights, interests and obligations under this Agreement to any direct
or indirect Subsidiary of Parent which is controlled (as such term is defined
in Regulation S-X under the Exchange Act) by Parent without the consent of
the Company. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
HANOVER COMPRESSOR COMPANY
By:
-------------------------------------
Its:
------------------------------------
Title:
----------------------------------
CADDO ACQUISITION CORPORATION
By:
-------------------------------------
Its:
------------------------------------
Title:
----------------------------------
OEC COMPRESSION CORPORATION
By:
-------------------------------------
Its:
------------------------------------
Title:
----------------------------------
SIGNATURE PAGE TO MERGER AGREEMENT
<PAGE>
ANNEX I
KEY STOCKHOLDERS
HACL, Ltd.
Energy Investors Joint Venture
SIGNATURE PAGE TO MERGER AGREEMENT
